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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, 2023


☐	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, 2023, the registrant had 106,331,159 shares of common stock (excluding 1,842,872 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, 2023 (Unaudited) and December 31, 2022	3

	Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, 2023 and 2022	4

	Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2023 and 2022	5

	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2023 and 2022	6

	Consolidated Statements of Stockholders' Equity (Unaudited) for the three and nine months ended September 30 , 2023 and 2022	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	24

Item 4.	Controls and Procedures	25

Part II - Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 5.	Other Information	26

Item 6.	Exhibits	27

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NOW INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	September 30, 2023			December 31, 2022
	(Unaudited)
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 outstanding		—			—
Common stock - par value $0.01; 330 million shares authorized; 106,329,287 and 110,369,266 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

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,
	2023		2022		2023			2022
Revenue	$	588	$	577	$	1,766		$	1,589
Operating expenses:
Cost of products	$	454		438		1,361			1,215
Warehousing, selling and administrative		97		95		297			268
Impairment and other charges		—		—		—			10
Operating profit		37		44		108			96
Other income (expense)		—		—		(1	)		9
Income before income taxes		37		44		107			105
Income tax provision		2		3		6			8
Net income		35		41		101			97
Net income attributable to noncontrolling interest		—		1		1			1
Net income attributable to NOW Inc.	$	35	$	40	$	100		$	96
Earnings per share attributable to NOW Inc. stockholders:
Basic	$	0.32	$	0.35	$	0.91		$	0.85
Diluted	$	0.32	$	0.35	$	0.90		$	0.85
Weighted-average common shares outstanding, basic		107		111		108			111
Weighted-average common shares outstanding, diluted		108		111		109			111

See notes to unaudited consolidated financial statements.

NOW INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In millions)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023		2022
Net income	$	35		$	41		$	101	$	97
Other comprehensive income:
Foreign currency translation adjustments		(4	)		(11	)		—		(8	)
Comprehensive income		31			30			101		89
Comprehensive income attributable to noncontrolling interest		—			1			1		1
Comprehensive income attributable to NOW Inc.	$	31		$	29		$	100	$	88

See notes to unaudited consolidated financial statements.

NOW INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities:
Net income	$	101		$	97
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		19			14
Provision for inventory		5			5
Impairment and other charges		—			10
Stock-based compensation		11			7
Other, net		14			(2	)
Change in operating assets and liabilities, net of effects of acquisitions:
Receivables		2			(110	)
Inventories		(35	)		(122	)
Prepaid and other current assets		(1	)		(4	)
Accounts payable, accrued liabilities and other, net		(33	)		99
Net cash provided by (used in) operating activities		83			(6	)
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(33	)		(21	)
Purchases of property, plant and equipment		(15	)		(7	)
Other, net		1			2
Net cash provided by (used in) investing activities		(47	)		(26	)
Cash flows from financing activities:
Repurchases of common stock		(49	)		(4	)
Payments relating to finance leases and other, net		(5	)		(1	)
Net cash provided by (used in) financing activities		(54	)		(5	)
Effect of exchange rates on cash and cash equivalents		—			(9	)
Net change in cash and cash equivalents		(18	)		(46	)
Cash and cash equivalents, beginning of period		212			313
Cash and cash equivalents, end of period	$	194		$	267

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, 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	)	$	(145	)	$	—		$	1	$	746
Net income		—		—			26			—			—			—		26
Stock-based compensation		—		2			—			—			—			—		2
Exercise of stock options		—		2			—			—			—			—		2
Other comprehensive income		—		—			—			1			—			—		1
June 30, 2022	$	1	$	2,066		$	(1,147	)	$	(144	)	$	—		$	1	$	777
Net income		—		—			40			—			—			1		41
Common stock repurchased		—		—			—			—			(4	)		—		(4	)
Common stock retired		—		(4	)		—			—			4			—		—
Stock-based compensation		—		3			—			—			—			—		3
Other comprehensive loss		—		—			—			(11	)		—			—		(11	)
September 30, 2022	$	1	$	2,065		$	(1,107	)	$	(155	)	$	—		$	2	$	806

December 31, 2022	$	1	$	2,066		$	(1,075	)	$	(150	)	$	—		$	2	$	844
Net income		—		—			31			—			—			1		32
Common stock repurchased		—		—			—			—			(36	)		—		(36	)
Common stock retired		—		(33	)		—			—			33			—		—
Stock-based compensation		—		3			—			—			—			—		3
Exercise of stock options		—		1			—			—			—			—		1
Shares withheld for taxes		—		(1	)		—			—			—			—		(1	)
Other comprehensive income		—		—			—			1			—			—		1
March 31, 2023	$	1	$	2,036		$	(1,044	)	$	(149	)	$	(3	)	$	3	$	844
Net income		—		—			34			—			—			—		34
Common stock repurchased		—		—			—			—			(8	)		—		(8	)
Common stock retired		—		(11	)		—			—			11			—		—
Stock-based compensation		—		4			—			—			—			—		4
Other comprehensive income		—		—			—			3			—			—		3
June 30, 2023	$	1	$	2,029		$	(1,010	)	$	(146	)	$	—		$	3	$	877
Net income		—		—			35			—			—			—		35
Common stock repurchased		—		—			—			—			(5	)		—		(5	)
Common stock retired		—		(5	)		—			—			5			—		—