Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - HD Supply Holdings, Inc. | Financial_Report.xls |
EX-31.2 - EX-31.2 - HD Supply Holdings, Inc. | a15-8127_1ex31d2.htm |
EX-31.3 - EX-31.3 - HD Supply Holdings, Inc. | a15-8127_1ex31d3.htm |
EX-31.4 - EX-31.4 - HD Supply Holdings, Inc. | a15-8127_1ex31d4.htm |
EX-32.1 - EX-32.1 - HD Supply Holdings, Inc. | a15-8127_1ex32d1.htm |
EX-32.2 - EX-32.2 - HD Supply Holdings, Inc. | a15-8127_1ex32d2.htm |
EX-31.1 - EX-31.1 - HD Supply Holdings, Inc. | a15-8127_1ex31d1.htm |
EX-32.3 - EX-32.3 - HD Supply Holdings, Inc. | a15-8127_1ex32d3.htm |
EX-32.4 - EX-32.4 - HD Supply Holdings, Inc. | a15-8127_1ex32d4.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 3, 2015
- OR -
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File |
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Exact name of Registrant as specified in its |
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State of |
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I.R.S. Employer |
001-35979 |
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HD SUPPLY HOLDINGS, INC. 3100 Cumberland Boulevard, Suite 1480 Atlanta, Georgia 30339 (770) 852-9000 |
|
Delaware |
|
26-0486780 |
333-159809 |
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HD SUPPLY, INC. 3100 Cumberland Boulevard, Suite 1480 Atlanta, Georgia 30339 (770) 852-9000 |
|
Delaware |
|
75-2007383 |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
HD Supply Holdings, Inc. |
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Yes x No o |
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HD Supply, Inc. |
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Yes o No x |
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
HD Supply Holdings, Inc. |
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Yes x No o |
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HD Supply, Inc. |
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Yes x No o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
HD Supply Holdings, Inc. |
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Large accelerated filer x |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company o |
(Do not check if a smaller reporting company) |
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HD Supply, Inc. |
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Large accelerated filer o |
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Accelerated filer o |
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Non-accelerated filer x |
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Smaller reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
HD Supply Holdings, Inc. |
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Yes o No x |
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HD Supply, Inc. |
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Yes o No x |
The number of shares of the registrants common stock outstanding as of June 5, 2015:
HD Supply Holdings, Inc. |
|
198,273,773 shares of common stock, par value $0.01 per share |
|
|
|
HD Supply, Inc. |
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1,000 shares of common stock, par value $0.01 per share, all of which were owned by HDS Holding Corporation, a wholly-owned subsidiary of HD Supply Holdings, Inc. |
This Form 10-Q is a combined quarterly report being filed separately by two registrants: HD Supply Holdings, Inc. and HD Supply, Inc. Unless the context indicates otherwise, any reference in this report to Holdings refers to HD Supply Holdings, Inc., any reference to HDS refers to HD Supply, Inc., the indirect wholly-owned subsidiary of Holdings, and any references to HD Supply, the Company, we, us and our refer to HD Supply Holdings, Inc. together with its direct and indirect subsidiaries, including HDS. Each registrant hereto is filing on its own behalf all of the information contained in this quarterly report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.
Forward-looking statements and information
This quarterly report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking terms such as believes, expects, may, will, should, could, seeks, intends, plans, estimates, anticipates or other comparable terms. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth strategies and the industries in which we operate.
Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industries in which we operate are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including those factors discussed in Item 1A, Risk Factors in our annual report on Form 10-K, for the fiscal year ended February 1, 2015 and those described from time to time in our other filings with the U.S. Securities and Exchange Commission (SEC). Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include:
· inherent risks of the maintenance, repair and operations market, infrastructure spending and the non-residential and residential construction markets;
· our ability to achieve and maintain profitability;
· our ability to service our debt and to refinance all or a portion of our indebtedness;
· limitations and restrictions in the agreements governing our indebtedness;
· the competitive environment in which we operate and demand for our products and services in highly competitive and fragmented industries;
· the loss of any of our significant customers;
· competitive pricing pressure from our customers;
· our ability to identify and acquire suitable acquisition candidates on favorable terms;
· cyclicality and seasonality of the maintenance, repair and operations market, infrastructure spending and the non-residential and residential construction markets;
· our ability to identify and develop relationships with a sufficient number of qualified suppliers and to maintain our supply chains;
· our ability to manage fixed costs;
· the development of alternatives to distributors in the supply chain;
· our ability to manage our working capital through product purchasing and customer credit policies;
· potential material liabilities under our self-insured programs;
· our ability to attract, train and retain highly qualified associates and key personnel;
· limitations on our income tax net operating loss carryforwards in the event of an ownership change;
· our ability to identify and integrate new products;
· the influence Bain has over corporate decisions; and
· failures in or breaches of our operational or information security systems, or those of our third-party service providers, as a result of cyber attacks or information security breaches.
You should read this report completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this report and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, changes in future operating results over time or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Amounts in millions, except share and per share data, unaudited
|
|
Three Months Ended |
| ||||
|
|
May 3, 2015 |
|
May 4, 2014 |
| ||
Net Sales |
|
$ |
2,221 |
|
$ |
2,094 |
|
Cost of sales |
|
1,572 |
|
1,491 |
| ||
Gross Profit |
|
649 |
|
603 |
| ||
Operating expenses: |
|
|
|
|
| ||
Selling, general and administrative |
|
447 |
|
426 |
| ||
Depreciation and amortization |
|
35 |
|
58 |
| ||
Restructuring |
|
|
|
3 |
| ||
Total operating expenses |
|
482 |
|
487 |
| ||
Operating Income |
|
167 |
|
116 |
| ||
Interest expense |
|
106 |
|
116 |
| ||
Loss on extinguishment & modification of debt |
|
|
|
2 |
| ||
Other (income) expense, net |
|
|
|
1 |
| ||
Income (Loss) from Continuing Operations Before Provision for Income Taxes |
|
61 |
|
(3 |
) | ||
Provision (benefit) for income taxes |
|
(181 |
) |
1 |
| ||
Income (Loss) from Continuing Operations |
|
242 |
|
(4 |
) | ||
Income (loss) from discontinued operations, net of tax |
|
|
|
(8 |
) | ||
Net Income (Loss) |
|
$ |
242 |
|
$ |
(12 |
) |
Other comprehensive income foreign currency translation adjustment |
|
5 |
|
1 |
| ||
Total Comprehensive Income (Loss) |
|
$ |
247 |
|
$ |
(11 |
) |
|
|
|
|
|
| ||
Weighted Average Common Shares Outstanding (thousands) |
|
|
|
|
| ||
Basic |
|
195,347 |
|
192,859 |
| ||
Diluted |
|
200,716 |
|
192,859 |
| ||
|
|
|
|
|
| ||
Basic Earnings Per Share(1): |
|
|
|
|
| ||
Income (Loss) from Continuing Operations |
|
$ |
1.24 |
|
$ |
(0.02 |
) |
Income (Loss) from Discontinued Operations |
|
$ |
|
|
$ |
(0.04 |
) |
Net Income (Loss) |
|
$ |
1.24 |
|
$ |
(0.06 |
) |
|
|
|
|
|
| ||
Diluted Earnings Per Share(1): |
|
|
|
|
| ||
Income (Loss) from Continuing Operations |
|
$ |
1.21 |
|
$ |
(0.02 |
) |
Income (Loss) from Discontinued Operations |
|
$ |
|
|
$ |
(0.04 |
) |
Net Income (Loss) |
|
$ |
1.21 |
|
$ |
(0.06 |
) |
(1) May not foot due to rounding.
