Farallon discloses 7% stake in KLX
Previously in this series, we learned that Farallon Capital disclosed a 7% stake in KLX (KLXI) in its 13G filing. KLX was formed on December 17, 2014, as a result of a spin-off from B/E Aerospace (BEAV) and its manufacturing business. In the previous parts of this series, we discussed parent company BEAV. In this article, we’ll take a look at an overview of KLX.
Aerospace, defense leader
KLX is a leading company in the aerospace and defense sectors. As of September 30, 2014, its last 12 months (or LTM) pro forma revenue was $1.7 billion with adjusted earnings before interest, tax, depreciation, and amortization (or EBITDA) margin of 23.2%. KLX operates in two segments:
- KLX Aerospace Solutions Group
- KLX Energy Services Group
KLX Aerospace Solutions Group
KLX Aerospace Solutions Group (or ASG) accounted for 76% of LTM pro forma revenue and is the world’s leading distributor of aerospace fasteners and consumables. It provides inventory management solutions for the commercial, business jet, and military markets worldwide. ASG’s highlights include:
- LTM pro forma revenue of $1.3 billion, with adjusted EBITDA margin of 21.2%
- ~1 million stock keeping units (or SKUs)
- global customer base of 4,700 customers
- top five customers accounted for 30% of LTM pro forma revenue
- commercial aerospace business accounted for 81% of LTM pro forma revenue, military 14%, and business jets remaining 5%
- 16,000 orders processed daily
- 60% of orders shipped within 24 hours
- 99% on-time order fulfillment
KLX Energy Services Group
KLX Energy Services Group (or ESG) accounted for 24% of KLX’s LTM pro forma revenue. In 2013, KLX started its expansion in energy sector by acquiring seven companies. It operates its energy business through KLX Energy Services. All these companies provide technical and logistics services and related rental equipment to oil and gas exploration and production (or E&P) companies. Some ESG highlights include:
- LTM pro forma revenue was $412 million, with an adjusted EBITDA margin of 29.4%.
- The company had 120 master services agreements (or MSAs) with major, regional, and independent E&P companies in North America.
- The company’s top five customers accounted for 41% of LTM pro forma revenue.
- The company’s services business accounted for 69% of LTM pro forma revenue, and the remaining 31% came from from rental business.
In the next part of this series, we’ll look at an industry overview of KLX’s Aerospace Solutions Group.