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Jun 06, 2017

HD Supply Holdings, Inc. Announces Fiscal 2017 First-Quarter Results, Sale of HD Supply Waterworks Business Unit and Share Repurchase Authorization

ATLANTA, June 06, 2017 (GLOBE NEWSWIRE) -- HD Supply Holdings, Inc. (NASDAQ:HDS), one of the largest industrial distributors in North America, today reported Net sales of $1.9 billion for the first quarter of fiscal 2017 ended April 30, 2017, an increase of $92 million, or 5.2 percent, as compared to the first quarter of fiscal 2016. 

"This is a significant moment in time for HD Supply as we simplify our business mix and accelerate our focus on next generation growth and innovation," stated Joe DeAngelo, Chairman, President & CEO of HD Supply.  "We continue to strategically evolve as we extend our customer-centric service differentiation."

Gross profit increased $22 million, or 3.6 percent, to $631 million for the first quarter of fiscal 2017 as compared to $609 million for the first quarter of fiscal 2016. Gross profit was 33.7 percent of Net sales for the first quarter of fiscal 2017, down approximately 50 basis points from 34.2 percent of Net sales for the first quarter of fiscal 2016.

Operating income decreased $2 million, or 1.1 percent, to $176 million for the first quarter of fiscal 2017 as compared to $178 million for the first quarter of fiscal 2016. Operating income as a percentage of Net sales was 9.4 percent for the first quarter of fiscal 2017, decreasing approximately 60 basis points from 10.0 percent for the first quarter of fiscal 2016.

Net income increased $99 million to $85 million for the first quarter of fiscal 2017 as compared to a Net loss of $14 million for the first quarter of fiscal 2016. Net income per diluted share increased $0.49 to $0.42 for the first quarter of fiscal 2017, as compared to a Net loss per diluted share of $0.07 for the first quarter of fiscal 2016. Net loss in the first quarter of fiscal 2016 included a $115 million pre-tax loss incurred as a result of the extinguishment of outstanding debt.

Adjusted EBITDA decreased $8 million, or 3.7 percent, to $207 million for the first quarter of fiscal 2017 as compared to $215 million for the first quarter of fiscal 2016. Adjusted EBITDA as a percentage of Net sales was 11.1 percent for the first quarter of fiscal 2017, decreasing approximately 100 basis points from 12.1 percent for the first quarter of fiscal 2016.

Adjusted net income increased $24 million, or 23.3 percent, to $127 million for the first quarter of fiscal 2017 as compared to $103 million for the first quarter of fiscal 2016.  Adjusted net income per diluted share was $0.63 for the first quarter of fiscal 2017, as compared to $0.51 for the first quarter of fiscal 2016. 

As of April 30, 2017, HD Supply's combined liquidity of approximately $742 million was comprised of $70 million in cash and cash equivalents and $672 million of additional available borrowings under HD Supply, Inc.'s senior asset-backed lending facility, based on qualifying inventory and receivables. 

As of April 30, 2017, the ratio of Net debt to LTM Adjusted EBITDA[1] was 4.0 times.

Business Unit Performance

Facilities Maintenance

Net sales increased $5 million, or 0.7 percent, to $682 million for the first quarter of fiscal 2017, as compared to $677 million for the first quarter of fiscal 2016.  Adjusted EBITDA decreased $17 million, or 12.7 percent, to $117 million for the first quarter of fiscal 2017 as compared to $134 million for the first quarter of fiscal 2016.  Adjusted EBITDA as a percentage of Net sales was 17.2 percent for the first quarter of fiscal 2017, decreasing approximately 260 basis points from 19.8 percent for the first quarter of fiscal 2016. 

Waterworks

Net sales increased $52 million, or 8.6 percent, to $657 million for the first quarter of fiscal 2017, as compared to $605 million for the first quarter of fiscal 2016.  Adjusted EBITDA increased $3 million, or 6.3 percent, to $51 million for the first quarter of fiscal 2017 as compared to $48 million for the first quarter of fiscal 2016.  Adjusted EBITDA as a percentage of Net sales was 7.8 percent for the first quarter of fiscal 2017, down approximately 10 basis points from 7.9 percent for the first quarter of fiscal 2016.

