Attached files

file filename
EX-32.3 - EX-32.3 - KLX Inc.klxi-20160430ex32373d799.htm
EX-32.2 - EX-32.2 - KLX Inc.klxi-20160430ex322885734.htm
EX-32.1 - EX-32.1 - KLX Inc.klxi-20160430ex321d9dd09.htm
EX-31.3 - EX-31.3 - KLX Inc.klxi-20160430ex313c3e117.htm
EX-31.2 - EX-31.2 - KLX Inc.klxi-20160430ex312ec585d.htm
EX-31.1 - EX-31.1 - KLX Inc.klxi-20160430ex311a14e26.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

 

FORM 10-Q/A

Amendment No. 2

 

Quarterly Report Pursuant to Section 13 or 15(d) 

of the Securities Exchange Act of 1934 

 

For The Quarterly Period Ended April 30, 2016

 

Commission File No. 001-36610 

 

KLX INC.

 

(Exact name of registrant as specified in its charter) 

 

 

 

DELAWARE

47-1639172

(State of Incorporation)

(I.R.S. Employer Identification No.)

 

1300 Corporate Center Way

Wellington, Florida 33414

(Address of principal executive offices)

 

(561) 383-5100

(Registrant's telephone number, including area code)

 

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

 

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

 

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

 

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

 

The registrant has one class of common stock, $0.01 par value, of which, 52,707,434 shares were outstanding as of May 23, 2016.

 

 

 


 

 

Table of Contents

 

 

 

 

 

 

Page

 

 

 

 

Explanatory Note

Part I 

Financial Information

 

Item 4. 

Controls and Procedures

Part II

Other Information

 

Item 6. 

Exhibits

 

 

 

Signatures 

 

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EXPLANATORY NOTE

 

This Amendment No. 2 on Form 10-Q/A (this “Amended Filing”) amends our original Quarterly Report on Form 10-Q for the quarter ended April 30, 2016 (the “Original Filing”). The purpose of this Amended Filing is to revise Part I, Item 4 to reflect management’s conclusion that our disclosure controls and procedures were not effective at April 30, 2016 due to a material weakness in our internal control over financial reporting identified subsequent to the issuance of our Original Filing and to include new certifications required by management.

 

While there is no requirement for any adjustments or restatement to our annual financial statements for any of the last three completed fiscal years, for any of the quarters of our last completed fiscal year or the prior two completed quarters of our current fiscal year, or for the one-month transition period prior to our last completed fiscal year, the possibility existed at April 30, 2016 that an identified weakness in our internal controls could have resulted in a material error in our financial results which may not have been detected in a timely manner.

 

As of the date of this Amended Filing, the Company has enhanced and strengthened its methodology for estimating the excess and obsolete (“E&O”) inventory provision and the related controls in order to remediate this weakness.  Management believes the enhancement which it has developed remediated the weakness that existed at April 30, 2016.

 

Except as disclosed above, this Amended Filing speaks only as of the date of the Original Filing and does not modify or update any other disclosures contained in our Original Filing.

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PART I - FINANCIAL INFORMATION 

 

ITEM 4. CONTROLS AND PROCEDURES 

 

Disclosure Controls and Procedures

 

KLX Inc. (the “Company,” “we,” “us,” or “our”) 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 April 30, 2016, of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Previously, based on that evaluation, our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of April 30, 2016. However, due to the material weakness in internal control over financial reporting described below, our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer have now concluded that our disclosure controls and procedures were not effective as of April 30, 2016.

 

Internal Control Over Financial Reporting

 

Subsequent to the issuance of the Fiscal 2015 10-K, as part of its regular review of selected audits of public accounting firms, the Public Company Accounting Oversight Board (“PCAOB”) conducted a review and inspection of Deloitte & Touche LLP’s (“Deloitte”) audit of KLX’s financial statements for the year ended January 31, 2016, after which the PCAOB provided comments to Deloitte (the “PCAOB Inspection Comments”). Following the PCAOB inspection, Deloitte requested a reevaluation of the adequacy of the controls related to the determination of the Company’s reserve for E&O inventories as well as the precision and specificity to which these review controls were executed and documented.

 

The Company previously used a demand and aging based model to determine the E&O reserve and has subsequently developed an alternative demand based model which produced a reserve result that was materially consistent with the previously recorded reserve. As a result, no adjustment or restatement to the historical financial statements was required.

 

Although no adjustment or restatement to previously issued financial statements was necessary, since a historical demand based E&O reserve model was not in place as of January 31, 2016, and the possibility of a material misstatement was not sufficiently mitigated by other compensating review controls, after consultation with the Board of Directors of the Company and Deloitte, on September 7, 2016, it was determined that there was a material weakness in the design and operating effectiveness of the Company’s review controls related to the E&O reserve. As the material weakness was not remediated as of April 30, 2016, management has concluded that the Company’s internal control over financial reporting was not sufficiently comprehensive and therefore ineffective as of April 30, 2016.

 

As of the date of this Amended Filing, the Company has implemented the aforementioned new demand based model for estimating the required E&O inventory reserve and has modified its existing controls over the review of the demand based model and as a result has remediated the material weakness in internal controls. The new demand based methodology 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, the nature of the inventory (proprietary parts or parts used across multiple aircraft types), whether the parts are currently produced or subject to a contract and other elements. Management believes the aforementioned changes provide sufficient controls to remediate the aforementioned material weakness in internal controls.

 

There were no changes in our internal control over financial reporting that occurred during the first quarter of fiscal 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3


 

ITEM 6. EXHIBITS

 

 

Exhibit 31 - Rule 13a-14(a)/15d-14(a) Certifications

 

 

 

 

31.1

Certification of Chief Executive Officer

 

 

 

 

31.2

Certification of Chief Financial Officer

 

 

 

 

31.3

Certification of Chief Operating Officer

 

 

 

 

Exhibit 32 - Section 1350 Certifications

 

 

 

 

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

 

 

 

 

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

 

 

 

 

32.3

Certification of Chief Operating Officer pursuant to 18 U.S.C. Section 1350

 

4


 

SIGNATURES

 

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

 

 

 

 

 

 

KLX INC.

 

 

 

 

 

 

Date: September 8, 2016

By:

/s/ Amin J. Khoury

 

 

Amin J. Khoury

 

 

Chairman and

 

 

Chief Executive Officer

 

 

 

 

By:

/s/ Michael F. Senft

 

 

Michael F. Senft

 

 

Vice President, Chief Financial Officer

 

 

and Treasurer

 

 

5