8-K
false 0001599617 0001599617 2019-11-06 2019-11-06

 

 

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 6, 2019

 

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.01

 

DNOW

 

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 


Item 2.02 Results of Operations and Financial Condition

On November 6, 2019, NOW Inc. issued a press release announcing earnings for the third quarter ended September 30, 2019 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 6, 2019 announcing the earnings results for the third quarter ended September 30, 2019.

         
 

104

   

Cover Page Interactive Data File (embedded within the Inline XBRL document)


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 6, 2019

 

NOW INC.

     

 

/s/ Raymond W. Chang

 

Raymond W. Chang

Vice President & General Counsel

EX-99.1

Exhibit 99.1

 

LOGO   

Earnings Conference Call

November 6, 2019

8:00 a.m. CST

1 (800) 446-1671 (North America)

1 (847) 413-3362 (Outside North America)

Webcast: ir.distributionnow.com

NOW Inc. Reports Third Quarter 2019 Results

HOUSTON, TX, November 6, 2019 – NOW Inc. (NYSE: DNOW) announced results for the third quarter ended September 30, 2019.

Third Quarter 2019 Financial Highlights

 

   

Revenue was $751 million for the third quarter of 2019

 

   

Net income was $10 million and non-GAAP net income excluding other costs was $9 million for the third quarter of 2019

 

   

Diluted earnings per share was $0.09 and non-GAAP diluted earnings per share excluding other costs was $0.08 for the third quarter of 2019

 

   

Non-GAAP EBITDA excluding other costs for the third quarter of 2019 was $24 million

 

   

Net cash provided by operating activities was $101 million for third quarter of 2019

 

   

Cash and cash equivalents was $113 million and long-term debt was zero at September 30, 2019

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

Dick Alario, Interim CEO of NOW Inc., noted, “The Company generated strong cash flow, improved gross margins and reduced operating costs this quarter, thanks to the hard work of our dedicated employees. We are excited that we achieved a debt-free position this quarter, which showcases the strength of our balance sheet. Even though market conditions have become more challenging as we close out 2019, we believe our expansive customer and supplier base, strong balance sheet, global distribution network and especially our proven and long-serving management team and employees, place the Company in a good position to advance its market strategy.”

Prior to the earnings conference call a presentation titled “NOW Inc., Third 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 255 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.

 

Contact:

David Cherechinsky

Senior Vice President and Chief Financial Officer

(281) 823-4722


NOW INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

     September 30,     December 31,  
     2019     2018  
     (Unaudited)        
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 113     $ 116  

Receivables, net

     466       482  

Inventories, net

     548       602  

Prepaid and other current assets

     21       19  
  

 

 

   

 

 

 

Total current assets

     1,148       1,219  

Property, plant and equipment, net

     117       106  

Deferred income taxes

     2       2  

Goodwill

     320       314  

Intangibles, net

     133       144  

Other assets

     70       10  
  

 

 

   

 

 

 

Total assets

   $ 1,790     $ 1,795  
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current liabilities:

    

Accounts payable

   $ 326     $ 329  

Accrued liabilities

     136       110  

Other current liabilities

     8       2  
  

 

 

   

 

 

 

Total current liabilities

     470       441  

Long-term debt

     —         132  

Long-term operating lease liabilities

     36       —    

Deferred income taxes

     5       6  

Other long-term liabilities

     12       2  
  

 

 

   

 

 

 

Total liabilities

     523       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; 108,798,362 and 108,426,962 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

     1       1  

Additional paid-in capital

     2,045       2,034  

Accumulated deficit

     (636     (678

Accumulated other comprehensive loss

     (143     (143
  

 

 

   

 

 

 

Total stockholders’ equity

     1,267       1,214  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,790     $ 1,795  
  

 

 

   

 

 

 

 

2


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,  
     2019     2018     2019     2019     2018  

Revenue

   $ 751     $ 822     $ 776     $ 2,312     $ 2,363  

Operating expenses:

          

Cost of products

     601       654       623       1,851       1,890  

Warehousing, selling and administrative

     136       142       136       407       422  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     14       26       17       54       51  

Other expense

     (2     (4     (2     (8     (11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     12       22       15       46       40  

Income tax provision

     2       2       1       4       4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 10     $ 20     $ 14     $ 42     $ 36  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

          

Basic earnings per common share

   $ 0.09     $ 0.18     $ 0.12     $ 0.38     $ 0.33  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

   $ 0.09     $ 0.18     $ 0.12     $ 0.38     $ 0.33  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding, basic

     109       108       109       109       108  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding, diluted

     109       109       109       109       109  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOW INC.

SUPPLEMENTAL INFORMATION

BUSINESS SEGMENTS (UNAUDITED)

(In millions)

 

     Three Months Ended      Nine Months Ended  
     September 30,      June 30,      September 30,  
     2019      2018      2019      2019      2018  

Revenue:

              

United States

   $ 567      $ 630      $ 605      $ 1,772      $ 1,792  

Canada

     83        93        74        243        270  

International

     101        99        97        297        301  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 751      $ 822      $ 776      $ 2,312      $ 2,363  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

3


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     Nine Months Ended  
     September 30,     June 30,     September 30,  
     2019     2018     2019     2019     2018  

GAAP net income (1)

   $ 10     $ 20     $ 14     $ 42     $ 36  

Interest, net

     1       2       1       4       6  

Income tax provision

     2       2       1       4       4  

Depreciation and amortization

     10       9       10       30       31  

Other costs (2)

     1       —         1       2       1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA excluding other costs

   $ 24     $ 33     $ 27     $ 82     $ 78  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA % excluding other costs (3)

     3.2     4.0     3.5     3.5     3.3

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

(In millions)

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,  
     2019     2018     2019     2019     2018  

GAAP net income (1)

   $ 10     $ 20     $ 14     $ 42     $ 36  

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

     (1     (3     (4     (10     (8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income excluding other costs (5)

   $ 9     $ 17     $ 10     $ 32     $ 28  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

DILUTED EARNINGS PER SHARE TO NON-GAAP DILUTED EARNINGS PER SHARE EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,  
     2019     2018     2019     2019     2018  

GAAP diluted earnings per share (1)

   $ 0.09     $ 0.18     $ 0.12     $ 0.38     $ 0.33  

Other costs, net of tax (4)

     (0.01     (0.03     (0.03     (0.09     (0.08
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share excluding other costs (5)

   $ 0.08     $ 0.15     $ 0.09     $ 0.29     $ 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 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 the transaction costs associated with acquisition activity and severance expenses which are 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 and nine months ended September 30, 2019, included a benefit of $2 million and $12 million, after tax, respectively, from changes in the valuation allowance recorded against the Company’s deferred tax assets; as well as, $1 million and $2 million, respectively, after tax, related to transaction costs associated with acquisition activity and severance expenses, which are included in operating profit.

(5)

Totals may not foot due to rounding.

 

4