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What changed in DNOW Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DNOW Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+204 added−196 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in DNOW Inc.'s 2023 10-K

204 paragraphs added · 196 removed · 169 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeSeasonal Nature of the Company’s Business A portion of our business has experienced seasonal trends, to some degree, which have varied by geographic region. In the U.S., activity has historically been higher during the summer and fall months.
Biggest changeWhile some large distributors compete in both markets, most companies focus on either the energy or industrial end market. Some of our suppliers also sell directly to end-users. Seasonal Nature of the Company’s Business A portion of our business has experienced seasonal trends, to some degree, which have varied by geographic region.
Products sold through our locations support greenfield expansion upstream capital projects, midstream infrastructure and transmission and MRO consumables used in day-to-day production. We provide downstream energy and industrial products for petroleum refining, chemical processing, liquefied natural gas (“LNG”) terminals, power generation utilities and customer on-site locations. 3 Our supplier network consists of thousands of vendors in approximately 40 countries.
Products sold through our locations support greenfield expansion upstream capital projects, midstream infrastructure and transmission and MRO consumables used in day-to-day production. We provide downstream energy and industrial 3 products for petroleum refining, chemical processing, liquefied natural gas (“LNG”) terminals, power generation utilities and customer on-site locations. Our supplier network consists of thousands of vendors in approximately 40 countries.
Process Solutions Process Solutions has a team of distribution experts, technical professionals and licensed engineers who provide expertise related to pumps, compressors and fluid movement packages, fabricated liquid and gas measurement systems and process and production equipment. Process Solutions distributes OEM equipment including pumps, generator sets, air and gas compressors, dryers, blowers, mixers and valves.
Process Solutions Process Solutions has a team of distribution experts, technical professionals and licensed engineers who provide expertise related to pumps, compressors, fluid movement packages, fabricated liquid and gas measurement systems and process and production equipment. Process Solutions distributes OEM equipment including pumps, generator sets, air compressors, dryers, blowers, mixers and valves.
Our global product offering includes consumable maintenance, repair and operating (“MRO”) supplies, pipe, manual and automated valves, fittings, flanges, gaskets, fasteners, electrical, instrumentation, artificial lift, pumping solutions, and modular process, production, measurement and control equipment. We also offer procurement, warehouse and inventory management solutions as part of our supply chain and materials management offering.
Our global product offering includes consumable maintenance, repair and operating (“MRO”) supplies, pipe, manual and automated valves, fittings, flanges, gaskets, fasteners, electrical, instrumentation, artificial lift, pumping solutions and modular process, production, measurement and control equipment. We also offer sourcing, procurement, warehouse and inventory management solutions as part of our supply chain and materials management offering.
Our long legacy of operating in many international regions, combined with significant expansion into several key markets, provides a competitive advantage as few of our competitors have a presence in most of the global energy producing regions. Distribution Industry Overview The distribution industry is highly fragmented, comprised of large companies with global reach and numerous small, local and regional competitors.
Our long legacy of operating in many international regions, combined with expansion into several key markets, provides a competitive advantage as few of our competitors have a presence in most of the global energy producing regions. Distribution Industry Overview The distribution industry is highly fragmented, comprised of large companies with global reach and numerous small, local and regional competitors.
Additionally, through our growing DigitalNOW® platform, customers can leverage world-class technology across ecommerce, data management and supply chain optimization applications to solve a wide array of complex operational and product sourcing challenges to assist in maximizing their return on assets.
Additionally, through our growing DigitalNOW® platform, customers can leverage world-class technology across ecommerce, data visualization, data management and supply chain optimization applications to solve a wide array of complex operational and product sourcing challenges to assist in maximizing their return on assets.
This solution saves our customers time and expense related to well hookup and tank battery commissioning and reduces field incident exposures due to a reduced labor requirement for battery construction.
This solution saves our customers time and expense related to well hookup and tank battery commissioning and reduces field incident exposures due to a reduced labor requirement for facility construction.
The segment data included in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are presented on a basis consistent with our internal management reporting. Segment information appearing in Note 16 “Business Segments” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) is also presented on this basis.
The segment data included in our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are presented on a basis consistent with our internal management reporting. Segment information appearing in Note 17 “Business Segments” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) is also presented on this basis.
Canada We have a network of approximately 40 locations in the Canadian oilfield, predominately in the oil rich provinces of Alberta, Saskatchewan, Manitoba and other targeted locations across the country. Our Canada segment primarily serves energy exploration, production, mining and drilling businesses, offering customers many of the same products and value-added solutions that we perform in the U.S.
Canada We have a network of approximately 40 locations in the Canadian oilfield, predominantly in the oil rich provinces of Alberta, Saskatchewan, Manitoba and other targeted locations across the country. Our Canada segment primarily serves energy exploration, production, mining and drilling businesses, offering customers many of the same products and value-added solutions that we perform in the U.S.
Our vapor recovery systems provide an environmental, social, and governance ("ESG") benefit by enabling customers to retain and sell residual flash gas commonly found in storage tanks resulting in a decrease in greenhouse gas emissions. 6 Customers Our primary customers are companies active in the upstream, midstream and downstream sectors of the energy industry, including drilling contractors, well servicing companies, independent and national oil and gas companies, midstream operators, refineries, petrochemical, chemical, utilities, RNG facilities and other downstream energy processors.
Our EcoVapor TM branded vapor recovery systems provide an environmental, social, and governance ("ESG") benefit by enabling customers to retain and sell residual flash gas commonly found in storage tanks resulting in a decrease in greenhouse gas emissions. 6 Customers Our primary customers are companies active in the upstream, midstream and downstream sectors of the energy industry, including drilling contractors, well servicing companies, independent and national oil and gas companies, midstream operators, refineries, petrochemical, chemical, utilities, RNG facilities and other downstream energy processors.
From our operations in approximately 20 countries, we sell to customers operating in approximately 80 countries. The supplies and equipment stocked by each of our branches are customized to meet varied and changing local customer demands. The breadth and scale of our offering enhances our value proposition to our customers, suppliers and shareholders.
From our operations in 18 countries, we sell to customers operating in approximately 80 countries. The supplies and equipment stocked by each of our branches are customized to meet varied and changing local customer demands. The breadth and scale of our offering enhances our value proposition to our customers, suppliers and shareholders.
Use of our large centralized and regional distribution centers allow us to aggregate product across multiple suppliers and customers, which, in turn, prevents each customer from separately creating duplicative supply chains that require fuel for deliveries and resources to manage.
Use of our large centralized and regional distribution centers allows us to aggregate product across multiple suppliers and customers, which, in turn, prevents each customer from separately creating duplicative supply chains that require fuel for deliveries and resources to manage.
We provide a full suite of process and production equipment, pumps and compressor packages, artificial lift, steel, fiberglass and composite pipe, valves and fittings (“PVF”), instrumentation and measurement, and safety and personal protective equipment (“PPE”) in the exploration, production, separation, storage and gathering of oil and gas, as well as the separation, removal, storage and transfer of produced water. 5 To minimize air emissions, we provide vapor recovery systems to capture and transfer gas and volatile organic compounds during the separation and storage of oil, gas and water from operating reservoirs.
We provide a full suite of process and production equipment, pumps and compressor packages, artificial lift, steel, fiberglass and composite pipe, valves and fittings (“PVF”), instrumentation and measurement, and safety and personal protective equipment (“PPE”) in the exploration, production, separation, storage and gathering of oil and gas, as well as the separation, removal, storage and transfer of produced water. 5 To minimize carbon based effluent emissions, we provide vapor recovery systems to capture and transfer gas and volatile organic compounds during the separation and storage of oil, gas and produced water from operating reservoirs.
United States We have approximately 110 locations in the U.S., which are geographically positioned to best serve the upstream, midstream and downstream energy and industrial markets. We offer higher value solutions in key product lines in the U.S. which broaden and deepen our customer relationships and related product line value.
United States We have approximately 105 locations in the U.S., which are geographically positioned to best serve the upstream, midstream, downstream and renewable energy and industrial markets. We offer higher value solutions in key product lines in the U.S. which broaden and deepen our customer relationships and related product line value.
ITEM 1. B USINESS Overview NOW Inc. (“NOW” or the “Company”), headquartered in Houston, Texas, was incorporated in Delaware on November 22, 2013. On June 2, 2014, NOW stock began regular trading on the New York Stock Exchange under the ticker symbol “DNOW”.
ITEM 1. B USINESS Overview DNOW Inc., previously NOW Inc. (“DNOW” or the “Company”), headquartered in Houston, Texas, was incorporated in Delaware on November 22, 2013. On June 2, 2014, DNOW stock began regular trading on the New York Stock Exchange under the ticker symbol “DNOW”.
These market dynamics make the distributor an essential element in the value chain for our customers. Our product offering is aligned to meet the needs of our customer base. Energy Energy branches are brick and mortar supply store operations that provide products to multiple upstream, midstream and downstream customers from a single location.
These market dynamics make us an essential element in the value chain for our customers. Our product offering is aligned to meet the needs of our customer base. Energy Centers Energy centers are brick and mortar supply store operations that provide products to multiple upstream, midstream and downstream customers from a single location.
We create a culture where all employees can strive to be their best, to achieve company goals and to deliver superior service to our customers. As of December 31, 2022, our U.S. workforce was comprised of approximately 27% female and 31% racial minorities. We recognize that we are an integral part of the communities in which we operate.
We create a culture where all employees can strive to be their best, to achieve company goals and to deliver superior service to our customers. As of December 31, 2023, our U.S. workforce was comprised of approximately 26% female and 32% racial minorities. We recognize that we are an integral part of the communities in which we operate.
As a distributor of energy and industrial markets, we offer a wide array of products and supply chain services.
As a distributor to the energy and industrial markets, we offer a wide array of products and supply chain services.
Through a network of approximately 170 locations and approximately 2,425 employees worldwide, we offer a complementary suite of digital procurement channels that, in conjunction with our locations, provides products to the energy and industrial markets around the world.
Through a network of approximately 165 locations and approximately 2,475 employees worldwide, we offer a complementary suite of digital procurement channels that, in conjunction with our locations, provides products to the energy and industrial markets around the world.
For produced water, we provide fluid movement products that help our customers environmentally dispose of water. For oil streams, we provide products that measure the quality and quantity of oil and gas through the separation process and prior to distribution to the midstream sector.
For produced water, we provide fluid movement products that help our customers dispose of produced water in an environmentally safe manner. For oil streams, we provide products that measure the quality and quantity of oil and gas through the separation process and prior to distribution to the midstream sector.
As customers increasingly aggregate purchases to improve efficiency and reduce costs, they partner with large distributors who can meet their needs for products in multiple locations around the world. Customers can procure products through our direct branch model or through our ecommerce site, https://shop.dnow.com .
As customers increasingly aggregate purchases to improve efficiency and reduce costs, they partner with large distributors who can meet their needs for products in multiple locations around the world. Customers can procure products through our direct branch model or through our ecommerce site, https://shop.dnow.com , or using our mobile application on smart devices.
Process Solutions also provides modular oil and gas tank battery solutions that positively impact our operator customers by enabling them to design a modular tank battery that enables flexibility and scalability for current and future production, while expediting revenue generation by reducing the time to complete a tank battery and getting oil and gas into the pipeline earlier.
Process Solutions also provides modular oil and gas wellsite facility solutions, also known as tank battery solutions that positively impact our operator customers by enabling them to design a modular tank battery that allows flexibility and scalability for current and future production, while expediting revenue generation by reducing the time to complete a tank battery and getting oil and gas into the pipeline earlier.
