Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 3, 2015

 

 

NOW INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36325   46-4191184

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

7402 North Eldridge Parkway

Houston, Texas

  77041
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: 281-823-4700

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition

On November 3, 2015, NOW Inc. issued a press release announcing earnings for the third quarter ended September 30, 2015 and conference call in connection therewith. A copy of the release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

The information contained in this Current Report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

The following exhibit is provided as part of the information furnished under Item 2.02 of this Current Report on Form 8-K:

 

99.1    NOW Inc. press release dated November 3, 2015 announcing the earnings results for the third quarter ended September 30, 2015.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 3, 2015       NOW INC.
     

/s/ Raymond W. Chang

     

Raymond W. Chang

Vice President & General Counsel


Index to Exhibits

 

99.1    NOW Inc. press release dated November 3, 2015 announcing the earnings results for the third quarter ended September 30, 2015.
EX-99.1

Exhibit 99.1

 

LOGO

 

NEWS

 
  Contact: Daniel Molinaro
  281-823-4941

FOR IMMEDIATE RELEASE

NOW Inc. Announces Third Quarter 2015 Financial Results

HOUSTON, TX, November 3, 2015—NOW Inc. (NYSE: DNOW) reported for its third quarter ended September 30, 2015 a net loss of $224 million, or $(2.09) per fully diluted share, compared to second quarter ended June 30, 2015 net loss of $19 million, or $(0.18) per fully diluted share. Excluding other costs, net loss was $18 million or $(0.17) per fully diluted share. Third quarter pre-tax other costs included an estimated $255 million non-cash goodwill impairment associated with the fair value of goodwill and $5 million in acquisition-related and severance charges.

Also included in our third quarter results is a pre-tax $16 million charge, the impact approximating $(0.10) per fully diluted share, for high steel content inventory cost adjustments, related to falling steel prices.

The Company’s revenues for the third quarter of 2015 were $753 million, an increase of less than one percent from the second quarter of 2015. Excluding incremental revenues attributable to acquisitions of approximately $20 million, sequential revenues declined two percent. Free cash flow for the third quarter was $161 million, an increase of $215 million from the year ago period and an increase of $70 million sequentially, driven by improved performance and reductions in receivables and inventory in 2015.

Robert Workman, President and CEO of NOW Inc., commented “During the third quarter, we continued to see contraction in the market with unrelenting land rig count declines in the United States, a tepid emergence from seasonal break-up in Canada and continued stacking and scrapping of deep-water offshore rigs globally. While we navigate this uncertain environment, our focus remains on what we can control. Our year-to-date free cash flow has been robust at $236 million and we anticipate further gains as we work to improve our working capital position.

“We were pleased to complete the acquisition of two businesses in the quarter, Odessa Pumps and Equipment in the United States, and a supplier of valves and actuators in Canada. We will continue integrating the nine acquisitions we have completed since the spin-off. We will maintain our focus on DistributionNOW’s long-term growth strategy positioning our company to withstand the current market downturn and to take advantage of an eventual market recovery.”

United States

Third quarter revenues for the United States were $497 million, flat with the second quarter of 2015, and a decrease of 34 percent from the third quarter of 2014. Excluding incremental revenues attributable to acquisitions of approximately $20 million, sequential revenues declined four percent, outperforming the U.S. rig count decline of five percent in the third quarter of 2015.

Canada

Revenues for the third quarter of 2015 for Canada were $94 million, up six percent compared to second quarter 2015 results and down 46 percent from the third quarter of 2014, outperforming the 50 percent Canadian rig count decline since the third quarter of 2014 and despite a weakened Canadian dollar. Canada’s sequential revenue increase was driven by a modestly improved but still depressed energy market.

International

International operations generated third quarter revenues of $162 million, which were down two percent from the second quarter of 2015 and up nine percent from the third quarter of 2014. Sequential revenues were down primarily from reduced market activity and customer spend.


The Company has scheduled a conference call for November 3, 2015, at 8:00 a.m. Central Time to discuss third quarter results. The call will be broadcast through the Investor Relations link on NOW Inc.’s web site at www.distributionnow.com, on a listen-only basis. A replay of the call will be available on the site for thirty days following the conference. Participants may also join the conference call by dialing 1-800-446-1671 within North America or 1-847-413-3362 outside of North America five to ten minutes prior to the scheduled start time and asking for the “NOW Inc. Earnings Conference Call” or the “DistributionNOW Earnings Conference Call.”

Additionally, concurrent to this release, the Company has provided a summary of this financial information, which includes annual and sequential comparisons that can be found through the Investor Relations link on its web site under the Events and Presentation tab.

