As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

12/10/19  KLX Energy Svcs Holdings, Inc.    10-Q       10/31/19   59:6.5M                                   Toppan Merrill Bridge/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    709K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     30K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     30K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     23K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML     24K 
36: R1          Document and Entity Information                     HTML     47K 
17: R2          Condensed Consolidated Balance Sheets               HTML     93K 
24: R3          Condensed Consolidated Balance Sheets -             HTML     33K 
                Parenthetical                                                    
53: R4          Condensed Consolidated Statements of (Loss)         HTML     60K 
                Earnings                                                         
37: R5          Condensed Consolidated Statements of Stockholders'  HTML     85K 
                Equity                                                           
18: R6          Condensed Consolidated Statements of Cash Flows     HTML    116K 
25: R7          Description of Business and Basis of Presentation   HTML     30K 
55: R8          Recent Accounting Pronouncements                    HTML     31K 
33: R9          Business Combinations                               HTML    113K 
13: R10         Property and Equipment, Net                         HTML     55K 
29: R11         Goodwill and Intangible Assets, Net                 HTML     99K 
51: R12         Related Party Transactions                          HTML     24K 
46: R13         Accrued Liabilities                                 HTML     45K 
12: R14         Long-Term Debt                                      HTML     26K 
28: R15         Fair Value Information                              HTML     28K 
50: R16         Commitments, Contingencies and Off-Balance Sheet    HTML     25K 
                Arrangements                                                     
45: R17         Accounting for Stock-Based Compensation             HTML     26K 
14: R18         Income Taxes                                        HTML     22K 
27: R19         Segment Reporting                                   HTML    300K 
56: R20         Net Earnings Per Common Share                       HTML     80K 
34: R21         Description of Business and Basis of Presentation   HTML     26K 
                (Policies)                                                       
20: R22         Business Combinations (Tables)                      HTML    104K 
23: R23         Property and Equipment, Net (Tables)                HTML     53K 
54: R24         Goodwill and Intangible Assets, Net (Tables)        HTML     91K 
32: R25         Accrued Liabilities (Tables)                        HTML     43K 
19: R26         Segment Reporting (Tables)                          HTML    294K 
22: R27         Net Earnings Per Common Share (Tables)              HTML     72K 
52: R28         Business Combinations (Details)                     HTML     83K 
35: R29         Business Combinations (Assets Acquired and          HTML     82K 
                Liabilities Assumed) (Details)                                   
43: R30         Property and Equipment, Net (Property and           HTML     52K 
                Equipment) (Details)                                             
47: R31         Goodwill and Intangible Assets (Major Asset         HTML    100K 
                Classes) (Details)                                               
30: R32         Related Party Transactions (Details)                HTML     20K 
15: R33         Accrued Liabilities (Details)                       HTML     36K 
44: R34         Long-Term Debt (Details)                            HTML     41K 
48: R35         Fair Value Information (Details)                    HTML     39K 
31: R36         Commitments, Contingencies and Off-Balance Sheet    HTML     20K 
                Arrangements (Details)                                           
16: R37         Accounting for Stock-Based Compensation (Details)   HTML     32K 
42: R38         Income Taxes (Details)                              HTML     21K 
49: R39         Segment Reporting (Revenues and Operating Earnings  HTML     43K 
                (Losses) by Reportable Segment) (Details)                        
39: R40         Segment Reporting (Revenues by Service Offering by  HTML     47K 
                Reportable Segment) (Details)                                    
58: R41         Segment Reporting (Capital Expenditures by          HTML     28K 
                Reportable Segment) (Details)                                    
26: R42         Segment Reporting (Total Assets by Reportable       HTML     27K 
                Segment) (Details)                                               
21: R43         Segment Reporting (Goodwill by Reportable Segment)  HTML     27K 
                (Details)                                                        
40: R44         Net Earnings Per Common Share (Details)             HTML     24K 
59: R45         Net Earnings Per Common Share (Computations of      HTML     49K 
                Basic and Diluted Earnings Per Share) (Details)                  
41: XML         IDEA XML File -- Filing Summary                      XML    103K 
57: EXCEL       IDEA Workbook of Financial Reports                  XLSX     55K 
 6: EX-101.INS  XBRL Instance -- klxe-20191031                       XML   1.80M 
 8: EX-101.CAL  XBRL Calculations -- klxe-20191031_cal               XML    118K 
 9: EX-101.DEF  XBRL Definitions -- klxe-20191031_def                XML    303K 
10: EX-101.LAB  XBRL Labels -- klxe-20191031_lab                     XML    681K 
11: EX-101.PRE  XBRL Presentations -- klxe-20191031_pre              XML    560K 
 7: EX-101.SCH  XBRL Schema -- klxe-20191031                         XSD    104K 
38: ZIP         XBRL Zipped Folder -- 0001558370-19-011456-xbrl      Zip    105K 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

