HD Supply
HD Supply Holdings, Inc. (Form: 8-K, Received: 09/06/2017 06:03:07)

 

 

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): September 6, 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))

 

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 September 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 July 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 September 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 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.

 

Description of Exhibit

 

 

 

99.1

 

Press Release “HD Supply Holdings, Inc. Announces 2017 Second-Quarter Results and Reaffirms Full-Year Guidance” dated September 6, 2017.

 

 

 

99.2

 

HD Supply presentation to investors.

 

2



 

EXHIBIT INDEX

 

Exhibit No.

 

Description of Exhibit

 

 

 

99.1

 

Press Release “HD Supply Holdings, Inc. Announces 2017 Second-Quarter Results and Reaffirms Full-Year Guidance” dated September 6, 2017.

 

 

 

99.2

 

HD Supply presentation to investors.

 

3



 

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: September 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: September 6, 2017

HD Supply, Inc.

 

 

 

 

By:

/s/ Dan S. McDevitt

 

 

Dan S. McDevitt

 

 

General Counsel and Corporate Secretary

 

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 2017 Second-Quarter Results

and Reaffirms Full-Year Guidance

 

ATLANTA, GA — September 6, 2017 — HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest industrial distributors in North America, today reported Net sales of $1.4 billion for the second quarter of fiscal 2017 ended July 30, 2017, an increase of $69 million, or 5.4 percent, as compared to the second quarter of fiscal 2016.

 

“In our second quarter of 2017, we stepped up our execution to improve performance. We met our revised Net Sales and Adjusted EBITDA targets for the second quarter and recommitted to our full year guidance. Following the sale of our Waterworks business, we have achieved our targeted capital structure of 2.0x to 3.0x financial leverage and are committed to delivering profitable growth in excess of market,” stated Joe DeAngelo, Chairman, President & CEO of HD Supply.

 

Gross profit increased $26 million, or 5.1 percent, to $539 million for the second quarter of fiscal 2017 as compared to $513 million for the second quarter of fiscal 2016. Gross profit was 39.9 percent of Net sales for the second quarter of fiscal 2017, down approximately 10 basis points from 40.0 percent of Net sales for second quarter of fiscal 2016.

 

Operating income increased $9 million, or 5.3 percent, to $180 million for the second quarter of fiscal 2017 as compared to $171 million for the second quarter of fiscal 2016. Operating income as a percentage of Net sales was 13.3 percent for the second quarter of fiscal 2017, flat as compared to the second quarter of fiscal 2016.

 

Net income increased $344 million to $442 million for the second quarter of fiscal 2017 as compared to $98 million for the second quarter of fiscal 2016. The increase in Net income was primarily due to a $323 million tax benefit within Discontinued Operations to record a deferred tax asset recognizing the outside basis difference in the Waterworks business. Net income per diluted share increased $1.73 to $2.22 for the second quarter of fiscal 2017, as compared to $0.49 for the second quarter of fiscal 2016.

 

Adjusted EBITDA increased $5 million, or 2.5 percent, to $208 million for the second quarter of fiscal 2017 as compared to $203 million for the second quarter of fiscal 2016. Adjusted EBITDA as a percentage of Net sales was 15.4 percent for the second quarter of fiscal 2017, decreasing approximately 40 basis points from 15.8 percent for the second quarter of fiscal 2016.

 

Adjusted net income increased $23 million, or 22.1 percent, to $127 million for the second quarter of fiscal 2017 as compared to $104 million for the second quarter of fiscal 2016.  Adjusted net income per diluted share was $0.64 for the second quarter of fiscal 2017, as compared to $0.51 for the second quarter of fiscal 2016.

 

1



 

As of July 30, 2017, HD Supply’s combined liquidity of approximately $590 million was comprised of $67 million in cash and cash equivalents and $523 million of additional available borrowings under HD Supply, Inc.’s (“HDS”) senior asset-backed lending facility, based on qualifying inventory and receivables.

 

Business Unit Performance

 

Facilities Maintenance

 

Net sales increased $28 million, or 3.8 percent, to $769 million for the second quarter of fiscal 2017, as compared to $741 million for the second quarter of fiscal 2016.  Adjusted EBITDA increased $5 million, or 3.3 percent, to $156 million for the second quarter of fiscal 2017 as compared to $151 million for the second quarter of fiscal 2016.  Adjusted EBITDA as a percentage of Net sales was 20.3 percent for the second quarter of fiscal 2017, decreasing approximately 10 basis points from 20.4 percent for the second quarter of fiscal 2016.

