What changed in this filing

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Item 9A. Controls and Procedures

2023-03-09 compared with 2021-04-28 · 66 added, 96 removed, 285 unchanged (36% of the section changed)

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Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures that are designed to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

We have established disclosure controls and procedures that are designed to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions (who are our Chief Executive Officer and Chief Financial Officer, respectively) as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.

In connection with the preparation of this Annual Report on Form 10-K for the fiscal year ended January 31, 2020, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness, as of January 31, 2021, of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act).

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of January 31, 2021.

Material Weakness Remediation

We identified a material weakness in our internal control over financial reporting during the quarter ended October 31, 2020.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness related to inadequate review of the measurement of depreciation expense for impaired property and equipment.

Beginning in the third quarter of 2020, we developed a plan to remediate the material weakness and have taken steps that we believe address the underlying causes of the material weakness.

Changes to controls included, but were not limited to, transitioning key roles following the Merger, hiring of additional accounting personnel, providing training, and enhancing review controls of the measurement of depreciation expense.

The material weakness is now considered to be remediated as the applicable controls and procedures implemented through our remediation plan have operated for a sufficient period of time and management has concluded, through testing, that these controls were operating effectively as of January 31, 2021.

In connection with the preparation of this Annual Report on Form 10-K for the year ended December 31, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness, as of December 31, 2022, of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act).

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2022.

Changes in Internal Control over Financial Reporting

On July 28, 2020, we completed the Merger, which resulted in changes to internal controls over the consolidation and reporting of our financial results.

As part of the Company’s ongoing integration activities, the Company’s financial reporting controls and procedures are in the process of being implemented at QES.

The two companies maintained separate accounting systems through January 31, 2021.

The consolidated financial statements presented in this Annual Report on Form 10-K were prepared using information obtained from these separate accounting systems.

Effective January 1, 2021, the Company consolidated all HR and payroll systems and processes.

Except for the material weakness remediation and integration of QES as noted above, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended January 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes to our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management, including our principal executive officer and principal financial officers, assessed the effectiveness of the Company’s internal control over financial reporting as of January 31, 2021.

In making the assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013).

As permitted by SEC guidance for newly acquired businesses, the scope of management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of January 31, 2021, has excluded the acquired business of QES and its subsidiaries.

We completed the Merger on July 28, 2020, and the excluded business represents approximately $108.9 million of total assets and total revenues of approximately $56.3 million included in the consolidated financial statements of the Company as of and for the year ended January 31, 2021.

Based on its assessment, management believes that, as of January 31, 2021, the Company’s internal control over financial reporting is effective.

Based on its assessment, management believes that, as of December 31, 2022, the Company’s internal control over financial reporting is effective.

OTHER INFORMATION

Purchase and Sale Agreement

On March 8, 2023, the Company completed the acquisition of all of the equity interests of Greene’s Energy Group, LLC (“Greene’s”), including $1.7 million in cash remaining with Greene’s (the “Greene’s Acquisition”), pursuant to that certain purchase and sale agreement dated March 8, 2023, between Greene’s Holding Corporation, the direct parent of Greene’s (“Seller”), and the Company (the “Purchase Agreement”).

The total consideration for the Greene’s Acquisition under the Purchase Agreement consisted of the issuance of approximately 2.4 million shares of the Company's common stock, par value $0.01 per share (the “Stock Consideration”), subject to customary post-closing adjustments, representing 14.7% of the fully diluted common stock of the Company with an implied enterprise value of approximately $30.3 million based on a 30-day volume weighted average price as of March 7, 2023 less acquired cash.

Registration Rights and Lock-Up Agreement

In connection with the Greene’s Acquisition, the Company entered into a Registration Rights and Lock-Up Agreement, dated as of March 8, 2023, with the Seller (the “Greene’s Registration Rights Agreement”), pursuant to which the Company must file a shelf registration statement upon the request of the Seller and certain of its affiliates to register the shares comprising the Stock Consideration.