 

For The Quarterly Period Ended October 31, 2019

 

Commission File No. 001-38609

 

 

KLX ENERGY SERVICES HOLDINGS, INC.

 

(Exact name of registrant as specified in its charter)

 

 

 

1300 Corporate Center Way

Wellington, Florida 33414

(Address of principal executive offices)

 

(561) 383-5100

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

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 every Interactive Data File required to be submitted 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 such files). YES [X] NO [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [  ] Accelerated filer [X] Non-accelerated filer [  ] Smaller reporting company [  ] Emerging growth company [X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

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 24,088,163 shares were outstanding as of December 5, 2019.

 

 

KLX ENERGY SERVICES HOLDINGS, INC.

 

Form 10-Q for the Quarter Ended October 31, 2019

 

Table of Contents

 

 

 

 

PART 1 – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

KLX ENERGY SERVICES HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions, other than per share amounts)

 

 

See accompanying notes to condensed consolidated financial statements.

KLX ENERGY SERVICES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS (UNAUDITED)

(In millions, other than per share amounts)

 

 

See accompanying notes to condensed consolidated financial statements.

KLX ENERGY SERVICES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

THREE AND NINE MONTHS ENDED OCTOBER 31, 2019 AND 2018

(In millions)

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

KLX ENERGY SERVICES HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

KLX ENERGY SERVICES HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited – In millions)

 

Note 1.Description of Business and Basis of Presentation

 

Description of Business

 

On September 14, 2018, KLX Inc. (the “Former Parent” or “KLX”) created an independent, publicly-traded company through a spin-off of its Energy Services Group business to Former Parent’s stockholders (the “Spin-Off”).  As a result of the Spin-Off, KLX Energy Services Holdings, Inc. (the “Company” or “KLX Energy Services”) now operates as an independent, publicly-traded company.

 

The Company is a provider of completion, intervention and production services and products to the major onshore oil and gas producing regions of the United States.

 

Basis of Presentation

 

Prior to the Spin-Off on September 14, 2018, the Company’s unaudited condensed financial statements were derived from the Former Parent’s condensed consolidated financial statements and accounting records as if it was operated on a stand-alone basis and were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany transactions and account balances within the Company have been eliminated.

 

The condensed consolidated statements of (loss) earnings for periods prior to the Spin-Off reflect allocations of general corporate expenses from the Former Parent, including, but not limited to, executive management, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, procurement and other shared services. The allocations were made on a direct usage basis when identifiable, with the remainder allocated on the basis of revenues generated, costs incurred, headcount or other measures. Management of the Company considers these allocations to be a reasonable reflection of the utilization of services by, or the benefits provided to, the Company. The allocations may not, however, reflect the expense the Company would have incurred as a stand-alone company for the periods presented. Actual costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.

 

Former Parent Company Investment – Former Parent company investment in the condensed consolidated statement of stockholders’ equity for the three and nine months ended October 31, 2018 represents Former Parent’s historical investment in the Company, the net effect of cost allocations from transactions with Former Parent and net transfers of cash and assets from Former Parent. See Note 6 for a further description of the transactions between the Company and Former Parent.

