10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑K

(Mark One)
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: January 31, 2018
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             .

Commission File Number: 001‑36610

KLX INC.

(Exact name of registrant as specified in its charter)

Delaware
(State of incorporation
or organization) 47‑1639172
(I.R.S. Employer Identification No.)

1300 Corporate Center Way,

Wellington, Florida

(Address of principal executive offices)

(561) 383‑5100

(Registrant’s telephone number, including area code)

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.01 Par Value	The NASDAQ Global Select Market

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

Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒  No ☐.

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

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 ☒  No ☐.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 ☒  No ☐.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☐

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 ☒ 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 ☒.

As of July 31, 2017 the aggregate market value of the registrant’s voting stock held by non‑affiliates was approximately $2,614 million. Shares of common stock held by executive officers and directors have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not a determination for any other purpose. The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of March 13, 2018 was 50,740,101 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Certain sections of the registrant’s Proxy Statement to be filed with the Commission in connection with the 2018 Annual Meeting of Stockholders or Annual Report on Form 10‑K/A, to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year, are incorporated by reference in Part III of this Form 10‑K. With the exception of those sections that are specifically incorporated by reference in this Annual Report on Form 10‑K, such Proxy Statement shall not be deemed filed as part of this Report or incorporated by reference herein.

TABLE OF CONTENTS

		Page
	PART I
ITEM 1.	Business	4
ITEM 1A.	Risk Factors	16
ITEM 1B.	Unresolved Staff Comments	36
ITEM 2.	Properties	36
ITEM 3.	Legal Proceedings	38
ITEM 4.	Mine Safety Disclosures	38
	PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	39
ITEM 6.	Selected Financial Data	41
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	54
ITEM 8.	Financial Statements and Supplementary Data	55
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	55
ITEM 9A.	Controls and Procedures	55
ITEM 9B.	Other Information	57
	PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	57
ITEM 11.	Executive Compensation	63
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	63
ITEM 13.	Certain Relationships and Related Party Transactions, and Director Independence	63
ITEM 14.	Principal Accountant Fees and Services	63
	PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	64
	Signatures	67
	Index to Consolidated and Combined Financial Statements and Schedule	F‑1

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CAUTIONARY STATEMENT REGARDING 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 Annual Report on Form 10‑K (this “Form 10‑K”) 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.

These forward‑looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause our actual results, performance and prospects to differ materially from those expressed in, or implied by, these forward‑looking statements. These factors include the risks, uncertainties, assumptions and other factors discussed under the headings “Item 1A. Risk Factors,” as well as “Item 1. Business”, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10‑K, including the following factors:

· regulation of and dependence upon the aerospace and energy industries;

· the cyclical nature of the aerospace and energy industries;

· market prices for fuel, oil and natural gas;

· competitive conditions;

· potential disruptions in our business from the announced review of strategic alternatives, including a potential sale of KLX or a sale of a division or divisions thereof, and the decision to engage or not in any strategic alternative;

· 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;

· just in time (“JIT”) contracts and long term agreements (“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;

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· the write‑off of a significant portion of intangible assets;

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

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

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

· 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 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‑K. These statements should be considered only after carefully reading this entire Form 10‑K. 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‑K not to occur.

Unless otherwise indicated, the industry data included in this Form 10‑K is from the February 2018 issue of the Airline Monitor, December 2017 report from the International Air Transport Association (“IATA”), the Current Boeing Market Outlook 2017, the Aircraft Analytical System (“ACAS”) database, the Airbus or Boeing corporate websites or the U.S. Energy Information Administration’s Annual Outlook 2017 Assumptions report.

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PART I

ITEM 1.  BUSINESS

Except as otherwise indicated or unless the context otherwise requires, “KLX,” “we,” “us” and “our” refer to KLX Inc. and its consolidated subsidiaries after giving effect to the internal reorganization and its spin‑off from B/E Aerospace, and “B/E Aerospace” refers to B/E Aerospace, Inc., its predecessors and its consolidated subsidiaries, other than, for all periods following the spin‑off, KLX Inc. and its consolidated subsidiaries. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—The Spin‑off.”

Our Company

We believe, based on our experience in the industry, that we are one of the world’s leading independent distributors and value‑added service providers of aerospace fasteners and consumables, and that we offer one of the broadest ranges of aerospace hardware and consumables and inventory and supply chain management services worldwide. Our aerospace distribution business is the product of both organic growth and a number of strategic acquisitions beginning in 2001. Through our global facilities network and advanced information technology systems, we believe we offer unparalleled service to commercial airline, business jet and defense original equipment manufacturers and their subcontractors (“OEMs”), airlines, maintenance, repair and overhaul (“MRO”) operators, fixed base operators (“FBOs”) and domestic military depots. With a large and diverse global customer base, including virtually all of the world’s commercial airline, business jet and defense OEMs, OEM subcontractors, airlines and major MRO operators across five continents, as well as the U.S. military, 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 well in excess of $100 million in proprietary information technology (“IT”) systems to create a superior technology platform. Our systems support both internal distribution processes and part attributes, along with customer services, including JIT deliveries and kitting solutions. This business is operated within our Aerospace Solutions Group (“ASG”) segment. During the fiscal year ended January 31, 2018 (“Fiscal 2017”), ASG generated approximately 82% of our consolidated revenues.

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

ASG sells fasteners and other consumable products to over 7,500 customer locations throughout the world. Its top five customers in Fiscal 2017 collectively accounted for approximately 30% of its Fiscal 2017 revenues.

In the latter part of 2013, we initiated an expansion into the energy services sector. In 2013 and 2014, we acquired seven companies dedicated to providing technical services and related rental equipment to oil and gas exploration and production (“E&P”) 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 on an episodic or urgent 24/7 basis. Our customers include independent and major oil and gas companies that are engaged in the exploration and production of oil and gas properties in onshore North America, including in the Northeast (Marcellus and Utica Shale), Rocky Mountains (Williston and Piceance Basins), Southwest (Permian Basin and Eagle Ford) and Mid‑Continent. This business is operated within our Energy Services Group (“ESG”) segment.

ESG has increased the number of its agreements with customers by over 140% from over 400 as of January 31, 2016 to over 1,000 as of January 31, 2018. These agreements enable us to work for substantially all of the major, regional and independent E&P companies in North America. ESG’s top five customers collectively represented approximately 20% of its Fiscal 2017 revenues.

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

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Review of Strategic Alternatives

On December 22, 2017, we announced that our Board initiated a review of strategic alternatives to maximize stockholder value, including a possible sale of KLX or a sale of a division or divisions thereof. We have engaged a financial and legal advisor to assist in the process. There can be no assurance of the terms, timing or structure of any transactions, or whether any such transactions will take place at all, and any such transactions are subject to risks and uncertainties. As our Board conducts its review, we remain committed to executing on our business strategies. We do not intend to make any further announcements related to our review unless and until our Board has approved a specific transaction or otherwise determined that further disclosure is appropriate.

Industry Overview

Aerospace Solutions Group

ASG is generally segmented by end customer or sales channel. Based on our experience in this industry, we estimate that during Fiscal 2017 the market for the products and services provided by ASG was approximately $15.1 billion; of this amount, we estimate that approximately 52%, or $7.8 billion, is served by the manufacturers of these products and OEMs directly to the end customers and approximately 48%, or $7.3 billion, is served by distributors such as ASG.

We believe that there is a direct relationship between demand for fasteners and other consumable products and airliner fleet size, aircraft utilization and aircraft age, as well as new aircraft production rates. All aircraft must be serviced at regular intervals, which drives aftermarket demand for aerospace fasteners and consumable products. ASG generated approximately 61% of its Fiscal 2017 revenues supporting original equipment manufacturers of commercial and military aircraft or aircraft system components and derived approximately 39% of its Fiscal 2017 revenues from aftermarket sales to support the in‑service fleet of commercial and military aircraft, and aircraft systems. Historically, aerospace fastener and consumable products revenues have been derived from the following sources:

· Support for commercial, business jet and military aircraft OEMs;

· Mandated aircraft maintenance;

· Support for commercial aircraft, business jet and defense subcontractors;

· Demand for structural aircraft modifications, cabin interior modifications and passenger‑to‑freighter conversions; and

· Supply chain management and consumables hardware distribution for land-based military depot aftermarket customers and the U.S. Department of Defense (“DoD”).

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

Since 2010, as the global economy began to recover from recession, increased passenger traffic volumes and the return to profitability of the global airline industry have created significant demand for commercial aircraft. Global air traffic demand increased 7.6% in 2017, well above the 10-year average annual growth rate of 5.5% and above the increase of 6.3% in 2016 and 7.4% in 2015. Air traffic growth in 2017 was supported by a broad-based pick-up in global economic conditions, lower cost airfares and strong consumer confidence. IATA forecasts a 2018 airline traffic increase of approximately 6%, above the historical trend for growth.

IATA expects the global airline industry to generate a profit of approximately $34.5 billion in 2017. Overall performance in 2017 has been positively impacted by strong passenger traffic growth, disciplined capacity management,

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positive macroeconomic factors, and improved airline offerings that stimulate demand. These record industry profits were delivered despite a modest reduction in yields as compared with 2016. IATA expects global airline profits of $38.4 billion in 2018, or 11.3% higher than 2017, driven primarily by strong demand, efficiency and lower interest payments. The increase in global airline profits in 2018 is expected to be the eighth straight year of profitability, and the airlines have substantially strengthened their balance sheets over the past several years through operating profits and by accessing capital markets. As a result, we believe airline balance sheets are much stronger than in any time in the past ten years.

Many airlines deferred the replacement of a large number of aging aircraft over the 2000‑2009 period. This, combined with recent more efficient new aircraft introductions, the growing requirements for more aircraft to support projected long‑term traffic growth, record capacity utilization rates, high fuel costs and the low cost of financing new aircraft drove the global airline industry to place record orders for new aircraft. Backlogs at Airbus S.A.S. (“Airbus”) and The Boeing Company (“Boeing”) stood at record levels of 7,253 and 5,864 aircraft, respectively, at January 31, 2018. Airbus reported that they have an approximate nine-year backlog. As a result, most industry analysts believe the outlook for new aircraft production and deliveries will be strong for the foreseeable future.

The strong new aircraft delivery cycle and new contract wins and market share gains have resulted in an increase in ASG’s revenues to support the global aerospace manufacturing base. However, unlike any prior new aircraft delivery cycle, a record number of new aircraft deliveries were to replace and retire older, less fuel efficient aircraft. The increase in our revenues derived from manufacturing customers combined with the decline in aftermarket revenues and higher margins associated with older aircraft, which have been retired, has resulted in a shift in our revenue mix and has impacted our gross margins. Our aftermarket revenues include both commercial aerospace customers and our business serving U.S. military depots. We expect aftermarket revenues to trend upwards in 2018 and beyond, as a larger percentage of the approximately 12,500 new aircraft which have been delivered since 2009 begin to require their first heavy maintenance.

Defense spending has historically been driven by the timing of military aircraft orders and evolving government strategies and policies. We also support military depots for all five branches of our armed services, which maintain in-service aircraft and equipment. Defense spending began to decline in 2012 as the U.S. government implemented its sequestration program and began to sunset production of numerous military aircraft. As a result, we have seen demand from our military and defense manufacturing customers decline from peak levels experienced prior to 2012. However, as a result of recently enacted legislation, industry analysts expect defense spending to increase at a mid-single digit percentage annual rate over the next five years. Similarly, business jet manufacturing has declined since 2007 as a result of lower demand driven by austerity measures implemented by corporate customers, and the reduction in demand from businesses and countries affected by depressed conditions in the global oil and gas industry. However, this period of extended decline is expected to end in 2018 as business jet deliveries are expected to increase 4% in response to mid-single digit growth in business jet traffic and the introduction of new products expected to stimulate demand for new aircraft.

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

Energy Services Group

The oil and gas industry has historically been both cyclical and seasonal. Activity levels are driven primarily by drilling rig counts, technological advances, well completions and workover activity, the geological characteristics of the producing wells and their effect on the services required to commence and maintain production levels, and our customers’ capital and operating budgets. All of these indicators are driven by commodity prices, which are affected by both domestic and global supply and demand factors. In particular, while U.S. natural gas prices are correlated with global oil price movements, they are also affected by local weather and consumption patterns.

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While global supply and demand factors will continue to result in commodity price volatility, we believe the secular outlook for the on-shore North American oil and gas industry remains positive due to:

· The projected long-term growth in global energy demand, combined with the United States’ long‑term goal of energy independence.

· According to the U.S. Energy Information Administration’s Annual Energy Outlook 2017 Assumptions report, currently identified recoverable reserves of 276 billion barrels of shale oil and 2,355 trillion cubic feet of shale gas are contained within the United States.

· Almost all E&P companies outsource the services required by them to drill wells and maintain production. Drilling and completion activities require numerous services and products from time to time on an “as needed” basis.

· The decline of conventional North American oil and natural gas reservoirs, together with the development of new recovery technologies, is leading to a shift toward the drilling and development of onshore unconventional oil and natural gas resources that require more wells to be drilled and active maintenance to sustain production and maximize total recoveries. While drilling activity has recently improved and we expect improving operating conditions for oil field service companies, a return to profitability will require that energy supply and demand reach equilibrium and commodity prices stabilize at a level where our customers can achieve an appropriate return on their investments. We believe the increased requirements of these unconventional resources will continue to support increasing service activity as the industry rebalances its allocation of assets to meet future growth.

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

· The increasing complexity of technology used in the oil and natural gas exploration and development process requires additional technicians on location during drilling. In particular, the increasing trend of pursuing horizontal and directional wells as opposed to vertical wells requires additional expertise on location and, typically, longer drilling times.

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

Growing Demand for Natural Gas in the United States.  We believe that natural gas will be in increasingly high demand in the United States over time because of its growing popularity as a cleaner burning fuel. The ongoing shift to the use of natural gas from coal-fired power plants and the increased access to residential customers from new pipeline projects is expected to support increased demand for natural gas. In addition, the recent commencement of liquefied natural gas shipments from the United States to foreign markets is also expected to increase demand for natural gas production.

Continued Outsourcing of Ancillary Services.  Some of the services we provide have been historically handled by drilling contractors themselves. In many instances, these services are only ancillary to the primary activity of drilling and completing wells and represent only a minor portion of the total well drilling cost. Drilling contractors often elect to outsource these services to suppliers who have the expertise to be able to provide increasingly more complex, high‑quality and reliable services on a 24/7 basis.

Impact of Recent Industry Downturn.  During the 2014 to mid-2016 industry downturn, prices of oil and natural gas declined rapidly, resulting in a dramatic reduction in drilling and completion activity by oil and gas producers in all regions of North America. Throughout all of 2015 and most of 2016, the oil field services industry experienced a deep retrenchment where both capacity of services across the industry was cut and the pricing of services became deeply

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depressed. During this period, poorly capitalized businesses and many smaller competitors were unable to survive and went out of business. The industry began to see a stabilization in demand in late 2016, and with oil prices rising through the $40’s per barrel and into the $60’s in 2017, oil and gas producers renewed their commitment to their capital budgets, which resulted in a higher level of demand, improved pricing and a more stable operating environment for oil field services businesses.

Products and Services

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

Aerospace Solutions Group

We believe, based on our experience in the industry, that we are one of the world’s leading independent distributors and value‑added service providers of aerospace fasteners and consumables, and that we offer one of the broadest ranges of aerospace hardware, consumables and inventory and supply chain management services worldwide. ASG, which was formerly the consumables management segment of B/E Aerospace, Inc. (our Former Parent), has evolved into an industry leader through multiple acquisitions, strong organic growth and strategic deployment of capital to address customer demand. As of January 31, 2018, ASG’s global presence consisted of approximately 1.7 million square feet in 25 principal facilities with over 2,000 employees worldwide. We believe ASG’s new global distribution and operations center together with the new warehouse management system will enhance future customer service while supporting productivity gains as well as allow for more effective inventory management as ASG consolidates inventory from three legacy facilities into the new facility.

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 Aerospace Hardware in 2001 and it became the platform upon which the rest of ASG was built. Between 2002 and 2017, we completed nine acquisitions, for an aggregate purchase price of approximately $2.2 billion. In 2016, we acquired Herndon Aerospace and Defense LLC, which principally serves U.S. domestic military depots that support in-service aircraft and other equipment for the five branches of the armed forces. We believe our organic growth together with these acquisitions has enabled us to position ourselves as a preferred global supplier to our customers. We have historically shipped approximately 60% of our orders within 24 hours of receipt of the order. With a large and diverse global customer base, including virtually all of the world’s commercial airline, business jet and defense OEMs, OEM subcontractors, major airlines and major MRO operators across five continents, we provide access to over one million SKUs that include aerospace fasteners and consumables, including chemicals, and related logistics services. Our service offerings include inventory management and replenishment, creative and differential supply chain solutions such as third‑party logistics programs, special packaging and bar‑coding, sophisticated parts kitting, quality assurance testing and a wide variety of purchasing assistance programs, plus the latest in electronic data interchange capability. Our seasoned purchasing and sales teams, coupled with state‑of‑the‑art IT and automated parts retrieval systems, help us to sustain our reputation for high‑quality products and rapid, on‑time delivery.

We service our global customer base of approximately 7,500 customer locations with over 600 sales, marketing, product support and customer service specialists worldwide. Approximately 39% of our Fiscal 2017 ASG segment revenues were derived from the aerospace and airline aftermarket and approximately 61% from sales to OEMs and their suppliers to support manufacturing customers under long-term agreements. We are an authorized distributor for more than 200 manufacturers and distribute products for over 2,500 manufacturers.

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

· Fasteners.  We stock inventory to support numerous commercial and military aircraft, business jets and helicopters. Our inventory position is highly diversified, supplying bolts, clips, hinges, rings, screws, carbon‑faced seals, gaskets, O‑rings and more.

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· Chemicals.  We stock approximately 40,000 chemicals and specialty materials SKUs from over 1,000 manufacturers, which we distribute to over 6,000 customers globally. Among these products are chemicals, sealants and adhesives, lubricants, paints, cleaners and degreasers.

· Honeywell Proprietary Parts.  We hold an exclusive 20‑year license (with 10 years remaining on the original license), which will renew for two successive five‑year periods if certain operating metrics are maintained, on over 30,000 Honeywell proprietary parts. Among the product lines supported by these parts are auxiliary power units, propulsion engines, electrical/electro‑mechanical and airframe and engine accessories. We are also the primary supplier of these parts to Honeywell for their use during the manufacturing of the aforementioned products.

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

· Motion and Control.Immediately before the end our fiscal year, we added a product line enabling us to offer our customers technical products, systems and expertise in motion and control applications including hydraulics, pneumatics, fluid connectors, filtration, electrical control systems seals, compressors and engineered systems for both OEM and aftermarket applications.

· In addition, we substantially expanded our jet engine product support product line.

Our product lines, which are deep and diverse, have an inventory valuation of approximately $1.4 billion.

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

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

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

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

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

· E‑Commerce.  A new, state-of-the-art e-commerce site was launched in January 2015. This service provides our customers with real‑time connection to our systems and inventory, where they can cross‑reference part numbers and also see product availability. E‑Commerce also provides customers with a customized solution and allows them to view usage reports for part planning and forecasting.

Energy Services Group

We serve energy industry customers who focus on developing and producing oil and gas onshore in North America. We initiated our expansion in the U.S. onshore oil field services sector in August 2013 when we acquired

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seven oilfield service companies operating in all key oil and gas shale basins for an aggregate purchase price of $0.7 billion (including deferred acquisition payments). We have integrated the operations of the seven acquisitions that comprise our current business and manage them both by service and product line offerings and by geographic markets. We offer a variety of services both individually and on a bundled basis as requested by our customers. Our E&P customers require numerous technical services and products on an “as needed” basis, including fishing (retrieval) services and equipment, wireline services, down-hole production services, pressure control, logging, pipe recovery and rental equipment to support these services. Much like the need for just‑in‑time delivery of consumables by ASG, ESG often is faced with just‑in‑time support requirements for our E&P customers that may be experiencing critical operating issues such as servicing an operating well under high pressures, or removing blockages during well drilling or production. As a result, our industry specialists (many with over 40 years of experience) are and may be on‑call (on a rotational basis) up to 24 hours a day, 7 days a week to meet our customers’ needs.

The market for services to support the drilling, completion and production of onshore oil and gas wells has expanded dramatically due to the technological advancements that allow for enhanced recovery from shale formations underlying much of the major onshore oil and gas reservoirs in the United States. This had led to growth in the market for the services we provide. We have established a solid presence in all the major onshore oil and gas producing regions in the contiguous 48 states (other than California), including the Northeast (Marcellus and Utica Shales), Rocky Mountains (Williston, DJ and Piceance Basins), Southwest (Permian Basin and Eagle Ford) and Mid‑Continent regions in North America. We serve energy industry customers who focus on developing and producing oil and gas onshore in North America. We have integrated the operations of the seven acquisitions that comprise our current business and manage them by both service and product line offerings and by geographic markets. We provide high‑quality services and products (new and remanufactured after use and American Petroleum Institute (“API”) certified) to remote drilling sites using our manufacturing, certification, logistics and IT capabilities to properly prepare for deployment, store, locate and deliver our equipment and service teams, as needed, to support our customers’ drilling operations. We also have a growing in-house proprietary tool development team which is focused on designing innovative tools that will further differentiate our services and enhance the outcomes for our customers.

We offer a variety of complementary services, both individually and on a bundled basis, as requested by our customers. Our key service and product offerings include:

· Fishing Services and Tools:  Our fishing tool business provides a range of specialized services and equipment that is utilized on a non-routine basis for both drilling and well services operations. When intervention is required at the well site, we provide solutions for our customers. When downhole problems develop and drilling or services operations or conditions require non-routine intervention, technicians intervene with specialized tools that are specifically suited to retrieve, or “fish,” and remove trapped equipment. This equipment may include overshots, spears, jarring equipment, internal and external cutters, Venturi tools, magnets and wash over equipment. In addition to our fishing services, we also provide drill‑out services to our clients consisting of downhole motors used to drill out frac plugs and sliding sleeves.

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

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

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· Completion Services:  Onshore completion services include a variety of services and equipment related to the initial well stimulation, completion and production. These services include the placement and removal of flow control nipples and valves, completion packers, bridge plugs and composite flow through frac plugs, as well as a full line of downhole services tools to optimize oil and gas recovery. These tools and services coupled with our expertise assist our clients in performing operations to optimize oil and gas recovery. These services and equipment are utilized in both the completion of newly drilled wells and the completion of behind pipe reserves in wells which have been previously drilled but not completed. Downhole completion and production services utilize a wide range of tools consisting of packers, bridge plugs, wellbore clean out equipment and cementation equipment to provide services to the completion and work-over market.

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

· Center for Innovation:  We have a dedicated team of engineers and product experts who work closely with our product line managers to develop new tools and adaptations to existing equipment that improve productivity and outcomes for our customers. As of January 31, 2018, our ESG innovation team has developed 21 proprietary new tools, registered 7 patents and has 27 patents pending. We believe these proprietary tools and patents provide differentiated service outcomes for our customers and have further developed the KLX “brand” as a market leader.

· Remanufacturing Shop:  Our operations facilities are positioned around the U.S. and allow our personnel to properly service, restore and test all pressure control equipment, valves, choke manifolds and closing units. By properly servicing and re-certifying our equipment, we can ensure our equipment works when it is deployed to a wellsite. In several of the operations facilities, we also offer machine shop services, which consist of CNC lathes, milling machines, spindle lathes and other machining equipment to rework and rectify damaged equipment and to design/build specialized fit‑for‑purpose tools.

We believe that ESG offers services and products which create value for our customers by reducing their exposure to non‑productive time (“NPT”) during the drilling and production phases. We provide services and equipment that assist our customers with maintaining and increasing the permeability of the reservoir. We provide specialized experts and equipment to locate and remove blockages or lost equipment from the reservoir that impede drilling or production operations and a broad range of rental equipment to support the operations of our service personnel and our customers. We provide essentially all of our services and related rental equipment in all of our geo regions, providing consistency for our customers and the ability to manage our business on a best practices basis throughout the organization

Customers, Competition and Marketing

Aerospace Solutions Group

We market our aerospace fasteners and other consumables directly to suppliers to the commercial, business jet, military and defense airframe manufacturers, the airframe manufacturers, the airlines, aircraft leasing companies, MRO providers, domestic military depots, general aviation, and other distributors. We believe that our key competitive advantages are the breadth of our product offerings and our ability to deliver our products on a timely basis, combined with our core competencies in information management, purchasing and logistics management. Customers for our ASG segment include major commercial aircraft, business jet and military OEMs, aftermarket MRO providers and airlines. Approximately 54% of our ASG revenues in Fiscal 2017 were to customers in the Americas with 27% to customers in Europe and the balance to customers in Asia, the Pacific and the Middle East.

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We believe the principal competitive factors in our industry include the ability to provide superior customer service and support, on‑time delivery, sufficient inventory availability, competitive pricing and an effective quality assurance program. Our competitors include both U.S. and foreign companies. Our principal competitors include Adept, Airbus, Alcoa/Arconic, Align, Aviall, Avic, Avio, Avnet, BASN, Boeing (corporate), Boeing Global Services, Champion, Fastenal, Heico, Jamaica Bearings, Pattonair, Precision Castparts, Satair, Wencor, and Wesco Aircraft.

As of January 31, 2018, we employed over 600 sales, marketing, product support and customer service personnel with an average of over 10 years of relevant industry experience.

Energy Services Group

ESG provides services and products and competes in a variety of distinct sub‑segments with a number of competitors. Substantially all of our ESG customers are engaged in the energy industry. Most of our sales are to regional or independent oil companies and these sales have resulted in a diversified and geographically balanced portfolio of more than 700 customers within North America. Revenues from ESG’s five largest customers collectively represented approximately 20% of ESG’s revenues in Fiscal 2017.

Our primary competitors are regional, which provide a more limited range of services and rental equipment and often have more limited financial resources to support their operations. With respect to certain of our services, we also compete with major, multinational companies, including Superior Energy Services, Schlumberger, Halliburton, Baker Hughes and Weatherford. Competition is based on a number of factors, including performance, safety, quality, reliability, service, price, response time and, increasingly, breadth of services and products.

ESG maintains both regional and product/services specialist sales teams. Although sales employees tend to be based locally in regions and field locations, we have established a corporate sales team to coordinate sales and marketing efforts with our key accounts. As of January 31, 2018, we had 22 corporate sales representatives and 53 regional sales representatives with an average of 15 years of experience.

Suppliers and Procurement

Aerospace Solutions Group

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

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

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

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

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

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

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Energy Services Group

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

Customer Service

Aerospace Solutions Group

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

· on‑time delivery;

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

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

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

Energy Services Group

We are highly differentiated in each of the geographic markets that we serve with our services and associated product offerings. This is achieved by providing targeted, complementary services and related products and being responsive to our customers with both quality, as measured by the industry-standard NPT, and timely response to any request. The key elements include:

· 24/7 operations;

· recognized industry leading technicians in our principal service and product lines;

· responsiveness to our customers’ requirements for ready‑to‑deploy API certified equipment and a “can do” philosophy;

· technical interface with customers via product line management personnel; and

· client intimacy.

Warranty Product Liability, Insurance

Aerospace Solutions Group

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

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Energy Services Group

The use of certain of our ESG rental equipment or the provision of technical services in connection therewith could involve operational risk and thereby expose us to liabilities. An accident involving our services or equipment, or the failure of a product, could result in personal injury, loss of life and damage to property, equipment or the environment. Damages from a catastrophic occurrence, such as a fire or explosion, could result in substantial claims for damages. We generally attempt to negotiate the terms of our MSAs consistent with industry practice. In general, we attempt to take responsibility for our own personnel and property, while our customers, such as the E&P companies and well operators, take responsibility for their own personnel, property and all liabilities arising from well and subsurface operations.

We maintain a risk management program that covers operating hazards, including product liability, property damage and personal injury claims as well as certain limited environmental claims. Our risk management program includes primary, umbrella and excess umbrella liability policies of $77 million per occurrence, including sudden and accidental pollution claims. We believe that our insurance is sufficient to cover product liability claims.

Information Technology

Aerospace Solutions Group

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

· Planning and Forecasting

· Customized System/Database

· Supplier and Customer Portals

· EDI

· E‑Commerce

· Support of Value‑Added Services

Our information technology infrastructure is based on a proprietary application that has been highly customized for our aerospace consumables management business over the last 15 years. Our IT systems support our order‑to‑cash, procure‑to‑pay, warehouse management and accounting processes on a global basis. Our key proprietary IT application interfaces with our customized proprietary applications together with leading specialty software packages such as JDA (Demand Planning), Sterling (EDI) and Oracle (Business Intelligence, Financial Consolidations and Financial Reporting). We utilize a Microsoft-based enterprise resource planning (“ERP”) system to support our ASG, ESG and Corporate activities.

We also employ virtualization technology to increase system availability, reduce hardware and maintenance costs and respond efficiently to market dynamics. Our systems are largely hosted on Microsoft “Cloud” platforms as well as a stand-alone data services infrastructure which runs 24/7 and is protected by network security technologies, an uninterrupted power supply and a backup generator. Remote access to our systems is provided via separate, high speed connections.

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Energy Services Group

We have successfully integrated our acquisitions onto a single financial accounting platform using the aforementioned ERP system together with an industry leading rental asset management software “TrakQuip”. These IT systems provide us with a scalable integrated platform that facilitates highly efficient operations, consolidated invoicing and optimal equipment utilization on both a site and segment basis. Our operating strategy is based upon balancing high asset and personnel utilization levels with consistently superior customer service. As such, our IT systems are integral to effectively managing our business.

Government Regulation and Environmental Matters

Aerospace Solutions Group

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

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

We are also subject to other government rules and regulations that include the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), as amended, the UK Bribery Act of 2010 (“UK Bribery Act”), the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), sanctions regulations administered by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC regulations”) the False Claims Act and the European Union’s Registration, Evaluation and Authorization of Chemicals (“REACH”).

Energy Services Group

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

Employees

As of January 31, 2018, we had approximately 3,000 employees. As of January 31, 2018, our ASG segment had approximately 2,000 employees. Approximately 59% of ASG’s employees are engaged in distribution, operations, quality and purchasing, 30% in sales, marketing and product support and 11% in finance, human resources, IT and general administration. As of January 31, 2018, our ESG segment had approximately 1,000 employees. This represents a reduction of approximately 600 employees, or approximately 38% of our ESG workforce, from peak levels in 2014 in

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order to align our capacity and associated labor costs with current business conditions. Approximately 82% of ESG’s employees are engaged in operations, quality and purchasing, 7% in sales, marketing and product support and 11% in finance, human resources, IT and general administration. Our employees are not unionized, and we consider our employee relations to be good.

Available Information

Our filings with the SEC, including this Form 10-K, our Quarterly Reports on Form 10-Q, our Proxy Statement, Current Reports on Form 8-K and amendments to any of those reports are available free of charge on our website, http://www.klx.com, as soon as reasonably practicable after they are filed with, or furnished to, the SEC. These reports may also be obtained at the SEC’s public reference room at 100F Street, N.E., Washington, DC 20549. The SEC also maintains a website at www.sec.gov that contains reports, proxy statements, information statements, and other information regarding SEC registrants, including KLX Inc. Information included in or connected to our website is not incorporated by reference in this annual report.

ITEM 1A.  RISK FACTORS

You should carefully consider each of the following risks and uncertainties, which we believe are the principal risks that we face and of which we are currently aware, and all of the other information in this Form 10‑K. Some of the risks and uncertainties described below relate to our business, while others relate to the spin‑off. Other risks relate principally to the securities markets and ownership of our common stock.

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

Risks Relating to Our Business

Risks Relating to the Aerospace Solutions Business

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

The FAA prescribes standards and licensing requirements for aircraft components, including virtually all commercial airline and general aviation cabin interior products, and licenses component repair stations within the United States. Comparable agencies, such as the European Aviation Safety Agency, the Civil Aviation Administration of China and the Japanese Civil Aviation Board, regulate these matters in other countries. Our suppliers and customers must generally be certified by such governmental agencies. If any of our suppliers’ government certifications are revoked, we would be less likely to buy such supplier’s products and, as a result, would need to locate a suitable alternate supply of such products, which we may be unable to accomplish on commercially reasonable terms or at all. If any of our customers’ government certifications are revoked, their demand for the products we sell would decline. In each case, ASG’s results of operations and financial condition may be adversely affected.

From time to time, these regulatory agencies propose new regulations or heighten industry oversight. These new regulations generally cause an increase in costs of our suppliers and customers to comply with these regulations. In the case of our suppliers, these expenses may be passed on to us in the form of price increases, which we may be unable to pass along to our customers. In the case of our customers, these expenses may limit their ability to purchase products from us. In addition, the Trump administration has called for substantial change to fiscal and tax policies, which may include border tariffs and new trade deals, which could have significant effects on our customers and, in turn, on our suppliers, which may impact our business. In each case, ASG’s results of operations and financial condition may be adversely affected.

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

We are directly dependent upon the airline and business jet industries, which are each sensitive to changes in global economic conditions. The airline industry is highly cyclical and the level of demand for air travel is correlated to the strength of the U.S. and global economies. Stagnant or weakening global economic conditions either in the United States or in other geographic regions, as we are currently experiencing, may have a material adverse effect on our business. Past periods of unfavorable economic conditions caused a reduction in spending for both leisure and business travel, resulting in the airline industry parking aircraft, delaying new aircraft purchases and deliveries, deferring retrofit programs and depleting existing inventories. The business jet industry is also severely impacted by both a weaker economy and by declining corporate profits. According to IATA, the economic downturn in 2008 and 2009, combined with the high fuel prices experienced during most of 2009, contributed to the worldwide airline industry’s loss of approximately $4.6 billion in 2009. In recent times, global financial markets have experienced volatility and disruption, in part due to the collapse in oil prices and the subsequent impact on emerging markets. Concerns over the tightening of the corporate credit markets, inflation, energy costs, the effect of the new U.S. presidential administration and other factors may continue to contribute to volatility in the global financial markets and may create further uncertainties for global economic conditions in the future. Furthermore, the environment in which the airline and business jet industries operate could continue to be affected by adverse foreign exchange impacts, fluctuating fuel prices, consolidation in the industry, changes in regulation, terrorism, safety, environmental, health concerns such as the Zika virus and labor issues. Many of these factors have, and could continue to have, a negative impact on air travel, which could materially adversely affect our business, results of operations, financial condition and cash flows.

Our business is also affected by risks that uniquely impact the airline and business jet industries. For instance, potential terrorist attacks, geopolitical conflict or security breaches, or fear of such events, even if not made directly on or involving the airline industry have, and could continue to have, a negative effect on the airline industry and as a result, our business as well. The global airline industry lost a total of approximately $52.8 billion during the period from 2001 to 2009 as a result of the decline in traffic and airfares caused by, among other things, the September 11, 2001 terrorist attacks, the SARS and H1N1 outbreaks, the conflicts in Iraq and Afghanistan, increases in fuel costs and heightened competition from low-cost carriers. During this period, a significant number of airlines worldwide declared bankruptcy or ceased operations. Any of these factors could potentially impact the airline and business jet industries in the future, and subsequently, materially adversely affect our business, results of operations, financial condition and cash flows.

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

The military market is highly dependent upon government budgetary trends, particularly the U.S. Department of Defense (“DoD”) budget. Future DoD budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy by the current and future presidential administrations and Congress, including pursuant to mandated spending reductions under the so‑called “sequestration” process, the U.S. government’s budget deficits, spending priorities, the cost of sustaining the U.S. military presence in overseas operations and possible political pressure to reduce U.S. government military spending, each of which could cause the DoD budget to decline.

A decline in U.S. military expenditures could result in a reduction in military aircraft production or a reduction in spending at U.S. land-based military depots, both of which could have a material adverse effect on our results of operations and financial condition.

We may be materially adversely affected by fluctuating jet fuel prices.

Fluctuations in the global supply of crude oil and the possibility of changes in government policy on jet fuel production, transportation and marketing make it difficult to predict the future availability and price, volatility and cost of jet fuel. In the event of a natural disaster, changes in fuel-related governmental policy, changes in access to petroleum product pipelines and terminals, speculation in energy futures markets, changes in aircraft fuel production capacity, environmental concerns, political disruptions, outbreaks or escalations of hostilities or other conflicts or significant

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disruptions in oil production or delivery in oil‑producing areas or elsewhere, there could be reductions in the production or importation of crude oil and significant increases in the cost of jet fuel. If there were major reductions in the availability of jet fuel or significant increases in its cost, commercial airlines will face increased operating costs. Due to the competitive nature of the airline industry, airlines are often unable to pass on future increases in fuel prices directly to customers by increasing fares. As a result, an increase in the price of jet fuel could result in a decrease in net income from either lower margins or, if airlines increase ticket fares, lower revenue resulting from reduced airline travel. Decreases in airline profitability could decrease the demand for new commercial aircraft, resulting in delays to or reductions in deliveries of commercial aircraft that utilize the products we sell, and, as a result, although rising oil and gas prices may benefit our ESG segment, ASG’s financial condition, results of operations and cash flows could be materially adversely affected.

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

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

We have established policies and procedures designed to assist us and our personnel to comply with REACH. However, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business, financial condition and results of operations.

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

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

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

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

While the majority of ASG’s operations are based domestically, we have significant operations based internationally with distribution facilities in the United Kingdom, Germany and France. In addition, we sell our products to airlines all over the world. Our customers are located primarily in North America, Europe, Asia, the Pacific Rim, South America and the Middle East. As a result, approximately 46% of ASG’s revenues for the year ended January 31,

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2018 were to customers located outside the United States. Volatile international economic, political and market conditions may have a negative impact on our operating results and our ability to achieve our goals.

In addition, we have several subsidiaries in foreign countries (primarily in Europe), which have sales outside the United States. As a result, we are exposed to currency exchange rate fluctuations as a portion of our revenues and expenses are denominated in currencies other than the U.S. dollar. Fluctuations in the value of foreign currencies affect the dollar value of our net investment in foreign subsidiaries, with these fluctuations being included in a separate component of stockholders’ equity. At January 31, 2018, we reported a cumulative foreign currency translation adjustment of approximately $(24.4) million in stockholders’ equity as a result of foreign currency adjustments, and we may incur additional adjustments in future periods. In addition, operating results of foreign subsidiaries are translated into U.S. dollars for purposes of our statement of earnings and comprehensive income at average monthly exchange rates. Moreover, to the extent that our revenues are not denominated in the same currency as our expenses, our net earnings could be materially adversely affected. For example, a portion of labor, material and overhead costs for our distribution facilities in the United Kingdom and Germany are incurred in British pounds or Euros but the related sales revenues may be denominated in U.S. dollars. Changes in the value of the U.S. dollar or other currencies could result in material fluctuations in foreign currency translation amounts or the U.S. dollar value of transactions and, as a result, our net earnings could be materially adversely affected.

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

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

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

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

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

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

Our JIT contracts and LTAs are long‑term, generally fixed‑price agreements with no guarantee of future customer purchase requirements, and may be terminated for convenience on short notice by our customers, often without meaningful penalties, provided that we are reimbursed for the cost of any inventory specifically procured for the customer. In addition, we purchase inventory based on our forecasts of anticipated future customer demand. As a result, we may take the risk of having excess inventory in the event that our customers do not place orders consistent with our forecasts. We also run the risk of not being able to pass along or otherwise recover unexpected increases in our product costs, including as a result of commodity price increases, which may increase above our established prices at the time we entered into the customer contract and established prices for parts we provide. When we are awarded new contracts, particularly JIT contracts, we may incur high costs, including salary and overtime costs to hire and train on‑site personnel, in the start‑up phase of our performance. In the event that we purchase more products than our customers require, product costs increase unexpectedly, we experience high start‑up costs on new contracts or our contracts are terminated, our results of operations and financial condition could be negatively affected.

Our international operations require us to comply with anti‑corruption laws and regulations of the U.S. government and various international jurisdictions, and our failure to comply with these laws and regulations could adversely affect our reputation, business, financial condition and results of operations.

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

We are also subject to U.S. and foreign export controls and sanctions laws and regulations, including the ITAR, the EAR and OFAC regulations. The ITAR generally requires export licenses from the U.S. Department of State for goods, technical data and services sent outside the United States that have military or strategic applications. The EAR regulates the export of certain “dual use” goods, software, and technologies, and in some cases requires export licenses from the U.S. Department of Commerce. OFAC regulations implement various sanctions programs that include prohibitions of restrictions on dealings with certain sanctioned countries, governments, entities and individuals. Violations of these legal requirements are punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts as well as other remedial measures. We have established policies and procedures designed to assist us and our personnel to comply with applicable U.S. and international laws and regulations. However, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage, and such a violation could adversely affect our reputation, business, financial condition and results of operations.

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

Our ability to provide efficient distribution of the products we sell to our customers is an integral component of our overall business strategy. We do not maintain our own delivery networks, and instead rely on third‑party package delivery companies. We cannot assure you that we will always be able to ensure access to preferred delivery companies

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or that these companies will continue to meet our needs or provide reasonable pricing terms. In addition, if the package delivery companies on which we rely on experience delays resulting from inclement weather or other disruptions, we may be unable to maintain products in inventory and deliver products to our customers on a timely basis, which may adversely affect our results of operations and financial condition.

Risks Relating to the Energy Services Business

We serve customers who are involved in drilling for and production of oil and natural gas. Demand for services in the oil and natural gas industry is cyclical and experienced a significant downturn during 2015 and 2016, which has significantly affected the performance of our ESG segment. Additional adverse developments affecting this industry could have a material adverse effect on our financial condition and results of operations.

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

The predominant factor that would reduce demand for ESG services and associated product offerings would be a reduction in land‑based drilling activity in the continental United States. The oil and gas industry experienced a significant downturn commencing in late 2014 that continued through 2015 and 2016. At the trough, our customers significantly cut back their capital expenditures resulting in both volume and pricing declines for oil field services, and the number of domestic land drilling rigs decreased by over 75%. Commodity prices, and market expectations of potential changes in these prices, significantly affected activity levels in 2015 and 2016 as well as the rates paid for our services. Worldwide political, economic and military events as well as natural disasters and other factors beyond our control contribute to oil and natural gas price levels and volatility and are likely to continue to do so in the future. Current levels in the price of natural gas, oil or natural gas liquids, as well as ongoing volatility, have had an adverse impact on the level of drilling, exploration and production activity, which could materially and adversely affect the demand for our services and the rates we are able to charge for our services in our ESG segment, although declines in the price of jet fuel may benefit our ASG segment. We negotiate the rates payable under our contracts based on prevailing market rates and rate books which are periodically updated and, as such, the rates we are able to charge will fluctuate with market conditions. However, higher commodity prices may not necessarily translate into increased drilling activity because our customers’ expectations of future prices also influence their activity. Lower demand for oilfield services could resume, which would adversely affect the rates that we are able to charge, and the demand for our services. Additionally, we may incur costs and have downtime any time our customers’ activities are refocused towards different drilling regions.

The domestic E&P industry in the United States underwent a substantial downturn in 2015 and much of 2016 with the beginning of a potential recovery commencing late in the third quarter of 2016 is placing unprecedented pressure on both our customers and competitors. We have reduced costs within our ESG business without compromising the business platform we have built. This includes a significant reduction in capital expenditures in 2016, as well as other workforce rightsizing and ongoing cost initiatives.

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

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drilling activity could directly curtail such activity or increase the cost of drilling, resulting in reduced levels of drilling activity and therefore reduced demand for our ESG services and associated product offerings.

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

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

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

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

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

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

· the discovery rates of new oil and natural gas reserves;

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

· oil refining capacity;

· merger and divestiture activity among oil and gas producers;

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

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

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

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

· the price and availability of alternative fuels and energy sources.

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

Reduced discovery rates of new oil and natural gas reserves, or a decrease in the development rate of reserves, in our market areas, whether due to increased governmental regulation, limitations on exploration and drilling activity or

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other factors, could have a material adverse impact on our financial condition and results of operations even in a stronger oil and natural gas price environment.

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

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

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

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

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

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

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

· liabilities from accidents or damage by our equipment;

· pollution and other damage to the environment;

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

· fires and explosions;

· mechanical or technological failures;

· spillage handling and disposing of materials;

· adverse weather conditions; and

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

If any of these hazards materialize, they could result in suspension of operations, termination of contracts without compensation, damage to or destruction of our equipment and the property of others, or injury or death to our personnel or third parties and could expose us to substantial liability or losses. The frequency and severity of such incidents will affect operating costs, insurability and relationships with customers, employees and regulators. In addition,

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these risks may be greater for us upon the acquisition of another company that has not allocated significant resources and management focus to safety and has a poor safety record.