The accompanying notes are an integral part of these consolidated financial statements.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
Amounts in millions, except share and per share data, unaudited
|
|
May 3, 2015 |
|
February 1, 2015 |
| ||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
155 |
|
$ |
85 |
|
Receivables, less allowance for doubtful accounts of $15 and $16 |
|
1,166 |
|
1,088 |
| ||
Inventories |
|
1,183 |
|
1,069 |
| ||
Deferred tax asset |
|
11 |
|
9 |
| ||
Other current assets |
|
60 |
|
47 |
| ||
Total current assets |
|
2,575 |
|
2,298 |
| ||
Property and equipment, net |
|
369 |
|
372 |
| ||
Goodwill |
|
3,071 |
|
3,071 |
| ||
Intangible assets, net |
|
192 |
|
200 |
| ||
Other assets |
|
114 |
|
119 |
| ||
Total assets |
|
$ |
6,321 |
|
$ |
6,060 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
887 |
|
$ |
688 |
|
Accrued compensation and benefits |
|
87 |
|
161 |
| ||
Current installments of long-term debt |
|
|
|
34 |
| ||
Other current liabilities |
|
201 |
|
252 |
| ||
Total current liabilities |
|
1,175 |
|
1,135 |
| ||
|
|
|
|
|
| ||
Long-term debt, excluding current installments |
|
5,361 |
|
5,223 |
| ||
Deferred tax liabilities |
|
173 |
|
166 |
| ||
Other liabilities |
|
110 |
|
296 |
| ||
Total liabilities |
|
6,819 |
|
6,820 |
| ||
|
|
|
|
|
| ||
Stockholders equity (deficit): |
|
|
|
|
| ||
Common stock, par value $0.01; 1 billion shares authorized; 198.5 million and 196.0 million shares issued and outstanding at May 3, 2015 and February 1, 2015, respectively |
|
2 |
|
2 |
| ||
Paid-in capital |
|
3,842 |
|
3,818 |
| ||
Accumulated deficit |
|
(4,315 |
) |
(4,540 |
) | ||
Accumulated other comprehensive loss |
|
(23 |
) |
(28 |
) | ||
Treasury stock, at cost, 0.1 million and 0.4 million shares at May 3, 2015 and February 1, 2015, respectively |
|
(4 |
) |
(12 |
) | ||
Total stockholders equity (deficit) |
|
(498 |
) |
(760 |
) | ||
Total liabilities and stockholders equity (deficit) |
|
$ |
6,321 |
|
$ |
6,060 |
|
The accompanying notes are an integral part of these consolidated financial statements.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in millions, unaudited
|
|
Three Months Ended |
| ||||
|
|
May 3, 2015 |
|
May 4, 2014 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
| ||
Net income (loss) |
|
$ |
242 |
|
$ |
(12 |
) |
Reconciliation of net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
36 |
|
63 |
| ||
Provision for uncollectibles |
|
1 |
|
3 |
| ||
Non-cash interest expense |
|
7 |
|
6 |
| ||
Payment of PIK interest & discounts upon extinguishment of debt |
|
|
|
(1 |
) | ||
Loss on extinguishment & modification of debt |
|
|
|
2 |
| ||
Stock-based compensation expense |
|
5 |
|
5 |
| ||
Deferred income taxes |
|
6 |
|
|
| ||
Other |
|
(2 |
) |
1 |
| ||
Changes in assets and liabilities: |
|
|
|
|
| ||
(Increase) decrease in receivables |
|
(76 |
) |
(108 |
) | ||
(Increase) decrease in inventories |
|
(112 |
) |
(108 |
) | ||
(Increase) decrease in other current assets |
|
(14 |
) |
5 |
| ||
Increase (decrease) in accounts payable and accrued liabilities |
|
66 |
|
22 |
| ||
Increase (decrease) in other long-term liabilities |
|
(182 |
) |
3 |
| ||
Net cash provided by (used in) operating activities |
|
(23 |
) |
(119 |
) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
Capital expenditures |
|
(24 |
) |
(28 |
) | ||
Proceeds from sales of property and equipment |
|
1 |
|
|
| ||
Net cash provided by (used in) investing activities |
|
(23 |
) |
(28 |
) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| ||
Proceeds from issuance of common stock under employee benefit plans |
|
19 |
|
20 |
| ||
Purchase of treasury shares |
|
(8 |
) |
|
| ||
Borrowings of long-term debt |
|
|
|
20 |
| ||
Repayments of long-term debt |
|
(16 |
) |
(22 |
) | ||
Borrowings on long-term revolver debt |
|
307 |
|
275 |
| ||
Repayments on long-term revolver debt |
|
(188 |
) |
(85 |
) | ||
Debt issuance and modification costs |
|
|
|
(3 |
) | ||
Other financing activities |
|
|
|
(1 |
) | ||
Net cash provided by (used in) financing activities |
|
114 |
|
204 |
| ||
Effect of exchange rates on cash and cash equivalents |
|
2 |
|
1 |
| ||
Increase (decrease) in cash and cash equivalents |
|
$ |
70 |
|
$ |
58 |
|
Cash and cash equivalents at beginning of period |
|
85 |
|
115 |
| ||
Cash and cash equivalents at end of period |
|
$ |
155 |
|
$ |
173 |
|
The accompanying notes are an integral part of these consolidated financial statements.
HD SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Amounts in millions, unaudited
|
|
Three Months Ended |
| ||||
|
|
May 3, 2015 |
|
May 4, 2014 |
| ||
Net Sales |
|
$ |
2,221 |
|
$ |
2,094 |
|
Cost of sales |
|
1,572 |
|
1,491 |
| ||
Gross Profit |
|
649 |
|
603 |
| ||
Operating expenses: |
|
|
|
|
| ||
Selling, general and administrative |
|
447 |
|
426 |
| ||
Depreciation and amortization |
|
35 |
|
58 |
| ||
Restructuring |
|
|
|
3 |
| ||
Total operating expenses |
|
482 |
|
487 |
| ||
Operating Income |
|
167 |
|
116 |
| ||
Interest expense |
|
106 |
|
116 |
| ||
Loss on extinguishment & modification of debt |
|
|
|
2 |
| ||
Other (income) expense, net |
|
|
|
1 |
| ||
Income (Loss) from Continuing Operations Before Provision for Income Taxes |
|
61 |
|
(3 |
) | ||
Provision (benefit) for income taxes |
|
(181 |
) |
1 |
| ||
Income (Loss) from Continuing Operations |
|
242 |
|
(4 |
) | ||
Income (loss) from discontinued operations, net of tax |
|
|
|
(8 |
) | ||
Net Income (Loss) |
|
$ |
242 |
|
$ |
(12 |
) |
Other comprehensive income foreign currency translation adjustment |
|
5 |
|
1 |
| ||
Total Comprehensive Income (Loss) |
|
$ |
247 |
|
$ |
(11 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
HD SUPPLY, INC. AND SUBSIDIARIES
Amounts in millions, except share and per share data, unaudited
|
|
May 3, 2015 |
|
February 1, 2015 |
| ||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
144 |
|
$ |
85 |
|
Receivables, less allowance for doubtful accounts of $15 and $16 |
|
1,166 |
|
1,088 |
| ||
Inventories |
|
1,183 |
|
1,069 |
| ||
Deferred tax asset |
|
11 |
|
9 |
| ||
Other current assets |
|
60 |
|
47 |
| ||
Total current assets |
|
2,564 |
|
2,298 |
| ||
Property and equipment, net |
|
369 |
|
372 |
| ||
Goodwill |
|
3,071 |
|
3,071 |
| ||
Intangible assets, net |
|
192 |
|
200 |
| ||
Other assets |
|
114 |
|
119 |
| ||
Total assets |
|
$ |
6,310 |
|
$ |
6,060 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
887 |
|
$ |
688 |
|
Accrued compensation and benefits |
|
87 |
|
161 |
| ||
Current installments of long-term debt |
|
|
|
34 |
| ||
Other current liabilities |
|
200 |
|
252 |
| ||
Total current liabilities |
|
1,174 |
|
1,135 |
| ||
|
|
|
|
|
| ||
Long-term debt, excluding current installments |
|
5,361 |
|
5,223 |
| ||
Deferred tax liabilities |
|
173 |
|
166 |
| ||
Other liabilities |
|
110 |
|
296 |
| ||
Total liabilities |
|
6,818 |
|
6,820 |
| ||
|
|
|
|
|
| ||
Stockholders equity (deficit): |
|
|
|
|
| ||
Common stock, par value $0.01; 1,000 shares authorized; 1,000 shares issued and outstanding |
|
|
|
|
| ||
Paid-in capital |
|
3,773 |
|
3,768 |
| ||
Accumulated deficit |
|
(4,258 |
) |
(4,500 |
) | ||
Accumulated other comprehensive loss |
|
(23 |
) |
(28 |
) | ||
Total stockholders equity (deficit) |
|
(508 |
) |
(760 |
) | ||
Total liabilities and stockholders equity (deficit) |
|
$ |
6,310 |
|
$ |
6,060 |
|
The accompanying notes are an integral part of these consolidated financial statements.
HD SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in millions, unaudited
|
|
Three Months Ended |
| ||||
|
|
May 3, 2015 |
|
May 4, 2014 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
| ||
Net income (loss) |
|
$ |
242 |
|
$ |
(12 |
) |
Reconciliation of net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
36 |
|
63 |
| ||
Provision for uncollectibles |
|
1 |
|
3 |
| ||
Non-cash interest expense |
|
7 |
|
6 |
| ||
Payment of PIK interest & discounts upon extinguishment of debt |
|
|
|
(1 |
) | ||
Loss on extinguishment & modification of debt |
|
|
|
2 |
| ||
Stock-based compensation expense |
|
5 |
|
5 |
| ||
Deferred income taxes |
|
6 |
|
|
| ||
Other |
|
(2 |
) |
1 |
| ||
Changes in assets and liabilities: |
|
|
|
|
| ||
(Increase) decrease in receivables |
|
(76 |
) |
(108 |
) | ||
(Increase) decrease in inventories |
|
(112 |
) |
(108 |
) | ||
(Increase) decrease in other current assets |
|
(14 |
) |
5 |
| ||
Increase (decrease) in accounts payable and accrued liabilities |
|
66 |
|
22 |
| ||
Increase (decrease) in other long-term liabilities |
|
(182 |
) |
3 |
| ||
Net cash provided by (used in) operating activities |
|
(23 |
) |
(119 |
) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
Capital expenditures |
|
(24 |
) |
(28 |
) | ||
Proceeds from sales of property and equipment |
|
1 |
|
|
| ||
Net cash provided by (used in) investing activities |
|
(23 |
) |
(28 |
) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| ||
Borrowings of long-term debt |
|
|
|
20 |
| ||
Repayments of long-term debt |
|
(16 |
) |
(22 |
) | ||
Borrowings on long-term revolver debt |
|
307 |
|
275 |
| ||
Repayments on long-term revolver debt |
|
(188 |
) |
(85 |
) | ||
Debt issuance and modification costs |
|
|
|
(3 |
) | ||
Other financing activities |
|
|
|
(1 |
) | ||
Net cash provided by (used in) financing activities |
|
103 |
|
184 |
| ||
Effect of exchange rates on cash and cash equivalents |
|
2 |
|
1 |
| ||
Increase (decrease) in cash and cash equivalents |
|
$ |
59 |
|
$ |
38 |
|
Cash and cash equivalents at beginning of period |
|
85 |
|
111 |
| ||
Cash and cash equivalents at end of period |
|
$ |
144 |
|
$ |
149 |
|
The accompanying notes are an integral part of these consolidated financial statements.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 NATURE OF BUSINESS AND BASIS OF PRESENTATION
Nature of Business
HD Supply Holdings, Inc. (Holdings) indirectly owns all of the outstanding common stock of HD Supply, Inc. (HDS).
Holdings, together with its direct and indirect subsidiaries, including HDS (HD Supply or the Company), is one of the largest industrial distribution companies in North America. The Company specializes in three distinct market sectors: Maintenance, Repair & Operations; Infrastructure & Power; and Specialty Construction. Through approximately 650 locations across 48 U.S. states and seven Canadian provinces, the Company serves these markets with an integrated go-to-market strategy. HD Supply has approximately 15,000 associates delivering localized, customer-tailored products, services and expertise. The Company serves approximately 500,000 customers, which include contractors, maintenance professionals, home builders, industrial businesses, and government entities. HD Supplys broad range of end-to-end product lines and services include over one million stock-keeping units (SKUs) of quality, name-brand and proprietary-brand products as well as value-add services supporting the entire life-cycle of a project from infrastructure and construction to maintenance, repair and operations.
HD Supply is managed primarily on a product line basis and reports results of operations in four reportable segments. The reportable segments are Facilities Maintenance, Waterworks, Power Solutions, and Construction & Industrial - White Cap. Other operating segments include Home Improvement Solutions, Interior Solutions, and HD Supply Canada. In addition, the consolidated financial statements include Corporate, which is comprised of enterprise-wide functional departments.
Basis of Presentation
In managements opinion, the unaudited financial information for the interim periods presented includes all adjustments necessary for a fair statement of the results of operations, financial position, and cash flows. All adjustments are of a normal recurring nature unless otherwise disclosed. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. For a more complete discussion of the Companys significant accounting policies and other information, you should read this report in conjunction with its annual report on Form 10-K, for the year ended February 1, 2015, which includes all disclosures required by generally accepted accounting principles (GAAP). Certain amounts in the prior-period financial statements have been reclassified to conform to the current periods presentation.
Fiscal Year
HD Supplys fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. Fiscal years ending January 31, 2016 (fiscal 2015) and February 1, 2015 (fiscal 2014) both include 52 weeks. The three months ended May 3, 2015 (first quarter 2015) and May 4, 2014 (first quarter 2014) both include 13 weeks.
Principles of Consolidation
The consolidated financial statements of HD Supply Holdings, Inc. present the results of operations, financial position and cash flows of HD Supply Holdings, Inc. and its wholly-owned subsidiaries, including HD Supply, Inc. The consolidated financial statements of HD Supply, Inc. present the results of operations, financial position and cash flows of HD Supply, Inc. and its wholly-owned subsidiaries. All material intercompany balances and transactions are eliminated. Results of operations of businesses acquired are included from their respective dates of acquisition. The results of operations of all discontinued operations have been separately reported as discontinued operations for all periods presented.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Estimates
Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing these consolidated financial statements in conformity with GAAP. Actual results could differ from these estimates.
Self-Insurance
HD Supply has a high deductible insurance program for most losses related to general liability, product liability, environmental liability, automobile liability, workers compensation, and is self-insured for medical claims and certain legal claims. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability. Self-insurance losses for claims filed and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and historical loss development experience. At May 3, 2015 and February 1, 2015, self-insurance reserves totaled approximately $96 million and $92 million, respectively.
NOTE 2 DISCONTINUED OPERATIONS
In January 2015, the Company sold substantially all of the assets of its Hardware Solutions business to Home Depot. The Company received cash proceeds of approximately $198 million, net of $2 million of transaction costs. As a result of the sale, the Company recorded an $8 million pre-tax gain in fiscal 2014.
In January 2014, the Company approved the disposal of Litemor, a specialty lighting distributor within the Companys HD Supply Canada business. During fiscal 2014, the Company finalized the disposal process of Litemor through liquidation and branch sales, resulting in a pre-tax loss on disposal of $15 million, which includes cash and non-cash charges.
Summary Financial Information
In accordance with Accounting Standards Codification (ASC) 205-20, Discontinued Operations, the results of the Hardware Solutions and Litemors operations and the gains/losses on sales of the businesses are classified as discontinued operations. The presentation of discontinued operations includes revenues and expenses of the discontinued operations and gain/loss on the disposition of businesses, net of tax, as one line item on the Consolidated Statements of Operations and Comprehensive Income (Loss). All Consolidated Statements of Operations and Comprehensive Income (Loss) presented have been revised to reflect this presentation.
The following table provides additional detail related to the results of operations of the discontinued operations (amounts in millions):
|
|
Three Months Ended |
| ||||
|
|
May 3, 2015 |
|
May 4, 2014 |
| ||
Net sales |
|
$ |
|
|
$ |
83 |
|
|
|
|
|
|
| ||
Gain (loss) on disposal of discontinued operations |
|
|
|
(14 |
) | ||
|
|
|
|
|
| ||
Income (loss) before provision for income taxes |
|
$ |
|
|
$ |
(11 |
) |
Provision for income taxes |
|
|
|
3 |
| ||
Income (loss) from discontinued operations, net of tax |
|
$ |
|
|
$ |
(8 |
) |
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 DEBT
HDSs long-term debt as of May 3, 2015 and February 1, 2015 consisted of the following (dollars in millions):
|
|
May 3, 2015 |
|
February 1, 2015 |
| ||||||
|
|
Outstanding |
|
Interest Rate |
|
Outstanding |
|
Interest Rate |
| ||
Senior ABL Facility due 2018 |
|
$ |
215 |
|
1.68 |
|
$ |
96 |
|
2.02 |
|
Term Loans due 2018, net of unamortized discount of $13 million and $14 million |
|
946 |
|
4.00 |
|
961 |
|
4.00 |
| ||
December 2014 First Priority Notes due 2021 |
|
1,250 |
|
5.25 |
|
1,250 |
|
5.25 |
| ||
April 2012 Second Priority Notes due 2020 |
|
675 |
|
11.00 |
|
675 |
|
11.00 |
| ||
October 2012 Senior Unsecured Notes due 2020 |
|
1,000 |
|
11.50 |
|
1,000 |
|
11.50 |
| ||
February 2013 Senior Unsecured Notes due 2020 |
|
1,275 |
|
7.50 |
|
1,275 |
|
7.50 |
| ||
Total long-term debt |
|
$ |
5,361 |
|
|
|
$ |
5,257 |
|
|
|
Less current installments |
|
|
|
|
|
(34 |
) |
|
| ||
Long-term debt, excluding current installments |
|
$ |
5,361 |
|
|
|
$ |
5,223 |
|
|
|
(1) Represents the stated rate of interest, without including the effect of discounts.
