November 23, 2020

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NOW Inc. Reports Third Quarter 2020 Results

HOUSTON--(BUSINESS WIRE)--#DNOW--NOW Inc. (NYSE: DNOW) announced results for the third quarter ended September 30, 2020. Financial Highlights Revenue was $326 million for the third quarter of 2020 Net loss was $22 million and non-GAAP net loss excluding other costs was $17 million for the third quarter of 2020 Diluted loss per share was $0.20 and non-GAAP diluted loss per share excluding other costs was $0.16 for the third quarter of 2020 Non-GAAP EBITDA excluding other costs for the third quarter of 2020 was a loss of $15 million, which includes the unfavorable impact of $9 million in inventory charges Cash and cash equivalents was $325 million and long-term debt was zero at September 30, 2020 Free cash flow for the third quarter of 2020 was $57 million David Cherechinsky, President and CEO of NOW Inc., added, “I am excited about the momentum building in the execution of our strategy. DNOW’s performance reflects our employees’ steadfast dedication to provide superior service and value to our customers. We have produced strong gross margins despite the deflationary pull by the market and have extracted historic levels of cost from the business with plans for further cost transformation. Our working capital discipline has resulted in a record cash balance and we are deploying disruptive technologies to simplify the customer experience, develop new revenue channels and drive efficiencies. We remain debt free with more than a half a billion dollars in total liquidity to continue our investment in technology initiatives, while judiciously pursuing inorganic opportunities that provide the optimal strategic fit.” About NOW Inc. DistributionNOW is a worldwide supplier of energy and industrial products and engineered equipment solutions. With approximately 2,550 employees and a network of approximately 200 locations worldwide, we offer a suite of digital solutions branded as DigitalNOW® that provide customers world-class technology for digital commerce and data and information management. Our locations provide products and solutions to exploration and production companies, energy transmission and storage companies, refineries, chemical companies, utilities, mining, municipal water, manufacturers and engineering and construction companies. DistributionNOW has a legacy of over 150 years and is headquartered in Houston, Texas. 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, 2020 2019 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 325 $ 183 Receivables, net 213 370 Inventories, net 318 465 Assets held-for-sale 6 34 Prepaid and other current assets 16 15 Total current assets 878 1,067 Property, plant and equipment, net 101 120 Deferred income taxes 2 2 Goodwill − 245 Intangibles, net − 90 Other assets 58 67 Total assets $ 1,039 $ 1,591 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 163 $ 255 Accrued liabilities 94 127 Liabilities held-for-sale 1 6 Other current liabilities 6 8 Total current liabilities 264 396 Long-term operating lease liabilities 29 34 Deferred income taxes − 4 Other long-term liabilities 15 13 Total liabilities 308 447 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; 109,379,627 and 109,207,678 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 1 1 Additional paid-in capital 2,050 2,046 Accumulated deficit (1,164 ) (775 ) Accumulated other comprehensive loss (156 ) (128 ) Total stockholders' equity 731 1,144 Total liabilities and stockholders' equity $ 1,039 $ 1,591 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, 2020 2019 2020 2020 2019 Revenue $ 326 $ 751 $ 370 $ 1,300 $ 2,312 Operating expenses: Cost of products 264 601 302 1,053 1,851 Warehousing, selling and administrative 83 136 97 310 407 Impairment charges − − − 320 − Operating profit (loss) (21 ) 14 (29 ) (383 ) 54 Other expense − (2 ) (2 ) (2 ) (8 ) Income (loss) before income taxes (21 ) 12 (31 ) (385 ) 46 Income tax provision (benefit) 1 2 (1 ) (2 ) 4 Net income (loss) $ (22 ) $ 10 $ (30 ) $ (383 ) $ 42 Earnings (loss) per share: Basic earnings (loss) per common share $ (0.20 ) $ 0.09 $ (0.27 ) $ (3.50 ) $ 0.38 Diluted earnings (loss) per common share $ (0.20 ) $ 0.09 $ (0.27 ) $ (3.50 ) $ 0.38 Weighted-average common shares outstanding, basic 109 109 109 109 109 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, 2020 2019 2020 2020 2019 Revenue: United States $ 228 $ 567 $ 260 $ 929 $ 1,772 Canada 42 83 41 161 243 International 56 101 69 210 297 Total revenue $ 326 $ 751 $ 370 $ 1,300 $ 2,312 NOW INC. SUPPLEMENTAL INFORMATION (CONTINUED) U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP RECONCILIATIONS NET INCOME (LOSS) TO NON-GAAP EBITDA EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED) (In millions) Three Months Ended Nine Months Ended September 30, June 30, September 30, 2020 2019 2020 2020 2019 GAAP net income (loss) (1) $ (22 ) $ 10 $ (30 ) $ (383 ) $ 42 Interest, net − 1 − − 4 Income tax provision (benefit) 1 2 (1 ) (2 ) 4 Depreciation and amortization 6 10 7 23 30 Other costs (2) − 1 9 334 2 EBITDA excluding other costs $ (15 ) $ 24 $ (15 ) $ (28 ) $ 82 EBITDA % excluding other costs (3) (4.6 %) 3.2 % (4.1 %) (2.2 %) 3.5 % NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS) EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED) (In millions) Three Months Ended Nine Months Ended September 30, June 30, September 30, 2020 2019 2020 2020 2019 GAAP net income (loss) (1) $ (22 ) $ 10 $ (30 ) $ (383 ) $ 42 Other costs, net of tax (4) (5) 5 (1 ) 12 340 (10 ) Net income (loss) excluding other costs (5) $ (17 ) $ 9 $ (18 ) $ (43 ) $ 32 DILUTED EARNINGS (LOSS) PER SHARE TO NON-GAAP DILUTED EARNINGS (LOSS) PER SHARE EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED) Three Months Ended Nine Months Ended September 30, June 30, September 30, 2020 2019 2020 2020 2019 GAAP diluted earnings (loss) per share (1) $ (0.20 ) $ 0.09 $ (0.27 ) $ (3.50 ) $ 0.38 Other costs, net of tax (4) 0.04 (0.01 ) 0.11 3.10 (0.09 ) Diluted earnings (loss) per share excluding other costs (5) $ (0.16 ) $ 0.08 $ (0.16 ) $ (0.40 ) $ 0.29 (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 (loss) excluding other costs and (iii) diluted earnings (loss) 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 for the nine months ended September 30, 2020 included impairment charges, as well as, net separation and transaction-related expenses, which are included in operating loss. (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, 2020, included an expense of $5 million and $10 million, respectively, from changes in the valuation allowance recorded against the Company’s deferred tax assets; as well as, nil and $316 million, respectively, related to the impairment charges of goodwill, intangibles and other assets and nil and $14 million, respectively, in net separation and transaction-related expenses. The Company has excluded the impact of these items on its valuation allowance in computing net income (loss) excluding other costs. (5) Totals may not foot due to rounding. Contacts Mark Johnson Senior Vice President and Chief Financial Officer (281) 823-4754