 

Financial Statement Preparation – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments which, in the opinion of the Company’s management, are considered necessary for a fair presentation of the results of operations for the periods shown are of a normal recurring nature and have been reflected in the condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or for any future period.

 

 

Note 2.Recent Accounting Pronouncements

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-01, Business Combinations. This update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The adoption of ASU 2017-01 did not have a material impact on the Company’s condensed consolidated financial statements.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments related to how certain cash receipts and payments are presented and classified in the statement of cash flows. These cash flow issues include debt prepayment or extinguishment costs, settlement of zero-coupon debt, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, with early adoption permitted, and should be applied retrospectively. The Company does not expect a material impact upon adoption of this ASU to its condensed consolidated financial statements as the Company’s condensed consolidated statements of cash flows are not impacted by the eight issues listed above.

 

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation—Stock Compensation. The ASU includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including that excess tax benefits and shortfalls be recorded as income tax benefit or expense in the statement of earnings, rather than equity, and requires excess tax benefits from stock-based compensation to be classified in cash flows from operations. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC Topic 842, Leases. ASU 2016-02 requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In November 2019, the FASB deferred the effective date for implementation of ASU 2016-02 by one year. The guidance under ASU 2016-02 is effective for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. Earlier adoption is permitted. To assess the impact of this guidance, the Company has established a cross functional implementation project team and is currently in the process of accumulating and evaluating all the necessary information required to properly account for its lease portfolio under the new standard.  The Company is in the process of developing its new accounting policies and determining the potential aggregate impact this guidance is likely to have on its financial statements as of its adoption date.

 

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which updated the guidance in ASC Topic 606, Revenue Recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should identify the contract(s) with a customer, identify the

performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB deferred the effective date for implementation of ASU 2014-09 by one year and during 2016, the FASB issued various related accounting standard updates, which clarified revenue accounting principles and provided supplemental adoption guidance. The guidance under ASU 2014-09 is effective for fiscal years beginning after December 15, 2018 and interim periods within annual reporting periods beginning after December 15, 2019. To assess the impact of this guidance, the Company established a cross functional implementation project team, inventoried its revenue streams and contracts with customers and applied the principles of the guidance against a selection of contracts to assist in the determination of potential revenue accounting differences. No individually significant implementation matters were identified, and revenue is recognized on a “point-in-time” basis for product revenues and over time for service revenues under the new standard, which is consistent with previous practice. The Company implemented internal controls, policies and processes to comply with the new standard. The Company adopted ASC Topic 606 in the first quarter of fiscal 2019 using the modified retrospective method of adoption, which resulted in no changes to the opening balance sheet as of February 1, 2019. Prior period statements of (loss) earnings will remain unchanged.

 

Note 3.Business Combinations

 

On November 5, 2018, the Company acquired Motley Services, LLC (“Motley”), a premier provider of well completion and intervention services for complex, long lateral, horizontal wells, for $140.0 in cash (net of cash acquired) and $9.0 of shares of the Company’s common stock payable to certain employees of Motley. Based on the Company’s purchase price allocation, the excess of the purchase price over the fair value of the identifiable assets acquired approximated $71.8, of which $28.3 was allocated to identifiable intangible assets consisting of customer contracts and relationships and covenants not to compete, and $43.5 is included in goodwill. The useful life assigned to the customer contracts and relationships is 20 years, and the covenants not to compete are being amortized over their contractual periods of three years.

 

On March 15, 2019, the Company acquired Tecton Energy Services (“Tecton”), a leading provider of flowback, drill-out and production testing services, operating primarily in the greater Rocky Mountains. On March 19, 2019, the Company acquired Red Bone Services LLC (“Red Bone”), a premier provider of oilfield services primarily in the Mid-Continent, providing fishing, non-frac high pressure pumping, thru-tubing and certain other services. The aggregate acquisition price of the acquisitions was approximately $74.6, comprised of approximately $47.0 in shares of the Company’s common stock issuable over time at a fixed price and approximately $27.6 in cash to the sellers and for the retirement of debt. The Company issued shares in a subsidiary company to effect the Red Bone acquisition, which become exchangeable for KLXE common stock over specified dates between the acquisition date and September 19, 2021. The Company issued shares in its common stock to effect the Tecton acquisition, a portion of which is not included in purchase consideration as the shares were escrowed and held as treasury stock to satisfy identified future tax obligations through cancellation of the shares. The shares issued to the sellers of Tecton and Red Bone are subject to restrictions on public re-sale from a minimum of six months to a maximum of 24 months, subject to acceleration upon the occurrence of certain events.

