Market Overview

NOW Inc. Reports Second Quarter 2018 Results

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NOW Inc. (NYSE:DNOW) announced results for the second quarter ended
June 30, 2018.

Earnings Conference Call
August 2, 2018
8:00 a.m. CST
1
(800) 446-1671 (North America)
1 (847) 413-3362 (Outside North
America)
Webcast: ir.distributionnow.com

Second Quarter 2018 Financial Highlights

  • Revenue was $777 million for the second quarter of 2018, up 19 percent
    year over year.
  • Net income was $14 million for the second quarter of 2018, versus a
    net loss of $17 million a year ago. Non-GAAP net income excluding
    other costs was $10 million for the second quarter of 2018 compared to
    a loss of $11 million a year ago.
  • Diluted earnings per share was $0.12 for the second quarter of 2018
    compared to a loss per share of $0.16 a year ago. Non-GAAP diluted
    earnings per share excluding other costs was $0.10 for the second
    quarter of 2018 compared to a loss per share of $0.10 in the second
    quarter of 2017.
  • Non-GAAP EBITDA excluding other costs for the second quarter of 2018
    was $29 million compared to a loss of $2 million a year ago.

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

Robert Workman, President and CEO of NOW Inc., added, "I couldn't be
more excited about the results our organization produced in the second
quarter. Product margin expansion fueled sequential revenue growth, in
what is generally a seasonally softer quarter due to Canadian break-up.
This, coupled with our continued focus on efficiencies, drove
incrementals of 100% sequentially, as EBITDA excluding other costs grew
$13 million, matching revenue growth."

Prior to the earnings conference call a presentation titled "NOW Inc.,
Second 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 270 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)
 
        June 30,     December 31,
2018 2017
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 91 $ 98
Receivables, net 495 423
Inventories, net 604 590
Prepaid and other current assets   23     18  
Total current assets 1,213 1,129
Property, plant and equipment, net 109 119
Deferred income taxes 2 2
Goodwill 321 328
Intangibles, net 155 166
Other assets   11     5  
Total assets $ 1,811   $ 1,749  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 315 $ 290
Accrued liabilities 103 103
Other current liabilities   2     1  
Total current liabilities 420 394
Long-term debt 195 162
Deferred income taxes 6 7
Other long-term liabilities   1     1  
Total liabilities 622 564
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;
108,390,737 and
108,030,438 shares issued and outstanding at June 30, 2018 and
December 31, 2017, respectively
1 1
Additional paid-in capital 2,026 2,019
Accumulated deficit (714 ) (730 )
Accumulated other comprehensive loss   (124 )   (105 )
Total stockholders' equity   1,189     1,185  
Total liabilities and stockholders' equity $ 1,811   $ 1,749  
 
 
NOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In millions, except per share data)
 
        Three Months Ended     Six Months Ended
June 30,     March 31, June 30,
2018     2017 2018 2018     2017
 
Revenue $ 777 $ 651 $ 764 $ 1,541 $ 1,282
Operating expenses:
Cost of products 620 527 616 1,236 1,044
Warehousing, selling and administrative   139     138     141     280     273  
Operating profit (loss) 18 (14 ) 7 25 (35 )
Other expense   (3 )   (3 )   (4 )   (7 )   (5 )
Income (loss) before income taxes 15 (17 ) 3 18 (40 )
Income tax provision (benefit)   1         1     2      
Net income (loss) $ 14   $ (17 ) $ 2   $ 16   $ (40 )
Earnings (loss) per share:
Basic earnings (loss) per common share $ 0.12   $ (0.16 ) $ 0.02   $ 0.15   $ (0.37 )
Diluted earnings (loss) per common share $ 0.12   $ (0.16 ) $ 0.02   $ 0.15   $ (0.37 )
Weighted-average common shares outstanding, basic   108     108     108     108     108  
Weighted-average common shares outstanding, diluted   108     108     108     108     108  
 
 
NOW INC.
SUPPLEMENTAL INFORMATION
 
BUSINESS SEGMENTS (UNAUDITED)
(In millions)
 
        Three Months Ended     Six Months Ended
June 30,     March 31, June 30,
2018     2017 2018 2018     2017
 
Revenue:
United States $ 600 $ 481 $ 562 $ 1,162 $ 920
Canada 75 79 102 177 175
International   102   91   100   202   187
Total revenue $ 777 $ 651 $ 764 $ 1,541 $ 1,282
 
 
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     Six Months Ended
June 30,     March 31, June 30,
2018     2017 2018 2018     2017
 
GAAP net income (loss) (1) $ 14 $ (17 ) $ 2 $ 16 $ (40 )
Interest, net 2 1 2 4 2
Income tax provision (benefit) 1 1 2
Depreciation and amortization 11 13 11 22 26
Other costs (2)   1     1         1     1  
EBITDA excluding other costs $ 29   $ (2 ) $ 16   $ 45   $ (11 )
EBITDA % excluding other costs (3) 3.7 % (0.3 %) 2.1 % 2.9 % (0.9 %)
 
NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS) EXCLUDING OTHER
COSTS RECONCILIATION (UNAUDITED)
(In millions)
 
        Three Months Ended     Six Months Ended
June 30,     March 31, June 30,
2018     2017 2018 2018     2017
 
GAAP net income (loss) (1) $ 14 $ (17 ) $ 2 $ 16 $ (40 )
Other costs, net of tax (4) (5)   (4 )   6     (1 )   (5 )   13  
Net income (loss) excluding other costs (5) $ 10   $ (11 ) $ 1   $ 11   $ (27 )
 

DILUTED EARNINGS (LOSS) PER SHARE TO NON-GAAP DILUTED EARNINGS
(LOSS) PER SHARE EXCLUDING

OTHER COSTS RECONCILIATION (UNAUDITED)

 
        Three Months Ended     Six Months Ended
June 30,     March 31, June 30,
2018     2017 2018 2018     2017
 
GAAP diluted earnings (loss) per share (1) $ 0.12 $ (0.16 ) $ 0.02 $ 0.15 $ (0.37 )
Other costs, net of tax (4)   (0.02 )   0.06     (0.01 )   (0.05 )   0.12  
Diluted earnings (loss) per share excluding other costs (5) $ 0.10   $ (0.10 ) $ 0.01   $ 0.10   $ (0.25 )
 

(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 includes severance expenses and accelerated debt
issuance costs, which are included in operating profit (loss) and
other expense, respectively.
(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 six months ended June
30, 2018, included a benefit of $5 million and $6 million, after
tax, respectively, from changes in the valuation allowance recorded
against the Company's deferred tax assets; as well as, $1 million
and $1 million, respectively, after tax, in severance expenses and
accelerated debt issuance costs, which are included in operating
profit (loss) and other expense, respectively. 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 and the six months
ended June 30, 2018.
(5) Totals may not foot due to rounding.
 

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