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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 ~~25, 2017~~26, 2022, the registrant had ~~107,803,100~~110,439,751 shares of common stock (excluding ~~1,884,067~~1,437,286 unvested restricted shares), par value $0.01 per share, outstanding.


		September 30, 2017			December 31, 2016			September 30, 2022			December 31, 2021
		(Unaudited)						(Unaudited)
ASSETS	ASSETS
Current assets:
Cash and cash equivalents		$	99		$	106		$	267		$	313
Receivables, net			466			354			406			304
Inventories, net			562			483			361			250
Prepaid and other current assets			22			16			20			16
Total current assets			1,149			959			1,054			883
Property, plant and equipment, net			126			143			109			111
Deferred income taxes			2			1
Goodwill			328			311			79			67
Intangibles, net			171			184			13			9
Other assets			4			5			27			34
Total assets		$	1,780		$	1,603		$	1,282		$	1,104
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	310		$	246		$	339		$	235
Accrued liabilities			111			100			111			112
Other current liabilities			1			1			8			22
Total current liabilities			422			347			458			369
Long-term debt			163			65
Deferred income taxes			7			7
Long-term operating lease liabilities									11			17
Other long-term liabilities			1			1			7			6
Total liabilities			593			420			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; 107,803,100 and 107,474,904 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively			1			1
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			2,017			2,002			2,065			2,060
Accumulated deficit			(727	)		(678	)		(1,107	)		(1,203	)
Accumulated other comprehensive loss			(104	)		(142	)		(155	)		(147	)
NOW Inc. stockholders' equity									804			711
Noncontrolling interest									2			1
Total stockholders' equity			1,187			1,183			806			712
Total liabilities and stockholders' equity		$	1,780		$	1,603		$	1,282		$	1,104

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenue

$
697

$
520

$
1,979

$
1,569

Operating expenses:

Cost of products

562

433

1,606

1,312

Warehousing, selling and administrative

141

140

414

432

Operating loss

(6
)

(53
)

(41
)

(175
)
Other expense

(3
)

(3
)

(8
)

(7
)
Loss before income taxes

(9
)

(56
)

(49
)

(182
)
Income tax provision (benefit)

—

—

—

(19
)
Net loss

$
(9
)

$
(56
)

$
(49
)

$
(163
)
Loss per share:

Basic loss per common share

$
(0.08
)

$
(0.53
)

$
(0.45
)

$
(1.52
)
Diluted loss per common share

$
(0.08
)

$
(0.53
)

$
(0.45
)

$
(1.52
)
Weighted-average common shares outstanding, basic
��

108

107

108

107

Weighted-average common shares outstanding, diluted

108

107

108

107


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2022			2021
Cash flows from operating activities:
Net loss	$	(49	)	$	(163	)
Adjustments to reconcile net loss to net cash provided by (used in) 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		38			39			14			18
Deferred income taxes		(1	)		(24	)
Stock-based compensation		16			17
Provision for doubtful accounts		3			16
Provision for inventory		11			31			5			8
Impairment and other charges								10			4
Other, net		(1	)		1			5			19
Change in operating assets and liabilities, net of acquisitions:
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Receivables		(106	)		129			(110	)		(93	)
Inventories		(81	)		152			(122	)		11
Prepaid and other current assets		(6	)		1			(4	)		(3	)
Accounts payable and accrued liabilities		70			(38	)
Income taxes receivable, net		(1	)		26
Other assets / liabilities, net		—			(1	)
Accounts payable, accrued liabilities and other, net								99			71
Net cash provided by (used in) operating activities		(107	)		186			(6	)		28
Cash flows from investing activities:
Business acquisitions, net of cash acquired								(21	)		(96	)
Purchases of property, plant and equipment		(3	)		(3	)		(7	)		(4	)
Business acquisitions, net of cash acquired		(4	)		(182	)
Purchases of intangible assets		—			(7	)
Other, net		4			1			2			1
Net cash used in investing activities		(3	)		(191	)
Net cash provided by (used in) investing activities								(26	)		(99	)
Cash flows from financing activities:
Borrowing under the revolving credit facility		277			227
Repayments under the revolving credit facility		(179	)		(190	)
Other		(1	)		(4	)
Net cash provided by financing activities		97			33
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		6			13			(9	)		(1	)
Net change in cash and cash equivalents		(7	)		41			(46	)		(75	)
Cash and cash equivalents, beginning of period		106			90			313			387
Cash and cash equivalents, end of period	$	99		$	131		$	267		$	312

1. Organization and Basis of Presentation

Nature of Operations

NOW Inc. (“NOW” or the “Company”) is a holding company headquartered in Houston, Texas that was incorporated in Delaware on November 22, 2013. NOW operates primarily under the DistributionNOW and ~~Wilson Export~~DNOW brands. NOW is a global distributor of energy products as well as products for industrial applications through its locations in the United States (“U.S.”), Canada and internationally which are geographically positioned to serve the energy and industrial markets in ~~over~~ approximately 80 countries. ~~NOW’s~~Additionally, through the Company’s growing DigitalNOW® platform, customers can leverage world-class technology across ecommerce, data management and supply chain optimization applications to solve a wide array of complex operational and product sourcing challenges to assist in maximizing their return on assets. The Company’s energy product ~~offerings are used in~~offering is consumed throughout all sectors of the ~~oil and gas~~energy industry ~~including~~– from upstream drilling and completion, exploration and production, midstream infrastructure development ~~and~~to downstream petroleum refining and petrochemicals – as well as in other industries, such as chemical processing, ~~power generation~~mining, utilities and ~~industrial manufacturing operations.~~renewables. The industrial distribution ~~portion of NOW’s business targets a diverse range of manufacturing~~end markets include engineering and ~~other facilities across numerous industries~~construction firms that perform capital and maintenance projects for their end ~~markets.~~user clients. NOW also provides supply chain and materials management solutions to ~~drilling contractors, E&P operators, midstream operators, downstream energy and industrial manufacturing companies.~~the same markets where the Company sells products. NOW’s supplier network consists of thousands of vendors in approximately 40 countries.

Basis of Presentation

~~All significant intercompany transactions and accounts have been eliminated.~~ The unaudited consolidated financial information included in this report has been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of SEC Regulation S-X. All significant intercompany transactions and accounts have been eliminated. Variable interest entities for which the Company is the primary beneficiary are fully consolidated with the equity held by the outside stockholders and their portion of net income (loss) reflected as noncontrolling interest in the accompanying consolidated financial statements. The principles for interim financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the financial statements included in the Company’s most recent Annual Report on Form 10-K. In the opinion of the Company’s management, the consolidated financial statements include all adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and nine months ended September 30, ~~2017~~2022, are not necessarily indicative of the results to be expected for the full year.

Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported results of operations. See Note 6 “Stockholders' Equity” for additional information.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported and contingent amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~Reclassification~~

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, receivables and payables approximated fair value because of the relatively short maturity of these instruments. Cash equivalents include only those investments having a maturity date of three months or less at the time of purchase. See Note ~~11 “Derivative~~13“Derivative Financial Instruments” for the fair value of derivative financial instruments.

Recently Issued Accounting Standards

In ~~May 2014,~~March 2020, the Financial Accounting Standards Board ~~(“FASB”)~~ issued Accounting Standards Update (“ASU”) ~~2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(Topic 606). ASU 2014-09 affects any entity using GAAP~~2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions that ~~either enters into contracts with customers~~reference LIBOR or another reference rate expected to ~~transfer goods or services or enters into contracts~~be discontinued because of reference rate reform. Entities that elect the relief are required to disclose the nature of the optional expedients and exceptions that are adopted and the reasons for the ~~transfer of nonfinancial assets unless those contracts are within~~adoptions. The guidance is effective upon issuance and the ~~scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in~~ ~~Revenue Recognition~~ ~~(Topic 605),~~expedients and ~~most industry-specific guidance.~~exceptions may be applied prospectively through December 31, 2022. The ASU provides two transition methods: (i) retrospectively to each prior reporting period presented or (ii) retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. In August 2015, the FASB proposed the effective date to be the annual reporting periods beginning after December 15, 2017, and interim periods therein. In May 2016, the FASB issued ASU 2016-12, ~~Narrow-Scope Improvements and Practical Expedients~~ (Topic 606), which clarifies implementation guidance on assessing collectability, presentation of sales tax, noncash consideration and completed contracts and contract modifications at transition. The Company will adopt Topic 606 in the first quarter of fiscal year 2018 pursuant to the aforementioned adoption method (ii). The Company has substantially completed its assessment of the impact of the new standard on key contracts with customers. The Company’s contracts predominantly contain a single delivery element and revenue is recognized at a single point in time when ownership, risks and rewards transfer. These are largely unimpacted by the new standard. Based on this preliminary assessment, which is subject to change, the Company does not expect the ~~cumulative adjustment~~adoption of this standard to have a material impact on the consolidated financial statements as a result of the adoption of the new standard. The Company is currently updating its control processes and procedures to support revenue recognition and disclosure requirements under the new standard.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ (Topic 842). ASU 2016-02 requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet. ASU 2016-02 is effective for annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is currently assessing the impact of ASU 2016-02 on its consolidated financial statements. The Company expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon the adoption of ASU 2016-02, which will increase the total assets and total liabilities that are reported relative to such amounts prior to adoption.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments~~ (Topic 326), which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU 2016-13 requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 is effective for annual and interim periods in fiscal years beginning after December 15, 2019, with early adoption permitted as of December 15, 2018, and requires modified retrospective transition method. The Company is currently assessing the impact of ASU 2016-13 on its consolidated financial statements.

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~ (Topic 715). ASU 2017-07 requires the disaggregation of the service cost component from the other components of net periodic benefit cost and allows only the service cost component of net benefit cost to be eligible for capitalization. ASU 2017-07 is effective for annual and interim periods in fiscal years beginning after December 15, 2017. The Company sponsors two defined benefit plans in the UK under which accrual of pension benefits has ceased and there will not be a service cost component to the net periodic pension cost. Plan members benefits that have previously been accrued are indexed in line with inflation during the period up to retirement in order to protect their purchasing power. The Company plans to adopt this standard in the first quarter of fiscal year 2018 and does not expect a material effect on its consolidated financial statements.

2. Revenue

The Company’s primary source of revenue is the sale of energy products and an extensive selection of products for industrial applications based upon purchase orders or contracts with customers. The majority of revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the product is shipped, delivered or picked up by the customer. The Company does not grant extended payment terms. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to proper government authorities. Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are recorded in cost of products.