 

Construction & Industrial

 

Net sales increased $40 million, or 7.4 percent, to $584 million for the second quarter of fiscal 2017, as compared to $544 million for the second quarter of fiscal 2016.  Adjusted EBITDA increased $1 million, or 1.5 percent, to $69 million for the second quarter of fiscal 2017 as compared to $68 million for the second quarter of fiscal 2016.  Adjusted EBITDA as a percentage of Net sales was 11.8 percent for the second quarter of fiscal 2017, down approximately 70 basis points from 12.5 percent for the second quarter of fiscal 2016.

 

Second-Quarter Monthly Sales Performance

 

Net sales for May, June and July of fiscal 2017 were $412 million, $408 million and $532 million, respectively.  There were 20 selling days in May, 19 selling days in June and 24 selling days in July.  Average year-over-year daily sales growth for May, June and July of fiscal 2017 was 6.9 percent, 3.4 percent and 5.6 percent, respectively.

 

Preliminary August Sales Results

 

Preliminary Net sales in August were approximately $435 million, which represents year-over-year average daily sales growth of approximately 6.7 percent. Preliminary August year-over-year average daily sales growth for Facilities Maintenance was approximately 4.3 percent and for Construction & Industrial was approximately 9.8 percent.  There were 20 selling days in both August 2017 and August 2016.

 

Subsequent Completion of the Sale of Waterworks

 

On August 1, 2017, the Company completed the sale of its Waterworks business for gross cash proceeds of $2,500 million, subject to a post-closing working capital adjustment. The Company expects to pay approximately $40 million of transaction costs and recognize a pre-tax gain of approximately $925 million. In connection with the pending sale, the Company recorded a $323 million net deferred tax asset and corresponding tax benefit in discontinued operations during the second quarter of fiscal 2017 in order to recognize the outside basis difference in the Waterworks investment. The Company expects to recognize tax expense of approximately $520 million in discontinued operations in third quarter fiscal 2017 related to the sale of the Waterworks business. This includes an expense of $323 million related to utilizing the deferred tax asset associated with the outside basis difference in the Waterworks subsidiary recorded as an income tax benefit in the second quarter in discontinued operations. The Company estimates that it will utilize approximately $280 million of tax-effected federal and state net operating loss carryforwards as a result of the sale of the Waterworks business.

 

Subsequent Capital Structure Activities

 

Repayment of the Senior ABL Facility

 

On August 1, 2017, HDS repaid all of the outstanding U.S. borrowings on its Senior ABL Facility. Canadian borrowings of $62 million on the Senior ABL Facility remain outstanding.

 

2



 

Amendment of the April 2016 Senior Unsecured Notes

 

On August 25, 2017, HDS entered into an amendment of its 5.75% Senior Unsecured Notes (the “April 2016 Senior Unsecured Notes”). The Second Supplemental Indenture amends and supplements the Indenture, dated as of April 11, 2016, as amended and supplemented by the First Supplemental Indenture, dated as of April 11, 2016 (together, the “Indenture”). Holders of a majority in aggregate principal amount of the outstanding April 2016 Senior Unsecured Notes consented to the Proposed Amendments (as defined below).

 

The Proposed Amendments (a) amend the definition of “Permitted Payments” contained in the Indenture to permit an additional category of Permitted Payments permitting Restricted Payments (as defined in the Indenture) at any time in an aggregate amount not to exceed (x) $500,000,000 and (y) thereafter, upon full use of such capacity set forth in clause (x), an additional amount, if any, such that, after giving pro forma effect to such Restricted Payment, the Company’s Consolidated Leverage Ratio does not exceed 3.00 to 1.00; (b) increase the interest rate for the April 2016 Senior Unsecured Notes to 7.00% per annum commencing April 15, 2019, to the extent the April 2016 Senior Unsecured Notes remain outstanding after April 15, 2019; (c) amend the definition of “Net Available Cash” contained in the Indenture to provide that proceeds from the sale of the Waterworks business unit consummated on August 1, 2017 (other than proceeds to be applied to redeem the Company’s December 2014 First Priority Notes due 2021 as defined below) shall be excluded and accordingly, the Company will not be required to apply the remaining net proceeds in accordance with the provision of the “Sale of Assets” covenant of the Indenture and (d) amend the definition of “Consolidated EBITDA” contained in the Indenture to provide that while the Company may continue to include in the calculation thereof projected cost savings, it may only do so with respect to those realized as a result of actions taken or to be taken in connection with a purchase of assets from, or a sale of assets to, a third party (excluding the Waterworks Sale).

 

As a result of entering into the Second Supplemental Indenture, the Company paid approximately $15 million in consent fees to holders of the outstanding April 2016 Senior Unsecured Notes, which will be capitalized as deferred financing costs and amortized over the expected life of the April 2016 Senior Unsecured Notes.

