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.	

Exhibit 99.1

 
 	 	 	
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.