Market Overview

NOW Inc. Reports First Quarter 2018 Results

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NOW Inc. (NYSE:DNOW) announced results for the first quarter ended
March 31, 2018.

 

Earnings Conference Call

May 2, 2018
8:00 a.m. CST
1 (800) 446-1671 (North America)
1 (847) 413-3362 (Outside North America)

Webcast: ir.distributionnow.com

 

First Quarter 2018 Financial Highlights

  • Revenue was $764 million for the first quarter of 2018, up 21 percent
    year over year and up 14 percent sequentially.
  • Net income was $2 million for the first quarter of 2018, versus a net
    loss of $23 million a year ago. Non-GAAP net income excluding other
    costs was $1 million compared to a loss of $16 million in the first
    quarter of 2017.
  • Diluted earnings per share was $0.02 for the first quarter of 2018
    compared to a loss per share of $0.21 a year ago. Non-GAAP diluted
    earnings per share excluding other costs was $0.01 for the first
    quarter of 2018 compared to a loss per share of $0.15 in the first
    quarter of 2017.
  • Non-GAAP EBITDA excluding other costs for the first quarter of 2018
    was $16 million compared to a loss of $9 million in the first quarter
    of 2017.
  • A $10 million pre-tax gain from the sale of property was included in
    the fourth quarter of 2017 results.

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

Robert Workman, President and CEO of NOW Inc., added, "The impressive
results produced in the first quarter signal a great start to 2018. We
are focused on strategically growing the business by targeting more
lucrative opportunities and continuing to deepen our relationships with
customers, while minimizing operating expenses, to deliver value to our
shareholders as the market expands."

Prior to the earnings conference call a presentation titled "NOW Inc.,
First Quarter 2018 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 275 locations and 4,500 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)
       
March 31, December 31,
2018 2017
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 80 $ 98
Receivables, net 496 423
Inventories, net 609 590
Prepaid and other current assets   21     18  
Total current assets 1,206 1,129
Property, plant and equipment, net 114 119
Deferred income taxes 2 2
Goodwill 329 328
Intangibles, net 162 166
Other assets   5     5  
Total assets   1,818     1,749  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 331 $ 290
Accrued liabilities 110 103
Other current liabilities   2     1  
Total current liabilities 443 394
Long-term debt 175 162
Deferred income taxes 7 7
Other long-term liabilities   1     1  
Total liabilities 626 564
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;
108,141,139 and
108,030,438 shares issued and outstanding at March 31, 2018 and
December 31, 2017, respectively
1 1
Additional paid-in capital 2,023 2,019
Accumulated deficit (728 ) (730 )
Accumulated other comprehensive loss   (104 )   (105 )
Total stockholders' equity   1,192     1,185  

Total liabilities and stockholders' equity

$ 1,818   $ 1,749  
 
NOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In millions, except per share data)
           
Three Months Ended
March 31, December 31,
2018 2017 2017
 
Revenue $ 764 $ 631 $ 669
Operating expenses:
Cost of products 616 517 541
Warehousing, selling and administrative   141     135     128  
Operating profit (loss) 7 (21 )
Other expense   (4 )   (2 )   (3 )
Income (loss) before income taxes 3 (23 ) (3 )
Income tax provision (benefit)   1          
Net income (loss) $ 2   $ (23 ) $ (3 )
Earnings (loss) per share:
Basic earnings (loss) per common share $ 0.02   $ (0.21 ) $ (0.03 )
Diluted earnings (loss) per common share $ 0.02   $ (0.21 ) $ (0.03 )
Weighted-average common shares outstanding, basic   108     108     108  
Weighted-average common shares outstanding, diluted   108     108     108  
 
NOW INC.
SUPPLEMENTAL INFORMATION
           
BUSINESS SEGMENTS (UNAUDITED)
(In millions)
 
Three Months Ended
March 31, December 31,
2018 2017 2017
 
Revenue:
United States $ 562 $ 439 $ 488
Canada 102 96 85
International   100   96   96
Total revenue $ 764 $ 631 $ 669
     
NOW INC.
SUPPLEMENTAL INFORMATION (CONTINUED)
 
U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP
RECONCILIATIONS
 
NET INCOME (LOSS) TO NON-GAAP EBITDA EXCLUDING OTHER COSTS
RECONCILIATION (UNAUDITED)
(In millions)
 
Three Months Ended
March 31, December 31,
2018 2017 2017
 
GAAP net income (loss) (1) $ 2 $ (23 ) $ (3 )
Interest, net 2 1 2
Income tax provision (benefit) 1
Depreciation and amortization 11 13 12
Other costs (2)           2  
EBITDA excluding other costs $ 16   $ (9 ) $ 13  
EBITDA % excluding other costs (3) 2.1 % (1.4 %) 1.9 %
 
 

NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS) EXCLUDING OTHER
COSTS RECONCILIATION (UNAUDITED)

(In millions)
 
Three Months Ended
March 31, December 31,
2018 2017 2017
 
GAAP net income (loss) (1) $ 2 $ (23 ) $ (3 )
Other costs, net of tax (4) (5)   (1 )   7     4  
Net income (loss) excluding other costs (5)   1     (16 )   1  
 
DILUTED EARNINGS (LOSS) PER SHARE TO NON-GAAP DILUTED EARNINGS
(LOSS) PER SHARE EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)
 
 
Three Months Ended
March 31, December 31,
2018 2017 2017
 
GAAP diluted earnings (loss) per share (1) $ 0.02 $ (0.21 ) $ (0.03 )
Other costs, net of tax (4)   (0.01 )   0.06     0.04  
Diluted earnings (loss) per share excluding other costs (5) $ 0.01   $ (0.15 ) $ 0.01  
 
(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 income (loss)
excluding other costs and (iii) diluted earnings (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 profit (loss). For the
three months ended March 31, 2018 and 2017, other costs was less
than $1 million in both periods.
(3) EBITDA % excluding other costs is defined as EBITDA excluding
other costs divided by Revenue.
(4) Other costs, net of tax, for the three months ended March 31,
2018 and 2017, respectively, included a benefit of $1 million and
expense of $7 million, after tax, respectively, from changes in the
valuation allowance recorded against the Company's deferred tax
assets. The Company has excluded the impact of a $9 million tax
charge related to the Tax Cuts and Jobs Act and a $4 million tax
charge related to the write-off of a previously recognized deferred
tax asset on its valuation allowance in computing net income (loss)
excluding other costs for the three months ended March 31, 2018.
(5) Totals may not foot due to rounding.

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