Our products are typically critical to our customers’ operations, yet represent only a small fraction of their total project or facility cost. As a result, our customers seek suppliers with established qualifications and an operational history to deliver high quality and reliable products that meet their requirements in a timely manner.
Our products provide an essential need to our customers’ operations, yet represent only a small fraction of their total project or facility cost. As a result, our customers seek suppliers with established qualifications and an operational history to deliver high quality and reliable products that meet their requirements in a timely manner.
After-market services include rental, machining and repair service from a team of field mechanics located throughout the central U.S. Process Solutions serves the upstream, midstream and downstream oil and gas markets as well as the municipal industrial, mining, power generation and general industries.
After-market services include rental mobile pumping units, machining and other repair services from a team of field mechanics located throughout the central U.S. Process Solutions serves the upstream, midstream and downstream oil and gas markets as well as the municipal water, industrial, mining, power generation and general industries.
We have developed expertise in providing application systems, work processes, parts integration, optimization solutions and after-sales support. Our solutions include outsourcing portions or entire functions of our customers’ procurement, warehouse and inventory management, logistics, point of issue technology, project management, business process and performance metrics reporting.
We have developed expertise in providing application systems, work processes, parts integration, optimization solutions and after-sales support that provide more efficient and productive solutions for our customers. Our solutions include outsourcing portions or entire functions of our customers’ procurement, warehouse and inventory management, logistics, point of issue technology, project management, business process and performance metrics reporting.
With one of our acquisitions in December 2022, we can offer our customers an expanding suite of emissions reduction technology that reduces the venting and flaring of greenhouse gas, targeting the oil and gas and the growing RNG markets. As a distributor, we perform minimal manufacturing operations. We do not utilize large amounts of water.
We offer our customers an expanding suite of emissions reduction technology that reduces the venting and flaring of greenhouse gas, targeting the oil and gas and the growing RNG markets. As a distributor, we perform minimal manufacturing operations. We do not utilize large amounts of water.
Our energy product offering is consumed throughout all sectors of the energy industry – from upstream drilling and completion, exploration and production (“E&P”), midstream infrastructure development to downstream petroleum refining and petrochemicals – as well as in other industries, such as chemical processing, mining, utilities and the evolving energy transition markets inclusive of greenhouse gas emissions capture, reduction and storage, renewable natural gas ("RNG"), wind, solar, and production of hydrogen as a fuel to power equipment.
Our product and service offerings are consumed throughout all sectors of the energy industry – from upstream drilling and completion, exploration and production (“E&P”), midstream transmission, gas and crude oil processing infrastructure development to downstream petroleum refining and petrochemicals – as well as in other industries, such as chemical processing, mining, water/wastewater, food and beverage, gas utilities and the evolution of energy transition markets inclusive of greenhouse gas reduction and emissions capture and storage, renewable fuels such as biofuels and renewable natural gas ("RNG"), wind, solar, production of hydrogen as a fuel to power equipment and select industrial markets.
Within our process and production equipment category, we produce customer lease automatic custody transfer (“LACT”) units, vapor recovery units to reduce emissions and routine flaring from storage tanks and renewable natural gas ("RNG") facilities, gas meter runs, ASME code vessels in the form of separators, heater treaters, gas conditioning systems, towers, reactors, condensate stabilizers, slug catchers and pressurized bullet tanks, pig launchers and receivers and water transfer and disposal units.
Within our process and production equipment category, we produce customer lease automatic custody transfer (“LACT”) units, Zero2 TM EcoVapor TM and Sulfur Sentinel TM units to reduce emissions associated with routine flaring originating from low pressure storage tanks and renewable fuels such as biogas and landfill gas marketed as RNG facilities, gas meter runs, ASME code vessels in the form of separators, heater treaters, gas conditioning systems, towers, reactors, condensate stabilizers, slug catchers and pressurized bullet tanks, pig launchers and receivers and water transfer and disposal units.
We believe in advocating for diversity within our workforce by employing women and men of varying cultures, nationalities and backgrounds to work together to achieve a common goal. To find the best employees, we must have a diverse pipeline of talent. We have expanded recruiting efforts with diverse organizations so we can reach a broader pool of candidates.
We believe in advocating for diversity within our workforce by employing women and men of varying cultures, nationalities and backgrounds to work together to achieve a common goal. To find the best employees, we must have a diverse pipeline of talent. We commit to advancing an inclusive environment where diversity is encouraged.
We are a global distributor to the oil and gas and industrial markets with a legacy of over 160 years. We operate primarily under the DistributionNOW and DNOW brands.
We are a global distributor to the oil and gas and industrial markets with a legacy of over 160 years. We operate primarily under the DNOW brand along with several affiliated brands operating in local or regional markets that are tied to prior acquisitions.
We offer market-competitive benefits for employees and opportunities for growth and advancement. We place a strong emphasis on employee growth and development and provide opportunities for valued contribution and innovation.
Human Capital Resources At December 31, 2023, we had approximately 2,475 employees, of which approximately 100 were temporary employees. We offer market-competitive benefits for employees and opportunities for growth and advancement. We place a strong emphasis on employee growth and development and provide opportunities for valued contribution and innovation.
In Canada, certain E&P activities have declined in the spring due to seasonal thaws and regulatory restrictions limiting the ability of drilling rigs and transportation to operate effectively and safely during these periods. Human Capital Resources At December 31, 2022, we had approximately 2,425 employees, of which approximately 100 were temporary employees.
In the U.S., activity has historically been higher during the summer and fall months. In Canada, certain E&P activities have declined in the spring due to seasonal thaws and regulatory restrictions limiting the ability of drilling rigs and transportation to operate effectively and safely during these periods.
We believe we could benefit from consolidation among our customers, as the resulting companies seek global distributors as their source for products and related solutions. No single customer represents more than 10% of our revenue. Competition The distribution companies serving the energy and industrial end markets are both numerous and competitive.
We believe we could benefit from consolidation among our customers, particularly in the U.S. and Canada where we have a broad footprint, as the resulting companies seek global distributors as their source for products and related solutions. The Company had one customer in the U.S. segment that represented approximately 10% of total revenues.
Removed
While some large distributors compete in both markets, most companies focus on either the energy or industrial end market. In the energy market, some of the larger companies against whom we compete include Ferguson Enterprises, Inc., MRC Global, Inc., Russel Metals, Inc., DXP Enterprises, Inc. and FloWorks International LLC.
Added
We provide products and services to the energy evolution and new energy markets driven by the public's desire to reduce current greenhouse gas levels and emissions, and to replace higher sources of greenhouse gas emitting forms of energy with lower emitting alternative forms to produce energy.
Removed
In the industrial market, some of the larger companies against whom we compete include Ferguson Enterprises, Inc., W.W. Grainger Inc., HD Supply, Inc., Wesco International Inc., MSC Industrial Direct Co., Inc., Applied Industrial Technologies, Inc., DXP Enterprises, Inc. and Fastenal Company.
Added
Competition The distribution companies serving the energy and industrial end markets are both numerous and competitive.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeChanges in our product mix may result from marketing activities to existing customers and needs communicated to us from existing and prospective customers. If customers begin to require more lower-margin products from us, our business, results of operations and financial condition may suffer. Customer credit risks could result in losses.
Biggest changeIf customers begin to require more lower-margin products from us, our business, results of operations and financial condition may suffer. Customer credit risks could result in losses. The concentration of our customers in the energy industry may impact our overall exposure to credit risk as customers may be similarly affected by prolonged changes in economic and industry conditions.
Even when acquisitions are completed, integration of acquired entities can involve significant difficulties, such as: • failure to achieve cost savings or other financial or operating objectives with respect to an acquisition; • complications and issues resulting from the integration/conversion of ERP systems; • strain on the operational and managerial controls and procedures of our business, and the need to modify systems or to add management resources; 13 • difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies; • amortization of acquired assets, which would reduce future reported earnings; • possible adverse short-term effects on our cash flows or operating results; • diversion of management’s attention from the ongoing operations of our business; • integrating personnel with different organizational cultures; • coordinating sales and marketing functions; • failure to obtain and retain key personnel of an acquired business; and • assumption of known or unknown material liabilities or regulatory non-compliance issues.
Even when acquisitions are completed, integration of acquired entities can involve significant difficulties, such as: • failure to achieve cost savings or other financial or operating objectives with respect to an acquisition; • complications and issues resulting from the integration/conversion of ERP systems; • strain on the operational and managerial controls and procedures of our business, and the need to modify systems or to add management resources; • difficulties in the integration and retention of customers or personnel and the integration and effective deployment of operations or technologies; • amortization of acquired assets, which would reduce future reported earnings; • possible adverse short-term effects on our cash flows or operating results; • diversion of management’s attention from the ongoing operations of our business; • integrating personnel with different organizational cultures; • coordinating sales and marketing functions; • failure to obtain and retain key personnel of an acquired business; and • assumption of known or unknown material liabilities or regulatory non-compliance issues.
Examples of risks inherent in conducting business in markets outside of the U.S. and Canada include: • changes in the political and economic conditions in the countries in which we operate, including civil uprisings and terrorist acts; • unexpected changes in regulatory requirements; • changes in tariffs; • the adoption of foreign or domestic laws limiting exports to or imports from certain foreign countries; • fluctuations in currency exchange rates and the value of the U.S. dollar; • restrictions on repatriation of earnings; • expropriation of property without fair compensation; • governmental actions that result in the deprivation of contract or proprietary rights; and • the acceptance of business practices which are not consistent with or are antithetical to prevailing business practices we are accustomed to in North America including export compliance and anti-bribery practices and governmental sanctions.
Examples of risks inherent in conducting business in markets outside of the U.S. and Canada include: • changes in the political and economic conditions in the countries in which we operate, including civil uprisings and terrorist acts; • unexpected changes in regulatory requirements; • changes in tariffs; • the adoption of foreign or domestic laws limiting exports to or imports from certain foreign countries; • fluctuations in currency exchange rates and the value of the U.S. dollar; 19 • restrictions on repatriation of earnings; • expropriation of property without fair compensation; • governmental actions that result in the deprivation of contract or proprietary rights; and • the acceptance of business practices which are not consistent with or are antithetical to prevailing business practices we are accustomed to in North America including export compliance and anti-bribery practices and governmental sanctions.
These include provisions: • providing our Board of Directors with the right to issue preferred stock without stockholder approval; • prohibiting stockholders from taking action by written consent; • restricting the ability of our stockholders to call a special meeting; • providing that the number of directors will be filled by the Board of Directors and vacancies on the Board of Directors, including those resulting from an enlargement of the Board of Directors, will be filled by the Board of Directors; • requiring cause and an affirmative vote of at least 80 percent of the voting power of the then-outstanding voting stock to remove directors; • requiring the affirmative vote of at least 80 percent of the voting power of the then-outstanding voting stock to amend certain provisions of our certificate of incorporation and bylaws; and • establishing advance notice requirements for nominations of candidates for election to our Board of Directors or for stockholder proposals.
These include provisions: • providing our Board of Directors with the right to issue preferred stock without stockholder approval; • prohibiting stockholders from taking action by written consent; • restricting the ability of our stockholders to call a special meeting; • providing that the number of directors will be filled by the Board of Directors and vacancies on the Board of Directors, including those resulting from an enlargement of the Board of Directors, will be filled by the Board of Directors; • requiring cause and an affirmative vote of at least 80 percent of the voting power of the then-outstanding voting stock to remove directors; 21 • requiring the affirmative vote of at least 80 percent of the voting power of the then-outstanding voting stock to amend certain provisions of our certificate of incorporation and bylaws; and • establishing advance notice requirements for nominations of candidates for election to our Board of Directors or for stockholder proposals.
