Market Overview

NOW Inc. Reports Second Quarter 2019 Results

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NOW Inc. (NYSE:DNOW) announced results for the second quarter ended June 30, 2019.

Second Quarter 2019 Financial Highlights

  • Revenue was $776 million for the second quarter of 2019, relatively flat year over year.
  • Net income was $14 million for the second quarter of 2019, unchanged from a year ago. Non-GAAP net income excluding other costs was $10 million for the second quarter of both 2019 and 2018.
  • Diluted earnings per share was $0.12 for the second quarter of 2019, unchanged from a year ago. Non-GAAP diluted earnings per share excluding other costs was $0.09 for the second quarter of 2019 compared to $0.10 a year ago.
  • Non-GAAP EBITDA excluding other costs for the second quarter of 2019 was $27 million compared to $29 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 pleased by the performance of our U.S. Process Solutions team as they exceeded pre-acquisition second quarter 2014 revenue levels, back when U.S. rig counts were nearly double the levels we're seeing today. This was achieved by leveraging our full suite of products and infrastructure throughout the major shale plays and by bundling opportunities through our U.S. Energy Centers and U.S. Supply Chain Services channels.

We completed two small acquisitions late in the quarter. One expanded our territory with a manufacturing supplier and another addresses choke points for our production equipment and positioned our process packaging capabilities closer to the Eagle Ford, Permian and downstream markets. This quarter we generated $66 million in free cash flow, cut our balance outstanding on our credit facility in half sequentially and returned to a net cash position. Finally, even though the market is softer now than we originally anticipated when we first gave guidance for 2019, our revenue outlook remains unchanged as we believe we can deliver 2019 year-over-year revenue levels near our 2018 results to down slightly in the low single-digit percentage range."

Prior to the earnings conference call a presentation titled "NOW Inc., Second 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 4,600 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)
 

June 30,

December 31,

2019

2018

(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents

$

80

 

$

116

 

Receivables, net

 

496

 

 

482

 

Inventories, net

 

598

 

 

602

 

Prepaid and other current assets

 

21

 

 

19

 

Total current assets

 

1,195

 

 

1,219

 

Property, plant and equipment, net

 

115

 

 

106

 

Deferred income taxes

 

2

 

 

2

 

Goodwill

 

324

 

 

314

 

Intangibles, net

 

139

 

 

144

 

Other assets

 

74

 

 

10

 

Total assets

$

1,849

 

$

1,795

 

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

336

 

$

329

 

Accrued liabilities

 

125

 

 

110

 

Other current liabilities

 

7

 

 

2

 

Total current liabilities

 

468

 

 

441

 

Long-term debt

 

62

 

 

132

 

Long-term operating lease liabilities

 

40

 

Deferred income taxes

 

5

 

 

6

 

Other long-term liabilities

 

10

 

 

2

 

Total liabilities

 

585

 

 

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; 108,795,797 and
108,426,962 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

1

 

 

1

 

Additional paid-in capital

 

2,041

 

 

2,034

 

Accumulated deficit

 

(646

)

 

(678

)

Accumulated other comprehensive loss

 

(132

)

 

(143

)

Total stockholders' equity

 

1,264

 

 

1,214

 

Total liabilities and stockholders' equity

$

1,849

 

$

1,795

 

 
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,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2019

 

 

 

2018

 

 
Revenue

$

776

 

$

777

 

$

785

 

$

1,561

 

$

1,541

 

Operating expenses:
Cost of products

 

623

 

 

620

 

 

627

 

 

1,250

 

 

1,236

 

Warehousing, selling and administrative

 

136

 

 

139

 

 

135

 

 

271

 

 

280

 

Operating profit

 

17

 

 

18

 

 

23

 

 

40

 

 

25

 

Other expense

 

(2

)

 

(3

)

 

(4

)

 

(6

)

 

(7

)

Income before income taxes

 

15

 

 

15

 

 

19

 

 

34

 

 

18

 

Income tax provision

 

1

 

 

1

 

 

1

 

 

2

 

 

2

 

Net income

$

14

 

$

14

 

$

18

 

$

32

 

$

16

 

Earnings per share:
Basic earnings per common share

$

0.12

 

$

0.12

 

$

0.17

 

$

0.29

 

$

0.15

 

Diluted earnings per common share

$

0.12

 

$

0.12

 

$

0.16

 

$

0.29

 

$

0.15

 

Weighted-average common shares outstanding, basic

 

109

 

 

108

 

 

109

 

 

109

 

 

108

 

Weighted-average common shares outstanding, diluted

 

109

 

 

108

 

 

109

 

 

109

 

 

108

 

 
NOW INC.
SUPPLEMENTAL INFORMATION
 
BUSINESS SEGMENTS (UNAUDITED)

(In millions)

 

Three Months Ended

 

Six Months Ended

June 30,

 

March 31,

 

June 30,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2019

 

 

 

2018

 

Revenue:
United States

$

605

 

$

600

 

$

600

 

$

1,205

 

$

1,162

 

Canada

 

74

 

 

75

 

 

86

 

 

160

 

 

177

 

International

 

97

 

 

102

 

 

99

 

 

196

 

 

202

 

Total revenue

$

776

 

$

777

 

$

785

 

$

1,561

 

$

1,541

 

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

 

Six Months Ended

June 30,

 

March 31,

 

June 30,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2019

 

 

 

2018

 

 
GAAP net income (1)

$

14

 

$

14

 

$

18

 

$

32

 

$

16

 

Interest, net

 

1

 

 

2

 

 

2

 

 

3

 

 

4

 

Income tax provision

 

1

 

 

1

 

 

1

 

 

2

 

 

2

 

Depreciation and amortization

 

10

 

 

11

 

 

10

 

 

20

 

 

22

 

Other costs (2)

 

1

 

 

1

 

 

1

 

 

1

 

EBITDA excluding other costs

$

27

 

$

29

 

$

31

 

$

58

 

$

45

 

EBITDA % excluding other costs (3)

 

3.5

%

 

3.7

%

 

3.9

%

 

3.7

%

 

2.9

%

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

Three Months Ended

 

Six Months Ended

June 30,

 

March 31,

 

June 30,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2019

 

 

 

2018

 

 
GAAP net income (1)

$

14

 

$

14

 

$

18

 

$

32

 

$

16

 

Other costs, net of tax (4) (5)

 

(4

)

 

(4

)

 

(5

)

 

(9

)

 

(5

)

Net income excluding other costs (5)

$

10

 

$

10

 

$

13

 

$

23

 

$

11

 

 
DILUTED EARNINGS PER SHARE TO NON-GAAP DILUTED EARNINGS PER SHARE EXCLUDING OTHER COSTS
RECONCILIATION (UNAUDITED)
 
Three Months Ended Six Months Ended
June 30, March 31, June 30,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2019

 

 

 

2018

 

 
GAAP diluted earnings per share (1)

$

0.12

 

$

0.12

 

$

0.16

 

$

0.29

 

$

0.15

 

Other costs, net of tax (4)

 

(0.03

)

 

(0.02

)

 

(0.04

)

 

(0.08

)

 

(0.05

)

Diluted earnings per share excluding other costs (5)

$

0.09

 

$

0.10

 

$

0.12

 

$

0.21

 

$

0.10

 

 

(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 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 primarily includes the transaction costs associated with acquisition activity in 2019.

(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, 2019, included a benefit of $5 million and $10 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, primarily related to transaction costs associated with acquisition activity, which are included in operating profit.

(5)

Totals may not foot due to rounding.

 

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