HD Supply
HD Supply Holdings, Inc. (Form: 8-K, Received: 06/06/2017 06:03:47)

 

 

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): June 6, 2017 (June 3, 2016)

 

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))

 

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 June 6, 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 ended April 30, 2017 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 June 6, 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 8.01  Other Events.

 

On June 3, 2017, the Company’s Board of Directors authorized the Company to enter into a share repurchase program for the repurchase of up to an aggregate amount of $500,000,000 of the Company’s common stock in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. For additional information concerning the share repurchase program, please refer to the press release filed as Exhibit 99.1 in Item 2.02 which is incorporated into this Item 8.01 by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 8.01 of this Current Report on Form 8-K 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 2017 First-Quarter Results, Sale of HD Supply Waterworks Business Unit and Share Repurchase Authorization” dated June 6, 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: June 6, 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: June 6, 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 2017 First-Quarter Results, Sale of HD Supply Waterworks Business Unit and Share Repurchase Authorization” dated June 6, 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 2017 First-Quarter Results,

Sale of HD Supply Waterworks Business Unit and Share Repurchase Authorization

 

ATLANTA, GA — June 6, 2017 — HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest industrial distributors in North America, today reported Net sales of $1.9 billion for the first quarter of fiscal 2017 ended April 30, 2017, an increase of $92 million, or 5.2 percent, as compared to the first quarter of fiscal 2016.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1



 

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

 

Business Unit Performance

 

Facilities Maintenance

 

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

 

Waterworks

 

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

 

Construction & Industrial

 

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

 

First-Quarter Monthly Sales Performance

 

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

 

Preliminary May Sales Results

 

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

 

Waterworks Sale Transaction

 

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

 

Share Repurchase Program Authorization

 

On June 3, 2017, the Board of Directors of HD Supply Holdings, Inc. (the “company”) authorized the company to enter into a share repurchase program for the repurchase of up to an aggregate amount of $500 million of the

 


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

 

2



 

company’s common stock in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

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

 

Facilities Maintenance Leadership

 

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

 

Capital Structure Activities

 

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

 

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

 

Second-Quarter 2017 Outlook

 

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

 

Fiscal 2017 First-Quarter Conference Call

 

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

 


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

 

3



 

Non-GAAP Financial Measures

 

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

 

About HD Supply

 

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

 

Forward-Looking Statements and Preliminary Results

 

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

 

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

 

4



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

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

 

 

 

Three Months Ended

 

 

 

April 30,
2017

 

May 1,
2016

 

Net Sales

 

$

1,873

 

$

1,781

 

Cost of sales

 

1,242

 

1,172

 

Gross Profit

 

631

 

609

 

Operating expenses:

 

 

 

 

 

Selling, general and administrative

 

431

 

401

 

Depreciation and amortization

 

24

 

23

 

Restructuring

 

 

7

 

Total operating expenses

 

455

 

431

 

Operating Income

 

176

 

178

 

Interest expense

 

49

 

85

 

Loss on extinguishment & modification of debt

 

3

 

115

 

Other (income) expense, net

 

2

 

 

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

 

122

 

(22

)

Provision (benefit) for income taxes

 

37

 

(8

)

Income (Loss) from Continuing Operations

 

85

 

(14

)

Income from discontinued operations, net of tax

 

 

 

Net Income (Loss)

 

$

85

 

$

(14

)

Other comprehensive income (loss) — foreign currency translation adjustment

 

1

 

4

 

Total Comprehensive Income (Loss)

 

$

86

 

$

(10

)

 

 

 

 

 

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

Basic

 

200,708

 

198,808

 

Diluted

 

203,017

 

198,808

 

 

 

 

 

 

 

Basic Earnings Per Share(1):

 

 

 

 

 

Income (loss) from Continuing Operations

 

$

0.42

 

$

(0.07

)

Income from Discontinued Operations

 

$

 

$

 

Net Income (loss)

 

$

0.42

 

$

(0.07

)

Diluted Earnings Per Share (1) :

 

 

 

 

 

Income (loss) from Continuing Operations

 

$

0.42

 

$

(0.07

)

Income from Discontinued Operations

 

$

 

$

 

Net Income (loss)

 

$

0.42

 

$

(0.07

)

 


(1 )May not foot due to rounding.