Many factors affect the supply of and demand for energy and, therefore, influence oil and natural gas prices, including: • the level of domestic and worldwide oil and natural gas production and inventories; • the level of drilling activity and the availability of attractive oil and natural gas field prospects, which governmental actions may affect, such as regulatory actions or legislation, or other restrictions on drilling, including those related to environmental concerns (e.g., a temporary moratorium on deepwater drilling in the Gulf of Mexico following a rig accident or oil spill); • the discovery rate of new oil and natural gas reserves and the expected cost of developing new reserves; • the actual cost of finding and producing oil and natural gas; • depletion rates; • domestic and worldwide refinery over capacity or under capacity and utilization rates; • the availability of transportation infrastructure and refining capacity; • increases in the cost of products that the oil and gas industry uses, such as those that we provide, which may result from increases in the cost of raw materials such as steel; • shifts in end-customer preferences toward fuel efficiency and the use of natural gas; • the economic or political attractiveness of alternative fuels, such as coal, hydrocarbon, battery power, wind, solar energy and biomass-based fuels; • increases in oil and natural gas prices or historically high oil and natural gas prices, which could lower demand for oil and natural gas products; • worldwide economic activity including growth in non-Organization for Economic Co-operation and Development countries, including China and India; • increased interest rates and the cost of capital; • national government policies, including government policies that could nationalize or expropriate oil and natural gas, E&P, refining or transportation assets; • the ability of OPEC and non-OPEC countries to set and maintain production levels and prices for oil; • the level of production by non-OPEC countries; • the impact of armed hostilities, or the threat or perception of armed hostilities, including the conflict in Ukraine; • public health crises, such as the COVID-19 pandemic that began in 2020 and emergence of any new virus strains that result in the return of lockdowns or other government restrictions; • environmental regulation; • import duties and tariffs; • technological advances; • global weather conditions and natural disasters; • currency fluctuations; and • tax policies.
Many factors affect the supply of and demand for energy and, therefore, influence oil and natural gas prices, including: • the level of domestic and worldwide oil and natural gas production and inventories; • the level of drilling activity and the availability of attractive oil and natural gas field prospects, which governmental actions may affect, such as regulatory actions or legislation, or other restrictions on drilling, including those related to environmental concerns (e.g., a temporary moratorium on deepwater drilling in the Gulf of Mexico following a rig accident or oil spill); • the discovery rate of new oil and natural gas reserves and the expected cost of developing new reserves; • the actual cost of finding and producing oil and natural gas; • depletion rates; • domestic and worldwide refinery over capacity or under capacity and utilization rates; • the availability of transportation infrastructure and refining capacity; • increases in the cost of products that the oil and gas industry uses, such as those that we provide, which may result from increases in the cost of raw materials such as steel; • shifts in end-customer preferences toward fuel efficiency and the use of natural gas; • the economic or political attractiveness of alternative fuels, such as coal, hydrocarbon, battery power, wind, solar energy and biomass-based fuels; • increases in oil and natural gas prices or historically high oil and natural gas prices, which could lower demand for oil and natural gas products; • worldwide economic activity including growth in non-Organization for Economic Co-operation and Development countries, including China and India; • increased interest rates and the cost of capital; • national government policies, including government policies that could nationalize or expropriate oil and natural gas, E&P, refining or transportation assets; • the ability of OPEC and non-OPEC countries to set and maintain production levels and prices for oil; • the level of production by non-OPEC countries; • the impact of armed hostilities, or the threat or perception of armed hostilities, including the conflicts in Ukraine and in Israel; • public health crises, such as the COVID-19 pandemic that began in 2020 and emergence of any new virus strains that result in the return of lockdowns or other government restrictions; • environmental regulation; • import duties and tariffs; • technological advances; • global weather conditions and natural disasters; • currency fluctuations; and • tax policies.
We face the following risks with respect to our insurance coverage: • we may not be able to continue to obtain insurance on commercially reasonable terms; • we may incur losses from interruption of our business that exceed our insurance coverage; 18 • we may be faced with types of liabilities that will not be covered by our insurance; • our insurance carriers may not be able to meet their obligations under the policies; or • the dollar amount of any liabilities may exceed our policy limits.
We face the following risks with respect to our insurance coverage: • we may not be able to continue to obtain insurance on commercially reasonable terms; • we may incur losses from interruption of our business that exceed our insurance coverage; • we may be faced with types of liabilities that will not be covered by our insurance; • our insurance carriers may not be able to meet their obligations under the policies; or • the dollar amount of any liabilities may exceed our policy limits.
Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and potentially have an adverse effect on our business and results of operations. 15 We have goodwill recorded on our balance sheet. If our goodwill becomes impaired, we may be required to recognize charges that would reduce our income.
Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and potentially have an adverse effect on our business and results of operations. We have goodwill recorded on our balance sheet. If our goodwill becomes impaired, we may be required to recognize charges that would reduce our income.
As a result of doing business in foreign countries and with foreign partners, we are exposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations. 19 The FCPA prohibits us from providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage.
As a result of doing business in foreign countries and with foreign partners, we are exposed to a heightened risk of violating anti-corruption and trade control laws and sanctions regulations. The FCPA prohibits us from providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage.
We may require more capital in the future to: • fund our operations (including, but not limited to, working capital requirements such as inventory); • finance investments in equipment and infrastructure needed to maintain and expand our distribution capabilities; 12 • enhance and expand the range of products we offer; and • respond to potential strategic opportunities, such as investments, acquisitions and international expansion.
We may require more capital in the future to: • fund our operations (including, but not limited to, working capital requirements such as inventory); • finance investments in equipment and infrastructure needed to maintain and expand our distribution capabilities; • enhance and expand the range of products we offer; and • respond to potential strategic opportunities, such as investments, acquisitions and international expansion.
We have experienced in the past, and we will likely experience in the future, significant fluctuations in operating results based on these changes. 11 General economic and geopolitical conditions may adversely affect our business. U.S. and global general economic conditions affect many aspects of our business, including demand for the products we distribute and the pricing and availability of supplies.
We have experienced in the past, and we will likely experience in the future, significant fluctuations in operating results based on these changes. General economic and geopolitical conditions may adversely affect our business. U.S. and global general economic conditions affect many aspects of our business, including demand for the products we distribute and the pricing and availability of supplies.
Stock markets in general have also experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could negatively affect the trading price of our common stock. 20 Your percentage ownership in us may be diluted in the future.
Stock markets in general have also experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could negatively affect the trading price of our common stock. Your percentage ownership in us may be diluted in the future.
Such a loss would require us to rely more heavily on our other existing suppliers or develop relationships with new suppliers, which may cause us to pay higher prices for products due to, among other things, a loss of volume discount benefits currently obtained from our major suppliers.
Such a loss would require us to rely more heavily on our other existing suppliers or develop relationships with new suppliers, which may 16 cause us to pay higher prices for products due to, among other things, a loss of volume discount benefits currently obtained from our major suppliers.
We may be unsuccessful in attracting, hiring, training and retaining qualified personnel. Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs or decreases in revenues. The proper functioning of our information systems is critical to the successful operation of our business.
We may be unsuccessful in attracting, hiring, training and retaining qualified personnel. 14 Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs or decreases in revenues. The proper functioning of our information systems is critical to the successful operation of our business.
The willingness of oil and gas operators to make capital and operating expenditures to explore for and produce oil and natural gas and the willingness of oilfield service companies to invest in capital and operating equipment will continue to be influenced by numerous factors over which we have no control, including: • the ability of the members of the Organization of Petroleum Exporting Countries (“OPEC”) and certain non-OPEC countries, to maintain price stability through voluntary production limits, the level of production by other non-OPEC countries, such as the United States, and worldwide demand for oil and gas; • the level of production from known reserves; • the cost of exploring for and producing oil and gas; • limits on access to capital and investor demands for capital discipline; • the level of drilling activity and drilling rig day rates; • worldwide economic activity; • national government political requirements; • changes in governmental regulations; • the impact of public health crises, such as the COVID-19 pandemic including any new virus strains that result in the return of lockdowns or other government restrictions, on worldwide demand for oil and gas; • the development of alternate energy sources; and • environmental regulations.
The willingness of oil and gas operators to make capital and operating expenditures to explore for and produce oil and natural gas and the willingness of oilfield service companies to invest in capital and operating equipment will continue to be influenced by numerous factors over which we have no control, including: • the ability of the members of the OPEC and certain non-OPEC countries, to maintain price stability through voluntary production limits, the level of production by other non-OPEC countries, such as the United States, and worldwide demand for oil and gas; • the level of production from known reserves; • the cost of exploring for and producing oil and gas; • limits on access to capital and investor demands for capital discipline; • the level of drilling activity and drilling rig day rates; • worldwide economic activity; • national government political requirements; • changes in governmental regulations; • the impact of public health crises, such as the COVID-19 pandemic including any new virus strains that result in the return of lockdowns or other government restrictions, on worldwide demand for oil and gas; • the development of alternate energy sources; and • environmental regulations.
In addition, there could be additional trade actions or rate increases imposed by the U.S. and these could also result in additional retaliatory actions by the U.S.’ trade partners.
In addition, there could be additional 17 trade actions or rate increases imposed by the U.S. and these could also result in additional retaliatory actions by the U.S.’ trade partners.
Over the last three years, the COVID-19 pandemic has adversely affected our business, and the emergence of any new virus strains that result in the return of broad-based lockdowns, vaccine mandates or other government interventions, could further adversely affect our operations and financial condition.
Over the last four years, the COVID-19 pandemic has adversely affected our business, and the emergence of any new virus strains that result in the return of broad-based lockdowns, vaccine mandates or other government interventions, could further adversely affect our operations and financial condition.
As of December 31, 2022, we had $116 million of goodwill recorded on our balance sheet. Under generally accepted accounting principles in the U.S., goodwill is not amortized, but must be reviewed for possible impairment annually, or more often in certain circumstances where events indicate that the asset values are not recoverable.
As of December 31, 2023, we had $139 million of goodwill recorded on our balance sheet. Under generally accepted accounting principles in the U.S., goodwill is not amortized, but must be reviewed for possible impairment annually, or more often in certain circumstances where events indicate that the asset values are not recoverable.
Over the last three years, the COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets.
Over the last four years, the COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets.
Our business may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions. The extent and duration of the military action, sanctions, trade controls and resulting market disruptions are impossible to predict, but could be substantial.
Our business may be materially adversely affected by any negative impact on the global economy and capital markets resulting from military conflicts or other geopolitical tensions. The extent and duration of military conflicts, sanctions, trade controls and resulting market disruptions are impossible to predict, but could be substantial.
However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of our company and our stockholders. 21 ITEM 1B. UNRESOLVE D STAFF COMMENTS None.
However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of our company and our stockholders. 22 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, we are subject to customer audit clauses in many of our multi-year contracts. If we are not able to provide the proper documentation or support for invoices per the contract terms, we may be subject to negotiated settlements with our major customers. Changes in our customer and product mix could cause our product margin to fluctuate.
In addition, we are subject to customer audit clauses in many of our multi-year contracts. If we are not able to provide the proper documentation or support for invoices per the contract terms, we may be subject to negotiated settlements with our major customers.
