Market Overview

NOW Inc. Reports Third Quarter 2017 Results

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NOW Inc. (NYSE:DNOW) announced results for the third quarter ended
September 30, 2017.

 

Earnings Conference Call

November 1, 2017
8:00 a.m. CST
1 (800) 446-1671 (North America)
1 (847) 413-3362 (Outside North America)

Webcast: ir.distributionnow.com

Third Quarter 2017 Financial Highlights

  • Revenue was $697 million for the third quarter of 2017, up 34 percent
    year over year.
  • Net loss was $9 million for the third quarter of 2017, versus $56
    million a year ago. Non-GAAP net loss excluding other costs was $3
    million compared to $36 million in the third quarter of 2016.
  • Diluted loss per share was $0.08 for the third quarter of 2017
    compared to $0.53 a year ago. Non-GAAP diluted loss per share
    excluding other costs was $0.03 for the third quarter of 2017 compared
    to $0.34 in the third quarter of 2016.
  • Non-GAAP EBITDA excluding other costs for the third quarter of 2017
    was $5 million compared to a loss of $40 million in the third quarter
    of 2016.

Refer to Supplemental Information in this release for GAAP to non-GAAP
reconciliations.

Robert Workman, President and CEO of NOW Inc., remarked, "I'm pleased
with the earnings growth our team produced this quarter. These results
reflect our focus on higher product margins, capturing business from new
customers and culling costs in areas left behind by the market recovery.
Despite weak oil prices in the third quarter and rig counts now
softening, we believe consistent execution on improving our core
operations, coupled with operators ramping up completions, will enable
positive earnings momentum."

Prior to the earnings conference call a presentation titled "NOW Inc.,
Third Quarter 2017 Review & Key Takeaways" will be available on the
Company's Investor Relations website.

About NOW Inc.

NOW Inc. is one of the largest distributors to energy and industrial
markets on a worldwide basis, with a legacy of over 150 years. NOW Inc.
operates primarily under the DistributionNOW and Wilson Export brands.
Through its network of approximately 300 locations and 4,600 employees
worldwide, NOW Inc. offers a comprehensive line of products and
solutions for the upstream, midstream and downstream energy and
industrial sectors. Our locations provide products and solutions to
exploration and production companies, energy transportation companies,
refineries, chemical companies, utilities, manufacturers and engineering
and construction companies.

Statements made in this press release that are forward-looking in
nature are intended to be "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934 and may
involve risks and uncertainties.
These statements may differ
materially from actual future events or results.
Readers are
referred to documents filed by NOW Inc. with the U.S. Securities and
Exchange Commission, which identify significant risk factors which could
cause actual results to differ from those contained in the
forward-looking statements.

 
NOW INC.
CONSOLIDATED BALANCE SHEETS
(In
millions, except share data)
           
September 30, December 31,
2017 2016
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 99 $ 106
Receivables, net 466 354
Inventories, net 562 483
Prepaid and other current assets   22     16  
Total current assets 1,149 959
Property, plant and equipment, net 126 143
Deferred income taxes 2 1
Goodwill 328 311
Intangibles, net 171 184
Other assets   4     5  
Total assets   1,780     1,603  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 310 $ 246
Accrued liabilities 111 100
Other current liabilities   1     1  
Total current liabilities 422 347
Long-term debt 163 65
Deferred income taxes 7 7
Other long-term liabilities   1     1  
Total liabilities 593 420
Commitments and contingencies
Stockholders' equity:
Preferred stock - par value $0.01; 20 million shares authorized;
no shares issued and outstanding
Common stock - par value $0.01; 330 million shares authorized;
107,803,100 and
107,474,904 shares issued and outstanding at September 30, 2017 and
December 31, 2016, respectively
1 1
Additional paid-in capital 2,017 2,002
Accumulated deficit (727 ) (678 )
Accumulated other comprehensive loss   (104 )   (142 )
Total stockholders' equity   1,187     1,183  
Total liabilities and stockholders' equity $ 1,780   $ 1,603  
 
NOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(In millions, except per share data)
                   