 

5



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

Amounts in millions, except per share data, Unaudited

 

 

 

April 30,
2017

 

January 29,
2017

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

70

 

$

75

 

Receivables, less allowance for doubtful accounts of $14 and $13

 

1,015

 

904

 

Inventories

 

913

 

831

 

Other current assets

 

40

 

37

 

Total current assets

 

2,038

 

1,847

 

Property and equipment, net

 

309

 

303

 

Goodwill

 

2,869

 

2,869

 

Intangible assets, net

 

109

 

112

 

Deferred tax asset

 

579

 

556

 

Other assets

 

22

 

20

 

Total assets

 

$

5,926

 

$

5,707

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

721

 

$

532

 

Accrued compensation and benefits

 

84

 

140

 

Current installments of long-term debt

 

14

 

14

 

Other current liabilities

 

156

 

157

 

Total current liabilities

 

975

 

843

 

Long-term debt, excluding current installments

 

3,716

 

3,798

 

Other liabilities

 

112

 

106

 

Total liabilities

 

4,803

 

4,747

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01; 1 billion shares authorized; 202.9 million and 201.4 million shares issued and outstanding at April 30, 2017 and January 29, 2017, respectively

 

2

 

2

 

Paid-in capital

 

3,994

 

3,962

 

Accumulated deficit

 

(2,850

)

(2,969

)

Accumulated other comprehensive loss

 

(14

)

(15

)

Treasury stock, at cost, 0.2 and 0.6 million shares at April 30, 2017 and January 29, 2017, respectively

 

(9

)

(20

)

Total stockholders’ equity

 

1,123

 

960

 

Total liabilities and stockholders’ equity

 

$

5,926

 

$

5,707

 

 

6



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in millions, Unaudited

 

 

 

Three Months Ended

 

 

 

April 30,
2017

 

May 1,
2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss)

 

$

85

 

$

(14

)

Reconciliation of net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

25

 

25

 

Provision for uncollectibles

 

2

 

1

 

Non-cash interest expense

 

3

 

4

 

Payments of discounts upon extinguishment of debt

 

(4

)

 

Loss on extinguishment of debt

 

3

 

115

 

Stock-based compensation expense

 

6

 

6

 

Deferred income taxes

 

34

 

(9

)

Other

 

(1

)

 

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

 

 

 

 

 

(Increase) decrease in receivables

 

(113

)

(81

)

(Increase) decrease in inventories

 

(83

)

(91

)

(Increase) decrease in other current assets

 

(3

)

(20

)

Increase (decrease) in accounts payable and accrued liabilities

 

129

 

140

 

Increase (decrease) in other long-term liabilities

 

 

 

Net cash provided by operating activities

 

83

 

76

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(24

)

(17

)

Proceeds from sales of property and equipment

 

2

 

 

Net cash provided by (used in) investing activities

 

(22

)

(17

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from issuance of common stock under employee benefit plans

 

25

 

6

 

Purchase of treasury shares

 

(9

)

(9

)

Borrowings of long-term debt

 

 

1,000

 

Repayments of long-term debt

 

(100

)

(1,108

)

Borrowings on long-term revolver debt

 

75

 

 

Repayments on long-term revolver debt

 

(55

)

 

Debt issuance and modification costs

 

(5

)

(14

)

Other financing activities

 

3

 

(2

)

Net cash provided by (used in) financing activities

 

(66

)

(127

)

Effect of exchange rates on cash and cash equivalents

 

 

2

 

Increase (decrease) in cash and cash equivalents

 

$

(5

)

$

(66

)

Cash and cash equivalents at beginning of period

 

75

 

269

 

Cash and cash equivalents at end of period

 

$

70

 

$

203

 

 

7



 

HD SUPPLY HOLDINGS, INC.

SEGMENT REPORTING

Amounts in millions, Unaudited

 

 

 

Facilities
Maintenance

 

Waterworks

 

Construction &
Industrial

 

Corporate

 

Total
Continuing
Operations

 

Three Months Ended April 30, 2017

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

682

 

$

657

 

$

536

 

$

(2

)

$

1,873

 

Adjusted EBITDA

 

117

 

51

 

55

 

(16

)

207

 

Depreciation(1) & Software Amortization

 

7

 

3

 

9

 

3

 

22

 

Other Intangible Amortization

 

1

 

 

 

2

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended May 1, 2016

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

677

 

$

605

 

$

501

 

$

(2

)

$

1,781

 

Adjusted EBITDA

 

134

 

48

 

49

 

(16

)

215

 

Depreciation(1) & Software Amortization

 

8

 

2

 

8

 

3

 

21

 

Other Intangible Amortization

 

1

 

1

 

 

2

 

4

 

 


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

 

Reconciliation of Non-GAAP Measures

 

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

 

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

 

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

 

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

 

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

 

·                        Adjusted EBITDA and Adjusted net income do not reflect changes in, or cash requirements for, our working capital needs;

 

·                        Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt;

 

·                        Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;

 

·                        Adjusted EBITDA and Adjusted net income do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often

 

8



 

have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

 

Adjusted EBITDA

 

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

 

 

 

Three Months Ended

 

 

 

April 30,
2017

 

May 1,
2016

 

Net income (loss)

 

$

85

 

$

(14

)

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

 

 

 

Income (loss) from continuing operations

 

85

 

(14

)

Interest expense, net

 

49

 

85

 

Provision (benefit) for income taxes

 

37

 

(8

)

Depreciation and amortization (1)

 

25

 

25

 

Loss on extinguishment of debt (2)

 

3

 

115

 

Restructuring charges (3)

 

 

7

 

Stock-based compensation

 

6

 

6

 

Other

 

2

 

(1

)

Adjusted EBITDA

 

$

207

 

$

215

 

 


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

 

(2)          Represents the loss on extinguishment of debt including the write-off of unamortized deferred financing costs and other assets or liabilities associated with such debt.