In addition, certain foreign jurisdictions and government-owned petroleum companies located in some of the countries in which we operate have adopted policies or regulations which may give local nationals in these countries competitive advantages. Competition in our industry could lead to lower revenues and earnings.
In addition, certain foreign jurisdictions and government-owned petroleum companies located in some of the countries in which we operate have adopted policies or regulations which may give local nationals in these countries competitive advantages.
Given the large dollar amounts and volume of our purchases from suppliers, a change in payment terms may have a material adverse effect on our liquidity and our ability to make payments to our suppliers and, consequently, may have a material adverse effect on us. 16 Price reductions by suppliers of products that we sell could cause the value of our inventory to decline.
Given the large dollar amounts and volume of our purchases from suppliers, a change in payment terms may have a material adverse effect on our liquidity and our ability to make payments to our suppliers and, consequently, may have a material adverse effect on us.
Our security measures may be undermined due to the actions of outside parties, employee error, internal or external malfeasance, or otherwise, and, as a result, an unauthorized party may obtain access to our data systems and misappropriate business and personal information. Our systems are subject to repeated attempts by third parties to access information or to disrupt our systems.
Our security measures may be undermined due to the rapid evolution and increased adoption of artificial intelligence and machine learning technologies, actions of outside parties, employee error, internal or external malfeasance, or otherwise, and, as a result, an unauthorized party may obtain access to our data systems and misappropriate business and personal information.
While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows. 17 Risks Relating to Legal and Regulatory Matters We are subject to strict environmental, health and safety laws and regulations that may lead to significant liabilities and have a material adverse effect on our business, financial condition and results of operations.
While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows.
In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons and entities, which could adversely affect the market for our common stock and other securities.
In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons and entities, which could adversely affect the market for our common stock and other securities. 20 Compliance with and changes in laws and regulations in the countries in which we operate could have a significant financial impact and effect how and where we conduct our operations.
We may be unable to successfully execute or effectively integrate acquisitions. One of our key operating strategies is to selectively pursue acquisitions, including large scale acquisitions, to continue to grow and increase profitability.
One of our key operating strategies is to selectively pursue acquisitions, including large scale acquisitions, to continue to grow and increase profitability.
As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. Our four primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our Company’s image, financial loss and private data exposure.
Our four primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our Company’s image, financial loss and private data exposure.
If customers were to purchase the products that we sell directly from manufacturers, or if manufacturers sought to increase their efforts to sell directly to end users, we could experience a significant decrease in profitability.
Historically, users of pipes, valves and fittings and related products have purchased certain amounts of these products through distributors and not directly from manufacturers. If customers were to purchase the products that we sell directly from manufacturers, or if manufacturers sought to increase their efforts to sell directly to end-users, we could experience a significant decrease in profitability.
From time to time, we may experience changes in our customer mix or in our product mix. Changes in our customer mix may result from geographic expansion, daily selling activities within current geographic markets and targeted selling activities to new customer segments.
Changes in our customer mix may result from business acquisitions, geographic expansion, daily selling activities within current geographic markets and targeted selling activities to new customer segments. Changes in our product mix may result from business acquisitions, marketing activities to existing customers and needs communicated to us from existing and prospective customers.
Certain of these competitors may have greater financial, technical and marketing resources than us, and may be in a better competitive position. The following competitive actions can each adversely affect our revenues and earnings: • price changes; • vendors with better terms; • consolidation in the industry; • investments in technology and fulfillment; and • improvements in availability and delivery.
The following competitive actions can each adversely affect our revenues and earnings: • price changes; • vendors with better terms; • consolidation in the industry; • investments in technology and fulfillment; and • improvements in availability and delivery.
Oil and natural gas prices have been and are expected to remain volatile. U.S. rig count increased from 588 rigs on January 7, 2022 to 779 rigs on December 30, 2022. U.S. rig count averaged 721 rigs in 2022. U.S. rig count at January 20, 2023 was 771 rigs.
Oil and natural gas prices have been and are expected to remain volatile. U.S. rig count decreased from 772 rigs on January 6, 2023 to 622 rigs on December 29, 2023. U.S. rig count averaged 689 rigs in 2023. U.S. rig count at January 19, 2024 was 620 rigs.
We perform ongoing credit evaluations of our customers and do not generally require collateral in support of our trade receivables. While we maintain reserves for expected credit losses, we cannot assure these reserves will be sufficient to meet write-offs of uncollectible receivables or that our losses from such receivables will be consistent with our expectations.
While we maintain reserves for expected credit losses, we cannot assure these reserves will be sufficient to meet write-offs of uncollectible receivables or that our losses from such receivables will be consistent with our expectations. 13 We may be unable to successfully execute or effectively integrate acquisitions.
Such disruptions or misappropriations and the resulting repercussions, including reputational damage and legal claims or proceedings, may adversely affect our results of operations, cash flows and financial condition, and the trading price of our common stock.
Such disruptions or misappropriations and the resulting repercussions, including reputational damage and legal claims or proceedings, may adversely affect our results of operations, cash flows and financial condition, and the trading price of our common stock. 15 Privacy concerns relating to our personal and business information being potentially breached could damage our reputation and deter current and potential users or customers from using our products and services.
We may be unable to compete successfully with other companies in our industry. We sell products in very competitive markets. In some cases, we compete with large companies with substantial resources. In other cases, we compete with smaller regional companies that may increasingly be willing to provide similar products at lower prices.
In some cases, we compete with large companies with substantial resources. In other cases, we compete with smaller regional companies that may increasingly be willing to provide similar products at lower prices. Certain of these competitors may have greater financial, technical and marketing resources than us, and may be in a better competitive position.
We maintain information systems controls designed to protect against, among other things, unauthorized program changes and unauthorized access to data on our information systems.
We maintain information systems controls designed to protect against, among other things, unauthorized program changes and unauthorized access to data on our information systems. If our information systems controls do not function properly, we face increased risks of unexpected errors and unreliable financial data or theft of proprietary Company information.
Increasing volatility in financial markets may cause these factors to change with a greater degree of frequency or increase in magnitude. In addition, worldwide economic conditions could have an adverse effect on our business, prospects, operating results, financial condition and cash flows.
Increasing volatility in financial markets may cause these factors to change with a greater degree of frequency or increase in magnitude.
It is impossible to predict accurately the effect that changes in these laws and regulations, or their interpretation or enforcement, may have on us. Existing or future laws, regulations, court orders or other public- or private-sector initiatives to limit greenhouse gas emissions or relating to climate change may reduce demand for our products and services.
It is impossible to predict accurately the effect that changes in these laws and regulations, or their interpretation or enforcement, may have on us.
Privacy concerns relating to our personal and business information being potentially breached could damage our reputation and deter current and potential users or customers from using our products and services. We have security measures and controls to protect personal and business information and continue to make investments to secure access to our information technology network.
We have security measures and controls to protect personal and business information and continue to make investments to secure access to our information technology network.
If our information systems controls do not function properly, we face increased risks of unexpected errors and unreliable financial data or theft of proprietary Company information. 14 The loss of third-party transportation providers upon whom we depend, or conditions negatively affecting the transportation industry, could increase our costs or cause a disruption in our operations.
The loss of third-party transportation providers upon whom we depend, or conditions negatively affecting the transportation industry, could increase our costs or cause a disruption in our operations. We depend upon third-party transportation providers for delivery of products to our customers.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine.
In addition, worldwide economic conditions could have an adverse effect on our business, prospects, operating results, financial condition and cash flows. 1 We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to, among other things, ongoing military conflicts, such as those in Ukraine and in Israel.
Demand for the products we distribute could decrease if the manufacturers of those products were to sell a substantial amount of goods directly to end users in the sectors we serve. Historically, users of pipes, valves and fittings and related products have purchased certain amounts of these products through distributors and not directly from manufacturers.
Competition in our industry could lead to lower revenues and earnings. 12 Demand for our sales of the products we distribute could decrease if the manufacturers of those products were to instead sell a substantial amount of goods directly to our customers in the sectors we serve.
The price for West Texas Intermediate crude was $76.87 per barrel at January 3, 2023, $75.99 per barrel on January 3, 2022 and $47.47 per barrel on January 4, 2021. This type of volatility has historically caused oil and natural gas companies to change their strategies and expenditure levels from year to year.
The price for West Texas Intermediate crude was $70.62 per barrel at January 2, 2024, $76.87 per barrel on January 3, 2023 and $75.99 per barrel on January 4, 2022.
The concentration of our customers in the energy industry may impact our overall exposure to credit risk as customers may be similarly affected by prolonged changes in economic and industry conditions. Further, laws in some jurisdictions in which we operate could make collection difficult or time consuming.
Further, laws in some jurisdictions in which we operate could make collection difficult or time consuming. We perform ongoing credit evaluations of our customers and do not generally require collateral in support of our trade receivables.
Removed
We depend upon third-party transportation providers for delivery of products to our customers.
Added
Even though the prices as of the beginning of January for the last three years have been relatively stable, prices have historically been very volatile, and this historical volatility has caused oil and natural gas companies to change their 11 strategies and expenditure levels from year to year.
Removed
Compliance with and changes in laws and regulations in the countries in which we operate could have a significant financial impact and effect how and where we conduct our operations.
Added
If our product costs became subject to significant future inflationary pressures, then we may not be able to fully offset these higher costs through price increases. Inflationary pressures and supply chain disruptions could result in further increases to our operating and capital costs that are not fixed.
Added
Additionally, these economic variables could lead to a renegotiation of contracts and/or supply agreements, among others. These economic variables are beyond our control and may adversely impact our business, financial condition, results of operations and future cash flows. We may be unable to compete successfully with other companies in our industry. We sell products in very competitive markets.
Added
Changes in our customer and product mix could cause our product margin to fluctuate or affect our competitive position. From time to time, we may experience changes in our customer mix or in our product mix.
Added
As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.
Added
Our systems are subject to repeated attempts by third parties to access information or to disrupt our systems.
Added
Price reductions by suppliers of products that we sell could cause the value of our inventory to decline.
Added
Risks Relating to Legal and Regulatory Matters We are subject to strict environmental, health and safety laws and regulations that may lead to significant liabilities and have a material adverse effect on our business, financial condition and results of operations.
Added
Existing or future laws, regulations, court orders or other public- or private-sector initiatives to limit greenhouse gas emissions or relating to climate change may reduce demand for our products and services and the physical effects of climate change could damage our assets or facilities, adversely impacting our business, results of operations, and financial condition.
Added
We and our suppliers also may be subject to physical risks associated with climate change, such as increased severity and frequency of extreme weather events and more frequent short-term business disruptions as a result of severe weather such as flooding, storms, droughts, fires, snowstorms and other climatic events, which could impair our ability to effectively deliver products and services to our customers or to keep our operating costs aligned with expectations or cause destruction to our assets or facilities.
Added
While we carry insurance coverage standard within our industry to protect us against many of these risks, the potential physical effects of climate 18 change are uncertain, and we may not carry adequate coverage to protect all of our assets or facilities from climate-related events.
Added
If any of these risks were realized, we could experience interruptions in supply or increases in costs that might result in our being unable to meet customer demand for our products and services, damage our relationships with our customers and reduce our market share, all of which could adversely affect our results of operations and financial condition.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeOur properties are comprised of offices, distribution centers and branches, approximately 85% of which are leased. One owned facility is pledged as collateral under our senior secured revolving credit facility discussed in Note 10 “Debt” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K); all other owned facilities are not subject to any mortgages.