 

Amendment of the Term Loan Facility

 

On August 31, 2017, HDS entered into a Fifth Amendment (the “Fifth Amendment”) to the credit agreement governing its existing Term Loan Facility. Pursuant to the Fifth Amendment, HDS amended its existing Term Loan Facility to, among other things, (i) refinance all the outstanding Term B-1 Loans with a new tranche of term loans (the “Term B-3 Loans”) in an aggregate principal amount of $535 million, (ii) refinance all the outstanding Term B-2 Loans with a new tranche of term loans (the “Term B-4 Loans”) in an aggregate principal amount of $546 million and (iii) amend the definition of “Permitted Payments” contained in the credit agreement to permit an additional category of Permitted Payments permitting Restricted Payments at any time in an aggregate amount not to exceed (x) $500,000,000 and (y) thereafter, upon full use of such capacity set forth in clause (x), an additional amount, if any, such that, after giving pro forma effect to such Restricted Payment, the Company’s consolidated leverage ratio does not exceed 3.00 to 1.00.

 

The Term B-3 Loans bear interest at the applicable margin for borrowings of 2.25% for LIBOR borrowings and 1.25% for base rate borrowings (a reduction of 50 basis points as compared to the Term B-1 Loans). The Term B-4 Loans bear interest at the applicable margin for borrowings of 2.50% for LIBOR borrowings and 1.50% for base rate borrowings (a reduction of 25 basis points as compared to the Term B-2 Loans). The Term B-3 Loans and Term B-4 Loans amortize in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount beginning December 2017 and will mature on August 13, 2021 and October 17, 2023, respectively.

 

The Fifth Amendment also provides for a prepayment premium equal to 1.00% of the aggregate principal amount of the applicable Term Loans being prepaid if, on or prior to March 2, 2018, the Company enters into certain repricing transactions.

 

In connection with the Fifth Amendment, the Company paid approximately $1 million in consent fees and expects to record a modification and extinguishment charge of approximately $3 million in the third quarter of fiscal 2017.

 

3



 

Redemption of the December 2014 First Priority Notes

 

On September 1, 2017, HDS used a portion of the net proceeds from the completion of the sale of the Waterworks business, to redeem all of the outstanding $1,250 million aggregate principal of its 5.25% Senior Secured First Priority Notes due 2021 (the “December 2014 First Priority Notes”), for an aggregated redemption price of approximately $1,325 million, including payments of $62 million make-whole premium calculated in accordance with the terms of the indenture as supplemented, governing such notes and pay $14 million of accrued but unpaid interest to the redemption date. The indenture, as supplemented, governing such notes was discharged and the liens securing the December 2014 First Priority notes were released in accordance with the terms of the indenture. As a result of the redemption, the Company expects to report a $73 million loss on extinguishment of debt in the third quarter of fiscal 2017, which includes the $62 million make-whole premium and the write-off of $11 million of unamortized deferred financing costs.

 

Share Repurchase Programs

 

As of August 8, 2017, the company completed the repurchase of all $500 million of common stock under the share repurchase program authorized in June 2017, purchasing approximately 15.9 million shares at an average price of $31.37 per share.

 

On August 27, 2017, the company’s Board of Directors authorized it to enter into a new share repurchase program for the repurchase of up to an aggregate $500 million of its common stock in accordance with guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

 

Third-Quarter 2017 Outlook

 

For the third quarter of fiscal 2017, Net sales are anticipated to be in the range of $1,320 million and $1,360 million, Adjusted EBITDA(1) in the range of $200 million and $212 million and Adjusted net income per diluted share(1) in the range of $0.73 and $0.79.  Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 187 million.  The company will provide further specifics on its outlook during the second-quarter fiscal 2017 earnings conference call and in the earnings call presentation materials.

 

Guidance for the full year 2017 is reconfirmed. Net sales are anticipated to be in the range of $5.0 billion and $5.1 billion, Adjusted EBITDA(1) in the range of $700 million and $730 million and Adjusted net income per diluted share(1) in the range of $2.13 and $2.29.  Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 194 million.

 

Fiscal 2017 Second-Quarter Conference Call

 

As previously announced, HD Supply will hold a conference call on Wednesday September 6 th , 2017 at 8:00 a.m. (Eastern Time) to discuss its second-quarter fiscal 2017 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.

 


(1)  No reconciliation of the forecasted range for Adjusted EBITDA to Net income or Income from Continuing Operations and Adjusted net income per diluted share to Net income per diluted share or Income from Continuing Operations per diluted share for the third quarter of fiscal 2017 and the full year 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.

 

4



 

Non-GAAP Financial Measures

 

HD Supply supplements its reporting of Net income with non-GAAP measurements, including Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share 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 500,000 customers with leadership positions in maintenance, repair and operations, and specialty construction sectors. Through approximately 260 locations across 36 states and six Canadian provinces, the company’s approximately 11,000 associates provide localized, customer-driven services including jobsite delivery, will call or direct-ship options, diversified logistics and innovative solutions that contribute to its customers’ success.

