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KLX Inc. (“KLX”) (NASDAQ:KLXI), the world’s leading distributor and value added service provider of aerospace fasteners and consumables, and a provider of services and products for the oil and gas industry, announced that the Company expects to recognize a non-cash, after-tax asset impairment charge of approximately $435 million related to its Energy Services Group (“ESG”). The impairment charge is subject to the finalization of the Company’s interim goodwill impairment analysis, and reflects a decline in the imputed valuation of the Company’s ESG assets.
Commenting on the impairment charge, Mr. Khoury stated, “During the third quarter of 2015, the Company performed an interim asset impairment test. The continuing downturn in the oil and gas industry, including the approximate 60 percent decrease in the price of oil, the more than 60 percent decrease in the number of onshore drilling rigs, and the resulting significant cutbacks in capital expenditures by our oil and gas customers, has resulted in a decrease in both volume and pricing for oil field services. As a result, during the third quarter of 2015, the Company determined that the carrying value of ESG’s assets has been impaired. KLX therefore expects to record a non-cash, after-tax impairment charge of approximately $435 million.”
Commenting on the Company’s outlook, Mr. Khoury stated, “We expect to report that third quarter revenues at our Aerospace Solutions Group (“ASG”) declined approximately 4.3 percent on a constant currency basis, driven by a decrease in sales to our military and business jet customers. Sales to our commercial aerospace OEM and aftermarket customers were essentially flat on a constant currency basis. Including currency headwinds, ASG’s third quarter sales were down approximately 6.0 percent.” Mr. Khoury continued, “The Company continues to expect a full year 2015 constant currency single digit increase in revenues, and an improvement in operating margin as compared to the prior year.”
Mr. Khoury concluded, “With respect to our Energy Services Group, we expect utilization and pricing pressures to accelerate into the fourth quarter and into next year due to the continued weakness in oil prices and continued decline in the U.S. onshore rig count. We expect the current challenging industry conditions to continue during 2016, including further reductions in rig count and capital expenditures by our E&P customers. We believe these conditions will continue to provide extraordinary opportunities to further enhance ESG’s product and service offerings and thereby position ESG to deliver superior financial results as the industry recovers.”
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fastener&equipment-The17th China(Guangzhou)Int’l Fastener &
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