Senior Credit Facilities
Asset Based Lending Facility
HDSs Senior Asset Based Lending Facility (Senior ABL Facility) provides for senior secured revolving loans and letters of credit of up to a maximum aggregate principal amount of $1,500 million (subject to availability under a borrowing base). Extensions of credit under the Senior ABL Facility are limited by a borrowing base calculated periodically based on specified percentages of the value of eligible inventory and eligible accounts receivable, subject to certain reserves and other adjustments. A portion of the Senior ABL Facility is available for letters of credit and swingline loans. As of May 3, 2015, HDS has $1,101 million of additional available borrowings under the Senior ABL Facility (after giving effect to the borrowing base limitations and approximately $34 million in letters of credit issued and including $41 million of borrowings available on qualifying cash balances).
At HDSs option, the interest rates applicable to the loans under the Senior ABL Facility are based (i) in the case of U.S. dollar-denominated loans, either at London Interbank Offered Rate (LIBOR) plus an applicable margin or Prime Rate plus an applicable margin and (ii) in the case of Canadian dollar-denominated loans, either the BA rate plus an applicable margin or the Canadian Prime Rate plus an applicable margin. The margins applicable for each elected interest rate are subject to a pricing grid, as defined in the Senior ABL Facility agreement, based on average excess availability for the previous fiscal quarter. The Senior ABL Facility also contains a letter of credit fee computed at a rate per annum equal to the Applicable Margin (as defined in the agreement) then in effect for LIBOR Loans and an unused commitment fee subject to a pricing grid, as included in the Senior ABL Facility agreement, based on the Average Daily Used Percentage (as defined in the agreement).
The Senior ABL Facility also permits HDS to add one or more incremental term loan facilities to be included in the Senior ABL Facility or one or more revolving credit facility commitments to be included in the Senior ABL Facility. The Senior ABL Facility will mature on June 28, 2018 (or the maturity date under HDSs Term Loan Facility, if earlier).
Senior Secured Term Loan Facility
HDSs Senior Term Facility consists of a senior secured Term Loan Facility (the Term Loan Facility, the term loans thereunder, the Term Loans) providing for Term Loans in an original aggregate principal amount of $1,000 million. The Term Loan Facility will mature on June 28, 2018 (the Term Loan Maturity Date). The Term
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Loans amortize in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the Term Loan Facility with the balance payable on the Term Loan Maturity Date.
During the first quarter of fiscal 2015 and in accordance with the annual excess cash flow (ECF) provisions of the Term Loan Facility, the Company offered a prepayment of $34 million based on the ECF calculation for fiscal year 2014. The lenders in the Term Loan Facility accepted $16 million, which the Company paid on March 30, 2015. As a result of the prepayment, the next amortizing payment on the Term Loan Facility will be in the third quarter of fiscal 2016.
The Term Loan bears interest at LIBOR (subject to a floor of 1%) plus a borrowing margin of 3% or Prime plus a borrowing margin of 2% at HDSs election, payable at the end of each calendar quarter with respect to Prime rate draws or at the maturity of each LIBOR draw (unless a draw is for a six-, nine-, or twelve-month period, then interest shall be paid quarterly). The Term Loans may be repaid at any time without penalty or premium.
On February 6, 2014, HDS amended its Term Loan Facility to reduce the applicable margin for borrowings by 25 basis points and reduce the LIBOR floor from 1.25% to 1.00%. The amendment also added a new soft call provision applicable to optional prepayment of term loans and extended the maturity of the term loans by approximately nine months, to June 28, 2018.
Secured Notes
5.25% Senior Secured First Priority Notes due 2021
HDS issued $1,250 million of December 2014 First Priority Notes (the December 2014 First Priority Notes) under an Indenture, dated December 4, 2014 among HDS, the Subsidiary Guarantors, the Trustee, and the Note Collateral Agent. The December 2014 First Priority Notes bear interest at a rate of 5.25% per annum and will mature on December 15, 2021. Interest is paid semi-annually in arrears on June 15th and December 15th of each year.
Redemption
HDS may redeem the December 2014 First Priority Notes, in whole or in part, at any time (1) prior to December 15, 2017, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium set forth in the Indenture and (2) on and after December 15, 2017, at the applicable redemption price set forth below (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant redemption date, if redeemed during the 12-month period commencing on December 15 of the year set forth below.
Year |
|
Percentage |
|
2017 |
|
103.938 |
% |
2018 |
|
102.625 |
% |
2019 |
|
101.313 |
% |
2020 and thereafter |
|
100.000 |
% |
In addition, at any time prior to December 15, 2017, HDS may redeem on one or more occasions up to 40% of the aggregate principal amount of the December 2014 First Priority Notes with the proceeds of certain equity offerings at a redemption price of 105.25% of the principal amount in respect of the December 2014 First Priority Notes being redeemed, plus accrued and unpaid interest to the redemption date, provided, however, that if the December 2014 First Priority Notes are redeemed, an aggregate principal amount of December 2014 First Priority Notes equal to at least 50% of the aggregate principal amount of December 2014 First Priority Notes must remain outstanding immediately after each such redemption of December 2014 First Priority Notes.
11% Senior Secured Second Priority Notes due 2020
HDSs 11% Senior Secured Second Priority Notes due 2020 (the April 2012 Second Priority Notes) bear interest at a rate of 11% per annum and will mature on April 15, 2020. Interest is paid semi-annually in arrears on April 15th and October 15th of each year.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Redemption
HDS may redeem the April 2012 Second Priority Notes, in whole or in part, at any time (1) prior to April 15, 2016, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium set forth in the indenture governing the April 2012 Second Priority Notes and (2) on and after April 15, 2016, at the applicable redemption price set forth below (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant redemption date, if redeemed during the 12-month period commencing on April 15 of the year set forth below.
Year |
|
Percentage |
|
2016 |
|
105.500 |
% |
2017 |
|
102.750 |
% |
2018 and thereafter1 |
|
00.000 |
% |
Collateral
The December 2014 First Priority Notes and the related guarantees are secured by a first-priority security interest in substantially all of the tangible and intangible assets of HDS and the Subsidiary Guarantors (other than the ABL Priority Collateral, in which the December 2014 First Priority Notes and the related guarantees have a second-priority security interest), including pledges of all Capital Stock of HDSs Restricted Subsidiaries directly owned by HDS and the Subsidiary Guarantors (but only up to 65% of each series of Capital Stock of each direct Foreign Subsidiary owned by HDS or any Subsidiary Guarantor), subject to certain thresholds, exceptions and permitted liens, and excluding any Excluded Assets (as defined in the indenture governing the December 2014 First Priority Notes ) and Excluded Subsidiary Securities (as defined in the indenture governing the December 2014 First Priority Notes) (the Cash Flow Priority Collateral).
The April 2012 Second Priority Notes and the related guarantees are secured by a second-priority security interest in the Cash Flow Priority Collateral, subject to permitted liens. In addition, the April 2012 Second Priority Notes and the related guarantees are secured by a third-priority security interest in the ABL Priority Collateral, subject to permitted liens.
The indentures governing the December 2014 First Priority Notes, the April 2012 Second Priority Notes and the applicable collateral documents provide that any capital stock and other securities of any of HDSs subsidiaries will be excluded from the collateral to the extent the pledge of such capital stock or other securities to secure the December 2014 First Priority Notes and April 2012 Second Priority Notes would cause such subsidiary to be required to file separate financial statements with the SEC pursuant to Rule 3-16 of Regulation S-X (as in effect from time to time).