The Seller and certain of its affiliates will also have the right to demand that the Company undertake an underwritten offering of shares comprising the Stock Consideration so long as the minimum market price of the shares to be included in the offering is $30.0 million, subject to certain other limitations.

In addition, the Seller and certain of its affiliates will have certain “piggyback” rights if the Company or certain other holders of the Company’s common stock undertake an underwritten offering, subject to customary cutbacks.

Pursuant to the terms of the Greene's Registration Rights Agreement, Seller agreed, subject to certain customary exceptions, not to, directly or indirectly, sell, offer or agree to sell, or otherwise transfer, or loan or pledge, through swap or hedging transactions, or grant any option to purchase, make any short sale or otherwise dispose of 66 2/3% of the shares comprising the Stock Consideration for specified periods of time ranging from six to twelve months following the closing of the Greene’s Acquisition, as described in the Greene's Registration Rights Agreement.

Unregistered Sales of Equity Securities

The shares comprising the Stock Consideration issued in the Greene’s Acquisition have not been registered under the Securities Act, in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act for transactions by an issuer not involving any public offering.

The Company’s reliance upon Section 4(a)(2) of the Securities Act was based upon the following factors:

(a) the issuance of the shares was an isolated private transaction by the Company that did not involve a public offering;

(b) there was only one recipient and (c) representations from Greene’s to support such exemption, including with respect to Greene’s status as an “accredited investor” (as that term is defined in Rule 501(a) of Regulation D promulgated under Section 4(a)(2) of the Securities Act).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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The following table sets forth information regarding our executive officers.

Officer Biography

Officer Age Biography

Christopher J.

Baker, President and Chief Executive Officer 48 Christopher J.

Baker, President, Chief Executive Officer and Director 50 Christopher J.

Baker became the President and Chief Executive Officer of KLXE upon completion of the Merger in July 2020.

Baker became a Director of KLXE in November 2022.

Additionally, since the completion of the Merger in July 2020, Mr.

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(ii) President and Director of KLX Energy Services LLC;

and (ii) Vice President of KLX Directional Drilling LLC, Centerline Trucking LLC, KLX Pressure Pumping LLC and KLX Wireline LLC.

and (ii) Vice President of KLX Directional Drilling LLC and Centerline Trucking LLC.

Previously, Mr.

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in Mechanical Engineering, and Rice University, where he earned an M.B.A.

Bouthillette, Executive Vice President, General Counsel and Chief Compliance Officer 52 Max L.

Bouthillette, Executive Vice President, General Counsel, Chief Compliance Officer and Secretary 54 Max L.

Bouthillette became the Executive Vice President, General Counsel, Chief Compliance Officer and Secretary of KLXE upon completion of the Merger in July 2020.

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(i) Vice President, Secretary and Director (or Manager, as applicable) of Krypton Intermediate, LLC, Krypton Holdco, LLC, KLX Energy Services LLC and KLX Energy Services Inc.;

and (ii) Vice President and Secretary of KLX Directional Drilling LLC, Centerline Trucking LLC, KLX Pressure Pumping LLC and KLX Wireline LLC.

and (ii) Vice President and Secretary of KLX Directional Drilling LLC and Centerline Trucking LLC.

Previously, Mr.

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Bouthillette has more than 24 years of legal experience for oilfield services companies, and previously served as Chief Compliance Officer and Deputy General Counsel for BJ Services from 2006 to 2010, as a partner with Baker Hostetler LLP from 2004 to 2006 and with Schlumberger in North America (Litigation Counsel), Asia (OFS Counsel) and Europe (General Counsel Products) from 1998 to 2003.

Bouthillette holds a B.B.A in Accounting from Texas A&M University and a Juris Doctorate from the University of Houston Law Center.

Bouthillette holds a B.B.A in Accounting from Texas A&M University and a Juris Doctor from the University of Houston Law Center.

Lehner, Executive Vice President and Chief Financial Officer 37 Keefer M.