Construction & Industrial

Net sales increased $35 million, or 7.0 percent, to $536 million for the first quarter of fiscal 2017, as compared to $501 million for the first quarter of fiscal 2016.  Adjusted EBITDA increased $6 million, or 12.2 percent, to $55 million for the first quarter of fiscal 2017 as compared to $49 million for the first quarter of fiscal 2016.  Adjusted EBITDA as a percentage of Net sales was 10.3 percent for the first quarter of fiscal 2017, up approximately 50 basis points from 9.8 percent for the first quarter of fiscal 2016.

First-Quarter Monthly Sales Performance

Net sales for February, March and April of fiscal 2017 were $535 million, $579 million and $759 million, respectively.  There were 20 selling days in February, 20 selling days in March and 25 selling days in April.  Average year-over-year daily sales growth for February, March and April of fiscal 2017 was 6.4 percent, 5.3 percent and 4.2 percent, respectively.

Preliminary May Sales Results

Preliminary Net sales in May were approximately $641 million, which represents year-over-year average daily sales growth of approximately 5.1 percent. Excluding Waterworks, preliminary Net sales in May were approximately $411 million, which represents year-over-year average daily sales growth of approximately 6.9%.  Preliminary May year-over-year average daily sales growth by business was Facilities Maintenance approximately 5.2 percent, Waterworks approximately 2.1 percent and Construction & Industrial approximately 9.3 percent.  There were 20 selling days in May 2017 and 20 selling days in May 2016. 

Waterworks Sale Transaction

Today, HD Supply announced it has entered into a definitive agreement to sell HD Supply Waterworks, the nation's largest distributor of water, sewer, storm and fire protection products, to Clayton, Dubilier & Rice.  The purchase price is approximately $2.5 billion payable in cash at closing.  The transaction is expected to close in HD Supply's third quarter of fiscal 2017 subject to customary closing conditions, including applicable regulatory approvals.

Share Repurchase Program Authorization

On June 3, 2017, the Board of Directors of HD Supply Holdings, Inc. (the "company") authorized the company to enter into a share repurchase program for the repurchase of up to an aggregate amount of $500 million of the company's common stock in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").  

The company will conduct repurchases under the program in the open market and through broker negotiated purchases in compliance with Rule 10b-18 of the Exchange Act, and subject to market conditions, applicable legal requirements, and other relevant factors. The share repurchases will be funded from the company's available cash balances. This share repurchase program does not obligate the company to acquire any particular amount of common stock, and it may be terminated at any time at the company's discretion. The company had 202,659,525 shares of common stock outstanding as of June 2, 2017.

Facilities Maintenance Leadership

Effective immediately, Will Stengel will assume the role of President & CEO of HD Supply Facilities Maintenance.  Will most recently served as Senior Vice President, Chief Operating Officer of Facilities Maintenance and has been with the company for over 10 years in various commercial, operations and strategy roles.  He will continue to report to Joe DeAngelo, who will maintain his position as Chairman, President & CEO of HD Supply.

Capital Structure Activities

On April 5, 2017, HD Supply, Inc. amended its existing ABL Credit Agreement, which, among other things, reduced the applicable margin for borrowings by 25 basis points, reduced commitment fees, and extended the maturity date of the Senior ABL Facility until April 5, 2022. As a result, the company incurred a $1 million loss on extinguishment of debt for write-offs of unamortized deferred financing costs.

On April 18, 2017, the company used cash flow from operations to repay $100 million aggregate principal of HD Supply, Inc.'s Term B-1 Loans. As a result, the company incurred a $2 million loss on extinguishment of debt, which includes write-offs of unamortized original issue discount and unamortized deferred financing costs for $1 million each.

Second-Quarter 2017 Outlook

The second quarter 2017 outlook excludes Waterworks. For the second quarter 2017, Net sales are anticipated to be in the range of $1,325 million and $1,365 million, Adjusted EBITDA[2] in the range of $200 million and $210 million and Adjusted net income per diluted share2 in the range of $0.60 and $0.65.  Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 203 million.  The company will provide further specifics on its outlook during the first-quarter fiscal 2017 earnings conference call and in the earnings call presentation materials. 