 

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 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 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, our quarterly report on Form 10-Q, for the fiscal quarter ended July 30, 2017, filed on September 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.

 

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

 

Six Months Ended

 

 

 

July 30,

2017

 

July 31,

2016

 

July 30,

2017

 

July 31,

2016

 

Net Sales

 

$

1,352

 

$

1,283

 

$

2,568

 

$

2,459

 

Cost of sales

 

813

 

770

 

1,545

 

1,477

 

Gross Profit

 

539

 

513

 

1,023

 

982

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

338

 

317

 

672

 

625

 

Depreciation and amortization

 

21

 

21

 

42

 

42

 

Restructuring

 

 

4

 

 

11

 

Total operating expenses

 

359

 

342

 

714

 

678

 

Operating Income

 

180

 

171

 

309

 

304

 

Interest expense

 

49

 

69

 

98

 

154

 

Loss on extinguishment of debt

 

 

 

3

 

115

 

Income from Continuing Operations Before Provision for Income Taxes

 

131

 

102

 

208

 

35

 

Provision for income taxes

 

50

 

41

 

69

 

15

 

Income from Continuing Operations

 

81

 

61

 

139

 

20

 

Income from discontinued operations, net of tax

 

361

 

37

 

388

 

64

 

Net Income

 

$

442

 

$

98

 

$

527

 

$

84

 

Other comprehensive income (loss) — foreign currency translation adjustment

 

(3

)

(2

)

(2

)

2

 

Total Comprehensive Income

 

$

439

 

$

96

 

$

525

 

$

86

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

 

 

 

 

Basic

 

197,752

 

199,250

 

199,230

 

199,029

 

Diluted

 

198,954

 

201,978

 

201,010

 

201,615

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share(1):

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.41

 

$

0.31

 

$

0.70

 

$

0.10

 

Income from Discontinued Operations

 

$

1.83

 

$

0.19

 

$

1.95

 

$

0.32

 

Net Income

 

$

2.24

 

$

0.49

 

$

2.65

 

$

0.42

 

Diluted Earnings Per Share (1) :

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.41

 

$

0.30

 

$

0.69

 

$

0.10

 

Income from Discontinued Operations

 

$

1.81

 

$

0.18

 

$

1.93

 

$

0.32

 

Net Income

 

$

2.22

 

$

0.49

 

$

2.62

 

$

0.42

 

 


(1)May not foot due to rounding.

 

6



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

Amounts in millions, except per share data, Unaudited

 

 

 

July 30,

2017

 

January 29,

2017

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

67

 

$

75

 

Receivables, less allowance for doubtful accounts of $11 and $9

 

693

 

559

 

Inventories

 

690

 

606

 

Current assets of discontinued operations

 

752

 

575

 

Other current assets

 

33

 

32

 

Total current assets

 

2,235

 

1,847

 

Property and equipment, net

 

266

 

253

 

Goodwill

 

1,807

 

1,807

 

Intangible assets, net

 

96

 

102

 

Deferred tax asset

 

857

 

556

 

Non-current assets of discontinued operations

 

1,120

 

1,122

 

Other assets

 

23

 

20

 

Total assets

 

$

6,404

 

$

5,707

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

454

 

$

320

 

Accrued compensation and benefits

 

83

 

98

 

Current installments of long-term debt

 

14

 

14

 

Current liabilities of discontinued operations

 

354

 

259

 

Other current liabilities

 

189

 

152

 

Total current liabilities

 

1,094

 

843

 

Long-term debt, excluding current installments

 

4,038

 

3,798

 

Non-current liabilities of discontinued operations

 

41

 

20

 

Other liabilities

 

100

 

86

 

Total liabilities

 

5,273

 

4,747

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01; 1 billion shares authorized; 189.1 million and 201.4 million shares issued and outstanding at July 30, 2017 and January 29, 2017, respectively

 

2

 

2

 

Paid-in capital

 

4,004

 

3,962

 

Accumulated deficit

 

(2,408

)

(2,969

)

Accumulated other comprehensive loss

 

(17

)

(15

)

Treasury stock, at cost, 14.2 and 0.6 million shares at July 30, 2017 and January 29, 2017, respectively

 

(450

)

(20

)

Total stockholders’ equity

 

1,131

 

960

 

Total liabilities and stockholders’ equity

 

$

6,404

 

$

5,707

 

 

7



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in millions, Unaudited

 

 

 

Six Months Ended

 

 

 

July 30,

2017

 

July 31,

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

527

 

$

84

 

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

 

 

 

 

 

Depreciation and amortization

 

50

 

51

 

Provision for uncollectibles

 

4

 

3

 

Non-cash interest expense

 

6

 

9

 

Payment of discounts upon extinguishment of debt

 

(4

)

 

Loss on extinguishment of debt

 

3

 

