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Pending Separation Transaction
9 Months Ended
Sep. 30, 2014
Text Block [Abstract]  
Pending Separation Transaction

Note 13.Pending Separation Transaction

 

On June 10, 2014, the Company announced that its management and Board of Directors has commenced a process to separate its business into two independent, publicly traded companies – one focused on aircraft interior equipment – design, development, manufacturing, certification and direct sales on a global basis, and the other focused on distribution, logistics and technical services for the aerospace and energy markets. The separation is expected to be completed by the end of the fourth calendar quarter of 2014 through a tax-free distribution to stockholders. Completion of the proposed separation is subject to certain conditions, including final approval by the Board of Directors, receipt of an appropriate tax opinion and effectiveness of a registration statement with the Securities and Exchange Commission, (the “SEC”). 

 

During the quarter, the Company filed a Form 10 Registration Statement and subsequently, a first amendment related thereto, with the SEC, and subject to customary conditions, the Company expects to be able to effect a distribution of the shares of KLX Inc. to B/E Aerospace, Inc. stockholders by the end of 2014. 

 

The Company currently intends to capitalize KLX through the issuance of approximately $1,200 of senior unsecured notes and to use approximately $750 of the net proceeds to pay a dividend to B/E Aerospace, leaving KLX with an expected approximately $430 in cash for general corporate purposes, approximately $110 of which is expected to be used to settle deferred payments associated with 2014 acquisitions. In addition, the Company expects KLX will establish a secured revolving credit facility for general corporate purposes. 

 

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, including the write-off of unamortized debt issue costs, approximately $43 in legal, accounting, and advisory costs, and approximately $67 related to international tax initiatives. The Company also expects to incur business repositioning and separation costs of approximately $94, 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 $26 related to a number of planned facility consolidations of its businesses, rationalization of headcount, employee transfers and other related costs and expenses. In addition, during 2015, KLX expects to incur approximately $20 of branding, recruiting, relocation, business repositioning, and other related expenses associated with post spin-off activities.