Welcome to the Third Quarter Earnings Conference Call. My name is Corey, and I will be operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to Senior Vice President and Chief Financial Officer, Daniel Molinaro. Mr. Molinaro, you may begin. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Thank you, Corey, and welcome, everyone, to the NOW, Inc. third quarter 2015 earnings conference call. We appreciate you joining us this morning and thanks for your interest in NOW, Inc. With me this morning is Robert Workman, President and CEO of NOW, Inc.; and Dave Cherechinsky, Corporate Controller and Chief Accounting Officer. NOW, Inc. operates primarily under the DistributionNOW and Wilson Export brands, and you'll hear us refer to DistributionNOW and DNOW, which is our New York Stock Exchange ticker symbol, throughout our conversations this morning. In addition to these brands, we are very excited about new brands added to the DNOW family, including MacLean Electrical, Machine Tools Supply, and Odessa Pumps and Equipment, among others. Before we begin this discussion on NOW, Inc.'s financial results for the third quarter ended September 30, 2015, please note that some of the statements we make during this call may contain forecasts, projections and estimates, including, but not limited to, comments about our outlook for the company's business. These are forward-looking statements within the meaning of the U.S. federal securities laws based on limited information as of today, which is subject to change. They are subject to risks and uncertainties and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in the year. I refer you to the latest Forms 10-K and 10-Q that NOW,…

Thank you. [Operating Instruction] And our first question comes from Dave Manthey from Robert W. Baird. David, your line is open. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Thank you, good morning. Robert R. Workman - President, Chief Executive Officer & Director: Good morning. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Good morning. First of all, on average, what percentage of your upstream sales are typically to drilling rigs versus fracking and completion activity? Robert R. Workman - President, Chief Executive Officer & Director: Very little goes to completion and fracking activity. That would be like selling to the companies who have the (29:12) frac spreads. We sell some product to them, but not much at all. The biggest part of our revenue upstream would be to the drilling contractors and to the oil and gas operators when they build tank batteries, and they have maintenance spend to keep their production going on older wells. So, I don't know the exact split out of that, but I would estimate that, in that segment, a quarter of our revenue goes to the drilling contractors and the other three-fourth goes to the operators. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Okay. I guess that is a definitional thing. When I was thinking completion, that's the tank batteries and hookups and that sort of thing? Robert R. Workman - President, Chief Executive Officer & Director: Yes, but that would be to the operator, yes. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Operator, okay. Perfect. And then, second, the lower of cost or market inventory charge appears to have cost you about 200 basis points of GP this quarter. But since that's a reset, I assume this disproportionately impacts the current quarter, and if we see stable pricing from here, I know that's an assumption, but if we were to see stable pricing, should we assume gross margins would be closer to the high-teens than the mid-teens? Robert R. Workman - President, Chief Executive Officer & Director: Yeah. I agree with you, that is a massive if, but in a perfect world if there were no more pricing pressures, some portion of the write-down of those goods would end up back in gross margin. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Okay. All right. Thank you very much.

Our next question comes from Matt Duncan from Stephens. Matt, your line is open.

Hi, good morning guys. Robert R. Workman - President, Chief Executive Officer & Director: Hi, Matt. How're you? Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Hi, Matt.

Good. Thanks. So Robert, on the gross margin side, I mean I'd say it's pretty good performance you guys are getting there when you back out the charges. You're up 20 basis points sequentially, if I back out the charges in the 2Q and the 3Q, despite all the pricing pressure we're seeing in the market. So what are you guys doing there to maintain those gross margins? Is it a product mix thing, or is there something else that you're doing? Robert R. Workman - President, Chief Executive Officer & Director: No. I would say that the activity around bidding and pricing pressures from customers really came on strong in Q1 where you saw the impact of the margin erosion and it really just kind of kept consistent. So we're really not doing anything different in Q3 that we did in Q2 to make sure that that pricing erosion doesn't deteriorate further. It's not really a product mix thing or anything else. It's just a repeat of the impact we had in Q1.

Okay. So if we had no additional inventory write-downs, which, again, I realize is a big if, given what's going on with steel prices, but if we had no additional write-downs, would gross margin theoretically be flat to up versus the Q3 adjusted level? Robert R. Workman - President, Chief Executive Officer & Director: I think we're in uncharted waters, Matt, because if you had asked me would gross margin deteriorate in Q3, just from a product pricing perspective, I would have said I am highly confident they would deteriorate and they didn't. So I'm getting surprised at how well they're holding up. I surely wouldn't expect them to grow, not in this market, but holding flat, I think, would be a win.

Okay. And then all things taken into account 4Q versus 3Q, it sounds like you're telling us sales are going to be down. Can you put any order of magnitude on that based on what you're seeing right now? Robert R. Workman - President, Chief Executive Officer & Director: Well, I could if the only effect was holidays, but determining what this rig count is going to do, which will be pretty significant, is impossible to forecast. So I would tell you that, if you make your own rig count forecast and use our performance on our revenue per rig, that'll get you somewhere there and then discount it for the holidays.

Okay. And then, last couple of things. Just free cash flow expectation for the year and then, on M&A, it sounds like you're sort of shifting the focus to larger deals outside upstream, if you could give us a little bit of color on the type of stuff you're looking at there that would be helpful? Robert R. Workman - President, Chief Executive Officer & Director: Okay. So we said on the last call that we thought we could get another $250 million to $300 million out of inventory and receivables in the second half of the year, and we surprised ourselves and got over $200 million out in Q3. So, we think we could see another $100 million-ish of value coming out of those two buckets, and what was your second question?

Just M&A. Robert R. Workman - President, Chief Executive Officer & Director: Yeah. So, we said all along that our M&A strategy includes several components. Some of those components were to increase our participation in the downstream market. As you saw with MTS, it was also around expanding our participation in industrial supply chain market, and so I think you would see more of that. I don't anticipate you're going to see us break out of what we've stated our M&A strategy is all along.

Okay. Thanks.

And our next question comes from Sam Darkatsh from Raymond James. Sam your line is open. Sam J. Darkatsh - Raymond James & Associates, Inc.: Good morning, Robert, Dan, Dave. How are you? Robert R. Workman - President, Chief Executive Officer & Director: Good morning, Sam. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: How are you, Sam? Sam J. Darkatsh - Raymond James & Associates, Inc.: Doing well. Thank you. A couple of quick questions. Robert, your mid-2016 goal for hitting positive EBITDA, can you give a sense of what your rig count assumption is for that expectation? Robert R. Workman - President, Chief Executive Officer & Director: Yeah. It's basically, assuming we're in this same depressed market, if rig count were to decline another 100 rigs, 200 rigs that would be another whole conversation. Because it's a lot easier to remove revenue off the income statement if the market declines than it is to adjust expenses. So we'd be chasing that revenue line downward. Sam J. Darkatsh - Raymond James & Associates, Inc.: So flattish rig count sequentially adjusted for seasonality is how we should look at it? Robert R. Workman - President, Chief Executive Officer & Director: Yes. Sam J. Darkatsh - Raymond James & Associates, Inc.: Okay. And then, I'm not sure if Dan or Dave, the remaining $296 million in goodwill, how much of that ballpark is remaining from deals that closed prior to the end of last year, and how much of that is from the recent deals? Just trying to get a sense of what, if things continue to look in the direction they are now, what might be at risk for further write-downs? Robert R. Workman - President, Chief Executive Officer & Director: Okay. A big chunk of that, more than a third of it is, is Canadian goodwill, which we're not impairing. We're impairing the U.S. energy reporting unit. The remainder is largely international, except for – I'm sorry. U.S. supply chain is another component. But our international unit, we talk about a small impairment in that part of the goodwill, and we're reviewing this each quarter. But most of this is international and U.S. supply chain and Canada, which is not impaired and U.S. supply chain, which is not impaired. So we fully impaired the U.S. Energy group is kind of my point. Sam J. Darkatsh - Raymond James & Associates, Inc.: Very helpful. Thank you folks. Robert R. Workman - President, Chief Executive Officer & Director: Thank you.

And our next question comes from Jeff Hammond from KeyBanc Capital Markets. Jeff, your line is open.

Hi, good morning guys. Robert R. Workman - President, Chief Executive Officer & Director: Hi, Jeff. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Hi, Jeff.

So on revenue per rig, nice bump the last couple of quarters. Do you attribute that to really share gains or our revenue per rig holding up maybe a little bit better this cycle relative to where you see the drop in downturns? Robert R. Workman - President, Chief Executive Officer & Director: Yeah. So, there's a component of that that's obviously acquired revenue, which is that $1.4 million number. But the part that's definitely share gains is going from $1.1 million in Q4 on the base business to $1.2 million the last two quarters, because we would definitely anticipate, like we have all always in the past, a reduced revenue per rig as they cannibalize inventories and pull back and cut expenses, and those things of that nature. And the only thing that would replace that are share gains. And we have a long list of those areas where we felt like we have gained that revenue stream to help offset reduced customer spending.

Okay. Great. And then, just on the inventory adjustment in the steel pricing, based on current prices now, do you expect, then, another adjustment into the fourth quarter and what the magnitude might be if things hold from here? Robert R. Workman - President, Chief Executive Officer & Director: The only new data point we have since our last LCM, lower of cost or market steel price related deflation adjustment is the month of October. And it definitely started sliding more toward the seamless side, which has been pretty insulated so far due to the mills having some pretty good discipline around taking production off-line. Based on what we saw happen in that month, if it were to flatten, we may have some adjustments that wouldn't be very significant. If it continues to slide like it has in October for the next two months, we'll definitely have some costing problem.

Okay. Great. And then just back on the acquisitions, what do you think currently is kind of the biggest impediment to getting additional deals done? Robert R. Workman - President, Chief Executive Officer & Director: Well, we don't adjust our willingness – I'm sorry, our model around what we're willing to pay from a multiple perspective. But as we get further into this downturn and realize it has got longer legs than we originally thought, our forecasting is definitely getting reduced. And so that's causing some bid/ask spread issues.

Okay. Thanks guys. Robert R. Workman - President, Chief Executive Officer & Director: Thank you.

And our next question comes from Walter Liptak from Seaport Global. Walter, your line is open. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Hi, Walter.

Thank you. Robert R. Workman - President, Chief Executive Officer & Director: Good morning, Walt.

Hi, guys. I wanted to ask about in your prepared remarks and commentary about market share gains, you mentioned something about a customer that was won back or something like that. I wonder if we could get some more color on it. Was it U.S. or international? How meaningful is this, or was that just sort of an anecdotal thing? Robert R. Workman - President, Chief Executive Officer & Director: Are you talking about the comment I made about the U.S. supply chain customer where we implemented in several of the core areas?

Yes, that's right. Robert R. Workman - President, Chief Executive Officer & Director: Yeah. So that'll be mostly share gain. That's not currently our customer. They use some of our competitors, and it's another model where we're taking over all the management of their supply chain on their field. So that will take a while to implement because it's a pretty large implementation. They'll become at the end of this implementation one of our largest customers. So you'll see that materialize in our U.S. supply chain business over the many, many quarters.

Okay. And how impactful was that on the revenue per rig? I mean, was that something where you could point to it and say, we have got to continue on this managing supply chain, we're gaining market share? I mean is this part of the strategy? Robert R. Workman - President, Chief Executive Officer & Director: Well, it's definitely part of our strategy, but that particular customer had almost no impact on revenue per rig because we're just in the early, early stages of implementation. So it would get lost in rounding if I divided the revenue we got from them by the rig count.

Okay. Got it. All right. Then I wanted to ask, too, about your comment on bad debt charge-offs. I wonder if you can quantify for us how much are you writing off. It didn't sound like the DSOs was particularly bad in the quarter, but what kind of condition are your receivables? Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Well, what we're seeing is our DSOs are getting better. Our processes for handling new transactions is much improved, but our bad debts have increased this year to abnormally high levels due to some of the spin-related activity from last year. We changed all our legal entities, implemented a new ERP system, and now we are here a year later and our customers are working to conserve their cash, and we're kind of working through that. But our bad debt charges this year or accruals for them have amounted to $21 million, and that's abnormally high. We think we've fixed the problems going forward, post-ERP implementation, so we think those numbers will come down. But those are abnormally high, and we'll revert back to our lower traditional small accrual numbers like we experienced in the past.

Okay. Got it. All right, thank you. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Thank you.

Our next question comes from Sean Meakim from JPMorgan. Sean, your line is open. Robert R. Workman - President, Chief Executive Officer & Director: Hi, Sean.

Good morning gentlemen. Hey, how are you? Robert R. Workman - President, Chief Executive Officer & Director: Good.

So you noted – you talked a little bit about the impact of steel pricing. Could you give us a little bit more on pricing trends for some of the different product lines, like valves, for example? I'm just curious if you're seeing any difference in terms of pricing pressure between some of the different end markets? Robert R. Workman - President, Chief Executive Officer & Director: No. The end markets really aren't – well, let me take that back. Downstream industrial and some other areas that are insulated from upstream activity aren't feeling nearly the pricing pressures that we do, obviously, in our drilling contractors and operator business. That's where all the pressure is being felt, and it's not really product line specific. It's more project related. So, we can make great margins on line pipe and great margins on valves by supporting the day-to-day needs of our customers. But when they have a project and they bid it out, that's when all product lines are affected on margin. So it's more specific to large projects and not specific to a product line.

Right. That makes sense. And then just, I was thinking about the balance sheet. If we take another leg down in activity, to a degree that would prevent you from getting back to breakeven at the EBITDA line, say, through 2016, at some point, does any of that have any impact on your borrowing capacity to fund deals, or do you think that that $700 million would still hold? Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Well, our credit facility is not a borrowing base facility. So we will have the ability to continue to borrow. We have borrowed some now $120 million at the end of the quarter. Challenger, whenever that happens, could cause us to borrow, but we're also generating cash to offset that to keep it down. But it'll have no impact on our borrowing capacity since we're not under a borrowing base.

Okay. Fair enough. Thank you. I appreciate that. Robert R. Workman - President, Chief Executive Officer & Director: Thank you.

Our next question comes from Chuck Minervino from Susquehanna. Chuck, your line is open. Robert R. Workman - President, Chief Executive Officer & Director: Hi, Chuck. Daniel L. Molinaro - Chief Financial Officer & Senior Vice President: Hi, Chuck.

Hi, how are you guys doing? Good morning. Robert R. Workman - President, Chief Executive Officer & Director: Good morning.

Just wanted to ask you how you're thinking about this business from an incremental margin perspective when the cycle does start turning and the rig count does start turning positive and you start seeing that sequential revenue growth. Whether that's mid-2016 or 2017, when you kind of factor in some of the costs that you guys have taken out of the business, can you talk a little bit about that? Robert R. Workman - President, Chief Executive Officer & Director: Yeah. So, when we're in a market where revenue fluctuates only slightly, so we're not in a massive downturn or upturn, we generally have a 10% flow through both negative and positive to the bottom line. However, in this case, with us chasing a rapidly declining revenue stream, it's more in the 15% to 20% range. We would fully expect that to be the same incrementals we had if it's a rapidly increasing market.

Got it. And is there any difference here? Can you contrast the different geographic segments? Is there anything to think about there, U.S., international, Canada? Robert R. Workman - President, Chief Executive Officer & Director: No. I would expect – again, there's two different kind of flow-throughs depending on how significant the revenue change is. But based on your question, if it comes back strong, I would expect in Canada and international and our US Energy segment to have that 15% to 20% incremental range. If it's a muted, really slow improvement, it'll be more toward 10% to 15%.

Got it. And, that number also, is that kind of assuming a kind of flat pricing environment, or is that kind of – you're thinking about it as you'll probably get some pricing in that environment as well? Robert R. Workman - President, Chief Executive Officer & Director: It includes some pricing because one of the reasons why in a severe downturn that our decrementals are high in the 15% to 20% range is because of pricing deterioration. In a really strong recovery, expense management, as well as pricing appreciation is what would generate the 15% to 20% incrementals.

Got it. All right. Thank you guys. Robert R. Workman - President, Chief Executive Officer & Director: Thank you.

We have no further questions at this time. I will now turn the call back over to Robert Workman, President and CEO, for closing remarks. Robert R. Workman - President, Chief Executive Officer & Director: Thanks, everyone, for your interest in DistributionNOW, and we look forward to talking to you about our fourth quarter 2015 results. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.