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 operates primarily under the DistributionNOW and Wilson Export brands. Through its network of more than 300 locations and 5,000 employees worldwide, NOW 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)

 

     September 30,     December 31,  
     2015     2014  
     (Unaudited)        
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 126      $ 195   

Receivables, net

     564        851   

Inventories, net

     771        949   

Deferred income taxes

     47        22   

Prepaid and other current assets

     24        30   
  

 

 

   

 

 

 

Total current assets

     1,532        2,047   

Property, plant and equipment, net

     162        124   

Deferred income taxes

     43        2   

Goodwill

     296        346   

Intangibles, net

     148        73   

Other assets

     5        4   
  

 

 

   

 

 

 

Total assets

   $ 2,186      $ 2,596   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current liabilities:

    

Accounts payable

   $ 292      $ 490   

Accrued liabilities

     97        125   

Other current liabilities

     —          5   
  

 

 

   

 

 

 

Total current liabilities

     389        620   

Long-term debt

     120        —     

Deferred income taxes

     15        10   

Other long-term liabilities

     4        —     
  

 

 

   

 

 

 

Total liabilities

     528        630   

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; 107,204,061 and 107,067,457 shares issued and outstanding, respectively

     1        1   

Additional paid-in capital

     1,969        1,952   

Retained earnings (deficit)

     (195     58   

Accumulated other comprehensive loss

     (117     (45
  

 

 

   

 

 

 

Total stockholders’ equity

     1,658        1,966   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $  2,186      $  2,596   
  

 

 

   

 

 

 


NOW INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data)

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,  
     2015     2014     2015     2015     2014  

Revenue

   $ 753      $ 1,070      $ 750      $ 2,366      $ 3,099   

Operating expenses:

          

Cost of products

     636        857        626        1,970        2,485   

Warehousing, selling and administrative

     153        163        151        467        459   

Impairment of goodwill

     255        —          —          255        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit (loss)

     (291     50        (27     (326     155   

Other income (expense)

     —          (1     (2     (6     (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (291     49        (29     (332     154   

Income tax provision (benefit)

     (67     17        (10     (79     54   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (224   $ 32      $ (19   $ (253   $ 100   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share:

          

Basic earnings (loss) per common share

   $ (2.09   $ 0.30      $ (0.18   $ (2.36   $ 0.93   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per common share

   $ (2.09   $ 0.30      $ (0.18   $ (2.36   $ 0.93   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding, basic

     107        107        107        107        107   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding, diluted

     107        108        107        107        108   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOW INC.

SUPPLEMENTAL INFORMATION

BUSINESS SEGMENTS (UNAUDITED)

(In millions)

 

     Three Months Ended      Nine Months Ended  
     September 30,      June 30,      September 30,  
     2015      2014      2015      2015      2014  

Revenue:

              

United States

   $ 497       $ 748       $ 496       $ 1,594       $ 2,114   

Canada

     94         173         89         299         489   

International

     162         149         165         473         496   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     753         1,070         750         2,366         3,099   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


NOW INC.

SUPPLEMENTAL INFORMATION (CONTINUED)

 

NET INCOME (LOSS) TO EBITDA EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

(In millions)

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,  
     2015     2014     2015     2015     2014  

Net income (loss) (1)

   $ (224   $ 32      $ (19   $ (253   $ 100   

Interest, net

     1        —          —          1        —     

Income tax provision (benefit)

     (67     17        (10     (79     54   

Depreciation and amortization

     10        4        9        26        14   

Other costs (2)

     260        —          3        272        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA excluding other costs

   $ (20   $ 53      $ (17   $ (33   $ 168   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA % excluding other costs (3)

     -2.7     5.0     -2.3     -1.4     5.4

DILUTED EARNINGS PER SHARE (“EPS”) TO DILUTED EPS EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

 

     Three Months Ended     Nine Months Ended  
     September 30,      June 30,     September 30,  
     2015     2014      2015     2015     2014  

GAAP diluted earnings (loss) per share (4)

   $ (2.09   $ 0.30       $ (0.18   $ (2.36   $ 0.93   

Other costs (2)

     1.92        —           0.02        2.00        —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per share excluding other costs

   $ (0.17   $ 0.30       $ (0.16   $ (0.36   $ 0.93   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

(1) We believe that net income (loss) is the financial measure calculated and presented in accordance with U.S. generally accepted accounting principles that is most directly comparable to EBITDA excluding other costs. EBITDA excluding other costs measures the Company’s operating performance without regard to certain expenses. EBITDA excluding other costs is not a presentation made in accordance with GAAP and the Company’s computation of EBITDA excluding other costs may vary from others in the industry. EBITDA excluding other costs has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.
(2) Other costs primarily includes the estimated goodwill impairment of $255 million in the three and nine months ended September 30, 2015 and the transaction costs associated with acquisitions including the cost of inventory that was stepped up to fair value during purchase accounting related to acquisitions and severance expenses which are included in operating profit (loss). Other costs, net of tax, in the quarter ended September 30, 2015, June 30, 2015 and March 31, 2015 were approximately $206 million, $2 million and $7 million, respectively.
(3) EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue.
(4) We believe that diluted earnings (loss) per share is the financial measure calculated and presented in accordance with U.S. generally accepted accounting principles that is most directly comparable to diluted earnings (loss) per share excluding other costs. Diluted earnings (loss) per share excluding other costs measures the Company’s operating performance without regard to certain expenses. Diluted earnings (loss) per share excluding other costs is not a presentation made in accordance with GAAP and the Company’s computation of diluted earnings (loss) per share excluding other costs may vary from others in the industry. Diluted earnings (loss) per share excluding other costs has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.