Unsecured Notes
11.5% Senior Unsecured Notes due 2020
HDSs 11.5% Senior Unsecured Notes due 2020 (the October 2012 Senior Unsecured Notes) bear interest at 11.5% per annum and will mature on July 15, 2020. Interest is paid semi-annually in arrears on April 15th and October 15th of each year.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Redemption
HDS may redeem the October 2012 Senior Unsecured Notes, in whole or in part, at any time (1) prior to October 15, 2016, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium set forth in the indenture governing the 11.5% Senior Notes and (2) on and after October 15, 2016, at the applicable redemption price set forth below (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant redemption date, if redeemed during the 12-month period commencing on October 15 of the year set forth below.
Year |
|
Percentage |
|
2016 |
|
105.750 |
% |
2017 |
|
102.875 |
% |
2018 and thereafter |
|
100.000 |
% |
In addition, at any time prior to October 15, 2015, HDS may redeem up to 35% of the aggregate principal amount of the October 2012 Senior Unsecured Notes with the proceeds of certain equity offerings at a redemption price of 111.50% of the principal amount in respect of the October 2012 Senior Unsecured Notes being redeemed, plus accrued and unpaid interest to the redemption date, provided, however, that if the October 2012 Senior Unsecured Notes are redeemed, an aggregate principal amount of the October 2012 Senior Unsecured Notes equal to at least 50% of the original aggregate principal amount of the October 2012 Senior Unsecured Notes must remain outstanding immediately after each such redemption of the October 2012 Senior Unsecured Notes.
7.5% Senior Unsecured Notes due 2020
HDSs 7.5% Senior Unsecured Notes due 2020 (the February 2013 Senior Unsecured Notes) bear interest at 7.5% per annum and will mature on July 15, 2020. Interest is paid semi-annually in arrears on April 15th and October 15th of each year.
Redemption
HDS may redeem the February 2013 Senior Unsecured Notes, in whole or in part, at any time (1) prior to October 15, 2016, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium set forth in the indenture governing the February 2013 Senior Notes and (2) on and after October 15, 2016, at the applicable redemption price set forth below (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant redemption date, if redeemed during the 12-month period commencing on October 15 of the year set forth below.
Year |
|
Percentage |
|
2016 |
|
103.750 |
% |
2017 |
|
101.875 |
% |
2018 and thereafter |
|
100.000 |
% |
In addition, at any time prior to October 15, 2015, HDS may redeem up to 35% of the aggregate principal amount of the February 2013 Senior Unsecured Notes with the proceeds of certain equity offerings at a redemption price of 107.50% of the principal amount in respect of the February 2013 Senior Unsecured Notes being redeemed, plus accrued and unpaid interest to the redemption date, provided, however, that if the February 2013 Senior Unsecured Notes are redeemed, an aggregate principal amount of the February 2013 Senior Unsecured Notes equal to at least 50% of the original aggregate principal amount of the February 2013 Senior Unsecured Notes must remain outstanding immediately after each such redemption of the February 2013 Senior Unsecured Notes.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Debt covenants
HDSs outstanding debt agreements contain various restrictive covenants including, but not limited to, limitations on additional indebtedness and dividend payments and stipulations regarding the use of proceeds from asset dispositions. As of May 3, 2015, HDS is in compliance with all such covenants that were in effect on such date.
NOTE 4 FAIR VALUE MEASUREMENTS
The fair value measurements and disclosure principles of GAAP (ASC 820, Fair Value Measurements and Disclosures) define fair value, establish a framework for measuring fair value and provide disclosure requirements about fair value measurements. These principles define a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly;
Level 3 Unobservable inputs in which little or no market activity exists.
The Companys financial instruments that are not reflected at fair value on the balance sheet were as follows as of May 3, 2015 and February 1, 2015 (amounts in millions):
|
|
As of May 3, 2015 |
|
As of February 1, 2015 |
| ||||||||
|
|
Recorded |
|
Estimated Fair |
|
Recorded |
|
Estimated Fair |
| ||||
Senior ABL Facility |
|
$ |
215 |
|
$ |
211 |
|
$ |
96 |
|
$ |
95 |
|
Term Loans and Notes |
|
5,159 |
|
5,572 |
|
5,175 |
|
5,504 |
| ||||
Total |
|
$ |
5,374 |
|
$ |
5,783 |
|
$ |
5,271 |
|
$ |
5,599 |
|
(1) These amounts do not include accrued interest; accrued interest is classified as Other current liabilities in the accompanying Consolidated Balance Sheets. These amounts do not include any related discounts.
The Company utilized Level 2 inputs, as defined in the fair value hierarchy, to measure the fair value of the long-term debt. Managements fair value estimates were based on quoted prices for recent trades of HDSs long-term debt, recent similar credit facilities initiated by companies with like credit quality in similar industries, quoted prices for similar instruments, and inquiries with certain investment communities.
NOTE 5 INCOME TAXES
For the three months ended May 3, 2015, the Companys combined federal, state, and foreign effective tax rate for continuing operations is a 295% benefit. The benefit was mainly driven by a decrease of $189 million in the Companys unrecognized U.S. federal and state tax benefits related to the February 19, 2015 approval and finalization of the Tentative Settlement (as defined in Note 9, Commitment and Contingencies) by the Joint Committee of Taxation. In addition, the Companys rate was impacted by the utilization of deferred tax assets which had previously been subject to a valuation allowance, increasing the deferred tax liability for U.S. goodwill amortization for tax purposes, and the accrual of income taxes for foreign and certain state jurisdictions. The Companys effective tax rate will vary based on a variety of factors, including overall profitability, the geographical mix of income before taxes and the related tax rates in the jurisdictions where it operates, restructuring and other one-time charges, as well as discrete events, such as settlements of future audits.
An increase in U.S. pre-tax book income resulted in the utilization of net deferred tax assets including U.S. tax net operating losses that were subject to a valuation allowance. The overall decrease in the valuation allowance was partially offset by an increase of the deferred tax liability for U.S. goodwill amortization for tax purposes. The
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
deferred tax liability related to the Companys U.S. tax deductible goodwill is considered a liability related to an asset with an indefinite life. Therefore, the deferred tax liability does not amortize and is not available as a source of taxable income to support the realization of deferred tax assets created by other deductible temporary timing differences. The Company does not believe it is more likely than not it will realize its U.S. deferred tax assets equal to the deferred liability created by tax deductible goodwill. During the three months ended May 3, 2015, the impact of the tax amortization of the indefinite lived intangibles on tax expense was a $6 million increase.
As of February 1, 2015, the Companys unrecognized tax benefits in accordance with the income taxes principles of GAAP (ASC 740, Income Taxes) were $187 million. During the three months ended May 3, 2015, the Companys unrecognized tax benefits decreased by $178 million to $9 million primary driven by IRS and state audit settlements. During the three months ended May 3, 2015, the Companys interest accrual related to unrecognized tax benefits decreased by $28 million. The Companys ending net accrual for interest and penalties related to unrecognized tax benefits as of February 1, 2015 was $29 million and decreased to $1 million as of May 3, 2015. As a result of the approval and finalization of the Tentative Settlement, the tax years ending February 3, 2008 and February 1, 2009 are settled and closed to any further adjustments.
At February 1, 2015 and May 3, 2015, the Companys valuation allowance on its U.S. deferred tax assets was approximately $1,013 million and $943 million, respectively. Each reporting period we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Through fiscal 2013 the Companys history of U.S. operating losses limited the weight we could apply to other subjective evidence such as the Companys projections for future profitability. With the Companys fiscal 2014 U.S. pretax income, long carryforward periods in its U.S. federal tax losses and similar carryforward periods in a significant portion of its state tax losses, and projected fiscal 2015 U.S. pretax income, we believe it is reasonably possible that sufficient positive evidence will exist during the next twelve months to release all or a significant portion of our valuation allowance on the Companys U.S. deferred tax assets.
See Note 9, Commitments and Contingencies, for discussion of the IRS audit of the Companys U.S. federal income tax returns.
NOTE 6 BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
The following basic and diluted weighted average common shares information is provided for HD Supply Holdings, Inc.
