UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

OR

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

Commission File Number 001-36325

NOW INC.

(Exact name of registrant as specified in its charter)

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

7402 North Eldridge Parkway,

Houston, Texas 77041

(Address of principal executive offices)

(281) 823-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	DNOW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).       Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes  ☐    No  ☒

As of July 29, 2020 the registrant had 109,379,627 shares of common stock (excluding 1,062,760 unvested restricted shares), par value $0.01 per share, outstanding.

1

NOW INC.

TABLE OF CONTENTS

Part I - Financial Information
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019	3
	Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and six months ended June 30, 2020 and 2019	5
	Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2020 and 2019	6
	Consolidated Statements of Stockholders' Equity (Unaudited) for the three and six months ended June 30, 2020 and 2019	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	26
Part II - Other Information
Item 1A.	Risk Factors	27
Item 6.	Exhibits	28

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NOW INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

	June 30, 2020			December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	269		$	183
Receivables, net		242			370
Inventories, net		370			465
Assets held-for-sale		—			34
Prepaid and other current assets		17			15
Total current assets		898			1,067
Property, plant and equipment, net		109			120
Deferred income taxes		3			2
Goodwill		—			245
Intangibles, net		—			90
Other assets		59			67
Total assets	$	1,069		$	1,591
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	166		$	255
Accrued liabilities		104			127
Liabilities held-for-sale		—			6
Other current liabilities		8			8
Total current liabilities		278			396
Long-term operating lease liabilities		30			34
Deferred income taxes		—			4
Other long-term liabilities		14			13
Total liabilities		322			447
Commitments and contingencies
Stockholders' equity:
Preferred stock - par value $0.01; 20 million shares authorized;    no shares issued and outstanding		—			—
Common stock - par value $0.01; 330 million shares authorized;    109,379,627 and 109,207,678 shares issued and outstanding at June 30, 2020    and December 31, 2019, respectively		1			1
Additional paid-in capital		2,047			2,046
Accumulated deficit		(1,142	)		(775	)
Accumulated other comprehensive loss		(159	)		(128	)
Total stockholders' equity		747			1,144
Total liabilities and stockholders' equity	$	1,069		$	1,591

See notes to unaudited consolidated financial statements.

3

NOW INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenue	$	370		$	776		$	974		$	1,561
Operating expenses:
Cost of products		302			623			789			1,250
Warehousing, selling and administrative		97			136			227			271
Impairment charges		—			—			320			—
Operating profit (loss)		(29	)		17			(362	)		40
Other expense		(2	)		(2	)		(2	)		(6	)
Income (loss) before income taxes		(31	)		15			(364	)		34
Income tax provision (benefit)		(1	)		1			(3	)		2
Net income (loss)	$	(30	)	$	14		$	(361	)	$	32
Earnings (loss) per share:
Basic earnings (loss) per common share	$	(0.27	)	$	0.12		$	(3.30	)	$	0.29
Diluted earnings (loss) per common share	$	(0.27	)	$	0.12		$	(3.30	)	$	0.29
Weighted-average common shares outstanding, basic		109			109			109			109
Weighted-average common shares outstanding, diluted		109			109			109			109

See notes to unaudited consolidated financial statements.

4

NOW INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In millions)

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Net income (loss)	$	(30	)	$	14	$	(361	)	$	32
Other comprehensive income (loss):
Foreign currency translation adjustments		8			1		(31	)		11
Comprehensive income (loss)	$	(22	)	$	15	$	(392	)	$	43

See notes to unaudited consolidated financial statements.