115

 

Stock-based compensation expense

 

12

 

11

 

Deferred income taxes

 

(223

)

52

 

Loss on sales of businesses, net

 

 

3

 

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

 

 

 

 

 

(Increase) decrease in receivables

 

(258

)

(232

)

(Increase) decrease in inventories

 

(141

)

(118

)

(Increase) decrease in other current assets

 

 

(9

)

Increase (decrease) in accounts payable and accrued liabilities

 

212

 

196

 

Increase (decrease) in other long-term liabilities

 

1

 

(1

)

Net cash provided by (used in) operating activities

 

189

 

164

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(43

)

(32

)

Proceeds from sales of property and equipment

 

2

 

1

 

Proceeds from sales of businesses, net

 

 

37

 

Net cash provided by (used in) investing activities

 

(41

)

6

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from issuance of common stock under employee benefit plans

 

29

 

14

 

Purchase of treasury shares

 

(414

)

(14

)

Borrowings of long-term debt

 

 

1,000

 

Repayments of long-term debt

 

(103

)

(1,110

)

Borrowings on long-term revolver debt

 

599

 

 

Repayments on long-term revolver debt

 

(261

)

 

Debt issuance costs

 

(6

)

(15

)

Other financing activities

 

 

(2

)

Net cash provided by (used in) financing activities

 

(156

)

(127

)

Effect of exchange rates on cash and cash equivalents

 

 

1

 

Increase (decrease) in cash and cash equivalents

 

$

(8

)

$

44

 

Cash and cash equivalents at beginning of period

 

75

 

269

 

Cash and cash equivalents at end of period

 

$

67

 

$

313

 

 

8



 

HD SUPPLY HOLDINGS, INC.

SEGMENT REPORTING

Amounts in millions, Unaudited

 

 

 

Facilities
Maintenance

 

Construction &
Industrial

 

Corporate

 

Total
Continuing
Operations

 

Three Months Ended July 30, 2017

 

 

 

 

 

 

 

 

 

Net sales

 

$

769

 

$

584

 

$

(1

)

$

1,352

 

Adjusted EBITDA

 

156

 

69

 

(17

)

208

 

Depreciation(1) & Software Amortization

 

5

 

9

 

5

 

19

 

Other Intangible Amortization

 

2

 

 

1

 

3

 

Three Months Ended July 31, 2016

 

 

 

 

 

 

 

 

 

Net sales

 

$

741

 

$

544

 

$

(2

)

$

1,283

 

Adjusted EBITDA

 

151

 

68

 

(16

)

203

 

Depreciation(1) & Software Amortization

 

7

 

9

 

4

 

20

 

Other Intangible Amortization

 

2

 

 

1

 

3

 

Six Months Ended July 30, 2017

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,451

 

$

1,120

 

$

(3

)

$

2,568

 

Adjusted EBITDA

 

273

 

124

 

(32

)

365

 

Depreciation(1) & Software Amortization

 

12

 

18

 

8

 

38

 

Other Intangible Amortization

 

3

 

 

3

 

6

 

Six Months Ended July 31, 2016

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,418

 

$

1,045

 

$

(4

)

$

2,459

 

Adjusted EBITDA

 

285

 

117

 

(32

)

370

 

Depreciation(1) & Software Amortization

 

15

 

17

 

6

 

38

 

Other Intangible Amortization

 

3

 

 

3

 

6

 

 


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

 

Reconciliation of Non-GAAP Measures

 

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

 

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

 

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

 

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

 

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

 

9



 

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

 

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

 

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

 

·                        Adjusted EBITDA and Adjusted net income do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

 

Adjusted EBITDA

 

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 30,
2017

 

July 31,
2016

 

July 30,
2017

 

July 31,
2016

 

Net income

 

$

442

 

$

98

 

$

527

 

$

84

 

Less income from discontinued operations, net of tax

 

361

 

37

 

388

 

64

 

Income from continuing operations

 

81

 

61

 

139

 

20

 

Interest expense, net

 

49

 

69

 

98

 

154

 

Provision for income taxes

 

50

 

41

 

69

 

15

 

Depreciation and amortization (1)

 

22

 

23

 

44

 

44

 

Loss on extinguishment of debt (2)

 

 

 

3

 

115

 

Restructuring charges (3)

 

 

4

 

 

11

 

Stock-based compensation

 

6

 

5

 

12

 

11

 

Adjusted EBITDA

 

$

208

 

$

203

 

$

365

 

$

370

 

 


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

 

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

 

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

 

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

 

Six Months Ended

 

 

 

July 30,
2017

 

July 31,
2016

 

July 30,
2017

 

July 31,
2016

 

Net income

 

$

442

 

$

98

 

$

527

 

$

84

 

Less income from discontinued operations, net of tax

 

361

 

37

 

388

 

64

 