The reconciliation of basic to diluted weighted average common shares for the three months ended May 3, 2015 and May 4, 2014 was as follows (in thousands):
|
|
Three Months Ended |
| ||
|
|
May 3, 2015 |
|
May 4, 2014 |
|
Weighted average common shares |
|
195,347 |
|
192,859 |
|
Effect of potentially dilutive securities: |
|
|
|
|
|
Stock plans |
|
5,369 |
|
|
|
Diluted weighted average common shares |
|
200,716 |
|
192,859 |
|
|
|
|
|
|
|
Stock plan securities excluded from dilution (1) |
|
1,062 |
|
14,648 |
|
(1) Represents securities not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.
Stock plans consist of securities (stock options, restricted stock and restricted stock units) granted under Holdings stock-based compensation plans. Diluted weighted average common shares outstanding equals basic
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
weighted average common shares outstanding for the three months ended May 4, 2014, as the effect of securities are anti-dilutive because the Company incurred a net loss.
NOTE 7 SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION
Receivables
Receivables consisted of the following (amounts in millions):
|
|
May 3, 2015 |
|
February 1, 2015 |
| ||
Trade receivables, net of allowance for doubtful accounts |
|
$ |
1,100 |
|
$ |
988 |
|
Vendor rebate receivables |
|
51 |
|
88 |
| ||
Other receivables |
|
15 |
|
12 |
| ||
Total receivables, net |
|
$ |
1,166 |
|
$ |
1,088 |
|
Other Current Liabilities
Other current liabilities consisted of the following (amounts in millions):
|
|
HD Supply Holdings, Inc. |
|
HD Supply, Inc. |
| ||||||||
|
|
May 3, 2015 |
|
February 1, 2015 |
|
May 3, 2015 |
|
February 1, 2015 |
| ||||
Accrued interest |
|
$ |
43 |
|
$ |
98 |
|
$ |
43 |
|
$ |
98 |
|
Accrued non-income taxes |
|
43 |
|
34 |
|
43 |
|
34 |
| ||||
Other |
|
115 |
|
120 |
|
114 |
|
120 |
| ||||
Total other current liabilities |
|
$ |
201 |
|
$ |
252 |
|
$ |
200 |
|
$ |
252 |
|
Supplemental Cash Flow Information
Cash paid for interest in the three months ended May 3, 2015 and May 4, 2014 was $154 million and $206 million, respectively. Additionally, during the three months ended May 4, 2014, the Company paid $1 million of original issue discounts related to the portion of the Term Loan amendment considered an extinguishment under ASC 470-50.
Cash paid for income taxes, net of refunds, in the three months ended May 3, 2015 and May 4, 2014 was approximately $3 million and $1 million, respectively.
Significant Non-Cash Transactions
During the three months ended May 3, 2015, Holdings retired 591,431 shares of its common stock (Retired Shares) held as Treasury Shares by Holdings in the amount of $17 million. All of these shares were repurchased by Holdings pursuant to the share repurchase program previously authorized. Holdings reinstated the Retired Shares to the status of authorized but unissued shares of common stock, par value $0.01 per share, effective as of the date of retirement. In accordance with Accounting Standards Codification 505-30, Equity-Treasury Stock, Holdings reversed the $0.01 par value of the Retired Shares and the excess of the cost of the Retired Shares over par value to Retained Earnings.
NOTE 8BRANCH CLOSURE AND CONSOLIDATION ACTIVITIES
During the fourth quarter of fiscal 2013, management evaluated the cost structure of the Company and identified opportunities to reduce costs across its businesses, primarily through a workforce reduction of approximately 150 employees in the Power Solutions business, global support center and, to a lesser extent, its other businesses.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the three months ended May 4, 2014, the Company continued restructuring activities under this plan, resulting in a restructuring charge of $3 million. These charges were recorded to operating expenses within the Consolidated Statement of Operations and Comprehensive Income (Loss). During fiscal 2014, the Company completed the restructuring activities under this plan.
NOTE 9 COMMITMENTS AND CONTINGENCIES
Internal Revenue Service
The Company carried back tax net operating losses (NOL) from its tax years ended on February 3, 2008 and February 1, 2009 to tax years during which it was a member of The Home Depot Inc.s (Home Depot) U.S. federal consolidated tax group. As a result of those NOL carrybacks, Home Depot received cash refunds from the IRS in the amount of approximately $354 million. Under an agreement (the Agreement) between the Company and Home Depot, Home Depot paid the Company the refund proceeds resulting from the NOL carrybacks.
In January 2013 in connection with an audit of the Companys U.S. federal income tax returns filed for the tax years ended on February 3, 2008 and February 1, 2009, the IRS issued a Revenue Agents Report (RAR) which proposed to disallow certain deductions claimed by the Company and a significant portion of the corresponding cash refunds resulting from the Companys NOL carrybacks. Pursuant to the terms of the Agreement, the Company would be required to reimburse Home Depot an amount equal to the disallowed refunds plus related interest. In collaboration with Home Depot, the Company challenged the proposed adjustments of the RAR by filing a formal protest with the IRS Office of Appeals. In July 2014, the Company reached a tentative settlement (Tentative Settlement) for approximately $27 million with the IRS Office of Appeals on the outstanding RAR. In order to stop the accrual of interest on the Tentative Settlement amount and as required under the Agreement, in August 2014 the Company made a payment of approximately $27 million to Home Depot which Home Depot then paid to the IRS. As a result of the Tentative Settlement, the Companys deferred tax assets increased by approximately $12 million before the impact of the valuation allowance.
The Tentative Settlement and the carryback claims were subject to review by the Joint Committee on Taxation (JCT) and the Tentative Settlement does not become effective nor are the carryback claims finalized until the JCT reviews them without objection or the IRS Office of Appeals executes such settlement, whichever comes first. The JCT is required to review refunds in excess of $2 million.
On February 19, 2015, the Company received notification the Tentative Settlement was approved by the Joint Committee of Taxation. As a result of the approval and finalization of the Tentative Settlement, the tax years ending February 3, 2008 and February 1, 2009 are settled and closed to any further adjustments.
See Note 5, Income Taxes, for further disclosures on the Companys income taxes.
Legal Matters
As previously reported, the Office of the United States Attorney for the Northern District of New York (U.S. Attorney) is conducting an investigation related to the activities of certain disadvantaged business enterprises (DBEs), including American Indian Builders and Suppliers, Inc. (AIB). In May 2011, in connection with that investigation, the government executed a search of an entity from which Waterworks purchased assets shortly before the search was executed. On June 20, 2012, the government executed search warrants at two Waterworks branches. In July 2014, the Company received a Civil Investigative Demand (CID) issued by the U.S. Attorney pursuant to the False Claims Act in the course of an investigation to determine whether the Company knowingly submitted false claims to the government in connection with the Companys sales to DBEs, and, in particular, AIB, on federally funded or partially-federally funded projects. The Company is updated by the government on its investigation periodically and continues to cooperate with the investigation.
HD Supply is involved in various legal proceedings arising in the normal course of its business. The Company establishes reserves for litigation and similar matters when those matters present loss contingencies that it determines to be both probable and reasonably estimable in accordance with ASC 450, Contingencies. In
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
the opinion of management, based on current knowledge, all reasonably estimable and probable matters, including the United States Attorney investigation matter described above, are believed to be adequately reserved for or covered by insurance and are not expected to have a material adverse effect on the Companys consolidated financial condition, results of operations or cash flows. For all other matters, except as noted below, management believes the possibility of losses from such matters is not probable, the potential loss from such matters is not reasonably estimable, or such matters are of such kind or involve such amounts that would not have a material adverse effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably. For material matters that are reasonably possible and reasonably estimable, including matters that are probable and estimable but for which the amount that is reasonably possible is in excess of the amount that the Company has accrued for, management has estimated the aggregate range of potential loss as $0 to $10 million. If a material loss is probable or reasonably possible, and in either case estimable, the Company has considered it in the analysis and it is included in the discussion set forth above.
NOTE 10 SEGMENT INFORMATION
HD Supplys operating segments are based on management structure and internal reporting. Each segment offers different products and services to the end customer, except for Corporate, which provides general corporate overhead support. The Company determines the reportable segments in accordance with the principles of segment reporting within ASC 280, Segment Reporting. For purposes of evaluation under these segment reporting principles, the Chief Operating Decision Maker for HD Supply assesses HD Supplys ongoing performance, based on the periodic review and evaluation of Net sales, Adjusted EBITDA, and certain other measures for each of the operating segments.
HD Supply has four reportable segments, each of which is presented below:
· Facilities MaintenanceFacilities Maintenance distributes maintenance, repair and operations (MRO) products, provides value-add services and fabricates custom products to multifamily, hospitality, healthcare and institutional facilities.