The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for products sold. Revenue is recorded at the transaction price net of estimates of variable consideration, which may include product returns, trade discounts and allowances. The Company accrues for variable consideration using the expected value method. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

See Note 8 “Business Segments” for disaggregation of revenue by reporting segments. The Company believes this disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed on contracts with an original expected duration of more than one year. The Company’s contracts are predominantly short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in Accounting Standards

~~In July 2015,~~ Codification (“ASC”) Topic 606 exempting the ~~FASB issued ASU 2015-11,~~ ~~Simplifying~~Company from disclosure of the ~~Measurement~~transaction price allocated to remaining performance obligations when the performance obligation is part of ~~Inventory~~ ~~(Topic 330). Under ASU 2015-11, inventory will be measured~~a contract that has an original expected duration of one year or less.

Receivables

Receivables are recorded when the Company has an unconditional right to consideration. Receivables are recorded and carried at the ~~“lower~~original invoiced amount less the allowance for doubtful accounts (“AFDA”). The estimated AFDA reflects the Company’s immediate recognition of ~~cost~~current expected credit losses by incorporating the historical loss experience, as well as current and ~~net realizable value.” ASU 2015-11 defines net realizable value as the “estimated selling prices~~future market conditions that are reasonably available. Judgments in the ~~ordinary course~~estimate of AFDA include global economic and business ~~less reasonably predictable~~conditions, oil and gas industry and market conditions, customer’s financial conditions and accounts receivable past due. As of September 30, 2022 and December 31, 2021, AFDA totaled $25 million in both periods.

Contract Assets and Liabilities

Contract assets primarily consist of retainage amounts held as a form of security by customers until the Company satisfies its remaining performance obligations. As of September 30, 2022 and December 31, 2021, contract assets were $1 million for both periods and were included in receivables, net in the consolidated balance sheets. The Company generally accounts for the incremental costs of ~~completion, disposal,~~obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less; however, these expenses are not material.

Contract liabilities primarily consist of deferred revenues recorded when customer payments are received or due in advance of satisfying performance obligations, including amounts which are refundable, and ~~transportation.” ASU 2015-11~~other accrued customer liabilities. Revenue recognition is ~~effective for annual~~deferred to a future period until the Company completes its obligations contractually agreed with customers. As of September 30, 2022 and ~~interim periods~~December 31, 2021, contract liabilities were $23 million and $27 million, respectively, and were included in ~~fiscal years beginning after December~~ accrued liabilities in the consolidated balance sheets. For the nine months ended September 30, 2022, the decrease in contract liabilities was primarily related to recognizing revenue of approximately $15 ~~2016. The Company adopted this standard~~ million that was deferred as of ~~January 1, 2017, with no material impact on its consolidated financial statements.~~December 31, 2021, partially offset by net current year customer deposits of approximately $11 million.

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Intra-Entity Transfers of Assets Other than Inventory~~ ~~(Topic 740),~~ to recognize the income tax consequences of intra-entity transfers of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for annual and interim periods in fiscal years beginning after December 15, 2017 with early adoption permitted in the first interim period of fiscal year 2017. Upon adoption, any deferred charge established upon the intra-company transfer would be recorded as a cumulative-effect adjustment to retained earnings. The Company early adopted this standard in the first quarter of fiscal year 2017 and reversed a deferred charge of $1 million previously recorded in prepaid and other current assets in the accompanying consolidated

~~balance sheets. However, due to the Company’s full valuation allowance in the U.S., the deferred charge recorded as a cumulative-effect adjustment to accumulated deficit netted to zero.~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~ (Topic 350), which eliminates Step 2 from the goodwill impairment test. ASU 2017-04 is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017 and should be applied prospectively. The Company early adopted this standard as of January 1, 2017, for use in its goodwill impairment testing.

2.3. Property, Plant and Equipment, net

Property, plant and equipment consist of (in millions):


	Estimated Useful Lives	September 30, 2022			December 31, 2021
Information technology assets	1-7 Years	$	48		$	48
Operating equipment (1)	2-15 Years		129			129
Buildings and land (2)	5-35 Years		93			91
Construction in progress			3			3
Total property, plant and equipment			273			271
Less: accumulated depreciation			(164	)		(160	)
Property, plant and equipment, net		$	109		$	111

Estimated
Useful Lives

September 30, 2017

December 31, 2016

Information technology assets

1-7 Years

$
48

$
47

Operating equipment

2-15 Years

93

93

Buildings and land⁽¹⁾⁽²⁾

5-35 Years

98

95

Construction in progress

1

1

Total property, plant and equipment

240

236

Less: accumulated depreciation

(114
)

(93
)
Property, plant and equipment, net

$
126

$
143

(1)

Includes finance lease right-of-use assets.

~~(1)~~

~~Land has an indefinite life~~.

~~(2)~~

As of September 30, 2017, the Company had classified assets from the U.S. segment related to a facility relocation as held for sale. The net carrying value of these properties was approximately $2 million. The Company expects to complete the sale of these assets within one year.

(2)

Land has an indefinite life.

3.4. Accrued Liabilities

Accrued liabilities consist of (in ~~millions)~~millions):


	September 30, 2022		December 31, 2021
Compensation and other related expenses	$	35	$	35
Contract liabilities		23		27
Taxes (non-income)		13		12
Current portion of operating lease liabilities		12		15
Other		28		23
Total	$	111	$	112

5. Debt

September 30, 2017

December 31, 2016

Compensation and other related expenses

$
36

$
25

Customer credits and prepayments

27

27

Taxes (non-income)

17

17

Other

31

31

Total

$
111

$
100

~~4. Debt~~

On ~~January 20, 2016,~~ December 14, 2021, the Company entered into an amendment ~~(the “Amendment”)~~ to its existing senior secured revolving credit facility ~~dated~~with a syndicate of lenders with Wells Fargo Bank, National Association, serving as the administrative agent (as amended, the “Credit Facility”).

Effective with the amendment, the Credit Facility provides for a $500 million global revolving credit facility, of which up to $50 million is available for the Company’s Canadian subsidiaries, and the maturity is extended to December 14, 2026. The Company has the right, subject to certain conditions, to increase the aggregate principal amount of commitments under the credit facility by $250 million. The Credit Facility also provides a letter of credit sub-facility of $25 million. The obligations under the Credit Facility are secured by substantially all the assets of the Company and its subsidiaries. The Credit Facility contains customary covenants, representations and warranties and events of default. The Company will be required to maintain a fixed charge coverage ratio of at least 1.00:1.00 as of ~~April 18, 2014 (the “Credit Agreement”). The Amendment, among other things, (i) suspends, until~~ the ~~Company elects otherwise,~~end of each fiscal quarter if excess availability under the Credit ~~Agreement’s minimum~~Facility falls below the greater of 10% of the borrowing base or $40 million.

Borrowings under the Credit Facility will bear an interest rate at the Company’s option, at (i) the base rate plus an applicable margin based on the Company’s fixed charge coverage ratio ~~effective as~~(and if applicable, the Company’s leverage ratio); or (ii) the greater of ~~December 30, 2015, (ii) adds a minimum asset~~LIBOR for the applicable interest period and zero, plus an applicable margin based on the Company’s fixed charge coverage ratio (and if applicable, the Company’s leverage ratio). As part of the amendment, when the fixed charge coverage ratio (as defined in the Credit ~~Agreement), which requires~~Facility) is less than or equal to 1.50 to 1.00, the applicable rate for borrowings of base rate loans and Eurocurrency rate loans decreases by 0.250%. The Credit Facility includes a commitment fee on the unused portion of commitments that ranges from 25 to 37.5 basis points. Commitment fees incurred during the ~~ratio~~period were included in other income (expense) in the consolidated statements of operations.

Availability under the ~~value~~Credit Facility is determined by a borrowing base comprised of ~~the Company’s~~ eligible ~~assets (value of qualified cash,~~receivables, eligible inventory and ~~eligible accounts receivable) to the amount of its outstanding obligations under the Credit Agreement is no less than 1.50 to 1.00, (iii) reduces the maximum capitalization ratio (as defined~~certain pledged deposits in the ~~Credit Agreement) from 50% to 45%, (iv) increases the applicable interest margin on current borrowings by 75 basis points~~U.S and the current commitment fee by 5 basis points and (v) reduces sub-facilities for standby letters of credit and swingline loans to $40 million and $25 million, respectively. In connection with the Amendment, the Company also entered into a Security Agreement dated as of January 20, 2016 (the “Security Agreement”) pursuant to which it granted the lenders under the Credit Agreement customary security interests in substantially all of the Company’s U.S. assets and in approximately 65% of the equity interests of the Company’s first-tier foreign subsidiaries.

Canada. As of September 30, ~~2017,~~ 2022, the Company had ~~borrowed $163 million~~no borrowings against ~~its senior secured revolving credit facility,~~the Credit Facility and ~~had $441~~approximately $481 million in availability (as defined in the Credit ~~Agreement)~~Facility) resulting in the excess availability (as defined in the Credit ~~Agreement)~~Facility) of ~~72%~~99%, subject to certain ~~restrictions. Borrowings that result in the excess availability dropping below 25% are conditioned upon compliance with or waiver of a minimum fixed charge ratio (as defined in the Credit Agreement).~~limitations. The Company ~~was~~is not obligated to ~~pay back the borrowing~~repay borrowings against the ~~senior secured revolving credit facility~~current Credit Facility until the expiration ~~date of April 18, 2019, as such the outstanding borrowing is classified as long term. As of September 30, 2017, the Company was in compliance with all financial~~date.

covenants in the credit facility. Total commitments under the amended credit facility remain at $750 million and the amended credit facility includes a $250 million accordion feature, subject to certain conditions.

~~At September 30, 2017, the~~The Company issued $5$4 million in letters of credit under ~~its senior revolving credit facility~~the Credit Facility primarily for casualty insurance requirements expiring in ~~July 2018.~~June 2023.

6. Stockholders’ Equity

5.Share Repurchase Program

On August 3, 2022, the Company’s Board of Directors approved a share repurchase program, under which the Company is authorized to purchase up to $80 million of its outstanding common stock through December 31, 2024. Under this program, the Company may from time to time repurchase common stock in open market transactions or enter into Rule 10b5-1 trading plans to facilitate the repurchase of its common stock pursuant to its share repurchase program. The amount and timing of any repurchases will depend on several factors, including share price, general business and market conditions, and alternative capital allocation opportunities. During the three months ended September 30, 2022, the Company repurchased 376,838 shares of its common stock on the open market at an average price of $10.33 per common share for a total of $4 million under this program. All shares repurchased shall be retired pursuant to the terms of the share repurchase program.

