HD Supply
HD Supply Holdings, Inc. (Form: 8-K, Received: 03/14/2017 06:03:42)

 

 

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): March 14, 2017 (March 14, 2017)

 

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.

3100 Cumberland Boulevard, Suite 1480
Atlanta, Georgia 30339
(770) 852-9000

 

Delaware

 

26-0486780

 

 

 

 

 

 

 

333-159809

 

HD SUPPLY, INC.
3100 Cumberland Boulevard, Suite 1480
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))

 

 

 



 

Item 2.02. Results of Operations and Financial Condition.

 

On March 14, 2017,  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 and full year ended January 29, 2017.

 

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 March 14, 2017 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 2016 Full-Year and Fourth-Quarter Results,” dated March 14, 2017.

 

 

 

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: March 14, 2017

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: March 14, 2017

HD Supply, Inc.

 

 

 

By:

/s/ Dan S. McDevitt

 

 

Dan S. McDevitt

 

 

General Counsel and Corporate Secretary

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description of Exhibit

 

 

 

 

99.1

 

Press Release “HD Supply Holdings, Inc. Announces Fiscal 2016 Full-Year and Fourth-Quarter Results,” dated March 14, 2017.

 

 

 

 

 

99.2

 

HD Supply presentation to investors.

 

 

4


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 2016 Full-Year and Fourth-Quarter Results

 

ATLANTA, GA — March 14, 2017 — HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest industrial distributors in North America, today reported Net sales of $7.4 billion for the full-year fiscal 2016 ended January 29, 2017, an increase of $316 million, or 4.4 percent, as compared to fiscal 2015.

 

“I am pleased with the team’s performance in fiscal 2016. We delivered growth and solid cash flow while simultaneously transforming our business capabilities,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We are intensely focused on controllable execution that contributes to the success of our customers and I am encouraged with our momentum in 2017.”

 

Gross profit increased $143 million, or 6.0 percent, to $2,532 million for the full-year fiscal 2016 as compared to $2,389 million for the full-year fiscal 2015.  Gross profit was 34.0 percent of Net sales for the full-year fiscal 2016, up approximately 50 basis points from 33.5 percent of Net sales for the full-year fiscal 2015.

 

Operating income increased $54 million, or 7.3 percent, to $791 million for the full-year fiscal 2016 as compared to $737 million for the full-year fiscal 2015. Operating income as a percentage of Net sales was 10.6% percent for the full-year fiscal 2016, up approximately 30 basis points from 10.3 percent for the full-year fiscal 2015.

 

Net income decreased $1,276 million, to $196 million for the full-year fiscal 2016 as compared to $1,472 million for the full-year fiscal 2015. Net income per diluted share decreased $6.34 to $0.97 for the full-year fiscal 2016 as compared to $7.31 for the full-year fiscal 2015. Net income for full-year fiscal 2015 included a $1,007 million tax benefit resulting from the reversal of the deferred tax asset valuation allowance, a $189 million non-cash tax credit from the settlement of an IRS audit, and a $186 million pre-tax gain on the sale of the Power Solutions business unit.

 

Adjusted EBITDA increased $45 million, or 5.1 percent, to $921 million for the full-year fiscal 2016 as compared to $876 million for the full-year fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 12.4 percent for the full-year fiscal 2016, up approximately 10 basis points from 12.3 percent for the full-year fiscal 2015.

 

Adjusted net income increased $181 million, or 51.6 percent, to $532 million for the full-year fiscal 2016 as compared to $351 million for the full-year fiscal 2015.  Adjusted net income per diluted share was $2.63 in the full-year fiscal 2016, as compared to $1.74 in the full-year fiscal 2015.

 

Fourth-Quarter 2016 Results

 

Net Sales increased $50 million, or 3.2 percent, to $1,634 million for the fourth quarter of fiscal 2016 as compared to $1,584 million for the fourth quarter of fiscal 2015.

 

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Gross profit increased $26 million, or 4.9 percent, to $560 million for the fourth quarter of fiscal 2016 as compared to $534 million for the fourth quarter of fiscal 2015. Gross profit was 34.3 percent of Net sales for the fourth quarter of fiscal 2016, up approximately 60 basis points from 33.7 percent of Net sales for the fourth quarter of 2015.

 

Operating income increased $14 million, or 10.7 percent, to $145 million for the fourth quarter of fiscal 2016 as compared to $131 million for the fourth quarter of fiscal 2015. Operating income as a percentage of Net sales was 8.9 percent for the fourth quarter of fiscal 2016, up approximately 60 basis points from 8.3 percent for the fourth quarter of fiscal 2015.

 

Net income decreased $819 million to $52 million for the fourth quarter of fiscal 2016 as compared to $871 million for the fourth quarter of fiscal 2015. Net income per diluted share decreased $4.07, to $0.26 for the fourth quarter of fiscal 2016 as compared to a $4.33 Net income per diluted share for the fourth quarter of fiscal 2015. Net income for the fourth quarter of fiscal 2015 included a $1,007 million tax benefit resulting from the reversal of the deferred tax asset valuation allowance.

 

Adjusted EBITDA increased $2 million, or 1.2 percent, to $169 million for the fourth quarter of fiscal 2016 as compared to $167 million for the fourth quarter of fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 10.3 percent for the fourth quarter of fiscal 2016, down approximately 20 basis points from 10.5 percent for the fourth quarter of fiscal 2015.

 

Adjusted net income increased $35 million to $90 million for the fourth quarter of fiscal 2016 as compared to $55 million for the fourth quarter of fiscal 2015.  Adjusted net income per diluted share was $0.44 in the fourth quarter of fiscal 2016, as compared to $0.27 in the fourth quarter of fiscal 2015.

 

As of January 29, 2017, HD Supply’s combined liquidity of approximately $729 million was comprised of $75 million in cash and cash equivalents and $654 million of additional available borrowings (excluding $26 million of borrowings on available cash balances) under HD Supply, Inc.’s senior asset-backed lending facility, based on qualifying inventory and receivables.

