8-K
false 0001599617 0001599617 2023-02-16 2023-02-16

 

 

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) February 16, 2023

 

 

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 February 16, 2023, NOW Inc. issued a press release announcing earnings for the quarter and full year ended December 31, 2022 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 February 16, 2023 announcing the earnings results for the fourth quarter and full year ended December 31, 2022.
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: February 16, 2023       NOW INC.
     

/s/ Raymond W. Chang

     

Raymond W. Chang

Vice President & General Counsel

EX-99.1

Exhibit 99.1

 

LOGO   

Earnings Conference Call

February 16, 2023

8:00 a.m. CT

1 (844) 200-6205 (within North America)

1 (929) 526-1599 (outside of North America)

Access Code: 703044

Webcast: ir.dnow.com

NOW Inc. Reports Fourth Quarter and Full-Year 2022 Results

HOUSTON, TX, February 16, 2023 – NOW Inc. (NYSE: DNOW) announced results for the fourth quarter and full-year ended December 31, 2022.

Fourth Quarter 2022 Financial Highlights

 

   

Revenue was $547 million for the fourth quarter of 2022

 

   

Net income attributable to NOW Inc. was $32 million and non-GAAP net income attributable to NOW Inc. excluding other costs was $29 million for the fourth quarter of 2022

 

   

Diluted earnings per share attributable to NOW Inc. stockholders was $0.28 and non-GAAP diluted earnings per share attributable to NOW Inc. stockholders excluding other costs was $0.25 for the fourth quarter of 2022

 

   

Non-GAAP EBITDA excluding other costs for the fourth quarter of 2022 was $47 million or 8.6% of revenue

 

   

Cash and cash equivalents was $212 million and long-term debt was zero at December 31, 2022 with total liquidity of approximately $564 million

 

   

Completed two acquisitions in December 2022 for $59 million in cash, one with a patented process technology solution that expands our suite of greenhouse gas emission reduction products, and one that enhances our pump strategy

 

   

Repurchased $3 million of common stock in the fourth quarter of 2022

David Cherechinsky, President and CEO of NOW Inc., added, “I am thrilled about our strong fourth quarter results, which capped off a stellar, record year for DNOW on many fronts. For the year, we achieved revenue growth of $504 million or 31% compared to 2021, without consuming cash from operations, as we turned working capital seven times, delivered impressive gross margins of 23.7% and generated $175 million in EBITDA excluding other costs, or 8.2% of revenue.

Our investments in four supercenters equip us to grow in those regional markets and calibrate product availability to resolve customer supply chain challenges. Additionally, the three acquisitions we completed during the year further enhance our competitive position and importance to suppliers, while deepening our appeal to customers. In December, we added two of these acquisitions, one that fortifies our pump position in the Permian and the other that positions DNOW as a vital energy evolution partner in reducing greenhouse gas emissions.

Entering 2023, we are in a great place as a company, remain debt-free with ample liquidity and are well positioned for continued growth and success. The highly talented women and men of DNOW show dedication, enthusiasm, resilience and a competitive spirit toward positioning our company to win the market.”

Prior to the earnings conference call a presentation titled “NOW Inc. Fourth Quarter and Full-Year 2022 Key Takeaways” will be available on the Company’s Investor Relations website.


About NOW Inc.

DistributionNOW is a worldwide supplier of energy and industrial products and packaged, engineered process and production equipment with a legacy of 160 years. Headquartered in Houston, Texas, with approximately 2,425 employees and a network of locations worldwide, we offer a broad set of supply chain solutions combined with a suite of digital solutions branded as DigitalNOW® that provide customers world-class technology for digital commerce, data and information management. Our locations provide products and solutions to exploration and production companies, midstream transmission and storage companies, refineries, chemical companies, utilities, mining, municipal water, manufacturers, engineering and construction companies as well as companies operating in the decarbonization, energy transition and renewables end markets.

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:

Mark Johnson

Senior Vice President and Chief Financial Officer

(281) 823-4754

 

2


NOW INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

     December 31,
2022
    December 31,
2021
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 212     $ 313  

Receivables, net

     398       304  

Inventories, net

     381       250  

Prepaid and other current assets

     26       16  
  

 

 

   

 

 

 

Total current assets

     1,017       883  

Property, plant and equipment, net

     119       111  

Goodwill

     116       67  

Intangibles, net

     25       9  

Other assets

     43       34  
  

 

 

   

 

 

 

Total assets

   $ 1,320     $ 1,104  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 304     $ 235  

Accrued liabilities

     126       112  

Other current liabilities

     9       22  
  

 

 

   

 

 

 

Total current liabilities

     439       369  

Long-term operating lease liabilities

     25       17  

Deferred income taxes

     1       —    

Other long-term liabilities

     11       6  
  

 

 

   

 

 

 

Total liabilities

     476       392  

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; 110,369,266 and 110,558,831 shares issued and outstanding at December 31, 2022 and 2021, respectively

     1       1  

Additional paid-in capital

     2,066       2,060  

Accumulated deficit

     (1,075     (1,203

Accumulated other comprehensive loss

     (150     (147
  

 

 

   

 

 

 

NOW Inc. stockholders’ equity

     842       711  

Noncontrolling interest

     2       1  
  

 

 

   

 

 

 

Total stockholders’ equity

     844       712  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,320     $ 1,104  
  

 

 

   

 

 

 

 

3


NOW INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data)

 

     Three Months Ended      Year Ended  
     December 31,      September 30,      December 31,  
     2022     2021      2022      2022      2021  

Revenue

   $ 547     $ 432      $ 577      $ 2,136      $ 1,632  

Operating expenses:

             

Cost of products

     415       331        438        1,630        1,275  

Warehousing, selling and administrative

     97       91        95        365        341  

Impairment and other charges

     —         3        —          10        7  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

     35       7        44        131        9  

Other income (expense)

     (1     8        —          8        3  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     34       15        44        139        12  

Income tax provision

     2       3        3        10        7  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     32       12        41        129        5  

Net income attributable to noncontrolling interest

     —         —          1        1        —    
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to NOW Inc.