Consolidated Variable Interest Entities ("VIE")

The Company holds a 49% interest in one VIE located in the Middle East. The Company is the primary beneficiary and consolidates the VIE as it has the power to direct the activities that most significantly affect the VIE’s economic performance and has the obligation to absorb the VIE’s losses or the right to receive benefits. The initial investment was completed in 2017 with the noncontrolling interest ("NCI") of approximately $1 million which was previously included in additional paid-in capital in the consolidated balance sheets as it was not material, and has been reclassified to NCI to conform to the current period financial statement presentation. For the three and nine months ended September 30, 2022, net income attributable to NCI was approximately $1 million. For all prior periods, net income (loss) attributable to NCI was less than $1 million.

The assets of the VIE can only be used to settle its own obligations and its creditors have no recourse to the Company’s assets. As of September 30, 2022 and December 31, 2021, the VIE’s assets were primarily current assets of $8 million and $4 million, respectively, and the liabilities were primarily current liabilities of $2 million and $1 million, respectively.

7. Accumulated Other Comprehensive Income (Loss) ("AOCI")

The components of ~~accumulated other comprehensive income (loss)~~AOCI are as follows (in millions):


	Foreign Currency Translation Adjustments
	Nine Months Ended September 30,
	2022			2021
Beginning balance	$	(147	)	$	(145	)
Other comprehensive income (loss) before reclassifications		(18	)		(1	)
Amounts reclassified from accumulated other comprehensive income (loss)		10			—
Net current-period other comprehensive income (loss)		(8	)		(1	)
Ending balance	$	(155	)	$	(146	)

Foreign

Currency

Translation

Adjustments

Balance at December 31, 2016

$
(142
)
Other comprehensive income

38

Balance at September 30, 2017

$
(104
)

The Company’s reporting currency is the U.S. dollar. A majority of the Company’s international entities in which there is a substantial investment have the local currency as their functional currency. As a result, foreign currency translation adjustments resulting from the process of translating the entities’ financial statements into the reporting currency are reported in other comprehensive income ~~(loss)~~or loss in accordance with ASC Topic 830, “Foreign Currency Matters.”

For the nine months ended September 30, 2022, the Company reclassified $10 million of foreign currency translation losses as a result of substantially completing the liquidation of certain foreign subsidiaries in its International segment. Such foreign currency translation losses were reclassified from the component of AOCI into earnings, reflected in impairment and other charges in the consolidated statement of operations.

6.8. Business Segments

Operating results by reportable segment are as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022			2021
Revenue:
United States	$	435	$	312	$	1,177		$	860
Canada		86		68		240			177
International		56		59		172			163
Total revenue	$	577	$	439	$	1,589		$	1,200
Operating profit (loss):
United States	$	31	$	4	$	77		$	(12	)
Canada		10		5		23			11
International		3		1		(4	)		3
Total operating profit	$	44	$	10	$	96		$	2

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenue:

United States
$
506

$
372

$
1,426

$
1,066

Canada

96

67

271

185

International

95

81

282

318

Total revenue
$
697

$
520

$
1,979

$
1,569

Operating profit (loss):

United States
$
(10
)

$
(46
)

$
(52
)

$
(149
)

Canada

4

(2
)

9

(16
)

International

—

(5
)

2

(10
)

Total operating loss
$
(6
)

$
(53
)

$
(41
)

$
(175
)

Operating profit (loss) % of revenue:

United States

(2.0
%)

(12.4
%)

(3.6
%)

(14.0
%)

Canada

4.2
%

(3.0
%)

3.3
%

(8.6
%)

International

0.0
%

(6.2
%)

0.7
%

(3.1
%)

Total operating loss %

(0.9
%)

(10.2
%)

(2.1
%)

(11.2
%)

7.9. Income Taxes

On May 1, 2014, the National Oilwell Varco, Inc. (“NOV”) Board of Directors approved the Spin-Off (the “Spin-Off” or “Separation”) of its distribution business into an independent, publicly traded company named NOW Inc. In connection with the Separation, the Company and NOV entered into a Tax Matters Agreement, dated as of May 29, 2014 (the “Tax Matters Agreement”). The Tax Matters Agreement sets forth the Company and NOV’s rights and obligations related to the allocation of federal, state, local and foreign taxes for periods before and after the Spin-Off, as well as taxes attributable to the Spin-Off, and related matters such as the filing of tax returns and the conduct of IRS and other audits. Pursuant to the Tax Matters Agreement, NOV has prepared and filed the consolidated federal income tax return, and any other tax returns that include both NOV and the Company for all the liability periods ended on or prior to May 30, 2014. The income tax provision (benefit) for periods prior to the Separation has been computed as if NOW were a stand-alone company. NOV will indemnify and hold harmless the Company for any income tax liability for periods

before the Separation date. The Company will prepare and file all tax returns that include solely the Company for all taxable periods ending after that date. Settlements of tax payments between NOV and the Company were generally treated as contributions from or distributions to NOV in periods prior to the Separation date.

The effective tax rates for the three and nine months ended September 30, ~~2017~~2022, were ~~(1.6%)~~6.8% and ~~0.6%~~7.6%, respectively, compared to ~~(0.2%)~~29.7% and ~~10.3%~~(117.1%), respectively, for the ~~same~~corresponding periods ~~in 2016. Compared to~~of 2021. In general, the effective tax rate differs from the U.S. statutory rate ~~the effective tax rate was impacted by~~due to recurring items, such as ~~lower~~differing tax rates on income earned in foreign jurisdictions, ~~that is permanently reinvested, offset by~~ nondeductible expenses, state income taxes and the change in valuation allowance recorded against deferred tax assets. ~~Due to~~For the three and nine months ended September 30, 2022, the effective tax rate was primarily driven by the recognition of tax expense from earnings in Canada offset by current year realization of deferred tax assets and corresponding release of valuation allowance in the U.S. For the nine months ended September 30, 2022, the effective tax rate was also impacted by impairment charges incurred as a result of substantially completing the liquidation of certain foreign subsidiaries with no associated tax benefit. The current geopolitical conditions and the COVID-19 pandemic have had an impact on the global supply chain and create continuing uncertainty in ~~our industry and thus our outlook,~~the Company’s short-term results. Consequently, the Company ~~continues~~is continuing to ~~utilize~~rely on the discrete-period method ~~of recording income taxes on a year-to-date effective~~for calculating its interim period tax ~~rate~~provision for the three and nine months ended September 30, ~~2017.~~2022. The Company will evaluate its use of this method each quarter until such time as a return to the annualized estimated effective tax rate method is deemed appropriate.

During the second quarter of 2016, the Company acquired Power Service and recorded a deferred tax liability of $19 million related to basis differences between U.S. GAAP and U.S. Tax associated with the acquisition and step-up to fair value of certain assets, primarily intangible assets. The step up in basis resulted in higher future taxable temporary differences and a corresponding reduction in the valuation allowance recorded against deferred tax assets in the U.S.

To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts would be classified as a component of income tax provision (benefit) in the financial statements consistent with the Company’s policy.

The Company is subject to taxation in the ~~United States,~~U.S., various states and foreign jurisdictions. The Company has significant operations in the ~~United States~~U.S. and Canada and to a lesser extent in various other international jurisdictions. Tax years that remain subject to examination ~~by major tax jurisdictions~~ vary by legal entity but are generally open in the U.S. for the tax years ending after ~~2013~~2018 and outside the U.S. for the tax years ending after ~~2011. The Company is indemnified for any income tax exposures related to the periods prior to the Separation under the Tax Matters Agreement with NOV.~~2016.

~~8. Loss~~10. Earnings (Loss) Per Share ~~(“EPS”)~~

For the three and nine months ended September 30,~~, 2017~~ 2022, approximately 2 million and ~~2016, 8,141,971 and 8,038,097, 7,430,510~~ ~~and 7,264,566,~~ 3 million, respectively, of potentially dilutive shares were excluded from the computation of diluted ~~loss~~earnings per share due to their antidilutive effect. For the three and nine months ended September 30, 2021, approximately 4 million and 5 million of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect or the Company recognizing a net ~~loss for the period.~~ loss.

Basic and diluted ~~loss~~earnings (loss) per share are as follows (in millions, except share data):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			Three Months Ended September 30,					Nine Months Ended September 30,
													2022			2021		2022			2021
Numerator:
Net loss attributable to the Company's stockholders	$	(9	)	$	(56	)	$	(49	)	$	(163	)
Net income (loss) attributable to NOW Inc.													$	40		$	5	$	96		$	(7	)
Less: net income attributable to participating securities														(1	)		—		(1	)		—
Net income (loss) attributable to NOW Inc. stockholders													$	39		$	5	$	95		$	(7	)
Denominator:
Weighted average basic common shares outstanding		107,752,427			107,473,952			107,695,277			107,396,681			110,863,381			110,558,831		110,747,087			110,351,625
Effect of dilutive securities		—			—			—			—			569,398			71,857		363,754			—
Weighted average diluted common shares outstanding		107,752,427			107,473,952			107,695,277			107,396,681			111,432,779			110,630,688		111,110,841			110,351,625
Loss per share attributable to the Company's stockholders:
Earnings (loss) per share attributable to NOW Inc. stockholders:
Basic	$	(0.08	)	$	(0.53	)	$	(0.45	)	$	(1.52	)	$	0.35		$	0.05	$	0.85		$	(0.06	)
Diluted	$	(0.08	)	$	(0.53	)	$	(0.45	)	$	(1.52	)	$	0.35		$	0.05	$	0.85		$	(0.06	)

Under ASC Topic 260, “Earnings Per ~~Share,” requires companies with unvested participating securities to utilize a two-class method for~~Share”, the ~~computation of net income attributable to the Company per share. The~~ two-class method requires a portion of net income attributable to ~~the Company~~NOW Inc. to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents, if declared. Net ~~losses are~~loss is not allocated to ~~nonvested shares~~unvested awards in periods ~~that~~ the Company determines that those shares are not obligated to participate in losses. For the periods that the Company recognized net income, net income allocated to these participating securities was excluded from net income attributable to NOW Inc. stockholders in the numerator of the earnings per share computation.

9.11. Stock-based Compensation and Outstanding Awards

In connection with the Separation, the Company and NOV entered into the Employee Matters Agreement which governs the Company and NOV’s compensation and employee benefit obligations with respect to current and former employees of each company, and generally allocates liabilities and responsibilities relating to employee compensation and benefit plans and programs. Such agreement provided the adjustment mechanisms applied as a result of the Spin-Off to convert outstanding NOV equity awards held by Company employees to Company awards.

The Company has a stock-based compensation plan known as the NOW Inc. Long-Term Incentive Plan (the “Plan”). Under the Plan, the Company’s employees are eligible to be granted stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and performance stock awards (“PSAs”).

