Market Overview

NOW Inc. Reports Fourth Quarter and Full-Year 2018 Results

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NOW Inc. (NYSE:DNOW) announced results for the fourth quarter and
full-year ended December 31, 2018.

Earnings Conference Call
February 14, 2019
8:00 a.m. CST
1
(800) 446-1671 (North America)
1 (847) 413-3362 (Outside North
America)
Webcast: ir.distributionnow.com

Fourth Quarter 2018 Financial Highlights

  • Revenue was $764 million for the fourth quarter of 2018, up 14 percent
    year over year.
  • Net income was $16 million for the fourth quarter of 2018, versus a
    net loss of $3 million a year ago. Non-GAAP net income excluding other
    costs was $11 million for the fourth quarter of 2018 compared to $1
    million a year ago.
  • Diluted earnings per share was $0.14 for the fourth quarter of 2018
    compared to a loss per share of $0.03 a year ago. Non-GAAP diluted
    earnings per share excluding other costs was $0.11 for the fourth
    quarter of 2018 compared to $0.01 a year ago.
  • Non-GAAP EBITDA excluding other costs for the fourth quarter of 2018
    was $31 million compared to $13 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, "We are encouraged
about delivering solid top line, bottom line and free cash flow results
in 2018, in a market that has seen, for the most part, an uneven
recovery. During the fourth quarter, we were able to sustain gross
margin percent gains, improve operating efficiencies, generate $69
million in free cash flow and reduce net debt to $16 million.

For 2019, many in the industry are forecasting a year softer than last,
especially in Canada. However, we expect the investments we made in
completions- and LNG-levered acquisitions during the downturn, will help
us offset these declines with 2019 revenue levels near our 2018 results
to down slightly in the low single-digit range. We enter the year with a
clean balance sheet, positioned to allocate capital towards further
differentiating us from our competitors, should the opportunities
present themselves in these uncertain market conditions."

Prior to the earnings conference call a presentation titled "NOW Inc.,
Fourth 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 265 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)
       
December 31, December 31,
2018 2017
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 116 $ 98
Receivables, net 482 423
Inventories, net 602 590
Prepaid and other current assets   19     18  
Total current assets 1,219 1,129
Property, plant and equipment, net 106 119
Deferred income taxes 2 2
Goodwill 314 328
Intangibles, net 144 166
Other assets   10     5  
Total assets $ 1,795   $ 1,749  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 329 $ 290
Accrued liabilities 110 103
Other current liabilities   2     1  
Total current liabilities 441 394
Long-term debt 132 162
Deferred income taxes 6 7
Other long-term liabilities   2     1  
Total liabilities 581 564
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;
108,426,962 and
108,030,438 shares issued and outstanding at December 31, 2018 and
2017, respectively
1 1
Additional paid-in capital 2,034 2,019
Accumulated deficit (678 ) (730 )
Accumulated other comprehensive loss   (143 )   (105 )
Total stockholders' equity   1,214     1,185  
Total liabilities and stockholders' equity $ 1,795   $ 1,749  
       
NOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In millions, except per share data)
   
Three Months Ended Year Ended
December 31, September 30, December 31,
2018 2017 2018 2018 2017
 
Revenue $ 764 $ 669 $ 822 $ 3,127 $ 2,648
Operating expenses:
Cost of products 607 541 654 2,497 2,147
Warehousing, selling and administrative   135     128     142     557     542  
Operating profit (loss) 22 26 73 (41 )
Other expense   (4 )   (3 )   (4 )   (15 )   (11 )
Income (loss) before income taxes 18 (3 ) 22 58 (52 )
Income tax provision (benefit)   2         2     6      
Net income (loss) $ 16   $ (3 ) $ 20   $ 52   $ (52 )
Earnings (loss) per share:
Basic earnings (loss) per common share $ 0.14   $ (0.03 ) $ 0.18   $ 0.47   $ (0.48 )
Diluted earnings (loss) per common share $ 0.14   $ (0.03 ) $ 0.18   $ 0.47   $ (0.48 )
Weighted-average common shares outstanding, basic   108     108     108     108     108  
Weighted-average common shares outstanding, diluted   109     108     109     109     108  
       
NOW INC.
SUPPLEMENTAL INFORMATION
           
BUSINESS SEGMENTS (UNAUDITED)
(In millions)
 
Three Months Ended Year Ended
December 31, September 30, December 31,
2018 2017 2018 2018 2017
 
Revenue:
United States $ 579 $ 488 $ 630 $ 2,371 $ 1,914
Canada 88 85 93 358 356
International   97   96   99   398   378
Total revenue $ 764 $ 669 $ 822 $ 3,127 $ 2,648
   
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 Year Ended
December 31, September 30, December 31,
2018 2017 2018 2018 2017
 
GAAP net income (loss) (1) $ 16 $ (3 ) $ 20 $ 52 $ (52 )
Interest, net 2 2 2 8 6
Income tax provision (benefit) 2 2 6
Depreciation and amortization 10 12 9 41 50
Other costs (2)   1     2         2     3  
EBITDA excluding other costs $ 31   $ 13   $ 33   $ 109   $ 7  
EBITDA % excluding other costs (3) 4.1 % 1.9 % 4.0 % 3.5 % 0.3 %
 
NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS) EXCLUDING OTHER
COSTS RECONCILIATION (UNAUDITED)
(In millions)
           
Three Months Ended Year Ended
December 31, September 30, December 31,
2018 2017 2018 2018 2017
 
GAAP net income (loss) (1) $ 16 $ (3 ) $ 20 $ 52 $ (52 )
Other costs, net of tax (4) (5)   (5 )   4     (3 )   (13 )   23  
Net income (loss) excluding other costs (5) $ 11   $ 1   $ 17   $ 39   $ (29 )
 

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

OTHER COSTS RECONCILIATION (UNAUDITED)

           
 
Three Months Ended Year Ended
December 31, September 30, December 31,
2018 2017 2018 2018 2017
 
GAAP diluted earnings (loss) per share (1) $ 0.14 $ (0.03 ) $ 0.18 $ 0.47 $ (0.48 )
Other costs, net of tax (4)   (0.03 )   0.04     (0.03 )   (0.11 )   0.21  
Diluted earnings (loss) per share excluding other costs (5) $ 0.11   $ 0.01   $ 0.15   $ 0.36   $ (0.27 )
 
(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 twelve months ended
December 31, 2018, included a benefit of $5 million and $14 million,
after tax, respectively, from changes in the 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 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 twelve months ended December 31, 2018.
(5) Totals may not foot due to rounding.

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