Fiscal 2017 First-Quarter Conference Call

As previously announced, HD Supply will hold a conference call on Tuesday June 6th, 2017 at 8:00 a.m. (Eastern Time) to discuss its first-quarter fiscal 2017 results and the Waterworks transaction overview.  The conference call and presentation materials can be accessed via webcast by logging on from the Investor Relations section of the company's Web site at hdsupply.com. The online replay will remain available for a limited time following the call.

Non-GAAP Financial Measures

HD Supply supplements its reporting of Net income with non-GAAP measurements, including Adjusted EBITDA, Adjusted net income (loss), Adjusted net income per diluted share and Net Debt. This supplemental information should not be considered in isolation or as a substitute for the GAAP measurements.  Additional information regarding Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share referred to in this press release is included below under "Reconciliation of Non-GAAP Measures."

About HD Supply

HD Supply (www.hdsupply.com) is one of the largest industrial distributors in North America. The company provides a broad range of products and value-add services to approximately 530,000 customers with leadership positions in maintenance, repair and operations, infrastructure and specialty construction sectors. Through approximately 500 locations across 48 states and six Canadian provinces, the company's approximately 14,000 associates provide localized, customer-driven services including jobsite delivery, will call or direct-ship options, diversified logistics and innovative solutions that contribute to its customers' success.

Forward-Looking Statements and Preliminary Results

This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements are based on management's beliefs, assumptions, and information currently available to management and are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking information presented in this press release is not a guarantee of future results, and that actual results may differ materially from those made in or suggested by the forward-looking information contained in this press release. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "plan," "seek," "comfortable with," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology. A number of important factors could cause actual events to differ materially from those contained in or implied by the forward-looking statements, including risks related to whether and when we are able to satisfy the conditions to the completion of the sale of the Waterworks business, including the receipt of required regulatory approvals, our ability to complete  the sale of the Waterworks business generally, and  those "Risk factors" in our annual report on Form 10-K, for the fiscal year ended January 29, 2017, filed on March 14, 2017, our quarterly report on Form 10-Q, for the fiscal quarter ended April 30, 2017, filed on June 6, 2017 and those described from time to time in our, and HD Supply, Inc.'s, other filings with the U.S. Securities and Exchange Commission, which can be found at the SEC's website www.sec.gov. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Estimates for Net sales, Adjusted EBITDA and Adjusted net income per diluted share are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end adjustments. Any variation between HD Supply's actual results and the preliminary financial data set forth above may be material.

_____________________

1 Net Debt: Total of Long Term debt and Current installments of long-term debt ($3,730), less cash and cash equivalents ($70). LTM denotes last twelve months.

2 No reconciliation of the forecasted range for Adjusted EBITDA to Net income or Income from Continuing Operations and Adjusted net income per diluted share to Net income per diluted share or Income from Continuing Operations per diluted share for the second quarter of fiscal 2017 is included in this press release because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.


HD SUPPLY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Amounts in millions, except share and per share data, Unaudited

 Three Months Ended
 April 30,
2017
 May 1,
2016
Net Sales$ 1,873 $1,781 
Cost of sales 1,242  1,172 
Gross Profit 631  609 
Operating expenses:   
Selling, general and administrative 431  401 
Depreciation and amortization 24  23 
Restructuring   7 
Total operating expenses 455  431 
Operating Income  176  178 
Interest expense 49  85 
Loss on extinguishment & modification of debt 3  115 
Other (income) expense, net 2   
Income from Continuing Operations Before Provision (Benefit) for Income Taxes 122  (22)
Provision (benefit) for income taxes 37  (8)
Income (Loss) from Continuing Operations 85  (14)
Income from discontinued operations, net of tax    
Net Income (Loss)$ 85 $(14)
Other comprehensive income (loss) — foreign currency translation adjustment 1  4 
Total Comprehensive Income (Loss)$ 86 $(10)
    
Weighted Average Common Shares Outstanding (thousands)   
Basic 200,708  198,808 
Diluted 203,017  198,808 
    
Basic Earnings Per Share(1):    
Income (loss) from Continuing Operations$  0.42 $(0.07)
Income  from Discontinued Operations$   $   
Net Income (loss)$  0.42 $  (0.07)
Diluted Earnings Per Share(1):    
Income (loss) from Continuing Operations$  0.42 $(0.07)
Income  from Discontinued Operations$   $   
Net Income (loss)$  0.42 $  (0.07)
 
(1)   May not foot due to rounding.
 


HD SUPPLY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
Amounts in millions, except per share data, Unaudited

 April 30,
2017
 January 29,
2017
ASSETS   
Current assets:   
Cash and cash equivalents$ 70  $75 
Receivables, less allowance for doubtful accounts of $14 and $13 1,015   904 
Inventories 913   831 
Other current assets 40   37 
Total current assets 2,038   1,847 
Property and equipment, net 309   303 
Goodwill 2,869   2,869 
Intangible assets, net 109   112 
Deferred tax asset 579   556 
Other assets 22   20 
Total assets$ 5,926  $5,707 
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:   
Accounts payable$ 721  $532 
Accrued compensation and benefits 84   140 
Current installments of long-term debt 14   14 
Other current liabilities 156     157 
Total current liabilities 975   843 
Long-term debt, excluding current installments 3,716   3,798 
Other liabilities 112   106 
Total liabilities 4,803   4,747 
Stockholders' equity:   
Common stock, par value $0.01; 1 billion shares authorized; 202.9 million and 201.4 million shares issued and outstanding at April 30, 2017 and January 29, 2017, respectively 2   2 
Paid-in capital 3,994   3,962 
Accumulated deficit (2,850)  (2,969)
Accumulated other comprehensive loss (14)  (15)
Treasury stock, at cost, 0.2 and 0.6 million shares at April 30, 2017 and January 29, 2017, respectively (9)  (20)
Total stockholders' equity 1,123   960 
Total liabilities and stockholders' equity$ 5,926  $5,707 


HD SUPPLY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in millions, Unaudited

 Three Months Ended
 April 30,
2017
 May 1,
2016
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income (loss)$ 85  $(14)
Reconciliation of net income (loss) to net cash provided by (used in) operating activities:   
Depreciation and amortization 25    25 
Provision for uncollectibles 2    1 
Non-cash interest expense 3    4 
Payments of discounts upon extinguishment of debt (4)   
Loss on extinguishment of debt 3   115 
Stock‑based compensation expense 6    6 
Deferred income taxes 34    (9)
Other (1)   
Changes in assets and liabilities, net of the effects of acquisitions & dispositions:   
(Increase) decrease in receivables (113)  (81)
(Increase) decrease in inventories (83)  (91)
(Increase) decrease in other current assets (3)  (20)
Increase (decrease) in accounts payable and accrued liabilities 129   140 
Increase (decrease) in other long-term liabilities     
Net cash provided by operating activities 83   76 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Capital expenditures (24)  (17)
Proceeds from sales of property and equipment   2      
Net cash provided by (used in) investing activities (22)  (17)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Proceeds from issuance of common stock under employee benefit plans 25   6 
Purchase of treasury shares (9)  (9)
Borrowings of long-term debt    1,000 
Repayments of long-term debt (100)  (1,108)
Borrowings on long-term revolver debt 75    
Repayments on long-term revolver debt (55)   
Debt issuance and modification costs (5)  (14)
Other financing activities 3   (2)
Net cash provided by (used in) financing activities (66)  (127)
Effect of exchange rates on cash and cash equivalents    2 
Increase (decrease) in cash and cash equivalents$ (5) $(66)
Cash and cash equivalents at beginning of period 75   269 
Cash and cash equivalents at end of period$ 70  $203 


HD SUPPLY HOLDINGS, INC.
SEGMENT REPORTING
Amounts in millions, Unaudited

 Facilities
Maintenance
 Waterworks Construction &
Industrial
 Corporate Total
Continuing
Operations
Three Months Ended April 30, 2017         
Net sales$ 682 $ 657 $ 536 $ (2) $ 1,873
Adjusted EBITDA 117  51  55  (16)  207
Depreciation(1) & Software Amortization 7  3  9  3   22
Other Intangible Amortization 1      2   3
Three Months Ended May 1, 2016         
Net sales$677 $605 $501 $(2) $1,781
Adjusted EBITDA 134  48  49  (16)  215
Depreciation(1) & Software Amortization 8  2  8  3   21
Other Intangible Amortization 1  1    2   4


(1)Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations.

Reconciliation of Non-GAAP Measures

Adjusted EBITDA and Adjusted net income are not recognized terms under GAAP and do not purport to be alternatives to Net income (loss) as a measure of operating performance. We present Adjusted EBITDA and Adjusted net income because each is a primary measure used by management to evaluate operating performance. In addition, we present Adjusted net income to measure our overall profitability as we believe it is an important measure of our performance. We believe the presentation of Adjusted EBITDA and Adjusted net income enhances investors' overall understanding of the financial performance of our business.

Adjusted EBITDA is based on "Consolidated EBITDA," a measure which is defined in our senior credit facilities and used in calculating financial ratios in several material debt covenants. Adjusted EBITDA is defined as Net income (loss) less Income (loss) from discontinued operations, net of tax, plus (i) Interest expense and Interest income, net, (ii) Provision (benefit) for income taxes, (iii) depreciation and amortization and further adjusted to exclude loss on extinguishment of debt, non-cash items and certain other adjustments to Consolidated Net Income permitted in calculating Consolidated EBITDA under our senior credit facilities.

Adjusted net income is defined as Net income (loss) less Income (loss) from discontinued operations, net of tax, further adjusted for loss on extinguishment of debt, certain non-cash, non-recurring or unusual items, net of tax.

We compensate for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, our presentation of Adjusted EBITDA and Adjusted net income may not be comparable to other similarly titled measures of other companies.

Adjusted EBITDA and Adjusted net income have limitations as analytical tools and should not be considered in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:

  • Adjusted EBITDA and Adjusted net income do not reflect changes in, or cash requirements for, our working capital needs;
  • Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt;
  • Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;
  • Adjusted EBITDA and Adjusted net income do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

Adjusted EBITDA

The following table presents a reconciliation of Net income (loss) and Income (loss) from Continuing Operations, the most directly comparable financial measures under GAAP, to Adjusted EBITDA for the periods presented (amounts in millions):

 Three Months Ended
 April 30,
2017
 May 1,
2016
Net income (loss) $ 85 $(14)
Less income (loss)  from discontinued operations, net of tax    
Income (loss) from continuing operations 85  (14)
Interest expense, net 49  85 
Provision (benefit) for income taxes 37  (8)
Depreciation and amortization (1) 25  25 
Loss on extinguishment of debt (2) 3  115 
Restructuring charges (3)   7 
Stock-based compensation 6  6 
Other 2  (1)
Adjusted EBITDA$ 207 $215 


(1)Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations.
(2)Represents the loss on extinguishment of debt including the write-off of unamortized deferred financing costs and other assets or liabilities associated with such debt.
(3)Represents the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs.

Adjusted Net Income

The following table presents a reconciliation of Net income (loss) and Income (loss) from Continuing Operations, the most directly comparable financial measures under U.S. GAAP, to Adjusted net income for the periods presented (dollars in millions, except per share amounts):

 Three Months Ended
 April 30,
2017
 May 1,
2016
Net income (loss)$ 85  $(14)
Less income (loss) from discontinued operations, net of tax     
Income (loss) from continuing operations 85   (14)
Plus: Provision (benefit) for income taxes 37   (8)
Less: Cash income taxes (3)  (1)
Plus: Amortization of acquisition-related intangible assets (other than software) 3   4 
Plus: Loss on extinguishment & modification of debt (1) 3   115 
Restructuring charges (2)    7 
Other 2    
Adjusted Net Income$ 127  $103 
    
Diluted weighted average common shares outstanding (thousands) 203,017   201,231 
Adjusted net income per share — diluted$ 0.63  $0.51 


(1)Represents the loss on extinguishment of debt including the write-off of unamortized deferred financing costs and other assets or liabilities associated with such debt.
(2)Represents the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs.

No reconciliation of the forecasted range for Adjusted EBITDA to Net income and Adjusted net income per diluted share to Net income per diluted share for the second quarter of fiscal 2017 is included in this press release because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

Results Revised for Discontinued Operations

On June 4, 2017, HD Supply entered into a definitive agreement to sell its Waterworks business, a provider of water and wastewater transmission products in the non-residential and residential markets. The transaction is expected to close in the third quarter of fiscal 2017. In accordance with Accounting Standards Codification 205-20, "Discontinued Operations," the results of the Waterworks business will be reflected as a discontinued operation beginning in the second quarter of fiscal 2017. The presentation of discontinued operations includes revenue and expenses of the discontinued operations, net of tax, as one line item on the Consolidated Statements of Operations for all periods presented.

The following tables present HD Supply's quarterly results of operations for the first quarter of fiscal 2017, fiscal 2016, and fiscal 2015, revised to reflect the Waterworks operations as discontinued operations. These financial statements also include the previous revisions reflecting Interior Solutions and Power Solutions as discontinued operations, as noted in our Fiscal 2016 Form 10-K (amounts in millions, except share and per share amounts, unaudited):

 Q1-17
Net sales$1,216
Cost of sales 732
Gross profit 484
Operating expenses: 
Selling, general and administrative 334
Depreciation and amortization 21
Total operating expenses 355
Operating income 129
Interest expense 49
Loss on extinguishment & modification of debt 3
Income from continuing operations before provision for income taxes 77
Provision for income taxes  19
Income from continuing operations 58
Income from discontinued operations, net of tax 27
Net income $ 85
  
Weighted Average Common Shares Outstanding (thousands) 
Basic 200,708
Diluted 203,017
Basic Earnings Per Share(1): 
Income from continuing operations$0.29
Income from discontinued operations   0.13
Net income$0.42
Diluted Earnings Per Share(1): 
Income from continuing operations$0.29
Income from discontinued operations 0.13
Net income (loss)$0.42
Non-GAAP financial data: 
Adjusted EBITDA$  157
Adjusted Net Income$80
Weighted Average Common Shares Outstanding (thousands) 
Basic 200,708
Diluted 203,017
Adjusted Net income per share - Basic$0.40
Adjusted Net income per share - Diluted$0.39
   
(1)    May not foot due to rounding.  
   


 Q1-16 Q2-16 Q3-16 Q4-16 Fiscal
2016
Net sales$1,176  $1,283 $1,275 $1,085  $4,819
Cost of sales 706   771  763  654   2,894
Gross profit 470   512  512  431   1,925
Operating expenses:         
Selling, general and administrative 309   315  327  318   1,269
Depreciation and amortization 21   21  21  21   84
Restructuring 7   4  3  (7)  7
Total operating expenses 337   340  351  332   1,360
Operating income 133   172  161  99   565
Interest expense 85   69  65  50   269
Loss on extinguishment & modification of debt 115     59  5   179
Income (loss) from continuing operations before provision for income taxes (67)  103  37  44   117
Provision (benefit) for income taxes  (26)  41  16  20   51
Income (loss) from continuing operations (41)  62  21  24   66
Income from discontinued operations, net of tax 27   36  39  28   130
Net income (loss)$ (14) $ 98 $ 60 $ 52  $ 196
          
Weighted Average Common Shares Outstanding (thousands)         
Basic 198,808   199,250  199,593  199,888   199,385
Diluted 198,808   201,978  202,007  202,587   202,000
Basic Earnings Per Share(1):         
Income (loss) from continuing operations$(0.21) $0.31 $0.11 $0.12  $0.33
Income from discontinued operations 0.14   0.18  0.20  0.14   0.65
Net income (loss)$(0.07) $0.49 $0.30 $0.26  $0.98
Diluted Earnings Per Share(1):         
Income (loss) from continuing operations$(0.21) $0.31 $0.10 $0.12  $0.33
Income (loss) from discontinued operations 0.14   0.18  0.19  0.14   0.64
Net income (loss)$(0.07) $0.49 $0.30 $0.26  $0.97
Non-GAAP financial data:         
Adjusted EBITDA$167  $205 $189 $119  $680
Adjusted Net Income$57  $105 $96 $44  $302
Weighted Average Common Shares Outstanding (thousands)         
Basic 198,808   199,250  199,593  199,888   199,385
Diluted 201,231   201,978  202,007  202,587   202,000
Adjusted Net income per share - Basic$0.29  $0.53 $0.48 $0.22  $1.51
Adjusted Net income per share - Diluted$0.28  $0.52 $0.48 $0.22  $1.50
                 
(1)    May not foot due to rounding.
                 


 Q1-15 Q2-15 Q3-15 Q4-15 Fiscal
2015
Net sales$1,090  $1,236 $1,238  $1,051  $4,615 
Cost of sales 660   745  754   642   2,801 
Gross profit 430   491  484   409   1,814 
Operating expenses:         
Selling, general and administrative 292   305  295   292   1,184 
Depreciation and amortization 24   25  24   24   97 
Restructuring      3   5   8 
Total operating expenses 316   330  322   321   1,289 
Operating income 114   161  162   88   525 
Interest expense 106   106  99   83   394 
Loss on extinguishment & modification of debt      100      100 
Other (income) expense, net    1        1 
Income (loss) from continuing operations before provision for income taxes 8   54  (37)  5   30 
Provision (benefit) for income taxes  (188)  8  8   (998)  (1,170)
Income (loss) from continuing operations 196   46  (45)  1,003   1,200 
Income (loss) from discontinued operations, net of tax 46   63  295   (132)  272 
Net income$ 242  $ 109 $ 250  $ 871  $ 1,472 
          
Weighted Average Common Shares Outstanding (thousands)         
Basic 195,347   196,893  197,529   198,276   197,011 
Diluted 200,716   201,809  197,529   201,156   201,308 
Basic Earnings Per Share(1):         
Income (loss) from continuing operations$1.00  $0.23 $(0.23) $5.06  $6.09 
Income (loss) from discontinued operations 0.24   0.32  1.49   (0.67)  1.38 
Net income$1.24  $0.55 $1.27  $4.39  $7.47 
Diluted Earnings Per Share(1):         
Income (loss) from continuing operations$0.98  $0.23 $(0.23) $4.99  $5.96 
Income (loss) from discontinued operations 0.23   0.31  1.49   (0.66)  1.35 
Net income$1.21  $0.54 $1.27  $4.33  $7.31 
Non-GAAP financial data:         
Adjusted EBITDA$144  $191 $195  $120  $650 
Adjusted Net Income$8  $52 $65  $11  $136 
Weighted Average Common Shares Outstanding (thousands)         
Basic 195,347   196,893  197,529   198,276   197,011 
Diluted 200,716   201,809  201,546   201,156   201,308 
Adjusted Net income per share - Basic$0.04  $0.26 $0.33  $0.06  $0.69 
Adjusted Net income per share - Diluted$0.04  $0.26 $0.32  $0.05  $0.68 
                   
(1)    May not foot due to rounding.
                   

The following table represents a reconciliation of Net income (loss) and Income (loss) from continuing operations, the most directly comparable financial measures under GAAP for the first quarter of fiscal 2017, fiscal 2016, and fiscal 2015, revised to reflect the Waterworks operations as discontinued operations for all periods presented, to Adjusted EBITDA for the periods presented (amounts in millions):

 Q1-17
Net income $ 85
Less income from discontinued operations, net of tax   27
Income from continuing operations   58
Interest expense, net 49
Provision for income taxes (i) 19
Depreciation and amortization (ii) 22
Stock-based compensation 6
Restructuring charges (iii) 
Loss on extinguishment of debt (iv) 3
Costs related to public offerings (v) 
Other 
Adjusted EBITDA$ 157


 Q1-16 Q2-16 Q3-16 Q4-16 Fiscal
2016
Net income (loss)$ (14) $ 98 $ 60  $ 52  $ 196
Less income from discontinued operations, net of tax 27   36  39   28   130
Income (loss) from continuing operations (41)  62  21   24   66
Interest expense, net 85   69  65   50   269
Provision (benefit) for income taxes (i) (26)  41  16   20   51
Depreciation and amortization (ii) 21   23  22   22   88
Stock-based compensation 6   5  4   5   20
Restructuring charges (iii) 7   4  3   (7)  7
Loss on extinguishment & modification of debt (iv) 115     59   5   179
Costs related to public offerings (v)            
Other    1  (1)     
Adjusted EBITDA$ 167  $ 205 $ 189  $ 119  $ 680


 Q1-15 Q2-15 Q3-15 Q4-15 Fiscal
2015
Net income$ 242  $ 109  $ 250  $ 871  $ 1,472 
Less income (loss) from discontinued operations, net of tax 46   63   295   (132)  272 
Income (loss) from continuing operations 196   46   (45)  1,003   1,200 
Interest expense, net 106   106   99   83   394 
Provision (benefit) for income taxes (i) (188)  8   8   (998)  (1,170)
Depreciation and amortization (ii) 25   26   25   24   100 
Stock-based compensation 5   5   4   2   16 
Restructuring charges (iii)       3   5   8 
Loss on extinguishment & modification of debt (iv)       100      100 
Costs related to public offerings (v)    1         1 
Other    (1)  1   1   1 
Adjusted EBITDA$ 144  $ 191  $ 195  $ 120  $ 650 


(i)During fiscal 2015, the company recorded a $1,007 million tax benefit for the reversal of substantially all of the valuation allowance on its U.S. net deferred tax assets and a $189 million tax benefit for the reduction in unrecognized tax benefits as a result of IRS and state audit settlements.
(ii)Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations and Comprehensive Income.
(iii)Represents the costs incurred for strategic alignment of our workforce and branch closures or consolidations. These costs include occupancy costs, severance, relocation costs, and other costs incurred to exit a location.
(iv)Represents the loss on extinguishment of debt including the premium paid to repurchase or call the debt as well as the write-off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt. Also includes the costs of debt modifications.
(v)Represents the costs expensed in connection with secondary offerings of the company's common stock by certain of the company's shareholders.

The following table represents a reconciliation of Net income (loss) and Income (loss) from continuing operations, the most directly comparable financial measures under GAAP for the first quarter of fiscal 2017, fiscal 2016, and fiscal 2014, revised to reflect the Waterworks operations as discontinued operations for all periods presented, to Adjusted Net Income for the periods presented (amounts in millions):

 Q1-17
Net income$ 85 
Less income from discontinued operations, net of tax   27 
Income from continuing operations   58 
Provision for income taxes (i) 19 
Cash paid for income taxes (3)
Amortization of acquisition-related intangible assets (other than software) 3 
Restructuring charges (ii)  
Loss on extinguishment of debt (iii) 3 
Costs related to public offerings (iv)  
Other  
Adjusted Net income$80 


 Q1-16 Q2-16 Q3-16 Q4-16 Fiscal
2016
Net income (loss)$ (14) $ 98  $ 60  $ 52  $ 196 
Less income from discontinued operations, net of tax 27   36   39   28   130 
Income (loss) from continuing operations (41)  62   21   24   66 
Provision (benefit) for income taxes (i) (26)  41   16   20   51 
Cash paid for income taxes (1)  (5)  (6)  (1)  (13)
Amortization of acquisition-related intangible assets (other than software) 3   3   3   3   12 
Restructuring charges (ii) 7   4   3   (7)  7 
Loss on extinguishment & modification of debt (iii) 115      59   5   179 
Costs related to public offerings (iv)              
Other              
Adjusted Net income$57  $105  $96  $44  $302 


 Q1-15 Q2-15 Q3-15 Q4-15 Fiscal
2015
Net income$ 242  $ 109  $ 250  $ 871  $ 1,472 
Less income (loss) from discontinued operations, net of tax 46   63   295   (132)  272 
Income (loss) from continuing operations 196   46   (45)  1,003   1,200 
Provision (benefit) for income taxes (i) (188)  8   8   (998)  (1,170)
Cash paid for income taxes (3)  (6)  (5)  (2)  (16)
Amortization of acquisition-related intangible assets (other than software) 3   3   3   3   12 
Restructuring charges (ii)       4   5   9 
Loss on extinguishment & modification of debt (iii)       100      100 
Costs related to public offerings (iv)    1         1 
Other              
Adjusted Net income$8  $52  $65  $11  $136 


(i)During fiscal 2015, the company recorded a $1,007 million tax benefit for the reversal of substantially all of the valuation allowance on its U.S. net deferred tax assets and a $189 million tax benefit for the reduction in unrecognized tax benefits as a result of IRS and state audit settlements.
(ii)Represents the costs incurred for strategic alignment of our workforce and branch closures or consolidations. These costs include occupancy costs, severance, relocation costs, and other costs incurred to exit a location.
(iii)Represents the loss on extinguishment of debt including the premium paid to repurchase or call the debt as well as the write-off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt. Also includes the costs of debt modifications.
(iv)Represents the costs expensed in connection with secondary offerings of the company's common stock by certain of the company's shareholders.


Investor Contact:
Charlotte McLaughlin
HD Supply Investor Relations
770-852-9100
InvestorRelations@hdsupply.com


Media Contact:

Quiana Pinckney, APR
HD Supply Public Relations
770-852-9057
Quiana.Pinckney@hdsupply.com
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