For the nine months ended September 30, ~~2017,~~2022, the Company granted ~~915,037~~1,152,413 shares of restricted stock ~~options~~awards ("RSAs") and restricted stock units ("RSUs") with a weighted average fair value of ~~$7.07 per share and 194,183 shares of RSAs and RSUs with a weighted average fair value of $19.92~~$9.86 per share. In addition, the Company granted ~~PSAs~~performance stock awards ("PSAs") to senior management employees with potential payouts varying from zero to ~~169,346~~701,668 shares. These options vest over a three-year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. The RSAs and RSUs vest on the first and third anniversary of the date of grant. The PSAs can be earned based on performance against established metrics over a three-year performance period. The PSAs are divided into three equal, independent parts that are subject to three separate performance metrics: (i) one-third of the PSAs have a Total Shareholder Return (TSR) metric, (ii) one-third of the PSAs have an EBITDA metric, and (iii) one-third of the PSAs have a Working Capital (WC) metric.

Performance against the TSR metric is determined by comparing the performance of the Company’s TSR with the TSR performance of designated peer companies for the three-year performance period. Performance against the EBITDA metric is determined by comparing the performance of the Company’s actual EBITDA average for each of the three-years of the performance period against the EBITDA metrics set by the Company’s Compensation Committee of the Board of Directors. Performance against the WC metric is determined by comparing the performance of the Company’s actual WC average for each of the three-years of the performance period against the WC metrics set by the Company’s Compensation Committee of the Board of Directors.

Stock-based compensation expense ~~totaled $5 million and $16 million~~ for the three and nine months ended September 30, ~~2017, respectively, and $5~~2022, totaled $3 million and ~~$17~~$7 million, respectively, compared to $2 million and $6 million, respectively, for the ~~same~~corresponding periods ~~in 2016, respectively.~~of 2021.

~~10.~~12. Commitments and Contingencies

In connection with the Spin-Off, the Company and NOV entered into a Separation and Distribution Agreement which contains the key provisions related to the separation from NOV and the distribution of the Company’s common stock to NOV shareholders. The Separation and Distribution Agreement separated the assets related to the Company’s business from NOV, along with liabilities related to such assets, which now reside with the Company. In general, the Company agrees to indemnify NOV from liabilities arising from the Company’s business and assets, and NOV agrees to indemnify the Company from liabilities arising from NOV’s business and assets (that remained with NOV), except as otherwise provided in such agreement.

The Company is involved in various claims, regulatory agency audits and pending or threatened legal actions involving a variety of ~~matters.~~matters with entities such as suppliers, customers, parties to acquisitions and divestitures, government authorities and other external parties. The Company regularly reviews and records the estimated probable liability in an amount believed to be sufficient and continues to periodically reexamine the estimates of probable liabilities and any associated expenses to make appropriate adjustments to such estimates as necessary. These estimated liabilities are based on the Company’s assessment of the nature of these matters, their progress toward resolution, the advice of legal counsel and outside experts as well as management’s intention and past experience regarding the valuation of these claims. The Company has also assessed the potential for additional losses above the amounts accrued as well as potential losses for matters that are not probable but are reasonably possible. The total potential loss on these matters cannot be ~~determined; however,~~determined. While the Company has established estimates it believes to be reasonable under the facts known, the outcomes of litigation and similar disputes are often difficult to reliably predict and may result in ~~the Company’s opinion, any ultimate liability,~~decisions or settlements that are contrary to, ~~the extent not otherwise recorded~~ or ~~accrued for, will not materially affect the Company’s financial position, cash flow or results of operations. These estimated liabilities are based on the Company’s assessment~~in excess of, the ~~nature of these matters, their progress toward resolution, the advice of legal counsel and outside experts as well as management’s intention and experience.~~Company's expectations.

The Company’s business is affected both directly and indirectly by governmental laws and regulations relating to the oilfield service industry in general, as well as by environmental and safety regulations that specifically apply to the Company’s business. Although the Company has not incurred material costs in connection with its compliance with such laws, there can be no assurance that other developments, such as new environmental laws, regulations and enforcement policies hereunder may not result in additional, presently unquantifiable costs or liabilities to the Company.

The Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable. Estimating reasonably possible losses also requires the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties. ~~NOW’s management currently estimates a range of loss for reasonably possible losses for which an estimate can be made is between~~ ~~zero and $15 million in the international segment primarily attributable to accounts receivable with~~

one customer. The Company has accrued its best estimate for loss as of September 30, 2017. Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly ~~from this estimate.~~

The Company maintains credit arrangements with several banks providing for ~~short-term borrowing capacity, overdraft protection~~standby letters of credit, including bid and performance bonds, and other bonding requirements. As of September 30, ~~2017, these credit arrangements totaled approximately $35 million, of which~~2022, the Company was contingently liable for approximately ~~$10~~ $13

million of outstanding standby letters of credit ~~including bid and performance related bonds~~ and surety bonds. The Company does not believe, based on historical experience and information currently available, that it is probable that any amounts will be required to be ~~paid.~~paid on those letters of credit and surety bonds.

In 2021, the Company completed an acquisition which included a contingent consideration arrangement that required additional consideration to be paid based on the achievement of a specified performance target over the earn-out period of one year. The fair value of contingent consideration liability included in other current liabilities in the consolidated balance sheet as of December 31, 2021, was approximately $13 million. As of March 31, 2022, the earn-out period was completed and the Company calculated the contingent consideration threshold was not achieved. As a result, the Company recognized a benefit of approximately $13 million in other income (expense) in the consolidated statement of operations in the three months ended March 31, 2022. However, the Company is currently in disagreement with the sellers on certain aspects of the agreement. The Company does not believe at this time that resolution of the matter will have a material impact on its consolidated financial statements, but the final outcome has not been determined.

~~11.~~13. Derivative Financial Instruments

The Company is exposed to certain risks relating to its ongoing business operations. The ~~primary risk managed by using derivative instruments is foreign currency exchange rate risk. The~~ Company has entered into certain financial derivative instruments to manage this risk.

The derivative financial instruments the Company has entered into are forward exchange contracts which have terms of less than one year to economically hedge foreign currency exchange rate risk on recognized ~~non-functional~~nonfunctional currency monetary accounts. The purpose of the Company’s foreign currency ~~economic~~ hedging activities is to economically hedge the Company’s risk from changes in the fair value of ~~non-functional~~nonfunctional currency denominated monetary accounts.

The Company records all derivative financial instruments at their fair value in its consolidated balance sheets. None of the derivative financial instruments that the Company holds are designated as either a fair value hedge or cash flow hedge and the gain or loss on the derivative instrument is recorded in earnings. The Company has determined that the fair value of its derivative financial instruments are computed using level 2 inputs (inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability) in the fair value hierarchy as the fair value is based on publicly available foreign exchange rates at each financial reporting date.

~~The table below provides data about~~As of September 30, 2022 and December 31, 2021, the fair value of the ~~derivative instruments that are recorded~~Company’s foreign currency forward contracts totaled an asset of less than $1 million and a liability of less than $1 million in both periods. The Company's foreign currency forward contract assets were included in prepaid and other current assets in the consolidated balance sheets (and the Company's foreign contract liabilities were included in ~~millions~~):other current liabilities in the consolidated balance sheets.

September 30, 2017

December 31, 2016

Assets

Liabilities

Assets

Liabilities

Derivatives not designated as hedging instruments:

Foreign exchange forward contracts⁽¹⁾

$
—

$
1

$
1

$
—

⁽¹⁾

Included in other current liabilities and other current assets in the consolidated balance sheets. The total notional amount of the forward foreign exchange contracts was approximately $26 million and $76 million at September 30, 2017 and December 31, 2016, respectively.

~~The table below provides~~For the three and nine months ended September 30, 2022, the Company recorded a gain of less than $1 million and a loss of less than $1 million, respectively, related to changes in fair value. For the three and nine months ended September 30, 2021, the Company recorded a loss of less than $1 million in both periods related to changes in fair value. All gains ~~(losses) recognized~~and losses were included in other income (expense) in the ~~accompanying~~ consolidated statements of ~~operations related to the Company’s derivative instruments (in millions~~):

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Derivatives not designated as hedging instruments:

Foreign exchange forward contracts

$
—

$
—

$
2

$
10

operations. As of September 30, ~~2017,~~2022 and December 31, 2021, the notional principal associated with those contracts was $9 million in both periods.

As of September 30, 2022, the Company’s financial instruments do notcontain any credit-risk-related or other contingent features that could cause accelerated payments when the Company’s financial instruments are in net liability positions. The Company does not use derivative financial instruments for trading or speculative purposes.

14. Acquisition

For the nine months ended September 30, 2022, the Company completed an acquisition for a net purchase price consideration of approximately $21 million cash. The acquisition expands NOW's product offering in the U.S. Process Solutions reporting unit. The Company completed its preliminary valuations as of the acquisition date of the acquired net assets and recognized goodwill of $12 million and intangible assets of $4 million in the United States segment, which are subject to change. If additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company will refine its estimate of fair value to allocate the purchase price more accurately; any such revisions are not expected to be significant. All of the goodwill is expected to be deductible for income tax purposes. The Company has not presented supplemental pro forma information because the acquired operations did not materially impact the Company’s consolidated operating results.

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

Some of the information in this document contains, or has incorporated by reference, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements typically are identified by use of terms such as “may,” “believe,” “anticipate,” “expect,” “plan,” “predict,” “estimate,” “will be” or other similar words and phrases, although some forward-looking statements are expressed differently. You should be aware that our actual results could differ materially from results anticipated in the forward-looking statements due to a number of factors, including, but not limited to, changes in oil and gas prices, changes in the energy markets, customer demand for our products, significant changes in the size of our customers, difficulties encountered in integrating mergers and acquisitions, general volatility in the capital markets, ability to complete the share repurchase program, disruptions caused by COVID-19, changes in applicable government regulations, increased borrowing costs, ~~competition between us~~geopolitical conditions (including the Ukraine conflict and ~~our former parent company, NOV, the triggering of rights~~its regional and ~~obligations by the Spin-Off~~ global impact)or any litigation arising out of or related ~~to the Separation,~~thereto, impairments in ~~goodwill or other intangible~~long-lived assets and worldwide economic activity. You should also consider carefully the statements under “Risk Factors,” as disclosed in our Form 10-K, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements. We undertake no obligation to update any such factors or forward-looking statements to reflect future events or developments.

We are a global distributor to the oil and gas and industrial markets with a legacy of ~~over 150~~160 years. We operate primarily under the DistributionNOW and ~~Wilson Export~~DNOW brands. Through ~~our~~a network of approximately ~~300~~170 locations and approximately ~~4,600~~2,350 employees worldwide, we ~~stock~~offer a complementary suite of digital procurement channels that, in conjunction with our locations, provides products to the energy and ~~sell~~industrial markets around the world.