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NOW INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions)

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	(361	)	$	32
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		17			20
Provision for doubtful accounts		6			(2	)
Provision for inventory		21			8
Impairment charges		320			—
Other, net		10			24
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Receivables		113			(9	)
Inventories		68			—
Prepaid and other current assets		(4	)		(2	)
Accounts payable, accrued liabilities and other, net		(116	)		(22	)
Net cash provided by (used in) operating activities		74			49
Cash flows from investing activities:
Purchases of property, plant and equipment		(5	)		(3	)
Business acquisitions, net of cash acquired		—			(8	)
Net proceeds from sale of business		25			—
Other, net		—			(2	)
Net cash provided by (used in) investing activities		20			(13	)
Cash flows from financing activities:
Borrowings under the revolving credit facility		—			171
Repayments under the revolving credit facility		—			(241	)
Other, net		(4	)		(3	)
Net cash provided by (used in) financing activities		(4	)		(73	)
Effect of exchange rates on cash and cash equivalents		(4	)		1
Net change in cash and cash equivalents		86			(36	)
Cash and cash equivalents, beginning of period		183			116
Cash and cash equivalents, end of period	$	269		$	80
Supplemental disclosures of cash flow information:
Accrued purchases of property, plant and equipment		2			2

See notes to unaudited consolidated financial statements.

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NOW INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In millions)

			Additional			Retained			Accum. Other			Total
	Common		Paid-In			Earnings			Comprehensive			Stockholders’
	Stock		Capital			(Deficit)			Income (Loss)			Equity
December 31, 2018	$	1	$	2,034		$	(678	)	$	(143	)	$	1,214
Net income		—		—			18			—			18
Stock-based compensation		—		4			—			—			4
Exercise of stock options		—		1			—			—			1
Shares withheld for taxes		—		(2	)		—			—			(2	)
Other comprehensive income		—		—			—			10			10
March 31, 2019	$	1	$	2,037		$	(660	)	$	(133	)	$	1,245
Net income		—		—			14			—			14
Stock-based compensation		—		4			—			—			4
Other comprehensive income		—		—			—			1			1
June 30, 2019	$	1	$	2,041		$	(646	)	$	(132	)	$	1,264
December 31, 2019	$	1	$	2,046		$	(775	)	$	(128	)	$	1,144
Cumulative effect of accounting change		—		—			(6	)		—			(6	)
Net loss		—		—			(331	)		—			(331	)
Other comprehensive loss		—		—			—			(39	)		(39	)
March 31, 2020	$	1	$	2,046		$	(1,112	)	$	(167	)	$	768
Net loss		—		—			(30	)		—			(30	)
Stock-based compensation		—		1			—			—			1
Other comprehensive income		—		—			—			8			8
June 30, 2020	$	1	$	2,047		$	(1,142	)	$	(159	)	$	747

See notes to unaudited consolidated financial statements.

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NOW INC.

Notes to Unaudited Consolidated Financial Statements

1. Organization and Basis of Presentation

Nature of Operations

NOW Inc. (“NOW” or the “Company”) is a holding company headquartered in Houston, Texas that was incorporated in Delaware on November 22, 2013. NOW operates primarily under the DistributionNOW and DNOW brands. NOW is a global distributor of energy products as well as products for industrial applications through its locations in the U.S., Canada and internationally which are geographically positioned to serve the energy and industrial markets in approximately 80 countries. NOW’s energy product offerings are used in the oil and gas industry including upstream drilling and completion, exploration and production, midstream infrastructure development and downstream petroleum refining – as well as in other industries, such as chemical processing and power generation. The industrial distribution portion of NOW’s business targets a diverse range of facilities across numerous industries and end markets. NOW also provides supply chain management to drilling contractors, E&P operators, midstream operators and downstream energy companies. NOW’s supplier network consists of thousands of vendors in approximately 40 countries.

Basis of Presentation

All significant intercompany transactions and accounts have been eliminated. The unaudited consolidated financial information included in this report has been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of SEC Regulation S-X. The principles for interim financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the financial statements included in the Company’s most recent Annual Report on Form 10-K. In the opinion of the Company’s management, the consolidated financial statements include all adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

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

Reclassification

Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported results of operations.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, receivables and payables approximated fair value because of the relatively short maturity of these instruments. Cash equivalents include only those investments having a maturity date of three months or less at the time of purchase. See Note 14 “Derivative Financial Instruments” for the fair value of derivative financial instruments.