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

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

The oil and gas industry has historically been both cyclical and seasonal. Activity levels are driven primarily by drilling rig counts, well completions and workover activity, the geological characteristics of the producing wells and their effect on the services required to commence and maintain production levels, and our customers’ capital and operating budgets. All of these indicators are driven by commodity prices, which are affected by both domestic and global supply and demand factors. In particular, while U.S. natural gas prices are correlated with global oil price movements, they are also affected by local market weather and consumption patterns. A prolonged economic slowdown, another recession in the United States, adverse events relating to the energy industry and local, regional and national economic conditions and factors, particularly a slowdown in the E&P industry, would continue to negatively impact our ESG operations and therefore adversely affect our results. The risks associated with our business are more acute during periods of economic slowdown or recession because such periods may be accompanied by decreased spending by our customers.

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

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

We intend to fund our future capital expenditures primarily with cash flows from operating activities and existing cash balances and, to the extent that is not sufficient, from borrowings under our $750 million secured revolving credit facility. If our cash, cash flows from operating activities and borrowings under the secured revolving credit facility are not sufficient to fund our capital expenditures, we would be required to fund these expenditures through the issuance of additional debt or equity or pursue alternative financing plans, such as refinancing or restructuring our debt, selling assets or reducing or delaying acquisitions or capital investments, such as planned upgrades or acquisitions of equipment and refurbishments of equipment, even if previously publicly announced.

The terms of any future debt instruments may restrict us from adopting some of these alternatives. If debt and equity capital or alternative financing plans are not available on favorable terms or at all, we would be required to curtail our capital spending, and our ability to sustain or improve our profits may be adversely affected. Our ability to refinance or restructure our debt will depend on the condition of the capital markets and our financial condition at such time, among other things. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, incurring additional debt may significantly increase our interest expense and financial leverage, and issuing common stock may result in significant dilution to our current stockholders.

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Shortages or increases in the costs of the equipment we use in our operations, or the availability of experienced personnel to perform our services could adversely affect our operations in the future.

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

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

We do not have long term contracts with third party suppliers of many of the goods and services that we use in large volumes in our ESG operations, including manufacturers of accommodations units, rental and fishing tools, chargers and other tools and equipment used in our operations. Especially during periods in which oilfield services are in high demand, the availability of certain goods and services used in our industry decreases and the price of such goods and services increases. We are dependent on a small number of suppliers for key goods and services. During the twelve months ended January 31, 2018, based on total purchase cost, our ten largest suppliers of goods and services represented approximately 24% of all such purchases. Our reliance on such suppliers could increase the difficulty of obtaining such goods and services in the event of a shortage in our industry or cause us to pay higher prices. Price increases, delays in delivery and interruptions in supply may require us to incur higher operating costs. Each of these could have a material adverse effect on our results of operations and financial condition.

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

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

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

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

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

For the transportation and relocation of our oilfield services equipment, we operate trucks and other heavy equipment. Therefore, we are subject to regulation as a motor carrier by the U.S. Department of Transportation and by

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various state agencies, whose regulations include certain permit requirements of highway and safety authorities. These regulatory authorities exercise broad powers over our trucking operations, generally governing such matters as the authorization to engage in motor carrier operations, safety, equipment testing and specifications and insurance requirements. The trucking industry is subject to possible regulatory and legislative changes that may impact our operations, such as changes in fuel emissions limits, the hours of service regulations that govern the amount of time a driver may drive or work in any specific period, limits on vehicle weight and size and other matters. EPA regulations limiting exhaust emissions became more restrictive in 2010. In 2010, an executive memorandum was signed directing the National Highway Traffic Safety Administration (the “NHTSA”) and the U.S. Environmental Protection Agency (the “EPA”) to develop new, stricter fuel efficiency standards for heavy trucks. In 2011, the NHTSA and the EPA adopted final rules that established fuel economy and greenhouse gas standards for medium- and heavy-duty vehicles. These standards apply to model years 2014 to 2018, which are required to achieve an approximate 20 percent reduction in fuel consumption by model year 2018. In October 2016, the NHTSA and the EPA published new, stricter standards that would apply to trailers beginning with model year 2018 and tractors beginning with model year 2021. As a result of these regulations, we may experience an increase in costs related to truck purchases or rentals and maintenance, an impairment of equipment productivity, a decrease in the residual value of these vehicles and an increase in operating expenses. Proposals to increase federal, state or local taxes, including taxes on motor fuels, are also made from time to time, and any such increase would increase our operating costs. We cannot predict whether, or in what form, any legislative or regulatory changes applicable to our trucking operations will be enacted and to what extent any such legislation or regulations could increase our costs or otherwise adversely affect our results of operations and financial condition.

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

The adoption of any future federal, state or local laws or implementing regulations imposing reporting obligations on, or limiting or banning, the hydraulic fracturing process could make it more difficult to complete natural gas and oil wells and could have a material adverse impact on ESG’s results of operations and financial condition. Presently, hydraulic fracturing is regulated primarily at the state level, typically by state oil and natural gas commissions and similar agencies, although the EPA has asserted federal regulatory authority pursuant to the Safe Drinking Water Act (“SDWA”). Several states have either adopted or proposed laws and/or regulations to require oil and natural gas operators to disclose chemical ingredients and water volumes used to hydraulically fracture wells, in addition to more stringent well construction and monitoring requirements. In December 2016, the EPA released its final report on the impacts of hydraulic fracturing on drinking water resources. The EPA report concluded that hydraulic fracturing activities have not led to widespread, systemic impacts on drinking water resources in the United States, although there are above-and below-ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources. Other governmental agencies, including the U.S. Department of Energy and the U.S. Department of the Interior, are evaluating various other aspects of hydraulic fracturing. These ongoing or proposed studies could spur initiatives to further regulate hydraulic fracturing under the SDWA or other regulatory mechanisms. If new federal, state or local laws or regulations that significantly restrict hydraulic fracturing are adopted, such legal requirements could result in delays, eliminate certain drilling activities and make it more difficult or costly for our customers to perform fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could reduce oil and natural gas exploration and production activities by our customers and, therefore, adversely affect our business. Such laws or regulations could also materially increase our costs of compliance and doing business by more strictly regulating how hydraulic fracturing wastes are handled or disposed.

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

Our operations and our ESG customers’ operations are subject to stringent federal, state and local laws and regulations, including those relating to, among other things, protection of natural resources, wetlands, endangered species, the environment, health and safety, waste management, waste disposal and the transportation of waste and other

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materials. Many of the facilities that are used for our ESG operations are leased, and such leases include varying levels of indemnity obligations to the landlord for environmental matters related to our use and occupation of such facilities. Our ongoing operations and our ESG customers’ operations pose risks of environmental liability, including leakage from operations to surface or subsurface soils, surface water or groundwater. Some environmental laws and regulations may impose strict liability, joint and several liability, or both. Additionally, an increase in regulatory requirements on oil and gas exploration and completion activities could significantly delay or interrupt our ESG customers’ operations. Increased costs of regulatory compliance, claims for liability or sanctions for noncompliance and related costs could cause us or our ESG customers to incur substantial costs or losses. Clean‑up costs and other damages resulting from any contamination‑related liabilities and costs associated with changes in and compliance with environmental laws and regulations could result in the reduction or discontinuation of our or our ESG customers’ operations, and in a material adverse effect on our financial condition and results of operations.

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

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

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

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

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

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

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

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of skilled workers could impair our capacity and diminish our profitability, having a material adverse effect on our business, financial condition and results of operations.

General

There can be no assurance that our review of strategic alternatives will enhance stockholder value or result in any transaction being consummated, and speculation and uncertainty regarding the outcome of our review of strategic alternatives may adversely impact our business.

On December 22, 2017, we announced that we had engaged a financial and legal advisor and are pursuing strategic alternatives to enhance stockholder value, including a possible sale of KLX or a sale of a division or divisions thereof. There can be no assurance of the terms, timing or structure of any transactions, or whether any such transactions will take place at all, and any such transactions are subject to risks and uncertainties. The process of reviewing strategic alternatives may involve significant resources and costs. In addition, the announced review of strategic alternatives may cause or result in:

· disruption of our business;

· difficulty in maintaining or negotiating and consummating new business or strategic relationships or transactions;

· distraction to our management and employees;

· increased stock price volatility; and

· increased costs and advisory fees.

If we are unable to mitigate these or other potential risks related to the uncertainty caused by our review of strategic alternatives, it may disrupt our businesses or could have a material adverse effect on our business, financial condition or results of operations.

Our ability to complete any transaction, if our Board decides to pursue one or more, will depend on numerous factors, some of which are outside of our control, including market conditions, interest of third parties in our business, industry trends and the availability of financing to potential buyers on commercially acceptable terms. Even if a transaction is completed, there can be no assurance that it will be successful or have a positive effect on stockholder value. Our Board may also determine that no transaction is in the best interest of stockholders at the time due to various factors. Further, it is not certain what impact any potential transactions, or a decision not to pursue any potential transactions, may have on our stock price, business, financial condition or results of operations.

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

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

In terms of the energy services market, price competition, equipment availability, location and suitability, experience of the workforce, safety records, reputation, operating integrity and condition of the equipment are all factors used by customers in awarding contracts. Our competitors are numerous, and many have more financial and technological resources. Contracts are traditionally awarded on the basis of competitive bids or direct negotiations with customers. The competitive environment has intensified as recent mergers among E&P companies have reduced the number of available ESG customers. The fact that certain oilfield services equipment is mobile and can be moved from

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one market to another in response to market conditions heightens the competition in the industry. In addition, any increase in the supply of hydraulic fracturing fleets could have a material adverse impact on market prices. This increased supply could also require higher capital investment to keep our services competitive.

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

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

Our significant customers change from year to year, in the case of ASG, depending on the level of overhaul, maintenance, repair and refurbishment activity and the level of new aircraft purchases, and in the case of ESG, depending on the level of E&P activity and the use of our services. During Fiscal 2017, 2016 and 2015, no single customer accounted for more than 10% of our consolidated revenues. ASG’s top five customers for Fiscal 2017 together accounted for approximately 30% of its revenues. ESG’s top five customers for Fiscal 2017 together accounted for approximately 20% of its revenues.

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

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

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

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

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

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

We may incur additional debt under our $750 million secured revolving credit facility or otherwise to finance our operations or for future growth, including funding acquisitions. A high degree of leverage could have important consequences to us. For example, it could:

· increase our vulnerability to adverse economic and industry conditions;

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

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

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

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

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

Our business was created largely through a series of acquisitions. We regularly evaluate acquisition opportunities, frequently engage in acquisition discussions and conduct due diligence activities and, where appropriate, engage in acquisition negotiations, some of which could be material to us. Our ability to continue to achieve our goals may depend upon our ability to effectively identify attractive businesses, access financing sources on acceptable terms, negotiate favorable transaction terms and successfully consummate and integrate any businesses we acquire, achieve cost efficiencies and to manage these businesses as part of our company.

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

We may experience future impairment charges.

To conduct our global business operations and execute our strategy, we acquire tangible and intangible assets, which affect the amount of future period amortization expense and possible impairment expense that we may incur. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect our consolidated and combined financial statements. As part of our strategy, we may make one or more acquisitions, which may result in the addition of duplicative assets, particularly inventories of certain parts. In the event such an acquisition results in the combined assets of our company and the acquired assets being in excess of any reasonable forecast of future need, the excess portion of the book value of these assets may be judged to be impaired. In accordance with ASC 360, Property, Plant, and Equipment, we assess potential impairment to long-lived assets (property and equipment and amortized intangible assets) when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Our judgment regarding the existence of impairment indicators and future cash flows related to intangible assets is based on operational performance of our acquired businesses,

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expected changes in the global economy, aerospace industry projections, discount rates and other judgmental factors. We would be required to record any such impairment losses resulting from any such test as a charge to operating results. To perform the annual assessment, we utilize a combination of income and market-based approaches to value the reporting units. The income approach to valuation relies on a discounted cash flow analysis to determine the fair value of each reporting unit, which considers forecasted cash flows discounted at an appropriate discount rate. The annual goodwill impairment test requires us to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins and working capital requirements, which are based upon our long-term strategic plan. The discount rate is an estimate of the overall after-tax rate of return required by a market participant, whose weighted average cost of capital includes both equity and debt, including a risk premium. Any future impairment loss could have a material adverse impact on our results of operations. As of January 31, 2018, our management believes the estimated fair value of each of our reporting units with goodwill balances, our indefinite lived intangible assets and each of our long-lived assets were each in excess of their carrying values. There were no indicators of goodwill or intangible asset impairment at January 31, 2018.

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

Our total assets reflect substantial intangible assets. At January 31, 2018, goodwill and identified intangibles, net, represented approximately 36% of our total assets. Intangible assets consist principally of goodwill and other identified intangible assets associated with our acquisitions. On at least an annual basis, we assess whether there has been an impairment in the value of goodwill and other intangible assets with indefinite lives. If the carrying value of the tested asset exceeds its estimated fair value, impairment is deemed to have occurred. In this event, the amount is written down to fair value. Under generally accepted accounting principles in the United States, this would result in a charge to operating earnings. Any determination requiring the write‑off of a significant portion of goodwill or unamortized identified intangible assets would negatively affect our results of operations and total capitalization, which could be material. For example, during the year ended January 31, 2016, we recorded a non-cash goodwill and identified intangibles impairment charge of $488.2. There were no impairment charges recorded in Fiscal 2017, 2016 or 2014. As of January 31, 2018, the balances of goodwill and intangible assets were $1,056.8 and $308.6, respectively.

Our debt instruments have significant financial and operating restrictions that may have an adverse effect on our operations.

Our ability to make payments on and refinance our indebtedness, including our current debt as well as any future debt that we may incur, will depend on our ability to generate cash in the future from operations, financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that we cannot control. The debt instruments governing such arrangements contain numerous financial, operating and/or negative covenants that limit our ability to incur additional or repay existing indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments, to engage in transactions with affiliates, to engage in sale/leaseback transactions, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. Agreements governing future indebtedness could also contain significant financial and operating restrictions. If we cannot service our debt or repay or refinance our debt as it becomes due, we may be forced to sell assets or take other disadvantageous actions, including (1) reducing financing in the future for working capital, capital expenditures and general corporate purposes or (2) dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness. In addition, our ability to withstand competitive pressures and to react to changes in the aerospace consumables and oilfield services industries could be impaired. The lenders or other investors who hold debt that we fail to service or on which we otherwise default could also accelerate amounts due, which could potentially trigger a default or acceleration of our other debt. We may not have, or may not be able to obtain, sufficient funds to make any required accelerated payments.

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

Information technology plays a crucial role in all of our operations. To remain competitive, our hardware, software and related services must interact with our suppliers and customers efficiently, record and process our financial

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transactions accurately, and obtain the data and information to enable the analysis of trends and plans and the execution of our strategies.

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

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

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

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

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

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

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

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

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Risks Relating to the Spin‑Off

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

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

Following the distribution, on October 23, 2016, B/E Aerospace agreed to be acquired by Rockwell Collins, Inc., and the acquisition subsequently closed on April 13, 2017 (the “B/E Acquisition”). In certain circumstances, the acquisition of a company that had distributed one or more subsidiaries in a spin-off, such as B/E Aerospace, can result in a prior spin-off transaction retroactively failing to qualify for tax free treatment. Shearman & Sterling LLP has rendered opinions, on which we are entitled to rely, that the B/E Acquisition will not cause the distribution to fail to qualify for tax free treatment. The opinions of Shearman & Sterling LLP are not binding on the IRS, and no ruling will be sought regarding the effect, if any, of the B/E Acquisition on the distribution.

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

Under the Tax Sharing and Indemnification Agreement between B/E Aerospace and us, we would generally be required to indemnify B/E Aerospace against any tax resulting from the distribution to the extent that such tax resulted from any of the following events (among others): (1) an acquisition of all or a portion of our stock or assets, whether by merger or otherwise, (2) any negotiations, understandings, agreements or arrangements with respect to transactions or

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events that cause the distribution to be treated as part of a plan pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in us, (3) certain other actions or failures to act by us, or (4) any breach by us of certain of our representations or covenants. Our indemnification obligations to B/E Aerospace and its subsidiaries, officers and directors are not limited by any maximum amount. If we are required to indemnify B/E Aerospace or such other persons under the circumstances set forth in the Tax Sharing and Indemnification Agreement, we could be subject to substantial liabilities.

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

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

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

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

Although we believe that B/E Aerospace and KLX were each solvent at the time of the spin‑off (including immediately after the distribution of shares of KLX common stock), that we are able to repay our debts as they mature following the spin‑off and have sufficient capital to carry on our businesses and the spin‑off and the distribution was made entirely out of surplus in accordance with Section 170 of the DGCL, we cannot assure you that a court would reach the same conclusions in determining whether B/E Aerospace or we were insolvent at the time of, or after giving effect to, the spin‑off, or whether lawful funds were available for the separation and the distribution to B/E Aerospace’s stockholders.

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

Under the Separation and Distribution Agreement, from and after the spin‑ off, each of B/E Aerospace and we are responsible for the debts, liabilities and other obligations related to the business or businesses which it owns and operates following the consummation of the spin‑off. Although we do not expect to be liable for any obligations that are not allocated to us under the Separation and Distribution Agreement, a court could disregard the allocation agreed to between the parties, and require that we assume responsibility for obligations allocated to B/E Aerospace (including, for

34

example, environmental liabilities), particularly if B/E Aerospace were to refuse or were unable to pay or perform the allocated obligations.

Risks Relating to Our Common Stock

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

We do not currently intend to pay dividends. Our dividend policy will be established by our Board based on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board considers relevant. In addition, the terms of the agreements governing debt that we incurred in connection with the spin‑off or in the future may limit or prohibit the payments of dividends. We cannot assure you that we will pay dividends in the future or continue to pay any dividends if we do commence the payment of dividends.

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

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

Our amended and restated certificate of incorporation and amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our Board rather than to attempt a hostile takeover. These provisions include, among others:

· the inability of our stockholders to call a special meeting;

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

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

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

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

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

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

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

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES

As of January 31, 2018, we had 59 principal operating facilities, which comprise an aggregate of approximately 2.4 million square feet of space. The following table describes the principal facilities and indicates the location, function, approximate size and ownership type of each location.

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City	Segment	Sq. Feet	Ownership
Doral, FL	ASG	504,200	Lease
Kaltenkirchen, Germany	ASG	297,100	Lease
Wichita, KS	ASG	80,000	Lease
Hamburg, Germany	ASG	80,000	Lease
O'Fallon, MO	ASG	77,000	Lease
Evans City, PA	ESG	70,600	Own
Northborough, MA	ASG	60,800	Lease
Fort Smith, AR	ESG	60,000	Lease
Burgess Hill, UK	ASG	60,000	Lease
Carson, CA	ASG	56,500	Lease
Earth City, MO	ASG	48,800	Lease
Chandler, AZ	ASG	47,400	Lease
Senlis, France	ASG	46,300	Lease
Chambersburg, PA	ASG	41,300	Lease
Grand Prairie, TX	ASG	38,900	Lease
Cotulla, TX	ESG	37,900	Own
Houston, TX	ASG	35,100	Lease
Bridgeport, WV	ESG	32,500	Lease
Agawam, MA	ASG	31,100	Lease
LaSalle, CO	ESG	30,200	Lease
Bridgeport, WV	ESG	25,600	Lease
Boothwyn, PA	ASG	25,000	Lease
Williston, ND	ESG	24,900	Own
Midvale, OH	ESG	23,400	Lease
Eunice, NM	ESG	23,100	Lease
Singapore	ASG	21,700	Lease
Everett, WA	ASG	21,700	Lease
Houston, TX	ESG	20,500	Lease
Throop, PA	ASG	20,000	Lease
Greensboro, NC	ASG	20,000	Lease
Gillette, WY	ESG	19,500	Own
Banyo QLD, Australia	ASG	19,400	Lease
Bossier City, LA	ESG	18,000	Lease
Simpson District, WV	ESG	18,000	Lease
Kenedy, TX	ESG	17,800	Lease
Gillette, WY	ESG	17,500	Lease
Wellington, FL	Corporate Administrative Headquarters	17,000	Lease
San Angelo, TX	ESG	16,800	Lease
Oklahoma City, OK	ESG	16,600	Lease
Vernal, UT	ESG	16,000	Lease
Paramus, NJ	ASG	15,500	Lease
Johnstown, CO	ESG	14,800	Own
Rock Springs, WY	ESG	14,300	Lease
Tioga, PA	ESG	14,000	Lease
Rzeszow, Poland	ASG	13,700	Lease
Casper, WY	ESG	13,600	Lease
Bossier City, LA	ESG	13,300	Lease
Sterling, CO	ESG	13,000	Lease
Weatherford, TX	ESG	12,600	Own
Platteville, CO	ESG	12,500	Own
Midland, TX	ESG	12,400	Lease
Houston, TX	ESG	12,300	Lease
Williston, ND	ESG	12,300	Own
Lewiston, ME	ASG	12,000	Lease
Dickinson, ND	ESG	11,600	Lease
Midland, TX	ESG	10,900	Lease
Singapore	ASG	10,500	Lease
Midland, TX	ESG	10,100	Lease
Bridgeport, WV	ESG	10,000	Lease

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

ITEM 3.  LEGAL PROCEEDINGS

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

There are no material pending legal proceedings, other than the ordinary routine litigation incidental to the business discussed above, to which we, or any of our subsidiaries, are a party or of which any of our property is the subject. See Note 8. Commitments, Contingencies and Off-Balance Sheet Arrangements.

ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

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

Our common stock is quoted on the NASDAQ Global Select Market under the symbol “KLXI”. The following table sets forth, for the periods indicated, the range of high and low per share sales prices for the common stock as reported by NASDAQ.

	Common Stock
	High		Low
Fiscal 2016:
First Quarter	$	34.29	$	25.33
Second Quarter		35.25		28.65
Third Quarter		39.00		30.97
Fourth Quarter		50.33		33.17
Fiscal 2017:
First Quarter	$	52.40	$	42.45
Second Quarter		53.13		46.01
Third Quarter		55.76		45.73
Fourth Quarter		72.53		52.82

On March 13, 2018, the last reported sale price of our common stock as reported by NASDAQ was $71.51 per share. As of such date, based on information provided to us by Computershare, our transfer agent, we had 1,451 registered holders, and because many of these shares are held by brokers and other institutions on behalf of the beneficial holders, we are unable to estimate the number of beneficial stockholders represented by these holders of record.

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Our share price has increased approximately 38% and 91% over the last 12 and 18 months, respectively, for the period ended December 22, 2017, which was the date of the Company’s strategic alternatives announcement.

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

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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 January 31, 2018:

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
November 1, 2017 - November 30, 2017		3,741	$	53.60		—	$	118.7
December 1, 2017 - December 31, 2017		703,421		68.82		—		118.7
January 1, 2018 – January 31, 2018		1,872		69.20		—		118.7
Total		709,034				—

(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 stock 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.

ITEM 6.  SELECTED FINANCIAL DATA

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

The following tables present a summary of selected historical consolidated and combined financial data for the periods indicated below. We derived the selected historical condensed consolidated and combined statements of earnings data for the years ended January 31, 2018, 2017 and 2016 and the balance sheet data as of January 31, 2018 and 2017 from our audited consolidated and combined financial statements included elsewhere in this Form 10‑K. We derived the selected historical financial data as of January 31, 2016 and 2015 and December 31, 2014 and 2013, and for the fiscal years ended December 31, 2014 and 2013 and for the one-month transition period ended January 31, 2015 from audited financial statements.

The historical statements of earnings and comprehensive income for periods prior to December 16, 2014 reflect allocations of general corporate expenses from B/E Aerospace including, but not limited to, executive management, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, procurement and other shared services. The allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues generated, costs incurred, headcount or other measures. Our management considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to, KLX. The allocations may not, however, reflect the expense we would have incurred as a stand‑alone company for such periods. Actual costs that may have been incurred if we had been a stand‑alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.

The financial information for periods prior to the spin-off from B/E Aerospace on December 16, 2014 included in this Form 10‑K may not necessarily reflect our financial position, results of operations and cash flows as if we had

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operated as a stand‑alone public company during such periods. Accordingly, our historical results should not be relied upon as an indicator of our future performance.

In presenting the financial data in conformity with GAAP, we are required to make estimates and assumptions that affect the amounts reported. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies,” included elsewhere in this Form 10‑K for a detailed discussion of the accounting policies that we believe require subjective and complex judgments that could potentially affect reported results.

The following selected historical financial and other data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated and combined financial statements and related notes included elsewhere in this Form 10‑K.

	Year Ended										Month Ended
	January 31, 2018		January 31, 2017		January 31, 2016		December 31, 2014		December 31, 2013		January 31, 2015
Statements of Earnings Data:
Revenues	$	1,740.8	$	1,494.1	$	1,567.4	$	1,695.7	$	1,291.6	$	133.0
Cost of sales(1)		1,263.8		1,126.1		1,202.4		1,194.9		872.8		95.6
Selling, general and administrative(1)		260.7		238.6		261.6		254.0		180.3		19.7
Goodwill impairment charge		—		—		310.4		—		—		—
Long-lived asset impairment charge		—		—		329.8		—		—		—
Operating earnings (loss)		216.3		129.4		(536.8)		246.8		238.5		17.7
Interest expense (income), net		75.8		75.9		77.3		3.0		(1.0)		6.3
Earnings (loss) before income taxes		140.5		53.5		(614.1)		243.8		239.5		11.4
Income taxes(2)		87.1		5.3		(228.3)		155.7		89.1		4.3
Net earnings (loss)	$	53.4	$	48.2	$	(385.8)	$	88.1	$	150.4	$	7.1
Basic net earnings (loss) per share(3):
Net earnings (loss)	$	1.06	$	0.93	$	(7.39)	$	1.69	$	2.88	$	0.14
Weighted average common shares		50.5		51.8		52.2		52.2		52.2		52.2
Diluted net earnings (loss) per share(3):
Net earnings (loss)	$	1.04	$	0.92	$	(7.39)	$	1.68	$	2.88	$	0.14
Weighted average common shares		51.3		52.2		52.2		52.3		52.3		52.3
Balance Sheet Data (end of period):
Working capital	$	1,743.5	$	1,702.5	$	1,761.6	$	1,788.4	$	1,366.1	$	1,792.0
Goodwill, intangible and other assets, net		1,398.1		1,343.4		1,244.3		1,792.3		1,417.6		1,766.4
Total assets		3,790.0		3,698.3		3,691.0		4,280.6		3,064.0		4,224.6
Stockholders’ equity		2,269.9		2,221.1		2,202.5		2,620.3		2,798.7		2,601.1
Other Data:
Depreciation and amortization		66.1		66.9		75.0		68.0		27.8		7.3

(1) Cost of sales and selling, general and administrative (“SG&A”) expense include $0.4 and $5.8, respectively, of costs primarily associated with the process being conducted by our Board of Directors to review strategic alternatives, the transition to the new ASG global distribution and operations center, a restructuring of the Eagle Ford Geo Region, which was the ESG segment’s only unprofitable region and other matters for the year ended January 31, 2018. Cost of sales and SG&A expense include $30.3 and $37.2, respectively, of business separation and acquisition‑related costs for the year ended January 31, 2016. Cost of sales and SG&A expense include $3.5 and $53.4, respectively, of acquisition‑related costs for the year ended December 31, 2014.

(2) For the year ended January 31, 2018 the Company was required to revalue its deferred tax assets as a result of recently enacted tax legislation. This revaluation and a change to the state tax rate resulted in a one-time non-cash tax charge of $43.3.

(3) On December 16, 2014, B/E Aerospace, Inc. distributed to its stockholders of record as of the close of business on December 5, 2014 one share of KLX common stock for every two shares of B/E’s common stock held as of the

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record date. Basic and diluted earnings per common share and the average number of common shares outstanding were calculated using the number of KLX common shares outstanding immediately following the distribution. See Note 11, Stockholders’ Equity, of the notes to the Consolidated and Combined Financial Statements for information regarding earnings per common share.

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

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

Overview

The Spin‑off

On December 16, 2014, B/E Aerospace distributed 100% of the outstanding shares of common stock of KLX to the B/E stockholders of record in a transaction intended to be tax‑free to B/E Aerospace, KLX and our initial stockholders for U.S. federal income tax purposes (other than with respect to any cash received in lieu of fractional shares) (“Spin-Off”).

As planned, subsequent to the Spin‑Off, we started bringing some of the functions that were previously provided to us through corporate allocations from B/E Aerospace in‑house. We entered into certain agreements with B/E Aerospace relating to transition services and IT services through April 2017. Annual charges under those agreements for services provided to us by B/E Aerospace were not material for the year ended January 31, 2018 and totaled $8.7 for the year ended January 31, 2017. In addition, at the time of the Spin-Off, we entered into an Employee Matters Agreement and a tax sharing and indemnification agreement with B/E Aerospace. We also entered into new financing arrangements in connection with the Spin‑Off. See “Liquidity and Capital Resources—New Financing Arrangements.”

Company Overview

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

Immediately prior to the end of January 2018, we acquired two new product lines. The first purchase includes high performance fasteners and precision components and assemblies dedicated to aircraft engine manufacturing. The second product line will enable us to offer our customers technical products, systems and expertise in motion and control applications, including hydraulics, pneumatics, fluid connectors, filtration, electrical control systems, seals, compressors and engineered systems for both OEM and aftermarket applications. The total purchase price of these new product lines was approximately $65.0.

In May 2016, we acquired Herndon Aerospace & Defense, LLC (“Herndon”), a leading supply chain management and consumables hardware distributor serving principally military depot aftermarket customers, as well as commercial aerospace customers. The acquisition of Herndon expanded our capability to provide comprehensive

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aftermarket supply chain management solutions to a broader portfolio of aftermarket customers. Herndon has established itself with the U.S. Department of Defense and its procurement arm, the Defense Logistics Agency (“DLA”), as a proven supplier of a broad range of consumables, resulting in a number of long term contracts with major military installations. Herndon’s status as an approved supplier to the DLA gives us the ability to expand our military aftermarket business as well as providing a platform for the introduction of new product offerings to Herndon’s existing customer base.

In 2013, we initiated an expansion into the U.S. onshore oil and gas services sector. We acquired seven companies in the business of providing technical services and related rental equipment to oil and gas exploration and production companies operating in every major onshore oil and gas region in the U.S. other than California, and have consolidated these companies into a single, coordinated business to most effectively serve our customers. 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 properties in North America, including in the Northeast (Marcellus and Utica Shale), Rocky Mountains (Williston and Piceance Basins), Southwest (Permian Basin and Eagle Ford) and Mid‑Continent. This business is operated within our ESG segment.

The oil and gas industry experienced a significant downturn commencing in late 2014 that continued throughout 2015 and most of 2016, during which time plummeting commodity prices driven by excess global supply resulted in record reductions in spending by all of our customers. At its low point in the second quarter of 2016, the domestic onshore drilling rig count was cut by over 75% from its peak in 2014 of 1,931 rigs to 404 rigs. As a result of the severity of this decline and the uncertainty of when industry conditions would improve, during the third quarter of 2015, we performed an interim asset impairment test in which we concluded the carrying value of our assets were impaired, resulting in an approximately $640.2 pre-tax ($402.7 after-tax) non-cash impairment charge.

Recent Developments

On December 22, 2017, we announced that our Board initiated a review of strategic alternatives to maximize stockholder value, including a possible sale of KLX or a sale of a division or divisions thereof. We have engaged a financial and legal advisor to assist in the process. There can be no assurance of the terms, timing or structure of any transactions, or whether any such transactions will take place at all, and any such transactions are subject to risks and uncertainties. As our Board conducts its review, we remain committed to executing on our business strategies.

Current Industry Conditions

Within our ASG segment, we generally derive our revenues from aerospace products and consumable products for both the new build market and the aftermarket. Our ASG business achieved a record in both revenues and profitability in 2017, as a result of solid demand from our commercial aerospace and defense manufacturing customers. Based upon aircraft manufacturers’ backlogs, we expect the current level of production to increase by a mid-single digit percentage growth rate in 2018. During 2017, ASG was awarded several new contracts and achieved certainmarket share gains. Defense spending has historically been driven by the timing of military aircraft orders and evolving government strategies and policies. We also support military depots for all five branches of our armed services, which maintain in-service aircraft and equipment. Defense spending began to decline in 2012 as the U.S. government implemented its sequestration program and began to sunset production of numerous military aircraft. As a result, we have seen demand from our military and defense manufacturing customers decline from peak levels experienced prior to 2012. Although defense spending has declined since 2012 due to the U.S. government’s sequestration program and sunsetting of numerous military aircraft platforms, industry analysts expect defense spending to increase at a mid-single digit annual rate over the next five years due to recently enacted legislation. Similarly, business jet manufacturing has declined since 2007 as a result of lower demand driven by austerity measures implemented by corporate customers, and the reduction in demand from businesses and countries affected by depressed conditions in the global oil and gas industry. However, this extended period of decline is expected to end in 2018 as business jet deliveries are expected to increase 4% in response to mid-single digit growth in business jet traffic and the introduction of new products expected to stimulate demand for new aircraft. Finally, our aftermarket revenues include both commercial aerospace customers and our business serving U.S. military depots. We expect aftermarket revenues to trend upwards in 2018 and beyond, as a larger percentage of the the approximately 12,500 new aircraft which have been delivered since 2009 begin to require their first heavy maintenance.

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Within our ESG segment, the technological advancements over the past approximately thirty years that allow for enhanced recovery from shale formations underlying much of the major onshore oil and gas reservoirs in the United States have expanded the market for services to support the drilling, completion and production of onshore oil and gas wells dramatically. This has led to rapid growth in the market for the services we provide, culminating in record financial results for many oil field service providers in 2014. However, the global production of oil and gas that year led to an imbalance of supply and demand that caused a rapid decline in commodity prices starting in late 2014 and continuing throughout 2015 and into 2016. In response to the dramatic downturn in the global markets for oil and gas and associated oil field services that prevailed through all of 2015 and 2016, the oil field services industry experienced a deep retrenchment where both capacity of services across the industry was cut and the pricing of services became deeply depressed. In response to these industry conditions, we implemented a business alignment and cost reduction initiative in 2015 to optimize both the size of our operations and the alignment of our assets and personnel, to position KLX to be the pre-eminent provider of the services we offer in each of the geographic regions we serve as the industry recovered.

We began to see a stabilization in demand in late 2016, and with oil prices rising through the $40’s per barrel and into the $60’s in 2017, we have begun to benefit from our customers’ renewed commitment to their capital budgets. During the year ended January 31, 2018, ESG experienced a 109.3% increase in revenues as compared with the prior year, and operating earnings turned positive during the fourth quarter of 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.

Revenues by reportable segment for the years ended January 31, 2018, 2017 and 2016 were as follows:

	Year Ended January 31,
	2018				2017				2016
		Revenues	% of Revenues			Revenues	% of Revenues			Revenues	% of Revenues
Aerospace Solutions Group	$	1,420.2	81.6	%	$	1,340.9	89.7	%	$	1,312.5	83.7	%
Energy Services Group		320.6	18.4	%		153.2	10.3	%		254.9	16.3	%
Total revenues	$	1,740.8	100.0	%	$	1,494.1	100.0	%	$	1,567.4	100.0	%

Substantially all of our sales and purchases are denominated in U.S. dollars. Revenues by domestic and foreign operations for the years ended January 31, 2018, 2017 and 2016 were as follows:

	Year Ended January 31,
	2018		2017		2016
Domestic	$	1,734.2	$	1,423.8	$	1,453.4
Foreign		6.6		70.3		114.0
Total revenues	$	1,740.8	$	1,494.1	$	1,567.4

Revenues by geographic region (based on destination) for the years ended January 31, 2018, 2017 and 2016 were as follows:

	Year Ended January 31,
	2018				2017				2016
			% of				% of				% of
	Revenues		Revenues		Revenues		Revenues		Revenues		Revenues
United States	$	1,090.4	62.6	%	$	865.6	57.9	%	$	955.3	61.0	%
Europe		382.7	22.0	%		387.9	26.0	%		376.3	24.0	%
Asia, Pacific Rim, Middle East and other		267.7	15.4	%		240.6	16.1	%		235.8	15.0	%
Total revenues	$	1,740.8	100.0	%	$	1,494.1	100.0	%	$	1,567.4	100.0	%

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Founded in 1974 as M&M Aerospace Hardware, ASG, formerly the consumables management segment of B/E Aerospace, Inc., has evolved into one of the industries leaders through multiple acquisitions and strong organic growth. As of January 31, 2018, ASG’s global presence consisted of approximately 1.7 million square feet in 25 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 2017, we completed nine acquisitions, for an aggregate purchase price of approximately $2.2 billion. We believe our organic growth together with these acquisitions has enabled us to position ourselves as a preferred global supplier to our customers.

The Company initiated an expansion into the oilfield support services and associated rental equipment business during the second half of 2013. During 2013 and 2014, we acquired the assets of seven oilfield service companies operating in each of the key shale oil and gas basins in North America for an aggregate purchase price of $717.7 (including deferred acquisition payments). Through these energy services acquisitions, we have established a base of North American operations from which we are able to offer our oilfield support services and associated rental equipment in the major oil and gas regions of the U.S., including Northeastern U.S., Southwestern U.S., North Dakota, Rocky Mountains and the Mid‑Continent.

The Company is organized based on the products and services it offers. As a result, we determined that ASG and ESG met the requirements of a reportable segment. 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.

The following discussion and analysis addresses the results of our operations for the years ended January 31, 2018, 2017 and 2016. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods.

Year Ended January 31, 2018, as Compared to Year Ended January 31, 2017

The following is a summary of revenues by segment:

	Revenues
					%
Segment	January 31, 2018		January 31, 2017		Change
Aerospace Solutions Group	$	1,420.2	$	1,340.9	5.9	%
Energy Services Group		320.6		153.2	109.3	%
Total	$	1,740.8	$	1,494.1	16.5	%

For Fiscal 2017, revenues of $1,740.8 increased $246.7, or 16.5%, as compared with the prior year. Our consolidated revenue growth was driven by a 5.9%, or $79.3, increase in ASG revenues and a 109.3%, or $167.4, increase in ESG revenues.

Cost of sales for Fiscal 2017 was $1,263.8, or 72.6% of sales, as compared to $1,126.1, or 75.4% of sales, for the year ended January 31, 2017 (“Fiscal 2016”). Cost of sales as a percentage of revenues improved by 280 basis points, despite $0.4 of costs associated with the transition to the new ASG global distribution and operations center and a restructuring of the Eagle Ford Geo Region, due to substantially improved results at our ESG business due to the improved market conditions, operating leverage and benefits from our ESG cost reduction initiatives, as well as a 30 basis point improvement at our ASG business.

Selling, general and administrative (“SG&A”) expense during Fiscal 2017 was $260.7, or 15.0% of revenues, as compared with $238.6, or 16.0% of revenues, in the prior year period. SG&A, as a percentage of revenues, improved by 100 basis points in Fiscal 2017 as compared with the prior year primarily due to increased operating leverage at ESG and a 10 basis point improvement at ASG, including $5.8 of costs primarily associated with the process being conducted by our Board of Directors to review strategic alternatives, the transition to the new ASG global distribution and operations

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center, a restructuring of the Eagle Ford Geo Region, which was the ESG segment’s only unprofitable region and other matters.

Operating earnings and operating margin of $216.3 and 12.4% increased by approximately $86.9 and 380 basis points, respectively, reflecting an approximate 30 basis point expansion in ASG’s operating margin and continued strong year-over-year improvement at ESG, including the $6.2 of costs primarily associated with the process being conducted by our Board of Directors to review strategic alternatives, the transition to the new ASG global distribution and operations center, a restructuring of the Eagle Ford Geo Region, which was the ESG segment’s only unprofitable region and other matters.

Interest expense for the twelve months ended January 31, 2018 was $75.8 as compared to $75.9 for the twelve months ended January 31, 2017.

Income tax expense for the twelve months ended January 31, 2018 was $87.1, or 62.0% of earnings before income taxes, compared to $5.3, or 9.9%, in the prior year period. Income tax expense for the Fiscal 2017 period included a one-time non-cash tax charge of $43.3 primarily related to the remeasurement of our U.S. net deferred tax asset to reflect the reduction in the corporate tax rate from 35% to 21% as a result of recent tax legislation. Excluding the impact of this one-time non-cash charge, our effective tax rate was 31.2% for the fiscal year ended January 31, 2018, reflecting the blended U.S. corporate tax rate of 35% for the 11 months ended December 31, 2017 and 21% for the one month ended January 31, 2018.

Net earnings and net earnings per diluted share for the year ended January 31, 2018 were $53.4 and $1.04, respectively, as compared to $48.2 and $0.92 respectively, in Fiscal 2016. Net earnings and net earnings per diluted share were negatively impacted in Fiscal 2017 by the previously mentioned one-time non-cash tax charge of $43.3.

Segment Results

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

	Operating Earnings (Loss)
					%
Segment	January 31, 2018		January 31, 2017		Change
Aerospace Solutions Group	$	238.5	$	220.6	8.1	%
Energy Services Group		(22.2)		(91.2)	75.7	%
Total	$	216.3	$	129.4	67.2	%

For the year ended January 31, 2018, ASG revenues of $1,420.2 increased by $79.3, or 5.9%, as compared to the same period in the prior year. Revenues from both commercial aerospace manufacturing and aftermarket customers increased by approximately 6%. ASG operating earnings of $238.5 increased 8.1%, and operating margin increased approximately 30 basis points to 16.8%.

For the year ended January 31, 2018, ESG revenues of $320.6 increased by $167.4, or 109.3%, as compared to the same period in the prior year. Operating loss improved by $69.0, or 75.7%, to $(22.2).

Year Ended January 31, 2017 Compared to the Year Ended January 31, 2016

The following is a summary of revenues by segment:

	Revenues
					%
Segment	January 31, 2017		January 31, 2016		Change
Aerospace Solutions Group	$	1,340.9	$	1,312.5	2.2	%
Energy Services Group		153.2		254.9	(39.9)	%
Total	$	1,494.1	$	1,567.4	(4.7)	%

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For Fiscal 2016, revenues of $1,494.1 decreased $73.3, or 4.7%, as compared with the prior year. The consolidated results reflect a 2.2%, or $28.4, increase in ASG revenues offset by a $101.7 decline in ESG revenues.

Cost of sales for Fiscal 2016 was $1,126.1, or 75.4% of sales, as compared to $1,202.4, or 76.7% of sales, for the year ended January 31, 2016 (“Fiscal 2015”). The year over year improvement is primarily related to cost reduction initiatives and the absence of spin-off related costs in Fiscal 2016.

Selling, general and administrative (“SG&A”) expense during Fiscal 2016 was $238.6, or 16.0% of revenues, as compared with $261.6, or 16.7% of revenues, in the prior year period. SG&A decreased in Fiscal 2016 as compared with the prior year by 70 basis points primarily due to post spin-off and business repositioning costs in the prior year period.

Operating earnings increased $666.2 to $129.4, primarily as a result of the $640.2 asset impairment charge at ESG in the prior year period compared to none in the current year period in addition to a 2.2% increase in revenues at ASG. The aforementioned results also reflect approximately $5.8 of costs and expenses associated with the Herndon acquisition.

Interest expense for the twelve months ended January 31, 2017 was $75.9 as compared to $77.3 for the twelve months ended January 31, 2016.

Income tax expense for the twelve months ended January 31, 2017 was $5.3, or 9.9% of earnings before income taxes, compared to income tax benefit of $228.3, or 37.2% of loss before income taxes, in the prior year period.

Net earnings and net earnings per diluted share for the year ended January 31, 2017 were $48.2 and $0.92, respectively, as compared to net loss and net loss per diluted share of $385.8 and $7.39, respectively, in Fiscal 2015. The increase was primarily related to the $640.2 asset impairment charge at ESG in the prior year compared to none in the current year.

Segment Results

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

	Operating (Loss) Earnings
					%
Segment	January 31, 2017		January 31, 2016(1)		Change
Aerospace Solutions Group	$	220.6	$	211.6	4.3	%
Energy Services Group		(91.2)		(748.4)	87.8	%
Total	$	129.4	$	(536.8)	124.1	%

(1) Includes $67.5 ($29.0 at ASG, $38.5 at ESG) of Post Spin-Off and Business Repositioning Expenses and a $640.2 impairment charge at ESG for the year ended January 31, 2016.