Additionally, through our growing DigitalNOW® platform, customers can leverage world-class technology across ecommerce, data management and supply chain optimization applications to solve a ~~comprehensive offering~~wide array of ~~energy products as well as an extensive selection of products for industrial applications.~~ complex operational and product sourcing challenges to assist in maximizing their return on assets.

Our energy product offering is consumed throughout all sectors of the ~~oil and gas~~energy industry – from upstream drilling and completion, exploration and production, ~~(“E&P”),~~ midstream infrastructure development to downstream petroleum refining and petrochemicals – as well as in other industries, such as chemical processing, mining, utilities and ~~industrial manufacturing operations.~~renewables. The industrial distribution end markets include ~~manufacturing, aerospace, automotive, refineries and~~ engineering and ~~construction.~~construction firms that perform capital and maintenance projects for their end user clients. We also provide supply chain and materials management solutions to ~~drilling contractors, E&P operators, midstream operators and downstream energy and industrial manufacturing companies around~~ the ~~world.~~same markets where we sell products.

Our global product offering includes consumable maintenance, repair and operating (“MRO”) supplies, pipe, valves, fittings, flanges, gaskets, fasteners, electrical, instrumentation, artificial lift, pumping solutions, valve actuation and modular process, measurement and control equipment. We also offer procurement, warehouse and inventory management solutions as part of our supply chain and materials management offering. ~~Through focused effort, we~~We have developed expertise in providing application systems, ~~and~~work processes, parts integration, optimization solutions and after-sales support.

Our solutions include outsourcing ~~the~~portions or entire functions of our customers’ procurement, ~~inventory~~warehouse and ~~warehouse~~inventory management, logistics, point of issue technology, project management, business process and performance metrics reporting. These solutions allow us to leverage the infrastructure of our SAP™ Enterprise Resource Planning (“ERP”) system and other technologies to streamline our customers’ purchasing process, from requisition to procurement to payment, by digitally managing workflow, improving approval routing and providing robust reporting functionality.

We support land and offshore operations for all the major oil and gas producing regions around the world through our network of locations. Our key markets, beyond North America, include ~~Latin~~South America, the North Sea, the Middle East, Asia Pacific, ~~and~~portions of the ~~Former~~former Soviet Union ~~(“FSU”).~~and Africa. Products sold through our locations support greenfield expansion upstream capital projects, midstream infrastructure and transmission and MRO consumables used in day-to-day production. We provide downstream energy and industrial products for petroleum refining, chemical processing, ~~LNG~~liquefied natural gas terminals, power generation utilities ~~and industrial manufacturing~~ operations and customer on-site locations.

We stock or sell ~~more than~~approximately 300,000 stock keeping units ~~(“SKUs”)~~ through our branch network. Our supplier network consists of thousands of vendors in approximately 40 countries. From our operations in ~~over~~approximately 20 countries we sell to customers operating in approximately 80 countries. The supplies and equipment stocked by each of our branches isare customized to meet varied and changing local customer demands. The breadth and scale of our offering enhances our value proposition to our customers, suppliers and shareholders.

We employ advanced information technologies, including a common ERP platform across most of our business, to provide complete procurement, ~~materials~~warehouse and inventory management and logistics coordination to our customers around the globe. Having a common ERP platform allows immediate visibility into ~~the Company’s~~our inventory assets, operations and financials ~~and operations~~ worldwide, enhancing decision making and efficiency.

Demand for our products is driven primarily by the level of oil and gas drilling, completions, servicing, ~~and~~ production, transmission, refining and petrochemical ~~and industrial manufacturing~~ activities. It is also influenced by the global supply and demand for energy, the economy in general and ~~by government policies.~~geopolitics. Several factors drive spending, such as investment in energy infrastructure, the North American conventional and shale plays, market expectations of future developments in the oil, natural gas, liquids, refined products, petrochemical, plant maintenance and other industrial ~~manufacturing~~ and energy sectors.

We have expanded globally, through acquisitions and organic investments, into Australia, Azerbaijan, Brazil, Canada, China, Colombia, Egypt, England, India, Indonesia, Kazakhstan, Kuwait, ~~Mexico,~~ Netherlands, Norway, Oman, ~~Peru, the Philippines, Russia, Saudi Arabia,~~ Scotland, Singapore, the United Arab Emirates and the United ~~States.~~States (“U.S.”).

We operate through three reportable segments: ~~United States (“~~U.S.”), Canada and International. The segment data included in our Management’s Discussion and Analysis ~~(“MD&A”)~~ are presented on a basis consistent with our internal management reporting. Segment information appearing in Note 68 “Business Segments” of the notes to the unaudited consolidated financial statements (Part I, Item 1 of this Form 10-Q) is also presented on this basis.

We have approximately ~~200~~110 locations in the U.S., which are geographically positioned to best serve the upstream, midstream and downstream energy and industrial markets.

We offer higher value solutions in key product lines in the U.S. which broaden and deepen our customer relationships and related product line value. Examples of these include artificial lift, pumps, valves and valve actuation, process and production equipment, fluid transfer products, measurement and controls, spoolable and coated steel-pipe and composite pipe, along with many other products required by our customers, which enable them to focus on their core business while we manage varying degrees of their supply chain. We also provide additional value to our customers through the engineering, design, construction, assembly, fabrication and optimization of products and equipment essential to the safe and efficient production, transportation and processing of oil and ~~gas and industrial manufacturing.~~gas.

We have a network of approximately 5540 locations in the Canadian oilfield, predominantly in the oil rich provinces of Alberta, Saskatchewan, Manitoba and ~~Saskatchewan in Western Canada.~~other targeted locations across the country. Our Canada segment primarily serves ~~the~~ energy exploration, production, mining and drilling business, offering customers many of the same products and value-added solutions that we perform in the U.S. In Canada, we also provide training for, and supervise the installation of, jointed and spoolable composite pipe. This product line is supported by inventory, ~~and~~as well as product and installation expertise to serve our customers.

We operate in approximately 20 countries and serve the needs of our international customers from approximately 3520 locations outside of the U.S. and Canada, which are strategically located in major oil and gas development areas. Our approach in these markets is similar to our approach in ~~the U.S.,~~North America, as our customers turn to us to provide ~~inventory~~products and supply chain solutions support closer to their drilling and exploration activities. Our long legacy of operating in many international regions, combined with significant expansion into several key markets, provides a competitive advantage as few of our competitors have a presence in most of the global energy producing regions.

~~All significant intercompany transactions and accounts have been eliminated.~~ The unaudited consolidated financial information included in this report has been prepared in accordance with ~~GAAP~~accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of SEC Regulation S-X. All significant intercompany transactions and accounts have been eliminated. Variable interest entities for which the Company is the primary beneficiary are fully consolidated with the equity held by the outside stockholders and their portion of net income (loss) reflected as noncontrolling interest in the accompanying consolidated financial statements. The principles for interim financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the financial statements included in the Company’s most recent Annual Report on Form 10-K. In the opinion of our management, the consolidated financial statements include all adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and nine months ended September 30, ~~2017~~2022, are not necessarily indicative of the results to be expected for the full year.

Our results are dependent on, among other ~~things,~~factors, the level of worldwide oil and gas drilling and completions, well remediation activity, crude oil and natural gas prices, capital spending by oilfield service companies and drilling contractors, and the worldwide oil and gas inventory levels. Key industry indicators for the third quarter of ~~2017~~2022 and ~~2016~~2021 and the second quarter of ~~2017~~2022 include the following:


					%					%							%					%
					3Q17 v					3Q17 v							3Q22 v					3Q22 v
	3Q17*		3Q16*		3Q16			2Q17*		2Q17			3Q22*		3Q21*		3Q21			2Q22*		2Q22
Active Drilling Rigs:
U.S.		947		480		97.3	%		892		6.2	%		761		498		52.8	%		716		6.3	%
Canada		208		121		71.9	%		114		82.5	%		199		151		31.8	%		114		74.6	%
International		947		936		1.2	%		958		(1.1	%)		857		772		11.0	%		816		5.0	%
Worldwide		2,102		1,537		36.8	%		1,964		7.0	%		1,817		1,421		27.9	%		1,646		10.4	%

West Texas Intermediate Crude Prices (per barrel)	$	48.16	$	44.85		7.4	%	$	48.24		(0.2	%)	$	93.18	$	70.62		31.9	%	$	108.72		(14.3	%)
Natural Gas Prices ($/MMBtu)	$	2.95	$	2.88		2.4	%	$	3.08		(4.2	%)	$	7.99	$	4.36		83.3	%	$	7.48		6.8	%
Hot-Rolled Coil Prices (steel) ($/short ton)	$	621.38	$	603.87		2.9	%	$	623.65		(0.4	%)	$	915.51	$	1,817.07		(49.6	%)	$	1,372.67		(33.3	%)

The following table details the U.S., Canadian and international rig activity and West Texas Intermediate oil prices for the past nine quarters ended September 30, ~~2017:~~2022:

Sources: Rig count: Baker Hughes, Inc. (www.bakerhughes.com); West Texas Intermediate Crude and Natural Gas Prices: Department of Energy, Energy Information Administration (www.eia.doe.gov); Hot-Rolled Coil Prices: ~~American Metal Market~~ SteelBenchmarker™ Hot Roll Coil USA (~~www.amm.com~~www.steelbenchmarker.com).

The worldwide quarterly average rig count increased ~~7.0%~~10.4% (from ~~1,964~~1,646 rigs to ~~2,102~~1,817 rigs) and the U.S. increased ~~6.2%~~6.3% (from ~~892~~716 rigs to ~~947~~761 rigs) in the third quarter of ~~2017~~2022 compared to the second quarter of ~~2017.~~2022. The average price per barrel of West Texas Intermediate Crude declined ~~0.2%~~14.3% (from ~~$48.24~~$108.72 per barrel to ~~$48.16~~$93.18 per barrel), and natural gas prices ~~declined 4.2%~~increased 6.8% (from ~~$3.08~~$7.48 per MMBtu to ~~$2.95~~$7.99 per MMBtu) in the third quarter of ~~2017~~2022 compared to the second quarter of ~~2017.~~2022. The average price per short ton of Hot-Rolled Coil declined ~~0.4%~~33.3% (from ~~$623.65~~$1,372.67 per short ton to ~~$621.38~~$915.51 per short ton) in the third quarter of ~~2017~~2022 compared to the second quarter of ~~2017.~~2022.