Biggest changeOur properties are comprised of offices, distribution centers and branches, approximately 85% of which are leased. One owned facility is pledged as collateral under our senior secured revolving credit facility discussed in Note 11 “Debt” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K); none of the other owned facilities are subject to mortgages.
ITEM 2. P ROPERTIES As of December 31, 2022, our three reporting segments, the United States, Canada and International, had approximately 110 locations, 40 locations and 20 locations, respectively. International countries include: Australia, Azerbaijan, Brazil, Colombia, Egypt, England, India, Indonesia, Kazakhstan, Kuwait, Netherlands, Norway, Oman, Scotland, Singapore and UAE.
ITEM 2. P ROPERTIES As of December 31, 2023, our three reporting segments, the United States, Canada and International, had approximately 105 locations, 40 locations and 20 locations, respectively. International countries include: Australia, Azerbaijan, Brazil, Colombia, Egypt, England, India, Indonesia, Kazakhstan, Kuwait, Netherlands, Norway, Oman, Scotland, Singapore and UAE.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeSee Note 13 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) for additional information. ITEM 4. MINE SAF ETY DISCLOSURES Not Applicable. 22 PART II
Biggest changeSee Note 14 “Commitments and Contingencies” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) for additional information. ITEM 4. MINE SAF ETY DISCLOSURES Not Applicable. 25 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−0 removed2 unchanged
Biggest changeThe following table presents a summary of share repurchases made during the three months ended December 31, 2022: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program (1) Approximate dollar value of shares that may yet be purchased under the program (1) (in millions) October 1 - 31, 2022 153,710 $ 10.84 153,710 $ 74 November 1 - 30, 2022 — $ — — $ 74 December 1 - 31, 2022 123,271 $ 12.32 123,271 $ 73 Total 276,981 $ 11.50 276,981 (1) On August 3, 2022, the Company’s Board of Directors approved a share repurchase program, under which the Company is authorized to purchase up to $80 million of its outstanding common stock through December 31, 2024. 23 Performance Graph The graph below compares the cumulative five year total return provided shareholders on NOW Inc.'s common stock relative to the cumulative total returns of the S&P Midcap 400 index and the PHLX Oil Service Sector index.
Biggest change(2) On August 3, 2022, the Company’s Board of Directors approved a share repurchase program, under which the Company is authorized to purchase up to $80 million of its outstanding common stock through December 31, 2024. 26 Performance Graph The graph below compares the cumulative five year total return provided shareholders on DNOW Inc.'s common stock relative to the cumulative total returns of the S&P Midcap 400 index and the PHLX Oil Service Sector index.
This information shall not be deemed to be ‘‘soliciting material’’ or to be ‘‘filed’’ with the Commission or subject to Regulation 14A (17 CFR 240.14a-1-240.14a-104), other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of section 18 of the Exchange Act (15 U.S.C. 78r). ITEM 6. RESERVED Not applicable. 24
This information shall not be deemed to be ‘‘soliciting material’’ or to be ‘‘filed’’ with the Commission or subject to Regulation 14A (17 CFR 240.14a-1-240.14a-104), other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of section 18 of the Exchange Act (15 U.S.C. 78r). ITEM 6. RESERVED Not applicable. 27
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Quarterly Common Stock Prices and Cash Dividends Per Share NOW Inc. common stock is traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “DNOW”.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Quarterly Common Stock Prices and Cash Dividends Per Share DNOW Inc. common stock is traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “DNOW”.
Our board of directors has not declared any dividends during 2020, 2021 or 2022 and currently has no intention to declare dividends. As of January 31, 2023, there were 1,775 holders of record of our common stock.
Our Board of Directors has not declared any dividends during 2021, 2022 or 2023 and currently has no intention to declare dividends. As of January 31, 2024, there were 1,732 holders of record of our common stock.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on December 31, 2017 and its relative performance is tracked through December 31, 2022. *$100 invested on 12/31/17 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each index on December 31, 2018 and its relative performance is tracked through December 31, 2023. *$100 invested on 12/31/18 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Copyright© 2022 Standard & Poor's, a division of S&P Global.
Copyright© 2024 Standard & Poor's, a division of S&P Global.
All rights reserved. 12/17 12/18 12/19 12/20 12/21 12/22 NOW Inc. $ 100 $ 106 $ 102 $ 65 $ 77 $ 115 S&P Midcap 400 $ 100 $ 89 $ 112 $ 128 $ 159 $ 138 PHLX Oil Service Sector $ 100 $ 55 $ 54 $ 32 $ 38 $ 62 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
All rights reserved. 12/18 12/19 12/20 12/21 12/22 12/23 DNOW Inc. $ 100 $ 97 $ 62 $ 73 $ 109 $ 97 S&P Midcap 400 $ 100 $ 126 $ 143 $ 179 $ 156 $ 181 PHLX Oil Service Sector $ 100 $ 99 $ 58 $ 70 $ 112 $ 114 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Added
The following table presents a summary of share repurchases made during the three months ended December 31, 2023: Period Total number of shares purchased Average price paid per share (1) Total number of shares purchased as part of publicly announced program (2) Approximate dollar value of shares that may yet be purchased under the program (1)(2) (in millions) October 1 - 31, 2023 — $ — — $ 24 November 1 - 30, 2023 61,254 $ 10.27 61,254 $ 24 December 1 - 31, 2023 30,268 $ 10.66 30,268 $ 23 Total 91,522 $ 10.40 91,522 (1) Excludes 1% excise tax on share repurchases.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

74 edited+20 added−21 removed40 unchanged
Biggest changeOur energy product offering is consumed throughout all sectors of the oil and gas industry – from upstream drilling and completion, E&P, midstream infrastructure development to downstream petrochemical and petroleum refining – as well as in other industries, such as chemical processing, mining, utilities and renewables. The industrial distribution end markets include refineries and engineering and construction firms.
Biggest changeOur product and service offerings are consumed throughout all sectors of the energy industry – from upstream drilling and completion, E&P, midstream transmission, gas and crude oil processing infrastructure development to downstream petroleum refining and petrochemicals – as well as in other industries, such as chemical processing, mining, water/wastewater, food and beverage, gas utilities and the evolution of energy transition markets inclusive of greenhouse gas reduction and emissions capture and storage, renewable fuels such as biofuels, RNG, wind, solar, production of hydrogen as a fuel to power equipment and select industrial markets.
Products sold through our locations support greenfield expansion upstream capital projects, midstream infrastructure and transmission and MRO consumables used in day-to-day production. We provide downstream energy and industrial products for petroleum refining, chemical processing, LNG, power generation utilities and customer on-site locations. Our supplier network consists of thousands of vendors in approximately 40 countries.
Products sold through our locations support greenfield expansion upstream capital projects, midstream infrastructure and transmission and MRO consumables used in day-to-day production. We provide downstream energy and industrial products for petroleum refining, chemical processing, LNG terminals, power generation utilities and customer on-site locations. Our supplier network consists of thousands of vendors in approximately 40 countries.
We use EBITDA excluding other costs internally to evaluate and manage the Company’s operations because we believe it provides useful supplemental information regarding the Company’s ongoing economic performance. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results.
We use EBITDA excluding other costs internally to evaluate and manage the Company’s operations because we believe it provides useful supplemental information regarding the Company’s ongoing operating performance. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results.
The annual tax provision includes 34 the impact of income tax provisions and benefits for changes to liabilities that the Company considers appropriate, as well as related interest. The Company is subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments.
The annual tax provision includes the impact of income tax provisions and benefits for changes to liabilities that the Company considers appropriate, as well as related interest. The Company is subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments.
As of December 31, 2022, the Company has an immaterial amount of undistributed foreign earnings that may be subject to taxation upon a future distribution. The Company has not recorded deferred income taxes on undistributed foreign earnings that it considers to be indefinitely reinvested. The Company makes a determination each period whether to indefinitely reinvest these earnings.
As of December 31, 2023, the Company has an immaterial amount of undistributed foreign earnings that may be subject to taxation upon a future distribution. The Company has not recorded deferred income taxes on undistributed foreign earnings that it considers to be indefinitely reinvested. The Company makes a determination each period whether to indefinitely reinvest these earnings.
From our operations in approximately 20 countries, we sell to customers operating in approximately 80 countries. The supplies and equipment stocked by each of our branches are customized to meet varied and changing local customer demands. The breadth and scale of our offering enhances our value proposition to our customers, suppliers and shareholders.
From our operations in 18 countries, we sell to customers operating in approximately 80 countries. The supplies and equipment stocked by each of our branches are customized to meet varied and changing local customer demands. The breadth and scale of our offering enhances our value proposition to our customers, suppliers and shareholders.
In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporates assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences.
In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporates assumptions about the amount of future state, federal and foreign pre-tax operating income adjusted for items that do not have tax consequences.
See Note 12 “Leases” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) for additional information on our obligations and timing of expected future lease payments.
See Note 13 “Leases” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) for additional information on our obligations and timing of expected future lease payments.
Consolidated Results Years Ended December 31, 2021 and December 31, 2020 For discussion related to the results of operations and changes in financial condition for the year ended December 31, 2021 compared to the year ended December 31, 2020 refer to Part II, Item 7.
Consolidated Results Years Ended December 31, 2022 and December 31, 2021 For discussion related to the results of operations and changes in financial condition for the year ended December 31, 2022 compared to the year ended December 31, 2021 refer to Part II, Item 7.
Availability under the revolving credit facility is determined by a borrowing base comprised of eligible receivables, eligible inventory and certain pledged deposits in the U.S. and Canada.
Availability under the revolving credit facility is determined by a borrowing base comprised of eligible receivables, eligible inventory and certain cash deposits in the U.S. and Canada.
Results of Operations Consolidated Results Years Ended December 31, 2022 and December 31, 2021 The results of operations are presented before consideration of the noncontrolling interest.
Results of Operations Consolidated Results Years Ended December 31, 2023 and December 31, 2022 The results of operations are presented before consideration of the noncontrolling interest.
As of December 31, 2022, we were in compliance with all covenants. We continuously monitor compliance with debt covenants. A default, if not waived or amended, may prevent us from taking certain actions, such as incurring additional debt.
As of December 31, 2023, we were in compliance with all covenants. We continuously monitor compliance with debt covenants. A default, if not waived or amended, would prevent us from taking certain actions, such as incurring additional debt.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K, which was filed with the United States Securities and Exchange Commission on February 17, 2022. 30 Non-GAAP Financial Measures and Reconciliations In an effort to provide investors with additional information regarding our results of operations as determined by GAAP, we disclose non-GAAP financial measures.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K, which was filed with the United States Securities and Exchange Commission on February 16, 2023. 33 Non-GAAP Financial Measures and Reconciliations In an effort to provide investors with additional information regarding our results of operations as determined by GAAP, we disclose non-GAAP financial measures.
Through our network of approximately 170 locations and approximately 2,425 employees worldwide, we stock and sell a comprehensive offering of energy products as well as a selection of products for industrial applications.
Through our network of approximately 165 locations and approximately 2,475 employees worldwide, we stock and sell a comprehensive offering of energy products as well as a selection of products for industrial applications.
The following table sets forth the reconciliations of EBITDA excluding other costs to the most comparable GAAP financial measures ( in millions ): Year Ended December 31, 2022 2021 2020 GAAP net income (loss) attributable to NOW Inc.
The following table sets forth the reconciliations of EBITDA excluding other costs to the most comparable GAAP financial measures ( in millions ): Year Ended December 31, 2023 2022 2021 GAAP net income attributable to DNOW Inc.