Income from continuing operations

 

81

 

61

 

139

 

20

 

Plus: Provision for income taxes

 

50

 

41

 

69

 

15

 

Less: Cash income taxes

 

(7

)

(5

)

(10

)

(6

)

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

 

3

 

3

 

6

 

6

 

Plus: Loss on extinguishment of debt (1)

 

 

 

3

 

115

 

Plus: Restructuring charges (2)

 

 

4

 

 

11

 

Adjusted Net Income

 

$

127

 

$

104

 

$

207

 

$

161

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

198,954

 

201,978

 

201,010

 

201,615

 

Adjusted net income per share — diluted

 

$

0.64

 

$

0.51

 

$

1.03

 

$

0.80

 

 


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

 

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

 

No reconciliation of the forecasted range for Adjusted EBITDA to Net income and Adjusted net income per diluted share to Net income per diluted share for the third 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

FINANCIAL RESULTS AND COMPANY OVERVIEW 2017 Second-Quarter Performance September 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 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. 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, Adjusted net income per diluted share, Net Debt and Free Cash Flow. This supplemental information should not be considered in isolation or as a substitute for the GAAP measurements. Additional information regarding Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share referred to in this presentation is included at the end of this presentation under “Reconciliation of Non-GAAP Measures.”

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Q2’17 Execution Highlights Focused on Controllable Execution 1 See appendix slides 20 and 21 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 2 Free Cash Flow is defined as Operating Cash Flow ($538M) Less Capital Expenditures ($92M) (including Cash Flow from Discontinued Operations) Note: “VPY” denotes Versus Prior Year, “LTM” denotes Last Twelve Months +5% Net Sales Growth Versus Prior Year (“VPY”) +5% Operating Income Growth VPY +33% Income from Continuing Operations VPY +2% Adjusted EBITDA1 Growth VPY +25% Adjusted Net Income per Diluted Share Growth VPY $446M LTM Free Cash Flow2 +8% Increase VPY +40 Basis Points Gross Margin Improvement VPY in Facilities Maintenance Talent and One Team Culture

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Capital Structure Update Financial Leverage Ratio of 2.5x Closed Sale of Waterworks on August 1, 2017, Netting $2.4B Cash After Fees and Taxes Fully Redeemed $1.25B of 5.25% First Priority Notes on September 1, 2017 Fully Paid Down $700M U.S. Revolving ABL Completed $500M Share Repurchase Announced June 6, 2017 Further $500M Share Repurchase Program Announced August 29, 2017 Normalized Capital Structure: Financial Leverage Ratio1 of 2.5x Amended $1.0B of 5.75% Senior Notes and $1.1B Term Loan Facility; Greater Capital Flexibility 1 Financial Leverage Ratio is defined as Consolidated Total Indebtedness divided by Adjusted EBITDA for the period of our most recent four consecutive fiscal quarters. Consolidated Total Indebtedness is defined as the aggregate principal of outstanding indebtedness, plus Letters of Credit, less Cash & Cash Equivalents. Adjusted for the sale of Waterworks.

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Execution Considerations Focus on Delivering Full-Year Financial Performance Targets Completed our Portfolio Rationalization and Moved Two Leadership Businesses from California to Atlanta Largest National Provider of MRO1 Products to Living Spaces and Non-Residential Construction Accelerated Investments in our Selling Channels and Enabling Functions Differentiated Team, Delivering on Our Customer Promise 1 Maintenance, Repair and Operations

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Performance In-line with Expectation Growth Consistent with Facilities Maintenance $500M Completed in August; Further $500M Authorized Scale, Geographical Density, Capabilities Topics of Recent Investor Interest Free Cash Flow is defined as Operating Cash Flow – Capital Expenditures (including Cash Flow from Discontinued Operations) Topic Consideration Operating Leverage1 HVAC Share Repurchases Property Improvement Expect 2H’17 Return to +1.5x Acquisitions Regular Tax Payer Late-2018 or Early 2019 Gross Margin Pressure Through 2017 End Taxes Rebar Pricing Distribution Center and Branch Closures Hurricane Harvey 1 Operating Leverage is Defined as Adjusted EBITDA Growth Divided by Total Net Sales Growth

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$1,283M $1,352M +5% Gross Profit Gross Margin % Operating Income Adj. EBITDA % Op. Income % $513M $539M 40.0% 39.9% $203M $208M $171M $180M 15.8% 15.4% 13.3% +5% -10 BPs -40 BPs +$5M ($ in millions, except per share data) $104M $127M +5% Net Sales 1 The increase in Net income and Net income per Diluted share was primarily due to a $323 million tax benefit within Discontinued Operations to record a deferred tax asset that is realizable as a result of the sale of the Waterworks business 2 See appendix slides 20 and 21 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 Q2’16 Adj. EBITDA2 VPY Adj. Net Income2 13.3% Q2’17 $0.51 $0.64 +25% Per Diluted Share +$69M +22% Net Income1 $98M $442M +$344M $0.49 $2.22 +$1.73 Per Diluted Share1 5.4% Sales Growth VPY Q2’17 Financial Results