· WaterworksWaterworks distributes complete lines of water and wastewater transmission products, serving contractors and municipalities in the water and wastewater industries for non-residential and residential uses.
· Power SolutionsPower Solutions distributes electrical transmission and distribution products, power plant MRO supplies and smart-grid products, and arranges materials management and procurement outsourcing for the power generation and distribution industries.
· Construction & Industrial - White CapConstruction & Industrial - White Cap distributes specialized hardware, tools, engineered materials and safety products to non-residential and residential contractors.
In addition to the reportable segments, our consolidated financial results include Corporate & Other. Corporate & Other is comprised of the following operating segments: Interior Solutions, Home Improvement Solutions and HD Supply Canada. Interior Solutions offers turnkey supply and installation services for multiple interior finish options, including flooring, cabinets, countertops, and window coverings, along with comprehensive design center services for non-residential, residential and senior living projects. Home Improvement Solutions offers light remodeling and construction supplies, kitchen and bath cabinets, windows, plumbing materials, electrical equipment and other products, primarily to small remodeling contractors and trade professionals. HD Supply Canada is an industrial distributor that primarily focuses on servicing fasteners/industrial supplies markets operating across six Canadian provinces. Corporate & Other also includes costs related to our centralized support functions, which are comprised of finance, information technology, human resources, legal, supply chain and other support services, and removes inter-segment transactions.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present Net sales, Adjusted EBITDA, and other measures for each of the reportable segments and total continuing operations for the periods indicated (amounts in millions):
|
|
Facilities |
|
Waterworks |
|
Power |
|
Construction |
|
Corporate & |
|
Total |
| ||||||
Three Months Ended May 3, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Sales |
|
$ |
635 |
|
$ |
570 |
|
$ |
499 |
|
$ |
388 |
|
$ |
129 |
|
$ |
2,221 |
|
Adjusted EBITDA |
|
122 |
|
45 |
|
21 |
|
32 |
|
(12 |
) |
208 |
| ||||||
Depreciation(1) & Software Amortization |
|
12 |
|
2 |
|
2 |
|
6 |
|
6 |
|
28 |
| ||||||
Other Intangible Amortization |
|
1 |
|
1 |
|
5 |
|
|
|
1 |
|
8 |
| ||||||
Three Months Ended May 4, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Sales |
|
$ |
604 |
|
$ |
551 |
|
$ |
461 |
|
$ |
344 |
|
$ |
134 |
|
$ |
2,094 |
|
Adjusted EBITDA |
|
109 |
|
41 |
|
18 |
|
22 |
|
(7 |
) |
183 |
| ||||||
Depreciation(1) & Software Amortization |
|
12 |
|
2 |
|
1 |
|
4 |
|
8 |
|
27 |
| ||||||
Other Intangible Amortization |
|
20 |
|
1 |
|
5 |
|
5 |
|
1 |
|
32 |
|
(1) Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Reconciliation to Consolidated Financial Statements
|
|
Three Months Ended |
| ||||
|
|
May 3, 2015 |
|
May 4, 2014 |
| ||
Total Adjusted EBITDA |
|
$ |
208 |
|
$ |
183 |
|
Depreciation and amortization (1) |
|
36 |
|
59 |
| ||
Stock-based compensation |
|
5 |
|
5 |
| ||
Restructuring |
|
|
|
3 |
| ||
Operating income |
|
167 |
|
116 |
| ||
Interest expense, net |
|
106 |
|
116 |
| ||
Loss on extinguishment & modification of debt |
|
|
|
2 |
| ||
Other (income) expense, net |
|
|
|
1 |
| ||
Income (Loss) from Continuing Operations Before Provision for Income Taxes |
|
61 |
|
(3 |
) | ||
Provision (benefit) for income taxes (2) |
|
(181 |
) |
1 |
| ||
Income (loss) from continuing operations |
|
242 |
|
(4 |
) | ||
Less Income (loss) from discontinued operations, net of tax |
|
|
|
(8 |
) | ||
Net Income (loss) |
|
$ |
242 |
|
$ |
(12 |
) |
(1) Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations.
(2) During the three months ended May 3, 2015, the Company recorded a reduction in unrecognized tax benefits as a result of IRS and state audit settlements. See Note 5, Income Taxes and Note 9, Commitments and Contingencies for discussion of the IRS audit settlement.
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 11SUBSIDIARY GUARANTORS
HDS (the Debt Issuer) had outstanding December 2014 First Priority Notes, April 2012 Second Priority Notes, October 2012 Senior Unsecured Notes, and February 2013 Senior Unsecured Notes (collectively the Notes) guaranteed by certain of its subsidiaries (the Subsidiary Guarantors). The Subsidiary Guarantors are direct or indirect wholly-owned domestic subsidiaries of HDS. The subsidiaries of HDS that do not guarantee the Notes (Non-guarantor Subsidiaries) are direct or indirect wholly-owned subsidiaries of HDS and primarily include HDSs operations in Canada.
The Debt Issuers payment obligations under the Notes are jointly and severally guaranteed by the guarantors and all guarantees are full and unconditional.
These guarantees are subject to release under the circumstances as described below:
(i) concurrently with any direct or indirect sale or disposition (by merger or otherwise) of any Subsidiary Guarantor or any interest therein in accordance with the terms of the applicable indebtedness by HDS or a restricted subsidiary, following which such Subsidiary Guarantor is no longer a restricted subsidiary of HDS;
(ii) at any time that such Subsidiary Guarantor is released from all of its obligations under all of its guarantees of payment of any indebtedness of HDS or any Subsidiary Guarantor under all other indebtedness and is not a borrower under the ABL Facility;
(iii) upon the merger or consolidation of any Subsidiary Guarantor with and into HDS or another Subsidiary Guarantor that is the surviving entity in such merger or consolidation, or upon the liquidation of such Subsidiary Guarantor following the transfer of all of its assets to HDS or another Subsidiary Guarantor;
(iv) concurrently with any Subsidiary Guarantor becoming an unrestricted subsidiary;
(v) during the period when the rating on the notes is changed to investment grade and certain covenants cease to apply while such investment grade rating is maintained, upon the merger or consolidation of any Subsidiary Guarantor with and into another subsidiary that is not a Subsidiary Guarantor with such other subsidiary being the surviving entity in such merger or consolidation, or upon liquidation of such Subsidiary Guarantor following the transfer of all of its assets to a subsidiary that is not a Subsidiary Guarantor;
(vi) upon legal or covenant defeasance of HDSs obligations under the applicable indebtedness, or satisfaction and discharge of the indenture governing the applicable indebtedness; or
(vii) subject to customary contingent reinstatement provisions, upon payment in full of the aggregate principal amount of all applicable indebtedness then outstanding and all other obligations guaranteed by a Subsidiary Guarantor then due and owing.
In addition, HDS has the right, upon 30 days notice to the applicable trustee, to cause any Subsidiary Guarantor that has not guaranteed payment of any indebtedness of HDS or any Subsidiary Guarantor under all other indebtedness and is not a borrower under the ABL Facility to be unconditionally released from all obligations under its Subsidiary Guarantee, and such Subsidiary Guarantee shall thereupon terminate and be discharged and of no further force or effect.
In connection with the issuance of the Notes, HDS determined the need for compliance with Rule 3-10 of SEC Regulation S-X. In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, HDS has included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(f) of SEC Regulation S-X. The following supplemental financial information sets forth, on a consolidating basis under the equity method of accounting, the condensed statements of operations and comprehensive income (loss), the condensed balance sheets, and the condensed statements of cash flows for the parent company issuer of the Notes, HDS, for the Subsidiary Guarantors and for the Non-guarantor Subsidiaries and total consolidated HDS and subsidiaries (amounts in millions).
