UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
(Exact name of registrant as specified in its charter)
|
||
(State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization) |
|
Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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.
|
☒ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|||
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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 August 2, 2024, the registrant had
1
DNOW INC.
TABLE OF CONTENTS
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DNOW INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
|
(Unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Receivables, net |
|
|
|
|
|
|
||
Inventories, net |
|
|
|
|
|
|
||
Prepaid and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangibles, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term operating lease liabilities |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders' equity: |
|
|
|
|
|
|
||
Preferred stock - par value $ |
|
|
|
|
|
|
||
Common stock - par value $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
DNOW Inc. stockholders' equity |
|
|
|
|
|
|
||
Noncontrolling interest |
|
|
|
|
|
|
||
Total stockholders' equity |
|
|
|
|
|
|
||
Total liabilities and stockholders' equity |
|
$ |
|
|
$ |
|
See notes to unaudited consolidated financial statements.
3
DNOW INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In millions, except per share data)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of products |
|
$ |
|
|
|
|
|
|
|
|
|
|
||||
Warehousing, selling and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to DNOW Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Earnings per share attributable to DNOW Inc. stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted-average common shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited consolidated financial statements.
4
DNOW INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In millions)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive income attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive income attributable to DNOW Inc. |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
See notes to unaudited consolidated financial statements.
5
DNOW INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
|
Six Months Ended June 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
||
Net income |
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Provision for inventory |
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
||
Other, net |
|
|
|
|
|
||
Change in operating assets and liabilities, net of effects of acquisitions: |
|
|
|
|
|
||
Receivables |
|
|
|
|
( |
) |
|
Inventories |
|
|
|
|
( |
) |
|
Prepaid and other current assets |
|
( |
) |
|
|
( |
) |
Accounts payable, accrued liabilities and other, net |
|
( |
) |
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
||
Business acquisitions, net of cash acquired |
|
( |
) |
|
|
( |
) |
Purchases of property, plant and equipment |
|
( |
) |
|
|
( |
) |
Other, net |
|
|
|
|
|
||
Net cash provided by (used in) investing activities |
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
||
Repurchases of common stock |
|
( |
) |
|
|
( |
) |
Other, net |
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
( |
) |
|
|
( |
) |
Effect of exchange rates on cash and cash equivalents |
|
( |
) |
|
|
|
|
Net change in cash and cash equivalents |
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
||
Cash and cash equivalents, end of period |
$ |
|
|
$ |
|
See notes to unaudited consolidated financial statements.
6
DNOW INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In millions)
|
Attributable to DNOW 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, 2022 |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
Net income |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Common stock repurchased |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Shares withheld for taxes |
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
March 31, 2023 |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Net income |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Common stock repurchased |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
June 30, 2023 |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
December 31, 2023 |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Net income |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Common stock repurchased |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Shares withheld for taxes |
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other comprehensive loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
March 31, 2024 |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Net income |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Common stock repurchased |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Common stock retired |
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Exercise of stock options |
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Other comprehensive loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
June 30, 2024 |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
See notes to unaudited consolidated financial statements.
7
DNOW INC.
Notes to Unaudited Consolidated Financial Statements
1. Organization and Basis of Presentation
Nature of Operations
DNOW Inc. (“DNOW” or the “Company”) is a holding company headquartered in Houston, Texas that was incorporated in Delaware on November 22, 2013. We operate primarily under the DNOW brand along with several affiliated brands operating in local or regional markets that are tied to prior acquisitions. DNOW 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 approximately
Basis of Presentation
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 GAAP 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, which are of a normal recurring nature unless disclosed otherwise, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results to be expected for the full year.
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 14 “Derivative Financial Instruments” for the fair value of derivative financial instruments.
Purchase Price Allocation of Acquisitions
The Company allocates the fair value of the purchase price consideration of an acquired business to its identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the fair value of the acquired assets and liabilities, if any, is recorded as goodwill. The Company uses all available information to estimate fair values including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows. The Company engages third-party valuation advisors to assist in fair value determination of inventories, identifiable intangible assets and any other significant assets or liabilities when appropriate. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, could materially impact the Company’s results of operations. See Note 15 “Acquisitions” for additional information.
Recently Issued Accounting Standards
In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280), which requires enhanced segment disclosures primarily focusing on significant segment expense disclosures for both interim and annual periods. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires modified retrospective transition
8
method. The Company will not early adopt, and is currently assessing the impact of ASU 2023-07 in its consolidated financial statements and its disclosures. The Company does not expect the adoption of this standard to have material impact in its consolidated statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which requires public companies to expand the income tax disclosures. The ASU requires entities to disclose more detailed information in their effective tax rate reconciliation and their cash taxes paid both in the U.S., state and foreign jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued. The Company will not early adopt, and is currently assessing the impact of ASU 2023-09 in its consolidated financial statements and in its disclosures.