 

Business Unit Performance

 

Facilities Maintenance

 

Full-Year Results

 

Net sales increased $72 million, or 2.7 percent, to $2,762 million in the full-year fiscal 2016, as compared to $2,690 million for the full-year fiscal 2015.  Adjusted EBITDA decreased $6 million, or 1.1 percent, to $523 million for the full-year fiscal 2016 as compared to $529 million for the full-year fiscal 2015.  Adjusted EBITDA as a percentage of Net sales was 18.9 percent for the full-year fiscal 2016, down approximately 80 basis points from 19.7 percent for the full-year fiscal 2015.

 

Fourth Quarter Results

 

Net sales increased $14 million, or 2.3 percent, to $620 million in the fourth quarter of fiscal 2016, as compared to $606 million for the fourth quarter of fiscal 2015.  Adjusted EBITDA decreased $4 million, or 3.9 percent, to $98 million for the fourth quarter of fiscal 2016 as compared to $102 million for the fourth quarter of fiscal 2015.  Adjusted EBITDA as a percentage of Net sales was 15.8 percent for the fourth quarter of fiscal 2016, down approximately 100 basis points from 16.8 percent for the fourth quarter of fiscal 2015.

 

Waterworks

 

Full-Year Results

 

Net sales increased $112 million, or 4.5 percent, to $2,622 million in the full-year fiscal 2016, as compared to $2,510 million for the full-year fiscal 2016.  Adjusted EBITDA increased $12 million, or 5.4 percent, to $234 million for the full-year fiscal 2015 as compared to $222 million for the full-year fiscal 2015.  Adjusted EBITDA as a

 

2



 

percentage of Net sales was 8.9 percent for the full-year fiscal 2016, up approximately 10 basis points from 8.8 percent for the full-year fiscal 2015.

 

Fourth Quarter Results

 

Net sales increased $18 million, or 3.4 percent, to $551 million in the fourth quarter of fiscal 2016, as compared to $533 million for the fourth quarter of fiscal 2015.  Adjusted EBITDA increased $1 million, or 2.4 percent, to $42 million for the fourth quarter of fiscal 2016 as compared to $41 million for the fourth quarter of fiscal 2015.  Adjusted EBITDA as a percentage of Net sales was 7.6 percent for the fourth quarter of fiscal 2016, down approximately 10 basis points from 7.7 percent for the fourth quarter of fiscal 2015.

 

Construction & Industrial

 

Beginning in the fourth quarter of fiscal 2016, management combined the Home Improvement Solutions operations with Construction & Industrial. All periods presented have been revised to reflect the combined business unit.

 

Full-Year Results

 

Net sales increased $131 million, or 6.8 percent, to $2,063 million in the full-year fiscal 2016, as compared to $1,932 million for the full-year fiscal 2015.  Adjusted EBITDA increased $40 million, or 21.7 percent, to $224 million for the full-year fiscal 2016 as compared to $184 million for the full-year fiscal 2015.  Adjusted EBITDA as a percentage of Net sales was 10.9 percent for the full-year fiscal 2016, up approximately 140 basis points from 9.5 percent for the full-year fiscal 2015.

 

Fourth Quarter Results

 

Net sales increased $19 million, or 4.3 percent, to $466 million in the fourth quarter of fiscal 2016, as compared to $447 million for the fourth quarter of fiscal 2015.  Adjusted EBITDA increased $6 million, or 17.6 percent, to $40 million for the fourth quarter of fiscal 2016 as compared to $34 million for the fourth quarter of fiscal 2015.  Adjusted EBITDA as a percentage of Net sales was 8.6 percent for the fourth quarter of fiscal 2016, up approximately 100 basis points from 7.6 percent for the fourth quarter of fiscal 2015.

 

Fourth-Quarter Monthly Sales Performance

 

Net sales for November, December and January of fiscal 2016 were $526 million, $527 million and $581 million, respectively.  There were 18 selling days in November, 20 selling days in December and 23 selling days in January.  Average year-over-year daily sales growth for November, December and January was 2.3 percent, 3.6 percent and 3.4 percent, respectively.

 

Capital Structure Activities

 

On January 26, 2017, the company used cash flow from operations to repay $200 million aggregate principal of HD Supply, Inc.’s  Term B-1 Loans. As a result, the company incurred a $5 million loss on extinguishment of debt, which includes write-offs of $2 million and $3 million of unamortized original issue discount and unamortized deferred financing costs, respectively. In the fourth quarter of fiscal 2016, the ratio of Net debt(1) to Adjusted EBITDA was 4.1 times, reduced approximately 0.5 turns since fiscal year-end 2015.

 

Preliminary February Sales Results

 

Preliminary Net sales in February were approximately $535 million, which represents year-over-year average daily sales growth of approximately 6.4 percent.  Preliminary February year-over-year average daily sales growth by business was Facilities Maintenance approximately 0.2 percent, Waterworks approximately 15 percent, and Construction & Industrial approximately 5.3 percent.  There were 20 selling days in February 2017.

 


(1)  Net Debt: Total of Long Term debt and Current installments of long-term debt, less cash and cash equivalents.

 

3



 

Fiscal Year 2017 and First-Quarter 2017 Outlook

 

For fiscal year 2017, the company estimates end market growth of approximately 2-3 percent. The company estimates 300 basis points of sales growth in excess of the estimated market growth and operating leverage in the range of 1.5 to 2.0 times for fiscal year 2017.

 

For first-quarter 2017, the company anticipates Net sales to be in the range of $1,840 million to $1,890 million, Adjusted EBITDA in the range of $205 million to $220 million, and Adjusted net income per diluted share in the range of $0.60 to $0.68.  The first-quarter 2017 Adjusted net income per diluted share range assumes a fully diluted weighted average share count of 203 million.  At the mid-point of the ranges, our first-quarter 2017 Net sales and Adjusted EBITDA translate into approximately 5 percent growth and -1 percent growth, respectively, versus prior year.

 

The company will provide further specifics on its end market, the first-quarter 2017 outlook, and the fiscal year 2017 outlook during the fourth-quarter fiscal 2016 earnings conference call and in the earnings call presentation materials.