 

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

 

Adjusted Net Income

 

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

 

 

 

Three Months Ended

 

 

 

April 30,
2017

 

May 1,
2016

 

Net income (loss)

 

$

85

 

$

(14

)

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

 

 

 

Income (loss) from continuing operations

 

85

 

(14

)

Plus: Provision (benefit) for income taxes

 

37

 

(8

)

Less: Cash income taxes

 

(3

)

(1

)

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

 

3

 

4

 

Plus: Loss on extinguishment & modification of debt (1)

 

3

 

115

 

Restructuring charges (2)

 

 

7

 

Other

 

2

 

 

Adjusted Net Income

 

$

127

 

$

103

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding (thousands)

 

203,017

 

201,231

 

Adjusted net income per share — diluted

 

$

0.63

 

$

0.51

 

 


(1)          Represents the loss on extinguishment of debt including the write-off of unamortized deferred financing costs and other assets or liabilities associated with such debt.

 

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

 

9



 

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

 

10



 

Results Revised for Discontinued Operations

 

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

 

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

 

 

 

Q1-17

 

Net sales

 

$

1,216

 

Cost of sales

 

732

 

Gross profit

 

484

 

Operating expenses:

 

 

 

Selling, general and administrative

 

334

 

Depreciation and amortization

 

21

 

Total operating expenses

 

355

 

Operating income

 

129

 

Interest expense

 

49

 

Loss on extinguishment & modification of debt

 

3

 

Income from continuing operations before provision for income taxes

 

77

 

Provision for income taxes

 

19

 

Income from continuing operations

 

58

 

Income from discontinued operations, net of tax

 

27

 

Net income

 

$

85

 

 

 

 

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

Basic

 

200,708

 

Diluted

 

203,017

 

Basic Earnings Per Share (1) :

 

 

 

Income from continuing operations

 

$

0.29

 

Income from discontinued operations

 

0.13

 

Net income

 

$

0.42

 

Diluted Earnings Per Share (1) :

 

 

 

Income from continuing operations

 

$

0.29

 

Income from discontinued operations

 

0.13

 

Net income (loss)

 

$

0.42

 

Non-GAAP financial data:

 

 

 

Adjusted EBITDA

 

$

157

 

Adjusted Net Income

 

$

80

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

Basic

 

200,708

 

Diluted

 

203,017

 

Adjusted Net income per share - Basic

 

$

0.40

 

Adjusted Net income per share - Diluted

 

$

0.39

 

 


(1)          May not foot due to rounding.

 

11



 

 

 

Q1-16

 

Q2-16

 

Q3-16

 

Q4-16

 

Fiscal
2016

 

Net sales

 

$

1,176

 

$

1,283

 

$

1,275

 

$

1,085

 

$

4,819

 

Cost of sales

 

706

 

771

 

763

 

654

 

2,894

 

Gross profit

 

470

 

512

 

512

 

431

 

1,925

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

309

 

315

 

327

 

318

 

1,269

 

Depreciation and amortization

 

21

 

21

 

21

 

21

 

84

 

Restructuring

 

7

 

4

 

3

 

(7

)

7

 

Total operating expenses

 

337

 

340

 

351

 

332

 

1,360

 

Operating income

 

133

 

172

 

161

 

99

 

565

 

Interest expense

 

85

 

69

 

65

 

50

 

269

 

Loss on extinguishment & modification of debt

 

115

 

 

59

 

5

 

179

 

Income (loss) from continuing operations before provision for income taxes

 

(67

)

103

 

37

 

44

 

117

 

Provision (benefit) for income taxes

 

(26

)

41

 

16

 

20

 

51

 

Income (loss) from continuing operations

 

(41

)

62

 

21

 

24

 

66

 

Income from discontinued operations, net of tax

 

27

 

36

 

39

 

28

 

130

 

Net income (loss)

 

$

(14

)

$

98

 

$

60

 

$

52

 

$

196

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

 

 

 

 

 

 

Basic

 

198,808

 

199,250

 

199,593

 

199,888

 

199,385

 

Diluted

 

198,808

 

201,978

 

202,007

 

202,587

 

202,000

 

Basic Earnings Per Share (1) :

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(0.21

)

$

0.31

 

$

0.11

 

$

0.12

 

$

0.33

 

Income from discontinued operations

 

0.14

 

0.18

 

