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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-36325

NOW INC.

(Exact name of registrant as specified in its charter)


Delaware		46-4191184
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

7402 North Eldridge Parkway,

Houston, Texas 77041

(Address of principal executive offices)

(281) 823-4700

(Registrant’s telephone number, including area code)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 26, 2022, the registrant had 110,439,751 shares of common stock (excluding 1,437,286 unvested restricted shares), par value $0.01 per share, outstanding.

NOW INC.

TABLE OF CONTENTS


Part I - Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	3

	Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2022 and 2021	4

	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and nine months ended September 30, 2022 and 2021	5

	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2022 and 2021	6

	Consolidated Statements of Stockholders' Equity (Unaudited) for the three and nine months ended September 30, 2022 and 2021	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	26

Part II - Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 6.	Exhibits	28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NOW INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	September 30, 2022			December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	267		$	313
Receivables, net		406			304
Inventories, net		361			250
Prepaid and other current assets		20			16
Total current assets		1,054			883
Property, plant and equipment, net		109			111
Goodwill		79			67
Intangibles, net		13			9
Other assets		27			34
Total assets	$	1,282		$	1,104
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	339		$	235
Accrued liabilities		111			112
Other current liabilities		8			22
Total current liabilities		458			369
Long-term operating lease liabilities		11			17
Other long-term liabilities		7			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; 110,635,461 and 110,558,831 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		1			1
Additional paid-in capital		2,065			2,060
Accumulated deficit		(1,107	)		(1,203	)
Accumulated other comprehensive loss		(155	)		(147	)
NOW Inc. stockholders' equity		804			711
Noncontrolling interest		2			1
Total stockholders' equity		806			712
Total liabilities and stockholders' equity	$	1,282		$	1,104

See notes to unaudited consolidated financial statements.

NOW INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022		2021
Revenue	$	577	$	439		$	1,589	$	1,200
Operating expenses:
Cost of products		438		343			1,215		944
Warehousing, selling and administrative		95		86			268		250
Impairment and other charges		—		—			10		4
Operating profit		44		10			96		2
Other income (expense)		—		(3	)		9		(5	)
Income (loss) before income taxes		44		7			105		(3	)
Income tax provision		3		2			8		4
Net income (loss)		41		5			97		(7	)
Net income attributable to noncontrolling interest		1		—			1		—
Net income (loss) attributable to NOW Inc.	$	40	$	5		$	96	$	(7	)
Earnings (loss) per share attributable to NOW Inc. stockholders:
Basic	$	0.35	$	0.05		$	0.85	$	(0.06	)
Diluted	$	0.35	$	0.05		$	0.85	$	(0.06	)
Weighted-average common shares outstanding, basic		111		111			111		110
Weighted-average common shares outstanding, diluted		111		111			111		110

See notes to unaudited consolidated financial statements.

NOW INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In millions)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net income (loss)	$	41		$	5		$	97		$	(7	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(11	)		(4	)		(8	)		(1	)
Comprehensive income (loss)		30			1			89			(8	)
Comprehensive income attributable to noncontrolling interest		1			—			1			—
Comprehensive income (loss) attributable to NOW Inc.	$	29		$	1		$	88		$	(8	)

See notes to unaudited consolidated financial statements.

NOW INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)


	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net income (loss)	$	97		$	(7	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		14			18
Provision for inventory		5			8
Impairment and other charges		10			4
Other, net		5			19
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Receivables		(110	)		(93	)
Inventories		(122	)		11
Prepaid and other current assets		(4	)		(3	)
Accounts payable, accrued liabilities and other, net		99			71
Net cash provided by (used in) operating activities		(6	)		28
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(21	)		(96	)
Purchases of property, plant and equipment		(7	)		(4	)
Other, net		2			1
Net cash provided by (used in) investing activities		(26	)		(99	)
Cash flows from financing activities:
Repurchases of common stock		(4	)		—
Payments relating to finance leases and other, net		(1	)		(3	)
Net cash provided by (used in) financing activities		(5	)		(3	)
Effect of exchange rates on cash and cash equivalents		(9	)		(1	)
Net change in cash and cash equivalents		(46	)		(75	)
Cash and cash equivalents, beginning of period		313			387
Cash and cash equivalents, end of period	$	267		$	312

See notes to unaudited consolidated financial statements.

NOW INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In millions)


	Attributable to NOW Inc. Stockholders
			Additional			Retained			Accum. Other							Total
	Common		Paid-In			Earnings			Comprehensive			Treasury		Noncontrolling		Stockholders’
	Stock		Capital			(Deficit)			Income (Loss)			Stock		Interest		Equity
December 31, 2020	$	1	$	2,050		$	(1,208	)	$	(145	)	$	—	$	1	$	699
Net loss		—		—			(10	)		—			—		—		(10	)
Stock-based compensation		—		2			—			—			—		—		2
Exercise of stock options		—		1			—			—			—		—		1
Shares withheld for taxes		—		(1	)		—			—			—		—		(1	)
Other comprehensive income		—		—			—			1			—		—		1
March 31, 2021	$	1	$	2,052		$	(1,218	)	$	(144	)	$	—	$	1	$	692
Net loss		—		—			(2	)		—			—		—		(2	)
Stock-based compensation		—		2			—			—			—		—		2
Exercise of stock options		—		2			—			—			—		—		2
Other comprehensive income		—		—			—			2			—		—		2
June 30, 2021	$	1	$	2,056		$	(1,220	)	$	(142	)	$	—	$	1	$	696
Net income		—		—			5			—			—		—		5
Stock-based compensation		—		2			—			—			—		—		2
Other comprehensive loss		—		—			—			(4	)		—		—		(4	)
September 30, 2021	$	1	$	2,058		$	(1,215	)	$	(146	)	$	—	$	1	$	699

December 31, 2021	$	1	$	2,060		$	(1,203	)	$	(147	)	$	—	$	1	$	712
Net income		—		—			30			—			—		—		30
Stock-based compensation		—		2			—			—			—		—		2
Other comprehensive income		—		—			—			2			—		—		2
March 31, 2022	$	1	$	2,062		$	(1,173