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KLX Inc. Reports Third Quarter 2017 Financial Results: Revenues Up 17.4%; Operating Earnings Up 56.7%; Raises 2017 EPS Guidance and Provides 2018 Initial Outlook

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WELLINGTON, Fla., Dec. 06, 2017 (GLOBE NEWSWIRE) -- KLX Inc. (the "Company") (NASDAQ:KLXI), a leading distributor and value added service provider of aerospace fasteners and consumables, and a provider of services and products to the oil and gas exploration and production industry, today reported its third fiscal quarter ended October 31, 2017 financial results.

On a GAAP basis, for the three-month period ended October 31, 2017, operating earnings of $60.5 million increased 56.7 percent and net earnings of $25.8 million and net earnings per diluted share of $0.51 increased 30.3 percent and 34.2 percent, respectively, as compared to the three-month period ended October 31, 2016.

THIRD QUARTER HIGHLIGHTS

  • Consolidated organic revenue growth of 17.4 percent to $456.7 million
  • Consolidated operating earnings of $60.5 million increased 56.7 percent
  • Adjusted Net Earnings and Adjusted Net Earnings per diluted share (as defined below) were $44.9 million and $0.88 per diluted share, representing increases of 55.9 percent and 60.0 percent, respectively
  • New contract wins and market share gains of approximately $125 million for F-35 Joint Strike Fighter, Pratt & Whitney GTF engine and Bombardier C-Series
  • Repurchased approximately $50 million KLXI common shares
  • Raised 2017 guidance by $0.10  to $3.10 of Adjusted Net Earnings per diluted share and provided preliminary 2018 outlook

We have presented Adjusted Net Earnings and Adjusted Net Earnings per diluted share to reflect net earnings before amortization and non-cash compensation expense, and to include the tax benefit from the amortization of tax-deductible goodwill ("Adjusted Net Earnings" and "Adjusted Net Earnings per diluted share"). This release also includes "ASG Adjusted EBITDA" and "ESG Adjusted EBITDA" which excludes non-cash compensation expense, and free cash flow. Each of the aforementioned metrics are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). See "Reconciliation of Non-GAAP Financial Measures."

THIRD QUARTER CONSOLIDATED RESULTS
On a consolidated basis, revenues increased 17.4 percent to $456.7 million, driven by a 5.4 percent increase in Aerospace Solutions Group segment ("ASG") revenues and a 121.6 percent increase in Energy Services Group ("ESG") revenues. Operating earnings and operating margin of $60.5 million and 13.2 percent increased by 56.7 percent and approximately 330 basis points, respectively, reflecting an approximate 80 basis point expansion in ASG's operating margin and continued strong year-over-year improvement at ESG. Adjusted Net Earnings and Adjusted Net Earnings per diluted share increased 55.9 percent and 60.0 percent to $44.9 million and $0.88 per diluted share, respectively.

Amin J. Khoury, KLX's Chairman and Chief Executive Officer, stated, "We are pleased with the third quarter operating results at both our ASG and ESG businesses. Our ASG segment delivered revenue growth, margin expansion and solid free cash flows. We are also pleased to report that ASG continued its market momentum with three new contract awards and market share gains valued at approximately $125 million in the aggregate, supporting the F-35 Joint Strike Fighter, Pratt & Whitney's new GTF engine and Bombardier's C-Series commercial aircraft." Mr. Khoury continued, "Our ESG segment generated very strong revenue growth and operating performance during the third quarter, delivering positive EBITDA and reinforcing our expectation for achieving positive operating earnings in the fourth quarter of this year."

THIRD QUARTER SEGMENT RESULTS
The following is a tabular summary and commentary of revenues, operating earnings and Adjusted EBITDA, for the three month periods ended October 31, 2017 and October 31, 2016 ($ millions):

             
    REVENUES    
    THREE MONTHS ENDED    
             
Segment   October 31, 2017   October 31, 2016   % Change
  Aerospace Solutions Group   $   367.6     $   348.8     5.4 %
  Energy Services Group       89.1         40.2     121.6 %
  Total   $   456.7     $   389.0     17.4 %
             
             
    OPERATING EARNINGS (LOSS)    
    THREE MONTHS ENDED    
             
Segment   October 31, 2017   October 31, 2016   % Change
  Aerospace Solutions Group   $   62.4     $   56.5     10.4 %
  Energy Services Group       (1.9 )       (17.9 )   89.4 %
  Total   $   60.5     $   38.6     56.7 %
             
             
    ADJUSTED EBITDA (LOSS)    
    THREE MONTHS ENDED    
             
Segment   October 31, 2017   October 31, 2016   % Change
  Aerospace Solutions Group   $   73.9     $   67.1     10.1 %
  Energy Services Group       9.4         (6.7 )   nm  
  Total   $   83.3     $   60.4     37.9 %
             

For the three months ended October 31, 2017, ASG revenues of $367.6 million increased 5.4 percent compared to the same period in the prior year. The increase in revenues was driven by a mid-single digit percentage increase in sales to commercial aerospace manufacturing customers, including initial revenue contributions from new business awards announced in 2016, partially offset by a decrease in demand from business jet manufacturing customers. Aftermarket revenues increased by approximately 3.6 percent as compared to the prior year. ASG operating earnings of $62.4 million increased 10.4 percent, and operating margin of 17.0 percent expanded approximately 80 basis points. ASG Adjusted EBITDA of $73.9 million was 20.1 percent of revenues and increased 10.1 percent as compared to the prior year period.

For the three months ended October 31, 2017, as compared to the same period of the prior year, ESG revenues of $89.1 million increased 121.6 percent, operating loss decreased $16.0 million, or 89.4 percent, to $(1.9) million, and Adjusted EBITDA of $9.4 million improved by $16.1 million. As compared to the second quarter of 2017, revenues increased by 21.2 percent, operating loss improved by 75.6 percent, and Adjusted EBITDA improved by 147.4 percent.

NINE MONTH CONSOLIDATED RESULTS
For the nine months ended October 31, 2017, revenues of $1.3 billion increased 15.9 percent, as compared to the prior year period. The consolidated results reflect a 6.0 percent increase in ASG revenues and a 106.6 percent increase in ESG revenues, both as compared to the same period of the prior year. 

Operating earnings were $161.4 million, an increase of 71.3 percent. Adjusted EBITDA of $230.2 million and Adjusted EBITDA margin of 17.7 percent, increased approximately 44.3 percent and approximately 350 basis points, respectively.

For the nine months ended October 31, 2017, GAAP basis net earnings and net earnings per diluted share were $64.9 million and $1.26 per share, increases of 114.2 percent and 117.2 percent, respectively. Adjusted Net Earnings and Adjusted Net Earnings per diluted share were $117.5 million and $2.28 per diluted share and increased 75.9 percent and 78.1 percent, respectively.

NINE MONTH SEGMENT RESULTS
The following is a tabular summary and commentary of revenues, operating earnings and Adjusted EBITDA, for the nine month periods ended October 31, 2017 and October 31, 2016 ($ millions):

    REVENUES    
    NINE MONTHS ENDED    
             
Segment   October 31, 2017   October 31, 2016   % Change
  Aerospace Solutions Group   $   1,072.2     $   1,011.1     6.0 %
  Energy Services Group       226.4         109.6     106.6 %
  Total   $   1,298.6     $   1,120.7     15.9 %
             
             
    OPERATING EARNINGS (LOSS)    
    NINE MONTHS ENDED    
             
Segment   October 31, 2017   October 31, 2016   % Change
  Aerospace Solutions Group   $   181.2    
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