0.20

 

0.14

 

0.65

 

Net income (loss)

 

$

(0.07

)

$

0.49

 

$

0.30

 

$

0.26

 

$

0.98

 

Diluted Earnings Per Share (1) :

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(0.21

)

$

0.31

 

$

0.10

 

$

0.12

 

$

0.33

 

Income (loss) from discontinued operations

 

0.14

 

0.18

 

0.19

 

0.14

 

0.64

 

Net income (loss)

 

$

(0.07

)

$

0.49

 

$

0.30

 

$

0.26

 

$

0.97

 

Non-GAAP financial data:

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

167

 

$

205

 

$

189

 

$

119

 

$

680

 

Adjusted Net Income

 

$

57

 

$

105

 

$

96

 

$

44

 

$

302

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

 

 

 

 

 

 

Basic

 

198,808

 

199,250

 

199,593

 

199,888

 

199,385

 

Diluted

 

201,231

 

201,978

 

202,007

 

202,587

 

202,000

 

Adjusted Net income per share - Basic

 

$

0.29

 

$

0.53

 

$

0.48

 

$

0.22

 

$

1.51

 

Adjusted Net income per share - Diluted

 

$

0.28

 

$

0.52

 

$

0.48

 

$

0.22

 

$

1.50

 

 


(1)          May not foot due to rounding.

 

12



 

 

 

Q1-15

 

Q2-15

 

Q3-15

 

Q4-15

 

Fiscal
2015

 

Net sales

 

$

1,090

 

$

1,236

 

$

1,238

 

$

1,051

 

$

4,615

 

Cost of sales

 

660

 

745

 

754

 

642

 

2,801

 

Gross profit

 

430

 

491

 

484

 

409

 

1,814

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

292

 

305

 

295

 

292

 

1,184

 

Depreciation and amortization

 

24

 

25

 

24

 

24

 

97

 

Restructuring

 

 

 

3

 

5

 

8

 

Total operating expenses

 

316

 

330

 

322

 

321

 

1,289

 

Operating income

 

114

 

161

 

162

 

88

 

525

 

Interest expense

 

106

 

106

 

99

 

83

 

394

 

Loss on extinguishment & modification of debt

 

 

 

100

 

 

100

 

Other (income) expense, net

 

 

1

 

 

 

1

 

Income (loss) from continuing operations before provision for income taxes

 

8

 

54

 

(37

)

5

 

30

 

Provision (benefit) for income taxes

 

(188

)

8

 

8

 

(998

)

(1,170

)

Income (loss) from continuing operations

 

196

 

46

 

(45

)

1,003

 

1,200

 

Income (loss) from discontinued operations, net of tax

 

46

 

63

 

295

 

(132

)

272

 

Net income

 

$

242

 

$

109

 

$

250

 

$

871

 

$

1,472

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

 

 

 

 

 

 

Basic

 

195,347

 

196,893

 

197,529

 

198,276

 

197,011

 

Diluted

 

200,716

 

201,809

 

197,529

 

201,156

 

201,308

 

Basic Earnings Per Share (1) :

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

1.00

 

$

0.23

 

$

(0.23

)

$

5.06

 

$

6.09

 

Income (loss) from discontinued operations

 

0.24

 

0.32

 

1.49

 

(0.67

)

1.38

 

Net income

 

$

1.24

 

$

0.55

 

$

1.27

 

$

4.39

 

$

7.47

 

Diluted Earnings Per Share (1) :

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.98

 

$

0.23

 

$

(0.23

)

$

4.99

 

$

5.96

 

Income (loss) from discontinued operations

 

0.23

 

0.31

 

1.49

 

(0.66

)

1.35

 

Net income

 

$

1.21

 

$

0.54

 

$

1.27

 

$

4.33

 

$

7.31

 

Non-GAAP financial data:

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

144

 

$

191

 

$

195

 

$

120

 

$

650

 

Adjusted Net Income

 

$

8

 

$

52

 

$

65

 

$

11

 

$

136

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

 

 

 

 

 

 

Basic

 

195,347

 

196,893

 

197,529

 

198,276

 

197,011

 

Diluted

 

200,716

 

201,809

 

201,546

 

201,156

 

201,308

 

Adjusted Net income per share - Basic

 

$

0.04

 

$

0.26

 

$

0.33

 

$

0.06

 

$

0.69

 

Adjusted Net income per share - Diluted

 

$

0.04

 

$

0.26

 

$

0.32

 

$

0.05

 

$

0.68

 

 


(1)          May not foot due to rounding.