U.S. rig count at October ~~13, 2017~~14, 2022 was ~~928~~769 rigs, ~~down 19~~up 8 rigs ~~compared to~~from the third quarter ~~of 2017 average of 947 rigs.~~2022 average. The price for West Texas Intermediate Crude was ~~$51.43~~$86.10 per barrel at October ~~13, 2017, up 6.8%~~14, 2022, down 7.6% from the third quarter ~~average of 2017.~~2022 average. The price for natural gas was ~~$2.99~~$6.10 per MMBtu at October ~~13, 2017, up 1.4%~~14, 2022, down 23.7% from the third quarter ~~average of 2017.~~2022 average. The price for Hot-Rolled Coil was ~~$609.63~~$769.00 per short ton at October ~~9, 2017,~~10, 2022, down ~~1.9%~~16.0% from the third quarter ~~average of 2017.~~2022 average.

For the three and nine months ended September 30, ~~2017,~~2022, the Company generated a net ~~loss~~income of $9$40 million and ~~$49~~$96 million on ~~$697~~$577 million and ~~$1,979~~$1,589 million in revenue, respectively. ~~Revenue increased $177 million or 34.0%, and $410 million or 26.1%, for the three and nine months ended September 30, 2017, respectively, when compared to the corresponding periods of 2016.~~ For the three and nine months ended September 30, ~~2017,~~2022, revenue increased $138 million or 31.4% and increased $389 million or 32.4%, respectively, and net ~~loss improved $47~~income increased $35 million and ~~$114~~$103 million, respectively, when compared to the corresponding periods of ~~2016.~~2021.

For the three and nine months ended September 30, ~~2017,~~2022, the Company generated an operating ~~loss~~profit of $6$44 million ~~or negative 0.9% of revenue,~~ and ~~$41~~$96 million, ~~or negative 2.1% of revenue,~~respectively, compared to ~~$53~~an operating profit of $10 million ~~or negative 10.2% of revenue,~~ and ~~$175~~$2 million, ~~or negative 11.2% of revenue,~~ respectively, for the corresponding periods of ~~2016.~~2021.

Our outlook for the Company remains tied to crude oil and natural gas commodity prices, global ~~rig count~~oil and gas drilling and ~~completion expenditures, particularly~~completions activity, oil and gas spending, and global demand for oil, its refined petroleum products, crude oil, natural gas liquids and natural gas production and decline rates. Crude oil and natural gas prices as well as crude oil and natural gas storage levels are primary catalysts for determining customer activity and we expect oil and gas demand to grow over the next several years.

The impact on our business from the COVID-19 pandemic and changing macroeconomic factors continue to unfold. In addition, inflationary pressures and efforts to combat it, threats of recession, changes to production limits, supply chain shortages and geopolitical conflicts, including the invasion of Ukraine by Russia and the sanctions imposed in ~~North America. Oil prices and U.S. oil storage levels~~response to this conflict, have increased the level of market volatility. Amid these dynamics, we will continue to ~~be the primary catalysts determining U.S. rig activity. Our approach continues to be to focus on what we can control. We take a long-term approach advancing~~support our customers, optimize our operations, advance our strategic goals and ~~managing~~manage the Company based on ~~current~~ market conditions.

We see the rise in energy transition investments as an opportunity for us to supply many of the current products and services we provide, as well as an opportunity to partner and source from new suppliers to expand our offering, to meet our customers’ needs for their energy transition investments. A number of our larger customers are leading the investments in energy transition projects where we expect to continue to ~~rationalize expenses~~supply them while expanding our offerings to meet their changing requirements. We are also targeting new customers that are not traditional oil and ~~capital where economic activity remains depressed and invest where markets~~gas customers, but are ~~expanding. We believe~~those that ~~our history~~will play a part in the future of ~~managing through these cycles, paired with our resources and minimal capital expenditure requirements, enable us to maximize new opportunities.~~energy transition.

The results of operations are presented before consideration of the noncontrolling interest. Operating results by reportable segment are as follows (in millions):

For the three and nine months ended September 30, ~~2017,~~2022, revenue was ~~$506~~$435 million and ~~$1,426~~$1,177 million, an increase of ~~$134~~$123 million or ~~36.0%~~39.4% and ~~$360~~an increase of $317 million or ~~33.8%~~36.9%, respectively, when compared to the corresponding periods of 2016. These increases were primarily driven by a year over year improvement in U.S. rig count, coupled with an incremental revenue gain of approximately $54 million on a year-to-date basis, from an acquisition completed in the second quarter of 2016.

2021. For the three and nine months ended September 30, ~~2017,~~2022, the increases were primarily driven by the strengthening in U.S. drilling and completions activity.

For the three and nine months ended September 30, 2022, the U.S. generated an operating ~~loss~~profit of ~~$10~~$31 million ~~or negative 2.0% of revenue~~ and ~~$52~~$77 million, ~~or negative 3.6% of revenue, respectively,~~ an improvement of ~~$36~~$27 million and ~~$97~~$89 million, respectively, when compared to the corresponding periods of ~~2016.~~2021. For the three and nine months ended September 30, ~~2017, U.S.~~2022, operating ~~losses narrowed~~profit increased primarily due to the ~~increases~~increase in ~~volume~~revenue discussed above, ~~and~~coupled with improved product margins, partially offset by increases in ~~the periods.~~employee related expenses.

For the three and nine months ended September 30, ~~2017,~~2022, revenue was ~~$96~~$86 million and ~~$271~~$240 million, ~~respectively,~~ an increase of ~~$29~~$18 million or ~~43.3%~~26.5% and ~~$86~~$63 million or ~~46.5%~~35.6%, respectively, when compared to the corresponding periods of ~~2016. These increases were primarily driven by a year over year improvement in Canadian rig count.~~

2021. For the three and nine months ended September 30, 2017, Canada generated an operating profit of $4 million or 4.2% of revenue and $9 million or 3.3% of revenue, respectively, an improvement of $6 million and $25 million, respectively, when compared to the corresponding periods of 2016. Operating profits increased in the periods primarily due to2022, the increases were primarily driven by the increase in ~~volume discussed above and lower inventory charges in the periods.~~Canadian rig count, partially offset by unfavorable foreign exchange rate impacts.

For the three and nine months ended September 30, 2017, revenue was $95 million and $282 million, respectively, an increase of $14 million or 17.3% and a decline of $36 million or 11.3%, respectively, when compared to the corresponding periods of 2016. The increase quarter over quarter is primarily driven by a resumption in electrical projects in Europe and increased customer penetration in the Middle East in the third quarter of 2017. The decrease on a year-to-date basis was primarily a result of the completion of large projects in the first half of 2016 that did not repeat, coupled with a softening in the offshore rig market.

~~For the three and nine months ended September 30, 2017, the international segment~~2022, Canada generated an operating profit of ~~nil~~$10 million and $2$23 million, ~~or 0.7% of revenue, respectively,~~ an ~~improvement~~increase of $5 million and $12 million, respectively, when compared to the corresponding periods of 2016. Operating profit improvement in the three months ended September 30, 2017 was primarily due to the increases in volume discussed above, coupled with improved product margins. Operating profit for the nine months ended September 30, 2017 improved primarily due to reduced bad debt charges and realized cost savings.

2021. For the three and nine months ended September 30, ~~2017,~~2022, operating profit increased primarily due to the increases in revenue discussed above, partially offset by reductions in the Canada Emergency Wage Subsidy and increases in employee related expenses.

For the three and nine months ended September 30, 2022, revenue was $56 million and $172 million, a decrease of $3 million or 5.1% and an increase of $9 million or 5.5%, respectively, when compared to the corresponding periods of 2021. For the three and nine months ended September 30, 2022, the changes were primarily driven by the increase in International rig count and stronger project activity, offset by unfavorable foreign exchange rate impacts of $6 million and $11 million, respectively.

For the three and nine months ended September 30, 2022, the International segment generated an operating profit of $3 million and an operating loss of $4 million, an improvement of $2 million and a decline of $7 million, respectively, when compared to the corresponding periods of 2021. For the three months ended September 30, 2022, operating profit increased due to a reduction in employee related expenses. For the nine months ended September 30, 2022, we recognized approximately $10 million of foreign currency translation losses as a result of substantially completing the liquidation of certain foreign subsidiaries reflected in impairment and other charges in the consolidated statements of operations, which was partially offset by the increase in revenue discussed above and a reduction in employee related expenses.

For the three and nine months ended September 30, 2022, cost of products was ~~$562~~$438 million and ~~$1,606~~$1,215 million, respectively, compared to ~~$433~~$343 million and ~~$1,312~~$944 million, respectively, for the corresponding periods ~~in 2016. The changes~~of 2021. For the three and nine months ended September 30, 2022, the increases were primarily due to ~~an increase~~the increases in revenue ~~offset by a reduction in inventory charges made~~ in the ~~period.~~periods. Cost of products includes the cost of inventory sold and related items, such as vendor consideration, inventory allowances, amortization of intangibles and inbound and outbound freight.

For the three and nine months ended September 30, ~~2017,~~2022, warehousing, selling and administrative ~~costs~~expenses were ~~$141~~$95 million and ~~$414~~$268 million, respectively, compared to ~~$140~~$86 million and ~~$432~~$250 million, respectively, for the corresponding periods of ~~2016.~~2021. For the three months ended September 30, ~~2017, operating expenses were essentially~~2022, the increase was primarily driven by an increase in ~~line with the prior period.~~employee related expenses. For the nine months ended September 30, ~~2017,~~2022, the ~~decrease~~increase was primarily driven by an increase in ~~operating expense was~~employee related toexpenses and reductions in ~~accounts receivable charges, as well as, lower property tax charges due to reduced inventory levels, offset by~~government wage subsidies realized in the ~~impact~~corresponding period of ~~additional operating expenses associated with an acquisition.~~2021. Warehousing, selling and administrative ~~costs~~expenses include ~~general corporate expenses, depreciation and~~ branch location, distribution center and regional expenses (including costs such as compensation, benefits and rent). as well as corporate general selling and administrative expenses.

For the three and nine months ended September 30, ~~2017,~~2022, impairment and other ~~expense was $3 million~~charges were nil and $8$10 million, respectively, compared to ~~$3 million~~nil and $7$4 million, respectively, for the corresponding periods of ~~2016. These charges were mainly~~2021. For the nine months ended September 30, 2022, the Company recognized approximately $10 million of foreign currency translation losses as a result of substantially completing the liquidation of certain foreign subsidiaries in the International segment.

