NOW Inc. Announces Second Quarter 2014 Earnings

HOUSTON--()--NOW Inc. (NYSE: DNOW) reported that for its second quarter ended June 30, 2014 it earned net income of $27 million, or $0.25 per fully diluted share, compared to first quarter ended March 31, 2014 net income of $41 million, or $0.38 per fully diluted share.

The Company’s revenues for the second quarter of 2014 were $952 million, a decline of 12 percent from the first quarter of 2014 and a decline of 11 percent from the second quarter of 2013. EBITDA for the second quarter of 2014 was $49 million, or 5.1 percent of sales.

Robert Workman, President and CEO of NOW Inc., remarked, “The second quarter of 2014 marked DistributionNOW’s separation from National Oilwell Varco, Inc. and the commencement of our business as a stand-alone entity. Additionally, we have now substantially completed our conversion to a single ERP system. While we are very excited to realize the full benefits of these opportunities, we have experienced the anticipated short term effects related to both an ERP implementation and spin-off activities. As expected, results were impacted by these items, coupled with the effects of a seasonal Canadian decline.

“Moving forward, we are confident that our seasoned employees and management will overcome these short term disruptions. We believe this will translate into marked improvements in revenue and profitability in the coming quarters. I would like to thank all of our dedicated employees for their hard work during this taxing and exciting time. We are enthusiastic about our future and will continue to develop DistributionNOW as the premier distributor to our customers while returning value to our shareholders.”

United States

Second quarter revenues for the United States were $662 million, a decrease of six percent from the first quarter of 2014 and a decrease of 11 percent from the second quarter of 2013. The decrease in sequential revenues is primarily attributable to the relocation of our central US pipe yard, reduced project revenues, employees being focused on ERP training over branch responsibilities and the implementation and training associated with learning a new quoting system.

Canada

Revenues for the second quarter of 2014 for Canada were $125 million, down 35 percent compared to first quarter 2014 results and down 27 percent from the second quarter of 2013. The main drivers of the sequential decrease were seasonal break-up, paired with certain anticipated challenges we encountered following the roll-out of our ERP system which caused delays in our supply chain and fulfillment processes that led to lower revenue in the affected branches.

International

International operations generated second quarter revenues of $165 million, which were down nine percent from the first quarter of 2014 and up six percent from the second quarter of 2013. Sequential revenues were down, as expected, due to large non-repeated valve projects in the Middle East and Asia.

The Company has scheduled a conference call for August 6, 2014, at 8:00 a.m. Central Time to discuss second 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.”

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 over 300 locations and over 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)

         
June 30, December 31,
2014 2013
(Unaudited)

ASSETS

Current assets:
Cash and cash equivalents $ 236 $ 101
Receivables, net 773 661
Inventories, net 882 850
Deferred income taxes 20 21
Prepaid and other current assets   35   29
Total current assets 1,946 1,662
 
Property, plant and equipment, net 118 102
Deferred income taxes 8 15
Goodwill 333 333
Intangibles, net 67 68
Other assets   1   3
Total assets $ 2,473 $ 2,183
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 401 $ 264
Accrued liabilities 103 99
Accrued income taxes   4   -
Total current liabilities 508 363
 
Deferred income taxes 5 16
Other liabilities   2   2
Total liabilities   515   381
 
Commitments and contingencies
 
Stockholders' equity:
Common stock - par value $0.01; 330 million shares authorized;

107,057,698 shares issued and outstanding

1 -
Preferred stock - par value $0.01; 20 million shares authorized;
no shares issued and outstanding - -
Additional paid-in capital 1,946 -
Retained earnings 10 -
National Oilwell Varco, Inc. ("NOV") net investment - 1,802
Accumulated other comprehensive income   1   -
Total stockholders' equity   1,958   1,802
Total liabilities and equity $ 2,473 $ 2,183
 
 
NOW INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In millions, except per share data)

 
      Three Months       Six Months Ended
Ended June 30 June 30
2014     2013 2014     2013
 
Revenue $ 952 $ 1,070 $ 2,029 $ 2,142
Operating expenses:
Cost of products 759 874 1,628 1,748
Operating and warehousing costs 105 103 207 204
Selling, general and administrative   45   40   89   79
Operating profit 43 53 105 111
Other income   -   2   -   4
Income before income taxes 43 55 105 115
Provision for income taxes   16   22   37   41
Net income $ 27 $ 33 $ 68 $ 74
 
 
Net income per share
Basic earnings per common share $ 0.25 $ 0.31 $ 0.64 $ 0.69
Diluted earnings per common share $ 0.25 $ 0.31 $ 0.63 $ 0.69
Weighted-average common shares outstanding, basic   107   107   107   107
Weighted-average common shares outstanding, diluted   108   107   108   107
 
                   
NOW INC.
SUPPLEMENTAL INFORMATION
 
NET INCOME TO EBITDA RECONCILIATION (UNAUDITED)

(In millions)

 
Three Months Six Months Ended
Ended June 30 June 30
2014 2013 2014 2013
 
Net income $ 27 $ 33 $ 68 $ 74
Interest expense - - - -
Tax provision 16 22 37 41
Depreciation and amortization   6     3     10     7  
EBITDA (1) $ 49   $ 58   $ 115   $ 122  
EBITDA % (2) 5.1 % 5.4 % 5.7 % 5.7 %
(1)     Because EBITDA is a non-U.S. GAAP financial measure, as defined by the SEC, we included a
reconciliation of EBITDA to the most directly comparable financial measures calculated and
presented in accordance with U.S. GAAP.
 

(2)

EBITDA % is defined as EBITDA divided by Revenue.

 
 
BUSINESS SEGMENTS (UNAUDITED)

(In millions)

                   
Three Months Ended Six Months Ended
June 30 June 30
2014 2013 2014 2013
Revenue:
United States $ 662 $ 742 $ 1,366 $ 1,454
Canada 125 172 316 387
International   165   156   347   301
Total Revenue $ 952 $ 1,070 $ 2,029 $ 2,142
 

Contacts

NOW Inc.
Daniel Molinaro, 281-823-4941

Release Summary

NOW Inc. (NYSE: DNOW) Announces Second Quarter 2014 Earnings

Contacts

NOW Inc.
Daniel Molinaro, 281-823-4941