As of December 31, 2022, we had no borrowings against our revolving credit facility and had approximately $482 million in availability (as defined in the Credit Agreement) resulting in the excess availability (as defined in the Credit Agreement) of 99%, subject to certain restrictions. Availability excluding certain cash deposits was approximately $352 million.
As of December 31, 2023, we had no borrowings against our revolving credit facility and had approximately $493 million in availability (as defined in the Credit Agreement) resulting in the excess availability (as defined in the Credit Agreement) of 99%, subject to certain restrictions. Availability excluding certain cash deposits was approximately $327 million.
Our international revenue is favorably impacted as the U.S. dollar weakens relative to other foreign currencies, and unfavorably impacted as the U.S dollar strengthens relative to other foreign currencies. Our international segment revenue was unfavorably impacted by approximately $16 million due to changes in foreign currency exchange rates over the prior year.
Our Canadian revenue is favorably impacted as the U.S. dollar weakens relative to the Canadian dollar, and unfavorably impacted as the U.S. dollar strengthens relative to the Canadian dollar. Our Canadian segment revenue was unfavorably impacted by approximately $11 million due to changes in foreign currency exchange rates over the prior year.
Warehousing, selling and administrative expenses include branch location, distribution center and regional expenses (including costs such as compensation, benefits and rent) as well as corporate general selling and administrative expenses. 29 Impairment and other charges Impairment and other charges were $10 million for the year ended December 31, 2022 compared to $7 million for the year ended December 31, 2021.
Warehousing, selling and administrative expenses include branch location, distribution center and regional expenses (including costs such as compensation, benefits and rent) as well as depreciation and corporate general selling and administrative expenses. 32 Impairment and other charges Impairment and other charges were nil for the year ended December 31, 2023 compared to $10 million for the year ended December 31, 2022.
(1) $ 128 $ 5 $ (427 ) Net income attributable to noncontrolling interest 1 — — Interest expense (income), net (1 ) — — Income tax provision (benefit) 10 7 (3 ) Depreciation and amortization 19 23 28 Other costs: Stock-based compensation (2) 11 8 10 Other (3) 7 2 345 EBITDA excluding other costs $ 175 $ 45 $ (47 ) EBITDA % excluding other costs (4) 8.2 % 2.8 % (2.9 %) (1) We believe that net income (loss) attributable to NOW Inc. is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA excluding other costs.
(1) $ 247 $ 128 $ 5 Net income attributable to noncontrolling interest 1 1 — Interest expense (income), net (4 ) (1 ) — Income tax provision (benefit) (110 ) 10 7 Depreciation and amortization 26 19 23 Other costs: Stock-based compensation 15 11 8 Other (2) 9 7 2 EBITDA excluding other costs $ 184 $ 175 $ 45 EBITDA % excluding other costs (3) 7.9 % 8.2 % 2.8 % (1) We believe that net income (loss) attributable to DNOW Inc. is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA excluding other costs.
The following table summarizes our net cash provided by (used in) operating activities, net cash provided by (used in) investing activities and net cash provided by (used in) financing activities for the periods presented ( in millions ): Year Ended December 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ — $ 30 $ 189 Net cash provided by (used in) investing activities (87 ) (96 ) 22 Net cash provided by (used in) financing activities (10 ) (6 ) (8 ) Fiscal Year 2022 Compared to Fiscal Year 2021 Net cash provided by operating activities was nil in 2022 compared to $30 million in 2021.
The following table summarizes our net cash flows provided by (used in) operating activities, investing activities and financing activities for the periods presented ( in millions ): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 188 $ — $ 30 Net cash provided by (used in) investing activities (48 ) (87 ) (96 ) Net cash provided by (used in) financing activities (55 ) (10 ) (6 ) Fiscal Year 2023 Compared to Fiscal Year 2022 Net cash provided by operating activities was $188 million in 2023 compared to nil in 2022.
Other income (expense) Other income was $8 million for the year ended December 31, 2022, compared to other income of $3 million for the year ended December 31, 2021.
Other income (expense) Other expense was $2 million for the year ended December 31, 2023 compared to other income of $8 million for the year ended December 31, 2022.
The Company operates through various subsidiaries in a number of countries throughout the world. Income taxes are based upon the tax laws and rates of the countries in which the Company operates and earns income.
Income Taxes The Company is a U.S. registered company and is subject to income taxes in the U.S. The Company operates through various subsidiaries in a number of countries throughout the world. Income taxes are based upon the tax laws and rates of the countries in which the Company operates and earns income.
Cost of products Cost of products was $1,630 million for the year ended December 31, 2022 compared to $1,275 million for the year ended December 31, 2021, an increase of $355 million. The increase was primarily due to the increase in revenue in the period.
Cost of products Cost of products was $1,786 million for the year ended December 31, 2023 compared to $1,630 million for the year ended December 31, 2022, an increase of $156 million. The increase was primarily due to the increase in revenue in the period.
We see the rise in energy evolution investments as an opportunity for us to supply many of the current products and services we provide, as well as an opportunity to partner and source from new suppliers to expand our offering, to meet our customers’ needs for their energy evolution investments.
We see the evolution in energy transition investments to reduce atmospheric carbon, source carbon capture, storage and new energy streams as an opportunity for DNOW to supply many of the current products and services we provide, as well as an opportunity to partner and source from new suppliers to expand our offering and to meet our customers’ needs for their energy evolution investments.
Our Canadian segment revenue was unfavorably impacted by approximately $12 million due to changes in foreign currency exchange rates over the prior year. Operating profit was $30 million for the year ended December 31, 2022, an increase of $13 million compared to operating profit of $17 million for the year ended December 31, 2021.
Our international segment revenue was unfavorably impacted by approximately $2 million due to changes in foreign currency exchange rates over the prior year. Operating profit was $15 million for the year ended December 31, 2023, an improvement of $17 million compared to operating loss of $2 million for the year ended December 31, 2022.
At December 31, 2022 and 2021, we had cash and cash equivalents of $212 million and $313 million, respectively. As of December 31, 2022, $86 million of our cash and cash equivalents was maintained in our various foreign subsidiaries. For the year ended December 31, 2022, we repatriated $14 million from our foreign subsidiaries.
At December 31, 2023 and 2022, we had cash and cash equivalents of $299 million and $212 million, respectively. As of December 31, 2023, $81 million of our cash and cash equivalents were maintained in the accounts of our various foreign subsidiaries. For the year ended December 31, 2023, we repatriated $24 million from our foreign subsidiaries.
EBITDA excluding other costs has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. (2) Stock-based compensation excludes net credits of $4 million for 2020 as such separation amounts were reported in Other.
EBITDA excluding other costs has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. (2) Other includes certain income and expenses not included in stock-based compensation.
We also provide supply chain and materials management solutions to the same markets where we sell products. Our global product offering includes consumable MRO supplies, pipe, manual and automated valves, fittings, flanges, gaskets, fasteners, electrical, instrumentation, artificial lift, pumping solutions, and modular process, production, measurement and control equipment.
Our global product offering includes consumable MRO supplies, pipe, manual and automated valves, fittings, flanges, gaskets, fasteners, electrical, instrumentation, artificial lift, pumping solutions, and modular process, production, measurement and control equipment. We also offer sourcing, procurement, warehouse and inventory management solutions as part of our supply chain and materials management offering.
We will continue to maintain capital discipline and monitor market dynamics, and we may adjust our capital expenditures accordingly. Share Repurchase Program On August 3, 2022, the Company’s Board of Directors approved a share repurchase program, under which the Company is authorized to purchase up to $80 million of its outstanding common stock through December 31, 2024.
Share Repurchase Program On August 3, 2022, the Company’s Board of Directors approved a share repurchase program, under which the Company is authorized to purchase up to $80 million of its outstanding common stock through December 31, 2024.
Our Canadian revenue was approximately 15% of total revenue in 2022, similar to 2021. We are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. Our Canadian revenue is favorably impacted as the U.S. dollar weakens relative to the Canadian dollar, and unfavorably impacted as the U.S. dollar strengthens relative to the Canadian dollar.
We are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar. Our international revenue is favorably impacted as the U.S. dollar weakens relative to other foreign currencies, and unfavorably impacted as the U.S dollar strengthens relative to other foreign currencies.
Cash used primarily related to business acquisitions of $80 million in 2022 compared to $96 million in 2021. Additionally, the Company used $9 million to purchase property, plant and equipment in 2022 compared to $5 million in 2021. Net cash used in financing activities was $10 million in 2022 compared to $6 million in 2021.
Net cash used in investing activities was $48 million in 2023 compared to $87 million in 2022. Cash used primarily related to business acquisitions of $32 million in 2023 compared to $80 million in 2022. Additionally, the Company used $17 million to purchase property, plant and equipment in 2023 compared to $9 million in 2022.
Net income increased for the year ended December 31, 2022, by $123 million when compared to the corresponding period of 2021. Revenue increased for the year ended December 31, 2022, by $504 million, or 30.9%, when compared to the corresponding period of 2021.
Net income increased for the year ended December 31, 2023, by $119 million when compared to the corresponding period of 2022. Revenue increased for the year ended December 31, 2023, by $185 million, or 8.7%, when compared to the corresponding period of 2022.
Crude oil and natural gas prices as well as crude oil and natural gas storage levels are primary catalysts for determining customer activity and we expect oil and gas demand to grow over the next several years. The impact on our business from the COVID-19 pandemic and changing macroeconomic factors continue to unfold.
Crude oil and natural gas prices as well as crude oil and natural gas storage levels are primary catalysts for determining customer activity and we expect global oil and gas demand to grow over the next several years.
The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates the Company is using to manage the underlying businesses. The Company remains in a three-year cumulative loss position at the end of 2022.
The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates the Company is using to manage the underlying businesses.
The average price of WTI crude increased 39.4% (from $67.99 per barrel to $94.79 per barrel), and natural gas prices increased 64.2% (from $3.91 per MMBtu to $6.42 per MMBtu) in 2022 compared to 2021. The average price of Hot-Rolled Coil declined 29.7% (from $1,561.23 per short ton to $1,097.24 per short ton) in 2022 compared to 2021.
The average price of WTI crude declined 18.1% (from $94.79 per barrel to $77.64 per barrel), and natural gas prices declined 60.4% (from $6.42 per MMBtu to $2.54 per MMBtu) in 2023 compared to 2022. The average price of Hot-Rolled Coil declined 19.1% (from $1,097.24 per short ton to $887.47 per short ton) in 2023 compared to 2022.
General Overview We are a global distributor to the oil and gas and industrial markets with a legacy of over 160 years. We operate primarily under the DistributionNOW and DNOW brands.
General Overview We are a global distributor to the oil and gas and industrial markets with a legacy of over 160 years. We operate primarily under the DNOW brand along with several affiliated brands operating in local or regional markets that are tied to prior acquisitions.
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.
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.
See sources on following page. 26 The following table details the U.S., Canadian, and international rig activity and West Texas Intermediate (“WTI”) oil prices for the past nine quarters ended December 31, 2022: Sources: Rig count: Baker Hughes, Inc.
Wells Completed 12,224 11,350 7.7 % 9,720 25.8 % * Averages for the years indicated, except for U.S. Wells Completed. See sources on following page. 29 The following table details the U.S., Canadian, and international rig activity and West Texas Intermediate (“WTI”) oil prices for the past nine quarters ended December 31, 2023: Sources: Rig count: Baker Hughes, Inc.
For the fourth quarter ended December 31, 2022, operating profit was $35 million, compared to operating profit of $7 million for the corresponding period of 2021.