For the three and nine months ended September 30, 2022, the Company recorded expense of less than $1 million and income of $9 million, respectively, compared to other expenses of $3 million and $5 million, respectively, for the corresponding periods of 2021. For the nine months ended September 30, 2022, other income was primarily attributable to ~~interest and bank charges~~a benefit of approximately $13 million related to the decrease of contingent consideration liability associated with ~~utilizing the credit facility and~~a prior year acquisition, partially offset by unfavorable foreign ~~currency~~ exchange rate ~~fluctuations.~~impacts.

The effective tax ~~rate~~rates for the three and nine months ended September 30, ~~2017 was (1.6%)~~2022, were 6.8% and ~~0.6%~~7.6%, respectively, compared to ~~(0.2%)~~29.7% and ~~10.3%~~(117.1%), respectively, for the ~~same~~corresponding periods ~~in 2016. Compared to~~of 2021. In general, the effective tax rate differs from the U.S. statutory rate ~~the effective tax rate was impacted by~~due to recurring items, such as ~~lower~~differing tax rates on income earned in foreign jurisdictions, ~~that is permanently reinvested, offset by~~ nondeductible expenses, state income taxes and the change in valuation allowance recorded against deferred tax assets. ~~Due to the continuing uncertainty in our industry and thus our outlook, the Company continues to utilize the method of recording income taxes on a year-to-date effective tax rate for~~For the three and nine months ended September 30, ~~2017. The Company will evaluate its use of this method each quarter until such time as a return to~~2022, the ~~annualized estimated~~ effective tax rate ~~method is deemed appropriate.~~was primarily driven by the recognition of tax expense from earnings in Canada offset by current year realization of deferred tax assets and corresponding release of valuation allowance in the U.S. For the nine months ended September 30, 2022, the effective tax rate was also impacted by impairment charges incurred as a result of substantially completing the liquidation of certain foreign subsidiaries with no associated tax benefit.

In an effort to provide investors with additional information regarding our results of operations as determined by GAAP, we disclose a non-GAAP financial ~~measure in our quarterly earnings press releases and other public disclosures.~~measures. The primary non-GAAP financial measure we ~~focus on~~disclose is earnings before interest, taxes, depreciation and amortization, excluding other costs (“EBITDA excluding other costs”). This financial measure excludes the impact of certain amounts ~~as further identified below~~ and ~~has~~is not ~~been~~ calculated in accordance with GAAP. A reconciliation of this non-GAAP financial measure, to its most comparable GAAP financial measure, is included below.

We use ~~this non-GAAP financial measure~~EBITDA excluding other costs internally to evaluate and manage the Company’s operations because we believe it provides useful supplemental information regarding the Company’s ongoing economic performance. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results. In an effort to better align with management’s evaluation of the Company’s performance and to facilitate comparison of our results to those of peer companies, beginning for the year ended December 31, 2021, EBITDA excluding other costs excludes non-cash stock-based compensation expense. Prior periods presented have been adjusted to conform with the current period presentation.

The following table sets forth the ~~reconciliation~~reconciliations of EBITDA excluding other costs to ~~its~~the most comparable GAAP financial ~~measure~~measures (in millions):

We assess liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. We expect ~~to remain in a strong financial position, with~~ resources ~~expected~~ to be available to reinvest in existing businesses, strategic acquisitions and capital expenditures to meet ~~short-~~short and long-term objectives. We believe that cash on hand, cash generated from expected results of operations and amounts available under our revolving credit facility will be sufficient to fund operations, anticipated working capital needs and other cash requirements, including capital ~~expenditures.~~expenditures and our share repurchase program.

As of September 30, ~~2017~~2022 and December 31, ~~2016, the Company~~2021, we had cash and cash equivalents of ~~$99~~$267 million and ~~$106~~$313 million, respectively. As of September 30, ~~2017, approximately $83~~2022, $84 million of our cash and cash equivalents were maintained in the accounts of our various foreign ~~subsidiaries and, if such amounts were transferred among countries or~~subsidiaries. During the first nine months of 2022, we repatriated ~~to the U.S., the~~$12 million primarily from our Canadian operations. The Company ~~may be subject to additional tax liabilities, which would be recognized in our financial statements in the~~makes a determination each period ~~during which such decisions were made. We currently have the~~concerning its intent and ability to ~~permanently~~indefinitely reinvest the cash held by its foreign subsidiaries. The Company has not recorded deferred income taxes on undistributed foreign earnings that it considers to be indefinitely reinvested. Future changes to our indefinite reinvestment assertion could result in additional taxes (withholding and/or state taxes), offset by any available foreign ~~subsidiaries~~tax credits.

We maintain a $500 million five-year senior secured revolving credit facility that will mature on December 14, 2026. Availability under the revolving credit facility is determined by a borrowing base comprised of eligible receivables, eligible inventory and ~~there are currently no plans for~~certain pledged deposits in the ~~repatriation~~U.S. and Canada. As of ~~such amounts.~~

At September 30, ~~2017, the Company~~2022, we had ~~$163 million of~~no borrowings against ~~its~~our revolving credit ~~facility.~~facility, and had approximately $481 million in availability (as defined in the Credit Agreement) resulting in the excess availability (as defined in the Credit Agreement) of 99%, subject to certain restrictions. Availability excluding certain cash deposits was approximately $368 million. Borrowings that result in the excess availability dropping below the greater of 10% of the borrowing base or $40 million are conditioned upon compliance with or waiver of a minimum fixed charge ratio (as defined in the Credit Agreement). The credit facility contains usual and customary affirmative and negative covenants for credit facilities of this type including financial covenants. As of September 30, ~~2017, the Company was~~2022, we were in compliance with all covenants. We continuously monitor compliance with debt covenants. A default, if not waived or amended, would prevent ~~the Company~~us from taking certain actions, such as incurring additional debt.

We are often party to certain transactions that require off-balance sheet arrangements such as standby letters of credit and performance
bonds and guarantees that are not reflected in our consolidated balance sheets. These arrangements are made in our normal course of
business and they are not reasonably likely to have a current or future material adverse effect on our financial condition, results of
operations, liquidity or cash flows.

The following table summarizes our net cash flows provided by (used in) operating activities, ~~net cash used in~~ investing activities and ~~net cash provided by~~ financing activities for the periods presented (in millions):

For the nine months ended September 30, ~~2017,~~2022, net cash used in operating activities was ~~$107~~$6 million compared to ~~net cash~~$28 million provided by operating activities ~~of $186 million~~ in the corresponding period of ~~2016.~~2021. For the nine months ended September 30, ~~2017,~~2022, net cash used in operating activities was primarily ~~driven by an~~due to a net increase in ~~receivables and inventories of $106 million and $81 million, respectively, offset by an increase in accounts payable and accrued liabilities of $70 million. These increases were~~working capital as a result of growing market activity, partially offset by improved ~~market conditions resulting in higher sales and purchases in the period.~~operating results.

For the nine months ended September 30, ~~2017,~~2022, net cash used in investing activities was $3$26 million compared to ~~$191~~$99 million used in investing activities in the corresponding period of ~~2016.~~2021. For the nine months ended September 30, ~~2017,~~2022, the Company ~~paid $3~~used $21 million ~~in relation~~ to ~~making~~fund an ~~Internal Revenue Code Section 338(h)(10) election~~acquisition and $7 million to ~~treat the Power Service acquisition as an asset~~ purchase for U.S. income tax purposes, as well as, paid $1 million in the second quarter of 2017 related to a first quarter measurement period adjustment for the acquisition, offset by approximately $4 million from proceeds on disposal of assets and an insurance recovery. Purchases of property, plant and ~~equipment were approximately $3 million for the nine months ended September 30, 2017.~~equipment.

For the nine months ended September 30, ~~2017,~~2022, net cash ~~provided by~~used in financing activities was ~~$97~~$5 million compared to ~~$33~~$3 million ~~for~~used in financing activities in the corresponding period of ~~2016. The activity in the period was primarily attributed to the Company making repayments under, and borrowing against, its revolving credit facility.~~

2021. For the nine months ended September 30, ~~2017,~~2022, net cash used in financing activities was attributable to the Company's payment of $4 million for share repurchases and $3 million for finance leases, partially offset by $2 million of cash received from the exercise of stock options.

For the nine months ended September 30, 2022, the effect of the change in exchange rates on cash and cash equivalents was ~~an increase~~a decrease of $6$9 million compared to ~~an increase~~a decrease of ~~$13~~$1 million for the corresponding period of ~~2016. The primary driver of the difference in the impact in 2017 versus 2016 was the strengthening of the British pound compared to the U.S. dollar.~~2021.

We intend to pursue additional acquisition candidates, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be ~~determined with certainty.~~predicted. We continue to expect to fund future cash acquisitions primarily with cash ~~flows~~on hand, cash flow from operations and ~~borrowings, including~~ the ~~undrawn~~usage of the available portion of the revolving credit ~~facility or new debt issuances, but may also issue additional equity either directly or in connection with acquisitions.~~facility. There can be no assurance that additional financing ~~for acquisitions~~ will be available at terms acceptable to us.

On August 3, 2022, the Company’s Board of Directors approved a share repurchase program, under which the Company is authorized to purchase up to $80 million of its outstanding common stock through December 31, 2024. We expect to fund share repurchases primarily with cash on hand, cash flow from operations and the usage of the available portion of the revolving credit facility. The timing and amount of any repurchases will be made at our discretion, taking into account a number of factors, including market conditions. As of September 30, 2022, we have repurchased 376,838 shares of our common stock for a total of $4 million. All shares repurchased shall be retired pursuant to the terms of the share repurchase program.

For a discussion of the critical accounting policies and estimates that we use in the preparation of our consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K. In preparing the financial statements, ~~we make~~the Company makes assumptions, estimates and judgments that affect the amounts reported. WeThe Company periodically ~~evaluate our~~evaluates its estimates and judgments that are most critical in nature, which are related to allowance for doubtful accounts, inventory reserves, goodwill and long-lived assets, contingent consideration, purchase price allocation of acquisitions, vendor consideration and income taxes. ~~Our~~Its estimates are based on historical experience and on ~~our~~its future expectations that ~~we believe~~the Company believes are reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results ~~may~~are likely to differ from our current estimates and those differences may be material.

Generally accepted accounting principles require us to test goodwill and other indefinite-lived intangible assets for impairment at least annually (performed in the fourth quarter) or more frequently whenever events or circumstances occur indicating that goodwill or other indefinite-lived intangible assets might be impaired. Adverse market conditions could result in the recognition of impairment if we determine that the fair values of its reporting units have fallen below their carrying values. Events or circumstances which could require interim testing include (but are not limited to) a significant reduction in worldwide oil and gas prices or drilling; a significant reduction in profitability or cash flow of oil and gas companies or drilling contractors; a significant reduction in worldwide well remediation activity; a significant reduction in capital investment by other oilfield service companies; or a significant increase in worldwide inventories of oil or gas.

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk

~~The Company is~~We are exposed to certain market risks that are inherent in our financial instruments and arise from changes in interest rates and foreign currency exchange rates. ~~The Company~~We may enter into derivative financial instrument transactions to manage or reduce market risk but ~~does~~do not enter into derivative financial instrument transactions for speculative purposes. ~~The Company does~~We do not currently have any material outstanding derivative instruments. See Note 1113 “Derivative Financial Instruments” to the consolidated financial statements.

A discussion of our primary market risk exposure in financial instruments is presented below.

~~The Company has~~We have operations in foreign countries and ~~transacts~~transact business globally in multiple currencies. ~~Its~~Our net assets as well as ~~its revenue,~~our revenues and costs and expenses denominated in foreign currencies, expose ~~the Company~~us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. Because we operate globally and ~~nearly one-third~~approximately one-fourth of ~~the Company’s revenue~~our net sales for the nine months ended September 30, ~~2017 was~~2022, were outside the ~~United States,~~U.S., foreign currency exchange rates can impact ~~the Company’s~~our financial position, results of operations and competitive position. ~~The Company is~~We are a net receiver of foreign currencies and, therefore, ~~benefits~~benefit from a weakening of the U.S. dollar and isare adversely affected by a strengthening of the U.S. dollar relative to the foreign currency. As of September 30, ~~2017, the~~2022, our most significant foreign currency exposure was to the Canadian dollar, ~~and~~followed by the British pound, with less significant foreign currency ~~exposures~~exposure to the Australian ~~dollar and Mexican peso.~~dollar.

The financial statements of foreign subsidiaries are translated into their U.S. dollar equivalents at end-of-period exchange rates for assets and liabilities, while revenue, costs and expenses are translated at average monthly exchange rates. Translation gains and losses are components of other comprehensive income (loss) as reported in the consolidated statements of comprehensive income (loss). Upon closure of a foreign subsidiary, the accumulated translation gains and losses relating to the foreign subsidiary are reclassified into earnings, reflected in impairment and other charges in the consolidated statements of operations. For the nine months ended September 30, ~~2017, the Company realized~~2022, we reported a net foreign currency translation ~~income totaling $38 million, which was included in other comprehensive income (loss).~~loss of $8 million.

Foreign currency exchange rate fluctuations generally do not materially affect our earnings since the functional currency is typically the local currency; however, our operations also have net assets not denominated in their functional currency, which exposes us to changes in foreign currency exchange rates that impact our ~~earnings~~net income as foreign currency transaction gains and losses. Foreign currency transaction gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized in the consolidated statements of operations as a component of other ~~expense.~~income (expense). For the ~~first~~ nine months ~~of 2017~~ended September 30, 2022 and ~~2016, the Company~~2021, we reported foreign currency transaction losses of $1 million ~~and $2 million, respectively.~~in both periods. Gains and losses are primarily due to exchange rate fluctuations related to monetary asset balances denominated in currencies other than the functional currency and fair value adjustments to economically hedged positions as a result of changes in foreign currency exchange rates.

Some of ~~our revenue~~the revenues for our foreign operations are denominated in U.S. dollars and, therefore, changes in foreign currency exchange rates impact earnings to the extent that costs associated with those U.S. dollar revenues are denominated in the local currency. Similarly, some of our ~~revenue~~revenues for our foreign operations are denominated in foreign currencies, but have associated U.S. dollar costs, which also give rise to foreign currency exchange rate exposure. In order to mitigate those risks, we may utilize foreign currency forward contracts to better match the currency of the revenues and the associated costs. Although we may utilize foreign currency forward contracts to economically hedge certain foreign currency denominated balances or transactions, we do not currently hedge the net investments in our foreign operations. The counterparties to our forward contracts are major financial institutions. The credit ratings and concentration of risk of these financial institutions are monitored by us on a continuing basis. In the event that the counterparties fail to meet the terms of a foreign currency contract, our exposure is limited to the foreign currency rate differential.

The average foreign exchange rate for the first nine months of ~~2017,~~2022 compared to the average for the ~~same~~corresponding period ~~in 2016,~~of 2021 decreased by approximately 1%4% compared to the U.S. dollar based on the aggregated weighted average revenue of our foreign-currency denominated foreign operations. The Canadian dollar, British pound and ~~Mexican peso~~Australian dollar decreased in relation to the U.S. dollar by approximately 8%2%, approximately 9% and ~~3%, respectively, while the Australian dollar and the Canadian dollar increased in relation to the U.S. dollar by~~ approximately ~~3% and 1%~~7%, respectively.

We utilized a sensitivity analysis to measure the potential impact on earnings based on a hypothetical 10% change in foreign currency rates. A 10% change from the levels experienced during the first nine months of ~~2017~~2022 of the U.S. dollar relative to foreign currencies that affected the Company would have resulted in ~~less than a $1~~$2 million change in net ~~loss~~income for the same period.

Our business is sensitive to steel prices, which can impact our product pricing, with steel tubular prices generally having the highest degree of sensitivity. While we cannot predict steel prices, we mitigate this risk by managing our inventory levels, including maintaining sufficient quantity on hand to meet demand, while limiting the risk of overstocking.

We are subject to interest rate risk with our revolving credit facility. The credit facility requires us to pay interest on outstanding borrowings at variable rates. Each one percentage point change in interest rates associated with the facility would result in a less than $1 million change in our quarterly cash interest expense based on the balance at September 30, 2017.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures and is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report at a reasonable assurance level.

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The following table presents a summary of share repurchases made during the three months ended September 30, 2022:

~~We hereby undertake, pursuant~~ to ~~Regulation S-K, Item 601(b), paragraph (4) (iii),~~our Current Report on Form 8-K filed on May 30, 2014

(2) Filed as an Exhibit to ~~furnish~~our Amendment No.1 to ~~the U.S. Securities and Exchange Commission, upon request, all constituent instruments defining the rights of holders of~~Form 10, as amended, Registration Statement filed on April 8, 2014

(3) Filed as an Exhibit to our ~~long-term debt not~~Quarterly Report on Form 10-Q filed ~~herewith.~~on May 7, 2015

26(4) Filed as an Exhibit to our Quarterly Report on Form 10-Q filed on November 2, 2016

(8) Filed as an Exhibit to our Current Report on Form 8-K/A filed on February 4, 2022

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 thereunto duly authorized.


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


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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if a small reporting company)~~	~~Small~~Smaller reporting company	☐

		Emerging growth company	☐


Part I - Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of September 30, ~~2017~~2022 (Unaudited) and December 31, ~~2016~~2021	3

	Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021	4

	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021	5

	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, ~~2017~~2022 and ~~2016~~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	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1415

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2425

Item 4.	Controls and Procedures	2526

Part II - Other Information

Item 6.2.	~~Exhibits~~Unregistered Sales of Equity Securities and Use of Proceeds	2627

Item 6.	Exhibits	28


Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced program (1)		Approximate dollar value of shares that may yet be purchased under the program (1) (in millions)
July 1 - 31, 2022		—	$	—		—	$	—
August 1 - 31, 2022		56,566	$	10.97		56,566	$	79
September 1 - 30, 2022		320,272	$	10.21		320,272	$	76
Total		376,838	$	10.33		376,838


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


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


	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	)	$	(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

	Foreign
	Currency
	Translation
	Adjustments
Balance at December 31, 2016	$	(142	)
Other comprehensive income		38
Balance at September 30, 2017	$	(104	)


Exhibit No.		Exhibit Description

~~2.1~~3.1		~~Separation and Distribution Agreement between National Oilwell Varco, Inc. and NOW Inc. dated May 29, 2014 (1)~~

~~3.1~~		NOW Inc. Amended and Restated Certificate of Incorporation ~~(1)~~(6)

3.2		NOW Inc. Amended and Restated Bylaws ~~(1)~~(6)

10.1		~~Tax Matters Agreement between National Oilwell Varco, Inc. and NOW Inc. dated May 29, 2014 (1)~~

~~10.2~~		~~Employee Matters Agreement between National Oilwell Varco, Inc. and NOW Inc. dated May 29, 2014 (1)~~

~~10.3~~		~~Master Distributor Agreement between National Oilwell Varco, L.P. and DNOW L.P. dated May 29, 2014 (1)~~

~~10.4~~		~~Master Service Agreement between National Oilwell Varco, L.P. and DNOW L.P. dated May 29, 2014 (1)~~

~~10.5~~		Form of Employment Agreement for Executive Officers (1)

~~10.6~~10.2		NOW Inc. 2014 Incentive Compensation Plan (2)

~~10.7~~10.3		~~Credit Agreement among NOW Inc., Wells Fargo Bank, National Association, as Administrative Agent, and the lenders and other financial institutions named therein, dated as of April 18, 2014 (3)~~

~~10.8~~		Agreement and Amendment No. 1 to Credit Agreement among NOW Inc., and Wells Fargo Bank, National Association, as administrative agent, and the lenders and other financial institutions named thereto, dated as of January 20, 2016 (4)

~~10.9~~		~~Pledge and Security Agreement, dated as of January 20, 2016 (4)~~

~~10.10~~		~~Form of Restricted Stock Award Agreement (6 year cliff vest) (5)~~

~~10.11~~		Form of Nonqualified Stock Option Agreement ~~(6)~~(3)

~~10.12~~10.4		Form of Restricted Stock Award Agreement (3 year cliff vest) ~~(6)~~(3)

~~10.13~~10.5		Form of Performance Award Agreement ~~(6)~~(3)

~~10.14~~10.6		Form of Amendment to Employment Agreement for Executive Officers ~~(7)~~(4)

~~31.1~~10.7		Credit Agreement dated as of April 30, 2018, among the Borrowers, the lenders party thereto and Wells Fargo Bank, National Association as administrative agent, an issuing lender and swing lender (5)

10.8		Employment Agreement between NOW Inc. and Chief Executive Officer David Cherechinsky (7)

10.9		Employment Agreement between NOW Inc. and Chief Financial Officer Mark Johnson (7)

10.10		First Amendment to Credit Agreement, and First Amendment to US Guaranty and Security Agreement, dated as of December 14, 2021, among the Borrowers, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, an issuing lender and swing lender.(8)

31.1		Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended

31.2		Certification pursuant to Rule 13a-14a and Rule 15d-14(a) of the Securities and Exchange Act, as amended

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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~~By:~~		~~/s/ Daniel L. Molinaro~~Date: November 2, 2022
		~~Daniel L. Molinaro~~
	By:	/s/ Mark B. Johnson
	Mark B. Johnson
	Senior Vice President and Chief Financial Officer