HOUSTON–(BUSINESS WIRE)–#DNOW–NOW Inc. (NYSE: DNOW) announced results for the third quarter ended September 30, 2020.

Financial Highlights

  • Revenue was $326 million for the third quarter of 2020
  • Net loss was $22 million and non-GAAP net loss excluding other costs was $17 million for the third quarter of 2020
  • Diluted loss per share was $0.20 and non-GAAP diluted loss per share excluding other costs was $0.16 for the third quarter of 2020
  • Non-GAAP EBITDA excluding other costs for the third quarter of 2020 was a loss of $15 million, which includes the unfavorable impact of $9 million in inventory charges
  • Cash and cash equivalents was $325 million and long-term debt was zero at September 30, 2020
  • Free cash flow for the third quarter of 2020 was $57 million

David Cherechinsky, President and CEO of NOW Inc., added, “I am excited about the momentum building in the execution of our strategy. DNOW’s performance reflects our employees’ steadfast dedication to provide superior service and value to our customers. We have produced strong gross margins despite the deflationary pull by the market and have extracted historic levels of cost from the business with plans for further cost transformation. Our working capital discipline has resulted in a record cash balance and we are deploying disruptive technologies to simplify the customer experience, develop new revenue channels and drive efficiencies. We remain debt free with more than a half a billion dollars in total liquidity to continue our investment in technology initiatives, while judiciously pursuing inorganic opportunities that provide the optimal strategic fit.”

About NOW Inc.

DistributionNOW is a worldwide supplier of energy and industrial products and engineered equipment solutions. With approximately 2,550 employees and a network of approximately 200 locations worldwide, we offer a suite of digital solutions branded as DigitalNOW® that provide customers world-class technology for digital commerce and data and information management. Our locations provide products and solutions to exploration and production companies, energy transmission and storage companies, refineries, chemical companies, utilities, mining, municipal water, manufacturers and engineering and construction companies. DistributionNOW has a legacy of over 150 years and is headquartered in Houston, Texas.

