8-K
DNOW Inc. (DNOW)
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 2, 2023
NOW INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-36325 | 46-4191184 |
|---|---|---|
| (State or other jurisdiction<br> <br>of incorporation) | (Commission<br> <br>File Number) | (IRS Employer<br> <br>Identification No.) |
| 7402 North Eldridge Parkway<br> <br>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) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange<br>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 |
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On November 2, 2023, NOW Inc. issued a press release announcing earnings for the quarter ended September 30, 2023 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 |
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(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 2, 2023 announcing the earnings results for the third quarter ended September 30, 2023. |
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| 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 2, 2023 | NOW INC. |
|---|---|
| /s/ Raymond W. Chang | |
| Raymond W. Chang<br> <br>Vice President & General Counsel |
EX-99.1
Exhibit 99.1
| Earnings Conference Call |
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| November 2, 2023 |
| 8:00 a.m. CT |
| 1 (888) 660-6431 (within North America) |
| 1 (929) 203-2118 (outside of North America) |
| Access Code: 7372055 |
| Webcast: ir.dnow.com |
NOW Inc. Reports Third Quarter 2023 Results
HOUSTON, TX, November 2, 2023—NOW Inc. (NYSE: DNOW) announced results for the third quarter ended September 30, 2023.
Third Quarter 2023 Financial Highlights
| • | Revenue was $588 million for the third quarter of 2023 |
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| • | Net income attributable to NOW Inc. was $35 million and non-GAAP net<br>income attributable to NOW Inc. excluding other costs was $28 million for the third quarter of 2023 |
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| • | Diluted earnings per share attributable to NOW Inc. stockholders was $0.32 and<br>non-GAAP diluted earnings per share attributable to NOW Inc. stockholders excluding other costs was $0.25 for the third quarter of 2023 |
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| • | EBITDA excluding other costs for the third quarter of 2023 was $46 million or 7.8% of revenue<br> |
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| • | Cash and cash equivalents was $194 million and long-term debt was zero at September 30, 2023 with total<br>liquidity of approximately $547 million |
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| • | Repurchased $5 million of common stock in the third quarter of 2023 |
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David Cherechinsky, President and CEO of DNOW, added, “We are excited that our third-quarter earnings proved resilient and produced our best year-to-date earnings since becoming a public company. Our gross margins remain strong as we optimize product mix and proactively manage our pipe product lines. We are realizing the benefits of our energy evolution and market-adjacent strategies, as U.S. Process Solutions expanded, aided by demand for fluid handling equipment, and increased EcoVapor product sales used in renewable natural gas decarbonization projects.
Maximizing shareholder value is our top priority. Our focus is on leveraging our debt-free balance sheet with $547 million of total liquidity, generating higher levels of free cash flow, pursuing margin accretive acquisitions and market share and executing our share repurchase program.
We believe the U.S. market will resume a growth path next year as customers reset their budgets and energy evolution projects accelerate. In an environment of strong oil prices, which are averaging near $80 over the last twelve months, we see support for growth in 2024.”
Prior to the earnings conference call a presentation titled “DNOW Third Quarter 2023 Key Takeaways” will be available on the Company’s Investor Relations website.
AboutNOW Inc.
DNOW 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 2,475 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-lookingstatements” 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 documentsfiled 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
NOW INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
| December 31,<br>2022 | |||||
|---|---|---|---|---|---|
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 194 | $ | 212 | ||
| Receivables, net | 396 | 398 | |||
| Inventories, net | 415 | 381 | |||
| Prepaid and other current assets | 28 | 26 | |||
| Total current assets | 1,033 | 1,017 | |||
| Property, plant and equipment, net | 130 | 119 | |||
| Goodwill | 140 | 116 | |||
| Intangibles, net | 29 | 25 | |||
| Other assets | 44 | 43 | |||
| Total assets | 1,376 | $ | 1,320 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | 301 | $ | 304 | ||
| Accrued liabilities | 114 | 126 | |||
| Other current liabilities | 8 | 9 | |||
| Total current liabilities | 423 | 439 | |||
| Long-term operating lease liabilities | 28 | 25 | |||
| Deferred income taxes | 1 | 1 | |||
| Other long-term liabilities | 17 | 11 | |||
| Total liabilities | 469 | 476 | |||
| Commitments and contingencies Stockholders’ equity: | |||||
| Preferred stock - par value 0.01; 20 million shares authorized; no shares issued and<br>outstanding | — | — | |||
| Common stock - par value 0.01; 330 million shares authorized; 106,329,287 and 110,369,266<br>shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | 1 | 1 | |||
| Additional paid-in capital | 2,028 | 2,066 | |||
| Accumulated deficit | (975 | ) | (1,075 | ) | |
| Accumulated other comprehensive loss | (150 | ) | (150 | ) | |
| NOW Inc. stockholders’ equity | 904 | 842 | |||
| Noncontrolling interest | 3 | 2 | |||
| Total stockholders’ equity | 907 | 844 | |||
| Total liabilities and stockholders’ equity | 1,376 | $ | 1,320 |
All values are in US Dollars.