 

13



 

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

 

 

 

Q1-17

 

Net income

 

$

85

 

Less income from discontinued operations, net of tax

 

27

 

Income from continuing operations

 

58

 

Interest expense, net

 

49

 

Provision for income taxes (i)

 

19

 

Depreciation and amortization (ii)

 

22

 

Stock-based compensation

 

6

 

Restructuring charges (iii)

 

 

Loss on extinguishment of debt (iv)

 

3

 

Costs related to public offerings (v)

 

 

Other

 

 

Adjusted EBITDA

 

$

157

 

 

 

 

Q1-16

 

Q2-16

 

Q3-16

 

Q4-16

 

Fiscal
2016

 

Net income (loss)

 

$

(14

)

$

98

 

$

60

 

$

52

 

$

196

 

Less income from discontinued operations, net of tax

 

27

 

36

 

39

 

28

 

130

 

Income (loss) from continuing operations

 

(41

)

62

 

21

 

24

 

66

 

Interest expense, net

 

85

 

69

 

65

 

50

 

269

 

Provision (benefit) for income taxes (i)

 

(26

)

41

 

16

 

20

 

51

 

Depreciation and amortization (ii)

 

21

 

23

 

22

 

22

 

88

 

Stock-based compensation

 

6

 

5

 

4

 

5

 

20

 

Restructuring charges (iii)

 

7

 

4

 

3

 

(7

)

7

 

Loss on extinguishment & modification of debt (iv)

 

115

 

 

59

 

5

 

179

 

Costs related to public offerings (v)

 

 

 

 

 

 

Other

 

 

1

 

(1

)

 

 

Adjusted EBITDA

 

$

167

 

$

205

 

$

189

 

$

119

 

$

680

 

 

 

 

Q1-15

 

Q2-15

 

Q3-15

 

Q4-15

 

Fiscal
2015

 

Net income

 

$

242

 

$

109

 

$

250

 

$

871

 

$

1,472

 

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

 

46

 

63

 

295

 

(132

)

272

 

Income (loss) from continuing operations

 

196

 

46

 

(45

)

1,003

 

1,200

 

Interest expense, net

 

106

 

106

 

99

 

83

 

394

 

Provision (benefit) for income taxes (i)

 

(188

)

8

 

8

 

(998

)

(1,170

)

Depreciation and amortization (ii)

 

25

 

26

 

25

 

24

 

100

 

Stock-based compensation

 

5

 

5

 

4

 

2

 

16

 

Restructuring charges (iii)

 

 

 

3

 

5

 

8

 

Loss on extinguishment & modification of debt (iv)

 

 

 

100

 

 

100

 

Costs related to public offerings (v)

 

 

1

 

 

 

1

 

Other

 

 

(1

)

1

 

1

 

1

 

Adjusted EBITDA

 

$

144

 

$

191

 

$

195

 

$

120

 

$

650

 

 


(i)                                     During fiscal 2015, the company recorded a $1,007 million tax benefit for the reversal of substantially all of the valuation allowance on its U.S. net deferred tax assets and a $189 million tax benefit for the reduction in unrecognized tax benefits as a result of IRS and state audit settlements.

 

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

 

(iii)                             Represents the costs incurred for strategic alignment of our workforce and branch closures or consolidations. These costs include occupancy costs, severance, relocation costs, and other costs incurred to exit a location.

 

(iv)                               Represents the loss on extinguishment of debt including the premium paid to repurchase or call the debt as well as the write-off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt. Also includes the costs of debt modifications.

 

14



 

(v)                                   Represents the costs expensed in connection with secondary offerings of the company’s common stock by certain of the company’s shareholders.

 

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

 

 

 

Q1-17

 

Net income

 

$

85

 

Less income from discontinued operations, net of tax

 

27

 

Income from continuing operations

 

58

 

Provision for income taxes (i)

 

19

 

Cash paid for income taxes

 

(3

)

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

 

3

 

Restructuring charges (ii)

 

 

Loss on extinguishment of debt (iii)

 

3

 

Costs related to public offerings (iv)

 

 

Other

 

 

Adjusted Net income

 

$

80

 

 

 

 

Q1-16

 

Q2-16

 

Q3-16

 

Q4-16

 

Fiscal
2016

 

Net income (loss)

 

$

(14

)

$

98

 

$

60

 

$

52

 

$

196

 

Less income from discontinued operations, net of tax

 

27

 

36

 

39

 

28

 

130

 

Income (loss) from continuing operations

 

(41

)

62

 

21

 

24

 

66

 

Provision (benefit) for income taxes (i)

 

(26

)

41

 

16

 

20

 

51

 

Cash paid for income taxes

 

(1

)

(5

)

(6

)

(1

)

(13

)

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

 

3

 

3

 

3

 

3

 

12

 

Restructuring charges (ii)

 

7

 

4

 

3

 

(7

)

7

 

Loss on extinguishment & modification of debt (iii)

 

115

 

 

59

 

5

 

179

 

Costs related to public offerings (iv)

 

 

 

 

 

 

Other

 

 

 

 

 

 

Adjusted Net income

 

$

57

 

$

105

 

$

96

 