Recently Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Entities that elect the relief are required to disclose the nature of the optional expedients and exceptions that are adopted and the reasons for the adoptions. The guidance is effective upon issuance and the expedients and exceptions may be applied prospectively through December 31, 2022. The Company is currently assessing the impact of ASU 2020-04 on its consolidated financial statements.

8

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. On January 1, 2020, the Company adopted ASC Topic 326 using the modified retrospective basis and began to recognize allowance for doubtful accounts (“AFDA”) based on the estimated lifetime expected credit loss related to trade receivables. The adoption of ASC Topic 326 resulted in a cumulative-effect adjustment of $6 million (net of income taxes) to its opening accumulated deficit and AFDA in the consolidated balance sheets. See Note 3 “Receivables, net” for additional information.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820), which modified the disclosure requirements on fair value measurements. On January 1, 2020, the Company adopted this standard and expanded its fair value disclosures to address the quantitative and qualitative requirements of this standard. See Note 4 “Asset Impairment” for fair value disclosures relating to the impairment of goodwill and other long-lived assets.  

In August 2018, The FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement service contract with the capitalization requirements of costs to develop or obtain internal-use software licenses. On January 1, 2020, the Company adopted this standard using the prospective transition approach, with no material impact in its consolidated financial statements.

2. Revenue

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

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

See Note 9 “Business Segments” for disaggregation of revenue by reporting segments. The Company believes this disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed on contracts with an original expected duration of more than one year. The Company’s contracts are predominantly short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC Topic 606 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations when the performance obligation is part of a contract that has an original expected duration of one year or less.

Receivables

Receivables are recorded when the Company has an unconditional right to consideration.

9

Contract Assets and Liabilities

Contract assets primarily consist of retainage amounts held as a form of security by customers until the Company satisfies its remaining performance obligations. As of June 30, 2020 and December 31, 2019, contract assets were $3 million in both periods, and were included in receivables, net in the consolidated balance sheets. The Company generally accounts for the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have been recognized is one year or less. These expenses were not material for the three and six months ended June 30, 2020 and 2019.

Contract liabilities primarily consist of deferred revenues recorded when customer payments are received or due in advance of satisfying performance obligations, including amounts which are refundable, and other accrued customer liabilities. Revenue recognition is deferred to a future period until the Company completes its obligations contractually agreed with customers. The decrease in contract liabilities for the six months ended June 30, 2020 was primarily related to revenue of approximately $15 million that was deferred at December 31, 2019, partially offset by net customer deposits and credits of approximately $6 million.  

3. Receivables, net

The Company is exposed to credit losses relating to sales to its customers. Receivables are recorded and carried at the original invoiced amount less the allowance for doubtful accounts. With the adoption of ASU 2016-13 on January 1, 2020, 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. Judgements in the estimate of AFDA include global economic and business conditions, oil and gas industry and market conditions, customer’s financial conditions and account receivables past due.

Activity in the allowance for doubtful accounts are as follows (in millions):

	June 30, 2020
Allowance for doubtful accounts
Beginning balance	$	16
Cumulative effect of accounting change		6
Additions charged to expenses		6
Charge-offs and other		(1	)
Ending balance	$	27

4. Asset Impairment

The Company tests goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating that it might be impaired. During the first quarter of 2020, the Company’s market capitalization declined significantly driven by current macroeconomic and geopolitical conditions including the collapse of oil prices caused by both surplus production and supply as well as the decrease in demand caused by the COVID-19 pandemic. In addition, the uncertainty related to oil demand continues to have a significant impact on the investment and operating plans of our primary customers. Based on these events, the Company concluded that it was more likely than not that the fair values of certain of its reporting units were less than their carrying values. Therefore, the Company performed an interim goodwill impairment test.

For the three months ended March 31, 2020, goodwill was evaluated for impairment at the reporting unit level. The Company had five reporting units: U.S. Energy, U.S. Supply Chain, U.S. Process Solutions, Canada and International. The Company determined the fair values of three reporting units with goodwill were below their carrying values, resulting in a $230 million goodwill impairment which was included in impairment charges in the consolidated statements of operations. No tax benefit was reported as the goodwill impairment was either nondeductible for tax purposes or was subject to a valuation allowance.