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Organic Growth Across Business Units Q2’17 Segment Performance Q2’17 $769M $584M Adj. EBITDA $156M $69M Net Sales ($ in millions) Q2’16 $741M $544M $151M VPY +4% +3% VPY +7% +1% $68M Q2’17 Q2’16

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Q2’17 Taxes and Cash Flow at Quarter End Favorable Tax Asset with Significant Gross Federal Net Operating Loss Carryforwards of Approximately $1.5 Billion ~$625M Tax-affected Amount of Federal and State NOLs Cash Taxes $7M in Q2’17 $17M – $20M Estimated for Q3’17 (Inclusive of $15M of Expected Cash Taxes on the Sale of HD Supply Waterworks) $30M – $40M Estimated for FY’17 (Inclusive of $15M of Expected Cash Taxes on the Sale of HD Supply Waterworks) GAAP Taxes ~38% for Q2’17 Expected to be ~35% to 36% for FY’17 $4.0B Net Debt1 at the End of Q2’17 $1.6B Net Debt1 After HD Supply Waterworks Sale 2.5x Financial Leverage Ratio2 $19M of Capital Expenditures in Q2’17 Note: Contains forward-looking information; please see Disclaimer on slide 2 1 Reconciled on slide 17 2 Financial Leverage Ratio is defined as Consolidated Total Indebtedness divided by Adjusted EBITDA for the period of our most recent four consecutive fiscal quarters. Consolidated Total Indebtedness is defined as the aggregate principal of outstanding indebtedness, plus Letters of Credit, less Cash & Cash Equivalents. Adjusted for the sale of Waterworks. Taxes Cash Flow Capital Structure Execution

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+5.4% Q2’17 Average Daily Sales Growth Q2’17 Monthly Average Daily Sales (%) 3.7% 8.2% 6.7% Aug. 4.3% 9.8% 2.6% ’16 Selling Days 24 20 19 4.5% Facilities Maintenance Construction & Industrial (Preliminary) 6.9% 3.4% 5.6% 5.2% 9.3% 20 3.0% 2.7% May Jun. Jul. Prior Year $532M $435M $408M HD Supply Net Sales $412M 5.2% 3.6% ’15 Selling Days Q2’17 0.2% 6.2% $409M 1.4% 6.7% $503M 1.7% 10.2% $395M 0.4% 6.6% $385M HD Supply Average Daily Sales Growth VPY ’17 Selling Days 24 20 19 20 Current Year 24 20 20 19 Note: Contains forward-looking information; please see Disclaimer on slide 2

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+13% +6% +7% +4% Q3’17 Guidance +5% Sales Growth VPY at Midpoint $1,360M $1,320M $188M $1,275M $212M $200M VPY Q3’16 Q3’17 Q3’16 Q3’17 Q3’17 Net Sales Adj. EBITDA Adj. Net Income Per Diluted Share1 VPY 1 Q3’17 Adjusted Net Income per Share range assumes a fully diluted weighted average share count of ~187 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 third 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. $0.79 $0.73 VPY ($ in millions, except per share amounts) $0.47 . . . . Q3’16 +68% +55% Midpoint $1,340M +5% $206M +10% $0.76 +62%

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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 September ’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 Note: Contains forward looking information; please see Disclaimer on slide 2  Low Single Digits to Mid-Single Digit

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Current Outlook Summary HD Supply Current Outlook Summary +5.1% Net Sales VPY at Midpoint $1,320M to $1,360M Net Sales +9.6% Adj. EBITDA VPY at Midpoint $200M to $212M Adj. EBITDA +61.7% Adj. Net Income per Diluted Share Increase VPY at Midpoint $0.73 to $0.79 Adj. Net Income per Diluted Share Assumes ~187M 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 +42.0% to +52.7% Adj. Net Income per Diluted Share VPY $2.13 to $2.29 Adj. Net Income per Diluted Share Assumes ~194M Diluted Share Count Q3’17 FY’17 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 third quarter of fiscal 2017 and full year 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.

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Q&A Q&A

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Concluding Remarks One Team, Driving Customer Success and Value Creation Continual Operational Improvement +5% Net Sales Growth in Q2’17 VPY +40 Basis Points Gross Margin Improvement in Facilities Maintenance in Q2’17 VPY 2.5x Financial Leverage Ratio1 After Sale of HD Supply Waterworks Enabling Focus, Growth Investment and Innovation Disciplined People, Thought and Action 1 Financial Leverage Ratio is defined as Consolidated Total Indebtedness divided by Adjusted EBITDA for the period of our most recent four consecutive fiscal quarters. Consolidated Total Indebtedness is defined as the aggregate principal of outstanding indebtedness, plus Letters of Credit, less Cash & Cash Equivalents. Adjusted for the sale of Waterworks.