   $ 32     $ 12      $ 40      $ 128      $ 5  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share attributable to NOW Inc. stockholders:

             

Basic

   $ 0.28     $ 0.11      $ 0.35      $ 1.14      $ 0.05  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.28     $ 0.11      $ 0.35      $ 1.13      $ 0.05  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average common shares outstanding, basic

     110       111        111        111        110  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average common shares outstanding, diluted

     111       111        111        111        110  
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

NOW INC.

SUPPLEMENTAL INFORMATION

BUSINESS SEGMENTS (UNAUDITED)

(In millions)

 

     Three Months Ended      Year Ended  
     December 31,      September 30,      December 31,  
     2022      2021      2022      2022      2021  

Revenue:

              

United States

   $ 414      $ 303      $ 435      $ 1,591      $ 1,163  

Canada

     75        72        86        315        249  

International

     58        57        56        230        220  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $ 547      $ 432      $ 577      $ 2,136      $ 1,632  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

4


NOW INC.

SUPPLEMENTAL INFORMATION (CONTINUED)

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

NET INCOME ATTRIBUTABLE TO NOW INC. TO NON-GAAP EBITDA EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

(In millions)

 

     Three Months Ended     Year Ended  
     December 31,     September 30,     December 31,  
     2022     2021     2022     2022     2021  

GAAP net income attributable to NOW Inc. (1)

   $ 32     $ 12     $ 40     $ 128     $ 5  

Net income attributable to noncontrolling interest (2)

     —         —         1       1       —    

Interest expense (income), net

     —         —         (1     (1     —    

Income tax provision

     2       3       3       10       7  

Depreciation and amortization

     5       5       5       19       23  

Other costs:

          

Stock-based compensation

     4       2       3       11       8  

Other (3)

     4       (5     2       7       2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA excluding other costs

   $ 47     $ 17     $ 53     $ 175     $ 45  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA % excluding other costs (4)

     8.6     3.9     9.2     8.2     2.8

NET INCOME ATTRIBUTABLE TO NOW INC. TO NON-GAAP NET INCOME ATTRIBUTABLE TO NOW INC. EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

(In millions)

 

     Three Months Ended     Year Ended  
     December 31,     September 30,     December 31,  
     2022     2021     2022     2022     2021  

GAAP net income attributable to NOW Inc. (1)

   $ 32     $ 12     $ 40     $ 128     $ 5  

Other, net of tax (5) (6)

     (3     (4     (6     (21     4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to NOW Inc. excluding other costs (6)

   $ 29     $ 8     $ 34     $ 107     $ 9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO NOW INC. STOCKHOLDERS TO NON-GAAP DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO NOW INC. STOCKHOLDERS EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)

 

     Three Months Ended     Year Ended  
     December 31,     September 30,     December 31,  
     2022     2021     2022     2022     2021  

GAAP diluted earnings per share attributable to NOW Inc. stockholders (1)

   $ 0.28     $ 0.11     $ 0.35     $ 1.13     $ 0.05  

Other, net of tax (5) (6)

     (0.03     (0.04     (0.05     (0.18     0.03  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share attributable to NOW Inc. stockholders excluding other costs (6)

   $ 0.25     $ 0.07     $ 0.30     $ 0.95     $ 0.08  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 attributable to NOW Inc. excluding other costs and (iii) diluted earnings per share attributable to NOW Inc. stockholders 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)

Net income attributable to noncontrolling interest represents the income retained by the noncontrolling party of a joint venture in our international segment which we consolidate into our financials as we are the primary beneficiary and controlling member.

 

5


(3)

Other includes certain income and expenses not included in stock-based compensation.

For the three months ended December 31, 2022, Other included approximately $4 million (included in warehousing, selling and administrative), of which approximately $3 million related to legal fees for litigation matters that were not ordinary or routine to the operations of the business where the Company is seeking damages and approximately $1 million related to separation and transaction-related charges.

For the year ended December 31, 2022, Other included approximately $10 million (included in impairment and other charges) related to the reclassification of accumulated foreign currency translation losses due to the substantial liquidation of certain foreign subsidiaries; as well as, approximately $10 million (included in warehousing, selling and administrative), of which approximately $5 million related to legal fees for litigation matters that were not ordinary or routine to the operations of the business where the Company is seeking damages and approximately $5 million related to separation and transaction-related charges; partially offset by a benefit of approximately $13 million (included in other income) related to the decrease of contingent consideration liability.

 

(4)

EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue.

(5)

For the three months ended December 31, 2022, Other, net of tax included a benefit of approximately $7 million from changes in the valuation allowance recorded against the Company’s deferred tax assets, partially offset by approximately $3 million related to legal fees for litigation matters that were not ordinary or routine to the operations of the business where the Company is seeking damages and approximately $1 million related to separation and transaction-related charges.

For the year ended December 31, 2022, Other, net of tax included a benefit of approximately $28 million from changes in the valuation allowance recorded against the Company’s deferred tax assets, as well as, a benefit of approximately $13 million related to the decrease of contingent consideration liability, partially offset by approximately $10 million of impairment and other charges, approximately $5 million in separation and transaction-related charges and $5 million related to legal fees for litigation matters discussed above.

The Company has excluded the impact of these items on its valuation allowance in computing net income excluding other costs.

 

(6)

Totals may not foot due to rounding.

 

6