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. Substantially all of the Company's 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 9 “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 Codification (“ASC”) Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations when the performance obligation is part of a contract that has an original expected duration of one year or less.
Allowance for Credit Losses
Allowance for credit losses is estimated based on an evaluation of accounts receivable aging, and the related historical loss experience, as adjusted for current and expected future market conditions that are reasonably available. Judgments in the estimate of allowance for credit losses include global economic and business conditions, oil and gas industry and market conditions, customer’s financial conditions and accounts receivable past due. As of June 30, 2024 and December 31, 2023, the allowance for credit losses totaled $
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 June 30, 2024 and December 31, 2023, contract assets were approximately $
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 other accrued customer liabilities. Revenue recognition is deferred to a future period until the Company completes its obligations contractually agreed with customers. As of June 30, 2024 and December 31, 2023, contract liabilities were $
9
3. Inventories, net
Inventories consist primarily of oilfield and industrial finished goods and work in process. Work in process primarily consists of inventory and labor related to customer specific engineered equipment. Finished goods are stated at the lower of cost or net realizable value and using average cost methods. Allowances for excess and obsolete inventories are determined based on the Company’s historical usage of inventory on hand as well as its future expectations.
Inventories consist primarily of (in millions):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Work in process |
|
$ |
|
|
$ |
|
||
Finished goods and other |
|
|
|
|
|
|
||
Total inventory |
|
|
|
|
|
|
||
Less: Inventory reserves |
|
|
( |
) |
|
|
( |
) |
Inventories, net |
|
$ |
|
|
$ |
|
Property, plant and equipment consist of (in millions):
|
|
Estimated |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Information technology assets |
|
|
$ |
|
|
$ |
|
|||
Operating equipment (1) |
|
|
|
|
|
|
|
|||
Buildings and land (2) |
|
|
|
|
|
|
|
|||
Construction in progress |
|
|
|
|
|
|
|
|
||
Total property, plant and equipment |
|
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
|
|
$ |
|
|
$ |
|
5. Accrued Liabilities
Accrued liabilities consist of (in millions):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Compensation and other related expenses |
|
$ |
|
|
$ |
|
||
Contract liabilities |
|
|
|
|
|
|
||
Taxes (non-income) |
|
|
|
|
|
|
||
Current portion of operating lease liabilities |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
On
The Credit Facility provides for a $
10
Borrowings under the Credit Facility will bear an interest rate at the Company’s option, (i) for borrowings denominated in U.S. dollars, at (a) the base rate plus the applicable margin or (b) adjusted term SOFR for the applicable interest period, plus the applicable margin and (ii) for borrowings denominated in Canadian dollars, the Canadian Dollar Offered Rate plus the applicable margin. In each case, with such applicable margin being based on the Company’s fixed charge coverage ratio. The Credit Facility includes a commitment fee on the unused portion of commitments that ranges from
Availability under the Credit Facility is determined by a borrowing base comprised of eligible receivables, eligible inventory and certain cash deposits in the U.S. and Canada. As of June 30, 2024, the Company had
The Company issued $
7. Stockholders’ Equity
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 $
Information regarding the shares repurchased was as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Total cost of shares repurchased (in millions) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Average price per share (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Number of shares repurchased |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Variable Interest Entities ("VIE")
The Company holds a
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 June 30, 2024 and December 31, 2023, the VIE’s assets were primarily current assets of $
8. Accumulated Other Comprehensive Income (Loss) ("AOCI")
The components of AOCI are as follows (in millions):
|
|
Foreign Currency Translation Adjustments |
|
|||||
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
Net current-period other comprehensive income (loss) |
|
|
( |
) |
|
|
|
|
Ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
11
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 or loss in accordance with ASC Topic 830, “Foreign Currency Matters.”
9. Business Segments
Operating results by reportable segment are as follows (in millions):
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating profit: |
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating profit |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
10. Income Taxes
The effective tax rates for the three and six months ended June 30, 2024, were
The Company is subject to taxation in the U.S., various states, and foreign jurisdictions. The Company has significant operations in the U.S. and Canada and to a lesser extent in various other international jurisdictions. Tax years that remain subject to examination vary by legal entity but are generally open in the U.S. for the tax years ending after 2019 and outside the U.S. for the tax years ending after 2017.
11. Earnings Per Share
For the three and six months ended June 30, 2024, less than
Basic and diluted earnings per share are as follows (in millions, except share data):
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to DNOW Inc. |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: net income attributable to participating securities |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income attributable to DNOW Inc. stockholders |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average basic common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average diluted common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share attributable to DNOW Inc. stockholders: |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
$ |
|
|
$ |
|
|
$ |