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(i) Vice President and Director of Krypton Intermediate, LLC, Krypton Holdco, LLC, KLX Energy Services LLC and KLX Energy Services Inc;

and (ii) Vice President of KLX Directional Drilling LLC, Centerline Trucking LLC, KLX Pressure Pumping LLC and KLX Wireline LLC.

and (ii) Vice President of KLX Directional Drilling LLC and Centerline Trucking LLC.

Previously, Mr.

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The following table sets forth information regarding our directors.

Director Biography

Director Age Biography

Collins 76 John T.

Collins has been the non-Executive Chairman of the Board upon the completion of the Merger in July 2020.

Collins has been a Director of KLXE since September 2018 and served as the non-Executive Chairman of the Board upon the completion of the Merger in July 2020 until June 2021.

Previously, Mr.

Collins became the Chairman of the Board in May 2020 before serving as a Director from KLXE from September 2018 through May 2020.

Collins served as the Chairman of the Board from May 2020 to July 2020.

He served on the board of directors of KLX Inc.

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Collins’s many years of experience in the management, acquisition and development of several companies.

Dalton Boutté, Jr.

66 Dalton Boutté, Jr.

became a Director upon the completion of the Merger in July 2020.

Boutté served on the QES board of directors (“QES Board”) from February 2018 through July 2020.

Boutté worked for Schlumberger from 1980 until his retirement in 2010.

In his last 10 years with Schlumberger, Mr.

Boutté held various senior-level positions, including President for Europe/Africa/CSI (2001 – 2001), Vice President of Worldwide Oilfield Services (2001 – 2003) and President of WesternGeco (2003 – 2009) and also served as Executive Vice President of Schlumberger Limited (2004 – 2010).

Boutté also currently serves as an independent director of Seitel Inc.

Boutté has a Bachelor of Science in Civil Engineering from University of New Orleans and was a Visiting Fellow at the Massachusetts Institute of Technology.

Our Board benefits from Mr.

Boutté’s extensive oilfield services background and his experience as an independent director of companies in the oil and natural gas industry

Gunnar Eliassen 37 Gunnar Eliassen became a Director of KLXE upon the completion of the Merger in July 2020.

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Eliassen’s extensive experience with public and private investments, including investments in the oil and natural gas industry.

Hamermesh 73 Richard G.

Hamermesh has been a Director since September 2018 and continued to serve as a Director upon completion of the Merger in July 2020.

He served on the board of directors of KLX Inc.

from December 2014 until its sale to The Boeing Company in October 2018.

From July 2015 until June 2020, Dr.

Hamermesh was a Senior Fellow at the Harvard Business School, where he additionally was the MBA Class of 1961 Professor of Management Practice from 2002 to 2015.

From 1987 to 2001, he was a co-founder and a Managing Partner of The Center for Executive Development, an executive education and development consulting firm.

From 1976 to 1987, Dr.

Hamermesh was a member of the faculty of Harvard Business School.

He is also an active investor and entrepreneur, having participated as a principal, director and investor in the founding and early stages of more than 15 organizations.

Hamermesh has served as a member of the board of directors of SmartCloud, Inc.

Additionally, Dr.

Hamermesh has served as a director and Chairman of the board of Qtection LLC since April 2020 and has served as director and Chairman of the board of Rhinostics, Inc.

since September 2020.

Hamermesh was a director of B/E Aerospace, Inc.

until its sale to Rockwell Collins in April 2017, and a director of Rockwell Collins from April 2017 until its sale to United Technologies Corporation in November 2018.

Our Board benefits from Dr.

Hamermesh’s education and business experience as co-founder of a leading executive education and consulting firm, as president, founder, director and co-investor in over 15 early stage businesses, and his 28 years as a Professor of Management Practice at Harvard Business School, where he has led MBA candidates through thousands of business case studies, as well as his intimate knowledge of our business and industry.

McCaffrey 68 Thomas P.

McCaffrey has served as a member of the Board since May 2020 and continued to serve as a member of the Board upon completion of the Merger in July 2020.

McCaffrey has served as a member of the Board since May 2020.