Goodwill by reportable segment is shown as follows (in millions):

	United States			Canada			International			Total
Balance at December 31, 2019 (1)	$	125		$	67		$	53		$	245
Impairment		(125	)		(60	)		(45	)		(230	)
Foreign currency translation adjustments		—			(7	)		(8	)		(15	)
Balance at June 30, 2020	$	—		$	—		$	—		$	—

⁽¹⁾ In the United States, Canada and International segments, net of prior years accumulated impairment of $393 million, $27 million and $54 million, respectively.

10

The Company evaluates the recoverability of long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. During the first quarter of 2020, the results of the Company's test for impairment of goodwill and the other negative market indicators described above were a triggering event that indicated that its long-lived assets were possibly impaired.

The Company identified its reporting units as individual asset groups and measured long-lived assets recoverability by a comparison of the carrying amount and the undiscounted cash flows of the reporting unit. The results indicated that long-lived assets associated with three reporting units were not recoverable. Further, the estimated fair value of these assets was determined to be below their carrying value. As a result, for the three months ended March 31, 2020, the Company recognized $90 million of impairments of long-lived assets which were included in impairment charges in the consolidated statements of operations. No triggering events were identified in the second quarter of 2020 to indicate that the remaining carrying value of long-lived assets were not recoverable. The Company recognized a $4 million tax benefit related to the long-lived asset impairments. As of June 30, 2020, the long-lived assets consisted primarily of $109 million in property, plant and equipment, net and $46 million in operating right-of-use assets. 

The impairment of long-lived assets recognized in the first quarter is shown as follows (in millions):

	United States			International			Total
Intangibles, net	$	(62	)	$	(22	)	$	(84	)
Property, plant and equipment, net		—			(4	)		(4	)
Operating right-of-use assets		(1	)		(1	)		(2	)
Total impairment	$	(63	)	$	(27	)	$	(90	)

The Company determined the fair value of both long-lived assets and goodwill primarily using the discounted cash flow method and in the case of goodwill, a multiples-based market approach for comparable companies when applicable. Given the current volatile market environment, the Company utilized third-party valuation advisors to assist us with these valuations. These analyses included significant judgment, including management’s short-term and long-term forecast of operating performance, discount rates based on the weighted average cost of capital, revenue growth rates, profitability margins, capital expenditures, the timing of future cash flows based on an eventual recovery of the oil and gas industry, and in the case of long-lived assets, the remaining useful life and service potential of the asset, all of which were classified as level 3 inputs under the fair value hierarchy. These impairment assessments incorporate inherent uncertainties, including projected commodity pricing, supply and demand for the Company’s products and future market conditions, which are difficult to predict in volatile economic environments. Discount rates utilized to value the reporting units were in a range from 11.5% to 12.8%.

5. Property, Plant and Equipment, net

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

	Estimated Useful Lives	June 30, 2020			December 31, 2019
Information technology assets	1-7 Years	$	48		$	46
Operating equipment (1)	2-15 Years		107			109
Buildings and land (2)	5-35 Years		103			100
Construction in progress			—			10
Total property, plant and equipment			258			265
Less: accumulated depreciation			(149	)		(145	)
Property, plant and equipment, net		$	109		$	120

⁽¹⁾ Includes finance lease right-of-use assets.

⁽²⁾ Land has an indefinite life.

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6. Accrued Liabilities

Accrued liabilities consist of (in millions):

	June 30, 2020		December 31, 2019
Compensation and other related expenses	$	28	$	31
Contract liabilities		25		34
Taxes (non-income)		9		12
Current portion of operating lease liabilities		17		21
Other		25		29
Total	$	104	$	127

7. Debt

On April 30, 2018, the Company replaced its existing senior secured revolving credit facility and entered into a senior secured revolving credit facility (the “Credit Facility”) with a syndicate of lenders with Wells Fargo Bank, National Association serving as the administrative agent. The five-year Credit Facility provides for a $750 million global revolving credit facility (with a letter of credit sub-facility of $60 million and a swing line sub-facility of 10% of the facility amount), of which up to $100 million is available for the Company’s Canadian subsidiaries and $40 million for the Company’s UK subsidiaries. The Company has the right, subject to certain conditions, to increase the aggregate principal amount of commitments under the credit facility by $250 million. The obligations under the Credit Facility are secured by substantially all the assets of the Company and its subsidiaries. The Credit Facility contains customary covenants, representations and warranties and events of default. The Company will be required to maintain a fixed charge coverage ratio of at least 1.00:1.00 as of the end of each fiscal quarter if excess availability under the Credit Facility falls below the greater of 12.5% of the borrowing base or $60 million.  

Borrowings under the Credit Facility will bear an interest rate at the Company’s option, at (i) the base rate plus an applicable margin based on the Company’s fixed charge coverage ratio (and if applicable, the Company’s leverage ratio); or (ii) the greater of LIBOR for the applicable interest period and zero, plus an applicable margin based on the Company’s fixed charge coverage ratio (and if applicable, the Company’s leverage ratio). The Credit Facility includes a commitment fee on the unused portion of commitments that ranges from 25 to 37.5 basis points. Commitment fees incurred during the period were included in other expense in the consolidated statements of operations.

Availability under the Credit Facility is determined by a borrowing base comprised of eligible receivables and eligible inventory in the U.S and Canada. As of June 30, 2020, the Company had no borrowings against the Credit Facility and approximately $256 million in availability (as defined in the Credit Facility) resulting in the excess availability (as defined in the Credit Facility) of 97%, subject to certain limitations. The Company is not obligated to pay back borrowings against the Credit Facility until the expiration date and as such, any outstanding borrowing is classified as long-term debt in the consolidated balance sheets.

The Company issued $7 million in letters of credit under the Credit Facility primarily for casualty insurance expiring in July 2021.

8. Accumulated Other Comprehensive Income (Loss)

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

	Foreign Currency
	Translation Adjustments
Balance at December 31, 2019	$	(128	)
Other comprehensive income (loss)		(31	)
Balance at June 30, 2020	$	(159	)

The Company’s reporting currency is the U.S. dollar. A majority of the Company’s international entities in which there is a substantial investment have the local currency as their functional currency. As a result, foreign currency translation adjustments resulting from the process of translating the entities’ financial statements into the reporting currency are reported in other comprehensive income or loss in accordance with ASC Topic 830, “Foreign Currency Matters.” For the six months ended June 30, 2020, several local currencies weakened against the U.S. dollar, contributing to the other comprehensive loss.

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9. Business Segments

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Revenue:
United States	$	260		$	605	$	701		$	1,205
Canada		41			74		119			160
International		69			97		154			196
Total revenue	$	370		$	776	$	974		$	1,561
Operating profit (loss):
United States	$	(24	)	$	16	$	(228	)	$	35
Canada		(5	)		1		(63	)		3
International		—			—		(71	)		2
Total operating profit (loss)	$	(29	)	$	17	$	(362	)	$	40

10. Income Taxes

The effective tax rates for the three and six months ended June 30, 2020, were 3.2% and 0.8%, respectively, compared to 5.1% and 5.9%, respectively, for the same periods in 2019. Compared to the U.S. statutory rate, the effective tax rate was impacted by recurring items, such as differing tax rates on income earned in certain foreign jurisdictions, nondeductible expenses, state income taxes and the change in valuation allowance recorded against deferred tax assets. Due to the continuing uncertainty in the Company’s industry, the Company continues to utilize the method of recording income taxes on a year-to-date effective tax rate for the three and six months ended June 30, 2020. The Company will evaluate its use of this method each quarter until such time as a return to the annualized estimated effective tax rate method is deemed appropriate.

The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act contains several tax law changes for corporations, including modifications for net operating loss carrybacks, the refundability of prior-year minimum tax liability, limitations on business interest and limitations on charitable contribution deductions. These benefits did not impact the Company’s tax provision for the three and six months ended June 30, 2020.

The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United States and Canada and to a lesser extent in various other international jurisdictions. Tax years th