Market Overview

NOW Inc. Reports First Quarter 2019 Results

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NOW Inc. (NYSE:DNOW) announced results for the first quarter ended
March 31, 2019.

Earnings Conference Call
May 2, 2019
8:00 a.m. CST
1
(800) 446-1671 (North America)
1 (847) 413-3362 (Outside North
America)
Webcast: ir.distributionnow.com

First Quarter 2019 Financial Highlights

  • Revenue was $785 million for the first quarter of 2019, up three
    percent year over year.
  • Net income was $18 million for the first quarter of 2019, versus $2
    million a year ago. Non-GAAP net income excluding other costs was $13
    million for the first quarter of 2019 compared to $1 million a year
    ago.
  • Diluted earnings per share was $0.16 for the first quarter of 2019
    compared to $0.02 a year ago. Non-GAAP diluted earnings per share
    excluding other costs was $0.12 for the first quarter of 2019 compared
    to $0.01 a year ago.
  • Non-GAAP EBITDA excluding other costs for the first quarter of 2019
    was $31 million compared to $16 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., commented, "We are
excited that the organization was able to generate year over year and
sequential revenue growth, especially considering the slowdown in
completions in North America at the end of 2018 and persistent takeaway
issues in both the Permian Basin and Canada. Top line improvements with
midstream customers and increased activity with offshore operators and
drilling contractors aided in producing these results.

"While land rig activity in North America has declined recently, the
shift of budgets to completions, in addition to order bookings for
midstream projects and pipeline pumps to be delivered later in the year,
may offset some of the headwinds expected in North America."

Prior to the earnings conference call a presentation titled "NOW Inc.,
First Quarter 2019 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 260 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,
  2019     2018  
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 87 $ 116
Receivables, net 513 482
Inventories, net 634 602
Prepaid and other current assets   18     19  
Total current assets 1,252 1,219
Property, plant and equipment, net 110 106
Deferred income taxes 2 2
Goodwill 318 314
Intangibles, net 140 144
Other assets   74     10  
Total assets $ 1,896   $ 1,795  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 339 $ 329
Accrued liabilities 130 110
Other current liabilities   6     2  
Total current liabilities 475 441
Long-term debt 124 132
Long-term operating lease liabilities 40
Deferred income taxes 5 6
Other long-term liabilities   7     2  
Total liabilities 651 581
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;
108,708,922 and
108,426,962 shares issued and outstanding at March 31, 2019 and
December 31, 2018, respectively
1 1
Additional paid-in capital 2,037 2,034
Accumulated deficit (660 ) (678 )
Accumulated other comprehensive loss   (133 )   (143 )
Total stockholders' equity   1,245     1,214  
Total liabilities and stockholders' equity $ 1,896   $ 1,795  
 
The Company adopted ASC 842, Leases, effective January 1, 2019
resulting in the addition of $70 million in assets and liabilities
on the Company's first quarter 2019 consolidated balance sheet.
 
NOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In millions, except per share data)
     
Three Months Ended
March 31, December 31,
  2019     2018     2018  
 
Revenue $ 785 $ 764 $ 764
Operating expenses:
Cost of products 627 616 607
Warehousing, selling and administrative   135     141     135  
Operating profit 23 7 22
Other expense   (4 )   (4 )   (4 )
Income before income taxes 19 3 18
Income tax provision   1     1     2  
Net income $ 18   $ 2   $ 16  
Earnings per share:
Basic earnings per common share $ 0.17   $ 0.02   $ 0.14  
Diluted earnings per common share $ 0.16   $ 0.02   $ 0.14  
Weighted-average common shares outstanding, basic   109     108     108  
Weighted-average common shares outstanding, diluted   109     108     109  
 
NOW INC.
SUPPLEMENTAL INFORMATION
       
BUSINESS SEGMENTS (UNAUDITED)
(In millions)
 
Three Months Ended
March 31, December 31,
  2019   2018   2018
 
Revenue:
United States $ 600 $ 562 $ 579
Canada 86 102 88
International   99   100   97
Total revenue $ 785 $ 764 $ 764
 
 
NOW INC.
SUPPLEMENTAL INFORMATION (CONTINUED)
       
U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP
RECONCILIATIONS
 
NET INCOME TO NON-GAAP EBITDA EXCLUDING OTHER COSTS
RECONCILIATION (UNAUDITED)
(In millions)
 
Three Months Ended
March 31, December 31,
  2019     2018     2018  
 
GAAP net income (1) $ 18 $ 2 $ 16
Interest, net 2 2 2
Income tax provision 1 1 2
Depreciation and amortization 10 11 10
Other costs (2)           1  
EBITDA excluding other costs $ 31   $ 16   $ 31  
EBITDA % excluding other costs (3) 3.9 % 2.1 % 4.1 %
NET INCOME TO NON-GAAP NET INCOME EXCLUDING OTHER COSTS
RECONCILIATION (UNAUDITED)
  (In millions)
     
Three Months Ended
March 31, December 31,
  2019     2018     2018  
 
GAAP net income (1) $ 18 $ 2 $ 16
Other costs, net of tax (4) (5)   (5 )   (1 )   (5 )
Net income excluding other costs (5) $ 13   $ 1   $ 11  
DILUTED EARNINGS PER SHARE TO NON-GAAP DILUTED EARNINGS PER SHARE
EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)
       
Three Months Ended
March 31, December 31,
  2019     2018     2018  
 
GAAP diluted earnings per share (1) $ 0.16 $ 0.02 $ 0.14
Other costs, net of tax (4)   (0.04 )   (0.01 )   (0.03 )
Diluted earnings per share excluding other costs (5) $ 0.12   $ 0.01   $ 0.11  
(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
excluding other costs and (iii) diluted earnings 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 which is included in
operating profit.
(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, 2019
and 2018, respectively, included a benefit of $5 million and $1
million, after tax, respectively, from changes in the valuation
allowance recorded against the Company's deferred tax assets.
(5) Totals may not foot due to rounding.

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