McCaffrey served as Chairman of the Integration Committee of the Board upon completion of the Merger until the Committee was disbanded in December 2020.

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Skindlo is qualified to continue serve on the Board due to his vast business experience, having founded and served as a director and as an officer of multiple companies, both private and public, and his service on the boards of numerous non-profit organizations.

66 Stephen M.

Ward, Jr., has served as a member of the Board since September 2018, and continued to serve as a member of the Board upon completion of the Merger in July 2020.

He served on the board of directors of KLX Inc.

from December 2014 until its sale to The Boeing Company in October 2018.

Ward has been a director of Carpenter Technology Corporation since 2001, where he is Chair of the Corporate Governance Committee and a member of the Compensation and Science and Technology Committees.

Ward previously served as President and Chief Executive Officer of Lenovo Corporation, which was formed by the acquisition of IBM Corporation’s personal computer business by Lenovo of China.

Ward had spent 26 years at IBM Corporation holding various management positions, including Chief Information Officer and Senior Vice President and General Manager, Personal Systems Group.

Ward is a founding team member and board member of C3.ai, a company that develops and sells internet of things software for analytics and control.

Ward is the Chairman of the Compensation Committee and a member of the Nominating and Corporate Governance Committee of C3.ai.

Ward was previously a board member and co-founder of E2open, a maker of enterprise software, and a board member of E-Ink, a maker of high-tech screens for e-readers and computers, and the Chairman of the board of QDVision, the developer and a manufacturer of quantum dot technology for the computer, TV and display industries until its sale.

Our Board benefits from Mr.

Ward’s broad executive experience and focus on innovation enables him to share with the Board valuable perspectives on a variety of issues relating to management, strategic planning, tactical capital investments and growth.

has served as a member of the Board since September 2018 and continued to serve as a member of the Board upon completion of the Merger in July 2020.

has served as a member of the Board since September 2018.

He served on the board of directors of KLX Inc.

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We maintain a copy of our code of business conduct, including any amendments thereto and any waivers applicable to any of our directors and officers, on our website at www.klxenergy.com.

The remaining information required by this item is incorporated by reference to our definitive proxy statement for our 2021 Annual Meeting of Stockholders pursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended January 31, 2021.

The remaining information required by this item is incorporated by reference to our definitive proxy statement for our 2023 Annual Meeting of Stockholders pursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended December 31, 2022.

EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to our definitive proxy statement for our 2021 Annual Meeting of Stockholders pursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended January 31, 2021.

The information required by this item is incorporated by reference to our definitive proxy statement for our 2023 Annual Meeting of Stockholders pursuant to Regulation 14A under the Exchange Act, which we expect to file with the SEC within 120 days after the close of the year ended December 31, 2022.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our independent registered public accounting firm is Deloitte & Touche LLP, Houston, Texas, PCAOB ID No 34 .

1.1 Equity Distribution Agreement, dated June 14, 2021, by and between the Company and Piper Sandler & Co.

(incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K (File No.

001-38609) filed with the SEC on June 14, 2021).

Purchase and Sale Agreement, dated as of March 8, 2023, between the Company and Greene’s Holding Corporation.

2.2 Agreement and Plan of Merger, dated May 3, 2020, by and among KLX Energy Services Holdings, Inc., Quintana Energy Services Inc., Krypton Intermediate LLC and Krypton Merger Sub Inc.

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(incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q, filed on September 8, 2020, File No.

3.2 Third Amended and Restated Bylaws of KLX Energy Services Holdings, Inc.

(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on December 8, 2020, File No.

3.2 Fourth Amended and Restated Bylaws of KLX Energy Services Holdings, Inc.

(incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on September 9, 2021, File No.

4.1 Indenture, dated October 31, 2018, among KLX Energy Services Holdings, Inc., as the issuer, KLX Energy Services LLC, KLX RE Holdings LLC and Wilmington Trust, National Association, as trustee and collateral agent (incorporated by reference to the Company’s Current Report on Form 8-K, filed on November 1, 2018, File No.

