10/23/2014 12:59:00 AM
NEWS BRIEFS
B/E Aerospace Moving Ahead With Fastener Spinoff Amid Record Profits
B/E Aerospace reported third quarter consumables management segment (CMS) revenues – primarily fasteners – increased 41.4% to $448.7 million, boosted by acquisitions. Segment operating earnings rose 35.4% to $81.9 million, and operating margin totaled. 18.3%.
Nine-month Consumables revenue climbed 29.8% to $1.24 billion, while operating earnings increased 23.9% to $231.3 million.
B/E Aerospace appears poised to spinoff their profitable aerospace fastener distribution into a new company named KLX Inc.
During Q3 B/E Aerospace filed a Form 10 Registration Statement and a first amendment with the Securities and Exchange Commission, with a distribution of KLX shares to B/E Aerospace shareholders by the end of 2014.
The Company currently intends to capitalize KLX through the issuance of approximately $1.2 billion of senior unsecured notes, and to use approximately $750 million of the net proceeds to pay a dividend to B/E Aerospace, leaving KLX with an expected approximately $430 million in cash for general corporate purposes, approximately $110 million of which is expected to be used to settle deferred payments associated with 2014 acquisitions.
The Company expects to redeem all of its outstanding debt in order to effect the separation of the two businesses. The Company’s new long-term debt is presently expected to be comprised of secured pre-payable term debt. The proceeds of the new long-term debt, together with the expected dividend from KLX will be utilized to prepay all of the Company’s current debt obligations and to pay all costs and expenses associated with the KLX spin-off. The Company also expects to establish a secured revolving line of credit for general corporate purposes.
The Company currently estimates that it will incur, during the second half of 2014, debt redemption costs of approximately $235 million, including the write-off of unamortized debt issue costs, approximately $43 million in legal, accounting, and advisory costs, and approximately $67 million related to international tax initiatives. The Company also expects to incur business repositioning and separation costs of approximately $94 million, including fourth quarter 2014 KLX business repositioning charges as described below.
KLX expects to record a business repositioning charge during the fourth quarter of 2014 of approximately $25 million related to a number of planned facility consolidations, rationalization of headcount, employee transfers and other related costs and expenses. In addition, during 2015 KLX expects to incur approximately $20 million of branding, recruiting, relocation, business repositioning, and other related expenses associated with post spin-off activities.
KLX would sell fasteners and other consumable products to over 4,700 global customers using “the broadest and deepest product portfolio in the world with over one million SKUs valued at over $1 billion.”
“Through organic growth and a number of strategic acquisitions beginning in 2001, we believe we have become our industry’s leading provider of aerospace fasteners, consumable products and supply chain management services,” according to KLX’s proposed corporate charter filed with the SEC.
In 2008 B/E Aerospace acquired Honeywell’s aerospace fastener distribution business, Honeywell Consumable Solutions, for $1.06 billion, transforming B/E Aerospace into one of the largest distributors of aerospace fasteners in the world.
As part of the deal, B/E signed a 30-year contract to become Honeywell’s exclusive licensee to sell fasteners, seals and other products, as well as supplying Honeywell’s production facilities.
KLX would serve as distributor for every major aerospace fastener manufacturer by using its $100 million proprietary IT systems.
An immediate goal of the new company would be to expand its customer base.
“Historically, we have focused our activities on the major OEMs and their subcontractors, but we believe there is a significant opportunity to expand our commercial MRO presence and that we can have a greater overall presence in the commercial airline maintenance market.”
The company would have an established presence in such locations as the United Arab Emirates, Australia, China, Singapore, India, Germany, Mexico and Italy.
Consumables Management operates a 62,000 sq ft manufacturing facility in Bridgeport, West Virginia, along with seven distribution centers in the U.S, two in Germany, two in the UK, and one in France.
In connection with the spin-off, long-time chairman and co-CEO Amin Khoury will step down from those rolls in B/E Aerospace. Werner Lieberherr would replace Khoury as CEO of B/E Aerospace, according to SEC documents.
Subsequently, Khoury would serve as executive chairman of B/E Aerospace and chairman and CEO of KLX. Khoury’s pay would be reduced by more than 50%, including a reduction in annual retirement benefits to $900,000 per year, in exchange for deferred cash payment.
In addition, B/E Aerospace CFO Thomas McCaffrey would serve as president and COO of KLX.
B/E Aerospace has named Michael Senft as VP, CFO and Treasurer of KLX.
KLX common stock would be listed on the NASDAQ under the ticker symbol “KLXI.” KLX would be located at 1300 Corporate Center Way, Wellington, Florida 33414-2105. Tel: 561 383-5100
Related Stories:
• Alcoa Fastener Segment Achieves Record ATOI
• Atlas Copco’s Fastener Segment Sees Growth
• Fastenal Buys Aero Fastener Distributor Av-Tech Ind.
• Fastener Orders Up at Precision Castparts
• B/E Aerospace Signs Fastener Agreement with ATR
• Fastener Material Revenue Rises at Carpenter Tech
• AFS Joins Thermoplastics Research Center
• Fastenal Reports October Sales Growth
Related Links:
Share: