Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 28, 2015 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | DNOW | |
Entity Registrant Name | NOW INC. | |
Entity Central Index Key | 1,599,617 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 107,204,061 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 126 | $ 195 |
Receivables, net | 564 | 851 |
Inventories, net | 771 | 949 |
Deferred income taxes | 47 | 22 |
Prepaid and other current assets | 24 | 30 |
Total current assets | 1,532 | 2,047 |
Property, plant and equipment, net | 162 | 124 |
Deferred income taxes | 43 | 2 |
Goodwill | 296 | 346 |
Intangibles, net | 148 | 73 |
Other assets | 5 | 4 |
Total assets | 2,186 | 2,596 |
Current liabilities: | ||
Accounts payable | 292 | 490 |
Accrued liabilities | 97 | 125 |
Other current liabilities | 5 | |
Total current liabilities | 389 | 620 |
Long-term debt | 120 | |
Deferred income taxes | 15 | 10 |
Other long-term liabilities | 4 | |
Total liabilities | $ 528 | $ 630 |
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; 107,204,061 and 107,067,457 shares issued and outstanding, respectively | $ 1 | $ 1 |
Additional paid-in capital | 1,969 | 1,952 |
Retained earnings (deficit) | (195) | 58 |
Accumulated other comprehensive loss | (117) | (45) |
Total stockholders' equity | 1,658 | 1,966 |
Total liabilities and stockholders' equity | $ 2,186 | $ 2,596 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Statement Of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 330,000,000 | 330,000,000 |
Common stock, shares issued | 107,204,061 | 107,067,457 |
Common stock, shares outstanding | 107,204,061 | 107,067,457 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenue | $ 753 | $ 1,070 | $ 2,366 | $ 3,099 |
Operating expenses: | ||||
Cost of products | 636 | 857 | 1,970 | 2,485 |
Warehousing, selling and administrative | 153 | 163 | 467 | 459 |
Impairment of goodwill | 255 | 255 | ||
Operating profit (loss) | (291) | 50 | (326) | 155 |
Other income (expense) | (1) | (6) | (1) | |
Income (loss) before income taxes | (291) | 49 | (332) | 154 |
Income tax provision (benefit) | (67) | 17 | (79) | 54 |
Net income (loss) | $ (224) | $ 32 | $ (253) | $ 100 |
Earnings (loss) per share: | ||||
Basic earnings (loss) per common share | $ (2.09) | $ 0.30 | $ (2.36) | $ 0.93 |
Diluted earnings (loss) per common share | $ (2.09) | $ 0.30 | $ (2.36) | $ 0.93 |
Weighted-average common shares outstanding, basic | 107,188,092 | 107,061,639 | 107,160,921 | 107,055,932 |
Weighted-average common shares outstanding, diluted | 107,188,092 | 107,625,243 | 107,160,921 | 107,548,167 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (224) | $ 32 | $ (253) | $ 100 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | (46) | (22) | (72) | (21) |
Comprehensive income (loss) | $ (270) | $ 10 | $ (325) | $ 79 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (253) | $ 100 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 26 | 14 |
Deferred income taxes | (89) | |
Stock-based compensation | 19 | 10 |
(Gain) loss on disposal of property, plant, and equipment | (2) | 2 |
Provision for doubtful accounts | 21 | 1 |
Provision for inventory | 36 | 6 |
Impairment of goodwill | 255 | |
Other, net | 1 | |
Change in operating assets and liabilities, net of acquisitions: | ||
Receivables | 316 | (246) |
Inventories | 183 | (61) |
Prepaid and other current assets | 15 | (6) |
Accounts payable and accrued liabilities | (281) | 211 |
Accrued or prepaid income taxes | 3 | 4 |
Other assets / liabilities, net | (5) | (6) |
Net cash provided by operating activities | 244 | 30 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (8) | (32) |
Business acquisitions, net of cash acquired | (397) | |
Proceeds from disposition of property, plant and equipment | 3 | |
Other, net | 8 | |
Net cash used in investing activities | (402) | (24) |
Cash flows from financing activities: | ||
Net contributions from National Oilwell Varco, Inc. ("NOV") | 74 | |
Borrowing from the revolving credit facility | 120 | |
Payments related to taxes withheld on stock-based compensation | (2) | |
Net cash provided by financing activities | 118 | 74 |
Effect of exchange rates on cash and cash equivalents | (29) | (15) |
Net change in cash and cash equivalents | (69) | 65 |
Cash and cash equivalents, beginning of period | 195 | 101 |
Cash and cash equivalents, end of period | 126 | 166 |
Supplemental disclosures of cash flow information: | ||
Income taxes paid, net | 7 | 50 |
Interest paid | 2 | |
Non-cash investing and financing activities: | ||
Contributed property, plant and equipment, net | 4 | |
Accrued purchases of property, plant and equipment | $ 1 | $ 1 |
Organization and Basis of Prese
Organization and Basis of Presentation | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Organization and Basis of Presentation | 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 brands. NOW is a global distributor of energy products as well as products for industrial applications through its locations in the U.S., Canada and internationally which are geographically positioned to serve the energy and industrial markets in approximately 90 countries. NOW’s energy product offerings are used in the oil and gas industry including upstream drilling and completion, exploration and production, midstream infrastructure development and downstream petroleum refining – as well as in other industries, such as chemical processing, power generation and industrial manufacturing operations. The industrial distribution portion of NOW’s business targets a diverse range of manufacturing and facilities across numerous industries and end markets. NOW also provides supply chain management to drilling contractors, E&P operators, midstream operators, downstream energy and industrial manufacturing companies. NOW’s supplier network consists of thousands of vendors in approximately 40 countries. The Separation 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 accordance with a separation and distribution agreement, the two companies were separated by NOV distributing to its stockholders 107,053,031 shares of common stock of the Company after the market closed on May 30, 2014. Each NOV stockholder received one share of NOW common stock for every four shares of NOV common stock held at the close of business on the record date of May 22, 2014 and not sold prior to close of business on May 30, 2014. Fractional shares of NOW common stock were not distributed and any fractional shares of NOW common stock otherwise issuable to a NOV stockholder were sold in the open market on such stockholder’s behalf, and such stockholder received a cash payment with respect to that fractional share. In conjunction with the Spin-Off, NOV received an opinion from its legal counsel to the effect that, based on certain facts, assumptions, representations and undertakings, for U.S. federal income tax purposes, the distribution of NOW common stock and certain related transactions generally was not taxable to NOV or U.S. holders of NOV common stock, except in respect to cash received in lieu of fractional shares, which generally will be taxable to such holders as a capital gain. Following the Spin-Off, NOW became an independent, publicly traded company as NOV had no ownership interest in NOW. Each company has separate public ownership, boards of directors and management. A Registration Statement on Form 10, as amended, relating to the Spin-Off was filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) and was declared effective on May 13, 2014. On June 2, 2014, NOW stock began trading the “regular-way” on the New York Stock Exchange under the ticker symbol “DNOW”. Basis of Presentation All financial information presented before the Spin-Off represents the combined results of operations, financial position and cash flows for the Company and all financial information presented after the Spin-Off represents the consolidated results of operations, financial position and cash flows for the Company. Accordingly: · The Company’s consolidated statement of operations for the nine months ended September 30, 2014 consists of the consolidated results of NOW for the period from May 31 through September 30 and the combined results of NOW for the period from January 1, 2014 through May 30, 2014. · The Company's consolidated statement of cash flows for the nine months ended September 30, 2014 consist of the consolidated results of NOW for the period from May 31 through September 30 and the combined results of NOW for the period from January 1, 2014 through May 30, 2014. · The Company’s historical financial statements prior to May 31, 2014 were derived from the consolidated financial statements and accounting records of NOV and include assets, liabilities, revenues and expenses directly attributable to the Company’s operations. The assets and liabilities in the consolidated financial statements have been reflected on a historical cost basis, as immediately prior to the separation, all of the assets and liabilities presented were wholly owned by NOV and were transferred within NOV. For the periods prior to the Spin-Off, the consolidated financial statements include expense allocations for certain functions provided by NOV as well as other NOV employees not solely dedicated to NOW, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives and stock-based compensation. These expenses were allocated to NOW on the basis of direct usage, when identifiable, with the remainder allocated on the basis of operating profit, headcount or other measures. Actual costs that would have been incurred, if NOW had been a stand-alone public company, would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company’s historical financial statements prior to May 31, 2014 do not reflect the debt or interest costs it might have incurred if it had been a stand-alone entity. In addition, the Company expects to incur other costs, not reflected in its historical financial statements prior to May 31, 2014, as a result of being a separate publicly traded company. As a result, the Company’s historical financial statements prior to May 31, 2014 do not necessarily reflect what its financial position or results of operations would have been if it had been operated as a stand-alone public entity during the periods covered prior to May 31, 2014, and may not be indicative of the Company’s future results of operations and financial position. The consolidated financial statements include certain assets and liabilities that were historically held by NOV and were specifically identifiable or otherwise allocable to the Company. The cash and cash equivalents held by NOV were not specifically identifiable to NOW and therefore were not allocated to it for any of the periods presented prior to the Spin-Off. Cash and cash equivalents in the Company’s consolidated balance sheets primarily represent cash held locally by entities included in its consolidated financial statements. Transfers of cash prior to the Spin-Off to and from NOV’s cash management system were reflected as a component of additional paid-in capital on the consolidated balance sheets. Prior to the Spin-Off, all significant intercompany transactions between NOW and NOV were considered to be effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected in the consolidated statements of cash flows as a financing activity and in the consolidated balance sheet as additional paid-in capital. The Company combined operating and warehousing costs with selling, general and administrative expenses in its consolidated statements of operations beginning with its March 31, 2015 Form 10-Q. These costs are now presented within “Warehousing, selling and administrative” expense for all periods presented. Operating and warehousing costs totaled $98 million and $300 million for the three months and nine months ended September 30, 2015, respectively, and $108 million and $315 million for the same periods in 2014, respectively. 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. 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 nine months ended September 30, 2015, are not necessarily indicative of the results to be expected for the full year. Reclassification 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 operating profit (loss), income (loss) before income taxes or net income (loss). 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. 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 12 for the fair value of derivative financial instruments. Recently Issued Accounting Standards In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers: Topic 606. Revenue Recognition, Property, Plant, and Equipment, Intangibles—Goodwill and Other) In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments . |
Property, Plant and Equipment
Property, Plant and Equipment | 9 Months Ended |
Sep. 30, 2015 | |
Property Plant And Equipment [Abstract] | |
Property, Plant and Equipment | 2. Property, Plant and Equipment Property, plant and equipment consist of (in millions): Estimated Useful Lives September 30, 2015 December 31, 2014 Information technology assets 2-7 Years $ 51 $ 49 Operating equipment 3-15 Years 81 51 Buildings and land (1) 5-35 Years 89 73 Construction in progress 5 2 Total property, plant and equipment 226 175 Less: accumulated depreciation (64 ) (51 ) Property, plant and equipment, net $ 162 $ 124 (1) Land has an indefinite life. |
Accrued Liabilities
Accrued Liabilities | 9 Months Ended |
Sep. 30, 2015 | |
Payables And Accruals [Abstract] | |
Accrued Liabilities | 3. Accrued Liabilities Accrued liabilities consist of (in millions): September 30, 2015 December 31, 2014 Compensation and other related expenses $ 28 $ 39 Customer credits and prepayments 20 34 Taxes (non income) 20 24 Other 29 28 Total $ 97 $ 125 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Debt | 4. Debt On April 18, 2014, the Company entered into a five-year senior unsecured revolving credit facility with a syndicate of lenders, including Wells Fargo Bank, National Association, as administrative agent. The credit facility became available to the Company on June 2, 2014 as a result of the satisfaction of customary conditions, including the consummation of the Separation. The credit facility is for an aggregate principal amount of up to $750 million with sub-facilities for standby letters of credit and swingline loans, each with a sublimit of $150 million and $50 million, respectively. The Company has the right, subject to certain conditions, to increase the aggregate principal amount of commitments under the credit facility by $250 million. Borrowings under the credit facility will bear interest at a base rate (as defined in the credit agreement) plus an applicable interest margin based on the Company’s capitalization ratio. The base rate is calculated as the highest of (a) the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 1/2 of 1%, (b) the prime commercial lending rate of the administrative agent, as established from time to time at its principal U.S. office, and (c) the Daily One-Month LIBOR (as defined in the credit agreement) plus 1%. The Company also has the option for its borrowings under the credit facility to bear interest based on LIBOR (as defined in the credit agreement). The credit facility is unsecured and guaranteed by the Company’s domestic subsidiaries. The credit agreement also provides for customary fees, including administrative agent fees, commitment fees, fees in respect of letters of credit and other fees. The annual commitment fee ranges from 25 to 35 basis points of the unused portion of the credit facility. The line of credit expires in April 2019, unless extended. The credit facility contains usual and customary affirmative and negative covenants for credit facilities of this type including financial covenants consisting of (a) a maximum capitalization ratio (as defined in the credit agreement) of 50% and (b) a minimum interest coverage ratio (as defined in the credit agreement) of no less than 3:1. As of September 30, 2015, the Company was in compliance with all covenants. The Company continuously monitors compliance with debt covenants. A default, if not waived or amended, would prevent the Company from taking certain actions, such as incurring additional debt. At September 30, 2015, the Company had borrowed $120 million against its senior unsecured revolving credit facility. The Company is not obligated to pay back the borrowing against the senior unsecured revolving credit facility until the expiration date of April 18, 2019. In addition, the Company has a $4 million letter of credit outstanding as of September 30, 2015. This letter of credit was issued under a discretionary agreement with a member of the Company’s bank group. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | 5. Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss) are as follows (in millions) Foreign Currency Translation Adjustments Balance at December 31, 2014 $ (45 ) Other comprehensive loss (72 ) Balance at September 30, 2015 $ (117 ) 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, currency translation adjustments resulting from the process of translating the entities’ financial statements into the reporting currency are reported in Other Comprehensive Income or Loss in accordance with ASC Topic 830 “Foreign Currency Matters.” |
Business Segments
Business Segments | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Business Segments | 6. Business Segments Operating results by reportable segment are as follows (in millions) Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Revenue: United States $ 497 $ 748 $ 1,594 $ 2,114 Canada 94 173 299 489 International 162 149 473 496 Total revenue $ 753 $ 1,070 $ 2,366 $ 3,099 Operating profit (loss): United States $ (294 ) $ 28 $ (329 ) $ 86 Canada 2 14 — 33 International 1 8 3 36 Total operating profit (loss) $ (291 ) $ 50 $ (326 ) $ 155 Operating profit (loss) % of revenue: United States (59.2 %) 3.7 % (20.6 %) 4.1 % Canada 2.1 % 8.1 % 0.0 % 6.7 % International 0.6 % 5.4 % 0.6 % 7.3 % Total operating profit (loss) % (38.6 %) 4.7 % (13.8 %) 5.0 % |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 7. Income Taxes 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 will prepare and file the consolidated federal income tax return, and any other tax returns that include both NOV and the Company for all the liability periods ending 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 rate for the Company was 22.8% and 23.7% for the three and nine months ended September 30, 2015, respectively, and 34.7% and 35.3% To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts have been 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, various states and foreign jurisdictions. The Company has significant operations in the United States 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 2009 and outside the U.S. for the tax years ending after 2008. The Company is indemnified by NOV for any income tax exposures related to the periods prior to the Separation. |
Earnings (loss) Per Share ("EPS
Earnings (loss) Per Share ("EPS") | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Earnings (loss) Per Share ("EPS") | 8. Earnings (loss) Per Share (“EPS”) For the three and nine months ended September 30, 2015 and 2014, 6,509,775 and 6,540,227, 1,233,385 and 2,083,908, respectively, of stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and performance share awards (“PSAs”) were excluded from the computation of diluted earnings (loss) per share due to their antidilutive effect. Basic and diluted earnings (loss) per share follows (in millions, except share data) Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Numerator for basic and diluted net income (loss) per share attributable to the Company's stockholders: Net income (loss) attributable to the Company's stockholders (1) $ (224 ) $ 32 $ (253 ) $ 100 Denominator for basic earnings (loss) per share attributable to the Company's stockholders: Weighted average common shares outstanding 107,188,092 107,061,639 107,160,921 107,055,932 Effect of dilutive securities: Dilutive effect of stock-based compensation — 563,604 — 492,235 Denominator for diluted earnings (loss) per share attributable to the Company's stockholders 107,188,092 107,625,243 107,160,921 107,548,167 Earnings (loss) per share attributable to the Company's stockholders: Basic $ (2.09 ) $ 0.30 $ (2.36 ) $ 0.93 Diluted $ (2.09 ) $ 0.30 $ (2.36 ) $ 0.93 (1) Losses are not allocated to nonvested shares in periods that the Company determines that those shares are not obligated to participate in losses. |
Stock-based Compensation and Ou
Stock-based Compensation and Outstanding Awards | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock-based Compensation and Outstanding Awards | 9. Stock-based Compensation and Outstanding Awards The Company established the NOW Inc. Long-Term Incentive Plan (the “Plan”). The Plan was adopted by the Company’s board of directors on May 1, 2014. Under the Plan, the Company’s employees are eligible to be granted stock options, RSAs, RSUs and PSAs. During the nine months ended September 30, 2015, the Company granted 534,929 stock options with a fair value of $8.06 per share and 157,538 shares of RSAs and RSUs with a weighted average fair value of $22.59 per share. In addition, the Company granted PSAs to senior management employees with potential payouts varying from zero to 146,486 shares. The stock options were granted February 24, 2015 with an exercise price of $22.44. These options generally 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 were granted February 24, 2015 and May 27, 2015 and vest on the third anniversary of the date of grant. The PSAs were granted on February 24, 2015 and 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 $7 million and $20 million for the three months and nine months ended September 30, 2015, respectively, and $5 million and $10 million for the same periods in 2014, respectively. A summary of stock option activity under the Plan as of September 30, 2015, and changes from December 31, 2014 through September 30, 2015 are presented below: Options (1) Shares Weighted Average Exercise Price Aggregate Intrinsic Value (in millions) Outstanding as of January 1, 2015 3,545,519 $ 30.86 Granted 534,929 22.44 Forfeited (33,261 ) 29.35 Exercised or settled — — Expired or canceled — — Outstanding as of September 30, 2015 4,047,187 $ 29.76 $ — Exercisable at September 30, 2015 2,482,499 $ 30.92 $ — (1) All Stock Options presented in this table are for NOW stock only. The weighted-average remaining contractual terms of outstanding options and exercisable options at September 30, 2015, were 6.8 years and 6.4 years, respectively. The total intrinsic value of options exercised for the period from December 31, 2014 through September 30, 2015 was $0. As of September 30, 2015, unrecognized compensation cost related to stock option awards was $10 million, which is expected to be recognized over a weighted average period of 1.6 years. A summary of the status of the Company’s nonvested shares as of September 30, 2015, and changes for the period from December 31, 2014 through September 30, 2015 are presented below: RSAs / RSUs / PSAs Shares Weighted Average Grant-Date Fair Value Nonvested as of January 1, 2015 2,446,938 $ 30.24 Granted 230,707 23.15 Vested (1) (199,813 ) 35.20 Forfeited (15,264 ) 31.31 Expired or canceled — — Nonvested as of September 30, 2015 2,462,568 $ 29.17 (1) 63,209 shares withheld and retired from the vesting of shares to employees to satisfy minimum tax withholding. As of September 30, 2015, unrecognized compensation cost related to RSUs, RSAs and PSAs was $49 million, which is expected to be recognized over a weighted average period of 4.0 years. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 10. Commitments and Contingencies The Company is involved in various claims, regulatory agency audits and pending or threatened legal actions involving a variety of matters. At September 30, 2015, the Company recorded an immaterial amount for contingent liabilities representing all contingencies believed to be probable. 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, in the Company’s opinion, any ultimate liability, 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 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. 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 $25 million in the international segment primarily attributable to accounts receivable with one customer. The Company has accrued its best estimate for loss at September 30, 2015. Factors underlying this estimated range of loss may change from time to time, and actual results may vary significantly from this estimate. In connection with one of the Company’s acquisitions, the Company agreed to make contingent consideration payments of up to $6 million upon the attainment of certain profitability milestones through February 2018. As of September 30, 2015, the estimated fair value of the contingent consideration of $3 million was recorded in other long-term liabilities. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 11. Related Party Transactions In connection with the Spin-Off, the Company and NOV entered into a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, and Transition Service Agreement each dated May 29, 2014. The Separation and Distribution Agreement 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 Tax Matters Agreement governs the respective rights, responsibilities and obligations of each party with respect to taxes and tax benefits, the filing of tax returns, the control of audits, restrictions to preserve the tax-free status of the Spin-Off and other tax matters. The Employee Matters Agreement 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 also provides the adjustment mechanisms to be applied as a result of the Spin-Off to convert outstanding NOV equity awards held by Company employees to Company awards. The Transition Service Agreement provides for transitional services in the areas of information technology, tax, accounting, finance and employee benefits and are initially short-term in nature. The charges under these transition service agreements will be at cost-based rates. Allocation of General Corporate Expenses For the periods prior to the Separation, the consolidated financial statements include expense allocations for certain functions provided by NOV as well as other NOV employees not solely dedicated to NOW, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives, and stock-based compensation. These expenses were allocated to NOW on the basis of direct usage when identifiable, with the remainder allocated on the basis of operating profit, headcount or other measures. Actual costs that may have been incurred if the Company had been a stand-alone public company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. During the three and nine months ended September 30, 2014, NOW was allocated $0 million and $6 million, respectively, which was included within warehousing, selling and administrative expenses in the accompanying consolidated statements of operations. Allocations from NOV discontinued as of May 30, 2014. |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | 12. 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 a year to economically hedge foreign currency exchange rate risk on recognized 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 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 determined 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. At 30, 2015, the net fair value of the Company’s foreign currency forward contracts totaled a net asset of less than $1 million and is included in other current assets in the accompanying Consolidated Balance Sheets; and the gain of less than $1 million is included in other income (expense) in the accompanying Consolidated Statements of Operations. The notional principal associated with those contracts was $119 million as of 30, 2015. At September 30, 2015, the Company’s financial instruments do not contain 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. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Acquisitions | 13. Acquisitions For the nine months ended September 30, 2015, the Company completed six acquisitions for an aggregate purchase price consideration of approximately $431 million. These acquisitions primarily expand NOW’s market in the United States, the United Kingdom, Australia and Norway. The Company has included the financial results of the acquisitions in its consolidated financial statements from the date of acquisition. In connection with one of the acquisitions, the Company the Company The Company completed its preliminary valuations as of the applicable acquisition date of the acquired net assets and recognized goodwill of $221 million and intangible assets of $84 million which is 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), including through asset appraisals and learning more about the newly acquired businesses, the Company will refine its estimates of fair value to allocate the purchase price more accurately; any such revisions are not expected to be significant. The Company has not presented supplemental pro forma information because the acquired operations would not have materially impacted the Company’s consolidated operating results. In July 2015, the Company entered into an agreement to purchase the business of Challenger Industries, Inc. The completion of this acquisition is subject to customary closing conditions. Challenger Industries, Inc. is a pipe, valves and fittings supplier for the downstream, midstream and upstream energy markets. Following is the purchase price allocation detail (in millions): As of September 30, 2015 Purchase price including contingent consideration $ 431 Less: cash acquired (29 ) Net purchase price 402 Fair value of net assets acquired: Current assets other than cash 145 Property, plant and equipment 50 Trade names (weighted average useful lives of 7 years) 22 Customer relationships (weighted average useful lives of 8 years) 62 Current liabilities (69 ) Deferred tax liabilities, net (28 ) Other non-current liability (1 ) Total fair value of net assets acquired 181 Goodwill (1) $ 221 (1) The amount of goodwill represents the excess of its purchase price over the fair value of net assets acquired . |
Goodwill Impairment
Goodwill Impairment | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill Impairment | 14. Goodwill Impairment Generally accepted accounting principles require the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating that goodwill might be impaired. Events or circumstances which could indicate a probable impairment 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. The Company considered the sustained decline in worldwide oil and gas prices and rig counts, which has impacted the Company’s current results and future outlook as well as the decline in the market value of the Company’s stock, as indicators that the fair value of the Company’s reporting units’ goodwill could have fallen below their carrying values. As a result, the Company performed an impairment analysis of its goodwill during the third quarter of 2015. The inputs used in the interim impairment test in the second quarter of 2015 were updated for current market conditions and forecasts and the valuation techniques used in the analysis were consistent with those used during previous testing. The Company has not completed the Step 2 measurement of the Company’s reporting units’ goodwill impairment due to the complexities involved in determining the implied fair values of the Company’s reporting units’ goodwill and in light of finalizing purchase accounting related to recent acquisitions. Significant estimates that are subject to change in the Step 2 analysis include, but are not limited to, the valuation of amortizable customer relationships and trade names, preliminary purchase price accounting related to recent acquisitions, estimated fair values of inventory and property, plant and equipment, among others. Any adjustments to the estimated impairment charge in the fourth quarter may be material to our consolidated results. The Company expects to complete the measurement of its reporting units’ goodwill impairment in the three months ended December 31, 2015. The third quarter 2015 goodwill impairment test indicated that two of the Company’s four reporting units’ goodwill were impaired The impairment charges were primarily the result of the substantial and sustained decline in oil prices during 2015, actual and forecasted declines in rig activity and the effects of those events and forecasts on the Company’s results of operations. Further, continued adverse market conditions could result in the recognition of additional impairment if the Company determines that the fair values of its reporting units have again fallen below their carrying values. |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | 15. Subsequent Event Subsequent to September 30, 2015, market conditions continue to deteriorate, and we identified additional adverse trends such as declines in rig count, oil and natural gas prices and increasingly unfavorable changes to anticipated capital spending budgets of operators. On that basis, in the three months ended December 31, 2015, we expect to reevaluate whether the fair value of our reporting units has fallen below its carrying amount, which could result in the Company recognizing additional impairment of goodwill. |
Organization and Basis of Pre22
Organization and Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Nature of Operations | 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 brands. NOW is a global distributor of energy products as well as products for industrial applications through its locations in the U.S., Canada and internationally which are geographically positioned to serve the energy and industrial markets in approximately 90 countries. NOW’s energy product offerings are used in the oil and gas industry including upstream drilling and completion, exploration and production, midstream infrastructure development and downstream petroleum refining – as well as in other industries, such as chemical processing, power generation and industrial manufacturing operations. The industrial distribution portion of NOW’s business targets a diverse range of manufacturing and facilities across numerous industries and end markets. NOW also provides supply chain management to drilling contractors, E&P operators, midstream operators, downstream energy and industrial manufacturing companies. NOW’s supplier network consists of thousands of vendors in approximately 40 countries. |
The Separation | The Separation 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 accordance with a separation and distribution agreement, the two companies were separated by NOV distributing to its stockholders 107,053,031 shares of common stock of the Company after the market closed on May 30, 2014. Each NOV stockholder received one share of NOW common stock for every four shares of NOV common stock held at the close of business on the record date of May 22, 2014 and not sold prior to close of business on May 30, 2014. Fractional shares of NOW common stock were not distributed and any fractional shares of NOW common stock otherwise issuable to a NOV stockholder were sold in the open market on such stockholder’s behalf, and such stockholder received a cash payment with respect to that fractional share. In conjunction with the Spin-Off, NOV received an opinion from its legal counsel to the effect that, based on certain facts, assumptions, representations and undertakings, for U.S. federal income tax purposes, the distribution of NOW common stock and certain related transactions generally was not taxable to NOV or U.S. holders of NOV common stock, except in respect to cash received in lieu of fractional shares, which generally will be taxable to such holders as a capital gain. Following the Spin-Off, NOW became an independent, publicly traded company as NOV had no ownership interest in NOW. Each company has separate public ownership, boards of directors and management. A Registration Statement on Form 10, as amended, relating to the Spin-Off was filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) and was declared effective on May 13, 2014. On June 2, 2014, NOW stock began trading the “regular-way” on the New York Stock Exchange under the ticker symbol “DNOW”. |
Basis of Presentation | Basis of Presentation All financial information presented before the Spin-Off represents the combined results of operations, financial position and cash flows for the Company and all financial information presented after the Spin-Off represents the consolidated results of operations, financial position and cash flows for the Company. Accordingly: · The Company’s consolidated statement of operations for the nine months ended September 30, 2014 consists of the consolidated results of NOW for the period from May 31 through September 30 and the combined results of NOW for the period from January 1, 2014 through May 30, 2014. · The Company's consolidated statement of cash flows for the nine months ended September 30, 2014 consist of the consolidated results of NOW for the period from May 31 through September 30 and the combined results of NOW for the period from January 1, 2014 through May 30, 2014. · The Company’s historical financial statements prior to May 31, 2014 were derived from the consolidated financial statements and accounting records of NOV and include assets, liabilities, revenues and expenses directly attributable to the Company’s operations. The assets and liabilities in the consolidated financial statements have been reflected on a historical cost basis, as immediately prior to the separation, all of the assets and liabilities presented were wholly owned by NOV and were transferred within NOV. For the periods prior to the Spin-Off, the consolidated financial statements include expense allocations for certain functions provided by NOV as well as other NOV employees not solely dedicated to NOW, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives and stock-based compensation. These expenses were allocated to NOW on the basis of direct usage, when identifiable, with the remainder allocated on the basis of operating profit, headcount or other measures. Actual costs that would have been incurred, if NOW had been a stand-alone public company, would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company’s historical financial statements prior to May 31, 2014 do not reflect the debt or interest costs it might have incurred if it had been a stand-alone entity. In addition, the Company expects to incur other costs, not reflected in its historical financial statements prior to May 31, 2014, as a result of being a separate publicly traded company. As a result, the Company’s historical financial statements prior to May 31, 2014 do not necessarily reflect what its financial position or results of operations would have been if it had been operated as a stand-alone public entity during the periods covered prior to May 31, 2014, and may not be indicative of the Company’s future results of operations and financial position. The consolidated financial statements include certain assets and liabilities that were historically held by NOV and were specifically identifiable or otherwise allocable to the Company. The cash and cash equivalents held by NOV were not specifically identifiable to NOW and therefore were not allocated to it for any of the periods presented prior to the Spin-Off. Cash and cash equivalents in the Company’s consolidated balance sheets primarily represent cash held locally by entities included in its consolidated financial statements. Transfers of cash prior to the Spin-Off to and from NOV’s cash management system were reflected as a component of additional paid-in capital on the consolidated balance sheets. Prior to the Spin-Off, all significant intercompany transactions between NOW and NOV were considered to be effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these intercompany transactions is reflected in the consolidated statements of cash flows as a financing activity and in the consolidated balance sheet as additional paid-in capital. The Company combined operating and warehousing costs with selling, general and administrative expenses in its consolidated statements of operations beginning with its March 31, 2015 Form 10-Q. These costs are now presented within “Warehousing, selling and administrative” expense for all periods presented. Operating and warehousing costs totaled $98 million and $300 million for the three months and nine months ended September 30, 2015, respectively, and $108 million and $315 million for the same periods in 2014, respectively. 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. 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 nine months ended September 30, 2015, are not necessarily indicative of the results to be expected for the full year. |
Reclassification | Reclassification 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 operating profit (loss), income (loss) before income taxes or net income (loss). |
Use of Estimates | 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. |
Fair Value of Financial Instruments | 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 12 for the fair value of derivative financial instruments. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers: Topic 606. Revenue Recognition, Property, Plant, and Equipment, Intangibles—Goodwill and Other) In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments . |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Property Plant And Equipment [Abstract] | |
Summary of Property, Plant and Equipment | Property, plant and equipment consist of (in millions): Estimated Useful Lives September 30, 2015 December 31, 2014 Information technology assets 2-7 Years $ 51 $ 49 Operating equipment 3-15 Years 81 51 Buildings and land (1) 5-35 Years 89 73 Construction in progress 5 2 Total property, plant and equipment 226 175 Less: accumulated depreciation (64 ) (51 ) Property, plant and equipment, net $ 162 $ 124 (1) Land has an indefinite life. |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Payables And Accruals [Abstract] | |
Summary of Accrued Liabilities | Accrued liabilities consist of (in millions): September 30, 2015 December 31, 2014 Compensation and other related expenses $ 28 $ 39 Customer credits and prepayments 20 34 Taxes (non income) 20 24 Other 29 28 Total $ 97 $ 125 |
Accumulated Other Comprehensi25
Accumulated Other Comprehensive Income (Loss) (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Components of Accumulated Other Comprehensive Income (Loss) | The components of accumulated other comprehensive income (loss) are as follows (in millions) Foreign Currency Translation Adjustments Balance at December 31, 2014 $ (45 ) Other comprehensive loss (72 ) Balance at September 30, 2015 $ (117 ) |
Business Segments (Tables)
Business Segments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
Summary of Operating Results by Reportable Segment | Operating results by reportable segment are as follows (in millions) Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Revenue: United States $ 497 $ 748 $ 1,594 $ 2,114 Canada 94 173 299 489 International 162 149 473 496 Total revenue $ 753 $ 1,070 $ 2,366 $ 3,099 Operating profit (loss): United States $ (294 ) $ 28 $ (329 ) $ 86 Canada 2 14 — 33 International 1 8 3 36 Total operating profit (loss) $ (291 ) $ 50 $ (326 ) $ 155 Operating profit (loss) % of revenue: United States (59.2 %) 3.7 % (20.6 %) 4.1 % Canada 2.1 % 8.1 % 0.0 % 6.7 % International 0.6 % 5.4 % 0.6 % 7.3 % Total operating profit (loss) % (38.6 %) 4.7 % (13.8 %) 5.0 % |
Earnings (loss) Per Share ("E27
Earnings (loss) Per Share ("EPS") (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Computation of Basic and Diluted Earnings (Loss) Per Share | Basic and diluted earnings (loss) per share follows (in millions, except share data) Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Numerator for basic and diluted net income (loss) per share attributable to the Company's stockholders: Net income (loss) attributable to the Company's stockholders (1) $ (224 ) $ 32 $ (253 ) $ 100 Denominator for basic earnings (loss) per share attributable to the Company's stockholders: Weighted average common shares outstanding 107,188,092 107,061,639 107,160,921 107,055,932 Effect of dilutive securities: Dilutive effect of stock-based compensation — 563,604 — 492,235 Denominator for diluted earnings (loss) per share attributable to the Company's stockholders 107,188,092 107,625,243 107,160,921 107,548,167 Earnings (loss) per share attributable to the Company's stockholders: Basic $ (2.09 ) $ 0.30 $ (2.36 ) $ 0.93 Diluted $ (2.09 ) $ 0.30 $ (2.36 ) $ 0.93 (1) Losses are not allocated to nonvested shares in periods that the Company determines that those shares are not obligated to participate in losses. |
Stock-based Compensation and 28
Stock-based Compensation and Outstanding Awards (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Summary of Stock Option Activity | A summary of stock option activity under the Plan as of September 30, 2015, and changes from December 31, 2014 through September 30, 2015 are presented below: Options (1) Shares Weighted Average Exercise Price Aggregate Intrinsic Value (in millions) Outstanding as of January 1, 2015 3,545,519 $ 30.86 Granted 534,929 22.44 Forfeited (33,261 ) 29.35 Exercised or settled — — Expired or canceled — — Outstanding as of September 30, 2015 4,047,187 $ 29.76 $ — Exercisable at September 30, 2015 2,482,499 $ 30.92 $ — (1) All Stock Options presented in this table are for NOW stock only. |
Summary of Status of Nonvested Shares | A summary of the status of the Company’s nonvested shares as of September 30, 2015, and changes for the period from December 31, 2014 through September 30, 2015 are presented below: RSAs / RSUs / PSAs Shares Weighted Average Grant-Date Fair Value Nonvested as of January 1, 2015 2,446,938 $ 30.24 Granted 230,707 23.15 Vested (1) (199,813 ) 35.20 Forfeited (15,264 ) 31.31 Expired or canceled — — Nonvested as of September 30, 2015 2,462,568 $ 29.17 (1) 63,209 shares withheld and retired from the vesting of shares to employees to satisfy minimum tax withholding. |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Schedule of Purchase Price Allocation | Following is the purchase price allocation detail (in millions): As of September 30, 2015 Purchase price including contingent consideration $ 431 Less: cash acquired (29 ) Net purchase price 402 Fair value of net assets acquired: Current assets other than cash 145 Property, plant and equipment 50 Trade names (weighted average useful lives of 7 years) 22 Customer relationships (weighted average useful lives of 8 years) 62 Current liabilities (69 ) Deferred tax liabilities, net (28 ) Other non-current liability (1 ) Total fair value of net assets acquired 181 Goodwill (1) $ 221 (1) The amount of goodwill represents the excess of its purchase price over the fair value of net assets acquired . |
Organization and Basis of Pre30
Organization and Basis of Presentation - Additional Information (Detail) $ in Millions | Nov. 22, 2013GeographicMarketVendorCountry | Sep. 30, 2015USD ($)shares | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)shares | Sep. 30, 2014USD ($) | Dec. 31, 2014shares |
Basis Of Presentation And Organization [Line Items] | ||||||
Number of geographical area covered | GeographicMarket | 90 | |||||
Number of vendors | Vendor | 1,000 | |||||
Number of countries distribution occur through vendors | Country | 40 | |||||
Common stock, shares outstanding | 107,204,061 | 107,204,061 | 107,067,457 | |||
Operating and warehousing costs | $ | $ 98 | $ 108 | $ 300 | $ 315 | ||
Separation [Member] | ||||||
Basis Of Presentation And Organization [Line Items] | ||||||
Spin-off description | In accordance with a separation and distribution agreement, the two companies were separated by NOV distributing to its stockholders 107,053,031 shares of common stock of the Company after the market closed on May 30, 2014. Each NOV stockholder received one share of NOW common stock for every four shares of NOV common stock held at the close of business on the record date of May 22, 2014 and not sold prior to close of business on May 30, 2014. | |||||
Common stock, shares outstanding | 107,053,031 | 107,053,031 | ||||
Ratio of common stock sharing | 4 |
Property, Plant and Equipment -
Property, Plant and Equipment - Summary of Property, Plant and Equipment (Detail) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, Gross | $ 226 | $ 175 |
Less: accumulated depreciation | (64) | (51) |
Property, plant and equipment, net | 162 | 124 |
Information Technology Assets [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, Gross | $ 51 | 49 |
Information Technology Assets [Member] | Minimum [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property plant and equipment estimated useful lives | 2 years | |
Information Technology Assets [Member] | Maximum [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property plant and equipment estimated useful lives | 7 years | |
Operating Equipment [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, Gross | $ 81 | 51 |
Operating Equipment [Member] | Minimum [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property plant and equipment estimated useful lives | 3 years | |
Operating Equipment [Member] | Maximum [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property plant and equipment estimated useful lives | 15 years | |
Buildings and Land (Indefinite Life) [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, Gross | $ 89 | 73 |
Buildings and Land (Indefinite Life) [Member] | Minimum [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property plant and equipment estimated useful lives | 5 years | |
Buildings and Land (Indefinite Life) [Member] | Maximum [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property plant and equipment estimated useful lives | 35 years | |
Construction in progress [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property, plant and equipment, Gross | $ 5 | $ 2 |
Accrued Liabilities - Summary o
Accrued Liabilities - Summary of Accrued Liabilities (Detail) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Payables And Accruals [Abstract] | ||
Compensation and other related expenses | $ 28 | $ 39 |
Customer credits and prepayments | 20 | 34 |
Taxes (non income) | 20 | 24 |
Other | 29 | 28 |
Total | $ 97 | $ 125 |
Debt - Additional Information (
Debt - Additional Information (Detail) $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Debt Instrument [Line Items] | |
Term of loan | 5 years |
Agreement date | Apr. 18, 2014 |
Aggregate loan amount | $ 750 |
Sub-facility for letter of credit | 150 |
Sub-facility for swing line loans | 50 |
Increase in aggregate principal amount | $ 250 |
Line of credit facility expiration date | 2019-04 |
Maximum capitalization ratio | 50.00% |
Minimum interest coverage ratio | 300.00% |
Senior Unsecured Revolving Credit Facility [Member] | |
Debt Instrument [Line Items] | |
Line of credit facility borrowings | $ 120 |
Letter of credit outstanding amount | $ 4 |
Minimum [Member] | |
Debt Instrument [Line Items] | |
Annual commitment fee range | 0.25% |
Maximum [Member] | |
Debt Instrument [Line Items] | |
Annual commitment fee range | 0.35% |
Federal Funds Rate [Member] | |
Debt Instrument [Line Items] | |
Base rate | 0.50% |
London Interbank Offered Rate (LIBOR) [Member] | |
Debt Instrument [Line Items] | |
Base rate | 1.00% |
Accumulated Other Comprehensi34
Accumulated Other Comprehensive Income (Loss) - Summary of Components of Accumulated Other Comprehensive Income (Loss) (Detail) $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Statement Of Income And Comprehensive Income [Abstract] | |
Accumulated other comprehensive income (loss), Beginning balance | $ (45) |
Other comprehensive loss | (72) |
Accumulated other comprehensive income (loss), Ending balance | $ (117) |
Business Segments - Summary of
Business Segments - Summary of Operating Results by Reportable Segment (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue: | ||||
Total revenue | $ 753 | $ 1,070 | $ 2,366 | $ 3,099 |
Operating profit (loss): | ||||
Total operating profit (loss) | $ (291) | $ 50 | $ (326) | $ 155 |
Operating profit (loss) % of revenue: | ||||
Total operating profit (loss) % | (38.60%) | 4.70% | (13.80%) | 5.00% |
United States [Member] | ||||
Revenue: | ||||
Total revenue | $ 497 | $ 748 | $ 1,594 | $ 2,114 |
Operating profit (loss): | ||||
Total operating profit (loss) | $ (294) | $ 28 | $ (329) | $ 86 |
Operating profit (loss) % of revenue: | ||||
Total operating profit (loss) % | (59.20%) | 3.70% | (20.60%) | 4.10% |
Canada [Member] | ||||
Revenue: | ||||
Total revenue | $ 94 | $ 173 | $ 299 | $ 489 |
Operating profit (loss): | ||||
Total operating profit (loss) | $ 2 | $ 14 | $ 33 | |
Operating profit (loss) % of revenue: | ||||
Total operating profit (loss) % | 2.10% | 8.10% | 0.00% | 6.70% |
International [Member] | ||||
Revenue: | ||||
Total revenue | $ 162 | $ 149 | $ 473 | $ 496 |
Operating profit (loss): | ||||
Total operating profit (loss) | $ 1 | $ 8 | $ 3 | $ 36 |
Operating profit (loss) % of revenue: | ||||
Total operating profit (loss) % | 0.60% | 5.40% | 0.60% | 7.30% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 22.80% | 34.70% | 23.70% | 35.30% |
Earnings (loss) Per Share ("E37
Earnings (loss) Per Share ("EPS") - Additional Information (Detail) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Restricted Stock Awards (RSAs) [Member] | ||||
Earnings Per Share [Line Items] | ||||
Antidilutive Securities excluded from Computation of Earnings Per Share | 6,509,775 | 1,233,385 | 6,540,227 | 2,083,908 |
Restricted Stock Units (RSUs) [Member] | ||||
Earnings Per Share [Line Items] | ||||
Antidilutive Securities excluded from Computation of Earnings Per Share | 6,509,775 | 1,233,385 | 6,540,227 | 2,083,908 |
Performance Share Awards (PSAs) [Member] | ||||
Earnings Per Share [Line Items] | ||||
Antidilutive Securities excluded from Computation of Earnings Per Share | 6,509,775 | 1,233,385 | 6,540,227 | 2,083,908 |
Earnings (loss) Per Share ("E38
Earnings (loss) Per Share ("EPS") - Computation of Basic and Diluted Earnings (Loss) Per Share (Detail) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Numerator for basic and diluted net income (loss) per share attributable to the Company's stockholders: | ||||
Net income (loss) attributable to the Company's stockholders | $ (224) | $ 32 | $ (253) | $ 100 |
Denominator for basic earnings (loss) per share attributable to the Company's stockholders: | ||||
Weighted average common shares outstanding | 107,188,092 | 107,061,639 | 107,160,921 | 107,055,932 |
Effect of dilutive securities: | ||||
Dilutive effect of stock-based compensation | 563,604 | 492,235 | ||
Denominator for diluted earnings (loss) per share attributable to the Company's stockholders | 107,188,092 | 107,625,243 | 107,160,921 | 107,548,167 |
Basic | $ (2.09) | $ 0.30 | $ (2.36) | $ 0.93 |
Diluted | $ (2.09) | $ 0.30 | $ (2.36) | $ 0.93 |
Stock-based Compensation and 39
Stock-based Compensation and Outstanding Awards - Additional Information (Detail) - USD ($) | Feb. 24, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock option granted | 534,929 | ||||
Stock option granted fair value | $ 8.06 | ||||