For the year ended January 31, 2017, ASG revenues of $1,340.9 increased 2.2%, driven principally by the contribution of Herndon’s military aftermarket business and increased aircraft maintenance activity. On a comparative basis with the prior year, ASG revenues in the first half of 2016 were negatively impacted by headwinds from our legacy military manufacturing customers and lower production levels at a number of commercial aerospace manufacturing customers. ASG revenues in the third and fourth quarters of 2016 reflect the inclusion of Herndon and an improvement in aftermarket demand due to an increase in aircraft maintenance activity. Operating earnings of $220.6 improved by 4.3% principally as a result of the increase in revenues from Herndon’s military aftermarket business and $29.0 of Post Spin-Off related costs in the prior year (none in Fiscal 2016) offset by the headwinds in the first half of 2016 discussed above.

For Fiscal 2016, ESG revenues of $153.2 declined $101.7, or 39.9%, as compared to the prior year, while operating loss improved by $657.2, or 87.8%, to ($91.2). ESG recorded an asset impairment charge of $640.2 in Fiscal 2015. Exclusive of this charge, ESG’s Fiscal 2016 operating loss improved by $17.0, or 15.7%. The improvement in

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operating loss reflects the intensive effort to consolidate facilities and align headcount with demand. We believe demand for oil field services may have troughed in the first half of 2016 and has begun to trend up.

Liquidity and Capital Resources

Current Financial Condition

Cash on hand at January 31, 2018 decreased by $22.0 as compared with cash on hand at January 31, 2017 primarily as a result of the repurchase of $92.1 of KLX common shares, $84.9 of capital expenditures, and $64.8 related to the acquisition of two new product lines to serve existing ASG customers and expand our opportunity set with new customers offset by cash flows provided by operating activities of $206.6. One purchase includes high performance fasteners and precision components and assemblies dedicated to aircraft engine manufacturing. The other purchased group of products will enable us to offer our customers technical products, systems and expertise in motion and control applications, including hydraulics, pneumatics, fluid connectors, filtration, electrical control systems, seals, compressors and engineered systems for both OEM and aftermarket applications. 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 are from cash on hand, cash flow from operations and our undrawn $750.0 Revolving Credit Facility. At January 31, 2018, we had $255.3 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.

During Fiscal 2015, our Board authorized repurchases of up to $100.0 of common stock under our existing $250.0 share repurchase program previously authorized by the Board. During Fiscal 2017, our Board authorized an increase in the Company’s share repurchase authority from $100.0 to $200.0. We have continued to repurchase shares in the open market and in privately negotiated transactions in compliance with Exchange Act Rule 10b-18, subject to market conditions, applicable legal requirements and other relevant factors. During Fiscal 2017, under the share repurchase program, we repurchased 1,652,661 shares of common stock at an average price of $48.04 per share for a total of $79.4. At January 31, 2018, we had $68.7 of authorization remaining under the share repurchase program. All decisions regarding future stock repurchases are at our sole discretion and will be evaluated from time to time in light of many factors, including our financial condition, earnings, capital requirements and debt covenants, if any, other contractual restrictions, as well as legal requirements (including compliance with published IRS guidelines for tax‑free spin‑offs), regulatory constraints, industry practice and other factors that we may deem relevant. The stock repurchase program may be modified, extended, suspended or discontinued by us at any time and we cannot provide any assurances regarding the number of shares that will be repurchased.

Working Capital

Working capital as of January 31, 2018 was $1,743.5, an increase of $41.0 as compared with working capital at January 31, 2017. As of January 31, 2018, total current assets increased by $71.4 and total current liabilities increased by $30.4. The increase in current assets is primarily related to the $54.8 increase in accounts receivable driven by the increase in revenues at both ASG and ESG and an increase in inventories of $26.5 as a result of previously mentioned product line acquisitions offset by a decrease in cash of $22.0. The increase in total current liabilities was primarily due to an increase in accounts payable of $14.8 and accrued liabilities of $15.6.

Cash Flows

As of January 31, 2018, cash and cash equivalents were $255.3 as compared to $277.3 at January 31, 2017. Cash provided by operating activities increased by $55.7 to $206.6 for the year ended January 31, 2018 as compared to $150.9 in the prior year primarily reflecting net earnings of $53.4 as compared with $48.2 in the prior year, an $80.9 reduction in the deferred tax asset ($6.2 in the prior year) and an increase in other current and non-current liabilities of $19.8 ($30.4 decrease in the prior year) offset by a $44.4 increase in accounts receivable ($6.9 decrease in the prior year). The primary uses of cash in investing activities during the year ended January 31, 2018 were related to capital expenditures of $84.9 and the acquisition of new product lines for $64.8. The primary use of cash in financing activities during the year ended January 31, 2018 was related to treasury stock purchases of $92.1.

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As of January 31, 2017, cash and cash equivalents were $277.3 as compared to $427.8 at January 31, 2016. Cash provided by operating activities was $150.9 for the year ended January 31, 2017 as compared to $217.2 in the prior year primarily reflecting net earnings of $48.2 adjusted by depreciation and amortization of $66.9 and a $6.9 decrease in accounts receivable ($40.3 decrease in the prior year period) offset by a $30.4 decrease in accrued liabilities ($18.8 increase in the prior year period) and an increase in inventory of $5.0 ($25.7 decrease in the prior year period). The primary uses of cash in investing activities during the year ended January 31, 2017 were related to capital expenditures of $35.5 and the acquisition of Herndon for $220.8, net of cash. The primary use of cash in financing activities during the year ended January 31, 2017 was related to our share repurchase program, under which we repurchased 982,062 shares of common stock at an average price of $41.20 per share for a total of $40.5.

As of January 31, 2016, cash and cash equivalents were $427.8 as compared to $447.2 at January 31, 2015. Cash provided by operating activities was $217.2 for the year ended January 31, 2016 as compared to $107.5 in the prior year. The primary sources of cash provided by operating activities during the year ended January 31, 2016 were net earnings of $25.1 (after adjusting for the non-cash charge of ($229.3) to deferred income taxes and the impairment charge of $640.2), adjusted by depreciation and amortization of $75.0, as well as a decrease in accounts receivable and inventories of $40.3 and $25.7, respectively. The primary uses of cash in investing activities during the year ended January 31, 2016 were related to capital expenditures of $130.5. The primary use of cash in financing activities during the year ended January 31, 2016 was for $90.9 of deferred acquisition payments associated with acquisitions we made in 2014.

Capital Spending

Our capital expenditures were $84.9, $35.5 and $130.5 during the years ended January 31, 2018, 2017 and 2016, respectively. Capital expenditures in 2017 were $84.9 reflecting investments related to our new 550,000 square foot ASG Miami global distribution and operations center, and discrete investments within the ESG business. In addition, as previously disclosed, immediately prior to the end of the fourth quarter we invested approximately $65.0 to expand ASG’s product offerings. We expect to incur approximately $65.0 to $75.0 in capital expenditures for the year ending January 31, 2019, principally related to ESG growth and maintenance capital expenditures and the completion of the new global headquarters and distribution facility and maintenance capital expenditures for ASG. We expect to fund future capital expenditures from cash on hand, cash flow from operations and from funds available from our $750.0 secured revolving credit facility.

Outstanding Debt and Other Financing Arrangements

Long-term debt at January 31, 2018 consisted of $1,200.0 of 5.875% senior unsecured notes due 2022, which at the date of this filing are redeemable at our option at 104.406% of the principal amount, plus accrued and unpaid interest.

We entered into a $500.0 secured revolving credit facility in connection with the Spin-Off, secured by substantially all of our assets and guaranteed by our subsidiaries, which bears interest at the London interbank offered rate (“LIBOR”) plus the applicable margin (as defined). On May 19, 2015, we amended and restated this secured Revolving Credit Facility to a structure tied to a borrowing base formula, and in the process, increased the size of the facility to $750.0 while reducing the interest rate margins applicable to any borrowings. No amounts were outstanding under this credit facility as of January 31, 2018. We believe that our cash flows, together with cash on hand and funds available under our $750.0 secured revolving credit facility will provide us with the ability to fund our operations, make planned capital expenditures payments and meet our debt service obligations.

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Contractual Obligations

The following chart reflects our contractual obligations and commercial commitments as of January 31, 2018. 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	2018		2019		2020		2021		2022		Thereafter		Total
Long-term debt and other non-current liabilities (1)	$	1.2	$	0.9	$	1.0	$	1.1	$	1,200.2	$	27.8	$	1,232.2
Operating leases		31.2		30.1		24.7		20.6		15.0		68.5		190.1
Future interest payments on outstanding debt (2)		72.6		72.6		71.2		70.6		70.6		0.2		357.8
Total	$	105.0	$	103.6	$	96.9	$	92.3	$	1,285.8	$	96.5	$	1,780.1
Commercial Commitments
Letters of credit	$	5.8		—		—		—		—		—	$	5.8

(1) Our liability for unrecognized tax benefits of $8.4 and related interest and penalties of $1.5 at January 31, 2018 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 combined financial statements.

(2) Interest payments include interest payments due on the 5.875% Notes based on the stated rate of 5.875%. To the extent we incur interest on our revolving credit facility, interest payments would fluctuate based on LIBOR or prime rate pursuant to the terms of our revolving credit facility.

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 consolidated balance sheet. Future minimum lease payments under these arrangements aggregated approximately $190.1 at January 31, 2018.

Indemnities, Commitments and Guarantees

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

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 MSAs with our E&P customers, which set forth the terms and conditions

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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

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

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

Revenue Recognition

Sales of products and services are recorded when the earnings process is complete. This generally occurs when the products are shipped to the customer in accordance with the contract or purchase order, risk of loss and title has passed to the customer, collectability is reasonably assured and pricing is fixed and determinable. In instances where title does not pass to the customer upon shipment, we recognize revenue upon delivery or customer acceptance, depending on the terms of the sales contract. Management provides allowances for credits and returns, based on historic experience, and adjusts such allowances as considered necessary.

In connection with the sales of our products, we also provide certain supply chain management services to certain of our customers. These services include the timely replenishment of products at the customer site, while also minimizing the customer’s on‑hand inventory. These services are provided by us contemporaneously with the delivery of the product, and as such, once the product is delivered, we do not have a post‑delivery obligation to provide services to the customer. The price of such services is generally included in the price of the products delivered to the customer, and revenue is recognized upon delivery of the product, at which point, we have satisfied our obligations to the customer. We do not account for these services as a separate element, as the services do not have stand‑alone value and cannot be separated from the product element of the arrangement.

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

Accounts Receivable

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

Inventories

Inventories, made up of finished goods, primarily consist of aerospace fasteners and consumables. We value inventories at the lower of cost and net realizable value, using “first‑in, first‑out” (FIFO) or weighted average cost method. During Fiscal 2016, we revised our methodology for estimating the provision required for excess and obsolete

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(“E&O”) inventories. The new methodology more adequately considers historical demand of our inventory to project future demand in order to estimate the provision required for E&O inventories. Other factors considered in the methodology include expected market growth rates and related elements. The implementation of the changes in methodology did not impact the current period or any prior period provision for E&O inventory. Demand for our products can fluctuate from period to period depending on customer activity. Our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess, obsolete and unmarketable inventories. In the future, if our inventories are determined to be overvalued, we would be required to recognize such costs in our cost of goods sold at the time of such determination. Likewise, if our inventories are determined to be undervalued, we may have over‑reported our costs of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale. Inventory reserves were approximately $72.4 and $59.6 as of January 31, 2018 and 2017, respectively.

Substantially all of our inventory is comprised of aerospace grade fasteners which support OEM production and the aftermarket over the life of the airframe. Inventory with a limited shelf life is continually monitored and reserved for in advance of expiration. The reserve for inventory with limited shelf life is not material to the Company’s financial statements.

Long‑Lived Assets and Goodwill

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

In accordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”), we assess potential impairment to goodwill of a reporting unit and to indefinite lived intangible assets on an annual basis, or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or indefinite lived intangible asset below its carrying amount. An impairment loss occurs if the amount of the recorded goodwill exceeds the implied goodwill. We would be required to record any such impairment losses. To perform the annual assessment, we utilize a combination of income and market-based approaches to value the reporting units. The income approach to valuation relies on a discounted cash flow analysis to determine the fair value of each reporting unit, which considers forecasted cash flows discounted at an appropriate discount rate. The annual goodwill impairment test requires us to make a number of assumptions and estimates concerning future levels of revenue growth, operating margins and working capital requirements, which are based upon our long-term strategic plan. The discount rate is an estimate of the overall after-tax rate of return required by a market participant, whose weighted average cost of capital includes both equity and debt, including a risk premium.

During Fiscal 2015, the continued downturn in the oil and gas industry, including the approximate 75% decrease in the number of onshore drilling rigs and the resulting significant cut backs in the capital expenditures of our customers, represented a significant adverse change in the business climate, which indicated that the ESG reporting unit’s goodwill may be impaired and ESG asset group’s long-lived assets may not be recoverable. As a result, during the third quarter ended October 31, 2015, the Company performed an interim goodwill impairment test and a long-lived asset recoverability test.

The valuation of the ESG reporting unit goodwill step one impairment test was estimated using the guideline public company analysis and the discounted cash flow analysis, which were equally weighted in the fair value analysis. See “Note 14 – Fair Value Information” for additional information regarding the fair value determination. The results of the first and second step of the goodwill impairment test indicated that goodwill was impaired, which resulted in a $310.4 goodwill impairment charge for Fiscal 2015.

In accordance with ASC 360, Property, Plant, and Equipment, we assess potential impairment to long lived assets (property and equipment and amortized intangible assets) when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Our judgment regarding the existence of impairment indicators and future cash flows related to intangible assets is based on operational performance of our

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acquired businesses, expected changes in the global economy, aerospace industry projections, discount rates and other judgmental factors.

The continued downturn in the oil and gas industry represented a change in circumstances indicating the carrying amount of long-lived assets may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. Based on the impairment indicators above, we performed a long-lived asset impairment analysis and concluded the carrying amount of the long-lived assets exceeded the undiscounted cash flows of the ESG asset group. As a result, we recorded a $329.8 long-lived asset impairment charge, $177.8 related to identified intangible assets and $152.0 related to property and equipment for Fiscal 2015. The charges eliminated the full value of the goodwill and identified intangible assets attributable to the ESG segment. The Company finalized the impairment analyses during the fourth quarter ended January 31, 2016. The accumulated goodwill impairment losses (incurred in 2008 and 2015) totaled $601.1 as of January 31, 2016. As goodwill related to ESG was substantially written off during the prior year period, there was no goodwill impairment in the years ended January 31, 2018 and 2017. Similarly, there was no long-lived asset impairment in the years ended January 31, 2018 and 2017.

While we use the best available information to prepare our cash flow and discount rate assumptions, actual future cash flows or market conditions could differ significantly resulting in the potential for future impairment charges related to recorded goodwill balances. While there are always changes in assumptions to reflect changing business and market conditions, our overall methodology and assumptions used have remained unchanged. Any future impairment loss could have an adverse impact on our results of operations. As of January 31, 2018, our management believes the estimated fair value of each of our reporting units with goodwill balances, our indefinite lived intangible assets and each of our long lived assets were in excess of their carrying values. There were no indicators of goodwill or intangible asset impairment at January 31, 2018.

Accounting for Income Taxes

Significant management judgment is required in evaluating our tax positions and in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We revalued our deferred tax assets resulting in a one-time non-cash tax charge of $43.3 as a result of recent tax legislation and a change to our state rate. We have also recorded a valuation allowance of $24.8 as of January 31, 2018, due to uncertainties related to our ability to utilize our deferred tax assets, primarily consisting of our foreign net operating losses. The valuation allowance is based on our estimates of taxable income by jurisdiction in the jurisdictions in which we operate and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates, or we revise these estimates in future periods, we may need to adjust the valuation allowance which could materially impact our financial position and results of operations. We have not provided for any residual U.S. income taxes on approximately $101.0 of earnings from our foreign subsidiaries because such earnings are intended to be indefinitely reinvested. It is not practicable to determine the amount of U.S. income and foreign withholding tax payable in the event all such foreign earnings are repatriated.

Effect of Inflation

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

ITEM 7A.  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 secured revolving credit facility.

Foreign currency—We have direct operations in Europe that receive revenues from customers primarily in U.S. dollars and we purchase raw materials and component parts from foreign vendors primarily in British pounds or Euros.

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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.

In the future, we and our foreign subsidiaries may enter into foreign currency exchange contracts to manage risk on transactions conducted in foreign currencies. At January 31, 2018, we had no outstanding foreign currency exchange contracts. In addition, we have not entered into any other derivative financial instruments.

Interest Rates—As of January 31, 2018, 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 January 31, 2018, we maintained a portfolio of cash 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 $0.3.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this section is set forth beginning on page F‑1 of this Form 10‑K.

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

None.

ITEM 9A.  CONTROLS AND PROCEDURES

Evaluation of 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 January 31, 2018, 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 our disclosure controls and procedures were effective as of January 31, 2018.

Changes in Internal Control over Financial Reporting

Except as described below, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the year ended January 31, 2018 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of KLX Inc. (“KLX” or the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles.

The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and the receipts and expenditures of the Company are being made only in accordance with authorizations of the management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

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

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of January 31, 2018. In making the assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control –  Integrated Framework (2013).  

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; the Company documented and tested its internal controls over financial reporting as part of its testing of internal controls over financial reporting.

During the quarter ended October 31, 2017, management remediated the previously disclosed material weakness related to the design and operating effectiveness of controls over the evaluation of the accounting treatment of significant events and transactions. Management performed procedures to ensure it had accounted for any significant events and transactions appropriately by reviewing its customer contracts, identifying significant or non-routine items and ensuring they were captured by the Company’s existing internal controls over financial reporting. Management also established a review control to ensure the criteria are met to recognize revenue resulting from end-of-contract and end-of-program claims as well as a review control designed to track and monitor contracts with terms that could lead to future significant transactions. The Company has tested the controls it designed and implemented to remediate the material weakness and determined they are operating effectively. No other changes in our internal control over financial reporting occurred during the year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The independent registered public accounting firm that audited the financial statements included in this annual report has issued an attestation report on the Company’s internal control over financial reporting.

During the fourth quarter ended January 31, 2018, management implemented and tested controls over the implementation of the new revenue recognition standard, ASC Topic 606, Revenue Recognition (“ASC 606”), to ensure management’s assessment of the impact of implementing ASC 606 was appropriate.

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ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our Executive Officers

The following table sets forth information regarding our executive officers as of March 19, 2018.

Name and Title	Business Experience
Amin J. Khoury Chief Executive Officer	Amin J. Khoury has served as Chief Executive Officer and Chairman of the Board of Directors of KLX Inc. since its formation in December 2014. Mr. Khoury co-founded B/E Aerospace in July 1987 and served as its Chairman of the Board until its sale to Rockwell Collins in April 2017. Mr. Khoury served as Chief Executive Officer of B/E Aerospace from December 31, 2005 through December 31, 2013. Mr. Khoury also served as the Co-Chief Executive Officer of B/E Aerospace from January 1, 2014 to December 16, 2014. Mr. Khoury was a Trustee of the Scripps Research Institute from May 2008 until July 2014 and was a director of Synthes Incorporated until its acquisition by Johnson & Johnson in 2012. Mr. Khoury holds an Executive Masters Professional Director Certification, the highest level, from the American College of Corporate Directors.
Thomas P. McCaffrey President and Chief Operating Officer	Thomas P. McCaffrey has served as President and Chief Operating Officer of KLX Inc. since the spin-off in December 2014. Previously, Mr. McCaffrey served as Senior Vice President and Chief Financial Officer of B/E Aerospace from May 1993 until December 16, 2014. Prior to joining B/E Aerospace, Mr. McCaffrey was an Audit Director with Deloitte & Touche LLP from August 1989 through May 1993, and from 1976 through 1989 served in several capacities, including Audit Partner, with Coleman & Grant LLP. Since 2016, Mr. McCaffrey has served as a member of the Board of Trustees of Palm Beach Atlantic University and as a member of its Audit Committee. Mr. McCaffrey is a Certified Public Accountant licensed to practice in the states of Florida and California.
Michael F. Senft Vice President—Chief Financial Officer	Michael F. Senft has served as Vice President and Chief Financial Officer and Treasurer of KLX Inc. since November 2014. Previously, Mr. Senft served on the Board of Directors of B/E Aerospace from February 2012 until September 2014. Mr. Senft previously was a Managing Director of Moelis & Company. Mr. Senft's prior positions include Global Head of Leveraged Finance at CIBC and Global Co-Head of Leveraged Finance at Merrill Lynch. For more than 20 years, he advised B/E Aerospace on its long-term capital transactions and strategic acquisitions. Mr. Senft has also served on the Board of Directors of Moly Mines Ltd. and Del Monte Foods.
John Cuomo Vice President and General Manager, Aerospace Solutions Group	John Cuomo has served as Vice President and General Manager of the Aerospace Solutions Group segment of KLX Inc. since the spin-off in December 2014. Previously, Mr. Cuomo served as Vice President and General Manager, Consumables Management business since July 2014. He has over 15 years of experience in the aerospace consumables distribution market and served in multiple roles and functions at B/E Aerospace Consumables Management from April 2000 to February 2014, with the most recent being Senior Vice President, Sales, Marketing and Business Development. Prior to joining B/E Aerospace, Mr. Cuomo served as an attorney at a large multi-national law firm practicing commercial law, mergers and acquisitions and litigation. He has a Bachelor of Science in International Business, a Juris Doctorate from the University of Miami and a Master of Business Administration from the University of Florida.

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Name and Title	Business Experience
Gary Roberts Vice President and General Manager, Energy Services Group	Gary Roberts has served as Vice President and General Manager of the Energy Services Group segment of KLX Inc. since the spin-off in December 2014. Previously, Mr. Roberts served as Vice President and General Manager, Energy Services Group since April 2014. Previously, Mr. Roberts was the Chief Executive Officer of Vision Oil Tools, LLC, a private energy services company, from 2010 until its acquisition by B/E Aerospace. Before that, Mr. Roberts was General Manager for Complete Production Services, Inc. and worked for Weatherford International from 1991 to 2008, holding management positions with increasing levels of responsibility in Singapore, China, Indonesia and Qatar. Mr. Roberts brings to KLX over 30 years of oilfield experience.
Roger Franks General Counsel, Vice President—Law and Human Resources, Secretary	Roger Franks has served as served as General Counsel, Vice President—Law and Human Resources, Secretary since December 2014. During Mr. Frank's tenure at B/E Aerospace, he oversaw employee matters, commercial disputes, compliance and general corporate law. Prior to joining B/E Aerospace, he was on the Board of Directors of a mid-size California law firm where he focused on commercial matters including employment law and litigation.
Heather Floyd Vice President—Finance and Corporate Controller	Heather Floyd has served as Vice President—Finance and Corporate Controller since the spin-off in December 2014. Previously, Ms. Floyd served as Vice President—Internal Audit of B/E Aerospace. Ms. Floyd has over 15 years of combined accounting, auditing, financial reporting and Sarbanes-Oxley compliance experience. Ms. Floyd joined B/E Aerospace in November 2010 as Director of Financial Reporting and Internal Controls. Prior to joining B/E Aerospace, Ms. Floyd served as an Audit Manager with Ernst & Young and in various accounting roles at Corporate Express, now a subsidiary of Staples. Ms. Floyd is a Certified Public Accountant licensed to practice in Florida.
Eric Wesch Vice President –Finance and Treasurer	Eric Wesch has been Vice President – Finance and Treasurer since July 2017. Previously, Mr. Wesch served as the Vice President – Finance, Treasurer and Assistant Secretary of B/E Aerospace, Inc. from July 2011 through April 2017 and as Corporate Treasurer from 2008 to 2011 where he oversaw treasury, risk management and shared services. Mr. Wesch has over 14 years of treasury related experience. Mr. Wesch joined B/E Aerospace, Inc. in 1997 as Manager, Financial Planning & Analysis and served in multiple roles within finance and treasury from January 1997 to 2008. Prior to joining B/E Aerospace, Inc., Mr. Wesch worked for Blockbuster Entertainment Group.

Our Board of Directors

The following table sets forth information regarding our directors as of March 19, 2018. The table contains each person’s biography as well as the qualifications and experience each person would bring to our Board. Our Board

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consists of eight members, seven of whom will meet applicable regulatory and exchange listing independence requirements.

Name and Title		Business Experience and Director Qualifications
Amin J. Khoury Chairman	78	Amin J. Khoury, our Chief Executive Officer and Chairman of our Board of Directors since our formation, co-founded B/E Aerospace in July 1987 and served as its Chairman of the Board. Mr. Khoury served as Chief Executive Officer of B/E Aerospace from December 31, 2005 through December 31, 2013. Mr. Khoury also served as the Co-Chief Executive Officer of B/E Aerospace from January 1, 2014 to December 16, 2014. Mr. Khoury was a Trustee of the Scripps Research Institute from May 2008 until July 2014. Mr. Khoury holds an Executive Masters Professional Director Certification, the highest level, from the American College of Corporate Directors. During his time at B/E Aerospace, Mr. Khoury was primarily responsible for the development and execution of B/E Aerospace's business strategies that resulted in its growth from a single product line business with $3.0 million in annual sales, to the leading global manufacturer of commercial aircraft and business jet cabin interior products and the world's leading distributor of aerospace consumable products, with annual revenues in 2013 of $3.5 billion. Mr. Khoury led the strategic planning and acquisition strategy of B/E Aerospace as well as its operational integration and execution strategies. He is a highly effective leader in organizational design and development matters and has been instrumental in identifying and attracting both our managerial talent and Board members. He has an intimate knowledge of the Company, its industry and its competitors which he has gained over the last 30 years at B/E Aerospace. All of the above experience and leadership roles uniquely qualify him to serve as our Company's Chairman of the Board.
John T. Collins Director	71	John T. Collins has been a Director since December 2014. From 1986 to 1992, Mr. Collins served as the President and Chief Executive Officer of Quebecor Printing (USA) Inc., which was formed in 1986 by a merger with Semline Inc., where he had served in various positions since 1968, including since 1973 as President. During his term, Mr. Collins guided Quebecor Printing (USA) Inc. through several large acquisitions and situated the company to become one of the leaders in the industry. From 1992 to 2017, Mr. Collins was the Chairman and Chief Executive Officer of The Collins Group, Inc., a manager of a private securities portfolio and minority interest holder in several privately held companies. Mr. Collins currently serves on the Board of Directors of Federated Funds, Inc. and has served on the Board of Directors for several public companies, including Bank of America Corp. and FleetBoston Financial. In addition, Mr. Collins has served as Chairman of the Board of Trustees of his alma mater, Bentley University. Our Board benefits from Mr. Collins's many years of experience in the management, acquisition and development of several companies.

59

Name and Title		Business Experience and Director Qualifications
Peter V. Del Presto Director	67	Peter V. Del Presto has been a Director since December 2014. Mr. Del Presto is an adjunct professor of finance at the University of Pittsburgh, where he teaches courses covering capital markets, advanced valuation methods and private equity. From 1985 until his retirement in 2010, Mr. Del Presto was a partner with PNC Equity Partners, a private equity firm and an affiliate of PNC Bank targeting middle-market companies for acquisition and investment. During his 25 years at PNC Equity Partners, Mr. Del Presto led the firm's investment in 35 companies and participated as a member of the firm's Investment Committee in over 200 investments. Mr. Del Presto was PNC Equity Partner's representative on the boards of 24 companies where he was responsible for the development of value creation strategies in each. Mr. Del Presto is a director of Spencer Turbine Company and Markel Corporation, a member of the Board of Advisors of Sabert Corporation and the principal shareholder of two smaller companies. Mr. Del Presto is also a licensed private pilot. Our Board benefits from Mr. Del Presto's background in engineering and business administration, his expertise in the field of finance, and 25 years of experience in the acquisition, investment and development of numerous companies.
Richard G. Hamermesh Director	70	Richard G. Hamermesh has been a Director since December 2014. Dr. Hamermesh is a Senior Fellow at the Harvard Business School, where he was formerly the MBA Class of 1961 Professor of Management Practice from 2002 to 2015. From 1987 to 2001, he was a co-founder and a Managing Partner of The Center for Executive Development, an executive education and development consulting firm. From 1976 to 1987, Dr. Hamermesh was a member of the faculty of Harvard Business School. He is also an active investor and entrepreneur, having participated as a principal, director and investor in the founding and early stages of more than 15 organizations. Dr. Hamermesh is a member of the Board of Directors of SmartCloud, Inc. and was a director of B/E Aerospace, Inc. until its sale to Rockwell Collins in April 2017. Dr. Hamermesh joined the Rockwell Collins Board of Directors in April 2017. Our Board benefits from Dr. Hamermesh's education and business experience as co-founder of a leading executive education and consulting firm, as president, founder, director and co-investor in over 15 early stage businesses, and his 28 years as a Professor of Management Practice at Harvard Business School, where he has led MBA candidates through thousands of business case studies, as well as his intimate knowledge of our business and industry (including over 27 years as a member of the B/E Aerospace board).

60

Name and Title		Business Experience and Director Qualifications
Benjamin A. Hardesty Director	68	Benjamin A. Hardesty has been a Director since December 2014. Mr. Hardesty has been the owner of Alta Energy LLC, a consulting business focused on oil and natural gas in the Appalachian Basin and onshore United States since, 2010. In May 2010, Mr. Hardesty retired as president of Dominion E&P, Inc., a subsidiary of Dominion Resources Inc. engaged in the exploration and production of oil and natural gas in North America, a position he had held since September 2007. After joining Dominion Resources in 1995, Mr. Hardesty had previously also served in other executive positions, including President of Dominion Appalachian Development, Inc. and General Manager and Vice President Northeast Gas Basin. Mr. Hardesty has served on the Board of Directors of Antero Resources Corporation since its initial public offering in October 2013. He previously was a member of the Board of Directors of Blue Dot Energy Services, LLC from 2011 until its sale to B/E Aerospace in 2013. From 1982 to 1995, Mr. Hardesty served as an officer and director of Stonewall Gas Company, and from 1978 to 1982 as vice president of operations of Development Drilling Corporation. Mr. Hardesty is director emeritus and past president of the West Virginia Oil & Natural Gas Association and past president of the Independent Oil & Gas Association of West Virginia. Mr. Hardesty serves on the Visiting Committee of the Petroleum Natural Gas Engineering Department of the College of Engineering and Mineral Resources at West Virginia University. Mr. Hardesty's significant experience in the oil and natural gas industry, including in our areas of operation, make him well suited to serve as a member of our Board.
Stephen M. Ward, Jr. Director	62	Stephen M. Ward, Jr., has been a Director since December 2014. Mr. Ward has been a director of Carpenter Technology Corporation since 2001, where he is Chair of the Corporate Governance Committee and a member of the Human Resources and Science and Technology Committees. Mr. Ward previously served as President and Chief Executive Officer of Lenovo Corporation, which was formed by the acquisition of IBM Corporation's personal computer business by Lenovo of China. Mr. Ward had spent 26 years at IBM Corporation holding various management positions, including Chief Information Officer and Senior Vice President and General Manager, Personal Systems Group. Mr. Ward is a co-founder and Board member of C3-IoT, a company that develops and sells internet of things software for analytics and control. Mr. Ward was previously a Board member and founder of E2open, a maker of enterprise software, and a Board member of E-Ink, a maker of high-tech screens for e-readers and computers, and the Chairman of the Board of QDVision, the developer and a manufacturer of quantum dot technology for the computer, TV and display industries until its sale. Mr. Ward's broad executive experience and focus on innovation enables him to share with our Board valuable perspectives on a variety of issues relating to management, strategic planning, tactical capital investments and international growth, making him well suited to serve as a member of our Board.

61

Name and Title		Business Experience and Director Qualifications
Theodore L. Weise Director	73	Theodore L. Weise has been a Director since December 2014. Mr. Weise is currently a business consultant and serves on the Board of Directors of Hawthorne Global Aviation Services. Mr. Weise joined Federal Express Corporation in 1972 during its formative years and retired in 2000 as its President and Chief Executive Officer. He held many officer positions, including Executive Vice President of World Wide Operations, and led the following divisions as its Senior Vice President: Air Operations, Domestic Ground Operations, Central Support Services, Business Service Center, and Operations Planning. Prior to joining Federal Express Corporation, Mr. Weise flew on the US Air Force F-111 as a Flight Test Engineer for General Dynamics Corp. He has previously served on the boards of Federal Express Corporation, Computer Management Sciences, Inc., ResortQuest International, Inc. and Pogo Jet, Inc. Mr. Weise is a member of the Missouri University of Science and Technology Board of Trustees, of which he was a past President. Mr. Weise is a jet rated Airline Transport Pilot with over 5,700 flight hours. He holds an Executive Masters Professional Director Certification from the American College of Corporate Directors. Our Board benefits from Mr. Weise's extensive leadership experience.
John T. Whates, Esq. Director	70	John T. Whates has been a Director since December 2014. Mr. Whates has been an independent tax advisor and involved in venture capital and private investing since 2005. He is a member of the Board of Dynamic Healthcare Systems, Inc. and was the Chairman of the Compensation Committee of B/E Aerospace until its sale to Rockwell Collins in April 2017. Mr. Whates joined the Rockwell Collins Board of Directors in April 2017. From 1994 to 2011, Mr. Whates was a tax and financial advisor to B/E Aerospace, providing business and tax advice on essentially all of its significant strategic acquisitions. Previously, Mr. Whates was a tax partner in several of the largest public accounting firms, most recently leading the High Technology Group Tax Practice of Deloitte LLP in Orange County, California. He has extensive experience working with aerospace and other public companies in the fields of tax, equity financing and mergers and acquisitions. Mr. Whates is an attorney licensed to practice in California and was an Adjunct Professor of Taxation at Golden Gate University. Our Board benefits from Mr. Whates's extensive experience, multi-dimensional educational background, and thorough knowledge of our business and industry.

Structure of the Board of Directors

Our Board is divided into three classes of directors. Directors of each class are chosen for three year terms upon the expiration of their current terms, and each year our stockholders elect one class of our directors. The directors designated as Class I directors will be up for election at the 2018 Annual Meeting of Stockholders to be held in August 2018 and the directors elected at that meeting will have three-year terms expiring in August 2021. The directors designated as Class II directors will be up for election at the 2019 Annual Meeting of Stockholders and the directors elected at that meeting will have three-years terms expiring in August 2022. The directors designated as Class III directors will be up for election at the 2020 Annual Meeting of Stockholders and the directors elected at that meeting will have three-year terms expiring in August 2023.

Audit Committee

We have a separately‑designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Messrs. Del Presto, Hardesty, Weise and Whates currently serve as members of the Audit Committee. Under the current SEC rules and the rules of NASDAQ, all of the members are independent. Our Board has determined that Mr. Del Presto and Mr. Whates are “audit committee financial experts” in accordance with current SEC rules. All members of the Audit Committee are independent, as that term is used in Item 407 of Regulation S‑K of the federal securities laws.

62

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officer, directors and greater‑than‑ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

Code of Business Conduct

Our Board has adopted a code of business conduct that applies to all our directors, officers and employees worldwide, including our principal executive officer, principal financial officer, controller, treasurer and all other employees performing a similar function. We maintain a copy of our code of business conduct, including any amendments thereto and any waivers applicable to any of our directors and officers, on our website at www.klx.com.

ITEM 11.  EXECUTIVE COMPENSATION

Information set forth under the captions “Compensation of Directors” and “Compensation Discussion and Analysis” in the Proxy Statement or Annual Report on Form 10‑K/A is incorporated by reference herein.

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

Information set forth under the captions “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement or Annual Report on Form 10‑K/A is incorporated by reference herein.

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

Information set forth under the captions “Certain Relationships and Related Party Transactions” in the Proxy Statement or Annual Report on Form 10‑ K/A is incorporated by reference herein.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information set forth under the caption “Principal Accountant Fees and Services” in the Proxy Statement or Annual Report on Form 10K/A is incorporated by reference herein.

63

PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)Financial Statements

The information required by this item is contained under the section “Index to Consolidated and Combined Financial Statements and Schedule” beginning on page F‑1 of this Form 10‑K.

(b)Exhibits

We are filing the following documents as exhibits to this Form 10‑K:

Exhibit No.	Description
2.1	Separation and Distribution Agreement, dated as of December 15, 2014, between B/E Aerospace, Inc. and KLX Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8‑K filed with the SEC on December 19, 2014).
2.2	Stock Purchase Agreement, dated as of May 17, 2016, by and among KLX Inc., Polytrade Holding Corp., Herndon Products Holding Corp., the Sellers and the Sellers’ Representative Named Therein (incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 9, 2016).
3.1	Amended and Restated Certificate of Incorporation of KLX Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8‑K filed with the SEC on December 19, 2014).
3.2	Amended and Restated By‑Laws of KLX Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8‑K filed with the SEC on August 13, 2015).
4.1	Indenture (including form of notes), dated December 8, 2014, between KLX Inc., as the issuer, and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8‑K filed with the SEC on December 12, 2014).
4.1.1	First Supplemental Indenture, dated as of December 16, 2014, by and among KLX Inc., as Issuer, the Guarantors named therein and Wilmington Trust Company, as Trustee incorporated by reference to Exhibit 4.1.1 of the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2017).
4.1.2	Second Supplemental Indenture, dated as of August 2, 2016, by and among KLX Inc., as Issuer, the Guarantors named therein and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on December 9, 2016).
10.1	Tax Sharing and Indemnification Agreement, dated as of December 15, 2014, between B/E Aerospace, Inc. and KLX Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K filed with the SEC on December 19, 2014).
10.2	First Amendment to Tax Sharing and Indemnification Agreement, dated as of October 23, 2016, by and between B/E Aerospace, Inc. and KLX Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10‑K filed with the SEC on April 14, 2017).
10.3	Stock and Asset Purchase Agreement, dated June 9, 2008, between B/E Aerospace, Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 2.1 to B/E Aerospace, Inc.’s Current Report on Form 8‑K dated June 9, 2008, filed with the SEC on June 11, 2008).
10.4	Supply Agreement, dated as of July 28, 2008, between B/E Aerospace, Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 10.5 to the Company’s Amendment No. 2 to Form 10 filed with the SEC on November 13, 2014).†
10.5	License Agreement, dated as of July 28, 2008, between B/E Aerospace, Inc. and Honeywell International Inc. (incorporated by reference to Exhibit 10.6 to the Company’s Amendment No. 2 to Form 10 filed with the SEC on November 13, 2014).†
10.6	Stockholders Agreement, dated as of July 28, 2008, among B/E Aerospace, Inc. and Honeywell International Inc., Honeywell UK Limited, Honeywell Holding France SAS and Honeywell Deutschland GmbH (incorporated by reference to Exhibit 10.3 to B/E Aerospace, Inc.’s Quarterly Report on Form 10‑Q for the quarter ended September 30, 2008, filed with the SEC on November 7, 2008).

64

Exhibit No.	Description
10.7	Amended and Restated Employment Agreement between KLX Inc. and Amin J. Khoury, dated as of May 25, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form10-Q filed with the SEC on August 24, 2017).*
10.8	Death Benefit Agreement between KLX Inc. and Amin J. Khoury, dated as of May 25, 2016 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 9, 2016).*
10.9	Consulting Agreement between KLX Inc. and Amin J. Khoury, dated as of May 25, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 24, 2017).*
10.10	Employment Agreement between KLX Inc. and Thomas P. McCaffrey, dated as of February 27, 2015 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 28, 2015).*
10.11	Employment Agreement between KLX Inc. and Michael F. Senft, dated as of February 27, 2015 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 28, 2015).*
10.12	Employment Agreement between KLX Inc. and John Cuomo, dated as of December 22, 2015.* **
10.13	Employment Agreement between KLX Inc. and Roger M. Franks, dated as of December 22, 2015 (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2016).*
10.14	KLX Inc. Long‑Term Incentive Plan (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S‑8 (File No. 333‑200923) filed with the SEC on December 12, 2014).*
10.15	KLX Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S‑8 (File No. 333‑200923) filed with the SEC on December 12, 2014).*
10.16	KLX Inc. Non‑Employee Directors Stock and Deferred Compensation Plan. **
10.17	KLX Inc. 2014 Deferred Compensation Plan (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S‑8 (File No. 333‑200919) filed with the SEC on December 12, 2014).*
10.18	Credit Agreement, dated as of May 19, 2015, by and between KLX Inc., the several Lenders, JPMorgan Chase Bank, N.A. (as Administrative Agent), J.P. Morgan Europe Limited (as European Collateral Agent), Citigroup Global Markets Inc., Goldman Sachs Bank, USA, Wells Fargo Bank, N.A., Royal Bank of Canada and Suntrust Bank (as Syndication Agents) and Barclays Bank PLC, Deutsche Bank Securities Inc., PNC Bank, National Association, Santander Bank, N.A and TD Bank, N.A. (as Documentation Agents) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K filed with the SEC on May 20, 2015).
10.19	Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K filed with the SEC on March 2, 2015).*
10.20	Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8‑K filed with the SEC on March 2, 2015).*
10.21	Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8‑K filed with the SEC on March 2, 2015).*
10.22	Medical Care Reimbursement Plan for Executives of KLX Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on December 9, 2016).*
10.23	Executive Retiree Medical and Dental Plan, dated as of May 25, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 24, 2017).*
21.1	List of subsidiaries of KLX Inc.**
23.1	Consent of Independent Registered Public Accounting Firm—Deloitte & Touche LLP**
31.1	Certification of Chief Executive Officer**
31.2	Certification of Chief Financial Officer**
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350**

65

Exhibit No.	Description
32.2 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350** XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Extension Labels Linkbase XBRL Taxonomy Extension Presentation Linkbase Document

*Management contract or compensatory plan.

**Filed herewith.

†Portions of the exhibit were omitted and filed separately pursuant to a request for confidential treatment.

66

SIGNATURES

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

KLX INC.
By:	/s/ Amin J. Khoury Amin J. Khoury Chairman and Chief Executive Officer

Date: March 19, 2018

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

/s/ Amin J. Khoury Amin J. Khoury	Chairman and Chief Executive Officer (Principal Executive Officer)	March 19, 2018
/s/ Michael F. Senft Michael F. Senft	Vice President—Chief Financial Officer (Principal Financial Officer)	March 19, 2018
/s/ Heather M. Floyd Heather M. Floyd	Vice President—Finance and Corporate Controller (Principal Accounting Officer)	March 19, 2018
/s/ John T. Collins John T. Collins	Director	March 19, 2018
/s/ Peter V. Del Presto Peter V. Del Presto	Director	March 19, 2018
/s/ Richard G. Hamermesh Richard G. Hamermesh	Director	March 19, 2018
/s/ Benjamin A. Hardesty Benjamin A. Hardesty	Director	March 19, 2018
/s/ Stephen M. Ward, Jr. Stephen M. Ward, Jr.	Director	March 19, 2018
/s/ Theodore L. Weise Theodore L. Weise	Director	March 19, 2018
/s/ John T. Whates John T. Whates	Director	March 19, 2018

67

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

	Page
Report of Independent Registered Public Accounting Firm	F‑2
Consolidated Financial Statements:
Consolidated Balance Sheets as of January 31, 2018 and 2017	F‑4
Consolidated Statements of Earnings and Comprehensive Income for the Years Ended January 31, 2018, 2017 and 2016	F‑5
Consolidated Statements of Stockholders’ Equity for the Years Ended January 31, 2018, 2017 and 2016	F‑6
Consolidated and Statements of Cash Flows for the Years Ended January 31, 2018, 2017 and 2016	F‑7
Notes to Consolidated Financial Statements for the Years Ended January 31, 2018, 2017 and 2016	F‑8
Consolidated Financial Statement Schedule:
Schedule II—Valuation and Qualifying Accounts for the Years Ended January 31, 2018, 2017 and 2016	F‑28

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of KLX Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of KLX Inc. and subsidiaries (the "Company") as of January 31, 2018 and 2017, the related consolidated statements of earnings and comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended January 31, 2018, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of January 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2018, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinions

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

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

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

F-2

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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

/s/ Deloitte & Touche LLP

Certified Public Accountants

Boca Raton, Florida 

March 19, 2018 

We have served as the Company's auditor since 2014.

F-3

KLX INC.