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
|
Three Months Ended May 3, 2015 |
| |||||||||||||
|
|
Debt Issuer |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Total HDS |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Sales |
|
$ |
|
|
$ |
2,147 |
|
$ |
74 |
|
$ |
|
|
$ |
2,221 |
|
Cost of sales |
|
|
|
1,520 |
|
52 |
|
|
|
1,572 |
| |||||
Gross Profit |
|
|
|
627 |
|
22 |
|
|
|
649 |
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative |
|
23 |
|
410 |
|
14 |
|
|
|
447 |
| |||||
Depreciation and amortization |
|
4 |
|
31 |
|
|
|
|
|
35 |
| |||||
Total operating expenses |
|
27 |
|
441 |
|
14 |
|
|
|
482 |
| |||||
Operating Income (Loss) |
|
(27 |
) |
186 |
|
8 |
|
|
|
167 |
| |||||
Interest expense |
|
107 |
|
61 |
|
|
|
(62 |
) |
106 |
| |||||
Interest (income) |
|
(60 |
) |
(2 |
) |
|
|
62 |
|
|
| |||||
Net (earnings) loss of equity affiliates |
|
(135 |
) |
|
|
|
|
135 |
|
|
| |||||
Income (Loss) From Continuing Operations Before Provision (Benefit) for Income Taxes |
|
61 |
|
127 |
|
8 |
|
(135 |
) |
61 |
| |||||
Provision (benefit) for income taxes |
|
(181 |
) |
(1 |
) |
1 |
|
|
|
(181 |
) | |||||
Income (Loss) from Continuing Operations |
|
242 |
|
128 |
|
7 |
|
(135 |
) |
242 |
| |||||
Net Income (Loss) |
|
$ |
242 |
|
$ |
128 |
|
$ |
7 |
|
$ |
(135 |
) |
$ |
242 |
|
Other comprehensive income (loss) foreign currency translation adjustment |
|
5 |
|
|
|
5 |
|
(5 |
) |
5 |
| |||||
Total Comprehensive Income (Loss) |
|
$ |
247 |
|
$ |
128 |
|
$ |
12 |
|
$ |
(140 |
) |
$ |
247 |
|
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (CONTINUED)
|
|
Three Months Ended May 4, 2014 |
| |||||||||||||
|
|
Debt Issuer |
|
Guarantor |
|
Non- |
|
Eliminations |
|
Total HDS |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net Sales |
|
$ |
|
|
$ |
2,006 |
|
$ |
88 |
|
$ |
|
|
$ |
2,094 |
|
Cost of sales |
|
|
|
1,425 |
|
66 |
|
|
|
1,491 |
| |||||
Gross Profit |
|
|
|
581 |
|
22 |
|
|
|
603 |
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Selling, general and administrative |
|
17 |
|
394 |
|
15 |
|
|
|
426 |
| |||||
Depreciation and amortization |
|
5 |
|
53 |
|
|
|
|
|
58 |
| |||||
Restructuring |
|
|
|
2 |
|
1 |
|
|
|
3 |
| |||||
Total operating expenses |
|
22 |
|
449 |
|
16 |
|
|
|
487 |
| |||||
Operating Income (Loss) |
|
(22 |
) |
132 |
|
6 |
|
|
|
116 |
| |||||
Interest expense |
|
117 |
|
60 |
|
|
|
(61 |
) |
116 |
| |||||
Interest (income) |
|
(60 |
) |
(1 |
) |
|
|
61 |
|
|
| |||||
Net (earnings) loss of equity affiliates |
|
(76 |
) |
|
|
|
|
76 |
|
|
| |||||
Loss on extinguishment & modification of debt |
|
2 |
|
|
|
|
|
|
|
2 |
| |||||
Other (income) expense, net |
|
1 |
|
|
|
|
|
|
|
1 |
| |||||
Income (Loss) From Continuing Operations Before Provision (Benefit) for Income Taxes |
|
(6 |
) |
73 |
|
6 |
|
(76 |
) |
(3 |
) | |||||
Provision (benefit) for income taxes |
|
5 |
|
(4 |
) |
|
|
|
|
1 |
| |||||
Income (Loss) from Continuing Operations |
|
(11 |
) |
77 |
|
6 |
|
(76 |
) |
(4 |
) | |||||
Income (loss) from discontinued operations, net of tax |
|
(1 |
) |
3 |
|
(10 |
) |
|
|
(8 |
) | |||||
Net Income (Loss) |
|
$ |
(12 |
) |
$ |
80 |
|
$ |
(4 |
) |
$ |
(76 |
) |
$ |
(12 |
) |
Other comprehensive income (loss) foreign currency translation adjustment |
|
1 |
|
|
|
1 |
|
(1 |
) |
1 |
| |||||
Total Comprehensive Income (Loss) |
|
$ |
(11 |
) |
$ |
80 |
|
$ |
(3 |
) |
$ |
(77 |
) |
$ |
(11 |
) |
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
As of May 3, 2015 |
| |||||||||||||
|
|
Debt Issuer |
|
Guarantor |
|
Non-Guarantor |
|
Eliminations |
|
Total HDS |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
89 |
|
$ |
17 |
|
$ |
38 |
|
$ |
|
|
$ |
144 |
|
Receivables, net |
|
2 |
|
1,120 |
|
44 |
|
|
|
1,166 |
| |||||
Inventories |
|
|
|
1,137 |
|
46 |
|
|
|
1,183 |
| |||||
Deferred tax asset |
|
|
|
66 |
|
2 |
|
(57 |
) |
11 |
| |||||
Other current assets |
|
10 |
|
48 |
|
2 |
|
|
|
60 |
| |||||
Total current assets |
|
101 |
|
2,388 |
|
132 |
|
(57 |
) |
2,564 |
| |||||
Property and equipment, net |
|
52 |
|
313 |
|
4 |
|
|
|
369 |
| |||||
Goodwill |
|
|
|
3,067 |
|
4 |
|
|
|
3,071 |
| |||||
Intangible assets, net |
|
|
|
190 |
|
2 |
|
|
|
192 |
| |||||
Deferred tax asset |
|
1 |
|
|
|
5 |
|
(1 |
) |
5 |
| |||||
Investment in subsidiaries |
|
3,169 |
|
|
|
|
|
(3,169 |
) |
|
| |||||
Intercompany notes receivable |
|
2,192 |
|
521 |
|
|
|
(2,713 |
) |
|
| |||||
Other assets |
|
102 |
|
7 |
|
|
|
|
|
109 |
| |||||
Total assets |
|
$ |
5,617 |
|
$ |
6,486 |
|
$ |
147 |
|
$ |
(5,940 |
) |
$ |
6,310 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
|
$ |
14 |
|
$ |
842 |
|
$ |
31 |
|
$ |
|
|
$ |
887 |
|
Accrued compensation and benefits |
|
28 |
|
57 |
|
2 |
|
|
|
87 |
| |||||
Current installments of long-term debt |
|
|
|
|
|
|
|
|
|
|
| |||||
Deferred tax liabilities |
|
57 |
|
|
|
|
|
(57 |
) |
|
| |||||
Other current liabilities |
|
68 |
|
123 |
|
9 |
|
|
|
200 |
| |||||
Total current liabilities |
|
167 |
|
1,022 |
|
42 |
|
(57 |
) |
1,174 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt, excluding current installments |
|
5,361 |
|
|
|
|
|
|
|
5,361 |
| |||||
Deferred tax liabilities |
|
|
|
174 |
|
|
|
(1 |
) |
173 |
| |||||
Intercompany notes payable |
|
521 |
|
2,192 |
|
|
|
(2,713 |
) |
|
| |||||
Other liabilities |
|
76 |
|
28 |
|
6 |
|
|
|
110 |
| |||||
Total liabilities |
|
6,125 |
|
3,416 |
|
48 |
|
(2,771 |
) |
6,818 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Stockholders equity (deficit) |
|
(508 |
) |
3,070 |
|
99 |
|
(3,169 |
) |
(508 |
) | |||||
Total liabilities and stockholders equity (deficit) |
|
$ |
5,617 |
|
$ |
6,486 |
|
$ |
147 |
|
$ |
(5,940 |
) |
$ |
6,310 |
|
HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES
HD SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED)
|
|
As of February 1, 2015 |
| |||||||||||||
|
|
Debt Issuer |
|
Guarantor |
|
Non-Guarantor |
|
Eliminations |
|
Total HDS |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
|
$ |
28 |
|
$ |
25 |
|
$ |
32 |
|
$ |
|
|
$ |
85 |
|
Receivables, net |
|
1 |
|
1,040 |
|
47 |
|
|
|
1,088 |
| |||||
Inventories |
|
|
|
1,029 |
|
40 |
|
|
|
1,069 |
| |||||
Deferred tax asset |
|
|
|
66 |
|
2 |
|
(59 |
) |
9 |
| |||||
Other current assets |
|
12 |
|
33 |
|
2 |
|
|
|
47 |