$

44

 

$

302

 

 

 

 

Q1-15

 

Q2-15

 

Q3-15

 

Q4-15

 

Fiscal
2015

 

Net income

 

$

242

 

$

109

 

$

250

 

$

871

 

$

1,472

 

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

 

46

 

63

 

295

 

(132

)

272

 

Income (loss) from continuing operations

 

196

 

46

 

(45

)

1,003

 

1,200

 

Provision (benefit) for income taxes (i)

 

(188

)

8

 

8

 

(998

)

(1,170

)

Cash paid for income taxes

 

(3

)

(6

)

(5

)

(2

)

(16

)

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

 

3

 

3

 

3

 

3

 

12

 

Restructuring charges (ii)

 

 

 

4

 

5

 

9

 

Loss on extinguishment & modification of debt (iii)

 

 

 

100

 

 

100

 

Costs related to public offerings (iv)

 

 

1

 

 

 

1

 

Other

 

 

 

 

 

 

Adjusted Net income

 

$

8

 

$

52

 

$

65

 

$

11

 

$

136

 

 


(i)                                     During fiscal 2015, the company recorded a $1,007 million tax benefit for the reversal of substantially all of the valuation allowance on its U.S. net deferred tax assets and a $189 million tax benefit for the reduction in unrecognized tax benefits as a result of IRS and state audit settlements.

 

(ii)                                 Represents the costs incurred for strategic alignment of our workforce and branch closures or consolidations. These costs include occupancy costs, severance, relocation costs, and other costs incurred to exit a location.

 

(iii)                             Represents the loss on extinguishment of debt including the premium paid to repurchase or call the debt as well as the write-off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt. Also includes the costs of debt modifications.

 

(iv)                               Represents the costs expensed in connection with secondary offerings of the company’s common stock by certain of the company’s shareholders.

 

15


Exhibit 99.2

FINANCIAL RESULTS AND COMPANY OVERVIEW 2017 First-Quarter Performance June 6, 2017

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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 risks related to whether and when we are able to satisfy the conditions to the completion of the sale of the Waterworks business, including the receipt of required regulatory approvals, our ability to complete the sale of the Waterworks business generally and those “Risk factors” in our annual report on Form 10-K, for the fiscal year ended January 29, 2017, filed on March 14, 2017 our quarterly report on Form 10-Q, for the fiscal quarter ended April 30, 2017, filed on June 6, 2017 and those described from time to time in our, and HD Supply, Inc.’s, other filings with the U.S. Securities and Exchange Commission, which can be found at the SEC’s website www.sec.gov. Any forward-looking information presented herein is made only as of the date of this 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 Net sales, Adjusted EBITDA and Adjusted Net income per diluted share are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end adjustments. Any variation between HD Supply’s actual results and the preliminary financial data set forth 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 (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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Transformational Transaction Waterworks Transaction Overview Entered Into Definitive Agreement to Sell HD Supply Waterworks for ~$2.5B in Cash ~$2.4B After-tax Net Proceeds Expected to Close Q3’17 After Customary Regulatory Approvals Use of Proceeds to Repay Debt, Invest in Next-Generation Growth and Innovation and Enables Return of Cash to Shareholders via $500M Share Repurchase Program Transaction Overview Strategic Rationale Simplifies Business Mix and Focuses Execution Accelerates Debt Reduction Enables Capital Return Program Accelerates Next-Generation Growth and Innovation Investment Improves Profitability Profile Reduces Cyclicality

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Facilities Maintenance Evolution Early Innings of Evolution with Clarity of Mission to Improve the Customer Experience Differentiated Untapped Potential Extend Customer-Centricity and One Team Culture Evolve Service Excellence Across Diverse Channels Listen, Prioritize and Act to Enhance Customer Experience Infuse and Develop Next-Generation Talent Reinvest Cash Flow to Accelerate Strategic Growth and Innovation “Customer-Centric Omni-Service”

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$1,781M $1,873M +5% Gross Profit Gross Margin % Operating Income Adj. EBITDA % Op. Income % $609M $631M 34.2% 33.7% $215M $207M $178M $176M 12.1% 11.1% 9.4% +4% -50 BPs -100 BPs -$8M ($ in millions, except per share data) $103M $127M -1% Net Sales 1 See appendix slides 19 and 20 for a reconciliation of Adjusted EBITDA , Adjusted Net Income and Adjusted Net Income per Diluted Share to Net Income (Loss) and Net Income (Loss) per Diluted Share Q1’16 Adj. EBITDA1 VPY Adj. Net Income1 10.0% -60 BPs Q1’17 $0.51 $0.63 +$0.12 Per Diluted Share +$92M +23% Net Income (Loss) ($14M) $85M +$99M ($0.07) $0.42 +$0.49 Per Diluted Share 5.2% Sales Growth VPY Q1’17 Financial Results