 

Based on the Company’s preliminary purchase price allocation, the excess of the purchase price over the fair value of the identifiable assets acquired approximated $45.7, of which $19.4 was allocated to identifiable intangible assets consisting of customer contracts and relationships and covenants not to compete, and $26.3 is included in goodwill. The useful life assigned to the customer contracts and relationships is 20 years, and the covenants not to compete are being amortized over their contractual periods of 18 months and three years for Tecton and Red Bone, respectively.

 

The Motley, Tecton and Red Bone acquisitions were accounted for as purchases under FASB ASC 805, Business Combinations (“ASC 805”). The assets purchased and liabilities assumed have been reflected, as of the respective dates of acquisition, in the accompanying condensed consolidated balance sheet as of October 31, 2019 and January 31, 2019. The results of operations for the Motley, Tecton and Red Bone

acquisitions are included in the accompanying condensed consolidated statements of (loss) earnings from the respective dates of acquisition. The valuation of certain assets, principally intangible assets including goodwill and identified intangible assets related to the Tecton and Red Bone acquisitions, is not yet complete, and as such, the Company has not yet finalized its allocation of the purchase price for the acquisitions.

 

The following table summarizes the fair values of assets acquired and liabilities assumed in the Motley acquisition, and the current estimates of fair values of assets acquired and liabilities assumed in the Tecton and Red Bone acquisitions, which are currently recorded based on management’s estimates in accordance with ASC 805:

 

 

The majority of goodwill and intangible assets for Motley are expected to be deductible for tax purposes. The majority of goodwill and intangible assets for Tecton and Red Bone are not expected to be deductible for tax purposes. As more fully described in Note 5, the Company performed an interim goodwill impairment test and a long-lived asset recovery test, which resulted in a $45.8 goodwill impairment charge and no charge to the amounts recorded for long-lived assets. The goodwill impairment charge is included in the condensed consolidated statements of (loss) earnings for the three and nine months ended October 31, 2019.

 

The Company has substantially integrated Motley and Red Bone and, as a result, it is not practicable to report stand-alone revenues and operating earnings of the acquired businesses since the acquisition date. The amount of Tecton revenues included in the Company’s results was approximately $7.0 and $16.1 for the three and nine months ended October 31, 2019, respectively. It is not practicable to report stand-alone operating earnings of Tecton since the acquisition date.

 

On a pro forma basis to give effect to the Motley, Tecton and Red Bone acquisitions, as if they occurred on February 1, 2018, revenues, net (loss) earnings and (loss) earnings per diluted share, inclusive of a $45.8 goodwill impairment charge, for the three and nine months ended October 31, 2019 and 2018 would have been as follows:

 

 

 

Note 4.Property and Equipment, Net

 

Property and equipment consist of the following:

 

 

Depreciation expense was $15.7 and $10.0 for the three months ended October 31, 2019 and 2018, respectively, and $45.1 and $28.1 for the nine months ended October 31, 2019 and 2018, respectively. Refer to Note 5 for a discussion of the interim long-lived asset recovery test performed during the three months ended October 31, 2019.

 

Note 5.Goodwill and Intangible Assets, Net

 

Goodwill and indefinite life intangible assets are tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of the asset has decreased below its carrying value. The abrupt deterioration in industry conditions, which accelerated through the end of the Company’s third quarter, was driven by a sharp sequential quarterly decline in U.S. land rig count and an unprecedented decline in active frac spreads from the second quarter to the third quarter. In fact, there was a significant sequential decline in hydraulic fracturing activity during each month of the third quarter. The decline in exploration & production activity resulted in lower demand levels and lower current and expected revenues for the Company. As a result, during the three months ended October 31, 2019, the Company performed an interim goodwill impairment test and a long-lived asset recoverability test.