 

Fiscal 2016 Fourth-Quarter Conference Call

 

As previously announced, HD Supply will hold a conference call on Tuesday March 14 th , 2017 at 8:00 a.m. (Eastern Time) to discuss its fourth-quarter and full-year fiscal 2016 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 (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 those “Risk factors” in our annual report on Form 10-K, for the fiscal year ended January 29, 2017, filed on March 14, 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

 

4



 

update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

 

5



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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

 

 

 

Three Months Ended

 

Fiscal Year Ended

 

 

 

January 29, 2017

 

January 31, 2016

 

January 29, 2017

 

January 31, 2016

 

Net Sales

 

$

1,634

 

$

1,584

 

$

7,439

 

$

7,123

 

Cost of sales

 

1,074

 

1,050

 

4,907

 

4,734

 

Gross Profit

 

560

 

534

 

2,532

 

2,389

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

398

 

371

 

1,637

 

1,535

 

Depreciation and amortization

 

24

 

27

 

95

 

108

 

Restructuring

 

(7

)

5

 

9

 

9

 

Total operating expenses

 

415

 

403

 

1,741

 

1,652

 

Operating Income

 

145

 

131

 

791

 

737

 

Interest expense

 

50

 

83

 

269

 

394

 

Loss on extinguishment & modification of debt

 

5

 

 

179

 

100

 

Other (income) expense, net

 

 

 

 

1

 

Income from Continuing Operations Before Provision (Benefit) for Income Taxes

 

90

 

48

 

343

 

242

 

Provision (benefit) for income taxes

 

38

 

(925

)

139

 

(1,084

)

Income from Continuing Operations

 

52

 

973

 

204

 

1,326

 

Income (loss) from discontinued operations, net of tax

 

 

(102

)

(8

)

146

 

Net Income

 

$

52

 

$

871

 

$

196

 

$

1,472

 

Other comprehensive income (loss) — foreign currency translation adjustment

 

 

(4

)

1

 

12

 

Total Comprehensive Income

 

$

52

 

$

867

 

$

197

 

$

1,484

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

 

 

 

 

Basic

 

199,888

 

198,276

 

199,385

 

197,011

 

Diluted

 

202,587

 

201,156

 

202,000

 

201,308

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share (1) :

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.26

 

$

4.91

 

$

1.02

 

$

6.73

 

Income (loss) from Discontinued Operations

 

$

 

$

(0.51

)

$

(0.04

)

$

0.74

 

Net Income

 

$

0.26

 

$

4.39

 

$

0.98

 

$

7.47

 

Diluted Earnings Per Share (1) :

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.26

 

$

4.84

 

$

1.01

 

$

6.59

 

Income (loss) from Discontinued Operations

 

$

 

$

(0.51

)

$

(0.04

)

$

0.73

 

Net Income

 

$

0.26

 

$

4.33

 

$

0.97

 

$

7.31

 

 


(1 )May not foot due to rounding.

 

6



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

Amounts in millions, except per share data, Unaudited

 

 

 

January 29,
2017

 

January 31,
2016

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

75

 

$

269

 

Receivables, less allowance for doubtful accounts of $13 and $13

 

904

 

872

 

Inventories

 

831

 

770

 

Current assets of discontinued operations

 

 

43

 

Other current assets

 

37

 

29

 

Total current assets

 

1,847

 

1,983

 

Property and equipment, net

 

303

 

310

 

Goodwill

 

2,869

 

2,869

 

Intangible assets, net

 

112

 

127

 

Deferred tax asset

 

556

 

685

 

Non-current assets of discontinued operations

 

 

20

 

Other assets

 

20

 

22

 

Total assets

 

$

5,707

 

$

6,016

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

532

 

$

490

 

Accrued compensation and benefits

 

140

 

142

 

Current installments of long-term debt

 

14

 

9

 

Current liabilities of discontinued operations

 

 

30

 

Other current liabilities

 

157

 

200

 

Total current liabilities

 

843

 

871

 

Long-term debt, excluding current installments

 

3,798

 

4,302

 

Non-current liabilities of discontinued operations

 

 

1

 

Other liabilities

 

106

 

98

 

Total liabilities

 

4,747

 

5,272

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01; 1 billion shares authorized; 201.4 million and 200.1 million shares issued and outstanding at January 29, 2017, 2016 and January 31, 2016, respectively

 

2

 

2

 

Paid-in capital

 

3,962

 

3,909

 

Accumulated deficit

 

(2,969

)

(3,150

)

Accumulated other comprehensive loss

 

(15

)

(16

)

Treasury stock, at cost, 0.6 and 0.06 million shares at January 29, 2017 and January 31, 2016, respectively

 

(20

)

(1

)

Total stockholders’ equity

 

960

 

744

 

Total liabilities and stockholders’ equity

 

$

5,707

 

$

6,016

 

 

7



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in millions, Unaudited

 

 

 

Fiscal Year Ended

 

 

 

January 29,
2017

 

January 31,
2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

196

 

$

1,472

 

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

 

 

 

 

 

Depreciation and amortization

 

102

 

134

 

Provision for uncollectibles

 

6

 

8

 

Non-cash interest expense

 

17

 

23

 

Payment of discounts upon extinguishment of debt

 

(7

)

(12

)

Loss on extinguishment & modification of debt

 

179

 

100

 

Stock-based compensation expense

 

20

 

16

 

Deferred income taxes

 

129

 

(839

)

(Gain) loss on sales of businesses, net

 

6

 

(186

)

Other

 

(11

)

(4

)

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

 

 

 

 

 

(Increase) decrease in receivables

 

(38

)

(63

)

(Increase) decrease in inventories

 

(62

)

(38

)

(Increase) decrease in other current assets

 

3

 

11

 

(Increase) decrease in other assets

 

(2

)

 

Increase (decrease) in accounts payable and accrued liabilities

 

(16

)

(14

)

Increase (decrease) in other long-term liabilities

 

(9

)

(186

)

Net cash provided by operating activities

 

513

 

422

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(81

)

(86

)

Proceeds from sales of property and equipment

 

32

 

3

 

Proceeds from sales of businesses

 

28

 

809

 

Net cash provided by (used in) investing activities

 

(21

)

726

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from issuance of common stock under employee benefit plans

 

33

 

74

 

Purchase of treasury shares

 

(34

)

(71

)

Borrowings of long-term debt

 

1,547

 

287

 

Repayments of long-term debt

 

(2,631

)

(1,152

)

Borrowings on long-term revolver debt

 

689

 

784

 

Repayments on long-term revolver debt

 

(269

)

(880

)

Debt issuance and modification costs

 

(19

)

(6

)

Other financing activities

 

(3

)

2

 

Net cash provided by (used in) financing activities

 

(687

)

(962

)

Effect of exchange rates on cash and cash equivalents

 

1

 

(2

)

Increase (decrease) in cash and cash equivalents

 

$

(194

)

$

184

 

Cash and cash equivalents at beginning of period

 

269

 

85

 

Cash and cash equivalents at end of period

 

$

75

 

$

269

 

 

8



 

HD SUPPLY HOLDINGS, INC.

SEGMENT REPORTING

Amounts in millions, Unaudited

 

 

 

Facilities
Maintenance

 

Waterworks

 

Construction &
Industrial

 

Corporate

 

Total
 Continuing
Operations

 

Three Months Ended January 29, 2017

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

620

 

$

551

 

$

466

 

$

(3

)

$

1,634

 

Adjusted EBITDA

 

98

 

42

 

40

 

(11

)

169

 

Depreciation(1) & Software Amortization

 

6

 

4

 

9

 

4

 

23

 

Other Intangible Amortization

 

2

 

 

 

1

 

3

 

Three Months Ended January 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

606

 

$

533

 

$

447

 

$

(2

)

$

1,584

 

Adjusted EBITDA

 

102

 

41

 

34

 

(10

)

167

 

Depreciation(1) & Software Amortization

 

9

 

3

 

8

 

4

 

24

 

Other Intangible Amortization

 

2

 

 

 

2

 

4

 

Fiscal Year Ended January 29, 2017

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,762

 

$

2,622

 

$

2,063

 

$

(8

)

$

7,439

 

Adjusted EBITDA

 

523

 

234

 

224

 

(60

)

921

 

Depreciation(1) & Software Amortization

 

29

 

11

 

33

 

14

 

87

 

Other Intangible Amortization

 

6

 

2

 

1

 

5

 

14

 

Fiscal Year Ended January 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,690

 

$

2,510

 

$

1,932

 

$

(9

)

$

7,123

 

Adjusted EBITDA

 

529

 

222

 

184

 

(59

)

876

 

Depreciation(1) & Software Amortization

 

43

 

11

 

30

 

14

 

98

 

Other Intangible Amortization

 

6

 

2

 

1

 

6

 

15

 

 


(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 (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 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;

 

9



 

·                        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

 

Fiscal Year Ended

 

 

 

January 29,
2017

 

January 31,
2016

 

January 29,
2017

 

January 31,
2016

 

Net income

 

$

52

 

$

871

 

$

196

 

$

1,472

 

Less income (loss) from discontinued operations, net of tax

 

 

(102

)

(8

)

146

 

Income from continuing operations

 

52

 

973

 

204

 

1,326

 

Interest expense, net

 

50

 

83

 

269

 

394

 

Provision (benefit) for income taxes (1)

 

38

 

(925

)

139

 

(1,084

)

Depreciation and amortization (2)

 

26

 

28

 

101

 

113

 

Loss on extinguishment & modification of debt (3)

 

5

 

 

179

 

100

 

Restructuring charges (4)

 

(7

)

5

 

9

 

9

 

Stock-based compensation

 

5

 

2

 

20

 

16

 

Costs related to public offerings (5)

 

 

 

 

1

 

Other

 

 

1

 

 

1

 

Adjusted EBITDA

 

$

169

 

$

167

 

$

921

 

$

876

 

 


(1)          During the fiscal year ended January 31, 2016, 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.

 

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

 

(3)          Represents the loss on extinguishment of debt including the premium paid to redeem 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 modification.

 

(4)          Represents the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs.

 

(5)          Represents the costs expensed in connection with secondary offerings of Holdings’ common stock by certain of Holdings’ stockholders.

 

10



 

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

 

Fiscal Year Ended

 

 

 

January 29,
2017

 

January 31,
2016

 

January 29,
2017

 

January 31,
2016

 

Net income

 

$

52

 

$

871

 

$

196

 

$

1,472

 

Less income (loss) from discontinued operations, net of tax

 

 

(102

)

(8

)

146

 

Income from continuing operations

 

52

 

973

 

204

 

1,326

 

Plus: Provision (benefit) for income taxes (1)

 

38

 

(925

)

139

 

(1,084

)

Less: Cash income taxes

 

(1

)

(2

)

(13

)

(16

)

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

 

3

 

4

 

14

 

15

 

Plus: Loss on extinguishment & modification of debt (2)

 

5

 

 

179

 

100

 

Plus: Restructuring charges (3)

 

(7

)

5

 

9

 

9

 

Plus: Costs related to public offerings (4)

 

 

 

 

1

 

Adjusted Net Income

 

$

90

 

$

55

 

$

532

 

$

351

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

202,587

 

201,156

 

202,000

 

201,308

 

Adjusted net income per share — diluted

 

$

0.44

 

$

0.27

 

$

2.63

 

$

1.74

 

 


(1)          During the fiscal year ended January 31, 2016, 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.

 

(2)          Represents the loss on extinguishment of debt including the premium paid to redeem 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 modification.

 

(3)          Represents the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs.

 

(4)          Represents the costs expensed in connection with secondary offerings of Holdings’ common stock by certain of Holdings’ stockholders.

 

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 first 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.

 

11


Exhibit 99.2

 

2016 Fourth-Quarter and Fiscal Year Performance March 14, 2017 Financial Results and Company Highlights

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Disclaimers 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 29, 2017, filed on March 14, 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 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. 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 (loss), Adjusted net income (loss) 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 (loss) and Adjusted net income (loss) per share referred to in this presentation is included at the end of this presentation under “Reconciliation of Non-GAAP Measures.”

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FY’16 Execution Highlights Focused on Controllable Execution +4.4% Net Sales Growth Versus Prior Year (“VPY”) +7.3% Operating Income Growth VPY $196M Net Income in Fiscal 2016 $1,472M Net Income in Fiscal 20151 +5.1% Adjusted EBITDA Growth VPY +51.1% Adjusted Net Income per Diluted Share Growth VPY $432M Free Cash Flow2 +29% Increase VPY +50 Basis Points Gross Margin Improvement VPY 1 Net Income in 2015 included a $1,084M tax benefit from the reversal of the Valuation Allowance 2 Free Cash Flow (FY 2016) is defined as Operating Cash Flow ($513M) Less Capital Expenditures ($81M) (including Cash Flow from Discontinued Operations)

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Q4’16 Execution Highlights Focused on Controllable Execution +3.2% Net Sales Growth VPY +10.7% Operating Income Growth VPY $52M Net Income for Fiscal Q4’16 $871 Net Income for Fiscal Q4’151 +1.2% Adjusted EBITDA Growth VPY +63.0% Adjusted Net Income per Diluted Share Growth VPY +60 Basis Points Gross Margin Improvement VPY 1 Net Income in Q4’15 included a $925M tax benefit from the reversal of the Valuation Allowance

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FY’16 Execution Examples 200 Atlanta-Based Support Associates Customer Centric Digital Vision Supply Chain Improvements Sold San Diego Headquarters Facility Intense Daily Performance Cadence Controllable Execution +96 Customer Facing Associates Established National Strategic Account Teams Improved Category Management 3.6x Outsized Growth in Fire Protection 2 Locations Opened Advancement in Digital Capabilities 10.9% EBITDA Margin 76% of Branches Double-Digit Adj. EBITDA %, +3 Pts VPY +15% Sales VPY in Top Performing Regions 49 Branches In-store purchases >40% 2 Locations Opened VPY in Priority Districts Sale of Interior Solutions Enhanced Capital Structure Debt and Interest Rate Reduction

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Controllable Execution Extend Leadership Positions Sell More to Existing Customers Introduce New Products and Services Expand and Integrate Channels to Reach Our Customers Acquire New Customers Enter New Geographies Deliver Operating Leverage Execute Category Management Save as We Grow Generate Cash Accelerate Debt Reduction Disciplined People, Thought and Action

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Improved Future After-tax Cash Flows Proprietary Brands; ~5% Annual Company Purchases Minimal Exposure Pockets of Strength; Non-residential Markets Topics of Recent Investor Interest Free Cash Flow is defined as Operating Cash Flow – Capital Expenditures (including Cash Flow from Discontinued Operations) Topic Consideration 3. Infrastructure 1. Corporate Tax Reform 4. Energy Market Recovery 2. Border Tax Cautiously Optimistic; Impact Likely in 20181 5. Construction Markets 1 Current 2017 Outlook does not reflect any potential future impact of infrastructure spend under the new administration Focused on Controllable Execution Remains Intense; Focused on Controllable Execution 6. Competitive Environment Three Large Businesses 7. Portfolio Waterworks Sales Shift from Q4’16 to Feb.’17 8. Weather

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Q4’16 Financial Results $1,584M $1,634M +3% Gross Profit Gross Margin % Operating Income Adj. EBITDA % Op. Income % $534M $560M 33.7% 34.3% $167M $169M $131M $145M 10.5% 10.3% 8.9% +5% +60 BPs -20 BPs +1% ($ in millions, except per share data) $55M $90M +11% Net Sales 1 Net Income in Q4’15 includes a $925M tax benefit from the reversal of the Valuation Allowance 2 See appendix slides 27 and 28 for a reconciliation of Adjusted EBITDA , Adjusted Net Income and Adjusted Net Income per Diluted Share to Net Income and Net Income per Diluted Share, Respectively Q4’15 Adj. EBITDA2 VPY Adj. Net Income2 8.3% +60 BPs Q4’16 $0.27 $0.44 +$0.17 Per Diluted Share +$50M +3% Net Sales Growth +64% Net Income1 $871M $52M -$819M $4.33 $0.26 -$4.07 Per Diluted Share

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Q4’16 and FY’16 Segment Results Q4’16 FY’16 $620M $2,762M Q4’16 FY’16 $551M $2,622M Q4’16 FY’16 $466M $2,063M +2% +3% Adj. EBITDA $98M $523M Sales Growth % Growth (4%) (1%) Op. Leverage1 nm nm +3% +4% $42M $234M +2% +5% 0.7x 1.2x +4% +7% $40M $224M +18% +22% 4.1x 3.2x Net Sales ($ in millions) Solid Growth 1 Adjusted EBITDA Growth, Divided by Sales Growth

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Q4’16 Taxes and Cash Flow Taxes Cash Flow Favorable Tax Asset with Significant Gross Federal Net Operating Loss Carryforwards of Approximately $1.8 Billion ~$700M Tax-affected Amount of Federal and State NOLs Cash Taxes $1M in Q4’16 $4M – $5M Estimated for Q1’17 $15M – $25M Estimated for FY’17 GAAP Taxes Normalized at Approximately 39% – 40% $3.7B1 Net Debt at the End of Q4’16 4.1x Net Debt to Adjusted EBITDA Repaid $200M 3.75% Secured Term B-1 Loan $22M of Capital Expenditures in Q4’16 $200M Debt Prepayment Note: Contains forward-looking information; please see Disclaimer on slide 2 1 Net Debt is Defined as Total of Long-Term Debt and Current Installments of Long-Term Debt, Less Cash and Cash Equivalents and is reconciled on slide 20

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Q4’16 Monthly Average Daily Sales (%) +3% Q4’16 Average Daily Sales Growth +6% Preliminary February Average Daily Sales Growth 2.8% 3.9% 3.7% 6.4% Feb. 0.2% 15.0% 5.3% 2.5% ’16 Selling Days 23 20 20 2.4% 6.4% Facilities Maintenance Waterworks Construction & Industrial (Preliminary) 2.3% 3.6% 3.4% 0.9% 2.9% 3.4% 18 7.0% 9.2% Nov. Dec. Jan. Prior Year $581M $535M $527M HD Supply Net Sales $526M 12.0% 4.5% ’15 Selling Days Q4’16 9.5% 6.4% 11.9% $502M 6.3% (0.9%) 8.4% $586M 12.2% 7.8% 17.1% $484M 7.4% 3.9% 10.4% $514M HD Supply Average Daily Sales Growth VPY ’17 Selling Days 24 20 19 18 Current Year 24 20 19 18

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+2% -5% +6% +3% Q1’17 Guidance 5% Sales Growth VPY at Midpoint $1,890M $1,840M $215M $1,781M $220M $205M VPY Q1’16 Q1’17 Q1’16 Q1’17 Q1’17 Net Sales Adj. EBITDA Adj. Net Income Per Diluted Share1 VPY 1 Q1’17 Adjusted Net Income per Share range assumes a fully diluted weighted average share count of ~203 million Note: Contains forward-looking information; please see Disclaimer on slide 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 first quarter of fiscal 2017 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 $0.60 VPY ($ in millions, except per share amounts) $0.51 . . . . Q1’16 +33% +18% Midpoint $1,865M +5% $213M -1% $0.64 +26%

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 FY’17 End Market Preliminary Outlook ~2% to 3% End Market Growth for FY’17 Residential Construction Water Infrastructure “Living Space” MRO Primary End Market Non- Residential Construction ~2% to 3% FY’17 End Market Estimates1 1% to 2% Current View as of March’ 17 Mid-Single Digit Low Single Digits to Low Single Digits 1 Management estimate; market estimate is management estimate of the growth of our end markets based on multiple quantitative and qualitative inputs; outlook does not reflect any potential future impact of Infrastructure spend under the new administration Note: Contains forward-looking information; please see Disclaimer on slide 2 Low Single Digits to Mid-Single Digit DC-Based Branch-Based

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FY’17 Operating Leverage Framework HDS Market Growth1 ~2-3% + Above Market Growth2 ~300 BPs = End Market Growth Controllable Execution Annual Net Sales Growth1,2 Illustrative Adj. EBITDA Growth Adjusted EBITDA Growth 12% HDS Market Growth 7.5% 5-6% 2.0x 1.5x Operating Leverage Target2,3 1 Management estimate; market estimate is management estimate of the growth of our markets based on multiple quantitative and qualitative inputs; outlook does not reflect any potential future impact of Infrastructure spend under the new administration 2 Long-term average growth target based on management estimates and projections 3 Operating Leverage is defined as Adjusted EBITDA growth divided by Total Net sales growth; target based on management estimates and projections Note: These numbers are forward-looking, are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based upon assumptions with respect to future decisions, which are subject to change. Actual results will vary and those variations may be material. For discussion of some of the important factors that could cause these variations, please consult the “Risk Factors” section of our Form 10-K for the fiscal year ended January 29, 2017. Nothing in this presentation should be regarded as a representation by any person that these objectives will be achieved and the Company undertakes no duty to update its objectives Above Market Growth 300 Basis Points Above Market Growth and 1.5x to 2.0x Operating Leverage Target in 2017

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FY’17 External Free Cash Flow Framework Building Free Cash Flow Momentum Illustrative Annual Net Sales Growth1, 2 Illustrative Adj. EBITDA Growth Adjusted EBITDA Growth 12% HDS Market Growth 7.5% 5-6% 2.0x 1.5x Operating Leverage Target2,3 Above Market Growth 1 Management estimate; market estimate is management estimate of the growth of our markets based on multiple quantitative and qualitative inputs; outlook does not reflect any potential future impact of Infrastructure spend under the new administration 2 Long-term average growth target based on management estimates and projections 3 Operating Leverage is defined as Adjusted EBITDA growth divided by total Net sales growth; target based on management estimates and projections Note: These numbers are forward-looking, are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based upon assumptions with respect to future decisions, which are subject to change. Actual results will vary and those variations may be material. For discussion of some of the important factors that could cause these variations, please consult the “Risk Factors” section of our Form 10-K for the fiscal year ended January 29, 2017. Nothing in this presentation should be regarded as a representation by any person that these objectives will be achieved and the Company undertakes no duty to update its objectives FY’17 Adjusted EBITDA: Less: Change in NWC Capex Free Cash Flow ~$600M - $650M 1.3% - 1.4% of Annual Net Sales ~15% of Annual Net Sales Growth Cash Interest ~$180M Cash Taxes $15M - $25M

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HD Supply Outlook Summary Focused on Controllable Execution Q1’17 FY’17 $1,840M - $1,890M Net Sales Range $205M - $220M Adjusted EBITDA Range $0.60 - $0.68 Adjusted Net Income per Diluted Share Increase Range ~203M Diluted Share Count Illustrative 1 Management estimate; market estimate is 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 Long-term average growth target based on management estimates and projections 3 Operating Leverage is defined as Adjusted EBITDA growth divided by Total Net sales growth; target based on management estimates and projections Note: Contains forward-looking information; please see Disclaimer on slide 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 first quarter of fiscal 2017 or full year 2017, as applicable, 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 2% to 3% End Market Growth Range Estimate1 ~300 Basis Points of Growth in Excess of Market Estimate2 1.5x to 2.0x Operating Leverage3 Range

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Q&A

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Concluding Remarks Solid Continual Improvement +4.4% Net Sales Growth in FY’16 VPY +51.1% Adjusted Net Income per Diluted Share Growth in FY’16 VPY +29.6% Free Cash Flow in FY’16 VPY Focus on 2017 Investment in Long-term Capabilities to Achieve Full Potential Disciplined People, Thought and Action Earned with Hard Work and One Team Execution Disciplined People, Thought and Action Note: “VPY” Denotes Versus Prior Year

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Appendix

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Capital Structure Overview Q4’16 Debt Balances Secured ABL Secured Term B-1 Secured 1st Lien Notes Senior Unsecured Notes $421 1,250 1,000 6/28/18 8/13/21 12/15/21 Outstanding Debt Less Cash and Cash Equivalents Net Debt $3,737 (75) $3,859 Balance Maturity 1 Represents the stated rate of interest, without including the effect of discounts or premiums 2 Subject to applicable redemption price terms 3 Represents the unamortized portion of discounts and deferred financing costs ~$3.7B Net Debt ($ in millions, unless otherwise noted) 2.38% 3.75% 5.25% Interest Rate1 639 now now 12/15/17 Soft Call Date2 5.75% 4/15/24 4/15/19 Less Discount3 (9) Less Deferred Financing Costs3 (38) Gross Debt $3,812 Secured Term B-2 10/17/23 3.75% 549 now

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Illustrative Adjusted EPS Calculation Adjusted EBITDA Adjusted Net Income per Diluted Share Adjusted Net Income = = Diluted Shares Outstanding3 ÷ Illustrative TBD TBD TBD ~203M FY’17 $169M $0.44 $90M ~203M Q4’16 ($ in millions, except per share data) ~203 Q1’17 TBD TBD TBD ~204 Q4’17 Estimates ~203 Q2’17 TBD TBD TBD ~203 Q3’17 Depreciation and Amortization1 ( - ) ($26M) (~26) ($100M – $110M) (~26) Amortization of Acquired Intangibles ( + ) ~$14M $3M ~4 ~3 ~3 ~4 Interest Expense2 ( - ) ($50M) ~($190M) Cash Income Taxes ( - ) ($15M – $25M) ($1M) Stock-based Compensation ( - ) ($5M) (~45) (~45) (~5) (~5) 1 Includes Amounts Recorded Within Cost of Sales 2 Includes Cash and Non-cash Interest Expense 3 Weighted Average Diluted Shares Outstanding Based on Management Estimates Note: These numbers are forward-looking, are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based upon assumptions with respect to future decisions, which are subject to change. Actual results will vary and those variations may be material. For discussion of some of the important factors that could cause these variations, please consult the “Risk Factors” section of our Form 10-K for the year ended January 29, 2016. Nothing in this presentation should be regarded as a representation by any person that these objectives will be achieved and the Company undertakes no duty to update its objectives. Actual (~6) (~6) (~6) (~6) (~$24M) TBD TBD (~26) (~26) (~50) (~50) TBD TBD TBD TBD (~5) (~5)

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Monthly Net Sales ($) $535M Preliminary February Sales FY’15 Facil. Maint. Waterworks Const. & Ind. ’16 Selling Days ’15 Selling Days ($ in millions) HD Supply Net Sales (Preliminary) FY’16 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. $586M $502M $550M $729M $609M $622M $785M $639M $603M $766M $526M $527M $581M $535M Dec. Jan. Feb. $235 $198 $209 $270 $220 $226 $295 $237 $221 $266 $189 $198 $233 $188 $160 $187 $258 $225 $226 $282 $231 $220 $282 $187 $177 $187 $164 $145 $154 $202 $165 $170 $209 $171 $163 $218 $150 $153 $163 23 20 20 25 20 19 24 20 19 25 18 20 23 24 20 20 25 19 20 24 20 19 25 18 19 24 $198 $184 $153 20 20 ’17 Selling Days 24 20 20 25 19 20 24 20 19 25 18 19 24 20 FY’17

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HD Supply Organic Average Daily Sales Growth VPY +6.4% Preliminary Average Daily Sales Growth in February (VPY%) Average Daily Sales – Organic (VPY%) FY’15 (Preliminary) FY’16 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. 4.5% 9.2% 7.9% 5.6% 3.6% 6.2% 3.0% 2.3% 3.7% 4.1% 2.3% 3.6% 3.4% 6.4% Dec. Jan. Feb. Facil. Maint. Waterworks Const. & Ind. ’16 Selling Days ’15 Selling Days ’17 Selling Days 6.3% 9.5% 5.7% 5.4% 0.4% 1.7% 1.4% 0.2% 2.4% 1.0% 0.9% 2.5% 2.8% -0.9% 6.4% 8.5% 4.2% 4.6% 7.9% 1.9% 1.5% 4.4% 6.0% 2.9% 2.4% 3.9% 8.4% 11.9% 10.2% 7.5% 6.6% 10.2% 6.7% 6.2% 4.4% 5.7% 3.4% 6.4% 3.7% 0.2% 15.0% 5.3% 23 20 20 25 20 19 24 20 19 25 18 20 23 24 20 20 25 19 20 24 20 19 25 18 19 24 20 20 24 20 20 25 19 20 24 20 19 25 18 19 24 20 FY’17

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Average Daily Sales – Organic1 (VPY%) 1 Adjusted to Exclude Acquisitions, Divestitures, and Selling Days Note: “VPY” Denotes Versus Prior Year (VPY%) Selling Days Facilities Maintenance Waterworks Construction & Industrial HD Supply 65 6.6% 6.1% 9.6% 7.3% Facilities Maintenance Waterworks Construction & Industrial HD Supply Selling Days 12.3% 11.0% 15.3% 12.6% 258 13.7% 17.1% 19.9% 16.5% 65 11.4% 6.3% 16.8% 10.9% 63 14.5% 12.8% 13.4% 13.6% 64 10.1% 9.3% 11.9% 10.3% 66 Facilities Maintenance Waterworks HD Supply Selling Days 7.5% 8.2% 11.1% 8.7% 253 Construction & Industrial 9.6% 8.2% 15.7% 10.6% 65 9.4% 9.5% 8.9% 9.3% 63 64 3.9% 10.6% 9.7% 7.8% 6.9% 3.3% 10.2% 6.4% 61 Facilities Maintenance Waterworks HD Supply Selling Days 7.7% 5.4% 9.3% 7.3% 65 Construction & Industrial 7.5% 10.6% 14.7% 10.4% 63 8.2% 9.8% 14.8% 10.6% 64 7.3% 9.8% 12.4% 9.4% 61 7.7% 9.0% 12.9% 9.5% 253 FY Q1 Q2 Q3 Q4 Facilities Maintenance Waterworks HD Supply Selling Days 5.1% 3.4% 11.2% 6.1% 65 Construction & Industrial 2016 2012 2013 2014 2015 6.9% 5.6% 9.5% 7.1% 63 8.5% 1.4% 8.7% 5.8% 64 8.2% 3.3% 11.8% 7.5% 61 7.2% 3.4% 10.2% 6.6% 253 63 1.1% 4.4% 7.7% 4.1% 1.1% 4.0% 5.5% 3.4% 64 2.3% 3.4% 4.3% 3.2% 61 2.7% 4.5% 6.8% 4.4% 253

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Operating Leverage1 (VPY) 1 Operating Leverage is Defined as Adjusted EBITDA Growth Divided by Adjusted Net Sales Growth (adjusted for the 53rd Week in fiscal 2012) Not Meaningful (“nm”) when Sales Growth is Negative and when Prior Period Adjusted EBITDA is Negative or when Adjusted EBITDA Growth is Negative Note: “VPY” Denotes Versus Prior Year 1.5x 1.1x 2.3x 1.9x Facilities Maintenance Waterworks Construction & Industrial HD Supply 1.4x 1.7x 5.4x 2.3x 1.3x 1.8x 5.9x 3.2x 1.3x 1.7x nm 2.1x 1.2x 2.9x 4.7x 2.1x Facilities Maintenance Waterworks Construction & Industrial HD Supply 1.6x 1.0x 3.5x 2.2x 2.7x 3.7x 4.9x 4.2x 1.6x 2.4x 3.2x 2.0x 1.4x 2.7x 3.2x 2.0x 1.3x 2.0x 3.1x 1.6x Facilities Maintenance Waterworks HD Supply Construction & Industrial HD Supply 1.6x 2.1x 2.9x 1.7x 1.2x 1.5x 4.1x 2.3x 1.5x 1.3x 1.9x 1.7x Facilities Maintenance Waterworks HD Supply Construction & Industrial 2.0x 1.7x 1.3x 1.4x 2.1x 2.0x 3.6x 2.1x 1.7x 1.6x 2.3x 1.8x FY Q1 Q2 Q3 Q4 2016 2012 2013 2014 2015 2.3x 2.9x 3.4x 2.4x Facilities Maintenance Waterworks HD Supply Construction & Industrial 1.8x 2.8x 2.8x 2.0x 0.8x 6.7x 4.0x 2.8x nm 4.2x 2.6x 1.2x 1.1x 3.6x 3.2x 2.1x nm 1.4x 4.0x 1.5x nm 1.4x 2.8x 0.1x nm 0.7x 4.1x 0.4x nm 1.2x 3.2x 1.2x

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C&I Historical Performance (including HIS) ($ in millions) 1 2012 includes $26M and $2M in Net Sales and Adjusted EBITDA, respectively, for the 53rd week $501M $49M Sales Adjusted EBITDA Selling Days $1,425M $81M 258 $349M $14M 66 $325M $14M 65 $369M $25M 63 Sales Adjusted EBITDA Selling Days $382M $28M 64 $356M $18M $1,553M $107M $376M $21M $402M $32M Sales Adjusted EBITDA Selling Days $419M $36M $411M $29M $461M $41M Sales Adjusted EBITDA Selling Days $481M $43M $400M $26M $1,753M $139M FY Q1 Q2 Q3 Q4 2016 2012 2013 2014 2015 $457M $40M Sales Adjusted EBITDA Selling Days $505M $52M $523M $58M $447M $34M $1,932M $184M $544M $68M $552M $67M $466M $40M $2,063M $224M 253 61 65 63 64 253 61 65 63 64 253 61 65 63 64 253 61 65 63 64

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Reconciliation of Non-GAAP Measures: Net Income to Adjusted EBITDA ($ in millions) 1 During the fiscal year ended January 31, 2016, 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. 2 Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. 3 Represents the loss on extinguishment of debt including the premium paid to redeem 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 modification. 4 Represents the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs. Q4’16 additionally includes a real estate gain of approximately $11M 5 Represents the costs expensed in connection with secondary offerings of Holdings’ common stock by certain of Holdings’ stockholders. Net income $52 $ 871 Less income (loss) from discontinued operations, net of tax — (102) Income from continuing operations 52 973 Interest expense, net 50 83 Provision (benefit) for income taxes 1 (925) Depreciation and amortization 2 26 28 Loss on extinguishment of debt 5 Restructuring charges 3 (7) 5 Stock-based compensation 4 5 2 Adjusted EBITDA $ 169 $ 167 38 — $ 196 $ 1,472 (8) 146 204 1,326 269 394 (1,084) 101 113 179 9 9 20 16 $ 921 $ 876 139 100 Costs related to public offerings — — — 1 5 Other — 1 — 1 Q4’16 Q4’15 FY’16 FY’15 Reconciliation

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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 During the fiscal year ended January 31, 2016, 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. 2 Represents the loss on extinguishment of debt including the premium paid to redeem 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 modification. 3 Represents the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs. Q4’16 additionally includes a real estate gain of approximately $11M 4 Represents the costs expensed in connection with secondary offerings of Holdings’ common stock by certain of Holdings’ stockholders. Weighted average common shares outstanding (in thousands) Basic Diluted Adjusted Net Income Per Share - Basic Adjusted Net Income Per Share - Diluted Net income $ 52 $ 871 Less income (loss) from discontinued operations, net of tax (102) Income (loss) from continuing operations 52 973 Provision (benefit) for income taxes1 38 (925) Cash paid for income taxes (1) (2) Amortization of acquisition related intangible assets (other than - software) Restructuring charges3 5 (7) Loss on extinguishment of debt2 5 Adjusted net income $ 90 $ 55 199,888 198,276 202,587 201,156 $0.45 $0.28 $0.44 $0.27 — — 3 4 $ 196 $ 1,472 146 204 1,326 139 (1,084) (13) (16) 9 9 179 $ 532 $ 351 199,385 197,011 202,000 201,308 $2.67 $1.78 $2.63 $1.74 (8) 100 14 15 Costs related to public offerings4 — — 1 — Q4’16 Q4’15 Q4’16 FY’15 Reconciliation

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