CONSOLIDATED BALANCE SHEETS AS OF JANUARY 31, 2018 AND 2017

(In millions)

	January 31,		January 31,
	2018		2017
ASSETS
Current assets:
Cash and cash equivalents	$	255.3	$	277.3
Accounts receivable–trade, less allowance for doubtful accounts ($12.0 at January 31, 2018 and $13.5 at January 31, 2017)		316.1		261.3
Inventories, net		1,407.9		1,381.4
Other current assets		51.7		39.6
Total current assets		2,031.0		1,959.6
Property and equipment, net of accumulated depreciation ($191.1 at January 31, 2018 and $149.4 at January 31, 2017)		286.4		248.3
Goodwill		1,056.8		996.4
Identifiable intangible assets, net		308.6		314.8
Deferred income taxes		74.5		147.0
Other assets		32.7		32.2
	$	3,790.0	$	3,698.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	180.8	$	166.0
Accrued liabilities		106.7		91.1
Total current liabilities		287.5		257.1
Long-term debt		1,184.6		1,182.0
Deferred income taxes		5.9		5.0
Other non-current liabilities		42.1		33.1
Commitments, contingencies and off-balance sheet arrangements (Note 8)
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; 54.6 million shares issued as of January 31, 2018 and 53.5 million shares issued as of January 31, 2017		0.5		0.5
Additional paid-in capital		2,756.5		2,686.5
Treasury stock: 3.8 million shares as of January 31, 2018 and 1.5 million shares as of January 31, 2017		(182.7)		(54.4)
Accumulated deficit		(280.0)		(328.0)
Accumulated other comprehensive loss		(24.4)		(83.5)
Total stockholders’ equity		2,269.9		2,221.1
	$	3,790.0	$	3,698.3

See accompanying notes to consolidated financial statements.

F-4

KLX INC.

CONSOLIDATED STATEMENTS OF EARNINGS AND

COMPREHENSIVE INCOME

FOR THE YEARS ENDED JANUARY 31, 2018, 2017 AND 2016

(In millions)

	Year Ended January 31,
	2018		2017		2016
Product revenues	$	1,420.2	$	1,340.9	$	1,312.5
Service revenues		320.6		153.2		254.9
Total revenues		1,740.8		1,494.1		1,567.4
Cost of sales - products		994.7		942.2		918.1
Cost of sales - services		269.1		183.9		284.3
Total cost of sales		1,263.8		1,126.1		1,202.4
Selling, general and administrative		260.7		238.6		261.6
Goodwill impairment charge		—		—		310.4
Long-lived asset impairment charge		—		—		329.8
Operating earnings (loss)		216.3		129.4		(536.8)
Interest expense		75.8		75.9		77.3
Earnings (loss) before income taxes		140.5		53.5		(614.1)
Income tax expense (benefit)		87.1		5.3		(228.3)
Net earnings (loss)	$	53.4	$	48.2	$	(385.8)
Other comprehensive income (loss):
Foreign currency translation adjustment		59.1		(9.3)		(18.7)
Comprehensive income (loss)	$	112.5	$	38.9	$	(404.5)
Net earnings (loss) per share - basic	$	1.06	$	0.93	$	(7.39)
Net earnings (loss) per share - diluted	$	1.04	$	0.92	$	(7.39)
Weighted average common shares - basic		50.5		51.8		52.2
Weighted average common shares - diluted		51.3		52.2		52.2

See accompanying notes to consolidated financial statements.

F-5

KLX INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED JANUARY 31, 2018, 2017 AND 2016

(In millions)

										Accumulated
				Additional				Retained		Other		Total
	Common Stock			Paid-in		Treasury		Earnings		Comprehensive		Stockholders’
	Shares	Amount		Capital		Stock		(Deficit)		Income (Loss)		Equity
Balance, January 31, 2015	52.8	$	0.5	$	2,644.8		—	$	11.3	$	(55.5)	$	2,601.1
Sale of stock under employee stock purchase plan	—		—		1.8		—		—		—		1.8
Return to provision true-up related to pre spin-off and other	—		—		1.0		—		—		—		1.0
Purchase of treasury stock	—		—		—		(12.5)		—		—		(12.5)
Restricted stock grants, net of forfeitures and restricted stock unit vesting	0.5		—		14.8		—		0.8		—		15.6
Net loss	—		—		—		—		(385.8)		—		(385.8)
Net foreign currency translation adjustments	—		—		—		—		—		(18.7)		(18.7)
Balance, January 31, 2016	53.3		0.5		2,662.4		(12.5)		(373.7)		(74.2)		2,202.5
Sale of stock under employee stock purchase plan	—		—		2.0		—		—		—		2.0
Purchase of treasury stock	—		—		—		(41.9)		—		—		(41.9)
Restricted stock expense, net of forfeitures, restricted stock unit vesting and stock option expense	0.2		—		22.1		—		(2.5)		—		19.6
Net earnings	—		—		—		—		48.2		—		48.2
Net foreign currency translation adjustments	—		—		—		—		—		(9.3)		(9.3)
Balance, January 31, 2017	53.5		0.5		2,686.5		(54.4)		(328.0)		(83.5)		2,221.1
Sale of stock under employee stock purchase plan	—		—		2.3		—		—		—		2.3
Purchase of treasury stock	—		—		—		(128.3)		—		—		(128.3)
Restricted stock expense, net of forfeitures, restricted stock unit vesting and stock option expense	1.1		—		67.7		—		(7.0)		—		60.7
Net earnings	—		—		—		—		53.4		—		53.4
Net foreign currency translation adjustments	—		—		—		—		—		59.1		59.1
Cumulative effect of adoption of new accounting principle (See Note 1)	—		—		—		—		1.6		—		1.6
Balance, January 31, 2018	54.6	$	0.5	$	2,756.5		(182.7)	$	(280.0)	$	(24.4)	$	2,269.9

See accompanying notes to consolidated financial statements.

F-6

KLX INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JANUARY 31, 2018, 2017 AND 2016

(In millions)

	Year Ended January 31,
	2018		2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)	$	53.4	$	48.2	$	(385.8)
Adjustments to reconcile net earnings (loss) to net cash flows provided by (used in) operating activities:
Depreciation and amortization		66.1		66.9		75.0
Deferred income taxes		80.9		6.2		(229.3)
Asset impairment charge		—		—		640.2
Non-cash compensation		26.4		20.2		15.8
Amortization of deferred financing fees		4.5		4.3		4.0
Tax impact from prior sales of restricted stock		—		—		0.2
Provision for inventory reserve		17.2		20.7		7.7
Change in allowance for doubtful accounts and sales returns		0.2		3.2		3.3
Loss on disposal of property and equipment		1.3		3.3		2.9
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable		(44.4)		6.9		40.3
Inventories		(9.2)		(5.0)		18.0
Other current and non-current assets		(19.5)		(4.6)		2.7
Accounts payable		9.9		11.0		3.4
Other current and non-current liabilities		19.8		(30.4)		18.8
Net cash flows provided by operating activities		206.6		150.9		217.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(84.9)		(35.5)		(130.5)
Acquisitions, net of cash acquired		(64.8)		(220.8)		(4.3)
Net cash flows used in investing activities		(149.7)		(256.3)		(134.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock and other		(92.1)		(44.9)		(9.5)
Cash proceeds from stock issuance		2.0		1.5		1.5
Tax impact from prior sales of restricted stock		—		—		(0.2)
Deferred acquisition payments		—		—		(90.9)
Net cash flows used in financing activities		(90.1)		(43.4)		(99.1)
Effect of foreign exchange rate changes on cash and cash equivalents		11.2		(1.7)		(2.7)
Net decrease in cash and cash equivalents		(22.0)		(150.5)		(19.4)
Cash and cash equivalents, beginning of period		277.3		427.8		447.2
Cash and cash equivalents, end of period	$	255.3	$	277.3	$	427.8
Supplemental disclosures of cash flow information:
Cash paid during period for:
Income taxes paid, net of refunds	$	6.6	$	6.1	$	13.2
Interest		73.0		72.1		71.0
Supplemental schedule of non-cash activities:
Accrued property additions	$	9.1	$	2.7	$	8.3
Treasury stock		—		—		3.0

See accompanying notes to consolidated financial statements.

F-7

KLX INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JANUARY 31, 2018, 2017 AND 2016

(Dollars In millions, except share and per share data)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

We believe, based on our experience in the industry, that we are the world’s leading distributor and value‑added service provider of aerospace fasteners and other consumables, offering one of the broadest ranges of aerospace hardware and consumables and inventory management services, selling to essentially every major airline in the world as well as leading maintenance, repair and overhaul (“MRO”) providers, the leading airframe manufacturers and their first and second tier suppliers. The Company also provides technical services and associated rental equipment to land‑based oil and gas exploration and drilling companies often in remote locations.

Basis of Presentation

The Company’s consolidated financial statements include KLX and its wholly owned subsidiaries were prepared in accordance with accounting principles generally accepted in the United States (GAAP). All intercompany transactions and account balances within the Company have been eliminated.

Use of Estimates—The preparation of the consolidated 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.

Revenue Recognition—Sales of products and services are recorded when the earnings process is complete. This generally occurs when the products are shipped to the customer in accordance with the contract or purchase order, risk of loss and title has passed to the customer, collectability is reasonably assured and pricing is fixed and determinable. In instances where title does not pass to the customer upon shipment, the Company recognizes revenue upon delivery or customer acceptance, depending on the terms of the sales contract. Management provides allowances for credits and returns, based on historic experience, and adjusts such allowances as considered necessary.

In connection with the sales of its products, the Company 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 the Company contemporaneously with the delivery of the product, and as such, once the product is delivered, the Company 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, the Company has satisfied its obligations to the customer. The Company does not account for these services as a separate element, as the services do not have stand‑alone value and cannot be separated from the product element of the arrangement.

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

Income Taxes—The Company provides deferred income taxes for temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. Deferred income taxes are computed using enacted tax rates that are expected to be in effect when the temporary differences reverse. A valuation allowance related to a deferred tax asset is recorded when it is more likely

F-8

than not that some portion or the entire deferred tax asset will not be realized. The Company records uncertain tax positions within income tax expense and classifies interest and penalties related to income taxes as income tax expense.

Cash Equivalents—The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable, Net—The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness, as determined by review of their current credit information. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. The allowance for doubtful accounts at January 31, 2018 and 2017 was $12.0 and $13.5, respectively.

Inventories—Inventories, made up of finished goods, primarily consist 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. During the year ended January 31, 2017 (“Fiscal 2016”), the Company revised its methodology for estimating the provision required for excess and obsolete (“E&O”) inventories. The new methodology more adequately considers historical demand of our inventory to project future demand in order to estimate the provision required for E&O inventories. Other factors considered in the methodology include expected market growth rates and related elements. The implementation of the new methodology did not impact any prior period reserve for E&O inventory. Demand for the Company’s products can fluctuate from period to period depending on customer activity. In accordance with industry practice, costs in inventory include amounts relating to long-term contracts with long production cycles and to inventory items with long production cycles, some of which are not expected to be realized within one year. As a result, the Company’s operating cycle is greater than a year and is closely tied to the lifecycle of an airframe. Inventory reserves were approximately $72.4 and $59.6 as of January 31, 2018 and 2017, respectively.

Substantially all of the Company’s inventory is comprised of aerospace grade fasteners which support OEM production and the aftermarket over the life of the airframe. Inventory with a limited shelf life is continually monitored and reserved for in advance of expiration. The reserve for inventory with limited shelf life is not material to the Company’s financial statements.

Property and Equipment, Net—Property and equipment are stated at cost and depreciated generally under the straight‑line method over their estimated useful lives of one to thirty years (or the lesser of the term of the lease for leasehold improvements, as appropriate).

Goodwill and Intangible Assets, Net—Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles—Goodwill and Other (“ASC 350”), goodwill and indefinite‑lived intangible assets are reviewed at least annually for impairment. Acquired intangible assets with definite lives are amortized over their individual useful lives. Other intangible assets are amortized using the straight‑line method over periods ranging from five to thirty years.

As of January 31, 2018, the Company had two reporting units, which were determined based on the guidelines contained in FASB ASC Topic 350, Subtopic 20, Section 35. Each reporting unit constitutes a business, for which there is discrete financial information available that is regularly reviewed by the management of the Company.

Goodwill is tested at least annually as of December 31st, and management assesses whether there has been any impairment in the value of goodwill by comparing the fair value to the net carrying value of the reporting units. If the carrying value exceeds its estimated fair value, an impairment loss is recognized for the difference in accordance with the Company’s adoption of the new accounting principle discussed below. In this event, the asset is written down accordingly. The fair values of the reporting units for goodwill impairment testing is determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances.

The indefinite‑lived intangible asset is tested at least annually for impairment. Impairment for the intangible asset with an indefinite life exists if the carrying value of the intangible asset exceeds its fair value. The fair value of the indefinite‑lived intangible asset is determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances.

F-9

For the years ended January 31, 2018 and 2017, the Company’s annual impairment testing yielded no impairments of goodwill or the indefinite‑lived intangible asset. For the year ended January 31, 2016, the Company determined goodwill related to the Energy Services Group (“ESG”) reporting unit was fully impaired and recorded a pre-tax impairment charge related to ESG’s goodwill of $310.4.

Long‑Lived Assets—The Company assesses potential impairments to its long‑lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. For the years ended January 31, 2018 and 2017, there were no impairments of long lived assets. For the year ended January 31, 2016, the Company used a combination of cost and market approaches for determining the fair value of the ESG asset group’s long-lived assets and recognized impairment charges related to identified intangibles and property and equipment of $177.8 and $152.0, respectively.

Common Stock Equivalents—The Company has potential common stock equivalents related to its outstanding restricted stock awards, restricted stock units and employee stock purchase plan. These potential common stock equivalents are not included in diluted loss per share for any period presented in which there is a net loss because the effect would have been anti‑dilutive.

Accounting for Stock‑Based Compensation—The Company accounts for share‑based compensation arrangements in accordance with the provisions of FASB ASC 718, Compensation—Stock Compensation (“ASC 718”), 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.

All unvested shares of restricted stock granted by B/E Aerospace, Inc. (our Former Parent) were converted into unvested shares of KLX on the distribution date at a ratio equal to 1.8139. Compensation cost recognized during the three years ended January 31, 2018 (“Fiscal 2017”) related to unvested shares converted on the distribution date and new shares of KLX restricted stock and stock options granted during the three years ended January 31, 2018.

The Company has established a qualified Employee Stock Purchase Plan. The Employee Stock Purchase Plan allows 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 for 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. The value of the rights under this Plan granted during the years ended January 31, 2018, 2017 and 2016 was $0.4, $0.3 and $0.3, respectively.

Foreign Currency Translation—The assets and liabilities of subsidiaries located outside the United States are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Revenue and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from foreign currency transactions are recognized currently in income, and those resulting from translation of financial statements are accumulated as a separate component of equity and accumulated other comprehensive income (loss). The Company’s European subsidiaries primarily utilize the British pound or the Euro as their local functional currency.

Treasury Stock - The Company may periodically repurchase shares of its common stock from employees for the satisfaction of their individual payroll tax withholding upon vesting of restricted stock and restricted stock units in connection with the Company’s Long-Term Incentive Plan (“LTIP”). The Company’s repurchases of common stock are recorded at the average cost of the common stock. As part of the LTIP, the Company repurchased 713,210 and 35,009 shares of its common stock for $48.9 and $1.5 during the years ended January 31, 2018 and 2017. In January 2016, the Board of Directors authorized a $100.0 share repurchase under the existing $250.0 share repurchase program. In March 2017, the Board of Directors authorized an increase in the Company’s share repurchase authority from $100.0 to $200.0. During Fiscal 2017, the Company repurchased 1,652,661 shares of common stock at an average price of $48.04 per share for a total of $79.4 as part of the share repurchase program. During Fiscal 2016, the Company repurchased 982,062

F-10

shares of common stock at an average price of $41.20 per share for a total of $40.5 as part of the share repurchase program.

Concentration of Risk—In Aerospace Solutions Group (“ASG”), the Company’s products and services are primarily concentrated within the aerospace industry with customers consisting primarily of commercial airlines, a wide variety of business jet customers and commercial aircraft manufacturers and their suppliers. In ESG, the Company provides products and services to energy industry customers who focus on developing and producing oil and gas onshore in North America. The Company’s management performs ongoing credit evaluations on the financial condition of all of its customers and maintains allowances for uncollectible accounts receivable based on expected collectability. Credit losses have historically been within management’s expectations and the provisions established.

Significant customers change from year to year, in the case of ASG, depending on the level of refurbishment activity and/or the level of new aircraft purchases by such customers, and in the case of ESG, depending on the level of exploration and production activity and the use of our services. During the years ended January 31, 2018, 2017 and 2016, no single customer accounted for more than 10% of the Company’s consolidated revenues.

Recent Accounting Pronouncements

In May 2017, the 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 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 January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other. ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted, and the Company adopted the new standard during the fourth quarter of 2017. The adoption of ASU 2017-04 did not have an impact on the Company’s consolidated financial statements; however, the Company will no longer perform the second step of the goodwill impairment test where applicable in future impairment tests.

In January 2017, the FASB issued ASU 2017-01, Business Combinations. This update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2017-01 is not expected to have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which eliminates a current exception in U.S. GAAP to the recognition of the income tax effects of temporary differences that result from intra-entity transfers of non-inventory assets. The intra-entity exception is being eliminated under the ASU. The standard is required to be applied on a modified retrospective basis and will be effective beginning with the first quarter of 2018. Early adoption is permitted, and the Company adopted the new standard during the first quarter of 2017, which resulted in the elimination of a $7.7 long-term prepaid tax balance and the recognition of a $8.8 longterm deferred tax asset with the offset recorded to the accumulated deficit.

F-11

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) related to how certain cash receipts and payments are presented and classified in the statement of cash flows. These cash flow issues include debt prepayment or extinguishment costs, settlement of zero-coupon debt, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted and should be applied retrospectively. The Company does not expect a material impact upon adoption of this ASU to its consolidated financial statements as the Company’s consolidated statements of cash flows are not impacted by the eight issues listed above, with the exception of the contingent consideration payments, which will not be presented in the year of adoption.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the income statement, rather than equity, and requires excess tax benefits from stock-based compensation to be classified in cash flow from operations. The Company adopted the new standard during the first quarter of 2017 in compliance with the effective date, which resulted in the recognition of a $0.5 long-term deferred tax asset with the offset recorded to accumulated deficit. Prior year periods have been adjusted to conform to the current year presentation. With respect to forfeitures, the Company will continue to estimate the number of awards expected to be forfeited upon award issuance.

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 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 deferred the effective date for implementation of ASU 2014-09 by one year and during 2016, the FASB issued various related accounting standard updates, which clarified revenue accounting principles and provided supplemental adoption guidance. The guidance under ASU 2014-09 is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within that year. To assess the impact of this guidance, the Company established a cross functional implementation project team, inventoried its revenue streams and contracts with customers at its two segments and applied the principles of the guidance against a selection of contracts to assist in the determination of potential revenue accounting differences. No individually significant implementation matters were identified, and our revenue will be recognized on a “point-in-time” basis for product revenues and over time for service revenues under the new standard, which is consistent with current practice. The Company implemented internal controls, policies and processes to comply with the new standard. The Company adopted ASC Topic 606 in the first quarter of 2018 using the modified retrospective method of adoption, which resulted in no changes to the opening consolidated balance sheet as of February 1, 2018. Prior period consolidated statements of earnings and comprehensive income will remain unchanged.

F-12

2. 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 over 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 (“ASC 805”). The assets purchased and liabilities assumed have been reflected in the accompanying consolidated balance sheets as of January 31, 2018 and 2017. The results of operations for the Herndon acquisition are included in the accompanying consolidated and combined statements of earnings 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.

The Company has substantially integrated Herndon into its ASG segment systems. As a result, it is not practicable to report stand-alone revenues and operating earnings of the acquired business since the acquisition date.

On a pro forma basis to give effect to the Herndon acquisition, as if it occurred on February 1, 2015, revenues and net earnings for the years ended January 31, 2017 and 2016 would have been as follows:

	UNAUDITED
	YEAR ENDED
	January 31, 2017		January 31, 2016
	Pro forma		Pro forma
Revenues	$	1,544.3	$	1,699.8
Net earnings (loss)		51.7		(376.7)
Earnings (loss) per diluted share		0.99		(7.21)

The Company acquired two new product lines immediately prior to the end of the fourth quarter of Fiscal 2017. The first purchase includes high performance fasteners and precision components and assemblies dedicated to aircraft engine manufacturing. The second group of products will enable us to offer our customers technical products, systems, and expertise in motion and control applications, including hydraulics, pneumatics, fluid connectors, filtration, electrical control systems, seals, compressors and engineered systems for both OEM and aftermarket applications. The Company acquired the two product lines for an aggregate purchase price of $64.8, which were accounted for as purchases under ASC 805 and primarily consisting of inventory, accounts receivable, goodwill and intangibles and accounts payable and other current liabilities. The acquisitions did not have a material impact on the accompanying consolidated financial

F-13

statements. The valuation of the acquired assets related to the product line acquisitions arenot yet complete, and as such, the Company has not yet finalized its allocation of the purchase price for the acquisitions.

3. PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

	Useful			January 31,		January 31,
	Life (Years)			2018		2017
Land, buildings and improvements	1	-	30	$	48.7	$	40.9
Machinery	2	-	20		142.1		119.8
Computer equipment and software	1	-	15		123.7		105.5
Furniture and equipment	3	-	20		163.0		131.5
					477.5		397.7
Less accumulated depreciation					191.1		149.4
				$	286.4	$	248.3

Depreciation expense was $46.8, $47.3and $51.3 for the years ended January 31, 2018, 2017 and 2016, respectively.

4. GOODWILL AND LONG-LIVED ASSETS, NET

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

				January 31, 2018						January 31, 2017
	Useful Life			Original		Accumulated		Net Book		Original		Accumulated		Net Book
	(Years)			Cost		Amortization		Value		Cost		Amortization		Value
Customer contracts and relationships	10	-	30	$	413.6	$	128.8	$	284.8	$	422.0	$	129.1	$	292.9
Covenants not to compete	5				2.2		0.7		1.5		5.5		3.6		1.9
Developed technologies	15				3.3		0.5		2.8		3.3		0.2		3.1
Trade names	Indefinite				19.5		-		19.5		16.9		-		16.9
				$	438.6	$	130.0	$	308.6	$	447.7	$	132.9	$	314.8

Amortization expense of intangible assets was $19.3, $19.6and $23.7 for the years ended January 31, 2018, 2017 and 2016, respectively. Amortization expense related to intangible assets is expected to be approximately $19.0 in each of the next five years.

In accordance with ASC 350, goodwill is not amortized but is subject to an annual impairment test. For the years ended January 31, 2018 and 2017, the Company’s annual impairment testing yielded no impairments of goodwill or the indefinite lived intangible asset. During the year ended January 31, 2016, the continued downturn in the oil and gas industry, including the nearly 75% decrease in the number of onshore drilling rigs and the resulting significant cutbacks in the capital expenditures of our customers, represented a significant adverse change in the business climate, which indicated that the ESG reporting unit’s goodwill was impaired and ESG asset group’s long-lived assets may not be recoverable. As a result, during the third quarter ended October 31, 2015, the Company performed an interim goodwill impairment test and a long-lived asset recoverability test. The results of the goodwill impairment testing indicated that goodwill was impaired which resulted in a $310.4 pre-tax goodwill impairment charge for the year ended January 31, 2016.

Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are tested for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. For the years ended January 31, 2018 and 2017, there were no impairments of long-lived assets. For the year ended January 31, 2016, the Company performed a long-lived asset

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impairment analysis and concluded the carrying amount of the long-lived assets exceeded the undiscounted cash flows of the ESG asset group. As a result, we recorded a $329.8 long-lived asset impairment charge, $177.8 related to identified intangible assets and $152.0 related to property and equipment for the year ended January 31, 2016.

The goodwill and long-lived asset impairment charges reflected the full value of the goodwill and identified intangible assets attributable to the ESG segment. The accumulated goodwill impairment losses (incurred in 2008 and 2015) totaled $601.1 as of January 31, 2016.

The changes in the carrying amount of goodwill for the years ended January 31, 2018, 2017 and 2016 are as follows:

Balance, January 31, 2016	$	954.9
Acquisitions		50.8
Purchase Price Adjustments		(2.5)
Effect of foreign currency translation		(6.8)
Balance, January 31, 2017		996.4
Acquisitions		17.3
Purchase Price Adjustments		(0.1)
Effect of foreign currency translation		43.2
Balance, January 31, 2018	$	1,056.8

5. RELATED PARTY TRANSACTIONS

On December 17, 2014, Former Parent created an independent public company through a spin‑off of its ASG and ESG businesses to Former Parent’s stockholders (“Spin‑Off”). In connection with the Spin‑off, we have created some of the functions that were previously provided to us through corporate allocations from B/E Aerospace in‑house. We also entered into certain agreements with B/E Aerospace relating to transition services and IT services through April 2017. In addition, we 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 year ended January 31, 2018 and totaled $8.7 for the year ended January 31, 2017.

On April 13, 2017, B/E Aerospace was acquired by Rockwell Collins, Inc. and is no longer a related party. Sales to B/E Aerospace were $4.4 through April 12, 2017 and $24.1 and $19.0 for the years ended January 31, 2017 and 2016.

6. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	January 31, 2018		January 31, 2017
Accrued salaries, vacation and related benefits	$	37.2	$	31.6
Accrued commissions		10.9		8.7
Income taxes payable		10.7		10.3
Accrued interest		11.7		11.7
Other accrued liabilities		36.2		28.8
	$	106.7	$	91.1

7. LONG‑TERM DEBT

Long-term debt consists of the following:

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	January 31, 2018		January 31, 2017
Senior unsecured notes	$	1,200.0	$	1,200.0
Less unamortized original issue discount and debt issue costs		15.4		18.0
	$	1,184.6	$	1,182.0

In December 2014, in connection with the Spin‑off, the Company issued $1,200.0 aggregate principal amount of 5.875% senior unsecured notes due 2022 (the “5.875% Notes”), in an offering pursuant to the Securities Act of 1933, as amended. The net proceeds from the issuance of the 5.875% Notes were approximately $1,172.1, of which $750.0 was distributed to Former Parent, leaving KLX with net proceeds of approximately $422.1. The 5.875% Notes are senior unsecured debt obligations of the Company. We also entered into a $500.0 secured revolving credit facility dated as of December 16, 2014, which was amended and restated to a $750.0 secured revolving credit facility as of May 19, 2015 (the “Revolving Credit Facility”). As of January 31, 2018 and 2017, long‑term debt consisted of $1,200.0 of our 5.875% Notes.

Letters of credit outstanding under the Revolving Credit Facility aggregated $5.8 at January 31, 2018.

The Revolving Credit Facility is tied to a borrowing base formula, has no financial covenants and has $744.2 of availability as of January 31, 2018. The Revolving Credit Facility bears interest at an annual rate equal to the London interbank offered rate (“LIBOR”) plus the applicable margin (as defined), and expires in May 2020. No amounts were outstanding under the Revolving Credit Facility as of January 31, 2018 or 2017.

Maturities of long‑term debt are as follows:

Year Ending January 31,
2019	$	—
2020		—
2021		—
2022		—
2023		1,200.0
Thereafter		—
Total	$	1,200.0

Interest expense amounted to $75.8, $75.9 and $77.7 for the years ended January 31, 2018, 2017 and 2016, respectively.

8. 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 consolidated and combined balance sheets. At January 31, 2018, future minimum lease payments under these arrangements approximated $190.1, of which $166.0 is related to long‑term real estate leases.

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Rent expense for the years ended January 31, 2018, 2017 and 2016 was $39.8, $28.9 and $37.7, respectively. Future payments under operating leases with terms greater than one year as of January 31, 2018 are as follows:

Year Ending January 31,
2019	$	31.2
2020		30.1
2021		24.7
2022		20.6
2023		15.0
Thereafter		68.5
Total	$	190.1

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 consolidated and combined 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 consolidated and combined financial statements. Accordingly, no significant amounts have been accrued for indemnities, commitments and guarantees.

The Company has employment and compensation agreements with key officers of the Company. An agreement with one of the officers provides for the officer to earn a minimum of $1.0 per year, subject to increases as determined from time to time by the Company's Board of Directors or the Compensation Committee of the Board of Directors, for a three-year period from the effective date (as defined in such agreement), with automatic extension by one year on each anniversary of the effective date of the agreement unless either party provides notice of non-renewal, as well as quarterly contributions to a tax-deferred compensation plan which in the aggregate, on an annual basis, would amount to a contribution equal to 100% of such officer's base salary in effect at the time, to be reduced to 30% effective for fiscal quarters commencing on or after February 1, 2017.

One other agreement provides for an officer to receive annual minimum compensation of $0.7 per year, which may be increased in the discretion of the Company’s Board of Directors or the Compensation Committee of the Board of Directors, for a three-year period from the effective date (as defined in such agreement) with automatic extension by one year on each anniversary of the effective date of the agreement unless either party provides notice of non-renewal, and to receive quarterly contributions to a tax-deferred compensation plan which in the aggregate, on an annual basis, would amount to a contribution equal to 100% of such officer’s base salary in effect at the time.

In addition, the Company has employment agreements with certain other key members of management expiring on various dates. 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.

9. INCOME TAXES

The Company determined the provision for income taxes using the asset and liability approach. Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities.

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Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. In assessing the need for a valuation allowance, the Company looked to the future reversal of existing taxable temporary differences, taxable income in carryback years and the feasibility of tax planning strategies and estimated future taxable income. The need for a valuation allowance can be affected by changes to tax laws, changes to statutory tax rates and changes to future taxable income estimates.

The Company recognizes tax benefits from uncertain tax positions 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. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

As of January 31, 2018, the Company has recorded a tax indemnity payable to B/E Aerospace totaling $6.4, of which $1.8 is classified in other current liabilities and $4.6 is classified in other long‑term liabilities.

Components of earnings (loss) before incomes taxes were:

	Year Ended January 31,
	2018		2017		2016
Earnings (loss) before income taxes
United States	$	128.3	$	41.3	$	(624.4)
Foreign		12.2		12.2		10.3
Earnings (loss) before income taxes	$	140.5	$	53.5	$	(614.1)

Income tax expense (benefit) consists of the following:

	Year Ended January 31,
	2018		2017		2016
Current:
Federal	$	(0.2)	$	—	$	0.7
State		0.8		0.3		(1.5)
Foreign		5.1		(1.3)		3.8
		5.7		(1.0)		3.0
Deferred:
Federal		79.8		14.4		(213.3)
State		2.9		1.3		(17.4)
Foreign		(1.3)		(9.4)		(0.6)
		81.4		6.3		(231.3)
Total income tax expense (benefit)	$	87.1	$	5.3	$	(228.3)

The difference between income tax expense (benefit) and the amount computed by applying the statutory U.S. federal income tax rate (33.8% for the year ended January 31, 2018 and 35% for the years ended January 31, 2017 and 2016) to the pre‑tax earnings consists of the following:

	Year Ended January 31,
	2018		2017		2016
Statutory federal income tax expense (benefit)	$	47.5	$	18.7	$	(214.9)
U.S. state income taxes		3.4		1.5		(17.5)
Foreign tax rate differential		(0.1)		0.1		(0.2)
Change in unrecognized tax benefits		0.2		(7.8)		0.4
Change in valuation allowance on foreign interest loss carryforwards		6.3		(1.6)		5.3
Other, net		0.7		1.3		2.0
Non-taxable/non-deductible items		(6.0)		(6.9)		(3.4)
Stock compensation		(7.2)		—		—
Change in tax rate		42.3		—		—
	$	87.1	$	5.3	$	(228.3)

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The tax effects of temporary differences and carryforwards that give rise to deferred income tax assets and liabilities consist of the following:

	January 31, 2018		January 31, 2017
Deferred tax assets:
Inventory reserves	$	19.8	$	24.8
Accrued liabilities		9.8		12.9
Intangible Assets		13.4		44.2
Net operating loss carryforward		70.3		81.2
Inventory capitalization		9.3		14.9
Other		14.8		19.9
		137.4		197.9
Deferred tax liabilities:
Intangible assets		(13.7)		(12.8)
Depreciation		(30.3)		(25.3)
		(44.0)		(38.1)
Net deferred tax asset before valuation allowance		93.4		159.8
Valuation allowance		(24.8)		(17.8)
Net deferred tax asset	$	68.6	$	142.0

A reconciliation of the beginning and ending amounts of gross uncertain tax positions is presented below:

	January 31, 2018		January 31, 2017		January 31, 2016
Unrecognized tax benefit at beginning of period	$	7.2	$	9.0	$	9.4
Additions for current year tax positions		0.1		4.6		—
Additions for prior year tax positions		—		1.3		—
Decreases for prior year tax positions		—		(7.6)		—
Foreign currency fluctuations		1.1		(0.1)		(0.4)
Unrecognized tax benefit at end of period	$	8.4	$	7.2	$	9.0

Included in the balance of unrecognized tax benefits as of January 31, 2018, 2017 and 2016 are $5.6, $4.4 and $9.0, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

The Company does not anticipate that the total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statutes of limitation within twelve months of this reporting date. The Company classifies interest and penalties related to income tax as income tax expense. The amount included in the Company’s liability for unrecognized tax benefits for interest and penalties was immaterial as of January 31, 2018, 2017 and 2016.

The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United States, the United Kingdom, France and Germany. Tax years that remain subject to examinations by major tax jurisdictions vary by legal entity but are generally open for the U.S. for tax years ending in 2014 and after and outside the U.S. for the tax years ending after 2007.

As of January 31, 2018, the Company has federal net operating loss carryforwards of $157.4 expiring beginning in 2035 and state net operating loss carryforwards of $134.6 expiring between 2020 and 2035 with the majority expiring in 2035. The Company has $117.8 of foreign net operating loss carryforwards as of January 31, 2018 for which a valuation allowance of $95.2 has been recognized.

All of the Company’s foreign net operating losses have an indefinite carryforward period. The Company’s future tax provision will reflect any favorable or unfavorable adjustments to its estimated tax liabilities when resolved. The Company is unable to predict the outcome of these matters. However, the Company believes that none of these matters will have a material effect on the results of operations or financial condition of the Company.

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In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the statement of earnings, rather than equity, and requires excess tax benefits from stock-based compensation to be classified in cash flow from operations. The Company adopted the new standard during the first quarter of 2017 in compliance with the effective date, which resulted in the recognition of a $0.5 long-term deferred tax asset with the offset recorded to accumulated deficit. Prior periods have been adjusted to conform to the current year presentation. With respect to forfeitures, the Company will continue to estimate the number of awards expected to be forfeited upon award issuance.

Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to $101.0 at January 31, 2018. Those earnings are considered to be permanently reinvested, and no provision for U.S. federal and state income taxes has been made. Distribution of these earnings in the form of dividends or otherwise could result in U.S. federal taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable in various foreign countries. It is not currently practical to determine the amount of U.S. income and foreign withholding tax payable in the event all such foreign earnings are repatriated.

The Company’s effective tax rate can fluctuate as operations and the local country tax rates fluctuate due to the number of tax jurisdictions in which the Company operates.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which eliminates a current exception in U.S. GAAP to the recognition of the income tax effects of temporary differences that result from intra-entity transfers of non-inventory assets. The intra-entity exception is being eliminated under the ASU. The standard is required to be applied on a modified retrospective basis and will be effective beginning with the first quarter of 2018. Early adoption is permitted, and the Company adopted the new standard during the first quarter of 2017, which resulted in the elimination of a $7.7 long-term prepaid tax balance and the recognition of a $8.8 long term deferred tax asset with the offset recorded to the accumulated deficit.

The Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cut and Jobs Act of 2017 (the “2017 Tax Act”). SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Tax Act enactment date for companies to complete the accounting relating to the 2017 Tax Act under the Income Taxes Topic of the FASB ASC. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the 2017 Tax Act for which the accounting under the Income Taxes Topic of the FASB ASC is complete. To the extent that a company's accounting for certain income tax effects of the 2017 Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply the Income Taxes Topic of the FASB ASC on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the 2017 Tax Act. The ultimate impact of the 2017 Tax Act in the Company's financial statements is provisional with regard to certain foreign tax provisions and may differ from its estimates due to changes in the interpretations and assumptions made by the Company as well as additional regulatory guidance that may be issued.

On December 22, 2017, President Trump signed into law the legislation generally known as the Tax Cut and Jobs Act of 2017. The tax law includes significant changes to the U.S. corporate tax systems including a rate reduction from 35% to 21% beginning in January of 2018, a change in the treatment of foreign earnings going forward and a deemed repatriation transition tax. In accordance with ASC 740, “Income Taxes”, the impact of a change in tax law is recorded in the period of enactment. During the fourth quarter of 2017, the Company recorded a material, non-cash, change in its net deferred income tax balances of approximately $43.3 related to the federal and state tax rate changes. The Company estimates that its deemed repatriation liability will not be material.

Under the tax sharing and indemnity agreement between the Company and B/E Aerospace, B/E Aerospace generally assumes liability for all federal and state income taxes for all tax periods ending on or prior to December 31, 2014. B/E Aerospace assumes the liability for all federal and state income taxes of KLX’s U.S. operations through the distribution date. KLX assumes all other federal taxes, foreign income tax/non‑income taxes and state/local non‑income

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taxes related to its business for all periods and B/E Aerospace assumes all other federal taxes, foreign income tax/non‑income taxes and state/local non‑income taxes related to their business for all periods. Additional taxes incurred related to the internal restructuring to separate the businesses to complete the spin‑off shall be shared equally between B/E Aerospace and KLX. Taxes incurred related to certain international tax initiatives for the KLX business shall be assumed by KLX subject to the calculation provisions of the tax sharing and indemnity agreement. In addition, B/E Aerospace transferred to KLX all the deferred tax assets and liabilities related to the KLX business as of December 16, 2014.

10. EMPLOYEE RETIREMENT PLANS

The Company sponsors and contributes to a qualified, defined contribution savings and investment plan, covering substantially all U.S. employees. The KLX Inc. Retirement Plan was established pursuant to Section 401(k) of the Internal Revenue Code. Under the terms of this plan, covered employees may contribute up to 100% of their pay, limited to certain statutory maximum contributions. Participants are vested in matching contributions immediately and the matching percentage is 100% of the first 3% of employee contributions and 50% on the next 2% of employee contributions. For all periods prior to the year ended January 31, 2017, KLX employees participated in a plan sponsored by our Former Parent. Total expense for the plan was $4.3, $3.4 and $3.6 for the years ended January 31, 2018, 2017 and 2016, respectively. The Company also sponsors and contributes to a supplemental executive retirement plan (“SERP”), which was established pursuant to Section 409A of the Internal Revenue Code, for certain employees. The SERP is an unfunded plan maintained for the purpose of providing deferred compensation for certain employees. This plan allows certain employees to annually elect to defer a portion of their compensation, on a pre‑tax basis, until their retirement. The retirement benefit to be provided is based on the amount of compensation deferred. Compensation expense under this program was $2.3, $2.5 and $2.4 for the years ended January 31, 2018, 2017 and 2016, respectively. The Company and its subsidiaries participate in government‑sponsored programs in certain foreign countries. The Company funds these plans based on legal requirements, tax considerations, local practices and investment opportunities.

11. STOCKHOLDERS’ EQUITY

Earnings Per Share—Basic net earnings per common share is computed using the weighted average of common shares outstanding during the year. Diluted net earnings per common share reflects the potential dilution from assumed conversion of all dilutive securities such as stock options and unvested restricted stock using the treasury stock method. When the effects of the outstanding stock options, restricted stock awards or restricted stock units are anti‑dilutive, they are not included in the calculation of diluted earnings per common share. For the years ended January 31, 2018, 2017 and 2016 no shares were excluded from the determination of diluted earnings per common share.

The following table sets forth the computation of basic and diluted net earnings per share for the years ended January 31, 2018, 2017 and 2016:

	Year Ended January 31,
	2018		2017		2016
Numerator: net earnings (loss)	$	53.4	$	48.2	$	(385.8)
Denominator:
Denominator for basic earnings per share—Weighted average shares (in millions)		50.5		51.8		52.2
Effect of dilutive securities—Dilutive securities (in millions)		0.8		0.4		—
Denominator for diluted earnings per share—Adjusted weighted average shares (in millions)		51.3		52.2		52.2
Basic net earnings (loss) per share	$	1.06	$	0.93	$	(7.39)
Diluted net earnings (loss) per share	$	1.04	$	0.92	$	(7.39)

Long‑Term Incentive Plan—The Company adopted a Long‑Term Incentive Plan (“LTIP”) similar to the Former Parent’s plan under which the Company’s Compensation Committee may grant stock options, stock appreciation rights, restricted stock, restricted stock units or other forms of equity based or equity related awards. All unvested shares of

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restricted stock granted by our Former Parent were transferred with the employees to KLX on the same terms and conditions on an exchange ratio of 1.8139 such that the impact was neutral to employees at the date of the Spin‑off.

During 2014, B/E Aerospace granted restricted stock under the Former Parent’s plan to certain members of the Company’s management which vests over four years. During the three years ended January 31, 2018, the Company granted restricted stock to certain members of the Company’s Board of Directors and management. Restricted stock grants vest over periods ranging from three to four years and are granted at the discretion of the Compensation Committee of the Company’s Board of Directors. Certain awards also vest upon attainment of performance goals. Compensation cost is recorded on a straight‑line basis over the vesting term of the shares based on the grant date value using the closing trading price. Share based compensation of $22.2, $15.6 and $11.4 was recorded during fiscal year 2017, 2016 and 2015, respectively relating to these restricted stock grants. Unrecognized compensation cost related to these grants was $37.5 at January 31, 2018.

The following table summarizes shares of restricted stock awards that were granted, vested, forfeited and outstanding:

	January 31, 2018				January 31, 2017
				Weighted				Weighted
		Weighted		Average		Weighted		Average
		Average		Remaining		Average		Remaining
	Shares	Grant Date		Vesting Period	Shares	Grant Date		Vesting Period
	(in thousands)	Fair Value		(in years)	(in thousands)	Fair Value		(in years)
Outstanding, beginning of period	766.4	$	38.57	2.44	827.2	$	36.40	3.12
Shares granted	207.1		57.65		262.3		41.97
Shares vested	(290.1)		39.75		(246.5)		35.72
Shares forfeited	(72.2)		38.24		(76.6)		35.96
Outstanding, end of period	611.2	$	44.52	1.98	766.4	$	38.57	2.44

During the year ended January 31, 2018, the Company granted 113,387 units of time and performance based restricted stock. During the year ended January 31, 2018, 1,814 restricted stock units were forfeited. As of January 31, 2018, the weighted average remaining vesting period for the 452,051 outstanding restricted stock units was 1.73 years.

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

At January 31, 2018 no unvested time-based stock options were outstanding under the KLX Inc. Long-Term Incentive Plan (the “Plan”) as all options were fully vested as of January 31, 2018. At January 31, 2017 we had 298,298 unvested time-based stock options outstanding. All of the time-based options vest ratably during the period of service.

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

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	January 31, 2018						January 31, 2017
				Weighted						Weighted
		Weighted		Average				Weighted		Average
		Average		Remaining		Aggregate		Average		Remaining		Aggregate
	Number	Exercise		Contractual Life		Intrinsic	Number	Exercise		Contractual Life		Intrinsic
	of Shares	Price		(in years)		Value (1)	of Shares	Price		(in years)		Value (1)
Outstanding, beginning of period	894,899	$	39.08	7.96	$	8,868.4	894,899	$	39.08	8.96	$	—
Granted	—		—				—		—
Exercised	(894,899)		39.08				—		—
Canceled	—		—				—		—
Outstanding, end of period	—	$	—	—	$	—	894,899	$	39.08	7.96	$	8,868.4
Exercisable, end of period	—	$	—	—	$	—	596,601	$	39.08	7.96	$	5,912.3

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

For the year ended January 31, 2018 and 2017, we recorded $3.4 and $3.9, respectively, of stock-based compensation expense related to these options that is included within selling, general and administrative expenses. At January 31, 2018 and 2017, the unrecognized stock-based compensation related to these options was $0 and $7.7, respectively, and is expected to be recognized over a weighted-average period of 0 and 0.87 years, respectively.

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

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

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

	January 31,
	2015
Expected life (in years)	6.50
Volatility	30.0%
Risk free interest rate	1.5%
Dividend yield	-

The weighted average fair value per option at the grant date for options issued during the one month ended January 31, 2015 was $12.99.

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12. EMPLOYEE STOCK PURCHASE PLAN

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. KLX issued approximately 40,000, 51,000 and 50,000 shares of common stock to employees of the Company during the years ended January 31, 2018, 2017 and 2016, respectively, at a weighted average price per share of $49.14, $31.09 and $30.62, respectively.