 

The valuation of the Company and its reportable segments’ goodwill impairment test was estimated using the guideline public company analysis and the discounted cash flow analysis, which were equally weighted in the fair value analysis. See Note 9 for additional information regarding the fair value determination. The results of the goodwill impairment test as of October 31, 2019, indicated that goodwill was impaired because the carrying value of two of the reporting units exceeded the fair value. Accordingly, the Company recorded a $45.8 goodwill impairment charge, which is included in the condensed consolidated statements of (loss) earnings for the three and nine months ended October 31, 2019. The charges reflect the full value of the goodwill attributable to the Northeast/Mid-Con and Southwest segments, leaving the Company with $24.0 goodwill related to the Rocky Mountains segment as of October 31, 2019. The fair value of the Rocky Mountains reporting unit exceeded the carrying value by approximately 15.9% as of October 15, 2019. The portion of the goodwill impairment charge attributable to Red Bone is provisional upon finalization of the purchase price allocation in the fourth quarter of 2019.

 

Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are tested for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. Based on the impairment indicators above, the Company performed a long-lived asset impairment analysis and concluded that the undiscounted cash flows of the long-lived assets exceeded the carrying amount of each segment’s asset group. The sum of the undiscounted cash flows of the Southwest, Rocky Mountains and Northeast/Mid-Con long-lived assets exceeded the carrying value by approximately 20.7%, 64.4% and 32.9%, respectively, as of October 15, 2019. As a result, the Company determined that its long-lived assets were not impaired as of October 31, 2019.

As of October 31, 2019, $24.0 of goodwill and $46.8 of identifiable intangible assets remain. The Company's cash flow projections were a significant input into the October 15, 2019 fair value. If the business continues to be unable to achieve projected results or long-term projections are adjusted downward, it could negatively impact future valuations of the Rocky Mountains reporting unit and the Company’s long-lived assets and result in an impairment charge.

 

The following sets forth the intangible assets by major asset class, all of which were acquired through business purchase transactions:

 

 

Amortization expense associated with identifiable intangible assets was $1.0 and $0.1 for the three months ended October 31, 2019 and 2018, respectively, and $2.9 and $0.2 for the nine months ended October 31, 2019 and 2018, respectively. The Company currently expects to recognize amortization expense related to intangible assets of approximately $4.0 in each of the next five fiscal years. The future amortization amounts are estimates. Actual future amortization expense may be different due to future acquisitions, impairments, changes in amortization periods or other factors.

 

The changes in the carrying amount of goodwill for the nine months ended October 31, 2019 are as follows:

 

 

 

Note 6.Related Party Transactions

 

The condensed consolidated statements of (loss) earnings for the three and nine months ended October 31, 2018 include an allocation of general corporate expenses from our former parent, KLX. These costs were allocated to the Company on a systematic and reasonable basis utilizing a direct usage basis when identifiable, with the remainder allocated on the basis of revenue generated, costs incurred, headcount or other measures.

 

Allocations for general corporate expenses, including management costs and corporate support services provided to the Company, totaled $3.2 and $16.6 for the three and nine months ended October 31, 2018 up through the date of the Spin-Off, respectively and were reported in the Company’s selling, general and administrative expenses on its condensed consolidated statements of (loss) earnings. These amounts include costs for allocations related to Former Parent’s strategic alternatives review process in the first quarter of Fiscal 2018, the Company’s Spin-Off process in the second and third quarters of Fiscal 2018 as well as for functions including executive management, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, procurement and other shared services.

 

In connection with the consummation of the Spin-Off, KLX Energy Services entered into a number of agreements with KLX, including a transition services agreement, distribution agreement, an employee matters agreement and an Intellectual Property (“IP”) matters agreement. These agreements govern the relationship