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,

2020

2019

(Unaudited)

ASSETS

Current assets:
Cash and cash equivalents

$

325

$

183

Receivables, net

213

370

Inventories, net

318

465

Assets held-for-sale

6

34

Prepaid and other current assets

16

15

Total current assets

878

1,067

Property, plant and equipment, net

101

120

Deferred income taxes

2

2

Goodwill

245

Intangibles, net

90

Other assets

58

67

Total assets

$

1,039

$

1,591

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable

$

163

$

255

Accrued liabilities

94

127

Liabilities held-for-sale

1

6

Other current liabilities

6

8

Total current liabilities

264

396

Long-term operating lease liabilities

29

34

Deferred income taxes

4

Other long-term liabilities

15

13

Total liabilities

308

447

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; 109,379,627 and
109,207,678 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

1

1

Additional paid-in capital

2,050

2,046

Accumulated deficit

(1,164

)

(775

)

Accumulated other comprehensive loss

(156

)

(128

)

Total stockholders' equity

731

1,144

Total liabilities and stockholders' equity

$

1,039

$

1,591

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,

2020

2019

2020

2020

2019

Revenue

$

326

$

751

$

370

$

1,300

$

2,312

Operating expenses:
Cost of products

264

601

302

1,053

1,851

Warehousing, selling and administrative

83

136

97

310

407

Impairment charges

320

Operating profit (loss)

(21

)

14

(29

)

(383

)

54

Other expense

(2

)

(2

)

(2

)

(8

)

Income (loss) before income taxes

(21

)

12

(31

)

(385

)

46

Income tax provision (benefit)

1

2

(1

)

(2

)

4

Net income (loss)

$

(22

)

$

10

$

(30

)

$

(383

)

$

42

Earnings (loss) per share:
Basic earnings (loss) per common share

$

(0.20

)

$

0.09

$

(0.27

)

$

(3.50

)

$

0.38

Diluted earnings (loss) per common share

$

(0.20

)

$

0.09

$

(0.27

)

$

(3.50

)

$

0.38

Weighted-average common shares outstanding, basic

109

109

109

109

109

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,

2020

2019

2020

2020

2019

Revenue:
United States

$

228

$

567

$

260

$

929

$

1,772

Canada

42

83

41

161

243

International

56

101

69

210

297

Total revenue

$

326

$

751

$

370

$

1,300

$

2,312

NOW INC.

SUPPLEMENTAL INFORMATION (CONTINUED)

U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) TO NON-GAAP RECONCILIATIONS

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

(In millions)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2020

2019

2020

2020

2019

GAAP net income (loss) (1)

$

(22

)

$

10

$

(30

)

$

(383

)

$

42

Interest, net

1

4

Income tax provision (benefit)

1

2

(1

)

(2

)

4

Depreciation and amortization

6

10

7

23

30

Other costs (2)

1

9

334

2

EBITDA excluding other costs

$

(15

)

$

24

$

(15

)

$

(28

)

$

82

EBITDA % excluding other costs (3)

(4.6

%)

3.2

%

(4.1

%)

(2.2

%)

3.5

%

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

(In millions)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2020

2019

2020

2020

2019

GAAP net income (loss) (1)

$

(22

)

$

10

$

(30

)

$

(383

)

$

42

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

5

(1

)

12

340

(10

)

Net income (loss) excluding other costs (5)

$

(17

)

$

9

$

(18

)

$

(43

)

$

32

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

RECONCILIATION (UNAUDITED)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2020

2019

2020

2020

2019

GAAP diluted earnings (loss) per share (1)

$

(0.20

)

$

0.09

$

(0.27

)

$

(3.50

)

$

0.38

Other costs, net of tax (4)

0.04

(0.01

)

0.11

3.10

(0.09

)

Diluted earnings (loss) per share excluding other costs (5)

$

(0.16

)

$

0.08

$

(0.16

)

$

(0.40

)

$

0.29

(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 (loss) excluding other costs and (iii) diluted earnings (loss) 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 for the nine months ended September 30, 2020 included impairment charges, as well as, net separation and transaction-related expenses, which are included in operating loss.

(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, 2020, included an expense of $5 million and $10 million, respectively, from changes in the valuation allowance recorded against the Company’s deferred tax assets; as well as, nil and $316 million, respectively, related to the impairment charges of goodwill, intangibles and other assets and nil and $14 million, respectively, in net separation and transaction-related expenses. The Company has excluded the impact of these items on its valuation allowance in computing net income (loss) excluding other costs.

(5)

Totals may not foot due to rounding.

Contacts

Mark Johnson

Senior Vice President and Chief Financial Officer

(281) 823-4754

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