Stock option granted, exercise price | $ 22.44 | ||||
Performance based restricted stock awards goals over performance period | 3 years | ||||
Stock-based compensation expense | $ 7,000,000 | $ 5,000,000 | $ 20,000,000 | $ 10,000,000 | |
Weighted-average remaining contractual term, options vested | 6 years 9 months 18 days | ||||
Weighted-average remaining contractual term, options exercisable | 6 years 4 months 24 days | ||||
Aggregate intrinsic value, Exercised or settled | $ 0 | ||||
Restricted Stock and Restricted Stock Units [Member] | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock based awards, shares granted | 157,538 | ||||
Stock based awards, shares granted, weighted average fair value | $ 22.59 | ||||
Stock Options [Member] | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock based awards, vested, number of years | 3 years | ||||
Unrecognized compensation costs | 10,000,000 | $ 10,000,000 | |||
Expected to be recognized over a weighted average period | 1 year 7 months 6 days | ||||
TSR metric [Member] | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Performance based restricted stock awards granted in percent | 33.33% | ||||
Performance based restricted stock awards performance average goal period | 3 years | ||||
EBITDA metric [Member] | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Performance based restricted stock awards granted in percent | 33.33% | ||||
Performance based restricted stock awards performance average goal period | 3 years | ||||
Working Capital (WC) metric [Member] | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Performance based restricted stock awards granted in percent | 33.33% | ||||
Performance based restricted stock awards performance average goal period | 3 years | ||||
RSAs and RSUs and PSAs [Member] | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock based awards, shares granted | 230,707 | ||||
Stock based awards, shares granted, weighted average fair value | $ 23.15 | ||||
Unrecognized compensation costs | $ 49,000,000 | $ 49,000,000 | |||
Expected to be recognized over a weighted average period | 4 years | ||||
Senior Management Employees [Member] | Minimum [Member] | Performance-base restricted stock [Member] | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock based awards, shares granted | 0 | ||||
Senior Management Employees [Member] | Maximum [Member] | Performance-base restricted stock [Member] | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock based awards, shares granted | 146,486 |
Stock-based Compensation and 40
Stock-based Compensation and Outstanding Awards - Summary of Stock Option Activity (Detail) | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Options, Outstanding, Beginning balance | 3,545,519 |
Options, Granted | 534,929 |
Options, Forfeited | (33,261) |
Options, Outstanding, Ending balance | 4,047,187 |
Options, Exercisable at September 30, 2015 | 2,482,499 |
Weighted average exercise price, Outstanding, Beginning balance | $ / shares | $ 30.86 |
Weighted average exercise price, Granted | $ / shares | 22.44 |
Weighted average exercise price, Forfeited | $ / shares | 29.35 |
Weighted average exercise price, Outstanding, Ending balance | $ / shares | 29.76 |
Weighted average exercise price, Exercisable at September 30, 2015 | $ / shares | $ 30.92 |
Stock-based Compensation and 41
Stock-based Compensation and Outstanding Awards - Summary of Status of the Nonvested Shares (Detail) - RSAs and RSUs and PSAs [Member] | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Nonvested shares, beginning balance | 2,446,938 |
Shares, Granted | 230,707 |
Shares, Vested | (199,813) |
Shares, Forfeited | (15,264) |
Nonvested shares, ending balance | 2,462,568 |
Weighted average grant date fair value, Nonvested beginning balance | $ / shares | $ 30.24 |
Weighted average grant date fair value, Granted | $ / shares | 23.15 |
Weighted average grant date fair value, Vested | $ / shares | 35.20 |
Weighted average grant date fair value, Forfeited | $ / shares | 31.31 |
Weighted average grant date fair value, Nonvested ending balance | $ / shares | $ 29.17 |
Stock-based Compensation and 42
Stock-based Compensation and Outstanding Awards - Summary of Status of the Nonvested Shares (Parenthetical) (Detail) | 9 Months Ended |
Sep. 30, 2015shares | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Shares paid for tax withholding | 63,209 |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) | Sep. 30, 2015USD ($) |
Loss Contingencies [Line Items] | |
Range of reasonably possible losses, minimum | $ 0 |
Range of reasonably possible losses, maximum | 25,000,000 |
Business Acquisition Acquiree One | |
Loss Contingencies [Line Items] | |
Business acquisition, maximum contingent consideration payments | 6,000,000 |
Business acquisition, fair value of contingent consideration payments | $ 3,000,000 |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Related Party Transaction [Abstract] | ||
Selling general and administration expenses | $ 0 | $ 6 |
Derivative Financial Instrume45
Derivative Financial Instruments - Additional Information (Detail) - Forward Contracts [Member] $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Derivative Instruments And Hedging Activities Disclosures [Line Items] | |
Notional principal associated with contracts | $ 119 |
Maximum [Member] | |
Derivative Instruments And Hedging Activities Disclosures [Line Items] | |
Foreign currency forward contracts | 1 |
Gain on foreign currency forward contracts | $ 1 |
Acquisitions - Additional Infor
Acquisitions - Additional Information (Detail) $ in Millions | 9 Months Ended | |
Sep. 30, 2015USD ($)Acquisition | Dec. 31, 2014USD ($) | |
Business Acquisition [Line Items] | ||
Goodwill | $ 296 | $ 346 |
Series of Individually Immaterial Business Acquisitions | ||
Business Acquisition [Line Items] | ||
Number of acquisitions completed | Acquisition | 6 | |
Purchase price | $ 431 | |
Goodwill | 221 | |
Intangible assets | 84 | |
Business Acquisition Acquiree One | ||
Business Acquisition [Line Items] | ||
Business acquisition, maximum contingent consideration payments | 6 | |
Business acquisition, fair value of contingent consideration payments as of acquisition date | $ 4 |
Acquisitions - Schedule of Purc
Acquisitions - Schedule of Purchase Price Allocation (Detail) - Series of Individually Immaterial Business Acquisitions $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Business Acquisition [Line Items] | |
Purchase price including contingent consideration | $ 431 |
Less: cash acquired | (29) |
Net purchase price | 402 |
Fair value of net assets acquired: | |
Current assets other than cash | 145 |
Property, plant and equipment | 50 |
Intangible assets | 84 |
Current liabilities | (69) |
Deferred tax liabilities, net | (28) |
Other non-current liability | (1) |
Total fair value of net assets acquired | 181 |
Goodwill (1) | 221 |
Trade Names [Member] | |
Fair value of net assets acquired: | |
Intangible assets | 22 |
Customer Relationships [Member] | |
Fair value of net assets acquired: | |
Intangible assets | $ 62 |
Acquisitions - Schedule of Pu48
Acquisitions - Schedule of Purchase Price Allocation (Parenthetical) (Detail) - Series of Individually Immaterial Business Acquisitions | 9 Months Ended |
Sep. 30, 2015 | |
Trade Names [Member] | |
Business Acquisition [Line Items] | |
Weighted average useful lives | 7 years |
Customer Relationships [Member] | |
Business Acquisition [Line Items] | |
Weighted average useful lives | 8 years |
Goodwill Impairment - Additiona
Goodwill Impairment - Additional Information (Detail) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2015USD ($)Reporting_Unit | Sep. 30, 2015USD ($) | |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Impairment of goodwill | $ | $ 255 | $ 255 |
Loss on impairment of goodwill, Net of tax | $ | $ 202 | $ 202 |
Number of reporting units | 4 | |
Number of reporting units' goodwill impaired | 2 |