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4.1.2 Second Supplemental Indenture, dated May 13, 2019, among KLX Energy Services Holdings, Inc., as the issuer, the Guaranteeing Subsidiaries named therein and Wilmington Trust, National Association, as trustee and collateral agent (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q, filed on August 22, 2019, File No.

4.1.3 Third Supplemental Indenture, dated August 25, 2020, among KLX Energy Services Holdings, Inc., as the issuer, the Guaranteeing Subsidiaries named therein and Wilmington Trust, National Association, as trustee and collateral agent (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q, filed on June 11, 2021, File No.

4.2 Form of 11.500% Senior Secured Notes due 2025 (included in Exhibit 4.1) .

4.3* Description of Securities registered pursuant to Section 12 of the Exchange Act.

4.3 Description of Securities registered pursuant to Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.3 of the Company’s Annual Report on Form 10-K, filed on April 28, 2021, File No.

10.1 Credit Agreement, dated as of August 10, 2018, by and among KLX Energy Services Holdings, Inc., the several Lenders and JPMorgan Chase Bank, N.A.

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as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed on August 22, 2019, File No.

10.1.3 Third Amendment, dated as of September 22, 2022, to Credit Agreement, dated as of August 10, 2018, by and among KLX Energy Services Holdings, Inc., the Subsidiary Guarantors party thereto, the several Lenders and JPMorgan Chase Bank, N.A.

as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.1 of KLX Energy Services Holdings, Inc.'s Current Report on Form 8-K, filed on September 28, 2022, File No.

10.2† KLX Energy Services Holdings, Inc.

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001-38609) filed with the SEC on July 28, 2020).

Registration Rights Agreement and Lock-Up Agreement, dated March 8, 2023, between KLX Energy Services Holdings, Inc.

and Greene’s Holding Corporation.

10.24 Registration Rights Agreement, dated May 3, 2020, by and among KLX Energy Services Holdings, Inc., Archer Holdco LLC, Geveran Investments Limited, Famatown Finance Limited Robertson QES Investment LLC, Quintana Energy Partners—QES Holdings LLC, Quintana Energy Fund – TE, L.P.

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2018 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.32 of Quintana Energy Services Inc.’s Annual Report on Form 10-K filed on March 6, 2020).

10.35† Form of Restricted Stock Unit Agreement (Executive Officers) under the KLX Energy Services Holdings, Inc.

Long-Term Incentive Plan.

21.1* List of subsidiaries of KLX Energy Services Holdings, Inc.

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2** Certification of Principal Executive Officer Pursuant to 18 U.S.C.

32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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† Management contract or compensatory plan or arrangement

¥ Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(a)(5) of Regulation S-K.

A copy of any omitted schedule and/or exhibit will be furnished to the SEC on request.

Form 10-K Summary

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Christopher J.

President and Chief Executive Officer

April 28, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 28, 2021.

President, Chief Executive Officer and Director

March 9, 2023

/s/ Christopher J.

Baker President and Chief Executive Officer (Principal Executive Officer)

Baker President, Chief Executive Officer and Director (Principal Executive Officer)

Christopher J.

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/s/ Geoffrey C.

Stanford Vice President and Chief Accounting Officer (Principal Accounting Officer)

Collins Chairman of the Board of Directors

/s/ Dalton Boutté, Jr.

Director and Chairman of the Compensation Committee

Dalton Boutté, Jr.

Stanford Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

/s/ Dag Skindlo Chairman of the Board of Directors

Whates Director and Chairman of the Audit Committee

/s/ Richard G.

Hamermesh Director and Chairman of the Nominating and Corporate Governance Committee

/s/ Gunnar Eliassen Director

/s/ Gunnar Eliassen

Director and Chairman of the Nominating and Corporate Governance Committee

Gunnar Eliassen

/s/ Stephen M.

/s/ Dag Skindlo Director

/s/ Corbin J.

Robertson, Jr.

Director and Chairman of the Compensation Committee

Robertson, Jr.

Collins Director

/s/ Thomas P.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures