UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

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

 

Date of Report (Date of earliest event reported): December 4, 2018

 

Commission File
Number

 

Exact name of Registrant as specified in its
charter, Address of principal executive offices
and Telephone number

 

State of
incorporation

 

I.R.S. Employer
Identification
Number

001-35979

 

HD SUPPLY HOLDINGS, INC.

3400 Cumberland Boulevard
Atlanta, Georgia 30339
(770) 852-9000

 

Delaware

 

26-0486780

 

 

 

 

 

 

 

333-159809

 

HD SUPPLY, INC.

3400 Cumberland Boulevard
Atlanta, Georgia 30339
(770) 852-9000

 

Delaware

 

75-2007383

 

Not Applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company o

 

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. o

 

 

 


 

Item 2.02. Results of Operations and Financial Condition.

 

On December 4, 2018,  HD Supply Holdings, Inc. (the “Company” or “HD Supply”), HD Supply, Inc.’s parent company, issued a press release, filed as Exhibit 99.1 and incorporated herein by reference, announcing the Company’s financial results for the three months ended October 28, 2018 and certain other information.

 

The information contained in Item 7.01 concerning the presentation to HD Supply investors is hereby incorporated into this Item 2.02 by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

Item 7.01.  Regulation FD Disclosure.

 

The slide presentation attached hereto as Exhibit 99.2, and incorporated herein by reference, will be presented to certain investors of HD Supply on December 4, 2018 and may be used by HD Supply in various other presentations to investors.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.

 

Description of Exhibit

 

 

 

99.1

 

Press Release “HD Supply Holdings, Inc. Announces Fiscal 2018 Third-Quarter Results, Raises Full-Year Guidance and Announces An Additional $500 million Share Repurchase Authorization” dated December 4, 2018.

 

 

 

99.2

 

HD Supply presentation to investors.

 

2


 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: December 4, 2018

HD Supply Holdings, Inc.

 

 

 

By:

/s/ Dan S. McDevitt

 

 

Dan S. McDevitt

 

 

General Counsel and Corporate Secretary

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: December 4, 2018

HD Supply, Inc.

 

 

 

By:

/s/ Dan S. McDevitt

 

 

Dan S. McDevitt

 

 

General Counsel and Corporate Secretary

 

3


Exhibit 99.1

 

 

Investor Contact:

Charlotte McLaughlin

HD Supply Investor Relations

770-852-9100

InvestorRelations@hdsupply.com

 

Media Contact:

Quiana Pinckney

HD Supply Public Relations

770-852-9057

Quiana.Pinckney@hdsupply.com

 

HD Supply Holdings, Inc. Announces Fiscal 2018 Third-Quarter Results, Raises Full-Year Guidance
Midpoint and Announces an Additional $500 million Share Repurchase Authorization

 

ATLANTA, GA — December 4th, 2018 — HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest industrial distributors in North America, today reported Net sales of $1.6 billion for the third quarter of fiscal 2018 ended October 28, 2018, an increase of $242 million, or 17.7 percent, as compared to the third quarter of fiscal 2017.  Organic sales growth for the third quarter of fiscal 2018 was 9.4 percent, as compared to the third quarter of fiscal 2017.

 

“I couldn’t be more proud of the team’s performance in the third quarter. We continued to see both businesses deliver impressive sales growth and have successfully enhanced our capital structure through strategic refinancing and opportunistic share repurchases.” stated Joe DeAngelo, Chairman and CEO of HD Supply. “I am also delighted to announce that on November 30, 2018, the Board of Directors authorized a new $500 million share repurchase program, bringing our total authorization to $1.5 billion since 2017.”

 

Gross profit increased $87 million, or 16.1 percent, to $629 million for the third quarter of fiscal 2018, as compared to $542 million for the third quarter of fiscal 2017. Gross profit was 39.0 percent of Net sales for the third quarter of fiscal 2018, down approximately 60 basis points from 39.6 percent for the third quarter of fiscal 2017.

 

Operating income increased $31 million, or 17.0 percent, to $213 million for the third quarter of fiscal 2018, as compared to $182 million for the third quarter of fiscal 2017. Operating income was 13.2 percent of Net sales for the third quarter of fiscal 2018, down approximately 10 basis points from 13.3 percent for the third quarter of fiscal 2017.

 

Income from continuing operations increased $36 million, or 78.3 percent, to $82 million for the third quarter of fiscal 2018, as compared to $46 million for the third quarter of fiscal 2017.

 

Net income decreased $370 million, or 81.9 percent, to $82 million for the third quarter of fiscal 2018, as compared to $452 million for the third quarter of fiscal 2017. Net income in the third quarter of fiscal 2017 included $406 million of Income from discontinued operations, net of tax.

 

Adjusted EBITDA increased $34 million, or 15.9 percent, to $248 million for the third quarter of fiscal 2018, as compared to $214 million for the third quarter of fiscal 2017. Adjusted EBITDA was 15.4 percent of Net sales for the third quarter of fiscal 2018, down approximately 20 basis points from 15.6 percent for the third quarter of fiscal 2017.

 

Adjusted net income increased $35 million, or 23.5 percent, to $184 million for the third quarter of fiscal 2018, as compared to $149 million for the third quarter of fiscal 2017.  Adjusted net income per diluted share was $1.00 in the third quarter of fiscal 2018, as compared to $0.80 in the third quarter of fiscal 2017.

 

1


 

As of October 28, 2018, HD Supply’s combined liquidity of $920 million was comprised of $52 million in cash and cash equivalents and $868 million of additional available borrowings (excluding $175 million of borrowings on available cash balances) under HD Supply, Inc.’s senior asset-based lending facility, based on qualifying inventory and receivables.

 

Business Unit Performance

 

Facilities Maintenance

 

Net sales increased $56 million, or 7.4 percent, to $810 million in the third quarter of fiscal 2018, as compared to $754 million for the third quarter of fiscal 2017.  Adjusted EBITDA increased $5 million, or 3.5 percent, to $149 million for the third quarter of fiscal 2018, as compared to $144 million for the third quarter of fiscal 2017.  Adjusted EBITDA was 18.4 percent of Net sales for the third quarter of fiscal 2018, down approximately 70 basis points from 19.1 percent for the third quarter of fiscal 2017.

 

Construction & Industrial

 

Net sales increased $186 million, or 30.1 percent, to $803 million in the third quarter of fiscal 2018, as compared to $617 million for the third quarter of fiscal 2017.  Organic sales growth was approximately 11.8 percent in the third quarter of fiscal 2018 as compared to the third quarter of fiscal 2017. Adjusted EBITDA increased $29 million, or 41.4 percent, to $99 million for the third quarter of fiscal 2018, as compared to $70 million for the third quarter of fiscal 2017.  Adjusted EBITDA was 12.3 percent of Net sales for the third quarter of fiscal 2018, up approximately 100 basis points from 11.3 percent for the third quarter of fiscal 2017.

 

Third-Quarter Monthly Sales Performance

 

Net sales for August, September and October of fiscal 2018 were $513 million, $481 million and $618 million, respectively.  There were 20 selling days in August, 19 selling days in September and 25 selling days in October in both 2018 and 2017.  Average year-over-year daily sales growth for August, September and October was 17.7 percent, 19.4 percent and 16.3 percent, respectively. On an organic basis, average year-over-year daily sales growth for August, September and October was 9.9 percent, 10.9 percent and 7.7 percent, respectively.

 

Preliminary November Sales Results

 

Preliminary Net sales in November 2018 were approximately $426 million, which represents year-over-year average daily sales growth of approximately 14.6 percent (6.8 percent on an organic basis).  Preliminary November year-over-year average daily sales growth by business segment was approximately 7.0 percent for Facilities Maintenance and approximately 23.1 percent (6.6 percent on an organic basis) for Construction & Industrial.  There were 18 selling days in both November 2018 and November 2017.

 

Capital Structure Activities

 

Redemption of the April 2016 Senior Unsecured Notes and Issuance of the October 2018 Senior Unsecured Notes

 

On October 11, 2018, HD Supply issued $750 million of 5.375% Senior Unsecured Notes due 2026 (“the October 2018 Senior Unsecured Notes”) at par. The Company used the net proceeds from the October 2018 Senior Unsecured Notes issuance, together with available cash and borrowings on our revolving credit facility, to redeem all of the outstanding $1,000 million aggregate principal of the 5.75% Senior Unsecured Notes due 2024.

 

Amendment of the Term Loan Facility and New Interest Rate Swap

 

On October 22, 2018, HD Supply entered into an amendment to the existing Term Loan Facility, which allowed for the refinancing of all the outstanding term loans totaling $1,070 million with a new tranche of term loans (the “Term B-5 Loans”) in the amount of $1,070 million, at an interest rate of LIBOR plus 1.75% or base rate plus 0.75%, maturing on October 17, 2023. On October 24, 2018, the Company entered into an interest rate swap agreement, which effectively converts $750 million of the Company’s Term B-5 Loans from a rate of LIBOR plus

 

2


 

1.75% to a 4.82% fixed rate.  With this transaction, the interest on more than 75% of our debt has effectively been fixed.

 

Share Repurchase Program

 

On November 30, 2018, the Company’s Board of Directors authorized a new share repurchase program for the repurchase of up to an aggregate $500 million of its common stock.  The Company will conduct repurchases under the share repurchase program in the open market and through broker negotiated purchases in compliance with Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended, and subject to market conditions, restrictive covenants contained in existing debt agreements, applicable legal requirements and other relevant factors. This share repurchase program does not obligate the Company to acquire any particular amount of its common stock, and it may be terminated at any time at the Company’s discretion.  As of November 30, 2018, the Company has $656 million remaining under its new and previous share repurchase authorizations.

 

Fourth-Quarter and Full Year 2018 Outlook

 

For the fourth quarter of fiscal 2018, Net sales are anticipated to be in the range of $1,375 million and $1,425 million, Adjusted EBITDA(1) in the range of $173 million and $183 million and Adjusted net income per diluted share(1) in the range of $0.63 and $0.68.  The Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 180 million.  At the mid-point of the ranges, our fourth-quarter 2018 Net sales and Adjusted EBITDA translate into approximately 18 percent growth and 17 percent growth, respectively, versus prior year.

 

For the full year fiscal 2018, Net sales are anticipated to be in the range of $5,976 million and $6,026 million, Adjusted EBITDA(1) in the range of $857 million and $867 million and Adjusted net income per diluted share(1) in the range of $3.33 and $3.38.  The Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 183 million. At the mid-point of the ranges, our full year 2018 Net sales and Adjusted EBITDA translate into approximately 17 percent growth and 18 percent growth, respectively, versus prior year.

 

Fiscal 2018 Third-Quarter Conference Call

 

As previously announced, HD Supply will hold a conference call on Tuesday, December 4th, 2018 at 8:00 a.m. (Eastern Time) to discuss its third-quarter results.  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 and Adjusted net income per diluted share. 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 500,000 customers with leadership positions in the maintenance, repair and operations and specialty construction sectors. Through approximately 270 branches and 44 distribution centers in the U.S. and Canada, the company’s approximately 11,000 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.

 


(1)  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 fourth quarter of fiscal 2018 or the full year fiscal 2018 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.

 

3


 

Forward-Looking Statements and Preliminary Results

 

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and information currently available to management and are subject to known and unknown risks and uncertainties, many of which October 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 October 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 “October,” “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 those “Risk factors” in our annual report on Form 10-K, for the fiscal year ended January 28, 2018, filed on March 13, 2018 and those described from time to time in our, and HD Supply, Inc.’s, other filings with the U.S. Securities and Exchange Commission (the “SEC”), 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 and year-end adjustments. Any variation between HD Supply’s actual results and the preliminary financial data set forth above may be material.

 

4


 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Amounts in millions, except share and per share data, Unaudited

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

October
28, 2018

 

October
29, 2017

 

October
28, 2018

 

October
29, 2017

 

Net Sales

 

$

1,612

 

$

1,370

 

$

4,601

 

$

3,938

 

Cost of sales

 

983

 

828

 

2,798

 

2,373

 

Gross Profit

 

629

 

542

 

1,803

 

1,565

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

391

 

336

 

1,147

 

1,008

 

Depreciation and amortization

 

25

 

21

 

72

 

63

 

Restructuring

 

 

3

 

9

 

3

 

Total operating expenses

 

416

 

360

 

1,228

 

1,074

 

Operating Income

 

213

 

182

 

575

 

491

 

Interest expense

 

32

 

36

 

101

 

134

 

Interest (income)

 

 

(1

)

(1

)

(1

)

Loss on extinguishment & modification of debt

 

69

 

78

 

69

 

81

 

Income from Continuing Operations Before Provision for Income Taxes

 

112

 

69

 

406

 

277

 

Provision for income taxes

 

30

 

23

 

105

 

92

 

Income from Continuing Operations

 

82

 

46

 

301

 

185

 

Income from discontinued operations, net of tax

 

 

406

 

1

 

794

 

Net Income

 

$

82

 

$

452

 

$

302

 

$

979

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

1

 

2

 

(1

)

Unrealized loss on cash flow hedge, net of tax of $1, $-, $1, $-

 

(4

)

 

(4

)

 

Total Comprehensive Income

 

$

78

 

$

453

 

$

300

 

$

978

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

 

 

 

 

Basic

 

182,730

 

185,651

 

183,349

 

194,704

 

Diluted

 

183,579

 

186,652

 

184,192

 

196,258

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share(1):

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.45

 

$

0.25

 

$

1.64

 

$

0.95

 

Income from Discontinued Operations

 

$

 

$

2.19

 

$

0.01

 

$

4.08

 

Net Income

 

$

0.45

 

$

2.43

 

$

1.65

 

$

5.03

 

Diluted Earnings Per Share(1):

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.45

 

$

0.25

 

$

1.63

 

$

0.94

 

Income from Discontinued Operations

 

$

 

$

2.18

 

$

0.01

 

$

4.05

 

Net Income

 

$

0.45

 

$

2.42

 

$

1.64

 

$

4.99

 

 


(1 ) May not foot due to rounding.

 

5


 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

Amounts in millions, except per share data, Unaudited

 

 

 

October 28,
2018

 

January 28,
2018

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

52

 

$

558

 

Receivables, less allowance for doubtful accounts of $19 and $12

 

860

 

612

 

Inventories

 

803

 

674

 

Other current assets

 

46

 

31

 

Total current assets

 

1,761

 

1,875

 

Property and equipment, net

 

356

 

325

 

Goodwill

 

1,993

 

1,807

 

Intangible assets, net

 

197

 

91

 

Deferred tax asset

 

94

 

205

 

Other assets

 

17

 

15

 

Total assets

 

$

4,418

 

$

4,318

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

483

 

$

377

 

Accrued compensation and benefits

 

105

 

95

 

Current installments of long-term debt

 

11

 

11

 

Other current liabilities

 

261

 

138

 

Total current liabilities

 

860

 

621

 

Long-term debt, excluding current installments

 

1,888

 

2,090

 

Other liabilities

 

70

 

141

 

Total liabilities

 

2,818

 

2,852

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01; 1 billion shares authorized; 181.4 million and 185.7 million shares issued and outstanding at October 28, 2018, and January 28, 2018, respectively

 

2

 

2

 

Paid-in capital

 

4,055

 

4,029

 

Accumulated deficit

 

(1,663

)

(1,966

)

Accumulated other comprehensive loss

 

(20

)

(17

)

Treasury stock, at cost, 23.2 and 18.2 million shares at October 28, 2018 and January 28, 2018, respectively

 

(774

)

(582

)

Total stockholders’ equity

 

1,600

 

1,466

 

Total liabilities and stockholders’ equity

 

$

4,418

 

$

4,318

 

 

6


 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in millions, Unaudited

 

 

 

Nine Months Ended

 

 

 

October 28,
2018

 

October 29,
2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

302

 

$

979

 

Reconciliation of net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

78

 

73

 

Provision for uncollectibles

 

9

 

6

 

Non-cash interest expense

 

15

 

11

 

Payment of discounts upon extinguishment of debt

 

(4

)

(6

)

Loss on extinguishment of debt

 

69

 

81

 

Stock-based compensation expense

 

19

 

19

 

Deferred income taxes

 

97

 

316

 

(Gain) on sales of businesses, net

 

 

(930

)

Other

 

(1

)

 

Changes in assets and liabilities, net of the effects of acquisitions & dispositions:

 

 

 

 

 

(Increase) decrease in receivables

 

(204

)

(249

)

(Increase) decrease in inventories

 

(94

)

(116

)

(Increase) decrease in other current assets

 

(3

)

1

 

(Increase) decrease in other assets

 

 

1

 

Increase (decrease) in accounts payable and accrued liabilities

 

95

 

132

 

Increase (decrease) in other long-term liabilities

 

1

 

2

 

Net cash provided by operating activities

 

379

 

320

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(79

)

(65

)

Proceeds from sales of property and equipment

 

 

2

 

Proceeds from sales of businesses, net

 

 

2,450

 

Payments for businesses acquired, net of cash acquired

 

(362

)

 

Net cash provided by (used in) investing activities

 

(441

)

2,387

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from issuance of common stock under employee benefit plans

 

7

 

37

 

Purchase of treasury shares

 

(166

)

(555

)

Tax withholdings on stock-based awards

 

(6

)

 

Borrowings of long-term debt

 

930

 

113

 

Repayments of long-term debt

 

(1,240

)

(1,526

)

Borrowings on long-term revolver debt

 

100

 

624

 

Repayments on long-term revolver debt

 

(49

)

(989

)

Debt issuance and modification costs

 

(18

)

(26

)

Other financing activities

 

(2

)

1

 

Net cash provided by (used in) financing activities

 

(444

)

(2,321

)

Effect of exchange rates on cash and cash equivalents

 

 

 

Increase (decrease) in cash and cash equivalents

 

$

(506

)

$

386

 

Cash and cash equivalents at beginning of period

 

558

 

75

 

Cash and cash equivalents at end of period

 

$

52

 

$

461

 

 

7


 

HD SUPPLY HOLDINGS, INC.

SEGMENT REPORTING

Amounts in millions, Unaudited

 

 

 

Facilities
Maintenance

 

Construction
& Industrial

 

Eliminations

 

Total
Continuing
Operations

 

Three Months Ended October 28, 2018

 

 

 

 

 

 

 

 

 

Net sales

 

$

810

 

$

803

 

$

(1

)

$

1,612

 

Adjusted EBITDA

 

149

 

99

 

 

248

 

Depreciation(1) & Software Amortization

 

10

 

12

 

 

22

 

Other Intangible Amortization

 

2

 

3

 

 

5

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended October 29, 2017

 

 

 

 

 

 

 

 

 

Net sales

 

$

754

 

$

617

 

$

(1

)

$

1,370

 

Adjusted EBITDA

 

144

 

70

 

 

214

 

Depreciation(1) & Software Amortization

 

9

 

10

 

 

19

 

Other Intangible Amortization

 

1

 

2

 

 

3

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended October 28, 2018

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,353

 

$

2,250

 

$

(2

)

$

4,601

 

Adjusted EBITDA

 

422

 

262

 

 

684

 

Depreciation(1) & Software Amortization

 

28

 

34

 

 

62

 

Other Intangible Amortization

 

6

 

10

 

 

16

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended October 29, 2017

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,205

 

$

1,737

 

$

(4

)

$

3,938

 

Adjusted EBITDA

 

397

 

182

 

 

579

 

Depreciation(1) & Software Amortization

 

26

 

31

 

 

57

 

Other Intangible Amortization

 

6

 

3

 

 

9

 

 


(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 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 less Income from discontinued operations, net of tax, plus (i) Interest expense and Interest income, net, (ii) Provision 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 less Income 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:

 

8


 

·                       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 and Income from Continuing Operations, the most directly comparable financial measures under GAAP, to Adjusted EBITDA for the periods presented (amounts in millions):

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

October 28,
2018

 

October 29,
2017

 

October 28,
2018

 

October 29,
2017

 

Net income

 

$

82

 

$

452

 

$

302

 

$

979

 

Less income from discontinued operations, net of tax

 

 

406

 

1

 

794

 

Income from continuing operations

 

82

 

46

 

301

 

185

 

Interest expense, net

 

32

 

35

 

100

 

133

 

Provision for income taxes

 

30

 

23

 

105

 

92

 

Depreciation and amortization (1)

 

27

 

22

 

78

 

66

 

Loss on extinguishment of debt (2)

 

69

 

78

 

69

 

81

 

Restructuring charges (3)

 

 

3

 

9

 

3

 

Stock-based compensation

 

7

 

7

 

19

 

19

 

Acquisition and integration costs (4)

 

2

 

 

5

 

 

Other

 

(1

)

 

(2

)

 

Adjusted EBITDA

 

$

248

 

$

214

 

$

684

 

$

579

 

 


(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 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.

 

(3)         Represents the costs related to exiting the Company’s previous corporate headquarters and the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs.

 

(4)         Represents the costs incurred in the acquisition and integration of A.H. Harris Construction Supplies.

 

9


 

Adjusted Net Income

 

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

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

October 28,
2018

 

October 29,
2017

 

October 28,
2018

 

October 29,
2017

 

Net income

 

$

82

 

$

452

 

$

302

 

$

979

 

Less income from discontinued operations, net of tax

 

 

406

 

1

 

794

 

Income from continuing operations

 

82

 

46

 

301

 

185

 

Plus: Provision for income taxes

 

30

 

23

 

105

 

92

 

Less: Cash income taxes

 

(4

)

(4

)

(9

)

(14

)

Plus: Amortization of acquisition-related intangible assets (other than software)

 

5

 

3

 

16

 

9

 

Plus: Loss on extinguishment of debt (1)

 

69

 

78

 

69

 

81

 

Plus: Restructuring charges (2)

 

 

3

 

9

 

3

 

Plus: Acquisition and integration costs (3)

 

2

 

 

5

 

 

Adjusted Net Income

 

$

184

 

$

149

 

$

496

 

$

356

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

183,579

 

186,652

 

184,192

 

196,258

 

Adjusted net income per share — diluted

 

$

1.00

 

$

0.80

 

$

2.69

 

$

1.81

 

 


(1)         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 include the costs of debt modifications.

 

(2)         Represents the costs related to exiting the Company’s previous corporate headquarters and the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs.

 

(3)         Represents the costs incurred in the acquisition and integration of A.H. Harris Construction Supplies.

 

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 fourth quarter of fiscal 2018 or full year fiscal 2018 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.

 

10


Exhibit 99.2

FINANCIAL RESULTS AND COMPANY OVERVIEW 2018 Third-Quarter Performance December 4th, 2018

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Disclaimer Forward-Looking Statements and Preliminary Results This presentation 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 and 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 presentation 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 presentation. 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 those “Risk factors” in our annual report on Form 10-K, for the fiscal year ended January 28, 2018, filed on March 13, 2018 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 presentation, 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 taxes, Net sales, Adjusted EBITDA, Adjusted net income per diluted share and Free Cash Flow are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between HD Supply’s actual results and the preliminary financial data set forth herein may be material. Non-GAAP Financial Measures HD Supply supplements its financial results that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) with non-GAAP measurements, including Adjusted EBITDA, Adjusted net income, Adjusted net income per diluted share, Net debt and Free cash flow. 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, Adjusted net income per diluted share and Net Debt referred to in this presentation is included at the end of this presentation under “Capital Structure Overview” and “Reconciliation of Non-GAAP Measures.”

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Q3’18 CEO Execution Highlights Focused on Controllable Execution 1 Free Cash Flow is defined as LTM Operating Cash Flow of $561M, Less Capital Expenditures of $108M 2 $91 million repurchased in the third quarter 2018. Subsequent repurchases between quarter end and November 30, 2018 totaled $125 million Note: “VPY” denotes Versus Prior Year, “LTM” denotes Last Twelve Months Promoted Brad Paulsen President of Facilities Maintenance Facilities Maintenance Investments in Early Stages of Return A.H. Harris Integration Progressing On Track Refinanced $1.0B Senior Secured Notes and ~$1.1B in Term Loans Executed Repurchases of $216 million of Shares through Nov. 302. Another $500M Authorization Announced Hurricane and Wildfire Management Sales and Earnings at High End Guidance +300 BPs Sales Outgrowth Double-Digit Earnings Growth +18% Net Sales Growth Versus Prior Year (“VPY”) +9% Organic Sales Growth VPY $453M LTM Free Cash Flow1 Raised 2018 Full Year Guidance at Midpoint Strategic Financial

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Limited Impact on Sales; No Locations Impacted Topics of Recent Investor Interest Topic Consideration 2. Non-residential End Market 3. Hurricanes and Wildfires Continued Strong End Market Performance Focused on Shareholder Value Limited Impact from Section 301; Rebar Stabilizing Tariffs

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$1,370M $1,612M +18% Gross Profit Gross Margin % Operating Income Adj. EBITDA % Op. Income % $542M $629M 39.6% 39.0% $214M $248M $182M $213M 15.6% 15.4% 13.2% +16% -60 BPs -20 BPs +16% ($ in millions, except per share data) $149M $184M +17% Net Sales 1 Q3’17 Net Income includes $406M of Income from Discontinued Operations 2 See appendix slides 21 and 22 for a reconciliation of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per Diluted Share to Net Income and Income from Continuing Operations Q3’17 Adj. EBITDA2 VPY Adj. Net Income2 13.3% Q3’18 $0.80 $1.00 +25% Per Diluted Share2 +$242M +23% Net Income1 $452M $82M -82% $2.42 $0.45 -$1.97 Per Diluted Share1 +17.7% Net Sales Growth VPY Q3’18 Financial Results -10 BPs +9% +$129M organic

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Organic Growth in Both Business Units Q3’18 Segment Performance Q3’18 $810M $803M Adj. EBITDA $149M $99M Net Sales ($ in millions) Q3’17 $754M $617M $144M VPY +7% +3% VPY +30% +41% $70M Q3’18 Q3’17 +12% organic

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Q3’18 Taxes and Cash Flow Favorable Tax Asset with Significant Gross Federal Net Operating Loss (“NOL”) Carryforwards of Approximately $334M ~$121M Tax-affected Amount of Federal and State NOLs Cash Taxes $4M in Q3’18 $3-4M Estimated in Q4’18 $40-50M Estimated in FY’19 Effective Tax Rate ~26% for Q4’18 Expected ~26% for FY’18 and FY’19 $2.0B Net Debt1 at the End of Q3’18 2.4x Net Debt to Adj. EBITDA $453M Q3’18 LTM Free Cash Flow2 $32M of Capital Expenditures in Q3’18 1 Reconciled on slide 17. “Net Debt” defined as Total Debt plus letter of credit and capital lease obligations, less cash and cash equivalents 2 Free Cash Flow is defined as LTM Operating Cash Flow of $561M, Less Capital Expenditures of $108M Note: Contains forward-looking information; please see Disclaimer on slide 2 Taxes Cash Flow NOL Fully Utilized During 2019

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+17.7% Q3’18 Average Daily Sales Growth Q3’18 Monthly Average Daily Sales (%) 7.1% 26.8% 14.6% Nov. 7.0% 23.1% 9.6% 31.4% Facilities Maintenance Construction & Industrial (Preliminary) 17.7% 19.4% 16.3% 6.0% 33.1% 6.7% 9.8% Aug. Sep. Oct. Prior Year $618M $426M $481M HD Supply Net Sales $513M 5.2% 10.0% Q3’18 4.3% 16.4% $372M 6.1% 14.5% $531M 1.3% 10.3% $403M 4.3% 9.8% $436M HD Supply Average Daily Sales Growth VPY ’17 Selling Days 25 18 19 20 Current Year Note: Contains forward-looking information; please see Disclaimer on slide 2 25 18 19 20 ’18 Selling Days Q4’18 organic 10.9% organic 6.8% organic 7.7% ’16 Selling Days 25 18 19 20 organic 9.9%

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+20% +14% +20% +16% Q4’18 Guidance +18% Net Sales Growth VPY at Midpoint $1,425M $1,375M $152M $1,183M $183M $173M VPY Q4’17 Q4’18 Q4’17 Q4’18 Q4’18 Net Sales Adj. EBITDA Adj. Net Income Per Diluted Share1 VPY 1 Q4’18 Adjusted Net Income per Diluted Share range assumes a fully diluted weighted average share count of ~180 million 2 Holiday Shift Relates to C&I Branch Closures on Dec. 24, 2018 and Dec. 31, 2018 Note: Contains forward-looking information; please see Disclaimer on slide 2. 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 fourth quarter of fiscal 2018 is included in this presentation 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 $0.68 $0.63 VPY ($ in millions, except per share amounts) $0.49 . . Q4’17 +39% +29% Midpoint $1,400M +18% $178M +17% $0.66 +35% Midpoint ex. 53rd Week and Holiday Shift2 +12% +13%

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FY’18 Guidance Strong Sales and Earnings Growth 1 End Market estimate of ~3% is the management estimate of the growth of our markets based on multiple quantitative and long-term average growth target based on management estimates and projections 2 Consolidated from March 5, 2018 3 Guidance Raised on June 5, 2018, September 5, 2018 and December 4, 2018 4 Operating Leverage is defined as Adjusted EBITDA Growth Divided by Total Net Sales Growth Note: Contains forward-looking information; please see Disclaimer on slide 2. No reconciliation of the forecasted range for Adjusted EBITDA to Net income for the full year fiscal 2018 is included in this presentation 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 $5,121M FY’17 +300 BPs $360M $6,001M Core Business Growth1 A.H Harris2 53rd Week and Holiday Shift $75M FY’18 Net Sales ($ in millions) $731M FY’17 1.5x FY’17 Supply Chain Costs A.H Harris2 FY’18 FM Accelerated Investments FY’18 Adj. EBITDA $862M $7M $40M Midpoint Midpoint 53rd Week and Holiday Shift ($12M) Core Business Growth 1.5x Op. Lev4 $279M $62M $6,026M $5,976M $867M $857M $7M $166M Guidance Raised3 $27M Guidance Raised3

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Approximately 3% End Market Growth for FY’19 FY’19 End Market Preliminary Outlook Residential Construction “Living Space” MRO Primary End Market Non-Residential Construction ~3% FY’19 End Market Estimates1 1% to 2% Current View as of December ’18 Low Single Digits to Mid-Single Digits 1 Management estimate; end market growth based on multiple quantitative and qualitative inputs Note: Contains forward looking information; please see Disclaimer on slide 2 Low Single Digits to Mid-Single Digits

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+300 BPs Outgrowth 9-10 Percent Adjusted EBITDA Growth on a 52-week Basis ~$500 million in Free Cash Flow Working Capital Investment to be Approximately 18% of Sales Growth Capex Approximately 2% of Sales $100 - $110 million in Cash Interest $40 - $50 million in Cash Taxes GAAP Tax Rate of Approximately 26% 300 Basis Points Market Outgrowth, Double Digit Earnings Growth FY’19 Preliminary Framework Note: Contains forward-looking information; please see Disclaimer on slide 2. No reconciliation of the forecasted range for Adjusted EBITDA or Free Cash Flow for the full year fiscal 2019 is included in this presentation 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

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Current Outlook Summary HD Supply Current Outlook Summary +18% Net Sales VPY at Midpoint $1,375M to $1,425M Net Sales +17% Adj. EBITDA VPY at Midpoint $173M to $183M Adj. EBITDA +35% Adj. Net Income per Diluted Share VPY at Midpoint $0.63 to $0.68 Adj. Net Income per Diluted Share Assumes ~180M Diluted Share Count1 Note: Contains forward-looking information; please see Disclaimer on slide 2. 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 fourth quarter of fiscal 2018 and full-year fiscal 2018 is included in this presentation 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 Q4’18 1 Assumes no additional share repurchases post November 30, 2018 2 Management estimate; end market growth based on multiple quantitative and qualitative inputs FY’18 Approximately 3% End Market VPY2 +17% Net Sales VPY at Midpoint $5,976M to $6,026M Net Sales +18% Adj. EBITDA VPY at Midpoint $857M to $867M Adj. EBITDA +45% Adj. Net Income per Diluted Share VPY at Midpoint $3.33 to $3.38 Adj. Net Income per Diluted Share Assumes ~183M Diluted Share Count1

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Q&A Q&A

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Concluding Remarks One Team, Driving Customer Success and Value Creation Continual Operational Improvement +18% Net Sales Growth in Q3’18 VPY +16% Adjusted EBITDA1 Growth in Q3’18 VPY +25% Adjusted Net Income per Diluted Share1 Growth in Q3’18 VPY Exiting 2018 in a Position of Strength Team is Focused and Energized to Deliver 1 See appendix slides 21 and 22 for a reconciliation of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per Diluted Share to Net Income and Income from Continuing Operations Note: “VPY” denotes Versus Prior Year.

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Q&A APPENDIX

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~$1.7B Net Debt Capital Structure Overview Q3’18 Debt Balances Senior ABL Facility Term B-5 Loans Oct. 2018 Senior Unsecured Notes $105 750 4/5/22 10/17/23 Outstanding Debt3 Less: Cash and Cash Equivalents Net Debt $1,987 (52) $1,925 Balance Maturity 1 Represents the Stated Rate of Interest, Without Including the Effect of Discounts, Premiums and Interest Rate Hedges 2 Subject to Applicable Redemption Price Terms 3 Excludes Unamortized Discounts of $4M and Unamortized Deferred Financing Costs of $22M ($ in millions) 3.61% 4.03% Interest Rate1 1,070 n/a 4/22/19 Soft Call Date2 5.375% 10/15/26 10/15/21 Plus: Letters of Credit 27 Plus: Capital Lease Obligation 87

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Illustrative Adjusted EPS Calculation Adjusted EBITDA Adjusted Net Income per Diluted Share Illustrative Adjusted EPS Calculation Adjusted Net Income = = Diluted Shares Outstanding ÷ TBD TBD TBD ~183 FY’18 ($ and Shares in millions, except per share data) $152 $0.49 $91 ~186 Q4’18 Estimates Q3’18 $248 $1.00 $184 ~184 Q4’17 Depreciation and Amortization1 ( – ) ($24) (~$104) Amortization of Acquired Intangibles ($27) ( + ) ~$22 $3 $5 Interest Expense, Net (GAAP) ( – ) (~$129) Cash Income Taxes ( – ) (~$12) Stock-based Compensation ( – ) ($31) ($32) ($2) ($4) 1 Includes Amounts Recorded within Cost of Sales Note: Contains forward looking information; please see Disclaimer on slide 2. No reconciliation of Adjusted EBITDA to Net income, Adjusted net Income to Net Income and Adjusted net income per diluted share to Net income per diluted share for the fourth quarter of fiscal 2018 and full year fiscal 2018 is included in this presentation 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. Actual ($7) ($7) (~$25) Illustrative TBD TBD TBD ~180 (~$26) ~$6 (~$29) (~$3) (~$6) Q1’18 $190 $0.70 $130 ~185 ($24) $5 ($33) ($2) ($6) Q2’18 $246 $0.99 $182 ~184 ($27) $6 ($35) ($3) ($6) Other ( + ) - $1 - (~$2) - $1

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$426M Preliminary November Sales Monthly Net Sales ($) Facil. Maint. Const. & Ind. ’18 Selling Days ’17 Selling Days ($ in millions) HD Supply Net Sales (Preliminary) FY’17 $211 $215 Note: Contains forward-looking information; please see Disclaimer on slide 2 1 Contains an extra selling week as compared with other years. Fiscal 2018 contains 53 weeks FY’18 ’16 Selling Days organic organic organic organic organic organic organic organic organic organic 18 20 281 20 20 25 20 19 24 20 19 25 18 18 20 23 20 20 25 20 19 24 20 19 25 18 18 20 23 20 20 25 20 19 24 20 19 25 18 $197 $208 $237 $212 $224 $287 $246 $249 $325 $263 $245 $302 $175 $182 $185 $179 $199 $288 $243 $237 $301 $250 $237 $316 organic organic organic organic organic organic organic organic organic organic organic organic organic organic organic organic organic $372M $390M $421M $391M $423M $575M $488M $486M $626M $513M $481M $618M $426M $406M $539M $455M $451M $583M $479M $447M $573M $397M Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov.

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+6.8% Organic Preliminary Average Daily Sales Growth in Nov. Average Daily Sales – Organic1 (VPY%) HD Supply Organic Average Daily Sales Growth VPY1 (VPY%) 1 Adjusted for Acquisitions, Divestitures, and Selling Days 2 Contains an extra selling week as compared with other years. Fiscal 2018 contains 53 weeks Note: Contains forward-looking information; please see Disclaimer on slide 2 Facil. Maint. Const. & Ind. 7.0% 6.6% FY’17 FY’18 ’18 Selling Days ’17 Selling Days ’16 Selling Days 18 20 282 20 20 25 20 19 24 20 19 25 18 18 20 23 20 20 25 20 19 24 20 19 25 18 18 20 23 20 20 25 20 19 24 20 19 25 18 4.3% 4.9% 2.2% 7.1% 5.9% 5.4% 6.3% 7.4% 6.1% 6.0% 9.6% 7.1% 16.4% 18.6% 13.3% 17.3% 9.4% 16.3% 16.0% 14.0% 14.4% 15.1% 12.6% 8.5% (Preliminary) 9.8% 10.9% 6.8% 11.7% 12.0% 17.7% 18.7% 18.7% 17.8% 17.7% 19.4% 16.3% 14.6% 7.5% 10.3% 10.6% 10.4% 9.7% 9.9% 10.9% 7.7% 6.8% Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov.

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Reconciliation of Non-GAAP Measures: Net Income to Adjusted EBITDA ($ in millions) 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, original issue discount, and other assets or liabilities associated with such debt. Also includes the cost of debt modification 3 Represents the costs related to exiting the Company’s previous corporate headquarters and the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs. 4 Represents the costs incurred in the acquisition and integration of A.H. Harris Construction Supplies Oct. 28, 2018 Oct. 29, 2017 Net income $82 $ 452 Less income from discontinued operations, net of tax - 406 Income from continuing operations 82 46 Interest expense, net 32 35 Provision for income taxes 23 Depreciation and amortization 1 27 22 Loss on extinguishment & modification of debt 69 Restructuring charges 2 - 3 Stock-based compensation 3 7 7 Adjusted EBITDA $ 248 $ 214 30 78 Three Months Ended Oct. 28, 2018 Oct. 29, 2017 $302 $ 979 1 794 301 185 100 133 92 78 66 69 9 3 19 19 $ 684 $ 579 105 81 Nine Months Ended Acquisition and integration costs 2 - 5 - Other (1) - (2) - 4

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Reconciliation of Non-GAAP Measures: Net Income to Adjusted Net Income and Adjusted Net Income Per Share ($ in millions, except share and per share amounts) 1 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 include the costs of debt modifications 2 Represents the costs related to exiting the Company’s previous corporate headquarters and the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs 3 Represents the costs incurred in the acquisition and integration of A.H. Harris Construction Supplies Weighted average common shares outstanding (in thousands) Basic Diluted Adjusted Net Income Per Share - Basic Adjusted Net Income Per Share - Diluted Net income $ 82 $ 452 Less income from discontinued operations, net of tax 406 Income from continuing operations 82 46 Provision for income taxes 30 23 Cash paid for income taxes (4) (4) Amortization of acquisition related intangible assets (other than - software) Restructuring charges2 3 - Loss on extinguishment & modification of debt1 69 Adjusted Net Income $ 184 $ 149 182,730 185,651 183,579 186,652 $1.01 $0.80 $1.00 $0.80 - 78 5 3 $ 302 $ 979 794 301 185 105 92 (9) (14) 3 9 69 $ 496 $ 356 183,349 194,704 184,192 196,258 $2.71 $1.83 $2.69 $1.81 1 81 16 9 Oct. 28, 2018 Oct. 29, 2017 Three Months Ended Oct. 28, 2018 Oct. 29, 2017 Nine Months Ended Acquisition and integration costs3 - 2 - 5

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