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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, | ||||||||||
| 2023 | 2022 | 2023 | 2023 | 2022 | ||||||||
| Revenue | $ | 588 | $ | 577 | $ | 594 | $ | 1,766 | $ | 1,589 | ||
| Operating expenses: | ||||||||||||
| Cost of products | 454 | 438 | 460 | 1,361 | 1,215 | |||||||
| Warehousing, selling and administrative | 97 | 95 | 98 | 297 | 268 | |||||||
| Impairment and other charges | — | — | — | — | 10 | |||||||
| Operating profit | 37 | 44 | 36 | 108 | 96 | |||||||
| Other income (expense) | — | — | (1 | ) | (1 | ) | 9 | |||||
| Income before income taxes | 37 | 44 | 35 | 107 | 105 | |||||||
| Income tax provision | 2 | 3 | 1 | 6 | 8 | |||||||
| Net income | 35 | 41 | 34 | 101 | 97 | |||||||
| Net income attributable to noncontrolling interest | — | 1 | — | 1 | 1 | |||||||
| Net income attributable to NOW Inc. | $ | 35 | $ | 40 | $ | 34 | $ | 100 | $ | 96 | ||
| Earnings per share attributable to NOW Inc. stockholders: | ||||||||||||
| Basic | $ | 0.32 | $ | 0.35 | $ | 0.31 | $ | 0.91 | $ | 0.85 | ||
| Diluted | $ | 0.32 | $ | 0.35 | $ | 0.31 | $ | 0.90 | $ | 0.85 | ||
| Weighted-average common shares outstanding, basic | 107 | 111 | 107 | 108 | 111 | |||||||
| Weighted-average common shares outstanding, diluted | 108 | 111 | 108 | 109 | 111 |
NOW INC.
SUPPLEMENTAL INFORMATION
BUSINESS SEGMENTS (UNAUDITED)
(In millions)
| Three Months Ended | Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | ||||||||
| 2023 | 2022 | 2023 | 2023 | 2022 | ||||||
| Revenue: | ||||||||||
| United States | $ | 448 | $ | 435 | $ | 456 | $ | 1,331 | $ | 1,177 |
| Canada | 68 | 86 | 66 | 217 | 240 | |||||
| International | 72 | 56 | 72 | 218 | 172 | |||||
| Total revenue | $ | 588 | $ | 577 | $ | 594 | $ | 1,766 | $ | 1,589 |
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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 | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | |||||||||||||
| 2023 | 2022 | 2023 | 2023 | 2022 | |||||||||||
| GAAP net income attributable to NOW Inc.<br>^(1)^ | $ | 35 | $ | 40 | $ | 34 | $ | 100 | $ | 96 | |||||
| Net income attributable to noncontrolling interest<br>^(2)^ | — | 1 | — | 1 | 1 | ||||||||||
| Interest expense (income), net | (2 | ) | (1 | ) | — | (3 | ) | (1 | ) | ||||||
| Income tax provision | 2 | 3 | 1 | 6 | 8 | ||||||||||
| Depreciation and amortization | 7 | 5 | 6 | 19 | 14 | ||||||||||
| Other costs: | |||||||||||||||
| Stock-based compensation | 4 | 3 | 4 | 11 | 7 | ||||||||||
| Other ^(3)^ | — | 2 | 2 | 6 | 3 | ||||||||||
| EBITDA excluding other costs | $ | 46 | $ | 53 | $ | 47 | $ | 140 | $ | 128 | |||||
| EBITDA % excluding other costs ^(4)^ | 7.8 | % | 9.2 | % | 7.9 | % | 7.9 | % | 8.1 | % |
NET INCOME ATTRIBUTABLE TO NOW INC. TO NON-GAAP NET INCOMEATTRIBUTABLE TO NOW INC. EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)
(In millions)
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | |||||||||||||
| 2023 | 2022 | 2023 | 2023 | 2022 | |||||||||||
| GAAP net income attributable to NOW Inc.^(1)^ | $ | 35 | $ | 40 | $ | 34 | $ | 100 | $ | 96 | |||||
| Other, net of tax ^(5) (6)^ | (7 | ) | (6 | ) | (7 | ) | (17 | ) | (18 | ) | |||||
| Net income attributable to NOW Inc. excluding other costs ^(6)^ | $ | 28 | $ | 34 | $ | 27 | $ | 83 | $ | 78 |
DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO NOW INC. STOCKHOLDERS TONON-GAAP DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO NOW INC. STOCKHOLDERS EXCLUDING OTHER COSTS RECONCILIATION (UNAUDITED)
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | June 30, | September 30, | |||||||||||||
| 2023 | 2022 | 2023 | 2023 | 2022 | |||||||||||
| GAAP diluted earnings per share attributable to NOW Inc. stockholders ^(1)^ | $ | 0.32 | $ | 0.35 | $ | 0.31 | $ | 0.90 | $ | 0.85 | |||||
| Other, net of tax ^(5) (6)^ | (0.07 | ) | (0.05 | ) | (0.06 | ) | (0.15 | ) | (0.15 | ) | |||||
| Diluted earnings per share attributable to NOW Inc. stockholders excluding other costs^(6)^ | $ | 0.25 | $ | 0.30 | $ | 0.25 | $ | 0.75 | $ | 0.70 | |||||
| (1) | In an effort to provide investors with additional information regarding our results as determined by GAAP, we<br>disclose various non-GAAP financial measures in our quarterly earnings press releases and other public disclosures. The non-GAAP financial measures include:<br>(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.<br>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<br>non-GAAP financial measures to its most comparable GAAP financial measure is included in the schedules herein. | ||||||||||||||
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| (2) | Net income attributable to noncontrolling interest represents the income retained by the noncontrolling party<br>of a joint venture in our international segment which we consolidate into our financials as we are the primary beneficiary and controlling member. | ||||||||||||||
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| (3) | For the nine months ended September 30, 2023, Other of approximately $6 million, included in<br>warehousing, selling and administrative, was 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 separation and transaction-related charges.<br> |
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| (4) | EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue.<br> |
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| (5) | Other, net of tax includes certain income and expenses and does not include stock-based compensation expense.<br> |
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For the three months ended September 30, 2023, 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. For the nine months ended September 30, 2023, Other, net of tax included a benefit of approximately $23 million from changes in the valuation allowance recorded against the Company’s deferred tax assets, partially offset by approximately $6 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 separation and transaction-related charges. 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. |
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