What: Shares of KLX Inc. , a global distributor of aerospace fasteners and consumables, as well as a provider of products and services for the oil and gas industry, are spiraling more than 18% lower today after the company announced it would take an after-tax asset impairment charge.
So what: During the third quarter, KLX performed an asset impairment test because of the intense downturn in the oil and gas industry -- including a roughly 60% plunge in the price of oil -- which heavily reduced the demand and pricing power for oil-field services.
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"As a result, during the third quarter of 2015, the Company determined that the carrying value of ESG's [the Energy Services Group segment] assets has been impaired. KLX therefore expects to record a non-cash, after-tax impairment charge of approximately $435 million," said Amin J. Khoury, KLX's chief executive officer, in a press release.
Now what: Heading into KLX's third-quarter earnings release scheduled for Tuesday, Dec. 1, 2015, investors can expect the current challenging conditions within the oil and gas services industry to continue, and pricing pressures to accelerate in the fourth quarter.
While KLX's customers in the oil and gas services industry will continue to reduce rig counts and capital expenditures, the company believes it has an opportunity to enhance its products and services to position KLX for a strong rebound when the industry recovers -- but don't expect that in the near-term.
The article Shares of KLX Inc. Plunge 18% After Announcement of $435 Million Charge originally appeared on Fool.com.
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