13. 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. 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. This group is comprised of the Chairman and Chief Executive Officer and the President and Chief Operating Officer.

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 other financial information by business segment:

	Year Ended January 31, 2018
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,420.2	$	320.6	$	1,740.8
Operating earnings(loss)(1)		238.5		(22.2)		216.3
Total assets(2)		3,495.8		294.2		3,790.0
Goodwill		1,056.8		—		1,056.8
Capital expenditures(3)		27.7		57.2		84.9
Depreciation and amortization		31.8		34.3		66.1

	Year Ended January 31, 2017
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,340.9	$	153.2	$	1,494.1
Operating earnings(loss)(1)		220.6		(91.2)		129.4
Total assets(2)		3,471.4		226.9		3,698.3
Goodwill		996.4		—		996.4
Capital expenditures(3)		11.0		24.5		35.5
Depreciation and amortization		30.4		36.5		66.9

	Year Ended January 31, 2016
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,312.5	$	254.9	$	1,567.4
Operating earnings(loss)(1)		211.6		(748.4)		(536.8)
Total assets(2)		3,422.8		268.2		3,691.0
Goodwill		952.4		2.5		954.9
Capital expenditures(3)		30.4		100.1		130.5
Depreciation and amortization		28.1		46.9		75.0

(1) Operating earnings (loss) includes an allocation of corporate IT costs, employee benefits and general and administrative costs. The allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues generated, costs incurred, headcount or other measures.

(2) Corporate assets (including cash and cash equivalents) of $263.6, $378.2 and $559.5 at January 31, 2018, 2017 and 2016, respectively, have been allocated to the above segments based on each segment’s percentage of total assets.

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

Geographic Information

The Company operates principally in three geographic areas, the United States, Europe (primarily Germany) and emerging markets, such as Asia, the Pacific Rim and the Middle East. There were no significant transfers among geographic areas during these periods.

The following table presents revenues and operating earnings (loss) based on the originating location for the years ended January 31, 2018, 2017 and 2016. Additionally, it presents all identifiable assets related to the operations in each geographic area as of January 31, 2018 and 2017:

	Year Ended January 31,
	2018		2017		2016
Revenues:
Domestic	$	1,734.2	$	1,423.8	$	1,453.4
Foreign		6.6		70.3		114.0
	$	1,740.8	$	1,494.1	$	1,567.4
Operating earnings (loss):
Domestic	$	198.8	$	109.3	$	(561.0)
Foreign		17.5		20.1		24.2
	$	216.3	$	129.4	$	(536.8)

	January 31, 2018		January 31, 2017
Identifiable assets:
Domestic	$	3,260.7	$	3,214.1
Foreign		529.3		484.2
	$	3,790.0	$	3,698.3

Revenues by geographic area, based on destination, for the years ended January 31, 2018, 2017 and 2016 were as follows:

	Year Ended January 31,
	2018				2017				2016
			% of				% of				% of
	Revenues		Revenues		Revenues		Revenues		Revenues		Revenues
United States	$	1,090.4	62.6	%	$	865.6	57.9	%	$	955.3	61.0	%
Europe		382.7	22.0	%		387.9	26.0	%		376.3	24.0	%
Asia, Pacific Rim, Middle East and other		267.7	15.4	%		240.6	16.1	%		235.8	15.0	%
Total revenues	$	1,740.8	100.0	%	$	1,494.1	100.0	%	$	1,567.4	100.0	%

Export revenues from the United States to customers in foreign countries amounted to $643.8, $511.1 and $457.9 in the years ended January 31, 2018, 2017 and 2016, respectively.

14. FAIR VALUE INFORMATION

All financial instruments are 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.

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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 January 31, 2018 and 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 $1,251.0 and $1,260.7 as of January 31, 2018 and 2017, respectively.

Goodwill and long-lived assets, including property and equipment and purchased intangibles subject to amortization were impaired and written down to their estimated fair values during the third quarter of Fiscal 2015. The goodwill level 3 fair value was determined using an income based approach utilizing estimates of future cash flow, discount rate and long-term growth rate, all of which were unobservable. The long-lived asset level 3 fair value was determined using a combination of the cost approach and the market approach, which used inputs that included replacement costs (unobservable), physical deterioration estimates (unobservable), economic obsolescence (unobservable), and market sales data for comparable assets.

The following table summarizes impairments of goodwill and long-lived assets and the related post impairment fair values of the corresponding ESG assets for the year ended January 31, 2016:

	Year Ended
	January 31, 2016
	Impairment		Fair Value
Property and equipment, net	$	152.0	$	174.3
Goodwill		310.4		—
Intangible assets		177.8		—
	$	640.2	$	174.3

Fair value is measured as of the impairment date using Level 3 inputs. See Note 4 for a discussion of the asset impairment charge recorded during the third quarter of Fiscal 2015.

The fair value information presented herein is based on pertinent information available to management at January 31, 2018 and 2017, respectively. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these consolidated and combined financial statements since those dates, and current estimates of fair value may differ significantly from the amounts presented herein.

15. SELECTED QUARTERLY DATA (Unaudited)

Summarized quarterly financial data for the years ended January 31, 2018 and 2017 are as follows:

	Year Ended January 31, 2018
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	411.3	$	430.6	$	456.7	$	442.2
Cost of sales		298.4		312.0		331.7		321.7
Net earnings		18.4		20.7		25.8		(11.5)
Basic net earnings per share(1)		0.36		0.41		0.52		(0.23)
Diluted net earnings per share(1)		0.36		0.40		0.51		(0.23)

(1) Net earnings per share are computed individually for each quarter presented. Therefore, the sum of the quarterly net earnings per share may not necessarily equal the total for the year.

F-26

	Year Ended January 31, 2017
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	352.8	$	378.9	$	389.0	$	373.4
Cost of sales		269.3		286.4		289.0		281.4
Net earnings		2.5		8.0		19.8		17.9
Basic net earnings per share(1)		0.05		0.15		0.38		0.35
Diluted net earnings per share(1)		0.05		0.15		0.38		0.34

(1) Net earnings per share are computed individually for each quarter presented. Therefore, the sum of the quarterly net earnings per share may not necessarily equal the total for the year.

F-27

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED JANUARY 31, 2018, 2017 AND 2016

(In millions)

	Balance At								Balance At
	Beginning						Write-Offs/		End
	Of Period		Expenses		Other		Disposals		Of Period
Deducted From Assets:
Allowance for doubtful accounts:
Year ended January 31, 2018	$	13.5	$	3.9	$	0.3	$	5.7	$	12.0
Year ended January 31, 2017		11.3		4.0		—		1.8		13.5
Year ended January 31, 2016		8.0		4.1		—		0.8		11.3
Reserve for inventory:
Year ended January 31, 2018	$	59.6	$	17.2	$	—	$	4.4	$	72.4
Year ended January 31, 2017		40.4		20.7		—		1.5		59.6
Year ended January 31, 2016		33.5		7.7		—		0.8		40.4
Deferred tax asset valuation allowance:
Year ended January 31, 2018	$	17.8	$	0.7	$	6.3	$	—	$	24.8
Year ended January 31, 2017		21.9		—		(1.6)		(2.5)		17.8
Year ended January 31, 2016		24.8		—		5.3		(8.2)		21.9

F-28

EX-10.12

Exhibit 10.12

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”) is entered into effective as of December 22, 2015, by and between KLX Inc., a Delaware corporation (the “Company”), and John A. Cuomo (the “Executive”).

RECITALS

WHEREAS, the Company and the Executive previously entered into an Employment Agreement effective as of February 26, 2015 (the “Prior Agreement”); and

WHEREAS, the Executive agrees to continue to provide services for the benefit of the Company for the additional period provided herein, and the Company wishes to procure such services as provided herein; and

WHEREAS, concurrently with the execution of the Prior Agreement, the Executive and the Company entered into the KLX 2015 Proprietary Rights Agreement, (the “2015 Proprietary Rights Agreement”), attached hereto as Exhibit A, and hereby incorporated by reference; and

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

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto, each intending to be legally bound, do hereby agree as follows:

1.         Employment. Subject to Section 4 of this Agreement, the Company shall employ the Executive as its Vice President and General Manager, Aerospace Solutions Group, and the Executive shall perform services for and continue in the employment of the Company commencing on February 26, 2015 (the “Effective Date”) until 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 Period” shall mean the initial three (3) year period and all extensions thereof, if any, as aforesaid, provided that the Executive continues to be employed by the Company; provided, however that for the purposes of Sections 4 and 5 of this Agreement, the Employment Period shall run through the last day of the then current Employment Period (assuming for this purpose the Executive’s continued employment through such last day).

2.         Position and Duties. The Executive shall serve the Company in the capacity of Vice President and General Manager, Aerospace Solutions Group and shall be accountable to and shall have such other powers, duties and responsibilities, consistent with such capacity as may from time to time be prescribed by the Chief Operating Officer of the Company, or his designee. The Executive shall perform and discharge, faithfully, diligently and to the best of his ability, such

powers, duties and responsibilities. The Executive shall devote all of his working time and efforts to the business and affairs of the Company.

3.         Compensation.

(a)        Salary. During the Employment Period, the Executive shall receive a salary (the “Salary”) payable at the rate of Three Hundred Sixty Thousand Eighty-One Dollars ($360,081.00) per annum. The Salary may be adjusted from time to time by the compensation committee of the Company’s board of directors (the “Compensation Committee”), provided,  however, that it shall at no time be adjusted below the Salary then in effect.  The Salary shall be paid biweekly or in accordance with the Company’s then current payroll practices, less all required deductions. The Salary shall be pro-rated for any period of service less than a full year.

(b)        Incentive Bonus. During the Employment Period, the Executive may receive an incentive target bonus for each fiscal year or portion thereof during which the Executive has been employed hereunder as determined by the Compensation Committee at the end of the applicable fiscal year, with the target annual incentive opportunity to be no less than seventy-five percent (75%) of the Executive’s then current Salary (the “Target Bonus”) in accordance with the Company’s executive bonus plan then in effect.  The incentive bonus shall be paid in accordance with Company policy, but in no event later than March 15th of the year following the year in which it is earned.

(c)        Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by him on behalf of the Company in accordance with the Company’s then current policies.

(d)        Benefits. During the Employment Period, the Executive shall be entitled to participate in or receive benefits under any life or disability insurance, health, pension, retirement, accident, deferred compensation, and other employee benefit plans, programs or arrangements made generally available by the Company to its senior executive officers, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements in effect from time to time. In accordance with the Company’s policies in effect from time to time, the Executive shall also be entitled to paid vacation in any fiscal year during the Employment Period as well as all paid holidays given by the Company to its senior executive officers.

(e)        Automobile. During the Employment Period, the Executive shall receive an automobile allowance of $1,100 per month (the “Automobile Allowance”), payable in accordance with Company policy as established from time to time, but in no event later than March 15th of the year following the year in which it shall accrue.

(f)        Equity Awards.  During the Employment Period, the Executive shall be eligible to participate in the Company’s equity incentive program(s) on the terms set forth by the Compensation Committee in its sole discretion, which program(s) may include stock options, restricted stock awards or units (“Equity Awards”).  The targeted grant date fair value of the annual Equity Awards shall be one hundred fifty percent (150%) of the Executive’s then current Salary (determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, or any successor promulgation). The actual grant date fair value of any Equity Award will be determined by the Compensation Committee based on its assessment of the Executive’s performance and may be more or less than the target amount.  The

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Equity Awards shall be granted pursuant to the terms of the Company’s equity incentive program(s) and an award agreement to be entered into between the Company and the Executive.

4.         Termination and Compensation Thereon.

(a)        Termination Date. Subject to the terms and conditions of this Agreement, the Executive’s employment pursuant to this Agreement may be terminated either by the Executive or the Company at any time and for any reason. The term “Termination Date” shall mean the date upon which the Executive’s employment is terminated (i) by his death, (ii) by his Incapacity (as defined in Section 4(c)), (iii) otherwise in accordance with this Agreement, (iv) upon the occurrence of a Change of Control in accordance with Section 5, or (v) for any other reason, the Executive incurs a Separation from Service (as defined in Section 13(c)).

(b)        Death.

(i)         The Executive’s employment 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 the Executive shall have designated in a notice filed with the Company (“Person”), or, if no such Person shall have been designated, to the Executive’s estate, a lump-sum amount equal to the sum of (A) a prorated portion of 75% of the Executive’s then current Salary, with the prorated amount to be determined based on the number of days that the Executive was employed by the Company in the year during which the Termination Date occurs, (B) the Executive’s Salary for the remainder of the Employment Period, (C) the maximum annual contribution under the Company’s deferred compensation plan of seven and a half percent (7.5%) of the Executive’s total base salary and annual cash bonus (with such maximum amount to be determined in accordance with the terms of the applicable deferred compensation plan) that would have been made during the remainder of the Employment Period and (D) two (2) times the Executive’s Target Bonus, in the case of each of clauses (B), (C) and (D) at the rates in effect as of the Termination Date (the lump sum amount determined in accordance with this Section 4(b)(i), the “Termination Amount”).

(ii)       Upon the Executive's death, the Company shall, within thirty (30) days following the 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 (A) any accrued and unpaid Salary, Automobile Allowance, vacation time and benefits through the date of death, and (B) any earned but unpaid bonuses payable to the Executive as determined by the Compensation Committee for any fiscal periods of the Company ending prior to the date of death.

(iii)      In addition, upon the Executive’s death, any Equity Awards granted to the 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.

(c)        Incapacity. If, in the reasonable judgment of the Compensation Committee, as a result of the Executive’s incapacity due to a medically determinable physical or mental illness, the Executive shall have been absent from his full-time duties as described in this Agreement for the entire period of twelve (12) consecutive months (“Incapacity”), the Executive’s employment shall

3

terminate at the end of the twelve (12)-month period as provided in this Section 4(c). In such event:

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

(ii)       the Company shall pay to the Executive a lump-sum amount equal to the Termination Amount;

(iii)      the Company shall pay to the Executive within thirty (30) days after the Termination Date (A) any accrued and unpaid Salary, Automobile Allowance, vacation time and benefits through the Termination Date and (B) any earned but unpaid bonuses payable to the Executive as determined by the Compensation Committee for any fiscal periods of the Company ending prior to the Termination Date; and

(iv)       upon a termination due to Incapacity, all Equity Awards granted to the 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.

The lump sum payment described in Section 4(c)(ii) shall be made on the sixtieth (60th) day following the Termination Date, provided that prior to the payment date the Executive signs a waiver and release agreement in the form provided by the Company and such waiver and release becomes effective and irrevocable in its entirety prior to such date. If the waiver and release does not become effective and irrevocable on or prior to the payment date set forth in the preceding sentence, the Company shall have no further obligations pursuant to Section 4(c)(ii)  or 4(f) of this Agreement. Any dispute between the Compensation Committee and the Executive with respect to the Executive’s Incapacity shall be settled by reference to a competent medical authority mutually agreed to by the Compensation Committee and the Executive or his personal representative, whose decision shall be binding on all parties.

(d)        Termination by the Company for Cause; Resignation by the Executive Without Good Reason.

(i)         If the Executive’s employment is terminated by the Company for Cause or the Executive resigns his employment for any reason (other than for Good Reason, as defined below), the Company shall have no further obligations to the Executive hereunder after the Termination Date, except for unpaid Salary and benefits accrued through the Termination Date.

(ii)       For purposes of this Agreement, “Cause”  shall mean (A) the willful and continued (after a reasonable period following such demand) failure by Executive to substantially perform his duties hereunder (other than (1) any such willful or continued failure resulting from his Incapacity due to physical or mental illness or physical injury or (2) any such actual or anticipated failure after the issuance of a notice of termination by Executive for Good Reason (as defined below)), after written demand for substantial performance is delivered by the Company to Executive that specifically identifies the manner in which the Company believes Executive has not substantially performed his duties; (B) the willful engaging by Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; or (C) the conviction of Executive of a felony by a court of competent jurisdiction in a judgment which has become final

4

and nonappealable if such conviction would render it impossible for Executive to perform his obligations hereunder or if the reputation of the Company would be materially damaged by the continuance of Executive’s employment hereunder.

For purposes of this Section 4(d)(ii) no act, or failure to act, on the part of Executive shall be considered “willful” unless done or omitted to be done by him in bad faith and without reasonable belief that his action or omission was in the best interest of the Company.

(iii)      For purposes of this Agreement, “Good Reason” shall mean any of the following events, which continues for more than thirty (30) days after the Executive’s written notice to the Company thereof: (A) the Executive’s principal office location is moved to, and continues to be, a location more than fifty (50) miles from its current location (it being understood that travel shall not be considered a move or relocation); (B) Executive’s position, powers, duties and responsibilities under Section 2 above are and continue to be materially reduced without his written agreement, (C) his compensation and benefits payable are and continue to be eliminated or materially reduced without his written agreement, or (D) a material breach by the Company of any term or provision of this Agreement; provided that Executive has given notice thereof to the Company and the Company has not cured the Good Reason, if applicable, within thirty (30) days after receiving such notice.

If Executive’s employment is terminated by the Company for Cause or by the Executive for any reason (other than for Good Reason), pursuant to Section 4(d)(i), the Company shall have no further obligations to Executive hereunder after the Termination Date, except as provided for in Section 4(d)(i), Section 19 (Indemnification) hereof, or other indemnification available to Executive by agreement, insurance, law, equity or the Company’s organizational documents.

(e)        Termination Without Cause; Termination for Good Reason. The Company may terminate the Executive’s employment hereunder at any time without Cause, and the Executive may terminate his employment hereunder at any time for Good Reason. In such event:

(i)         the Company shall pay to the Executive a lump sum amount equal to the Termination Amount;

(ii)       the Company shall pay to the Executive any accrued and unpaid Salary, Automobile Allowance, vacation time and benefits through the Termination Date;

(iii)      the Company shall pay to the Executive any earned but unpaid bonuses payable to the Executive as determined by the Compensation Committee for any fiscal periods of the Company ending prior to the Termination Date; and

(iv)       any Equity Awards granted to the Executive that would not vest on or prior to the Termination Date shall vest as of the Termination Date 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.

The payments described in Sections 4(e)(ii) and 4(e)(iii) shall be made within thirty (30) days following the Termination Date. The lump sum payment described in Section 4(e)(i) shall be made on the sixtieth (60th) day following the Termination Date,  provided that prior to the payment date

5

the Executive signs a waiver and release agreement in the form provided by the Company and such waiver and release becomes effective and irrevocable in its entirety prior to such date. If the waiver and release does not become effective and irrevocable on or prior to the payment date set forth in the preceding sentence, the Company shall have no further obligations pursuant to Sections 4(e)(i) or 4(g).

(f)        Change of Control.

(i)         If a “Change of Control” (as defined in Section 4(f)(ii)) of the Company occurs, the Company will be obligated as provided in this Section 4(f). For purposes of determining the Company’s obligations under this Section 4(f), the date on which a Change of Control is effective shall be referred to as the “Change of Control Date.” If a Change of Control occurs during the Employment Period, the Executive’s employment shall be terminated, and:

(A)       the Company or its successor in interest shall pay to the Executive a lump-sum amount equal to (x) any accrued and unpaid Salary, Automobile Allowance, vacation time and benefits through the Change of Control Date, (y) any earned but unpaid bonuses payable to the Executive as determined by the Compensation Committee for any fiscal periods of the Company ending prior to the Termination Date, and (z) 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.

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

(C)       The payment described in Section 4(f)(i)(A) shall be made on the Change of Control Date.

(ii)       For purposes of this Agreement, a “Change of Control” shall mean a “change in control event” within the meaning of the default rules under Section 409A of the U.S. Internal Revenue Code of 1986, as amended (“Code”), and the regulations and guidance promulgated thereunder (together with Section 409A of the Code, “Section 409A”).  The obligations of the Company pursuant to this Section 4(f) shall survive any termination of this Agreement or the Executive’s employment or any resignation of such employment by the Executive pursuant to this Section 4(f).

(iii)      A Change of Control shall occur on the effective date of any event specified in Section 4(f)(ii) above.  In connection with any determination of ownership for purposes of Section 4(f)(ii) above, the attribution rules of Section 318(a) of the Code shall apply.

(g)        Benefit Continuation.  If the Executive’s employment is terminated pursuant to Sections 4(c), 4(e) or 4(f), the Company shall provide the Executive and his eligible dependents with continued participation in medical, dental and health benefit plans available to the Company’s executive officers on similar terms and conditions as active executives, from the Termination Date until the date that is eighteen (18) months following the Termination Day; provided, however, that the continuation of such benefits shall be subject to the respective terms

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of the applicable plan, in effect from time to time, and the timely payment by the Executive of his applicable share of the applicable premiums in effect from time to time, and, except with respect to a termination of employment pursuant to Section 4(f), that the Executive signs a waiver and release agreement in the form provided by the Company and such waiver and release becomes effective and irrevocable in its entirety.

(h)        280G Matters.

(i)         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”), determine 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.

(ii)       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 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.

(iii)      The reduction contemplated by this Section 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: (A) any Payments as a result of the acceleration of the vesting of performance-based Equity Awards pursuant to Section 5(c)(ii), (B) any Payment under Section 5(a) or Section 5(c)(i) that is a “parachute payment” within the meaning of Section 280G of the Code, (C) any other cash Payments that are “parachute payments” and would be made upon a Change of Control, beginning with payments that would be made last in time, and (D) 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 Section 1.280G-1, Q&A 24(c).

(iv)       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

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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 of the Code 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.

(v)        All fees and expenses of the Accounting Firm in implementing the provisions of this Section 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 (including for services provided by Executive’s Advisor) and any legal and accounting fees incurred with respect to disputes related thereto (including for services provided by Executive’s Advisor).

(vi)       The following terms shall have the following meanings for purposes of this Section 4(h):

(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.

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(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.

5.         Covenants of the Executive. In consideration of the receipt and execution of this Agreement, including all of the benefits set forth herein that are beyond or in addition to the benefits the Executive was previously entitled or eligible to receive (each benefit separately and cumulatively being sufficient consideration for the Executive’s covenants contained in this Section 5), and the Executive’s continued employment as the Vice President and General Manager, Aerospace Solutions Group (also separately being sufficient consideration for the Executive’s covenants contained in this Section 5), the Executive agrees as follows:

(a)        Non-Competition.

(i)         The Executive shall not during the Executive’s employment with the Company and for two (2) years after the Termination Date (the “Non-Compete Restrictive Period”), directly or indirectly:

(A)       compete in the United States or on the internet with respect to any “Competing Product or Service”, which is defined to mean those products or services offered and/or under development by the Company or any of its subsidiaries or affiliates during the Executive’s employment (both during the term of this Agreement and any periods prior to this Agreement whereby Executive was employed by the Company or its predecessors) with the Company of which the Executive has knowledge, or any product or service competitive with or intended to compete with such products or services, or any product or service of the Company or any of its subsidiaries or affiliates which the Executive acquired knowledge of as a result of, arising out of, or from his employment with the Company (including its predecessors); and

(B)       own, invest in, make loans to, operate, manage, control, participate in, consult with, or advise, any entity or person that provides a Competing Product or Service with the Company in the United States or on the internet. This covenant shall not prevent the Executive from having passive investments of less than five percent (5%) of the outstanding equity securities of any entity listed for trading on a national stock exchange (as defined in the Securities Exchange Act of 1934) or any recognized automatic quotation system.

(ii)       If the Executive breaches any covenant contained in this Section 5(a), the Executive agrees and acknowledges that the Non-Compete Restrictive Period shall be extended during the time of such breach. The Executive further agrees and acknowledges that, in the event of the Executive’s breach of any covenants contained in this Section 5(a), the Non-Compete Restrictive Period may, to extent permitted by law, be extended for up to two (2) years, which shall commence upon either (x) a determination by the Company that the Executive has stopped breaching such covenants, or (y) the date of a court’s or arbitrator’s final determination that the Executive breached a covenant contained in Section 5(a).

(b)        Non-Solicitation.

(i)         As a separate and independent covenant, the Executive agrees that he shall not during his employment with the Company and for two (2) years after the Termination Date (the “Non-Solicitation Restrictive Period”), directly or indirectly:

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(A)       contact, solicit, perform services for, or accept work or business (in any capacity other than as a Company employee) from any clients or customers of the Company, its subsidiaries or affiliates, with whom the Executive has worked or had contact during the Executive’s employment with the Company, or of whom the Executive had knowledge of due to his employment or access to the Company’s confidential information and/or trade secrets;

(B)       contact, solicit or accept contact from any clients, subcontractors, consultants, vendors, suppliers or independent contractors of the Company, its subsidiaries or affiliates, for the purpose of interfering with, causing, inviting, or encouraging any such persons or entities from altering or terminating their business relationship or association with the Company, its subsidiaries or affiliates. This applies to any clients, subcontractors, consultants, vendors, suppliers or independent contractors with whom the Executive has worked or had contact during his employment with the Company, or of whom the Executive had knowledge due to his employment or access to the Company’s confidential information and/or trade secrets; or

(C)       contact, solicit or accept contact from any employee of the Company, its subsidiaries or affiliates for the purpose of interfering with their employment with the Company, its subsidiaries or affiliates, or inviting or encouraging them to terminate their employment with the Company, its subsidiaries or affiliates or which has the effect of altering or terminating their employment with the Company, its subsidiaries or affiliates.

(ii)       If the Executive breaches any covenant contained in this Section 5(b), the Executive agrees and acknowledges that the Non-Solicitation Restrictive Period shall be extended during the time of such breach. The Executive further agrees and acknowledges that, in the event of the Executive’s breach of any covenants contained in this Section 5(b), the Non-Solicitation Restrictive Period may, to the extent permitted by law, be extended for up to two (2) years, which shall commence upon either (x) a determination by the Company that the Executive has stopped breaching such covenants, or (y) the date of a court’s or arbitrator’s final determination that the Executive breached a covenant contained in Section 5(b).

6.         Amendments. No amendment to this Agreement or any Exhibit hereto shall be effective unless it shall be in writing and signed by each party hereto.

7.         Notices. All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally or sent by facsimile at a facsimile number provided in writing by the receiving party or three days after being mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to the Company, to it at:

KLX, Inc. 

1300 Corporate Center Way

Wellington, FL 33414

Attention: Chief Operating Officer

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If to the Executive, to him at:

John A. Cuomo

11 Island Avenue, #1501

Miami Beach, FL 33139

8.         Entire Agreement. This Agreement and the 2015 Proprietary Rights Agreement constitute the entire agreement among the parties hereto pertaining to the subject matter hereof and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties hereto, including, without limitation the Prior Agreement. The non-solicitation and non-competition provisions in this Agreement and in the 2015 Proprietary Rights Agreement shall be deemed separate and distinct provisions and each applicable time period shall run concurrently in accordance with its terms for the benefit of the Company.

9.         Headings. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning of this Agreement.

10.       Counterparts. This Agreement may be executed in any number of counterparts which together shall constitute one instrument.

11.       Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida and shall in all respects be interpreted, enforced and governed under the laws of said State, without regards for, or consideration of, any conflicts of law principles.

12.       Withholding. All payment made by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld by the Company under applicable law.

13.       Section 409A.

(a)        If any amounts that become due under Section 4 of this Agreement constitute “nonqualified deferred compensation” within the meaning of Section 409A, payment of such amounts shall not commence until the Executive incurs a Separation from Service (as defined in Section 13(c), below) if and only if necessary to avoid accelerated taxation or tax penalties in respect of such amounts.

(b)        Notwithstanding any provision of this Agreement to the contrary, if the Executive is a “Specified Employee” (as defined below in Section 13(c)) 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 the Executive’s Separation from Service for any reason other than death or (ii) the Executive’s date of death. The provisions of this Section 15(b) shall only apply if required to comply with Section 409A.

(c)        For purposes of this Agreement, “Separation from Service” shall have the meaning set forth in Section 409A(a)(2)(A)(i) and determined in accordance with the default rules under Section 409A. “Specified Employee” shall have the meaning set forth in Section 409A(a)(2)(B)(i),

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as determined in accordance with the uniform methodology and procedures adopted by the Company and then in effect.

(d)        It is intended that the terms and conditions of this Agreement comply with Section 409A. If any provision of this Agreement contravenes any regulations or United States Treasury guidance promulgated under Section 409A, or could cause any amounts or benefits hereunder to be subject to taxes, interest and penalties under Section 409A, the Company may, in its sole discretion and without the Executive’s consent, modify the Agreement to: (i) comply with, or avoid being subject to, Section 409A, (ii) avoid the imposition of taxes, interest and penalties under Section 409A, and/or (iii) maintain, to the maximum extent practicable, the original intent of the applicable provision without contravening the provisions of Section 409A. This Section 15(d) does not create an obligation on the part of the Company to modify this Agreement and does not guarantee that the amounts or benefits owed under this Agreement will not be subject to interest and penalties under Section 409A.

(e)        Anything in this Agreement to the contrary notwithstanding, no reimbursement payable to the Executive pursuant to any provisions of this Agreement or pursuant to any plan or arrangement of the Company Group 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. No amount reimbursed during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year.

14.       Enforceability; Waiver. The invalidity and unenforceability of any term or provision of this Agreement shall not affect the validity or enforceability of any other term or provision of this Agreement.  The 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 the 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.

15.       Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. This Agreement may be assigned by the Company. The Executive may not assign or delegate his duties under this Agreement without the Company’s prior written approval.

16.       Survival. The obligations of the Executive pursuant to the 2015 Proprietary Rights Agreement (where applicable), the respective obligations of the parties pursuant to Section 5 of this Agreement, and the entitlements of the Executive and obligations of the Company pursuant to Section 4 of this Agreement, shall each survive any termination or expiration of this Agreement, or any termination or resignation of the Executive’s employment, as the case may be.

17.       Indemnification.  To the maximum extent permitted under the law of the State of Delaware as from time to time in effect, the Company hereby agrees to indemnify and defend Executive and hold him harmless from and against all liabilities, costs and expenses, including, but not limited to, amounts paid in satisfaction of judgments, in settlement or as fines or penalties, and counsel fees and disbursements, incurred by Executive in connection with the defense or disposition of, or otherwise in connection with or resulting from, any action, suit or other proceeding, whether civil,

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criminal, administrative or investigative, before any court or administrative or legislative or investigative body, in which Executive may be or may have been involved as a party or otherwise or with which Executive may be or may have been threatened, while in office or thereafter, by reason of Executive’s being an officer or director of the Company or by reason of any action taken or not taken in such capacity. Executive's contractual indemnification rights under this Section 16 shall (i) be in addition to any right of indemnification available to Executive by agreement, insurance, law, equity or the Company’s organizational documents, and (ii) notwithstanding any other provision of this Agreement to the contrary, survive Executive's termination of employment with the Company hereunder for any reason.

18.       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.

19.       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, acquisitions of life insurance policies or other arrangements to meet the obligations created under this Agreement.

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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first written above.

EXECUTIVE
/s/ John A. Cuomo
John A. Cuomo
KLX INC.
By:	/s/ Thomas P. McCaffrey
Name:	Thomas P. McCaffrey
Title:	President and Chief Operating Officer

[SIGNATURE PAGE – CUOMO AMENDED AND RESTATED EMPLOYMENT AGREEMENT]

EXHIBIT A

KLX 2015 Proprietary Rights Agreement

KLX 2015 PROPRIETARY RIGHTS AGREEMENT

This Proprietary Rights Agreement (“Agreement”) is intended to set forth in writing my responsibility to KLX Inc. and/or any of its subsidiaries or affiliated businesses (collectively the “Company”) during my employment, consultancy, and/or tenure as an independent contractor with the Company and thereafter. I recognize that the Company is engaged in a continuous program of research, development and production respecting its business, present and future. As part of my employment, consultancy, and/or tenure as an independent contractor with the Company, I have certain obligations relating to business, confidential and/or proprietary information of the Company, as well as to inventions which I may develop during my employment, consultancy, and/or tenure as an independent contractor with the Company.

I acknowledge and agree that:

1.             Agreement, Effective Date.  This Agreement shall be effective on, the first day of my employment, consultancy, and/or tenure as an independent contractor with the Company and shall continue in effect throughout my employment, consultancy, and/or tenure as an independent contractor (the “Agreement Period”). As an inducement to and in consideration of my acceptance and/or continuation of employment, consultancy, and/or tenure as an independent contractor with the Company, and the Company’s compensating me for services and extending to me certain other benefits of a compensatory nature, but without any obligation on the Company’s part to continue such employment, compensation or benefits for any specified period whatsoever, I agree to protect, safeguard and maintain the integrity and confidentiality of the Company’s valuable assets and legitimate business interests in accordance with the terms and conditions set forth in this Agreement.

2.             Confidentiality.  I will maintain in confidence and will not disclose or use, either during or after the Agreement Period, any “Proprietary Information”, whether or not in written form, except to the extent required to perform my duties on behalf of the Company. Proprietary Information means all of the following materials and information that I use, receive, have access to, conceive or develop or have used, received, conceived or developed, in whole or in part, in connection with my employment, consultancy, and/or tenure as an independent contractor with the Company:

(i)             Written materials of the Company;

(ii)           The names and information relating to customers and prospective customers of the Company and/or persons, firms, corporations or other entities with whom the Company has provided goods or services at any time, including contact persons, addresses and phone numbers, their characteristics and preferences and types of services provided to or received from those customers and prospective customers;

(iii)          The terms of various agreements between the Company and any third parties, including without limitation, the terms of customer agreements, vendor or supplier agreements, lease agreements, advertising agreements, fee arrangements, terms of dealing and the like;

(iv)           Any data or database, trading algorithms or processes, or other information compiled by the Company, including, but not limited to, customer lists, customer information, information concerning the Company, or any business in which the Company is engaged or contemplates becoming engaged, any company with which the Company engages in business, any customer, prospective customer or other person, firm or corporation to whom or which the Company has provided goods or services or to whom or which any employee of the Company has provided goods or services on behalf of the Company, or any compilation, analysis, evaluation or report concerning or deriving from any data or database, or any other information;

(v)            All policies, procedures, strategies and techniques regarding the services performed by the Company or regarding the training, marketing and sales of the Company, either oral or written. The Company’s internal corporate policies and practices related to its services, price lists, fee arrangements and terms of dealings with customers or potential customers or vendors. Information relating to formulas, records, research and development data, trade secrets, processes, other methods of doing business, forecasts and business and marketing plans;

(vi)           Any other information, data, know-how or knowledge of a confidential or proprietary nature observed, used, received, conceived or developed by me in connection with my employment, consultancy, and/or tenure as an independent contractor by the Company, including and not limited to the Company’s methodologies, price strategies, price lists, costs and quantities sold, financial and sales information, including, but not limited to, the Company’s financial condition, business interests, initiatives, objectives, plans or strategies; internal information regarding personnel

identity, skills, compensation, organizational charts, budgets or costs of individual departments, and the compensation paid to those working for or who provide services to the Company; and performance of investments, funds or portfolio companies, including any “track record” or other financial performance information or results;

(vii)         All other non-public information regarding the amount and nature of the capital and assets owned or controlled by, or net worth of, the Company and/or any of the Company’s shareholders, members, partners, employees or investors; the investments made, directly or indirectly, by the Company (including, but not limited to, any partnerships, corporations or other entities in which the Company may invest and the assets which any of those entities acquires); the expected or actual rates of return or holding periods of any investment by the Company; the respective interest in any investment of any of its shareholders, members, partners or investors or the manner in which those interests are held; the identities of the other persons or entities who participate in any investment made by the Company; and financial statements, projections, budgets and market information;

(viii)        All discoveries, software (including, without limitation, both source code and object code), models, drawings, photographs, specifications, trademarks, formulas, patterns, devices, compilations and all other proprietary know-how and technology, whether or not patentable or copyrightable, and all copies and tangible embodiments of any of the foregoing, and that have been or will be created for the Company by me, whether alone or with others;

(ix)           The Company’s inventions, 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 my employment, consultancy, and/or tenure as an independent contractor and any other information which is identified as confidential by the Company; and

(x)            “Trade Secrets”, which shall include, but not be limited to, information regarding formulas, processes or methods that: (a) derive independent economic value, actual or potential, from not being generally known to or readily ascertainable by proper means, by other persons who can obtain economic value from its disclosure or use; and (b) is the subject of reasonable efforts by the Company to maintain its secrecy. “Trade Secrets” shall also include all other information or data that qualifies as a trade secret under applicable law.

3.             Inventions.

3.1           Definition of Inventions used in this Agreement: the term “Invention” means any new or useful art, discovery, contribution, finding or improvement, whether or not patentable, and all related know-how. Inventions include, but are not limited to, all designs, discoveries, formulas, processes, manufacturing techniques, semiconductor designs, computer software, inventions, improvements and ideas.

3.2           Disclosure and Assignment of Inventions.

(i)            I will promptly disclose and describe to the Company all Inventions which I may solely or jointly conceive, develop, or reduce to practice during the Agreement Period (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 Secrets, or (iii) which resulted from any work I performed for the Company (the “Company Inventions”). I assign all my right, title and interest worldwide in the Company Inventions and in all intellectual property rights based upon the Company Inventions. However, I do not assign or agree to assign any Inventions relating in any way to the Company business or demonstrably anticipated research and development which were made by me prior to my employment, consultancy, and/or tenure as an independent contractor with the Company, which Inventions, if any, are identified on Appendix “A” to this Agreement. Appendix “A” contains no confidential information. I have no rights in any Inventions other than the inventions specified in Appendix “A”. If no such list is attached, I have no such Inventions or I grant an irrevocable, nonexclusive, royalty-free, worldwide license to the Company to make, use and sell Inventions

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developed by me prior to my employment, consultancy, and/or tenure as an independent contractor with the Company.

(ii)           I recognize that Inventions relating to my activities while working for the Company and conceived or made by me, along or with others, within one (1) year after termination of the Agreement Period may have been conceived in significant part while I was retained by the Company. Accordingly, I agree that such Inventions shall be presumed to have been conceived during my employment, consultancy, and/or tenure as an independent contractor with the Company and assign such Inventions to the Company as a Company Invention unless and until I have established the contrary. I agree to disclose promptly in writing to the Company all Inventions made or conceived by me for one (1) year after the Agreement Period, whether or not I believe such Inventions are subject to this Agreement, to permit a determination by the Company as to whether or not the Inventions should be the property of the Company. Any such information will be received in confidence by the Company.

3.3                Nonassignable Inventions.  This Agreement does not apply to an invention which qualifies fully as a nonassignable invention under the laws of the state of Florida.

4.               Use and Return of Proprietary Information and Trade Secrets:

(i)            I agree that under no circumstance and at no time shall any of the Proprietary Information and Trade Secrets be taken from the Company’s premises and that under no circumstances and at no time shall any of the Proprietary Information and Trade Secrets be duplicated, in whole or in part, without the express written permission of the Company, which permission may be granted or denied in the Company’s sole and absolute discretion;

(ii)           I agree that, upon termination of my employment (if applicable) and/or tenure as an independent contractor with the Company for any reason (regardless of whether or not the Company retains me as a consultant) or at any other time upon the Company’s request, I shall return to Company, without retaining any copies, all Proprietary Information and Trade Secrets, as well as all other Company’s documents and other materials, which are in my possession regardless of the form in which any such materials are kept;

(iii)          I covenant and agree that all right, title and interest in any Proprietary Information and Trade Secrets shall be and shall remain the exclusive property of the Company and shall be and hereby are vested and assigned by me to the Company. I agree to promptly disclose to the Company all Proprietary Information and Trade Secrets developed in whole or in part by me within the scope of this Agreement. In relation to my employment, consultancy, and/or tenure as an independent contractor or the performance of this Agreement, I have created or may create certain work product for the Company that may be copyrighted or copyrightable under the laws of the United States. To the extent that any such work product is created, I will be considered to have created a Work Made for Hire as defined in 17 U.S.C. § 101, and the Company shall have the sole right to the copyright. In the event that any such work product created by me does not qualify as a Work Made for Hire, I hereby assign the copyright and all rights, throughout the world, in and to the work product to the Company, as provided for in paragraph (v) below. I agree to turn over to the Company all physical manifestations of the Proprietary Information and Trade Secrets in my possession or under my control at the request of the Company;

(iv)          I acknowledge that all documents, in hard copy or electronic form, received, created or used by me in connection with my employment, consultancy, and/or tenure as an independent contractor with the Company are and will remain the property of the Company. I agree to return all such documents (including all copies) promptly upon the termination of my employment, consultancy, and/or tenure as an independent contractor, certify that no other documents remain, and agree that, during or after my employment, consultancy, and/or tenure as an independent contractor, I will not, under any circumstances, without the written consent of the Company, disclose those documents to anyone outside the Company or use those documents for any purpose other than the advancement of the Company’s interests;

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(v)            I agree to assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the work product (including Proprietary Information and/or Trade Secrets) and any rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such work product and any rights relating thereto, and testifying in a suit or other proceeding relating to such work product and any rights relating thereto. I further agree that my obligation to execute or cause to be executed, when it is in my power to do so, any such instrument or papers shall continue after the termination of this Agreement. In connection with my execution of this Agreement, I hereby irrevocably grant to the Company an irrevocable power of attorney designating and appointing the Company’s duly authorized officer as my agent and attorney in fact, should I become unable because of my mental or physical incapacity or for any other reason, to sign any documents with respect to any work product including, without limitation, permitting the Company to apply for or pursue any application for any United States or foreign patents or copyright registrations covering such work product. In connection with such power of attorney, I permit the agent to act for and on my behalf and stead to execute and file any papers, oaths and to do all other lawfully permitted acts with respect to such work product with the same legal force and effect as if executed or done by me.

5.             Competitive Employment.  During the Agreement Period, including any extensions thereof (as applicable), I agree that I will not directly or indirectly own, manage, work for, provide services to, obtain financial interest in, control or participate in the ownership, management or control of, or be employed or engaged by or otherwise affiliated or associated as a consultant, director, agent, independent contractor or otherwise with any other corporation, partnership, proprietorship, firm, association or other entity that is engaged in any manner in the business of the Company.

I further agree that during the same period I will not directly or indirectly own, manage, work for, provide services to, obtain financial interest in, control or participate in the ownership, management or control of, or be employed or engaged by or otherwise affiliated or associated as a consultant, director, agent, independent contractor or otherwise with any business entity that is not engaged in the business of the Company in any market in which the Company conducts business or provides services where such other business entity could utilize or gain a business or economic advantage through the use of Confidential Information, Trade Secrets, my training by the Company, my relationship with the Company’s customers, suppliers, vendors, clients or investors or prospective customers, suppliers, vendors, clients or investors or the Company’s goodwill.

I may make passive investments in publicly traded entities not to exceed 3% of the outstanding voting securities of such public entity, provided, however, that such investment do not prevent me from abiding by this Agreement, including this Paragraph 5.

6.             Non-solicitation.  During the Agreement Period and for a period of two (2) years thereafter, I will not solicit or encourage, or cause others to solicit or encourage, any employees, suppliers, vendors, or consultants of/to the Company to terminate their employment or other relationship, as applicable, with the Company.

7.             Acts to Secure Proprietary Rights.  I agree to perform, during and after the Agreement Period, all acts deemed necessary or desirable by the Company to permit and assist it, at the Company’s expense, in perfecting and enforcing the full benefits, enjoyment, rights and title throughout the world in the Company Inventions. Such acts may include, but are not limited to, execution of documents and assistance or cooperation in the registration and enforcement of applicable patents and copyrights or other legal proceedings.

8.             No Conflicting Obligations.  My performance of this Agreement does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me prior to my employment, consultancy, and/or tenure as an independent contractor with the Company. I will not disclose, induce, or permit the Company to, either directly or indirectly, use, any confidential or proprietary information or material belonging to any previous employer or other person or entity. I am not a party to any other agreement that will interfere with my full compliance with this Agreement. I will not enter into any agreement, whether written or oral, conflicting with the provisions of this Agreement.

9.             Survival. Notwithstanding the termination of the Agreement Period, this Agreement shall survive such termination and continue in accordance with its terms and conditions. Unless provided otherwise in a written contract with the

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Company, this Agreement does not in any way restrict my right or the right of the Company to terminate my employment, consultancy, and/or tenure as an independent contractor at any time, for any reason or for no reason.

10.           Specific Performance.  A breach of any of the promises or agreements contained herein will result in irreparable and continuing damage to the Company for which there will be no adequate remedy at law, and the Company shall be entitled to injunctive relief and/or a decree for specific performance, and such other relief as may be proper (including monetary damages, if appropriate).

11.           Waiver.  The waiver by the Company of a breach of any provision of this Agreement by me will not operate or be construed as a waiver of any other or subsequent breach by me.

12.           Severability.  If any part of this Agreement is found invalid or unenforceable, that part will be 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.

13.           Governing Law. This Agreement will be governed by and construed in accordance with the laws (other than the conflict of laws rules) of the state of Florida.

14.           Entire Agreement.  Except for the Employment Agreement between you and the Company, this Agreement and the Exhibits to this Agreement constitute the entire agreement between the parties relating to this subject matter and supersede all prior or simultaneous representations, discussions, negotiations and agreements, whether written or oral, except for prior proprietary rights agreements which shall for the period prior to the effective date of this agreement be deemed to be in addition to, and not in lieu of, this Agreement for such prior period. This Agreement may be amended or modified only with the written consent of both me and the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.

15.           Assignment.  This Agreement may be assigned by the Company. I may not assign or delegate my duties under this Agreement without the Company’s prior written approval. This Agreement shall be binding upon my heirs, successors and permitted assignees.

		EMPLOYEE
Date:	2/26/2015		/s/ John A. Cuomo
		(Name)
			John A. Cuomo
		(Printed Name)
Date:	2/26/2015	KLX INC.
		By:	/s/ Roger Franks
		Title:	General Counsel, Vice President –
			Law and Human Resources

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Appendix A to the 2015 Proprietary Rights Agreement

EX-10.16

Exhibit 10.16

KLX INC.

NON-EMPLOYEE DIRECTORS STOCK

AND

DEFERRED COMPENSATION PLAN

TABLE OF CONTENTS

		Page
SECTION 1.	PURPOSES AND AUTHORIZED SHARES	3
SECTION 2.	DEFINITIONS	3
SECTION 3.	PARTICIPATION	5
SECTION 4.	SHARE OR DEFERRAL ELECTIONS	5
4.1	Time and Types of Elections	5
4.2	Permitted Amounts; Elections	5
SECTION 5.	DEFERRAL ACCOUNTS	5
5.1	Cash Account	5
5.2	Stock Unit Account	6
5.3	Dividend Equivalent Credits to Stock Unit Account	6
5.4	Immediate Vesting and Accelerated Crediting	6
5.5	Distribution of Cash or Shares	6
5.6	Adjustments in Case of Changes in Common Stock	7
SECTION 6.	ADMINISTRATION	8
6.1	The Administrator	8
6.2	Committee Action	8
6.3	Rights and Duties; Delegation and Reliance; Decisions Binding	8
SECTION 7.	PLAN CHANGES AND TERMINATION	9
7.1	Amendments	9
7.2	Term	9
SECTION 8.	MISCELLANEOUS	9
8.1	Unfunded Plan and Limitation On Participants’ Rights	9
8.2	Beneficiaries	9
8.3	Benefits Not Transferable; Obligations Binding Upon Successors	9
8.4	Governing Law; Severabilty	10
8.5	Compliance with Laws	10
8.6	Plan Construction	10
8.7	Headings Not Part of Plan	10

2

KLX INC.
NON-EMPLOYEE DIRECTORS STOCK
AND
DEFERRED COMPENSATION PLAN

SECTION 1.  PURPOSES AND AUTHORIZED SHARES

The purposes of the KLX Inc. Non-Employee Directors Stock and Deferred Compensation Plan (the “Plan”) are to attract, motivate and retain eligible non-employee directors of KLX Inc. (the “Company”) who elect to participate in this Plan by offering them opportunities to defer compensation and to encourage directors to increase their stock ownership in the Company.  An aggregate number not to exceed 200,000 shares of Common Stock (subject to adjustments contemplated by Section 5.6 hereof) may be delivered pursuant to this Plan.

SECTION 2.  DEFINITIONS

Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary:

ACCOUNT or ACCOUNTS means one or more of the Participant’s Cash Account(s) or Stock Unit Account(s), as the context requires.

APPLICABLE PERCENTAGE means the percentage of Eligible Compensation subject to deferral or payment in Shares.

AVERAGE FAIR MARKET VALUE means the average of the Fair Market Values of a share of Common Stock during the last ten (10) trading days preceding the applicable Award Date.

AWARD DATE means, in the case of Cash Account deferrals, each date on which cash would otherwise have been paid; in the case of Unit Account deferrals, the last day of each fiscal quarter.

BOARD means the Board of Directors of the Company, as constituted from time to time.

CASH ACCOUNT means the bookkeeping account maintained by the Company on behalf of a Participant who elects to defer his or her Compensation in cash pursuant to Section 4.

CODE means the Internal Revenue Code of 1986, as amended from time to time, and the applicable guidance, rulings, and regulations promulgated thereunder.

COMMON STOCK means the Common Stock of the Company, par value $0.01 per share, subject to adjustment pursuant to Section 5.6 hereof.

COMMITTEE means the Board or a Committee of the Board acting under delegated authority from the Board.

COMPANY means KLX Inc., a Delaware corporation, and its successors and assigns.

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DIVIDEND EQUIVALENT means the amount of cash dividends or other cash distributions paid by the Company on that number of shares of Common Stock which is equal to the number of Stock Units then credited to a Participant’s Stock Unit Account on the applicable measurement date, which amount shall be allocated as additional Stock Units to the Participant’s Stock Unit Account, as provided in Section 5.3 hereof.

EARNINGS mean those earnings that are allocable to the Participant’s Cash Accounts in such manner as the Committee shall reasonably determine.

EFFECTIVE DATE means the date of the consummation of the distribution of all of the shares of the Company’s Common Stock on a pro rata basis to the holders of B/E Aerospace, Inc. common stock.

ELIGIBLE COMPENSATION means retainer and/or meeting fees for services as a director, as established by the Board from time to time, which may be payable in cash or Shares.

ELIGIBLE DIRECTOR means a member of the Board who is not an officer or employee of the Company or a subsidiary and who is compensated in the capacity as a director.

EXCHANGE ACT means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.

FAIR MARKET VALUE means on any date the average of the high and low prices of the Common Stock, as published in The Wall Street Journal or otherwise reliably reported, of the principal securities exchange or market on which the Common Stock is so listed, admitted to trade, or quoted, or, if there is no trading of the Common Stock on such date, then the average of the high and low prices of the Common Stock as quoted on the next preceding date on which there was trading in such shares.  If the Common Stock is not so listed, admitted or quoted, the Committee may designate such other exchange, market or source of data as it deems appropriate for determining such value of purposes of this Plan.

PARTICIPANT means an Eligible Director who elects to participate in this Plan or otherwise has an Account balance under this Plan.

PLAN means the KLX Inc. Non-Employee Directors Stock and Deferred Compensation Plan, as amended from time to time.

SHARES means shares of Common Stock.

STOCK UNIT OR UNIT means a non-voting unit of measurement which is deemed for bookkeeping and payment purposes to represent the right to receive one share of Common Stock of the Company pursuant to the terms of this Plan.

STOCK UNIT ACCOUNT means the bookkeeping account maintained by the Company on behalf of each Participant which is credited with Stock Units in accordance with Section 5.2.

YEAR means each fiscal year during the term of this Plan.

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SECTION 3.  PARTICIPATION

Each Eligible Director may elect to defer under and subject to Section 4 of this Plan his or her Eligible Compensation for any Year.

SECTION 4.  SHARE OR DEFERRAL ELECTIONS

4.1         TIME AND TYPES OF ELECTIONS.  On or before December 31 immediately preceding each succeeding Year (or, in the case of a person who first becomes an Eligible Director during the Year, within 30 days after becoming an Eligible Director), each Eligible Director may make the following two irrevocable elections, subject to Section 4.2 hereof:

(1)         To the extent that Participant’s Eligible Compensation is designated as payable to the Participant in the form of cash, the Company may, in its sole discretion, permit a Participant to elect, in lieu of cash, (a) to receive such Eligible Compensation currently in Shares, (b) to defer such Eligible Compensation in a Cash Account, (c) to defer such Eligible Compensation in a Stock Unit Account, or (d) to select one or more of the preceding payment or deferral methods in accordance with the Applicable Percentage increments set forth in Section 4.2 hereof such that the sum of all such Applicable Percentage increments does not exceed 100%.

(2)         To the extent that Participant’s Eligible Compensation is designated as payable to the Participant in the form of Common Stock, the Company may, in its sole discretion, permit a Participant to elect, in lieu of Common Stock, to defer all or a portion of such Eligible Compensation in a Stock Unit Account in accordance with the Applicable Percentage increments set forth in Section 4.2 hereof such that the sum of all such Applicable Percentage increments does not exceed 100%.

4.2         PERMITTED AMOUNTS; ELECTIONS.  The portions of the Eligible Compensation subject to deferral or payment in Shares shall be limited to increments of 25%, 50%, 75% or 100% (the “Applicable Percentage”).  All elections shall be in writing on forms provided by the Company (and such election forms may, in the discretion of the Company, require that a Participant defer all or a specified portion of such Participant’s Eligible Compensation in accordance with this Section 4).  If an election is made under this Section 4 and is not revoked or changed with respect to the following Year by December 31 of the current Year, the election shall be deemed a continuing one and shall remain in place with respect to compensation for the following Year.

SECTION 5.  DEFERRAL ACCOUNTS

5.1         CASH ACCOUNT.  If an Eligible Director has made an election under Section 4.1(1)(b) to defer the receipt of cash compensation in a Cash Account, the Company shall establish and maintain a Cash Account for the Participant under this Plan, which Account shall be a memorandum account on the books of the Company.  A Participant’s Cash Account shall be credited as follows:

(1)         As of the date the Eligible Compensation would have been otherwise payable, the Company shall credit the Participant’s Cash Account with an amount equal to the Applicable Percentage of the Eligible Compensation.

(2)         As of the last day of each fiscal quarter, each Participant’s Cash Account shall be credited with the Earnings reasonably determined by the Committee to be allocable to such Account.

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5.2         STOCK UNIT ACCOUNT.

(1)         Elective Deferrals.  If an Eligible Director has made an election under Section 4.1(1)(c) or 4.1(2) to defer receipt of cash compensation or stock compensation in a Stock Unit Account, the Committee shall, as of the last day of each fiscal quarter in which the Eligible Compensation was earned and would otherwise be paid, credit the Participant’s Stock Unit Account with a number of Units determined by dividing an amount which is equal to the Applicable Percentage of the Participant’s Eligible Compensation by the Average Fair Market Value of a share of Common Stock as of the Award Date.

(2)         Limitations on Rights Associated with Units.  A Participant’s Stock Unit Account shall be a memorandum account on the books of the Company.  The Units credited to a Participant’s Stock Unit Account shall be used solely as a device for the determination of the number of shares of Common Stock to be eventually distributed to the Participant in accordance with this Plan.  The Units shall not be treated as property or as a trust fund of any kind.  No Participant shall be entitled to any voting or other stockholder rights with respect to Units granted or credited under this Plan.  The number of Units credited (and the number of Shares to which the Participant is entitled under this Plan) shall be subject to adjustment in accordance with Section 5.6 and the terms of this Plan.

5.3         DIVIDEND EQUIVALENT CREDITS TO STOCK UNIT ACCOUNT.  As of the end of each quarter, a Participant’s Stock Unit Account shall be credited with additional Units in an amount equal to the Dividend Equivalent representing dividends paid during the quarter on a number of shares equal to the aggregate number of Stock Units in the Participant’s Stock Unit Account as of the end of the preceding quarter divided by the Average Fair Market Value of a share of Common Stock as of the applicable crediting date.

5.4         IMMEDIATE VESTING AND ACCELERATED CREDITING.

(1)         Units and Other Amounts Vest Immediately.  All Units or other amounts credited to one or more of a Participant’s Accounts shall be at all times fully vested and not subject to a risk of forfeiture.

(2)         Acceleration of Crediting of Accounts.  In the event a Participant ceases to serve as a director of the Company, the crediting of amounts to a Participant’s Cash Account, if applicable, and the crediting of Units to a Participant’s Stock Unit Account, if applicable, shall be accelerated to the date of termination of service.  In such case, the amount or number of Units credited for the quarter in which the termination of services occurs shall be prorated based on the number of days of service during the applicable quarter, and the Award Date shall be deemed to be the date of termination of service.

5.5         DISTRIBUTION OF CASH OR SHARES.

(1)         Time and Manner of Distribution of Accounts.  The cash or Shares payable under this Plan in respect of Cash Accounts or Stock Unit Accounts, respectively, shall be distributed to the Participant (or, in the event of his or her death, the Participant’s Beneficiary) at such time and in such manner as elected by the Participant and set forth in the Participant’s election form.  In the sole discretion of the Company (as set forth in the form of election form provided by the Company), a Participant may elect distributions in one of the following two forms:  (i) a lump sum distribution, or

6

(ii) annual installments not to exceed ten (10) such annual installments.  Each annual installment shall be equal to the value of the Account being distributed multiplied by a fraction, the numerator of which is one (1) and the denominator of which is the number of installments remaining to be paid.  In the event that a Participant fails to make an election, then distribution shall be made in the form of a lump sum.  Each Account, less any applicable withholding taxes, shall be distributed commencing the earlier of (x) the date specified in the Participant’s election form as described above, or (y) the first day of the month immediately following the date of the Participant’s termination of service, or as soon as administratively practicable thereafter.

(2)         Small Distributions.  Notwithstanding the foregoing, if after a termination of service the balance remaining in a Participant’s Cash Account is less than $10,000 or, if the aggregate fair market value of the Units remaining in the Participant’s Stock Unit Account on the date of the termination of service is less than $10,000, then such remaining balances shall be distributed in a lump sum.

(3)         Election to Further Defer Distribution of Cash Accounts or Stock UnitAccounts.  A Participant may, with the approval of the Administrator, elect to further defer the commencement of any distribution to be made with respect to amounts credited under any Cash or Stock Unit Account by filing a new written election with the Committee on a form approved by the Committee; provided, however, that (a) no such election shall be effective until twelve (12) months after such election is filed with the Committee, (b) no such new election shall be effective with respect to any Account after benefits with respect to the Account shall have commenced, and (c) such election must provide that the first payment with respect to such election must be deferred for at least five (5) years from the date such payment would otherwise have been made.

(4)         Form of Distribution of Cash Accounts or Stock Unit Accounts.  Stock Units credited to a Participant’s Stock Unit Account shall be distributed in an equivalent whole number of Shares of the Company’s Common Stock.  Any fractional share interests shall be accumulated and paid in cash with the last distribution.  All amounts credited to a Participant’s Cash Account shall be distributed in cash.

5.6         ADJUSTMENTS IN CASE OF CHANGES IN COMMON STOCK.  If there shall occur any change in the outstanding shares of the Company’s Common Stock by reason of any stock dividend, stock split, recapitalization, merger, consolidation, combination or other reorganization, exchange of shares, sale of all or substantially all of the assets of the Company, split-up, split-off, spin-off, extraordinary redemption, liquidation or similar corporate change or change in capitalization or any distribution to holders of the Company’s Common Stock (other than cash dividends and cash distributions), the Committee shall make such proportionate and equitable adjustments consistent with the effect of such event on stockholders generally (but without duplication of benefits if Dividend Equivalents are credited), as the Committee determines to be necessary or appropriate, in the number, kind and/or character of shares of Common Stock or other securities, property and/or rights contemplated hereunder, including any appropriate adjustments to the market prices used in the determination of the number of Shares and Units, and in rights in respect of Stock Unit Accounts credited under this Plan so as to preserve the benefits intended.

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SECTION 6.  ADMINISTRATION

6.1         THE ADMINISTRATOR.  The Administrator of this Plan shall be the Board as a whole or a Committee as appointed from time to time by the Board to serve as administrator of this Plan.  The participating members of any Committee so acting shall include, as to decisions in respect of participants who are subject to Section 16 of the Exchange Act, only those members who are Non-Employee Directors (as defined in Rule 16b-3 promulgated under the Exchange Act (“Rule 16b-3”)).  Members of the Committee shall not receive any additional compensation for administration of this Plan.

6.2         COMMITTEE ACTION.  A member of the Committee shall not vote upon any matter which relates solely to himself or herself as a Participant in this Plan.  Action of the Committee with respect to the administration of this Plan shall be taken pursuant to a majority vote or (assuming compliance with Section 6.1) by unanimous written consent of its members.

6.3         RIGHTS AND DUTIES; DELEGATION AND RELIANCE; DECISIONS BINDING.  Subject to the limitations of this Plan, the Committee shall be charged with the general administration of this Plan and the responsibility for carrying out its provisions, and shall have powers necessary to accomplish those purposes, including, but not by way of limitation, the following:

(1)         To construe and interpret this Plan;

(2)         To resolve any questions concerning the amount of benefits payable to a Participant (except that no member of the Committee shall participate in a decision relating solely to his or her own benefits);

(3)         To make all other determinations required by this Plan;

(4)         To maintain all the necessary records for the administration of this Plan; and

(5)         To make and publish forms, rules and procedures for the administration of this Plan.

The determination of the Committee made in good faith as to any disputed question or controversy and the Committee’s determination of benefits payable to Participants, including decisions as to adjustments under Section 5.6, shall be conclusive and binding for all purposes of this Plan.  In performing its duties, the Committee shall be entitled to rely on information, opinions, reports or statements prepared or presented by:  (a) officers or employees of the Company whom the Committee believes to be reliable and competent as to such matters; and (b) counsel (who may be employees of the Company), independent accountants and other persons as to matters which the Committee believes to be within such persons’ professional or expert competence.

The Committee shall be fully protected with respect to any action taken or omitted by it in good faith pursuant to the advice of such persons.  The Committee may delegate ministerial, bookkeeping and other non-discretionary functions to individuals who are officers or employees of the Company.

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SECTION 7.  PLAN CHANGES AND TERMINATION

7.1         AMENDMENTS.  The Board shall have the right to amend this Plan in whole or in part from time to time or may at any time suspend or terminate this Plan (provided such amendment, suspension or termination complies with requirements under Code Section 409A); provided, however, that no amendment or termination shall cancel or otherwise adversely affect in any way, without his or her written consent, any Participant’s rights with respect to then outstanding Accounts or Dividend Equivalent credits thereon so long as the Account is outstanding).  Any amendments authorized hereby shall be stated in an instrument in writing, and all Participants shall be bound by upon receipt of notice the amendment.

7.2         TERM.  It is the current expectation of the Company that this Plan shall continue indefinitely, but continuance of this Plan is not assumed as a contractual obligation of the Company.  If the Board of Directors decides to discontinue or terminate this Plan, it shall notify the Committee and Participants in this Plan of its action in writing, and this Plan shall be terminated at the time set forth on the notice.  All Participants shall be bound thereby.  No benefits shall accrue in respect of Eligible Compensation earned after a discontinuance or termination of this Plan.

SECTION 8.  MISCELLANEOUS

8.1         UNFUNDED PLAN AND LIMITATION ON PARTICIPANTS’ RIGHTS.  Participants shall have the rights only if general unsecured creditors of the Company with respect to amounts credited and benefits payable, if any, on their Cash Account, and rights no greater than the right to receive the Common Stock (or equivalent value as a general unsecured creditor) with respect to Stock Units or Share Accounts.  The Plan constitutes a mere promise by the Company to make distributions in the future.  It is intended that this Plan shall constitute an “unfunded” plan for tax purposes.  Participation in this Plan shall not give any person the right to serve as a member of the Board or any rights or interests other than as herein provided.  Participants shall not be entitled to receive actual dividends or to vote Shares until after delivery of a certificate representing the Shares.

8.2         BENEFICIARIES.

(1)         Beneficiary Designation.  Upon forms provided by and subject to conditions imposed by the Company, each Participant may designate in writing the Beneficiary or Beneficiaries (as defined in Section 8.2(2)) whom such Participant desires to receive any amounts payable under this Plan after his or her death.  The Company and the Committee may rely on the Participant’s designation of a Beneficiary or Beneficiaries last filed in accordance with the terms of this Plan.

(2)         Definition of Beneficiary.  A Participant’s “Beneficiary” or “Beneficiaries” shall be the person, persons, trust or trusts (or similar entity) designated by the Participant or, in the absence of a designation, entitled by will or the laws of descent and distribution to receive the Participant’s benefits under this Plan in the event of the Participant’s death, and shall mean the Participant’s executor or administrator if no other Beneficiary is identified and able to act under the circumstances.

8.3         BENEFITS NOT TRANSFERABLE; OBLIGATIONS BINDING UPON SUCCESSORS.  Benefits of a Participant under this Plan shall not be assignable or transferable and any purported transfer, assignment, pledge or other encumbrance or attachment of any payments or benefits under this Plan, or any interest therein, other than by operation of law or pursuant to Section 8.2, shall not be permitted

9

or recognized.  Shares deliverable under this Plan may be subject to restrictions on transfer under applicable securities laws, unless the Shares are duly registered prior to issuance.  Obligations of the Company under this Plan shall be binding upon successors of the Company.

8.4         GOVERNING LAW; SEVERABILTY.  The validity of this Plan or any of its provisions shall be construed, administered and governed in all respects under the laws of the State of Florida.  If any provision of this Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective.

8.5         COMPLIANCE WITH LAWS.  This Plan and the offer, issuance and delivery of shares of Common Stock and/or the payment of money through the deferral of compensation under this Plan are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law) and to such approvals by any listing, agency or any regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  Any securities delivered under this Plan shall be subject to prior registration or such restrictions as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as it may reasonably request to assure such compliance.

8.6         PLAN CONSTRUCTION.  This Plan is intended to comply with the requirements of Section 409A of the Internal Revenue Code and the regulations and other guidance issued thereunder, as in effect from time to time.  To the extent a provision of the Plan is contrary to or fails to address the requirements of Code Section 409A, the Plan shall be construed and administered as necessary to comply with such requirements until this Plan is appropriately amended to comply with such requirements.

It is the intent of the Company that transactions pursuant to this Plan satisfy and be interpreted in a manner that satisfies the applicable conditions for exemption under Rule 16b-3 so that to the extent elections are timely made, elective deferrals (including the crediting of Units and Dividend Equivalents and the distribution of Shares hereunder) will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and will not be subjected to avoidable liability thereunder.  The Committee may, subject to Sections 8.5 hereof, permit elections by Eligible Directors that would not qualify for exemption under Section 16(b) of the Exchange Act, so long as the availability of any exemption thereunder for other Participants under this Plan is not compromised.

8.7         HEADINGS NOT PART OF PLAN.  Headings and subheadings in this Plan are inserted for reference only and are not to be considered in the construction of the provisions hereof.

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EX-21.1

Exhibit 21.1

List of Subsidiaries of KLX Inc.

Set forth below is a list of subsidiaries of KLX Inc. The following entities are wholly owned subsidiaries of KLX Inc. and are owned directly by either KLX Inc. or by wholly owned subsidiaries of KLX Inc.

Subsidiary	Jurisdiction of Formation
AAA Aircraft Supply, LLC	Delaware
Advanced Engineered Products LLC	Delaware
Herndon Aerospace & Defense, LLC	Delaware
Herndon Products Holding Corporation	Delaware
Interturbine Aviation Logistics Ltd	United Kingdom
Interturbine, LLC	Delaware
Interturbine Tianjin Limited	China
Jay Cee Fastener Corp.	New Jersey
KLX Aerospace Solutions (Hong Kong) Limited	Hong Kong
KLX Aerospace Solutions Canada Inc.	Canada
KLX Aerospace Solutions DE Holding GmbH	Germany
KLX Aerospace Solutions Defense LLC	Missouri
KLX Aerospace Solutions Deutschland GmbH	Germany
KLX Aerospace Solutions FZE	United Arab Emirates
KLX Aerospace Solutions GmbH	Germany
KLX Aerospace Solutions Hungary Kft.	Hungary
KLX Aerospace Solutions II Limited	United Kingdom
KLX Aerospace Solutions International GmbH	Switzerland
KLX Aerospace Solutions International Service Center GmbH	Germany
KLX Aerospace Solutions Limited	United Kingdom
KLX Aerospace Solutions Logistics GmbH	Germany
KLX Aerospace Solutions S.r.l.	Italy
KLX Aerospace Solutions SAS	France
KLX Aerospace Solutions Sp. z o.o.	Poland
KLX Aerospace Solutions Czechia s.r.o.	Czech Republic
KLX Aerospace Solutions s.r.o.	Czech Republic
KLX Aerospace Solutions Pte. Limited	Singapore
KLX Aerospace Solutions Pty Limited	Australia
KLX Energy Holdings LLC	Delaware
KLX Energy Services LLC	Delaware
KLX Europe Holding Limited	United Kingdom
KLX International Inc.	Delaware
KLX Investments I S.à r.l.	Luxembourg
KLX Investments II S.à r.l.	Luxembourg
KLX Investments III S.à r.l.	Luxembourg
KLX RE Holdings LLC	Delaware
M&M Aerospace Hardware, Inc.	Florida
N Y F Corp.	New Jersey
Polygon Aerospace, LLC	Texas
Polytrade Holding Corporation	Delaware
UFC Aerospace LLC	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333‑200923 and 333‑200919 on Form S-8 of our report dated March 19, 2018, relating to the consolidated financial statements and financial statement schedule of KLX Inc. and subsidiaries (the “Company”) and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of KLX Inc. and subsidiaries for the year ended January 31, 2018.

/s/ DELOITTE & TOUCHE LLP

Boca Raton, FL

March 19, 2018

EX-31.1

Exhibit 31.1

KLX INC.

CERTIFICATIONS

I, Amin J. Khoury, certify that:

1.I have reviewed this annual report on Form 10‑K 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.

		Chairman and Chief Executive Officer
Date: March 19, 2018	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 annual report on Form 10‑K 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.

		Chairman and Chief Executive Officer
Date: March 19, 2018	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 Annual Report of KLX Inc. (the “Company”) on Form 10‑K for the fiscal year ended January 31, 2018, 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.

		Chairman and Chief Executive Officer
Date: March 19, 2018	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 Annual Report of KLX Inc. (the “Company”) on Form 10‑K for the fiscal year ended January 31, 2018, 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.

		Chairman and Chief Executive Officer
Date: March 19, 2018	By:	/s/ Michael F. Senft
		Michael F. Senft
		Vice President—Chief Financial Officer

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Mar. 13, 2018	Jul. 31, 2017
Document And Entity Information
Document Type	10-K
Amendment Flag	false
Document Period End Date	Jan. 31, 2018
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
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 Voluntary Filers	No
Entity Well-known Seasoned Issuer	Yes
Entity Common Stock, Shares Outstanding		50,740,101
Entity Public Float			$ 2,614

XML

Consolidated Balance Sheets - USD ($) $ in Millions	Jan. 31, 2018	Jan. 31, 2017
Current assets:
Cash and cash equivalents	$ 255.3	$ 277.3
Accounts receivable–trade, less allowance for doubtful accounts ($12.0 at January 31, 2018 and $13.5 at January 31, 2017)	316.1	261.3
Inventories, net	1,407.9	1,381.4
Other current assets	51.7	39.6
Total current assets	2,031.0	1,959.6
Property and equipment, net of accumulated depreciation ($191.1 at January 31, 2018 and $149.4 at January 31, 2017)	286.4	248.3
Goodwill	1,056.8	996.4
Identifiable intangible assets, net	308.6	314.8
Deferred income taxes	74.5	147.0
Other assets	32.7	32.2
Total assets	3,790.0	3,698.3
Current liabilities:
Accounts payable	180.8	166.0
Accrued liabilities	106.7	91.1
Total current liabilities	287.5	257.1
Long-term debt	1,184.6	1,182.0
Deferred income taxes	5.9	5.0
Other non-current liabilities	42.1	33.1
Commitments, contingencies and off-balance sheet arrangements (Note 8)
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; 54.6 million shares issued as of January 31, 2018 and 53.5 million shares issued as of January 31, 2017	0.5	0.5
Additional paid-in capital	2,756.5	2,686.5
Treasury stock: 3.8 million shares at January 31, 2018 and 1.5 million shares at January 31, 2017	(182.7)	(54.4)
Accumulated deficit	(280.0)	(328.0)
Accumulated other comprehensive loss	(24.4)	(83.5)
Total stockholders' equity	2,269.9	2,221.1
Total liabilities and equity	$ 3,790.0	$ 3,698.3

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Jan. 31, 2018	Jan. 31, 2017
Consolidated Balance Sheets
Accounts receivable - trade, allowance for doubtful accounts	$ 12.0	$ 13.5
Property and equipment, accumulated depreciation	$ 191.1	$ 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
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	54,600,000	53,500,000
Treasury stock	3,800,000	1,500,000

XML

Consolidated Statements of Earnings and Comprehensive Income - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Consolidated Statements of Earnings and Comprehensive Income
Product revenues	$ 1,420.2	$ 1,340.9	$ 1,312.5
Service revenues	320.6	153.2	254.9
Total revenues	1,740.8	1,494.1	1,567.4
Cost of sales - products	994.7	942.2	918.1
Cost of sales - services	269.1	183.9	284.3
Total cost of sales	1,263.8	1,126.1	1,202.4
Selling, general and administrative	260.7	238.6	261.6
Goodwill impairment charge	0.0	0.0	310.4
Long-lived asset impairment charge			329.8
Operating earnings (loss)	216.3	129.4	(536.8)
Interest expense	75.8	75.9	77.3
Earnings (loss) before income taxes	140.5	53.5	(614.1)
Income tax expense (benefit)	87.1	5.3	(228.3)
Net earnings (loss)	53.4	48.2	(385.8)
Other comprehensive income (loss):
Foreign currency translation adjustment	59.1	(9.3)	(18.7)
Comprehensive income (loss)	$ 112.5	$ 38.9	$ (404.5)
Net earnings (loss) per share - basic	$ 1.06	$ 0.93	$ (7.39)
Net earnings (loss) per share - diluted	$ 1.04	$ 0.92	$ (7.39)
Weighted average common shares - basic	50.5	51.8	52.2
Weighted average common shares - diluted	51.3	52.2	52.2

XML

Consolidated and Combined Statements Of Stockholders' Equity - USD ($) shares in Millions, $ in Millions	Common Stock	Additional Paid-in Capital	Treasury Stock	Retained Earnings (Deficit)	Accumulated Other Comprehensive Income (Loss)	Total
Balance at Jan. 31, 2015	$ 0.5	$ 2,644.8		$ 11.3	$ (55.5)	$ 2,601.1
Balance (shares) at Jan. 31, 2015	52.8
Sale of stock under employee stock purchase plan		1.8				1.8
Return to provision true-up related to pre spin-off and other		1.0				1.0
Purchase of treasury stock			$ (12.5)			(12.5)
Restricted stock grants, net of forfeitures and restricted stock unit vesting		14.8		0.8		15.6
Restricted stock grants, net of forfeitures and restricted stock unit vesting (in shares)	0.5
Net earnings (loss)				(385.8)		(385.8)
Net foreign currency translation adjustments					(18.7)	(18.7)
Balance at Jan. 31, 2016	$ 0.5	2,662.4	(12.5)	(373.7)	(74.2)	2,202.5
Balance (shares) at Jan. 31, 2016	53.3
Sale of stock under employee stock purchase plan		2.0				2.0
Purchase of treasury stock			(41.9)			(41.9)
Restricted stock grants, net of forfeitures and restricted stock unit vesting		22.1		(2.5)		19.6
Restricted stock grants, net of forfeitures and restricted stock unit vesting (in shares)	0.2
Net earnings (loss)				48.2		48.2
Net foreign currency translation adjustments					(9.3)	(9.3)
Balance at Jan. 31, 2017	$ 0.5	2,686.5	(54.4)	(328.0)	(83.5)	2,221.1
Balance (shares) at Jan. 31, 2017	53.5
Sale of stock under employee stock purchase plan		2.3				2.3
Purchase of treasury stock			(128.3)			(128.3)
Restricted stock grants, net of forfeitures and restricted stock unit vesting		67.7		(7.0)		60.7
Restricted stock grants, net of forfeitures and restricted stock unit vesting (in shares)	1.1
Net earnings (loss)				53.4		53.4
Net foreign currency translation adjustments					59.1	59.1
Cumulative effect of adoption of new accounting principle (See Note 1)				1.6		1.6
Balance at Jan. 31, 2018	$ 0.5	$ 2,756.5	$ (182.7)	$ (280.0)	$ (24.4)	$ 2,269.9
Balance (shares) at Jan. 31, 2018	54.6

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)	$ 53.4	$ 48.2	$ (385.8)
Adjustments to reconcile net earnings (loss) to net cash flows provided by (used in) operating activities:
Depreciation and amortization	66.1	66.9	75.0
Deferred income taxes	80.9	6.2	(229.3)
Asset impairment charge			640.2
Non-cash compensation	26.4	20.2	15.8
Amortization of deferred financing fees	4.5	4.3	4.0
Tax impact from prior sales of restricted stock			0.2
Provision for inventory reserve	17.2	20.7	7.7
Change in allowance for doubtful accounts and sales returns	0.2	3.2	3.3
Loss on disposal of property and equipment	1.3	3.3	2.9
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(44.4)	6.9	40.3
Inventories	(9.2)	(5.0)	18.0
Other current and non-current assets	(19.5)	(4.6)	2.7
Accounts payable	9.9	11.0	3.4
Other current and non-current liabilities	19.8	(30.4)	18.8
Net cash flows provided by operating activities	206.6	150.9	217.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(84.9)	(35.5)	(130.5)
Acquisitions, net of cash acquired	(64.8)	(220.8)	(4.3)
Net cash flows used in investing activities	(149.7)	(256.3)	(134.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock	(92.1)	(44.9)	(9.5)
Cash proceeds from stock issuance	2.0	1.5	1.5
Tax impact from prior sales of restricted stock			(0.2)
Deferred acquisition payments			(90.9)
Net cash flows used in financing activities	(90.1)	(43.4)	(99.1)
Effect of foreign exchange rate changes on cash and cash equivalents	11.2	(1.7)	(2.7)
Net decrease in cash and cash equivalents	(22.0)	(150.5)	(19.4)
Cash and cash equivalents, beginning of period	277.3	427.8	447.2
Cash and cash equivalents, end of period	255.3	277.3	427.8
Cash paid during period for:
Income taxes paid, net of refunds	6.6	6.1	13.2
Interest	73.0	72.1	71.0
Supplemental schedule of non-cash activities:
Accrued property additions	$ 9.1	$ 2.7	8.3
Treasury stock.			$ 3.0

XML

Description of Business and Summary of Significant Accounting Policies

12 Months Ended

Jan. 31, 2018

Description of Business and Summary of Significant Accounting Policies

Description of Business and Summary of Significant Accounting Policies

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

We believe, based on our experience in the industry, that we are the world’s leading distributor and value‑added service provider of aerospace fasteners and other consumables, offering one of the broadest ranges of aerospace hardware and consumables and inventory management services, selling to essentially every major airline in the world as well as leading maintenance, repair and overhaul (“MRO”) providers, the leading airframe manufacturers and their first and second tier suppliers. The Company also provides technical services and associated rental equipment to land‑based oil and gas exploration and drilling companies often in remote locations.

Basis of Presentation

The Company’s consolidated financial statements include KLX and its wholly owned subsidiaries were prepared in accordance with accounting principles generally accepted in the United States (GAAP). All intercompany transactions and account balances within the Company have been eliminated.

Use of Estimates—The preparation of the consolidated 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. 

Revenue Recognition—Sales of products and services are recorded when the earnings process is complete. This generally occurs when the products are shipped to the customer in accordance with the contract or purchase order, risk of loss and title has passed to the customer, collectability is reasonably assured and pricing is fixed and determinable. In instances where title does not pass to the customer upon shipment, the Company recognizes revenue upon delivery or customer acceptance, depending on the terms of the sales contract. Management provides allowances for credits and returns, based on historic experience, and adjusts such allowances as considered necessary.

In connection with the sales of its products, the Company 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 the Company contemporaneously with the delivery of the product, and as such, once the product is delivered, the Company 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, the Company has satisfied its obligations to the customer. The Company does not account for these services as a separate element, as the services do not have stand‑alone value and cannot be separated from the product element of the arrangement.

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

Income Taxes—The Company provides deferred income taxes for temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. Deferred income taxes are computed using enacted tax rates that are expected to be in effect when the temporary differences reverse. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or the entire deferred tax asset will not be realized. The Company records uncertain tax positions within income tax expense and classifies interest and penalties related to income taxes as income tax expense.

Cash Equivalents—The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable, Net—The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness, as determined by review of their current credit information. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. The allowance for doubtful accounts at January 31, 2018 and 2017 was $12.0 and $13.5, respectively.

Inventories—Inventories, made up of finished goods, primarily consist 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. During the year ended January 31, 2017 (“Fiscal 2016”), the Company revised its methodology for estimating the provision required for excess and obsolete (“E&O”) inventories. The new methodology more adequately considers historical demand of our inventory to project future demand in order to estimate the provision required for E&O inventories. Other factors considered in the methodology include expected market growth rates and related elements. The implementation of the new methodology did not impact any prior period reserve for E&O inventory. Demand for the Company’s products can fluctuate from period to period depending on customer activity. In accordance with industry practice, costs in inventory include amounts relating to long-term contracts with long production cycles and to inventory items with long production cycles, some of which are not expected to be realized within one year. As a result, the Company’s operating cycle is greater than a year and is closely tied to the lifecycle of an airframe. Inventory reserves were approximately $72.4 and $59.6 as of January 31, 2018 and 2017, respectively.

Substantially all of the Company’s inventory is comprised of aerospace grade fasteners which support OEM production and the aftermarket over the life of the airframe. Inventory with a limited shelf life is continually monitored and reserved for in advance of expiration. The reserve for inventory with limited shelf life is not material to the Company’s financial statements.

Property and Equipment, Net—Property and equipment are stated at cost and depreciated generally under the straight‑line method over their estimated useful lives of one to thirty years (or the lesser of the term of the lease for leasehold improvements, as appropriate).

Goodwill and Intangible Assets, Net—Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles—Goodwill and Other (“ASC 350”), goodwill and indefinite‑lived intangible assets are reviewed at least annually for impairment. Acquired intangible assets with definite lives are amortized over their individual useful lives. Other intangible assets are amortized using the straight‑line method over periods ranging from five to thirty years.

As of January 31, 2018, the Company had two reporting units, which were determined based on the guidelines contained in FASB ASC Topic 350, Subtopic 20, Section 35. Each reporting unit constitutes a business, for which there is discrete financial information available that is regularly reviewed by the management of the Company.

Goodwill is tested at least annually as of December 31st, and management assesses whether there has been any impairment in the value of goodwill by comparing the fair value to the net carrying value of the reporting units. If the carrying value exceeds its estimated fair value, an impairment loss is recognized for the difference in accordance with the Company’s adoption of the new accounting principle discussed below. In this event, the asset is written down accordingly. The fair values of the reporting units for goodwill impairment testing is determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances.

The indefinite‑lived intangible asset is tested at least annually for impairment. Impairment for the intangible asset with an indefinite life exists if the carrying value of the intangible asset exceeds its fair value. The fair value of the indefinite‑lived intangible asset is determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances.

For the years ended January 31, 2018 and 2017, the Company’s annual impairment testing yielded no impairments of goodwill or the indefinite‑lived intangible asset. For the year ended January 31, 2016, the Company determined goodwill related to the Energy Services Group (“ESG”) reporting unit was fully impaired and recorded a pre-tax impairment charge related to ESG’s goodwill of $310.4.

Long‑Lived Assets—The Company assesses potential impairments to its long‑lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. For the years ended January 31, 2018 and 2017, there were no impairments of long lived assets. For the year ended January 31, 2016, the Company used a combination of cost and market approaches for determining the fair value of the ESG asset group’s long-lived assets and recognized impairment charges related to identified intangibles and property and equipment of $177.8 and $152.0, respectively.

Common Stock Equivalents—The Company has potential common stock equivalents related to its outstanding restricted stock awards, restricted stock units and employee stock purchase plan. These potential common stock equivalents are not included in diluted loss per share for any period presented in which there is a net loss because the effect would have been anti‑dilutive.

Accounting for Stock‑Based Compensation—The Company accounts for share‑based compensation arrangements in accordance with the provisions of FASB ASC 718, Compensation—Stock Compensation (“ASC 718”), 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.

All unvested shares of restricted stock granted by B/E Aerospace, Inc. (our Former Parent) were converted into unvested shares of KLX on the distribution date at a ratio equal to 1.8139. Compensation cost recognized during the three years ended January 31, 2018 (“Fiscal 2017”) related to unvested shares converted on the distribution date and new shares of KLX restricted stock and stock options granted during the three years ended January 31, 2018.

The Company has established a qualified Employee Stock Purchase Plan. The Employee Stock Purchase Plan allows 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 for 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. The value of the rights under this Plan granted during the years ended January 31, 2018, 2017 and 2016 was $0.4,  $0.3 and $0.3, respectively.

Foreign Currency Translation—The assets and liabilities of subsidiaries located outside the United States are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Revenue and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from foreign currency transactions are recognized currently in income, and those resulting from translation of financial statements are accumulated as a separate component of equity and accumulated other comprehensive income (loss). The Company’s European subsidiaries primarily utilize the British pound or the Euro as their local functional currency.

Treasury Stock - The Company may periodically repurchase shares of its common stock from employees for the satisfaction of their individual payroll tax withholding upon vesting of restricted stock and restricted stock units in connection with the Company’s Long-Term Incentive Plan (“LTIP”). The Company’s repurchases of common stock are recorded at the average cost of the common stock. As part of the LTIP, the Company repurchased 713,210 and 35,009 shares of its common stock for $48.9 and $1.5 during the years ended January 31, 2018 and 2017. In January 2016, the Board of Directors authorized a $100.0 share repurchase under the existing $250.0 share repurchase program. In March 2017, the Board of Directors authorized an increase in the Company’s share repurchase authority from $100.0 to $200.0. During Fiscal 2017, the Company repurchased 1,652,661 shares of common stock at an average price of $48.04 per share for a total of $79.4 as part of the share repurchase program. During Fiscal 2016, the Company repurchased 982,062 shares of common stock at an average price of $41.20 per share for a total of $40.5 as part of the share repurchase program.

Concentration of Risk—In Aerospace Solutions Group (“ASG”), the Company’s products and services are primarily concentrated within the aerospace industry with customers consisting primarily of commercial airlines, a wide variety of business jet customers and commercial aircraft manufacturers and their suppliers. In ESG, the Company provides products and services to energy industry customers who focus on developing and producing oil and gas onshore in North America. The Company’s management performs ongoing credit evaluations on the financial condition of all of its customers and maintains allowances for uncollectible accounts receivable based on expected collectability. Credit losses have historically been within management’s expectations and the provisions established.

Significant customers change from year to year, in the case of ASG, depending on the level of refurbishment activity and/or the level of new aircraft purchases by such customers, and in the case of ESG, depending on the level of exploration and production activity and the use of our services. During the years ended January 31, 2018, 2017 and 2016, no single customer accounted for more than 10% of the Company’s consolidated revenues.

Recent Accounting Pronouncements

In May 2017, the 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 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 January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other. ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted, and the Company adopted the new standard during the fourth quarter of 2017. The adoption of ASU 2017-04 did not have an impact on the Company’s consolidated financial statements; however, the Company will no longer perform the second step of the goodwill impairment test where applicable in future impairment tests.

In January 2017, the FASB issued ASU 2017-01, Business Combinations. This update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2017-01 is not expected to have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which eliminates a current exception in U.S. GAAP to the recognition of the income tax effects of temporary differences that result from intra-entity transfers of non-inventory assets. The intra-entity exception is being eliminated under the ASU. The standard is required to be applied on a modified retrospective basis and will be effective beginning with the first quarter of 2018. Early adoption is permitted, and the Company adopted the new standard during the first quarter of 2017, which resulted in the elimination of a $7.7 long-term prepaid tax balance and the recognition of a $8.8 longterm deferred tax asset with the offset recorded to the accumulated deficit.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) related to how certain cash receipts and payments are presented and classified in the statement of cash flows. These cash flow issues include debt prepayment or extinguishment costs, settlement of zero-coupon debt, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted and should be applied retrospectively. The Company does not expect a material impact upon adoption of this ASU to its consolidated financial statements as the Company’s consolidated statements of cash flows are not impacted by the eight issues listed above, with the exception of the contingent consideration payments, which will not be presented in the year of adoption.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the income statement, rather than equity, and requires excess tax benefits from stock-based compensation to be classified in cash flow from operations. The Company adopted the new standard during the first quarter of 2017 in compliance with the effective date, which resulted in the recognition of a $0.5 long-term deferred tax asset with the offset recorded to accumulated deficit. Prior year periods have been adjusted to conform to the current year presentation. With respect to forfeitures, the Company will continue to estimate the number of awards expected to be forfeited upon award issuance.

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 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 deferred the effective date for implementation of ASU 2014-09 by one year and during 2016, the FASB issued various related accounting standard updates, which clarified revenue accounting principles and provided supplemental adoption guidance. The guidance under ASU 2014-09 is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within that year. To assess the impact of this guidance, the Company established a cross functional implementation project team, inventoried its revenue streams and contracts with customers at its two segments and applied the principles of the guidance against a selection of contracts to assist in the determination of potential revenue accounting differences. No individually significant implementation matters were identified, and our revenue will be recognized on a “point-in-time” basis for product revenues and over time for service revenues under the new standard, which is consistent with current practice. The Company implemented internal controls, policies and processes to comply with the new standard. The Company adopted ASC Topic 606 in the first quarter of 2018 using the modified retrospective method of adoption, which resulted in no changes to the opening consolidated balance sheet as of February 1, 2018. Prior period consolidated statements of earnings and comprehensive income will remain unchanged.

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Business Combinations

12 Months Ended

Jan. 31, 2018

Business Combinations

Business Combinations

2. 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 over 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 (“ASC 805”). The assets purchased and liabilities assumed have been reflected in the accompanying consolidated balance sheets as of January 31, 2018 and 2017. The results of operations for the Herndon acquisition are included in the accompanying consolidated and combined statements of earnings 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.

The Company has substantially integrated Herndon into its ASG segment systems. As a result, it is not practicable to report stand-alone revenues and operating earnings of the acquired business since the acquisition date.

On a pro forma basis to give effect to the Herndon acquisition, as if it occurred on February 1, 2015, revenues and net earnings for the years ended January 31, 2017 and 2016 would have been as follows:

	UNAUDITED
	YEAR ENDED
	January 31, 2017		January 31, 2016
	Pro forma		Pro forma
Revenues	$	1,544.3	$	1,699.8
Net earnings (loss)		51.7		(376.7)
Earnings (loss) per diluted share		0.99		(7.21)

The Company acquired two new product lines immediately prior to the end of the fourth quarter of Fiscal 2017. The first purchase includes high performance fasteners and precision components and assemblies dedicated to aircraft engine manufacturing. The second group of products will enable us to offer our customers technical products, systems, and expertise in motion and control applications, including hydraulics, pneumatics, fluid connectors, filtration, electrical control systems, seals, compressors and engineered systems for both OEM and aftermarket applications. The Company acquired the two product lines for an aggregate purchase price of $64.8, which were accounted for as purchases under ASC 805 and primarily consisting of inventory, accounts receivable, goodwill and intangibles and accounts payable and other current liabilities. The acquisitions did not have a material impact on the accompanying consolidated financial statements. The valuation of the acquired assets related to the product line acquisitions arenot yet complete, and as such, the Company has not yet finalized its allocation of the purchase price for the acquisitions.

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Property and Equipment, Net

12 Months Ended

Jan. 31, 2018

Property and Equipment, Net

Property and Equipment, Net

3. PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

	Useful			January 31,		January 31,
	Life (Years)			2018		2017
Land, buildings and improvements	1	-	30	$	48.7	$	40.9
Machinery	2	-	20		142.1		119.8
Computer equipment and software	1	-	15		123.7		105.5
Furniture and equipment	3	-	20		163.0		131.5
					477.5		397.7
Less accumulated depreciation					191.1		149.4
				$	286.4	$	248.3

Depreciation expense was $46.8,  $47.3and $51.3 for the years ended January 31, 2018, 2017 and 2016, respectively.

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Goodwill and Intangible Assets

12 Months Ended

Jan. 31, 2018

Goodwill and Intangible Assets

Goodwill and Intangible Assets

4. GOODWILL AND LONG-LIVED ASSETS, NET

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

				January 31, 2018						January 31, 2017
	Useful Life			Original		Accumulated		Net Book		Original		Accumulated		Net Book
	(Years)			Cost		Amortization		Value		Cost		Amortization		Value
Customer contracts and relationships	10	-	30	$	413.6	$	128.8	$	284.8	$	422.0	$	129.1	$	292.9
Covenants not to compete	5				2.2		0.7		1.5		5.5		3.6		1.9
Developed technologies	15				3.3		0.5		2.8		3.3		0.2		3.1
Trade names	Indefinite				19.5		-		19.5		16.9		-		16.9
				$	438.6	$	130.0	$	308.6	$	447.7	$	132.9	$	314.8

Amortization expense of intangible assets was $19.3,  $19.6and $23.7 for the years ended January 31, 2018, 2017 and 2016, respectively. Amortization expense related to intangible assets is expected to be approximately $19.0 in each of the next five years.

In accordance with ASC 350, goodwill is not amortized but is subject to an annual impairment test. For the years ended January 31, 2018 and 2017, the Company’s annual impairment testing yielded no impairments of goodwill or the indefinite lived intangible asset. During the year ended January 31, 2016, the continued downturn in the oil and gas industry, including the nearly 75% decrease in the number of onshore drilling rigs and the resulting significant cutbacks in the capital expenditures of our customers, represented a significant adverse change in the business climate, which indicated that the ESG reporting unit’s goodwill was impaired and ESG asset group’s long-lived assets may not be recoverable. As a result, during the third quarter ended October 31, 2015, the Company performed an interim goodwill impairment test and a long-lived asset recoverability test. The results of the goodwill impairment testing indicated that goodwill was impaired which resulted in a $310.4 pre-tax goodwill impairment charge for the year ended January 31, 2016.

Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are tested for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. For the years ended January 31, 2018 and 2017, there were no impairments of long-lived assets. For the year ended January 31, 2016, the Company performed a long-lived asset impairment analysis and concluded the carrying amount of the long-lived assets exceeded the undiscounted cash flows of the ESG asset group. As a result, we recorded a $329.8 long-lived asset impairment charge, $177.8 related to identified intangible assets and $152.0 related to property and equipment for the year ended January 31, 2016.

The goodwill and long-lived asset impairment charges reflected the full value of the goodwill and identified intangible assets attributable to the ESG segment. The accumulated goodwill impairment losses (incurred in 2008 and 2015) totaled $601.1 as of January 31, 2016.

The changes in the carrying amount of goodwill for the years ended January 31, 2018, 2017 and 2016 are as follows:

Balance, January 31, 2016	$	954.9
Acquisitions		50.8
Purchase Price Adjustments		(2.5)
Effect of foreign currency translation		(6.8)
Balance, January 31, 2017		996.4
Acquisitions		17.3
Purchase Price Adjustments		(0.1)
Effect of foreign currency translation		43.2
Balance, January 31, 2018	$	1,056.8

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Related Party Transactions

12 Months Ended

Jan. 31, 2018

Related Party Transactions

Related Party Transactions

5. RELATED PARTY TRANSACTIONS

On December 17, 2014, Former Parent created an independent public company through a spin‑off of its ASG and ESG businesses to Former Parent’s stockholders (“Spin‑Off”). In connection with the Spin‑off, we have created some of the functions that were previously provided to us through corporate allocations from B/E Aerospace in‑house. We also entered into certain agreements with B/E Aerospace relating to transition services and IT services through April 2017. In addition, we 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 year ended January 31, 2018 and totaled $8.7 for the year ended January 31, 2017.

On April 13, 2017, B/E Aerospace was acquired by Rockwell Collins, Inc. and is no longer a related party. Sales to B/E Aerospace were $4.4 through April 12, 2017 and $24.1 and $19.0 for the years ended January 31, 2017 and 2016.

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Accrued Liabilities

12 Months Ended

Jan. 31, 2018

Accrued Liabilities

Accrued Liabilities

6. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

	January 31, 2018		January 31, 2017
Accrued salaries, vacation and related benefits	$	37.2	$	31.6
Accrued commissions		10.9		8.7
Income taxes payable		10.7		10.3
Accrued interest		11.7		11.7
Other accrued liabilities		36.2		28.8
	$	106.7	$	91.1

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Long-Term Debt

12 Months Ended

Jan. 31, 2018

Long-Term Debt

Long-Term Debt

7. LONG‑TERM DEBT

Long-term debt consists of the following:

	January 31, 2018		January 31, 2017
Senior unsecured notes	$	1,200.0	$	1,200.0
Less unamortized original issue discount and debt issue costs		15.4		18.0
	$	1,184.6	$	1,182.0

In December 2014, in connection with the Spin‑off, the Company issued $1,200.0 aggregate principal amount of 5.875% senior unsecured notes due 2022 (the “5.875% Notes”), in an offering pursuant to the Securities Act of 1933, as amended. The net proceeds from the issuance of the 5.875% Notes were approximately $1,172.1, of which $750.0 was distributed to Former Parent, leaving KLX with net proceeds of approximately $422.1. The 5.875% Notes are senior unsecured debt obligations of the Company. We also entered into a $500.0 secured revolving credit facility dated as of December 16, 2014, which was amended and restated to a $750.0 secured revolving credit facility as of May 19, 2015 (the “Revolving Credit Facility”). As of January 31, 2018 and 2017, long‑term debt consisted of $1,200.0 of our 5.875% Notes.

Letters of credit outstanding under the Revolving Credit Facility aggregated $5.8 at January 31, 2018.

The Revolving Credit Facility is tied to a borrowing base formula, has no financial covenants and has $744.2 of availability as of January 31, 2018. The Revolving Credit Facility bears interest at an annual rate equal to the London interbank offered rate (“LIBOR”) plus the applicable margin (as defined), and expires in May 2020. No amounts were outstanding under the Revolving Credit Facility as of January 31, 2018 or 2017.

Maturities of long‑term debt are as follows:

Year Ending January 31,
2019	$	—
2020		—
2021		—
2022		—
2023		1,200.0
Thereafter		—
Total	$	1,200.0

Interest expense amounted to $75.8,  $75.9 and $77.7 for the years ended January 31, 2018, 2017 and 2016, respectively.

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Commitments, Contingencies and Off-Balance Sheet Arrangements

12 Months Ended

Jan. 31, 2018

Commitments, Contingencies and Off-Balance Sheet Arrangements

Commitments, Contingencies and Off-Balance Sheet Arrangements

8. 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 consolidated and combined balance sheets. At January 31, 2018, future minimum lease payments under these arrangements approximated $190.1,  of which $166.0 is related to long‑term real estate leases.

Rent expense for the years ended January 31, 2018, 2017 and 2016 was $39.8,  $28.9 and $37.7, respectively. Future payments under operating leases with terms greater than one year as of January 31, 2018 are as follows:

Year Ending January 31,
2019	$	31.2
2020		30.1
2021		24.7
2022		20.6
2023		15.0
Thereafter		68.5
Total	$	190.1

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 consolidated and combined 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 consolidated and combined financial statements. Accordingly, no significant amounts have been accrued for indemnities, commitments and guarantees.

The Company has employment and compensation agreements with key officers of the Company. An agreement with one of the officers provides for the officer to earn a minimum of $1.0 per year, subject to increases as determined from time to time by the Company's Board of Directors or the Compensation Committee of the Board of Directors, for a three-year period from the effective date (as defined in such agreement), with automatic extension by one year on each anniversary of the effective date of the agreement unless either party provides notice of non-renewal, as well as quarterly contributions to a tax-deferred compensation plan which in the aggregate, on an annual basis, would amount to a contribution equal to 100% of such officer's base salary in effect at the time, to be reduced to 30% effective for fiscal quarters commencing on or after February 1, 2017.

One other agreement provides for an officer to receive annual minimum compensation of $0.7 per year, which may be increased in the discretion of the Company’s Board of Directors or the Compensation Committee of the Board of Directors, for a three-year period from the effective date (as defined in such agreement) with automatic extension by one year on each anniversary of the effective date of the agreement unless either party provides notice of non-renewal, and to receive quarterly contributions to a tax-deferred compensation plan which in the aggregate, on an annual basis, would amount to a contribution equal to 100% of such officer’s base salary in effect at the time.

In addition, the Company has employment agreements with certain other key members of management expiring on various dates. 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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Income Taxes

12 Months Ended

Jan. 31, 2018

Income Taxes

Income Taxes

9. INCOME TAXES

The Company determined the provision for income taxes using the asset and liability approach. Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. In assessing the need for a valuation allowance, the Company looked to the future reversal of existing taxable temporary differences, taxable income in carryback years and the feasibility of tax planning strategies and estimated future taxable income. The need for a valuation allowance can be affected by changes to tax laws, changes to statutory tax rates and changes to future taxable income estimates.

The Company recognizes tax benefits from uncertain tax positions 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. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

As of January 31, 2018, the Company has recorded a tax indemnity payable to B/E Aerospace totaling $6.4, of which $1.8 is classified in other current liabilities and $4.6 is classified in other long‑term liabilities.

Components of earnings (loss) before incomes taxes were:

	Year Ended January 31,
	2018		2017		2016
Earnings (loss) before income taxes
United States	$	128.3	$	41.3	$	(624.4)
Foreign		12.2		12.2		10.3
Earnings (loss) before income taxes	$	140.5	$	53.5	$	(614.1)

Income tax expense (benefit) consists of the following:

	Year Ended January 31,
	2018		2017		2016
Current:
Federal	$	(0.2)	$	—	$	0.7
State		0.8		0.3		(1.5)
Foreign		5.1		(1.3)		3.8
		5.7		(1.0)		3.0
Deferred:
Federal		79.8		14.4		(213.3)
State		2.9		1.3		(17.4)
Foreign		(1.3)		(9.4)		(0.6)
		81.4		6.3		(231.3)
Total income tax expense (benefit)	$	87.1	$	5.3	$	(228.3)

The difference between income tax expense (benefit) and the amount computed by applying the statutory U.S. federal income tax rate (33.8% for the year ended January 31, 2018 and 35% for the years ended January 31, 2017 and 2016) to the pre‑tax earnings consists of the following:

	Year Ended January 31,
	2018		2017		2016
Statutory federal income tax expense (benefit)	$	47.5	$	18.7	$	(214.9)
U.S. state income taxes		3.4		1.5		(17.5)
Foreign tax rate differential		(0.1)		0.1		(0.2)
Change in unrecognized tax benefits		0.2		(7.8)		0.4
Change in valuation allowance on foreign interest loss carryforwards		6.3		(1.6)		5.3
Other, net		0.7		1.3		2.0
Non-taxable/non-deductible items		(6.0)		(6.9)		(3.4)
Stock compensation		(7.2)		—		—
Change in tax rate		42.3		—		—
	$	87.1	$	5.3	$	(228.3)

The tax effects of temporary differences and carryforwards that give rise to deferred income tax assets and liabilities consist of the following:

	January 31, 2018		January 31, 2017
Deferred tax assets:
Inventory reserves	$	19.8	$	24.8
Accrued liabilities		9.8		12.9
Intangible Assets		13.4		44.2
Net operating loss carryforward		70.3		81.2
Inventory capitalization		9.3		14.9
Other		14.8		19.9
		137.4		197.9
Deferred tax liabilities:
Intangible assets		(13.7)		(12.8)
Depreciation		(30.3)		(25.3)
		(44.0)		(38.1)
Net deferred tax asset before valuation allowance		93.4		159.8
Valuation allowance		(24.8)		(17.8)
Net deferred tax asset	$	68.6	$	142.0

A reconciliation of the beginning and ending amounts of gross uncertain tax positions is presented below:

	January 31, 2018		January 31, 2017		January 31, 2016
Unrecognized tax benefit at beginning of period	$	7.2	$	9.0	$	9.4
Additions for current year tax positions		0.1		4.6		—
Additions for prior year tax positions		—		1.3		—
Decreases for prior year tax positions		—		(7.6)		—
Foreign currency fluctuations		1.1		(0.1)		(0.4)
Unrecognized tax benefit at end of period	$	8.4	$	7.2	$	9.0

Included in the balance of unrecognized tax benefits as of January 31, 2018, 2017 and 2016 are $5.6,  $4.4 and $9.0, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

The Company does not anticipate that the total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statutes of limitation within twelve months of this reporting date. The Company classifies interest and penalties related to income tax as income tax expense. The amount included in the Company’s liability for unrecognized tax benefits for interest and penalties was immaterial as of January 31, 2018, 2017 and 2016.

The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United States, the United Kingdom, France and Germany. Tax years that remain subject to examinations by major tax jurisdictions vary by legal entity but are generally open for the U.S. for tax years ending in 2014 and after and outside the U.S. for the tax years ending after 2007.

As of January 31, 2018, the Company has federal net operating loss carryforwards of $157.4 expiring beginning in 2035 and state net operating loss carryforwards of $134.6 expiring between 2020 and 2035 with the majority expiring in 2035. The Company has $117.8 of foreign net operating loss carryforwards as of January 31, 2018 for which a valuation allowance of $95.2 has been recognized.

All of the Company’s foreign net operating losses have an indefinite carryforward period. The Company’s future tax provision will reflect any favorable or unfavorable adjustments to its estimated tax liabilities when resolved. The Company is unable to predict the outcome of these matters. However, the Company believes that none of these matters will have a material effect on the results of operations or financial condition of the Company.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the statement of earnings, rather than equity, and requires excess tax benefits from stock-based compensation to be classified in cash flow from operations. The Company adopted the new standard during the first quarter of 2017 in compliance with the effective date, which resulted in the recognition of a $0.5 long-term deferred tax asset with the offset recorded to accumulated deficit. Prior periods have been adjusted to conform to the current year presentation. With respect to forfeitures, the Company will continue to estimate the number of awards expected to be forfeited upon award issuance.

Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to $101.0 at January 31, 2018. Those earnings are considered to be permanently reinvested, and no provision for U.S. federal and state income taxes has been made. Distribution of these earnings in the form of dividends or otherwise could result in U.S. federal taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable in various foreign countries. It is not currently practical to determine the amount of U.S. income and foreign withholding tax payable in the event all such foreign earnings are repatriated.

The Company’s effective tax rate can fluctuate as operations and the local country tax rates fluctuate due to the number of tax jurisdictions in which the Company operates.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which eliminates a current exception in U.S. GAAP to the recognition of the income tax effects of temporary differences that result from intra-entity transfers of non-inventory assets. The intra-entity exception is being eliminated under the ASU. The standard is required to be applied on a modified retrospective basis and will be effective beginning with the first quarter of 2018. Early adoption is permitted, and the Company adopted the new standard during the first quarter of 2017, which resulted in the elimination of a $7.7 long-term prepaid tax balance and the recognition of a $8.8 long term deferred tax asset with the offset recorded to the accumulated deficit.

The Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the tax effects of the Tax Cut and Jobs Act of 2017 (the “2017 Tax Act”). SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Tax Act enactment date for companies to complete the accounting relating to the 2017 Tax Act under the Income Taxes Topic of the FASB ASC. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the 2017 Tax Act for which the accounting under the Income Taxes Topic of the FASB ASC is complete. To the extent that a company's accounting for certain income tax effects of the 2017 Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply the Income Taxes Topic of the FASB ASC on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the 2017 Tax Act. The ultimate impact of the 2017 Tax Act in the Company's financial statements is provisional with regard to certain foreign tax provisions and may differ from its estimates due to changes in the interpretations and assumptions made by the Company as well as additional regulatory guidance that may be issued.

On December 22, 2017, President Trump signed into law the legislation generally known as the Tax Cut and Jobs Act of 2017. The tax law includes significant changes to the U.S. corporate tax systems including a rate reduction from 35% to 21% beginning in January of 2018, a change in the treatment of foreign earnings going forward and a deemed repatriation transition tax. In accordance with ASC 740, “Income Taxes”, the impact of a change in tax law is recorded in the period of enactment. During the fourth quarter of 2017, the Company recorded a material, non-cash, change in its net deferred income tax balances of approximately $43.3 related to the federal and state tax rate changes. The Company estimates that its deemed repatriation liability will not be material.

Under the tax sharing and indemnity agreement between the Company and B/E Aerospace, B/E Aerospace generally assumes liability for all federal and state income taxes for all tax periods ending on or prior to December 31, 2014. B/E Aerospace assumes the liability for all federal and state income taxes of KLX’s U.S. operations through the distribution date. KLX assumes all other federal taxes, foreign income tax/non‑income taxes and state/local non‑income taxes related to its business for all periods and B/E Aerospace assumes all other federal taxes, foreign income tax/non‑income taxes and state/local non‑income taxes related to their business for all periods. Additional taxes incurred related to the internal restructuring to separate the businesses to complete the spin‑off shall be shared equally between B/E Aerospace and KLX. Taxes incurred related to certain international tax initiatives for the KLX business shall be assumed by KLX subject to the calculation provisions of the tax sharing and indemnity agreement. In addition, B/E Aerospace transferred to KLX all the deferred tax assets and liabilities related to the KLX business as of December 16, 2014.

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Employee Retirement Plans

12 Months Ended

Jan. 31, 2018

Employee Retirement Plans

Employee Retirement Plans

10. EMPLOYEE RETIREMENT PLANS

The Company sponsors and contributes to a qualified, defined contribution savings and investment plan, covering substantially all U.S. employees. The KLX Inc. Retirement Plan was established pursuant to Section 401(k) of the Internal Revenue Code. Under the terms of this plan, covered employees may contribute up to 100% of their pay, limited to certain statutory maximum contributions. Participants are vested in matching contributions immediately and the matching percentage is 100% of the first 3% of employee contributions and 50% on the next 2% of employee contributions. For all periods prior to the year ended January 31, 2017, KLX employees participated in a plan sponsored by our Former Parent. Total expense for the plan was $4.3,  $3.4 and $3.6 for the years ended January 31, 2018, 2017 and 2016, respectively. The Company also sponsors and contributes to a supplemental executive retirement plan (“SERP”), which was established pursuant to Section 409A of the Internal Revenue Code, for certain employees. The SERP is an unfunded plan maintained for the purpose of providing deferred compensation for certain employees. This plan allows certain employees to annually elect to defer a portion of their compensation, on a pre‑tax basis, until their retirement. The retirement benefit to be provided is based on the amount of compensation deferred. Compensation expense under this program was $2.3,  $2.5 and $2.4 for the years ended January 31, 2018, 2017 and 2016, respectively. The Company and its subsidiaries participate in government‑sponsored programs in certain foreign countries. The Company funds these plans based on legal requirements, tax considerations, local practices and investment opportunities.

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Stockholders' Equity

12 Months Ended

Jan. 31, 2018

Stockholders' Equity

Stockholders' Equity

11. STOCKHOLDERS’ EQUITY

Earnings Per Share—Basic net earnings per common share is computed using the weighted average of common shares outstanding during the year. Diluted net earnings per common share reflects the potential dilution from assumed conversion of all dilutive securities such as stock options and unvested restricted stock using the treasury stock method. When the effects of the outstanding stock options, restricted stock awards or restricted stock units are anti‑dilutive, they are not included in the calculation of diluted earnings per common share. For the years ended January 31, 2018, 2017 and 2016 no shares were excluded from the determination of diluted earnings per common share.

The following table sets forth the computation of basic and diluted net earnings per share for the years ended January 31, 2018, 2017 and 2016:

	Year Ended January 31,
	2018		2017		2016
Numerator: net earnings (loss)	$	53.4	$	48.2	$	(385.8)
Denominator:
Denominator for basic earnings per share—Weighted average shares (in millions)		50.5		51.8		52.2
Effect of dilutive securities—Dilutive securities (in millions)		0.8		0.4		—
Denominator for diluted earnings per share—Adjusted weighted average shares (in millions)		51.3		52.2		52.2
Basic net earnings (loss) per share	$	1.06	$	0.93	$	(7.39)
Diluted net earnings (loss) per share	$	1.04	$	0.92	$	(7.39)

Long‑Term Incentive Plan—The Company adopted a Long‑Term Incentive Plan (“LTIP”) similar to the Former Parent’s plan under which the Company’s Compensation Committee may grant stock options, stock appreciation rights, restricted stock, restricted stock units or other forms of equity based or equity related awards. All unvested shares of restricted stock granted by our Former Parent were transferred with the employees to KLX on the same terms and conditions on an exchange ratio of 1.8139 such that the impact was neutral to employees at the date of the Spin‑off.

During 2014, B/E Aerospace granted restricted stock under the Former Parent’s plan to certain members of the Company’s management which vests over four years. During the three years ended January 31, 2018, the Company granted restricted stock to certain members of the Company’s Board of Directors and management. Restricted stock grants vest over periods ranging from three to four years and are granted at the discretion of the Compensation Committee of the Company’s Board of Directors. Certain awards also vest upon attainment of performance goals. Compensation cost is recorded on a straight‑line basis over the vesting term of the shares based on the grant date value using the closing trading price. Share based compensation of $22.2,  $15.6 and $11.4 was recorded during fiscal year 2017, 2016 and 2015, respectively relating to these restricted stock grants. Unrecognized compensation cost related to these grants was $37.5 at January 31, 2018.

The following table summarizes shares of restricted stock awards that were granted, vested, forfeited and outstanding:

	January 31, 2018				January 31, 2017
				Weighted				Weighted
		Weighted		Average		Weighted		Average
		Average		Remaining		Average		Remaining
	Shares	Grant Date		Vesting Period	Shares	Grant Date		Vesting Period
	(in thousands)	Fair Value		(in years)	(in thousands)	Fair Value		(in years)
Outstanding, beginning of period	766.4	$	38.57	2.44	827.2	$	36.40	3.12
Shares granted	207.1		57.65		262.3		41.97
Shares vested	(290.1)		39.75		(246.5)		35.72
Shares forfeited	(72.2)		38.24		(76.6)		35.96
Outstanding, end of period	611.2	$	44.52	1.98	766.4	$	38.57	2.44

During the year ended January 31, 2018, the Company granted 113,387 units of time and performance based restricted stock. During the year ended January 31, 2018, 1,814 restricted stock units were forfeited. As of January 31, 2018, the weighted average remaining vesting period for the 452,051 outstanding restricted stock units was 1.73 years.

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

At January 31, 2018 no unvested time-based stock options were outstanding under the KLX Inc. Long-Term Incentive Plan (the “Plan”) as all options were fully vested as of January 31, 2018. At January 31, 2017 we had 298,298 unvested time-based stock options outstanding. All of the time-based options vest ratably during the period of service.

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

	January 31, 2018						January 31, 2017
				Weighted						Weighted
		Weighted		Average				Weighted		Average
		Average		Remaining		Aggregate		Average		Remaining		Aggregate
	Number	Exercise		Contractual Life		Intrinsic	Number	Exercise		Contractual Life		Intrinsic
	of Shares	Price		(in years)		Value (1)	of Shares	Price		(in years)		Value (1)
Outstanding, beginning of period	894,899	$	39.08	7.96	$	8,868.4	894,899	$	39.08	8.96	$	—
Granted	—		—				—		—
Exercised	(894,899)		39.08				—		—
Canceled	—		—				—		—
Outstanding, end of period	—	$	—	—	$	—	894,899	$	39.08	7.96	$	8,868.4
Exercisable, end of period	—	$	—	—	$	—	596,601	$	39.08	7.96	$	5,912.3

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

For the year ended January 31, 2018 and 2017, we recorded $3.4 and $3.9, respectively, of stock-based compensation expense related to these options that is included within selling, general and administrative expenses. At January 31, 2018 and 2017, the unrecognized stock-based compensation related to these options was $0 and $7.7, respectively, and is expected to be recognized over a weighted-average period of 0 and 0.87 years, respectively.

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

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

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

	January 31,
	2015
Expected life (in years)	6.50
Volatility	30.0%
Risk free interest rate	1.5%
Dividend yield	-

The weighted average fair value per option at the grant date for options issued during the one month ended January 31, 2015 was $12.99.

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Employee Stock Purchase Plan

12 Months Ended

Jan. 31, 2018

Employee Stock Purchase Plan

Employee Stock Purchase Plan

12. EMPLOYEE STOCK PURCHASE PLAN

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. KLX issued approximately 40,000, 51,000 and 50,000 shares of common stock to employees of the Company during the years ended January 31, 2018, 2017 and 2016, respectively, at a weighted average price per share of $49.14, $31.09 and $30.62, respectively.

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Segment Reporting

12 Months Ended

Jan. 31, 2018

Segment Reporting

Segment Reporting

13. 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. 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. This group is comprised of the Chairman and Chief Executive Officer and the President and Chief Operating Officer.

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 other financial information by business segment:

	Year Ended January 31, 2018
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,420.2	$	320.6	$	1,740.8
Operating earnings(loss)(1)		238.5		(22.2)		216.3
Total assets(2)		3,495.8		294.2		3,790.0
Goodwill		1,056.8		—		1,056.8
Capital expenditures(3)		27.7		57.2		84.9
Depreciation and amortization		31.8		34.3		66.1

	Year Ended January 31, 2017
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,340.9	$	153.2	$	1,494.1
Operating earnings(loss)(1)		220.6		(91.2)		129.4
Total assets(2)		3,471.4		226.9		3,698.3
Goodwill		996.4		—		996.4
Capital expenditures(3)		11.0		24.5		35.5
Depreciation and amortization		30.4		36.5		66.9

	Year Ended January 31, 2016
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,312.5	$	254.9	$	1,567.4
Operating earnings(loss)(1)		211.6		(748.4)		(536.8)
Total assets(2)		3,422.8		268.2		3,691.0
Goodwill		952.4		2.5		954.9
Capital expenditures(3)		30.4		100.1		130.5
Depreciation and amortization		28.1		46.9		75.0

(1) Operating earnings (loss) includes an allocation of corporate IT costs, employee benefits and general and administrative costs. The allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues generated, costs incurred, headcount or other measures.

(2) Corporate assets (including cash and cash equivalents) of $263.6,  $378.2 and $559.5 at January 31, 2018, 2017 and 2016, respectively, have been allocated to the above segments based on each segment’s percentage of total assets.

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

Geographic Information

The Company operates principally in three geographic areas, the United States, Europe (primarily Germany) and emerging markets, such as Asia, the Pacific Rim and the Middle East. There were no significant transfers among geographic areas during these periods.

The following table presents revenues and operating earnings (loss) based on the originating location for the years ended January 31, 2018, 2017 and 2016. Additionally, it presents all identifiable assets related to the operations in each geographic area as of January 31, 2018 and 2017:

	Year Ended January 31,
	2018		2017		2016
Revenues:
Domestic	$	1,734.2	$	1,423.8	$	1,453.4
Foreign		6.6		70.3		114.0
	$	1,740.8	$	1,494.1	$	1,567.4
Operating earnings (loss):
Domestic	$	198.8	$	109.3	$	(561.0)
Foreign		17.5		20.1		24.2
	$	216.3	$	129.4	$	(536.8)

	January 31, 2018		January 31, 2017
Identifiable assets:
Domestic	$	3,260.7	$	3,214.1
Foreign		529.3		484.2
	$	3,790.0	$	3,698.3

Revenues by geographic area, based on destination, for the years ended January 31, 2018, 2017 and 2016 were as follows:

	Year Ended January 31,
	2018				2017				2016
			% of				% of				% of
	Revenues		Revenues		Revenues		Revenues		Revenues		Revenues
United States	$	1,090.4	62.6	%	$	865.6	57.9	%	$	955.3	61.0	%
Europe		382.7	22.0	%		387.9	26.0	%		376.3	24.0	%
Asia, Pacific Rim, Middle East and other		267.7	15.4	%		240.6	16.1	%		235.8	15.0	%
Total revenues	$	1,740.8	100.0	%	$	1,494.1	100.0	%	$	1,567.4	100.0	%

Export revenues from the United States to customers in foreign countries amounted to $643.8,  $511.1 and $457.9 in the years ended January 31, 2018, 2017 and 2016, respectively.

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Fair Value Measurements

12 Months Ended

Jan. 31, 2018

Fair Value Information

Fair Value Information

14. FAIR VALUE INFORMATION

All financial instruments are 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 January 31, 2018 and 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 $1,251.0 and $1,260.7 as of January 31, 2018 and 2017, respectively.

Goodwill and long-lived assets, including property and equipment and purchased intangibles subject to amortization were impaired and written down to their estimated fair values during the third quarter of Fiscal 2015. The goodwill level 3 fair value was determined using an income based approach utilizing estimates of future cash flow, discount rate and long-term growth rate, all of which were unobservable. The long-lived asset level 3 fair value was determined using a combination of the cost approach and the market approach, which used inputs that included replacement costs (unobservable), physical deterioration estimates (unobservable), economic obsolescence (unobservable), and market sales data for comparable assets.

The following table summarizes impairments of goodwill and long-lived assets and the related post impairment fair values of the corresponding ESG assets for the year ended January 31, 2016:

	Year Ended
	January 31, 2016
	Impairment		Fair Value
Property and equipment, net	$	152.0	$	174.3
Goodwill		310.4		—
Intangible assets		177.8		—
	$	640.2	$	174.3

Fair value is measured as of the impairment date using Level 3 inputs. See Note 4 for a discussion of the asset impairment charge recorded during the third quarter of Fiscal 2015.

The fair value information presented herein is based on pertinent information available to management at January 31, 2018 and 2017, respectively. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these consolidated and combined financial statements since those dates, and current estimates of fair value may differ significantly from the amounts presented herein.

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Selected Quarterly Data (Unaudited)

12 Months Ended

Jan. 31, 2018

Selected Quarterly Data (Unaudited)

Selected Quarterly Data (Unaudited)

15. SELECTED QUARTERLY DATA (Unaudited)

Summarized quarterly financial data for the years ended January 31, 2018 and 2017 are as follows:

	Year Ended January 31, 2018
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	411.3	$	430.6	$	456.7	$	442.2
Cost of sales		298.4		312.0		331.7		321.7
Net earnings		18.4		20.7		25.8		(11.5)
Basic net earnings per share(1)		0.36		0.41		0.52		(0.23)
Diluted net earnings per share(1)		0.36		0.40		0.51		(0.23)

(1) Net earnings per share are computed individually for each quarter presented. Therefore, the sum of the quarterly net earnings per share may not necessarily equal the total for the year.

	Year Ended January 31, 2017
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	352.8	$	378.9	$	389.0	$	373.4
Cost of sales		269.3		286.4		289.0		281.4
Net earnings		2.5		8.0		19.8		17.9
Basic net earnings per share(1)		0.05		0.15		0.38		0.35
Diluted net earnings per share(1)		0.05		0.15		0.38		0.34

(1) Net earnings per share are computed individually for each quarter presented. Therefore, the sum of the quarterly net earnings per share may not necessarily equal the total for the year.

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Valuation and Qualifying Accounts

12 Months Ended

Jan. 31, 2018

Valuation and Qualifying Accounts

Valuation And Qualifying Accounts

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED JANUARY 31, 2018, 2017 AND 2016

(In millions)

	Balance At								Balance At
	Beginning						Write-Offs/		End
	Of Period		Expenses		Other		Disposals		Of Period
Deducted From Assets:
Allowance for doubtful accounts:
Year ended January 31, 2018	$	13.5	$	3.9	$	0.3	$	5.7	$	12.0
Year ended January 31, 2017		11.3		4.0		—		1.8		13.5
Year ended January 31, 2016		8.0		4.1		—		0.8		11.3
Reserve for inventory:
Year ended January 31, 2018	$	59.6	$	17.2	$	—	$	4.4	$	72.4
Year ended January 31, 2017		40.4		20.7		—		1.5		59.6
Year ended January 31, 2016		33.5		7.7		—		0.8		40.4
Deferred tax asset valuation allowance:
Year ended January 31, 2018	$	17.8	$	0.7	$	6.3	$	—	$	24.8
Year ended January 31, 2017		21.9		—		(1.6)		(2.5)		17.8
Year ended January 31, 2016		24.8		—		5.3		(8.2)		21.9

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

12 Months Ended

Jan. 31, 2018

Description of Business and Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The Company’s consolidated financial statements include KLX and its wholly owned subsidiaries were prepared in accordance with accounting principles generally accepted in the United States (GAAP). All intercompany transactions and account balances within the Company have been eliminated.

Use of Estimates

Use of Estimates—The preparation of the consolidated 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.

Revenue Recognition

Revenue Recognition—Sales of products and services are recorded when the earnings process is complete. This generally occurs when the products are shipped to the customer in accordance with the contract or purchase order, risk of loss and title has passed to the customer, collectability is reasonably assured and pricing is fixed and determinable. In instances where title does not pass to the customer upon shipment, the Company recognizes revenue upon delivery or customer acceptance, depending on the terms of the sales contract. Management provides allowances for credits and returns, based on historic experience, and adjusts such allowances as considered necessary.

In connection with the sales of its products, the Company 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 the Company contemporaneously with the delivery of the product, and as such, once the product is delivered, the Company 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, the Company has satisfied its obligations to the customer. The Company does not account for these services as a separate element, as the services do not have stand‑alone value and cannot be separated from the product element of the arrangement.

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

Income Taxes

Income Taxes—The Company provides deferred income taxes for temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. Deferred income taxes are computed using enacted tax rates that are expected to be in effect when the temporary differences reverse. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or the entire deferred tax asset will not be realized. The Company records uncertain tax positions within income tax expense and classifies interest and penalties related to income taxes as income tax expense.

Cash Equivalents

Cash Equivalents—The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable, Net

Accounts Receivable, Net—The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness, as determined by review of their current credit information. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. The allowance for doubtful accounts at January 31, 2018 and 2017 was $12.0 and $13.5, respectively.

Inventories

Inventories—Inventories, made up of finished goods, primarily consist 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. During the year ended January 31, 2017 (“Fiscal 2016”), the Company revised its methodology for estimating the provision required for excess and obsolete (“E&O”) inventories. The new methodology more adequately considers historical demand of our inventory to project future demand in order to estimate the provision required for E&O inventories. Other factors considered in the methodology include expected market growth rates and related elements. The implementation of the new methodology did not impact any prior period reserve for E&O inventory. Demand for the Company’s products can fluctuate from period to period depending on customer activity. In accordance with industry practice, costs in inventory include amounts relating to long-term contracts with long production cycles and to inventory items with long production cycles, some of which are not expected to be realized within one year. As a result, the Company’s operating cycle is greater than a year and is closely tied to the lifecycle of an airframe. Inventory reserves were approximately $72.4 and $59.6 as of January 31, 2018 and 2017, respectively.

Substantially all of the Company’s inventory is comprised of aerospace grade fasteners which support OEM production and the aftermarket over the life of the airframe. Inventory with a limited shelf life is continually monitored and reserved for in advance of expiration. The reserve for inventory with limited shelf life is not material to the Company’s financial statements.

Property and Equipment, Net

Property and Equipment, Net—Property and equipment are stated at cost and depreciated generally under the straight‑line method over their estimated useful lives of one to thirty years (or the lesser of the term of the lease for leasehold improvements, as appropriate).

Goodwill and Intangible Assets, Net

Goodwill and Intangible Assets, Net—Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles—Goodwill and Other (“ASC 350”), goodwill and indefinite‑lived intangible assets are reviewed at least annually for impairment. Acquired intangible assets with definite lives are amortized over their individual useful lives. Other intangible assets are amortized using the straight‑line method over periods ranging from five to thirty years.

As of January 31, 2018, the Company had two reporting units, which were determined based on the guidelines contained in FASB ASC Topic 350, Subtopic 20, Section 35. Each reporting unit constitutes a business, for which there is discrete financial information available that is regularly reviewed by the management of the Company.

Goodwill is tested at least annually as of December 31st, and management assesses whether there has been any impairment in the value of goodwill by comparing the fair value to the net carrying value of the reporting units. If the carrying value exceeds its estimated fair value, an impairment loss is recognized for the difference in accordance with the Company’s adoption of the new accounting principle discussed below. In this event, the asset is written down accordingly. The fair values of the reporting units for goodwill impairment testing is determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances.

The indefinite‑lived intangible asset is tested at least annually for impairment. Impairment for the intangible asset with an indefinite life exists if the carrying value of the intangible asset exceeds its fair value. The fair value of the indefinite‑lived intangible asset is determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances.

For the years ended January 31, 2018 and 2017, the Company’s annual impairment testing yielded no impairments of goodwill or the indefinite‑lived intangible asset. For the year ended January 31, 2016, the Company determined goodwill related to the Energy Services Group (“ESG”) reporting unit was fully impaired and recorded a pre-tax impairment charge related to ESG’s goodwill of $310.4.

Long-Lived Assets

Long‑Lived Assets—The Company assesses potential impairments to its long‑lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. For the years ended January 31, 2018 and 2017, there were no impairments of long lived assets. For the year ended January 31, 2016, the Company used a combination of cost and market approaches for determining the fair value of the ESG asset group’s long-lived assets and recognized impairment charges related to identified intangibles and property and equipment of $177.8 and $152.0, respectively.

Common Stock Equivalents

Common Stock Equivalents—The Company has potential common stock equivalents related to its outstanding restricted stock awards, restricted stock units and employee stock purchase plan. These potential common stock equivalents are not included in diluted loss per share for any period presented in which there is a net loss because the effect would have been anti‑dilutive.

Accounting for Stock-Based Compensation

Accounting for Stock‑Based Compensation—The Company accounts for share‑based compensation arrangements in accordance with the provisions of FASB ASC 718, Compensation—Stock Compensation (“ASC 718”), 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.

All unvested shares of restricted stock granted by B/E Aerospace, Inc. (our Former Parent) were converted into unvested shares of KLX on the distribution date at a ratio equal to 1.8139. Compensation cost recognized during the three years ended January 31, 2018 (“Fiscal 2017”) related to unvested shares converted on the distribution date and new shares of KLX restricted stock and stock options granted during the three years ended January 31, 2018.

The Company has established a qualified Employee Stock Purchase Plan. The Employee Stock Purchase Plan allows 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 for 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. The value of the rights under this Plan granted during the years ended January 31, 2018, 2017 and 2016 was $0.4,  $0.3 and $0.3, respectively.

Foreign Currency Translation

Foreign Currency Translation—The assets and liabilities of subsidiaries located outside the United States are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Revenue and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from foreign currency transactions are recognized currently in income, and those resulting from translation of financial statements are accumulated as a separate component of equity and accumulated other comprehensive income (loss). The Company’s European subsidiaries primarily utilize the British pound or the Euro as their local functional currency.

Treasury Stock

Treasury Stock - The Company may periodically repurchase shares of its common stock from employees for the satisfaction of their individual payroll tax withholding upon vesting of restricted stock and restricted stock units in connection with the Company’s Long-Term Incentive Plan (“LTIP”). The Company’s repurchases of common stock are recorded at the average cost of the common stock. As part of the LTIP, the Company repurchased 713,210 and 35,009 shares of its common stock for $48.9 and $1.5 during the years ended January 31, 2018 and 2017. In January 2016, the Board of Directors authorized a $100.0 share repurchase under the existing $250.0 share repurchase program. In March 2017, the Board of Directors authorized an increase in the Company’s share repurchase authority from $100.0 to $200.0. During Fiscal 2017, the Company repurchased 1,652,661 shares of common stock at an average price of $48.04 per share for a total of $79.4 as part of the share repurchase program. During Fiscal 2016, the Company repurchased 982,062 shares of common stock at an average price of $41.20 per share for a total of $40.5 as part of the share repurchase program.

Concentration of Risk

Concentration of Risk—In Aerospace Solutions Group (“ASG”), the Company’s products and services are primarily concentrated within the aerospace industry with customers consisting primarily of commercial airlines, a wide variety of business jet customers and commercial aircraft manufacturers and their suppliers. In ESG, the Company provides products and services to energy industry customers who focus on developing and producing oil and gas onshore in North America. The Company’s management performs ongoing credit evaluations on the financial condition of all of its customers and maintains allowances for uncollectible accounts receivable based on expected collectability. Credit losses have historically been within management’s expectations and the provisions established.

Significant customers change from year to year, in the case of ASG, depending on the level of refurbishment activity and/or the level of new aircraft purchases by such customers, and in the case of ESG, depending on the level of exploration and production activity and the use of our services. During the years ended January 31, 2018, 2017 and 2016, no single customer accounted for more than 10% of the Company’s consolidated revenues.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2017, the 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 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 January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other. ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted, and the Company adopted the new standard during the fourth quarter of 2017. The adoption of ASU 2017-04 did not have an impact on the Company’s consolidated financial statements; however, the Company will no longer perform the second step of the goodwill impairment test where applicable in future impairment tests.

In January 2017, the FASB issued ASU 2017-01, Business Combinations. This update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2017-01 is not expected to have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which eliminates a current exception in U.S. GAAP to the recognition of the income tax effects of temporary differences that result from intra-entity transfers of non-inventory assets. The intra-entity exception is being eliminated under the ASU. The standard is required to be applied on a modified retrospective basis and will be effective beginning with the first quarter of 2018. Early adoption is permitted, and the Company adopted the new standard during the first quarter of 2017, which resulted in the elimination of a $7.7 long-term prepaid tax balance and the recognition of a $8.8 longterm deferred tax asset with the offset recorded to the accumulated deficit.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”) related to how certain cash receipts and payments are presented and classified in the statement of cash flows. These cash flow issues include debt prepayment or extinguishment costs, settlement of zero-coupon debt, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years with early adoption permitted and should be applied retrospectively. The Company does not expect a material impact upon adoption of this ASU to its consolidated financial statements as the Company’s consolidated statements of cash flows are not impacted by the eight issues listed above, with the exception of the contingent consideration payments, which will not be presented in the year of adoption.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the income statement, rather than equity, and requires excess tax benefits from stock-based compensation to be classified in cash flow from operations. The Company adopted the new standard during the first quarter of 2017 in compliance with the effective date, which resulted in the recognition of a $0.5 long-term deferred tax asset with the offset recorded to accumulated deficit. Prior year periods have been adjusted to conform to the current year presentation. With respect to forfeitures, the Company will continue to estimate the number of awards expected to be forfeited upon award issuance.

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 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 deferred the effective date for implementation of ASU 2014-09 by one year and during 2016, the FASB issued various related accounting standard updates, which clarified revenue accounting principles and provided supplemental adoption guidance. The guidance under ASU 2014-09 is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within that year. To assess the impact of this guidance, the Company established a cross functional implementation project team, inventoried its revenue streams and contracts with customers at its two segments and applied the principles of the guidance against a selection of contracts to assist in the determination of potential revenue accounting differences. No individually significant implementation matters were identified, and our revenue will be recognized on a “point-in-time” basis for product revenues and over time for service revenues under the new standard, which is consistent with current practice. The Company implemented internal controls, policies and processes to comply with the new standard. The Company adopted ASC Topic 606 in the first quarter of 2018 using the modified retrospective method of adoption, which resulted in no changes to the opening consolidated balance sheet as of February 1, 2018. Prior period consolidated statements of earnings and comprehensive income will remain unchanged.

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Business Combinations (Tables) - Herndon

12 Months Ended

Jan. 31, 2018

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

Pro Forma Revenues, Net Earnings (Loss) and Diluted Net Earnings (Loss) Per Share

	UNAUDITED
	YEAR ENDED
	January 31, 2017		January 31, 2016
	Pro forma		Pro forma
Revenues	$	1,544.3	$	1,699.8
Net earnings (loss)		51.7		(376.7)
Earnings (loss) per diluted share		0.99		(7.21)

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Property and Equipment, Net (Tables)

12 Months Ended

Jan. 31, 2018

Property and Equipment, Net

Property and Equipment

	Useful			January 31,		January 31,
	Life (Years)			2018		2017
Land, buildings and improvements	1	-	30	$	48.7	$	40.9
Machinery	2	-	20		142.1		119.8
Computer equipment and software	1	-	15		123.7		105.5
Furniture and equipment	3	-	20		163.0		131.5
					477.5		397.7
Less accumulated depreciation					191.1		149.4
				$	286.4	$	248.3

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Jan. 31, 2018

Goodwill and Intangible Assets

Intangible Assets by Major Asset Class

				January 31, 2018						January 31, 2017
	Useful Life			Original		Accumulated		Net Book		Original		Accumulated		Net Book
	(Years)			Cost		Amortization		Value		Cost		Amortization		Value
Customer contracts and relationships	10	-	30	$	413.6	$	128.8	$	284.8	$	422.0	$	129.1	$	292.9
Covenants not to compete	5				2.2		0.7		1.5		5.5		3.6		1.9
Developed technologies	15				3.3		0.5		2.8		3.3		0.2		3.1
Trade names	Indefinite				19.5		-		19.5		16.9		-		16.9
				$	438.6	$	130.0	$	308.6	$	447.7	$	132.9	$	314.8

Schedule of carrying amount of goodwill

Balance, January 31, 2016	$	954.9
Acquisitions		50.8
Purchase Price Adjustments		(2.5)
Effect of foreign currency translation		(6.8)
Balance, January 31, 2017		996.4
Acquisitions		17.3
Purchase Price Adjustments		(0.1)
Effect of foreign currency translation		43.2
Balance, January 31, 2018	$	1,056.8

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Accrued Liabilities (Tables)

12 Months Ended

Jan. 31, 2018

Accrued Liabilities

Accrued Liabilities

	January 31, 2018		January 31, 2017
Accrued salaries, vacation and related benefits	$	37.2	$	31.6
Accrued commissions		10.9		8.7
Income taxes payable		10.7		10.3
Accrued interest		11.7		11.7
Other accrued liabilities		36.2		28.8
	$	106.7	$	91.1

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Long-Term Debt (Tables)

12 Months Ended

Jan. 31, 2018

Long-Term Debt

Long-Term Debt

	January 31, 2018		January 31, 2017
Senior unsecured notes	$	1,200.0	$	1,200.0
Less unamortized original issue discount and debt issue costs		15.4		18.0
	$	1,184.6	$	1,182.0

Maturities of Long-Term Debt

Year Ending January 31,
2019	$	—
2020		—
2021		—
2022		—
2023		1,200.0
Thereafter		—
Total	$	1,200.0

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

12 Months Ended

Jan. 31, 2018

Commitments, Contingencies and Off-Balance Sheet Arrangements

Future Payments under Operating Leases with Terms Greater Than One Year

Year Ending January 31,
2019	$	31.2
2020		30.1
2021		24.7
2022		20.6
2023		15.0
Thereafter		68.5
Total	$	190.1

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Income Taxes (Tables)

12 Months Ended

Jan. 31, 2018

Income Taxes

Components of Earnings (Loss) Before Incomes Taxes

	Year Ended January 31,
	2018		2017		2016
Earnings (loss) before income taxes
United States	$	128.3	$	41.3	$	(624.4)
Foreign		12.2		12.2		10.3
Earnings (loss) before income taxes	$	140.5	$	53.5	$	(614.1)

Components of Income Tax Expense (Benefit)

	Year Ended January 31,
	2018		2017		2016
Current:
Federal	$	(0.2)	$	—	$	0.7
State		0.8		0.3		(1.5)
Foreign		5.1		(1.3)		3.8
		5.7		(1.0)		3.0
Deferred:
Federal		79.8		14.4		(213.3)
State		2.9		1.3		(17.4)
Foreign		(1.3)		(9.4)		(0.6)
		81.4		6.3		(231.3)
Total income tax expense (benefit)	$	87.1	$	5.3	$	(228.3)

Difference Between Income Tax Expense (Benefit) and Amount Computed by Applying Statutory United States Federal Income Tax Rate to Pre-Tax Earnings

	Year Ended January 31,
	2018		2017		2016
Statutory federal income tax expense (benefit)	$	47.5	$	18.7	$	(214.9)
U.S. state income taxes		3.4		1.5		(17.5)
Foreign tax rate differential		(0.1)		0.1		(0.2)
Change in unrecognized tax benefits		0.2		(7.8)		0.4
Change in valuation allowance on foreign interest loss carryforwards		6.3		(1.6)		5.3
Other, net		0.7		1.3		2.0
Non-taxable/non-deductible items		(6.0)		(6.9)		(3.4)
Stock compensation		(7.2)		—		—
Change in tax rate		42.3		—		—
	$	87.1	$	5.3	$	(228.3)

Tax Effects of Temporary Differences and Carryforwards that Give Rise to Deferred Income Tax Assets and Liabilities

	January 31, 2018		January 31, 2017
Deferred tax assets:
Inventory reserves	$	19.8	$	24.8
Accrued liabilities		9.8		12.9
Intangible Assets		13.4		44.2
Net operating loss carryforward		70.3		81.2
Inventory capitalization		9.3		14.9
Other		14.8		19.9
		137.4		197.9
Deferred tax liabilities:
Intangible assets		(13.7)		(12.8)
Depreciation		(30.3)		(25.3)
		(44.0)		(38.1)
Net deferred tax asset before valuation allowance		93.4		159.8
Valuation allowance		(24.8)		(17.8)
Net deferred tax asset	$	68.6	$	142.0

Reconciliation of Beginning and Ending Amounts of Gross Uncertain Tax Positions

	January 31, 2018		January 31, 2017		January 31, 2016
Unrecognized tax benefit at beginning of period	$	7.2	$	9.0	$	9.4
Additions for current year tax positions		0.1		4.6		—
Additions for prior year tax positions		—		1.3		—
Decreases for prior year tax positions		—		(7.6)		—
Foreign currency fluctuations		1.1		(0.1)		(0.4)
Unrecognized tax benefit at end of period	$	8.4	$	7.2	$	9.0

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Stockholders' Equity (Tables)

12 Months Ended

Jan. 31, 2018

Stockholders' Equity

Computation of Basic and Diluted Net Earnings Per Share

	Year Ended January 31,
	2018		2017		2016
Numerator: net earnings (loss)	$	53.4	$	48.2	$	(385.8)
Denominator:
Denominator for basic earnings per share—Weighted average shares (in millions)		50.5		51.8		52.2
Effect of dilutive securities—Dilutive securities (in millions)		0.8		0.4		—
Denominator for diluted earnings per share—Adjusted weighted average shares (in millions)		51.3		52.2		52.2
Basic net earnings (loss) per share	$	1.06	$	0.93	$	(7.39)
Diluted net earnings (loss) per share	$	1.04	$	0.92	$	(7.39)

Restricted Stock Shares Granted, Vested, Forfeited and Outstanding

	January 31, 2018				January 31, 2017
				Weighted				Weighted
		Weighted		Average		Weighted		Average
		Average		Remaining		Average		Remaining
	Shares	Grant Date		Vesting Period	Shares	Grant Date		Vesting Period
	(in thousands)	Fair Value		(in years)	(in thousands)	Fair Value		(in years)
Outstanding, beginning of period	766.4	$	38.57	2.44	827.2	$	36.40	3.12
Shares granted	207.1		57.65		262.3		41.97
Shares vested	(290.1)		39.75		(246.5)		35.72
Shares forfeited	(72.2)		38.24		(76.6)		35.96
Outstanding, end of period	611.2	$	44.52	1.98	766.4	$	38.57	2.44

Summary of Options Activity

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

	January 31, 2018						January 31, 2017
				Weighted						Weighted
		Weighted		Average				Weighted		Average
		Average		Remaining		Aggregate		Average		Remaining		Aggregate
	Number	Exercise		Contractual Life		Intrinsic	Number	Exercise		Contractual Life		Intrinsic
	of Shares	Price		(in years)		Value (1)	of Shares	Price		(in years)		Value (1)
Outstanding, beginning of period	894,899	$	39.08	7.96	$	8,868.4	894,899	$	39.08	8.96	$	—
Granted	—		—				—		—
Exercised	(894,899)		39.08				—		—
Canceled	—		—				—		—
Outstanding, end of period	—	$	—	—	$	—	894,899	$	39.08	7.96	$	8,868.4
Exercisable, end of period	—	$	—	—	$	—	596,601	$	39.08	7.96	$	5,912.3

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

Weighted Average Assumptions Used to Value Option Grants

	January 31,
	2015
Expected life (in years)	6.50
Volatility	30.0%
Risk free interest rate	1.5%
Dividend yield	-

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Segment Reporting (Tables)

12 Months Ended

Jan. 31, 2018

Segment Reporting

Revenues and Other Financial Information by Business Segment

	Year Ended January 31, 2018
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,420.2	$	320.6	$	1,740.8
Operating earnings(loss)(1)		238.5		(22.2)		216.3
Total assets(2)		3,495.8		294.2		3,790.0
Goodwill		1,056.8		—		1,056.8
Capital expenditures(3)		27.7		57.2		84.9
Depreciation and amortization		31.8		34.3		66.1

	Year Ended January 31, 2017
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,340.9	$	153.2	$	1,494.1
Operating earnings(loss)(1)		220.6		(91.2)		129.4
Total assets(2)		3,471.4		226.9		3,698.3
Goodwill		996.4		—		996.4
Capital expenditures(3)		11.0		24.5		35.5
Depreciation and amortization		30.4		36.5		66.9

	Year Ended January 31, 2016
	Aerospace Solutions Group		Energy Services Group		Consolidated
Revenues	$	1,312.5	$	254.9	$	1,567.4
Operating earnings(loss)(1)		211.6		(748.4)		(536.8)
Total assets(2)		3,422.8		268.2		3,691.0
Goodwill		952.4		2.5		954.9
Capital expenditures(3)		30.4		100.1		130.5
Depreciation and amortization		28.1		46.9		75.0

(1) Operating earnings (loss) includes an allocation of corporate IT costs, employee benefits and general and administrative costs. The allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues generated, costs incurred, headcount or other measures.

(2) Corporate assets (including cash and cash equivalents) of $263.6,  $378.2 and $559.5 at January 31, 2018, 2017 and 2016, respectively, have been allocated to the above segments based on each segment’s percentage of total assets.

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

Revenues and Operating Earnings Based on Originating Location

	Year Ended January 31,
	2018		2017		2016
Revenues:
Domestic	$	1,734.2	$	1,423.8	$	1,453.4
Foreign		6.6		70.3		114.0
	$	1,740.8	$	1,494.1	$	1,567.4
Operating earnings (loss):
Domestic	$	198.8	$	109.3	$	(561.0)
Foreign		17.5		20.1		24.2
	$	216.3	$	129.4	$	(536.8)

Total Assets by Reportable Segment

	January 31, 2018		January 31, 2017
Identifiable assets:
Domestic	$	3,260.7	$	3,214.1
Foreign		529.3		484.2
	$	3,790.0	$	3,698.3

Revenues by Geographic Area Based on Destination

	Year Ended January 31,
	2018				2017				2016
			% of				% of				% of
	Revenues		Revenues		Revenues		Revenues		Revenues		Revenues
United States	$	1,090.4	62.6	%	$	865.6	57.9	%	$	955.3	61.0	%
Europe		382.7	22.0	%		387.9	26.0	%		376.3	24.0	%
Asia, Pacific Rim, Middle East and other		267.7	15.4	%		240.6	16.1	%		235.8	15.0	%
Total revenues	$	1,740.8	100.0	%	$	1,494.1	100.0	%	$	1,567.4	100.0	%

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Fair Value Information (Tables)

12 Months Ended

Jan. 31, 2018

Fair Value Information

Summary of Impairments of Goodwill and Long-lived Assets

	Year Ended
	January 31, 2016
	Impairment		Fair Value
Property and equipment, net	$	152.0	$	174.3
Goodwill		310.4		—
Intangible assets		177.8		—
	$	640.2	$	174.3

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Selected Quarterly Data (Unaudited) (Tables)

12 Months Ended

Jan. 31, 2018

Selected Quarterly Data (Unaudited)

Summary of Quarterly Financial Data

Summarized quarterly financial data for the years ended January 31, 2018 and 2017 are as follows:

	Year Ended January 31, 2018
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	411.3	$	430.6	$	456.7	$	442.2
Cost of sales		298.4		312.0		331.7		321.7
Net earnings		18.4		20.7		25.8		(11.5)
Basic net earnings per share(1)		0.36		0.41		0.52		(0.23)
Diluted net earnings per share(1)		0.36		0.40		0.51		(0.23)

(1) Net earnings per share are computed individually for each quarter presented. Therefore, the sum of the quarterly net earnings per share may not necessarily equal the total for the year.

	Year Ended January 31, 2017
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	352.8	$	378.9	$	389.0	$	373.4
Cost of sales		269.3		286.4		289.0		281.4
Net earnings		2.5		8.0		19.8		17.9
Basic net earnings per share(1)		0.05		0.15		0.38		0.35
Diluted net earnings per share(1)		0.05		0.15		0.38		0.34

Net earnings per share are computed individually for each quarter presented. Therefore, the sum of the quarterly net earnings per share may not necessarily equal the total for the year.

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Description of Business and Summary of Significant Accounting Policies (Details) $ / shares in Units, $ in Millions		12 Months Ended
	Dec. 16, 2014	Jan. 31, 2018 USD ($) item $ / shares shares	Jan. 31, 2017 USD ($) item $ / shares shares	Jan. 31, 2016 USD ($) item	Apr. 30, 2017 USD ($)	Mar. 31, 2017 USD ($)	Jan. 07, 2016 USD ($)
Accounts receivable, Net
Accounts receivable - trade, allowance for doubtful accounts		$ 12.0	$ 13.5
Inventories
Inventory reserves		$ 72.4	59.6
Goodwill and Intangible Assets, Net
Number of reporting units | item		2
Goodwill impairment charge		$ 0.0	0.0	$ 310.4
Long-lived assets impairment		$ 0.0	0.0
Accounting for Stock Based Compensation
Unvested shares, distribution date conversion ratio	1.8139
Qualified employees purchase of stock at a price equal to percentage of closing price		85.00%
Employee Stock Purchase Plan, rights granted		$ 0.4	0.3	0.3
Treasury Stock
Purchase of treasury stock		128.3	41.9	$ 12.5
Recent Accounting Pronouncements
Long-term deferred tax asset		74.5	147.0
Accumulated deficit		$ (280.0)	$ (328.0)
Accounting Standards Update 2016-16 | Early adoption
Recent Accounting Pronouncements
Long-term deferred tax asset					$ 8.8
Long-term prepaid tax balance					(7.7)
Accounting Standards Update 2016-09
Recent Accounting Pronouncements
Long-term deferred tax asset					0.5
Accumulated deficit					$ 0.5
KLX Inc Long Term Incentive Plan
Treasury Stock
Purchase of treasury stock (shares) | shares		713,210	35,009
Purchase of treasury stock		$ 48.9	$ 1.5
Existing $250.0 Share Repurchase Program
Treasury Stock
Purchase of treasury stock (shares) | shares		1,652,661	982,062
Share repurchase program, authorized amount			$ 250.0			$ 200.0	$ 100.0
Purchase of treasury stock		$ 79.4	$ 40.5
Repurchased shares, average price per share | $ / shares		$ 48.04	$ 41.20
Sales Revenues | Customer Concentration
Concentration of Risk
Concentration risk percentage		10.00%	10.00%	10.00%
Number of customers exceeding the concentration risk percentage threshold | item		0	0	0
Energy Services Group
Goodwill and Intangible Assets, Net
Goodwill impairment charge				$ 310.4
Intangible assets impairment				177.8
Property and equipment impairment				152.0
Long-lived assets impairment				$ 329.8
Minimum
Property and Equipment, Net
Property and equipment, useful lives (years)		1 year
Goodwill and Intangible Assets, Net
Intangible assets, useful lives		5 years
Maximum
Property and Equipment, Net
Property and equipment, useful lives (years)		30 years
Goodwill and Intangible Assets, Net
Intangible assets, useful lives		30 years

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Business Combinations (Details) - USD ($) $ in Millions		6 Months Ended	12 Months Ended
	May 17, 2016	Jan. 31, 2017	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Business Combinations
Purchase price, net of cash acquired			$ 64.8	$ 220.8	$ 4.3
Goodwill		$ 996.4	1,056.8	996.4	$ 954.9
Purchase price adjustments			$ (0.1)	(2.5)
Minimum
Business Combinations
Useful Life (years)			5 years
Maximum
Business Combinations
Useful Life (years)			30 years
Herndon
Business Combinations
Purchase price, net of cash acquired	$ 220.8
Identified intangible assets including goodwill		119.6		119.6
Identified intangibles		68.9		68.9
Goodwill		$ 50.7		$ 50.7
Customer contracts and relationships | Minimum
Business Combinations
Useful Life (years)			10 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	12 Months Ended
	Jan. 31, 2017	Jan. 31, 2016	Jan. 31, 2018
Business Combination, Separately Recognized Transactions [Line Items]
Goodwill	$ 996.4	$ 954.9	$ 1,056.8
Pro forma
Unaudited pro forma revenues	1,544.3	1,699.8
Unaudited pro forma net earnings	$ 51.7	$ (376.7)
Unaudited pro forma diluted net earnings (loss) per share	$ 0.99	$ (7.21)
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
Two Product Lines
Business Combination, Separately Recognized Transactions [Line Items]
Total consideration paid			$ 64.8

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Property and Equipment, Net (Property and Equipment) (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 477.5	$ 397.7
Less accumulated depreciation	191.1	149.4
Property, Plant and Equipment, Net, Total	$ 286.4	248.3
Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	1 year
Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	30 years
Land, buildings and improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 48.7	40.9
Land, buildings and improvements | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	1 year
Land, buildings and improvements | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	30 years
Machinery
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 142.1	119.8
Machinery | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	2 years
Machinery | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	20 years
Computer Equipment and Software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 123.7	105.5
Computer Equipment and Software | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	1 year
Computer Equipment and Software | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	15 years
Furniture and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 163.0	$ 131.5
Furniture and equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	3 years
Furniture and equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful lives (years)	20 years

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Property and Equipment, Net (Depreciation Expense) (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Property and Equipment, Net
Depreciation expense	$ 46.8	$ 47.3	$ 51.3

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Goodwill and Long-Lived Assets, Net (Major Asset Classes) (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Goodwill and Intangible Assets Disclosure [Line Items]
Original Cost	$ 438.6	$ 447.7
Accumulated Amortization	130.0	132.9
Net Book Value	308.6	314.8
Approximate percentage decrease in the number of onshore drilling rigs			75.00%
Goodwill impairment charge	0.0	0.0	$ 310.4
Impairment of indefinite lived intangibles	0.0	0.0
Impairment of Long-Lived Assets Held-for-use	$ 0.0	0.0
Minimum
Goodwill and Intangible Assets Disclosure [Line Items]
Useful Life (years)	5 years
Maximum
Goodwill and Intangible Assets Disclosure [Line Items]
Useful Life (years)	30 years
Trade names
Goodwill and Intangible Assets Disclosure [Line Items]
Original Cost	$ 19.5	16.9
Net Book Value	19.5	16.9
Customer contracts and relationships
Goodwill and Intangible Assets Disclosure [Line Items]
Original Cost	413.6	422.0
Accumulated Amortization	128.8	129.1
Net Book Value	$ 284.8	292.9
Customer contracts and relationships | Minimum
Goodwill and Intangible Assets Disclosure [Line Items]
Useful Life (years)	10 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	0.7	3.6
Net Book Value	$ 1.5	1.9
Developed Technologies
Goodwill and Intangible Assets Disclosure [Line Items]
Useful Life (years)	15 years
Original Cost	$ 3.3	3.3
Accumulated Amortization	0.5	0.2
Net Book Value	$ 2.8	$ 3.1

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Goodwill and Long-Lived Assets, Net (Goodwill and Amortization Expenses) (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Goodwill and Intangible Assets
Amortization expense of intangible assets	$ 19.3	$ 19.6	$ 23.7
Expected amortization expenses in year one	19.0
Expected amortization expenses in year two	19.0
Expected amortization expenses in year three	19.0
Expected amortization expenses in year four	19.0
Expected amortization expenses in year five	19.0
Long-lived assets impairment	$ 0.0	$ 0.0
Accumulated goodwill impairment loss			$ 601.1

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Goodwill and Long-lived Assets, Net (Changes in Carrying Amount of Goodwill) (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Goodwill and Intangible Assets
Goodwill, Balance	$ 996.4	$ 954.9
Acquisitions	17.3	50.8
Purchase price adjustments	(0.1)	(2.5)
Effect of foreign currency translation	43.2	(6.8)
Impairment	0.0	0.0	$ (310.4)
Goodwill, Balance	$ 1,056.8	$ 996.4	$ 954.9

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Related Party Transactions (Details) - Former parent - USD ($) $ in Millions	2 Months Ended	12 Months Ended
	Apr. 12, 2017	Jan. 31, 2017	Jan. 31, 2016
Cost incurred pursuant to arrangements		$ 8.7
Sales	$ 4.4	$ 24.1	$ 19.0

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Accrued Liabilities (Details) - USD ($) $ in Millions	Jan. 31, 2018	Jan. 31, 2017
Accrued Liabilities
Accrued salaries, vacation and related benefits	$ 37.2	$ 31.6
Accrued commissions	10.9	8.7
Income taxes payable	10.7	10.3
Accrued interest	11.7	11.7
Other accrued liabilities	36.2	28.8
Total accrued liabilities	$ 106.7	$ 91.1

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Long-Term Debt (Details) $ in Millions	1 Months Ended	12 Months Ended
	Dec. 31, 2014 USD ($)	Jan. 31, 2018 USD ($) item	Jan. 31, 2017 USD ($)	May 19, 2015 USD ($)	Dec. 16, 2014 USD ($)
Debt Instrument [Line Items]
Long-term debt		$ 1,184.6	$ 1,182.0
Long term debt outstanding		1,200.0
Revolving Credit Facility
Debt Instrument [Line Items]
Amount outstanding		0.0	0.0
Revolving credit facility				$ 750.0	$ 500.0
Current borrowing capacity		$ 744.2
Number of maintenance financial covenants | item		0
Outstanding letter of credit amount		$ 5.8
Senior Unsecured Notes 5.875 Percent Due 2022
Debt Instrument [Line Items]
Senior unsecured notes	$ 1,200.0	1,200.0	1,200.0
Less unamortized original issue discount and debt issue costs		15.4	18.0
Senior unsecured notes net of unamortized original issue discount and debt issue costs		$ 1,184.6	$ 1,182.0
Debt, interest rate		5.875%	5.875%
Long term debt outstanding			$ 1,200.0
Proceeds from the issue of Notes	1,172.1
Amount distributed to former parent from the proceeds	750.0
Proceeds net of distribution to former parent	$ 422.1

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Long-Term Debt - Maturities (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Long-Term Debt
2023	$ 1,200.0
Total	1,200.0
Interest expense	$ 75.8	$ 75.9	$ 77.7

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Commitments, Contingencies and Off-Balance Sheet Arrangements (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Rent expense	$ 39.8	$ 28.9	$ 37.7
2019	31.2
2020	30.1
2021	24.7
2022	20.6
2023	15.0
Thereafter	68.5
Total	190.1
Real Estate
Total	$ 166.0

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Commitments, Contingencies and Off-Balance Sheet Arrangements - Commitments (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Apr. 30, 2017	Jan. 31, 2017
Key Officer One
Minimum contractual salary	$ 1.0
Initial term of employment agreements	3 years
Number of additional years for which employment agreements may renew	1 year
Annual contribution percentage, as a percent of base salary, to a tax-deferred compensation plan		30.00%	100.00%
Key Officer Two
Minimum contractual salary	$ 0.7
Initial term of employment agreements	3 years
Number of additional years for which employment agreements may renew	1 year
Annual contribution percentage, as a percent of base salary, to a tax-deferred compensation plan	100.00%

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Income Taxes - Components of Earnings Before Income Taxes (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Tax Indemnity Payable To Former Parent	$ 6.4
(Loss) earnings before income taxes
United States	128.3	$ 41.3	$ (624.4)
Foreign	12.2	12.2	10.3
Earnings (loss) before income taxes	140.5	$ 53.5	$ (614.1)
Other Current Liabilities
Tax Indemnity Payable To Former Parent	1.8
Other Long term Liabilities [Member]
Tax Indemnity Payable To Former Parent	$ 4.6

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Income Taxes - Income Tax Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Current:
Federal	$ (0.2)		$ 0.7
State	0.8	$ 0.3	(1.5)
Foreign	5.1	(1.3)	3.8
Total current income tax expense	5.7	(1.0)	3.0
Deferred:
Federal	79.8	14.4	(213.3)
State	2.9	1.3	(17.4)
Foreign	(1.3)	(9.4)	(0.6)
Total deferred income tax expense (benefit)	81.4	6.3	(231.3)
Total income tax (benefit) expense	$ 87.1	$ 5.3	$ (228.3)

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Income Taxes - Reconciliation (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Dec. 31, 2017	Jan. 31, 2017	Jan. 31, 2016
Income Taxes
Effective U.S. federal income tax rate	33.80%	35.00%	35.00%	35.00%
Statutory federal income tax expense (benefit)	$ 47.5		$ 18.7	$ (214.9)
U.S. state income taxes	3.4		1.5	(17.5)
Foreign tax rate differential	(0.1)		0.1	(0.2)
Change in unrecognized tax benefits	0.2		(7.8)	0.4
Change in valuation allowance on foreign interest loss carryforwards	6.3		(1.6)	5.3
Other, net	0.7		1.3	2.0
Non-taxable/non-deductible items	(6.0)		(6.9)	(3.4)
Stock compensation	(7.2)
Change in tax rate	42.3
Total income tax (benefit) expense	$ 87.1		$ 5.3	$ (228.3)

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Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions	Jan. 31, 2018	Jan. 31, 2017
Deferred tax assets:
Inventory reserves	$ 19.8	$ 24.8
Accrued liabilities	9.8	12.9
Intangible assets	13.4	44.2
Net operating loss carryforward	70.3	81.2
Inventory capitalization	9.3	14.9
Other	14.8	19.9
Gross deferred tax assets	137.4	197.9
Deferred tax liabilities:
Intangible assets	(13.7)	(12.8)
Depreciation	(30.3)	(25.3)
Deferred tax liabilities	(44.0)	(38.1)
Net deferred tax asset (liability) before valuation allowance	93.4	159.8
Valuation allowance	(24.8)	(17.8)
Net deferred tax asset	$ 68.6	$ 142.0

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Income Taxes - Gross Uncertain Tax Positions Reconciliation (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Jan. 31, 2018	Dec. 31, 2018	Jan. 31, 2018	Dec. 31, 2017	Jan. 31, 2017	Jan. 31, 2016	Apr. 30, 2017
Unrecognized tax benefit at beginning of period			$ 7.2		$ 9.0	$ 9.4
Additions for current year tax positions			0.1		4.6
Additions for prior year tax positions					1.3
Decreases for prior year tax positions					(7.6)
Currency fluctuations			1.1		(0.1)	(0.4)
Unrecognized tax benefit at end of period	$ 8.4		8.4		7.2	9.0
Unrecognized tax benefits that would affect effective tax rate, if recognized	5.6		5.6		4.4	$ 9.0
Valuation allowance	24.8		24.8		17.8
Undistributed Earnings of Foreign Subsidiaries	101.0		101.0
Provision for undistributed earnings of foreign subsidiaries			0.0
Long-term deferred tax asset	74.5		74.5		147.0
Accumulated deficit	(280.0)		$ (280.0)		$ (328.0)
Effective U.S. federal income tax rate			33.80%	35.00%	35.00%	35.00%
Tax Cut and Jobs Act of 2017, Amount	43.3
Forecast
Effective U.S. federal income tax rate		21.00%
Domestic
Operating loss carryforward	157.4		$ 157.4
Foreign
Operating loss carryforward	117.8		117.8
Valuation allowance	95.2		95.2
State and Local
Operating loss carryforward	$ 134.6		$ 134.6
Accounting Standards Update 2016-09
Long-term deferred tax asset							$ 0.5
Accumulated deficit							0.5
Early adoption | Accounting Standards Update 2016-16
Long-term deferred tax asset							8.8
Long-term prepaid tax balance							$ (7.7)

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Employee Retirement Plans (Details) - Savings and Investment Plan - USD ($)	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Employer matching percentage of employee contributions on first level of eligible compensation (as a percent)	100.00%
Percentage of eligible compensation, first level, matched by employer (as a percent)	3.00%
Employer match of employee contributions on the second level of eligible compensation (as a percent)	$ 50
Percentage of eligible compensation, second level, partially matched by employer (as a percent)	2.00%
Total expense for plans established pursuant to Section 401(k)	$ 4,300,000	$ 3,400,000	$ 3,600,000
Compensation expense	$ 2,300,000	$ 2,500,000	$ 2,400,000
Maximum
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined contribution savings and investment plan, employees contribution rate	100.00%

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Stockholders' Equity - Computation of Basic and Diluted Net Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended								12 Months Ended
	Jan. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Jan. 31, 2017	Oct. 31, 2016	Jul. 31, 2016	Apr. 30, 2016	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Stockholders' Equity
Numerator: net (loss) earnings	$ (11.5)	$ 25.8	$ 20.7	$ 18.4	$ 17.9	$ 19.8	$ 8.0	$ 2.5	$ 53.4	$ 48.2	$ (385.8)
Weighted average common shares:
Basic weighted average common shares (in millions)									50.5	51.8	52.2
Effect of dilutive securities - Dilutive securities (in millions)									0.8	0.4
Diluted weighted average common shares (in millions)									51.3	52.2	52.2
Basic net (loss) earnings per share:
Basic net earnings per common share	$ (0.23)	$ 0.52	$ 0.41	$ 0.36	$ 0.35	$ 0.38	$ 0.15	$ 0.05	$ 1.06	$ 0.93	$ (7.39)
Diluted net (loss) earnings per share:
Diluted net earnings per common share	$ (0.23)	$ 0.51	$ 0.40	$ 0.36	$ 0.34	$ 0.38	$ 0.15	$ 0.05	$ 1.04	$ 0.92	$ (7.39)

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Stockholders' Equity - Long-Term Incentive Plan (Details) $ in Millions		12 Months Ended
	Dec. 16, 2014	Jan. 31, 2018 USD ($) shares	Jan. 31, 2017 USD ($) shares	Jan. 31, 2016 USD ($) shares
Stockholders Equity Note [Line Items]
Anti-dilutive securities excluded from determination of diluted earnings per common share		0	0	0
Unvested shares, distribution date conversion ratio	1.8139
Restricted Stock
Stockholders Equity Note [Line Items]
Share based compensation | $		$ 22.2	$ 15.6	$ 11.4
Unrecognized compensation cost | $		$ 37.5
Restricted stock units granted		207,100	262,300
Restricted stock units forfeited		72,200	76,600
Outstanding restricted stock units		611,200	766,400	827,200
Restricted Stock | Minimum
Stockholders Equity Note [Line Items]
Restricted stock and restricted stock unit grants, vesting period		3 years
Restricted Stock | Maximum
Stockholders Equity Note [Line Items]
Restricted stock and restricted stock unit grants, vesting period		4 years
Restricted Stock Unit
Stockholders Equity Note [Line Items]
Restricted stock units granted		113,387
Restricted stock units forfeited		1,814
Outstanding restricted stock units		452,051

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Stockholders' Equity - Restricted Stock Activity (Details) - $ / shares	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Restricted Stock
Shares
Outstanding, beginning of period	766,400	827,200
Shares granted	207,100	262,300
Shares vested	(290,100)	(246,500)
Shares forfeited	(72,200)	(76,600)
Outstanding, end of period	611,200	766,400	827,200
Weighted Average Grant Date Fair Value
Outstanding, beginning of period	$ 38.57	$ 36.40
Shares granted	57.65	41.97
Shares vested	39.75	35.72
Shares forfeited	38.24	35.96
Outstanding, end of period	$ 44.52	$ 38.57	$ 36.40
Weighted Average Remaining Vesting Period
Weighted Average Remaining Vesting Period	1 year 11 months 23 days	2 years 5 months 9 days	3 years 1 month 13 days
Restricted Stock Unit
Shares
Shares granted	113,387
Shares forfeited	(1,814)
Outstanding, end of period	452,051
Weighted Average Remaining Vesting Period
Weighted Average Remaining Vesting Period	1 year 8 months 23 days

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Stockholders' Equity - Stock Option Activity (Details) - Options	1 Months Ended	12 Months Ended
	Jan. 31, 2015 USD ($)	Jan. 31, 2018 USD ($) $ / shares item shares	Jan. 31, 2017 USD ($) $ / shares shares	Jan. 31, 2016 $ / shares shares
Number of Shares
Unvested time-based stock options outstanding			298,298
Outstanding, beginning of period		894,899	894,899
Granted
Exercised		(894,899)
Canceled
Outstanding, end of period			894,899	894,899
Exercisable, end of period			596,601
Weighted Average Exercise Price
Outstanding, beginning of period | $ / shares		$ 39.08	$ 39.08
Granted | $ / shares
Exercised | $ / shares		39.08
Canceled | $ / shares
Outstanding, end of period | $ / shares			39.08	$ 39.08
Exercisable, end of period | $ / shares			$ 39.08
Weighted Average Remaining Contractual Life (in years)
Outstanding		0 years	7 years 11 months 16 days	8 years 11 months 16 days
Exercisable, end of period		0 years	7 years 11 months 16 days
Aggregate Intrinsic Value
Outstanding | $			$ 8,868,400
Exercisable, end of period | $			5,912,300
Vesting period		3 years
Vesting installments | item		3
Expiration period		10 years
Share based compensation | $	$ 3,900,000	$ 3,400,000
Unrecognized stock-based compensation related to options | $		$ 0	$ 7,700,000
Compensation costs not yet recognized, weighted-average period of recognition		0 years	10 months 13 days

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Stockholders' Equity - Weighted Average Assumptions (Details) - Options	1 Months Ended
	Jan. 31, 2015 $ / shares
Weighted Average Assumptions
Expected life (in years)	6 years 6 months
Volatility	30.00%
Risk free interest rate	1.50%
Weighted average fair value per option at date of grant	$ 12.99

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Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan - $ / shares	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock price (as percentage)	85.00%
Common stock issued to employees of the company	40,000	51,000	50,000
Weighted average price per share (in dollars per share)	$ 49.14	$ 31.09	$ 30.62

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Segment Reporting (Revenues and Other Financial Information by Business Segment) (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Jan. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Jan. 31, 2017	Oct. 31, 2016	Jul. 31, 2016	Apr. 30, 2016	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	$ 442.2	$ 456.7	$ 430.6	$ 411.3	$ 373.4	$ 389.0	$ 378.9	$ 352.8	$ 1,740.8	$ 1,494.1	$ 1,567.4
Operating earnings									216.3	129.4	(536.8)
Total assets	3,790.0				3,698.3				3,790.0	3,698.3	3,691.0
Goodwill	1,056.8				996.4				1,056.8	996.4	954.9
Capital expenditures									84.9	35.5	130.5
Depreciation and amortization									66.1	66.9	75.0
Aerospace Solutions Group
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues									1,420.2	1,340.9	1,312.5
Operating earnings									238.5	220.6	211.6
Total assets	3,495.8				3,471.4				3,495.8	3,471.4	3,422.8
Goodwill	1,056.8				996.4				1,056.8	996.4	952.4
Capital expenditures									27.7	11.0	30.4
Depreciation and amortization									31.8	30.4	28.1
Energy Services Group
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues									320.6	153.2	254.9
Operating earnings									(22.2)	(91.2)	(748.4)
Total assets	294.2				226.9				294.2	226.9	268.2
Goodwill											2.5
Capital expenditures									57.2	24.5	100.1
Depreciation and amortization									34.3	36.5	46.9
Corporate, Non-Segment
Segment Reporting, Revenue Reconciling Item [Line Items]
Total assets	$ 263.6				$ 378.2				$ 263.6	$ 378.2	$ 559.5

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Segment Reporting (Revenues and Operating Earnings Based on Originating Location) (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Jan. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Jan. 31, 2017	Oct. 31, 2016	Jul. 31, 2016	Apr. 30, 2016	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Segment Reporting Information [Line Items]
Revenues	$ 442.2	$ 456.7	$ 430.6	$ 411.3	$ 373.4	$ 389.0	$ 378.9	$ 352.8	$ 1,740.8	$ 1,494.1	$ 1,567.4
Operating earnings									216.3	129.4	(536.8)
Identifiable assets	3,790.0				3,698.3				3,790.0	3,698.3	3,691.0
Domestic
Segment Reporting Information [Line Items]
Revenues									1,734.2	1,423.8	1,453.4
Operating earnings									198.8	109.3	(561.0)
Identifiable assets	3,260.7				3,214.1				3,260.7	3,214.1
Foreign
Segment Reporting Information [Line Items]
Revenues									6.6	70.3	114.0
Operating earnings									17.5	20.1	$ 24.2
Identifiable assets	$ 529.3				$ 484.2				$ 529.3	$ 484.2

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Segment Reporting (Revenues by Geographic Area Based on Destination) (Details) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Jan. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Jan. 31, 2017	Oct. 31, 2016	Jul. 31, 2016	Apr. 30, 2016	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Segment Reporting, Asset Reconciling Item [Line Items]
Revenues	$ 442.2	$ 456.7	$ 430.6	$ 411.3	$ 373.4	$ 389.0	$ 378.9	$ 352.8	$ 1,740.8	$ 1,494.1	$ 1,567.4
% of Revenues									100.00%	100.00%	100.00%
U.S.
Segment Reporting, Asset Reconciling Item [Line Items]
Revenues									$ 1,090.4	$ 865.6	$ 955.3
% of Revenues									62.60%	57.90%	61.00%
Europe
Segment Reporting, Asset Reconciling Item [Line Items]
Revenues									$ 382.7	$ 387.9	$ 376.3
% of Revenues									22.00%	26.00%	24.00%
Asia, Pacific Rim, Middle East and other
Segment Reporting, Asset Reconciling Item [Line Items]
Revenues									$ 267.7	$ 240.6	$ 235.8
% of Revenues									15.40%	16.10%	15.00%
Foreign
Segment Reporting, Asset Reconciling Item [Line Items]
Revenues									$ 6.6	$ 70.3	$ 114.0
Export revenues from United States to customers in foreign countries									$ 643.8	$ 511.1	$ 457.9

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Fair Value Measurements (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Asset Impairment Charges [Abstract]
Goodwill impairment charge	$ 0.0	$ 0.0	$ 310.4
Total asset impairment charges			640.2
Energy Services Group
Asset Impairment Charges [Abstract]
Property and equipment impairment, net			152.0
Goodwill impairment charge			310.4
Intangible assets impairment			177.8
Total asset impairment charges			640.2
Assets, Fair Value Disclosure [Abstract]
Property and equipment fair value, net			174.3
Total fair value			$ 174.3
Senior Unsecured Notes 5.875 Percent Due 2022
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt, interest rate	5.875%	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
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior unsecured notes, fair value	$ 1,251.0	$ 1,260.7

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Selected Quarterly Data (Unaudited) (Summarized Data) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended								12 Months Ended
	Jan. 31, 2018	Oct. 31, 2017	Jul. 31, 2017	Apr. 30, 2017	Jan. 31, 2017	Oct. 31, 2016	Jul. 31, 2016	Apr. 30, 2016	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016	Jan. 31, 2015
Selected Quarterly Data (Unaudited)
Accounts Receivable - trade	$ 316.1				$ 261.3				$ 316.1	$ 261.3
Inventories, net	1,407.9				1,381.4				1,407.9	1,381.4
Stockholders' equity	2,269.9				2,221.1				2,269.9	2,221.1	$ 2,202.5	$ 2,601.1
Revenues	442.2	$ 456.7	$ 430.6	$ 411.3	373.4	$ 389.0	$ 378.9	$ 352.8	1,740.8	1,494.1	1,567.4
Cost of sales	321.7	331.7	312.0	298.4	281.4	289.0	286.4	269.3	1,263.8	1,126.1	1,202.4
Net earnings (loss)	$ (11.5)	$ 25.8	$ 20.7	$ 18.4	$ 17.9	$ 19.8	$ 8.0	$ 2.5	$ 53.4	$ 48.2	$ (385.8)
Basic net earnings per share	$ (0.23)	$ 0.52	$ 0.41	$ 0.36	$ 0.35	$ 0.38	$ 0.15	$ 0.05	$ 1.06	$ 0.93	$ (7.39)
Diluted net earnings per share	$ (0.23)	$ 0.51	$ 0.40	$ 0.36	$ 0.34	$ 0.38	$ 0.15	$ 0.05	$ 1.04	$ 0.92	$ (7.39)
Impairment charge											$ 640.2
Goodwill impairment charge									$ 0.0	$ 0.0	$ 310.4

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Valuation and Qualifying Accounts (Details) - USD ($) $ in Millions	12 Months Ended
	Jan. 31, 2018	Jan. 31, 2017	Jan. 31, 2016
Allowance for doubtful accounts
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance At Beginning Of Period	$ 13.5	$ 11.3	$ 8.0
Expenses	3.9	4.0	4.1
Other	0.3
Write- Offs/ Disposals	5.7	1.8	0.8
Balance At End Of Period	12.0	13.5	11.3
Reserve for obsolete inventories
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance At Beginning Of Period	59.6	40.4	33.5
Expenses	17.2	20.7	7.7
Write- Offs/ Disposals	4.4	1.5	0.8
Balance At End Of Period	72.4	59.6	40.4
Deferred tax asset valuation allowance
Valuation and Qualifying Accounts Disclosure [Line Items]
Balance At Beginning Of Period	17.8	21.9	24.8
Expenses	0.7
Other	6.3	(1.6)	5.3
Write- Offs/ Disposals		(2.5)	(8.2)
Balance At End Of Period	$ 24.8	$ 17.8	$ 21.9