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Organic Growth Across Business Units Q1’17 Segment Performance Q1’17 $682M $657M $536M Adj. EBITDA $117M $51M $55M Net Sales ($ in millions) Q1’16 $677M $605M $501M $134M $48M +9% VPY +1% -13% VPY VPY +6% +7% +12% $49M Q1’17 Q1’16 Q1’17 Q1’16

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Q1’17 Taxes and Cash Flow Favorable Tax Asset with Significant Gross Federal Net Operating Loss Carryforwards of Approximately $1.7 Billion ~$700M Tax-affected Amount of Federal and State NOLs Cash Taxes $3M in Q1’17 $5M – $6M Estimated for Q2’17 $30M – $40M Estimated for FY’17 (Inclusive of Expected Cash Taxes on the Sale of HD Supply Waterworks) GAAP Taxes ~30% for Q1’17 Expected to be ~37% for FY’17 $3.7B1 Net Debt at the End of Q1’17 4.0x Net Debt to LTM Adjusted EBITDA Extended ABL Maturity until April 5, 2022 Repaid $100M Term B-1 Loans $24M of Capital Expenditures in Q1’17 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 16 Taxes Cash Flow Capital Structure Execution

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+5.2% Q1’17 Average Daily Sales Growth Q1’17 Monthly Average Daily Sales (%) 1 Adjusted to eliminate the effect of Acquisitions and Divestitures; Note: “VPY” denotes Versus Prior Year 0.8% 5.0% 7.7% 5.1% May 5.2% 2.1% 9.3% 1.1% ’16 Selling Days 25 20 20 8.1% 7.9% Facilities Maintenance Waterworks Construction & Industrial (Preliminary) 6.4% 5.3% 4.2% 0.2% 15.0% 5.3% 20 9.2% 3.6% Feb. Mar. Apr. Prior Year $759M $641M $579M HD Supply Net Sales $535M 7.9% 5.6% ’15 Selling Days Q1’17 0.4% 4.6% 6.6% $609M 5.4% 4.2% 7.5% $729M 5.7% 8.5% 10.2% $550M 9.5% 6.4% 11.9% $502M HD Supply Average Daily Sales Growth VPY1 ’17 Selling Days 25 20 20 20 Current Year 25 19 20 20

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Waterworks Expected Use of Proceeds Sources Uses Gross Proceeds Taxes and Transaction Costs (<$100M) $2,500M Redeem First Lien $1,250M Pay First Lien Make Whole and Accrued Interest $80M Redeem Term B-1 Loan $533M Available Cash $537M $2,400M Total Uses Expected $2.4B Net Proceeds ($ in millions) $2,400M Total Sources

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~2 to 3% End Market Growth for FY’17 FY’17 End Market Preliminary Outlook Residential Construction “Living Space” MRO Primary End Market Non- Residential Construction ~2 to 3% FY’17 End Market Estimates1 1% to 2% Current View as of June’17 Mid-Single Digit 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 a new administration Note: Contains forward looking information; please see Disclaimer on slide 2 Low Single Digits to Mid-Single Digit

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Q2’17 and FY’17 Outlook Reconciliation Q2’17 and FY’17 Outlook Reconciliation Net Sales Adjusted EBITDA HDS Excluding Waterworks $1,325 – $1,365 $200 – $210 Waterworks ~$770 ~$75 - = - = = – HDS Including Waterworks $2,095 – $2,135 $275 – $285 ($ in millions) Q2’17: FY’17: Q2’17: FY’17: $5,000 – $5,100 ~$2,800 - = $7,800 – $7,900 $700 – $730 ~$250 - = $950 – $980

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Current Outlook Summary HD Supply Current Outlook Summary +4.8% Net Sales VPY at Midpoint Flat Adj. EBITDA VPY at Midpoint +19.3% Adj. Net Income per Diluted Share Increase VPY at Midpoint Assumes ~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% to +3% End Market VPY1 3.8% to 5.8% Net Sales VPY $5,000M to $5,100M Net Sales 2.9% to 7.4% Adj. EBITDA VPY $700M to $730M Adj. EBITDA 34.7% to 44.7% Adj. Net Income per Diluted Share VPY $2.02 to $2.17 Adj. Net Income per Diluted Share Assumes ~203M Diluted Share Count $1,325M to $1,365M Net Sales $200M to $210M Adj. EBITDA  $5,000M to $5,100M Net Sales  $0.60 to $0.65 Adj. Net Income per Diluted Share Q2’17 FY’17

 


Q&A Q&A

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Concluding Remarks Significant Moment in Time for HD Supply Leap Forward to Extend Customer-Centric Differentiation Enables Focus, Growth Investment and Innovation Success is Earned with Hard Work and Team Performance One Team, Driving Customer Success and Value Creation