For the year ended December 31, 2023, operating profit was $140 million compared to operating profit of $131 million for the corresponding period of 2022.
A summary of the Company’s revenue and operating profit (loss) by segment in 2022 and 2021 follows ( in millions ): Year Ended December 31, Variance 2022 2021 $ Revenue: United States $ 1,591 $ 1,163 $ 428 Canada 315 249 66 International 230 220 10 Total revenue $ 2,136 $ 1,632 $ 504 Operating profit (loss): United States $ 103 $ (8 ) $ 111 Canada 30 17 13 International (2 ) — (2 ) Total operating profit (loss) $ 131 $ 9 $ 122 28 United States Revenue was $1,591 million for the year ended December 31, 2022, an increase of $428 million or 36.8% compared to the year ended December 31, 2021.
A summary of the Company’s revenue and operating profit (loss) by segment in 2023 and 2022 follows ( in millions ): Year Ended December 31, Variance 2023 2022 $ Revenue: United States $ 1,749 $ 1,591 $ 158 Canada 282 315 (33 ) International 290 230 60 Total revenue $ 2,321 $ 2,136 $ 185 Operating profit (loss): United States $ 104 $ 103 $ 1 Canada 21 30 (9 ) International 15 (2 ) 17 Total operating profit (loss) $ 140 $ 131 $ 9 31 United States Revenue was $1,749 million for the year ended December 31, 2023, an increase of $158 million or 9.9% compared to the year ended December 31, 2022.
The Company records unrecognized tax benefits as liabilities in accordance with ASC 740 and adjusts these liabilities when judgment changes as a result of the evaluation of new information not previously available in jurisdictions of operation.
See Note 10 “Income Taxes” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) for additional information. The Company records unrecognized tax benefits as liabilities in accordance with ASC 740 and adjusts these liabilities when judgment changes as a result of the evaluation of new information not previously available in jurisdictions of operation.
For the year ended December 31, 2022, other income was primarily attributable to a benefit of approximately $13 million related to the decrease of contingent consideration liability associated with a prior year acquisition, partially offset by unfavorable foreign exchange rate impacts.
For the year ended December 31, 2022, other income of approximately $13 million was primarily related to not achieving any earn-out thresholds prior to the expiration of the earn-out period from a 2021 acquisition, partially offset by unfavorable foreign exchange rate impacts.
See “Non-GAAP Financial Measures and Reconciliations” in Results of Operations for an explanation of our use of non-GAAP financial measures and reconciliations to the corresponding measures calculated in accordance with GAAP. 25 Operating Environment Overview Our results are dependent on, among other things, the level of worldwide oil and gas drilling and completions, well remediation activity, crude and natural gas prices, capital spending by oilfield service companies and drilling contractors, and the worldwide oil and gas inventory levels.
Operating Environment Overview Our results are dependent on, among other factors, the level of worldwide oil and gas drilling and completions, well remediation activity, crude oil and natural gas prices, capital spending by oilfield service companies and drilling contractors, and the worldwide oil and gas inventory levels.
Operating profit increased primarily due to the increase in revenue discussed above, partially offset by higher employee related expenses and no benefit from the Canada Emergency Wage Subsidy in 2022. International Revenue was $230 million for the year ended December 31, 2022, an increase of $10 million or 4.5% compared to the year ended December 31, 2021.
Operating profit improved in 2023 primarily due to the increase in revenue discussed above, partially offset by higher employee-related expenses supporting the revenue growth. Canada Revenue was $282 million for the year ended December 31, 2023, a decline of $33 million or 10.5% compared to the year ended December 31, 2022.
Key industry indicators for the past three years include the following: % % 2022 v 2022 v 2022* 2021* 2021 2020* 2020 Active Drilling Rigs: U.S. 721 475 51.8 % 436 65.4 % Canada 176 131 34.4 % 90 95.6 % International 851 755 12.7 % 825 3.2 % Worldwide 1,748 1,361 28.4 % 1,351 29.4 % West Texas Intermediate Crude Prices (per barrel) $ 94.79 $ 67.99 39.4 % $ 39.23 141.6 % Natural Gas Prices ($/MMBtu) $ 6.42 $ 3.91 64.2 % $ 2.04 214.7 % Hot-Rolled Coil Prices (steel) ($/short ton) $ 1,097.24 $ 1,561.23 (29.7 %) $ 574.67 90.9 % * Averages for the years indicated.
Key industry indicators for the past three years include the following: % % 2023 v 2023 v 2023* 2022* 2022 2021* 2021 Active Drilling Rigs: U.S. 689 721 (4.4 %) 475 45.1 % Canada 177 176 0.6 % 131 35.1 % International 948 851 11.4 % 755 25.6 % Worldwide 1,814 1,748 3.8 % 1,361 33.3 % West Texas Intermediate Crude Prices (per barrel) $ 77.64 $ 94.79 (18.1 %) $ 67.99 14.2 % Natural Gas Prices ($/MMBtu) $ 2.54 $ 6.42 (60.4 %) $ 3.91 (35.0 %) Hot-Rolled Coil Prices (steel) ($/short ton) $ 887.47 $ 1,097.24 (19.1 %) $ 1,561.23 (43.2 %) U.S.
The Company periodically evaluates its estimates and judgments that are most critical in nature, which are related to allowance for doubtful accounts, inventory reserves, purchase price allocation of acquisitions, vendor consideration and income taxes. Its estimates are based on historical experience and on its future expectations that the Company believes are reasonable.
Critical Accounting Policies and Estimates In preparing the financial statements, the Company makes assumptions, estimates and judgments that affect the amounts reported. The Company periodically evaluates its estimates and judgments that are most critical in nature, which are related to allowance for doubtful accounts, inventory reserves, purchase price allocation of acquisitions and income taxes.
In general, the effective tax rate differs from the U.S. statutory rate due to recurring items, such as differing tax rates on income earned in foreign jurisdictions, nondeductible expenses, state income taxes and the change in valuation allowance recorded against deferred tax assets.
Provision (benefit) for income taxes The effective tax rate for the years ended December 31, 2023, and December 31, 2022 was (79.7%) and 7.2%, respectively. In general, the effective tax rate differs from the U.S. statutory rate due to recurring items, such as differing tax rates on income earned in foreign jurisdictions, nondeductible expenses and state income taxes.
The estimated AFDA reflects the Company’s immediate recognition of current expected credit losses by incorporating the historical loss experience, as well as current and future market conditions that are reasonably available. Judgments in the estimate of AFDA include global economic and business conditions, oil and gas industry and market conditions, customers’ financial conditions and account receivables past due.
The estimated allowance for doubtful accounts ("AFDA") reflects the Company’s immediate recognition of current expected credit losses by incorporating the historical loss experience, as well as current and future market conditions that are reasonably available.
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 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.
U.S. rig count at January 20, 2023 was 771 rigs, up 50 rigs from the 2022 average. The price for WTI crude was $81.27 per barrel at January 20, 2023, down 14.3% from the 2022 average. The price for natural gas was $3.15 per MMBtu at January 20, 2023, down 50.9% from the 2022 average.
U.S. rig count at January 19, 2024 was 620 rigs, down 69 rigs from the 2023 average. The price for WTI crude was $73.69 per barrel at January 19, 2024, down 5.1% from the 2023 average. The price for natural gas was $2.70 per MMBtu at January 19, 2024, up 6.3% from the 2023 average.
As a result, management believes that it is not more-likely-than-not that the Company would be able to realize the benefits of its deferred tax assets in the U.S., Canada and other foreign jurisdictions and accordingly recognized a valuation allowance for the year ended December 31, 2022.
The Company continues to recognize a valuation allowance on certain identified deferred tax assets in the U.S. and non-U.S. jurisdictions where management believes that it is not more-likely-than-not that the Company would be able to realize the benefits of those specific deferred tax assets.
Warehousing, selling and administrative expenses Warehousing, selling and administrative expenses were $365 million for the year ended December 31, 2022 compared to $341 million for the year ended December 31, 2021, an increase of $24 million.
Warehousing, selling and administrative expenses Warehousing, selling and administrative expenses were $395 million for the year ended December 31, 2023 compared to $365 million for the year ended December 31, 2022, an increase of $30 million. The increase was primarily driven by an increase in employee-related expenses supporting the revenue growth.
Amid these dynamics, we will continue to support our customers, optimize our operations, advance our strategic goals and manage the Company based on market conditions.
Despite lower North American rig count resulting from enhancements in technology leading to increased rig efficiencies, we maintain a constructive outlook for our market. Amid these dynamics, we will continue to support our customers, optimize our operations, advance our strategic goals and manage the Company based on market conditions.
The increase in the period was primarily driven by the strengthening in U.S. drilling and completions activity. Operating profit was $103 million for the year ended December 31, 2022, an improvement of $111 million compared to operating loss of $8 million for the year ended December 31, 2021.
The increase in the period was driven by an increase in project related activity and incremental revenue from acquisitions completed in 2022 and 2023. Operating profit was $104 million for the year ended December 31, 2023, an improvement of $1 million compared to operating profit of $103 million for the year ended December 31, 2022.
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.
Changes in our estimates can be material under different market conditions. 36 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 Company recognizes deferred tax assets to the extent that the Company believes these assets are more-likely-than-not to be realized.
The Company recognizes deferred tax assets to the extent that the Company believes these assets are more-likely-than-not to be realized, recording a valuation allowance against the gross carrying value of the deferred tax assets to reduce the net recorded amount to the expected realizable amount.
The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results are likely to differ from our current estimates and those differences may be material.
Its estimates are based on historical experience and on its future expectations that the Company believes are reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Our solutions include outsourcing portions or entire functions of our customers’ procurement, warehouse and inventory management, logistics, point of issue technology, project management, business process and performance metrics reporting.
We have developed expertise in providing application systems, work processes, parts integration, optimization solutions and after-sales support that provide more efficient and productive solutions for our customers. Our solutions include outsourcing portions or entire functions of our customers’ procurement, warehouse and inventory management, logistics, point of issue technology, project management, business process and performance metrics reporting.
At December 31, 2022 and 2021, allowance for doubtful accounts totaled $25 million in both periods, or 5.9% and 7.6% of gross accounts receivable, respectively. Inventory Reserves Inventories consist primarily of oilfield and industrial finished goods. Inventories are stated at the lower of cost or net realizable value and using average cost methods.
At December 31, 2023 and 2022, allowance for doubtful accounts totaled $26 million and $25 million, or 6.3% and 5.9% of gross accounts receivable, respectively. Inventory Reserves 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.
Operating loss was $2 million for the year ended December 31, 2022, a decline of $2 million compared to operating profit of nil for the year ended December 31, 2021.
Operating profit was $21 million for the year ended December 31, 2023, a decline of $9 million compared to operating profit of $30 million for the year ended December 31, 2022. Operating profit decreased primarily due to the decline in revenue discussed above.
( www.bakerhughes.com ); West Texas Intermediate Crude and Natural Gas Prices: Department of Energy, Energy Information Administration ( www.eia.doe.gov ); Hot-Rolled Coil Prices: SteelBenchmarker™ Hot Roll Coil USA ( www.steelbenchmarker.com ). The worldwide average rig count increased 28.4% (from 1,361 rigs to 1,748 rigs) and the U.S. increased 51.8% (from 475 rigs to 721 rigs) in 2022 compared to 2021.
