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Related Party Transactions and Net Parent Company Investment
 3 Months Ended
Mar. 31, 2014
Related Party Transactions [Abstract]  
Related Party Transactions and Net Parent Company Investment

9. Related Party Transactions and Net Parent Company Investment

Allocation of General Corporate Expenses

The combined financial statements include expense allocations for certain functions provided by NOV as well as other NOV employees not solely dedicated to NOW, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives, and stock-based compensation. These expenses have been allocated to NOW on the basis of direct usage when identifiable, with the remainder allocated on the basis of operating profit, headcount or other measures. During the three months ended March 31, 2014 and 2013, NOW was allocated $3 million and $2 million, respectively, of general corporate expenses incurred by NOV which is included within selling, general and administrative expenses in the accompanying combined statements of income.

 

The expense allocations have been determined on a basis that is considered to be a reasonable reflection of the utilization of services provided or the benefit received by the Company during the periods presented. The allocations may not reflect the expense the Company would have incurred as an independent, publicly traded company for the periods presented. Actual costs that may have been incurred if the Company had been a stand-alone public company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.

Net Parent Company Investment

Net contributions from (distributions to) net parent company investment are included within net parent company investment on the Combined Balance Sheets and Statements of Cash Flows. The components of the net transfers to and from parent as of March 31, 2014 and 2013 are as follows (in millions):

 

     Three Months Ended
March 31,		  
     2014     2013  

Net contributions from parent company per the combined changes in net parent company investment

    $ 119      $ 49   

Less: Net income

      (41 )      (41 ) 
  

 

 

    

 

 

  

Contributions from parent company per the combined statements of cash flows

    $ 78      $ 8   
  

 

 

    

 

 

  

The combined financial statements include certain assets and liabilities that have historically been held at the parent company corporate level but which are specifically identifiable or otherwise allocable to the Company. The cash and cash equivalents held by the parent company at the corporate level are not specifically identifiable to NOW and therefore were not allocated to it for any of the periods presented. Cash and equivalents in the Company’s combined balance sheets primarily represent cash held locally by entities included in its combined financial statements. Transfers of cash to and from the parent company’s cash management system are reflected as a component of net parent company investment on the combined balance sheets.

All significant intercompany transactions between NOW and the parent company have been included in these combined financial statements and are considered to be effectively settled for cash in the combined financial statements at the time the transaction is recorded when the underlying transaction is to be settled in cash by the parent company. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flow as a financing activity and in the combined balance sheets as parent company investment.