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Q&A APPENDIX

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~$3.7B Net Debt Capital Structure Overview Q1’17 Debt Balances Sec. ABL Sec. Term B-1 Sec. 1st Lien Notes Sr. Unsecured Notes $439 1,250 1,000 4/5/22 8/13/21 12/15/21 Outstanding Debt Less Cash and Cash Equivalents Net Debt $3,660 (70) $3,773 Balance Maturity 1 Represents the stated rate of interest, without including the effect of discounts or premiums 2 Subject to applicable redemption price terms 3 Represents the unamortized portion of discounts and deferred financing costs ($ in millions, unless otherwise noted) 2.65% 3.90% 5.25% Interest Rate1 537 n/a now 12/15/17 Soft Call Date2 5.75% 4/15/24 4/15/19 Less Discount3 (8) Less Deferred Financing Costs3 (35) Gross Debt $3,730 Sec. Term B-2 10/17/23 3.90% 547 now

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$641M Preliminary May Sales Monthly Net Sales ($) FY’16 Facil. Maint. Waterworks Const. & Ind. ’17 Selling Days ’16 Selling Days ($ in millions) HD Supply Net Sales (Preliminary) FY’17 Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May May $609M $622M $785M $639M $603M $766M $579M $526M $527M $759M $581M $535M $641M $226 $295 $237 $221 $266 $189 $198 $233 $198 $212 $272 $232 $226 $282 $231 $220 $282 $187 $177 $187 $184 $202 $271 $230 $170 $209 $171 $163 $218 $150 $153 $163 $153 $166 $217 $180 $220 $225 $165 20 19 24 20 19 25 18 20 23 20 20 25 20 20 19 24 20 19 25 18 20 23 20 20 25 20 Note: Contains forward-looking information; please see Disclaimer on slide 2

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+5.1% Preliminary Average Daily Sales Growth in May Average Daily Sales – Organic1 (VPY%) HD Supply Organic Average Daily Sales Growth VPY1 (VPY%) 1 Adjusted for Acquisitions, Divestitures, and Selling Days Note: “VPY” denotes Versus Prior Year; Contains forward-looking information; please see Disclaimer on slide 2 FY’16 Facil. Maint. Waterworks Const. & Ind. ’17 Selling Days ’16 Selling Days (Preliminary) FY’17 Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May May 3.6% 6.2% 3.0% 2.3% 3.7% 4.1% 5.3% 2.3% 3.6% 4.2% 3.4% 6.4% 5.1% 1.7% 1.4% 0.2% 2.4% 1.0% 0.9% 2.5% 2.8% 0.2% 1.1% 0.8% 5.2% 7.9% 1.9% 1.5% 4.4% 6.0% 2.9% 2.4% 3.9% 15.0% 8.1% 5.0% 2.1% 10.2% 6.7% 6.2% 4.4% 5.7% 3.4% 6.4% 3.7% 5.3% 7.9% 7.7% 9.3% 0.4% 4.6% 6.6% 20 19 24 20 19 25 18 20 23 20 20 25 20 20 19 24 20 19 25 18 20 23 20 20 25 20 ’15 Selling Days 19 20 24 20 19 25 18 19 24 20 20 25 19

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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 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 Q1’17 Q1’16 Net income (loss) $85 $ (14) Less income (loss) from discontinued operations, net of tax 27 27 Income from continuing operations 58 (41) Interest expense, net 49 85 Provision (benefit) for income taxes (26) Depreciation and amortization 1 22 21 Loss on extinguishment of debt 3 Restructuring charges 2 — 7 Stock-based compensation 3 6 6 Adjusted EBITDA $ 157 $ 167 19 115 Other — — Reconciliation (ex Waterworks) Q1’17 Q1’16 $85 $ (14) — — 85 (14) 49 85 (8) 25 25 3 — 7 6 6 $ 207 $ 215 37 115 2 (1) 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 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 2 Represents the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs Weighted average common shares outstanding (in thousands) Basic Diluted Adjusted Net Income Per Share - Basic Adjusted Net Income Per Share - Diluted Net income (loss) $ 85 $ (14) Less income (loss) from discontinued operations, net of tax 27 Income (loss) from continuing operations 58 (41) Provision (benefit) for income taxes 19 (26) Cash paid for income taxes (3) (1) Amortization of acquisition related intangible assets (other than - software) Restructuring charges 2 7 — Loss on extinguishment of debt 1 3 Adjusted net income $ 80 $ 57 200,708 198,808 203,017 201,231 $0.40 $0.22 $0.39 $0.28 27 115 3 3 Q1’17 Q1’16 Reconciliation (ex Waterworks) Other — — $ 85 $ (14) — 85 (14) 37 (8) (3) (1) 7 — 3 $ 127 $ 103 200,708 198,808 203,017 201,231 $0.63 $0.52 $0.63 $0.51 — 115 3 4 Q1’17 Q1’16 Reconciliation — 2

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