( www.bakerhughes.com ); West Texas Intermediate Crude and Natural Gas Prices: Department of Energy, Energy Information Administration ( www.eia.doe.gov ); Hot-Rolled Coil Prices: SteelBenchmarker™ Hot Roll Coil USA ( www.steelbenchmarker.com ); U.S. Wells Completed: Department of Energy, Energy Information Administration (www.eia.doe.gov) (As revised).
The increase was driven by the increase in international rig count and stronger project activity, partially offset by unfavorable foreign exchange rate impacts. Our international revenue was approximately 11% of total revenue in 2022, compared to 14% to 2021. We are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar.
The decrease was due to lower project related activity as well as an unfavorable foreign exchange rate impact. Our Canadian revenue was approximately 12% of total revenue in 2023, compared to 15% in 2022. We are subject to fluctuations in foreign currency exchange rates relative to the U.S. dollar.
For the year ended December 31, 2020, Other included $321 million of impairment and other charges as well as $18 million in separation and transaction-related expenses (included in operating loss), and $6 million in pension expense (included in other expense) related to the de-risking of our defined benefit plans (4) EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue. 31 Liquidity and Capital Resources We assess liquidity in terms of our ability to generate cash to fund operating, investing and financing activities.
(3) EBITDA % excluding other costs is defined as EBITDA excluding other costs divided by Revenue. 34 Liquidity and Capital Resources We assess liquidity in terms of our ability to generate cash to fund operating, investing and financing activities.
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. 33 Vendor Consideration The Company receives funds from vendors in the normal course of business, principally as a result of purchase volumes.
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.
At December 31, 2022 and 2021, inventory reserves totaled $20 million and $32 million, or 5.0% and 11.3% of gross inventory, respectively. Changes in our estimates can be material under different market conditions.
At December 31, 2023 and 2022, inventory reserves totaled $21 million and $20 million, or 5.4% and 5.0% of gross inventory, respectively.
We continue to expect to fund future cash acquisitions primarily with cash flow from operations and the usage of the available portion of the revolving credit facility. We expect capital expenditures for fiscal year 2023 to be approximately $15 million, primarily related to purchases of property, plant and equipment.
Capital Spending We intend to pursue additional acquisition candidates, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We continue to expect to fund future cash acquisitions primarily with cash on hand, cash flow from operations and the usage of the available portion of the revolving credit facility.
The change during the year in the valuation allowance was a reduction of $27 million in the U.S. and $1 million in other foreign jurisdictions resulting from a corresponding reduction in deferred tax assets.
The total change in the valuation allowance during the year ended December 31, 2023, was $142 million in the U.S., $3 million in Canada and $3 million in other foreign jurisdictions.
Canada Revenue was $315 million for the year ended December 31, 2022, an increase of $66 million or 26.5% compared to the year ended December 31, 2021. The increase was primarily driven by the increase in Canadian rig count, partially offset by unfavorable foreign exchange rate impacts.
International Revenue was $290 million for the year ended December 31, 2023, an increase of $60 million or 26.1% compared to the year ended December 31, 2022. The increase was driven by stronger project activity and increase in international rig count. Our international revenue was approximately 12% of total revenue in 2023, compared to 11% in 2022.
The price for Hot-Rolled Coil was $737.00 per short ton at January 23, 2023, down 32.8% from the 2022 average. 27 Executive Summary For the year ended December 31, 2022, the Company generated net income of $128 million, or $1.13 per fully diluted share on $2,136 million in revenue.
Wells Completed for January 2024 was 863, down 15.3% on an annualized basis compared to 2023. 30 Executive Summary For the year ended December 31, 2023, the Company generated net income of $247 million, or $2.24 per fully diluted share on $2,321 million in revenue.
For the year ended December 31, 2022, we have repurchased 653,819 shares of our common stock for a total of $7 million. All shares repurchased shall be retired pursuant to the terms of the share repurchase program. Critical Accounting Policies and Estimates In preparing the financial statements, the Company makes assumptions, estimates and judgments that affect the amounts reported.
For the year ended December 31, 2023, we repurchased 4,547,694 shares of our common stock for a total of $50 million. All shares repurchased shall be retired pursuant to the terms of the share repurchase program. As of December 31, 2023, we had approximately $23 million remaining under the program’s authorization.
Effect of the Change in Exchange Rates The effect of the change in exchange rates on cash flows was a decrease of $4 million and a decrease of $2 million for the years ended December 31, 2022 and 2021, respectively. 32 Capital Spending We intend to pursue additional acquisition candidates, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted.
Cash used primarily related to the Company's payment of approximately $50 million for share repurchases compared to $7 million in 2022. 35 Effect of the Change in Exchange Rates The effect of the change in exchange rates on cash flows was an increase of $2 million and a decrease of $4 million for the years ended December 31, 2023 and 2022, respectively.
For the year ended December 31, 2022, we recognized approximately $10 million of foreign currency translation losses as a result of substantially completing the liquidation of certain foreign subsidiaries reflected in impairment and other charges in the consolidated statements of operations, which was partially offset by a reduction in employee related expenses and increased revenue discussed above.
For the year ended December 31, 2023, operating profit increased primarily due to the increase in revenue discussed above and as a result of $10 million of impairment and other charges recognized in the second quarter of 2022 that did not repeat.
The Company performs periodic credit evaluations of its customers’ financial condition and, generally, does not require collateral but may require letters of credit or prepayments for certain sales. Allowances for doubtful accounts ("AFDA") are established based on an evaluation of accounts receivable aging, and where applicable, specific reserves on an individual customer basis.
These receivables are generally trade receivables due in one year or less or expected to be billed and collected in one year or less. The Company measures the allowance for credit losses on trade receivables based on an evaluation of accounts receivable aging, and where applicable, specific reserves on an individual customer basis.
For the year ended December 31, 2021, the effective tax rate was primarily driven by the low level of consolidated pre-tax income and the recognition of tax expense from earnings in Canada, which was not able to be offset by benefits recognized on losses in other jurisdictions.
For the year ended December 31, 2023, the effective tax rate benefit was primarily driven by a $148 million deferred tax benefit from the release of the valuation allowance against certain U.S. and non-U.S. deferred tax assets and the recognition of tax expense from earnings in Canada and the United Kingdom.
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We also offer procurement, warehouse and inventory management solutions as part of our supply chain and materials management offering. We have developed expertise in providing application systems, work processes, parts integration, optimization solutions and after-sales support.
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The industrial distribution end markets include engineering and construction firms that perform capital and maintenance projects for their end-user clients. We also provide supply chain and materials management solutions to the same markets where we sell products.
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For the year ended December 31, 2022, operating profit was $131 million compared to operating profit of $9 million for the corresponding period of 2021. For the fourth quarter ended December 31, 2022, the Company generated net income of $32 million, or $0.28 per fully diluted share on $547 million in revenue.
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See “Non-GAAP Financial Measures and Reconciliations” 28 in Results of Operations for an explanation of our use of non-GAAP financial measures and reconciliations to the corresponding measures calculated in accordance with GAAP.
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Net income increased for the fourth quarter ended December 31, 2022, by $20 million when compared to the corresponding period of 2021. Revenue increased for the fourth quarter ended December 31, 2022, by $115 million, or 26.6%, when compared to the corresponding period of 2021.
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The worldwide average rig count increased 3.8% (from 1,748 rigs to 1,814 rigs) and the U.S. declined 4.4% (from 721 rigs to 689 rigs) in 2023 compared to 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe are a net receiver of foreign currencies and therefore benefit from a weakening of the U.S. dollar and are adversely affected by a strengthening of the U.S. dollar relative to the foreign currency.
Biggest changeWe are a net receiver of foreign currencies, and therefore, benefit from a weakening of the U.S. dollar and are adversely affected by a strengthening of the U.S. dollar relative to the foreign currency. As of December 31, 2023, our most significant foreign currency exposure was to the Canadian dollar, followed by the British pound and the Australian dollar.
We may enter into derivative financial instrument transactions to manage or reduce market risk but do not enter into derivative financial instrument transactions for speculative purposes. We do not currently have any material outstanding derivative instruments. See Note 14 “Derivative Financial Instruments” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) for additional information.
We may enter into derivative financial instrument transactions to manage or reduce market risk but do not enter into derivative financial instrument transactions for speculative purposes. We do not currently have any material outstanding derivative instruments. See Note 15 “Derivative Financial Instruments” of the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Form 10-K) for additional information.
We utilized a sensitivity analysis to measure the potential impact on earnings based on a hypothetical 10% change in foreign currency rates. A 10% change from the levels experienced during 2022 of the U.S. dollar relative to foreign currencies that affected the Company would have resulted in $3 million change in net income for 2022.
We utilized a sensitivity analysis to measure the potential impact on earnings based on a hypothetical 10% change in foreign currency rates. A 10% change from the levels experienced during 2023 of the U.S. dollar relative to foreign currencies that affected the Company would have resulted in $3 million change in net income for 2023.
Because we operate globally and approximately one-fourth of our 2022 net sales were outside the U.S., foreign currency exchange rates can impact our financial position, results of operations and competitive position.
Because we operate globally and approximately one-fourth of our 2023 net sales were outside the U.S., foreign currency exchange rates can impact our financial position, results of operations and competitive position.
For the years ended December 31, 2022, 2021 and 2020, we reported a net foreign currency transaction loss of $2 million, loss of $1 million and gain of $2 million, respectively.
For the years ended December 31, 2023, 2022 and 2021, we reported a net foreign currency transaction loss of $1 million, loss of $2 million and loss of $1 million, respectively.
Commodity Steel Pricing Our business is sensitive to steel prices, which can impact our product pricing, with steel tubular prices generally having the highest degree of sensitivity. While we cannot predict steel prices, we manage this risk by managing our inventory levels, including maintaining sufficient quantity on hand to meet demand, while reducing the risk of overstocking. 36 ITEM 8.
Commodity Steel Pricing Our business is sensitive to steel prices, which can impact our product pricing, with steel tubular prices generally having the highest degree of sensitivity. While we cannot predict steel prices, we mitigate this risk by managing our inventory levels, including maintaining sufficient quantity on hand to meet demand, while limiting the risk of overstocking. 39 ITEM 8.
The average foreign exchange rate for 2022 compared to the average for 2021 decreased by approximately 5% compared to the U.S. dollar based on the aggregated weighted average revenue of our foreign currency denominated foreign operations. The Canadian dollar, British pound and Australian dollar decreased in relation to the U.S. dollar by approximately 4%, 10% and 8%, respectively.
The average foreign exchange rate for 2023 compared to the average for 2022 decreased by approximately 3% compared to the U.S. dollar based on the aggregated weighted average revenue of our foreign-currency denominated foreign operations. The Canadian dollar and Australian dollar decreased in relation to the U.S. dollar by approximately 4% and 4%, respectively.
Upon closure of a foreign subsidiary, the accumulated foreign currency translation gains and losses relating to the foreign subsidiary are reclassified into earnings, reflected in impairment and other charges in the consolidated statements of operations.
Upon closure of a foreign subsidiary, the accumulated foreign currency translation gains and losses relating to the foreign subsidiary are reclassified into earnings, reflected in impairment and other charges in the consolidated statements of operations. During 2023, we reported a net foreign currency translation gain of $5 million, which was included in other comprehensive income.
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As of December 31, 2022, our most significant foreign currency exposure was to the Canadian dollar, followed by the British pound, with less significant foreign currency exposure to the Australian dollar.
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During 2022, we reported a net foreign currency translation loss of $3 million, after the reclassification of accumulated foreign currency translation losses of approximately $10 million related to the substantial liquidation of certain foreign subsidiaries.

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