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2017 2016 2017 2017 2016
 
Revenue $ 697 $ 520 $ 651 $ 1,979 $ 1,569
Operating expenses:
Cost of products 562 433 527 1,606 1,312
Warehousing, selling and administrative   141     140     138     414     432  
Operating loss (6 ) (53 ) (14 ) (41 ) (175 )
Other expense   (3 )   (3 )   (3 )   (8 )   (7 )
Loss before income taxes (9 ) (56 ) (17 ) (49 ) (182 )
Income tax provision (benefit)                   (19 )
Net loss $ (9 ) $ (56 ) $ (17 ) $ (49 ) $ (163 )
Loss per share:
Basic loss per common share $ (0.08 ) $ (0.53 ) $ (0.16 ) $ (0.45 ) $ (1.52 )
Diluted loss per common share $ (0.08 ) $ (0.53 ) $ (0.16 ) $ (0.45 ) $ (1.52 )
Weighted-average common shares outstanding, basic   108     107     108     108     107  
Weighted-average common shares outstanding, diluted   108     107     108     108     107  
 
NOW INC.
SUPPLEMENTAL INFORMATION
                   
BUSINESS SEGMENTS (UNAUDITED)
(In millions)
 
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2017 2016 2017 2017 2016
 
Revenue:
United States $ 506 $ 372 $ 481 $ 1,426 $ 1,066
Canada 96 67 79 271 185
International   95   81   91   282   318
Total revenue $ 697 $ 520 $ 651 $ 1,979 $ 1,569
 
NOW INC.
SUPPLEMENTAL INFORMATION (CONTINUED)
U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP
RECONCILIATIONS
NET LOSS TO NON-GAAP EBITDA EXCLUDING OTHER COSTS RECONCILIATION
(UNAUDITED)
(In millions)
                   
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2017 2016 2017 2017 2016
 
GAAP net loss (1) $ (9 ) $ (56 ) $ (17 ) $ (49 ) $ (163 )
Interest, net 2 1 1 4 2
Income tax provision (benefit) (19 )
Depreciation and amortization 12 14 13 38 39
Other costs (2)       1     1     1     8  
EBITDA excluding other costs $ 5   $ (40 ) $ (2 ) $ (6 ) $ (133 )
EBITDA % excluding other costs (3) 0.7 % (7.7 %) (0.3 %) (0.3 %) (8.5 %)
   
NET LOSS TO NON-GAAP NET LOSS EXCLUDING OTHER COSTS
RECONCILIATION (UNAUDITED)
(In millions)
               
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2017 2016 2017 2017 2016
 
GAAP net loss (1) $ (9 ) $ (56 ) $ (17 ) $ (49 ) $ (163 )
Other costs, net of tax (4) (5)   6     20     6     19     45  
Net loss excluding other costs (5) $ (3 ) $ (36 ) $ (11 ) $ (30 ) $ (118 )
 
DILUTED LOSS PER SHARE TO NON-GAAP DILUTED LOSS PER SHARE
EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)
                   
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2017 2016 2017 2017 2016
 
GAAP diluted loss per share (1) $ (0.08 ) $ (0.53 ) $ (0.16 ) $ (0.45 ) $ (1.52 )
Other costs, net of tax (4)   0.05     0.19     0.06     0.17     0.42  
Diluted loss per share excluding other costs (5) $ (0.03 ) $ (0.34 ) $ (0.10 ) $ (0.28 ) $ (1.10 )
 

(1) In an effort to provide investors with additional information
regarding our results as determined by GAAP, we disclose various
non-GAAP financial measures in our quarterly earnings press releases and
other public disclosures. The non-GAAP financial measures include: (i)
earnings before interest, taxes, depreciation and amortization (EBITDA)
excluding other costs, (ii) net loss excluding other costs and (iii)
diluted loss per share excluding other costs. Each of these financial
measures excludes the impact of certain other costs and therefore has
not been calculated in accordance with GAAP. A reconciliation of each of
these non-GAAP financial measures to its most comparable GAAP financial
measure is included in the schedules herein.

(2) Other costs primarily includes the transaction costs associated with
acquisition activity, including the cost of inventory that was stepped
up to fair value during purchase accounting and severance expenses which
are included in operating loss.

(3) EBITDA % excluding other costs is defined as EBITDA excluding other
costs divided by Revenue.

(4) Other costs, net of tax, for the three and nine months ended
September 30, 2017 includes an expense of $5 million and $18 million,
respectively, after tax, for a valuation allowance recorded against the
Company's deferred tax assets; as well as, less than $1 million and $1
million, respectively, after tax, in severance expenses that are
included in operating loss.

(5) Totals may not foot due to rounding.

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