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Q&A APPENDIX

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~$4.0B Net Debt Capital Structure At Q2’17 Quarter End Q2’17 Debt Balances Sec. ABL Sec. Term B-1 Sec. 1st Lien Notes Sr. Unsecured Notes $762 1,250 1,000 4/5/22 8/13/21 12/15/21 Outstanding Debt Less Cash and Cash Equivalents Net Debt $3,985 (67) $4,093 Balance Maturity 1 Represents the stated rate of interest, without including the effect of discounts or premiums 2 Subject to applicable redemption price terms 3 Represents the unamortized portion of discounts and deferred financing costs ($ in millions, unless otherwise noted) 3.29% 4.05% 5.25% Interest Rate1 535 n/a now 12/15/17 Soft Call Date2 5.75% 4/15/24 4/15/19 Less Discount3 (7) Less Deferred Financing Costs3 (34) Gross Debt $4,052 Sec. Term B-2 10/17/23 4.05% 546 now

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$435M Preliminary August Sales Monthly Net Sales ($) FY’16 Facil. Maint. Const. & Ind. ’17 Selling Days ’16 Selling Days ($ in millions) HD Supply Net Sales (Preliminary) FY’17 Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Aug. $409M $383M $483M $338M $352M $395M $408M $350M $378M $532M $488M $412M $435M $221 $266 $189 $198 $233 $198 $212 $272 $232 $231 $306 $248 $163 $218 $150 $153 $163 $153 $166 $217 $180 $178 $226 $188 $237 $171 20 19 25 18 20 23 20 20 25 20 19 24 20 20 19 25 18 20 23 20 20 25 20 19 24 20 Note: Contains forward-looking information; please see Disclaimer on slide 2

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+6.7% Preliminary Average Daily Sales Growth in August 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. Const. & Ind. ’17 Selling Days ’16 Selling Days (Preliminary) FY’17 Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Aug. 20 19 25 18 20 23 20 20 25 20 19 24 20 20 19 25 18 20 23 20 20 25 20 19 24 20 ’15 Selling Days 20 19 25 18 19 24 20 20 25 19 20 24 20 2.4% 1.0% 0.9% 2.5% 2.8% 0.2% 1.1% 0.8% 5.2% 2.6% 3.7% 4.3% 0.2% 4.4% 5.7% 3.4% 6.4% 3.7% 5.3% 7.9% 7.7% 9.3% 4.5% 8.2% 9.8% 6.2% 2.7% 3.3% 3.0% 2.0% 4.2% 3.2% 3.4% 2.4% 3.9% 5.6% 3.8% 6.9% 6.7%

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Reconciliation of Non-GAAP Measures: Net Income to Adjusted EBITDA ($ in millions) 1 Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations 2 Represents the loss on extinguishment of debt including the write-off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt 3 Represents the costs incurred for strategic alignment of our workforce. These costs include severance, relocation costs and other related costs July 30, 2017 July 31, 2016 Net income $442 $ 98 Less income from discontinued operations, net of tax 361 37 Income from continuing operations 81 61 Interest expense, net 49 69 Provision for income taxes 41 Depreciation and amortization 1 22 23 Loss on extinguishment of debt — Restructuring charges 2 — 4 Stock-based compensation 3 6 5 Adjusted EBITDA $ 208 $ 203 50 — Three Months Ended July 30, 2017 July 31, 2016 $527 $ 84 388 64 139 20 98 154 15 44 44 3 — 11 12 11 $ 365 $ 370 69 115 Six Months Ended

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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 write-off of unamortized deferred financing costs, original issue discount, 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 Weighted average common shares outstanding (in thousands) Basic Diluted Adjusted Net Income Per Share - Basic Adjusted Net Income Per Share - Diluted Net income $ 442 $ 98 Less income from discontinued operations, net of tax 37 Income from continuing operations 81 61 Provision for income taxes 50 41 Cash paid for income taxes (7) (5) Amortization of acquisition related intangible assets (other than - software) Restructuring charges 2 4 — Loss on extinguishment of debt 1 — Adjusted net income $ 127 $ 104 197,752 199,250 198,954 201,978 $0.64 $0.52 $0.64 $0.51 361 — 3 3 $ 527 $ 84 64 139 20 69 15 (10) (6) 11 — 3 $ 207 $ 161 199,230 199,029 201,010 201,615 $1.04 $0.81 $1.03 $0.80 388 115 6 6 July 30, 2017 July 31, 2016 Three Months Ended July 30, 2017 July 31, 2016 Six Months Ended

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