Attached files
| file | filename |
|---|---|
| 8-K - 8-K - HD Supply Holdings, Inc. | a15-20724_18k.htm |
Exhibit 99.1
HD Supply Holdings, Inc.
Unaudited Pro Forma Financial Statements
Overview
On October 5, 2015, pursuant to the Purchase Agreement (the “Purchase Agreement”), dated as of July 15, 2015, among HD Supply, Inc., a Delaware corporation (“HD Supply”), HD Supply Holdings, LLC, a Florida limited liability company (“Holdings LLC”), HD Supply GP & Management, Inc., a Delaware corporation (“HDS GP”), HD Supply Power Solutions Group, Inc., a Delaware corporation (“HDS PS Group”), Brafasco Holdings, II, Inc., a Delaware corporation (“Brafasco”, and collectively with HD Supply, Holdings LLC, HDS GP and HDS PS Group, the “Sellers”) and Anixter Inc., a Delaware corporation (the “Buyer”), the Sellers and certain affiliates of the Sellers completed the sale to the Buyer, and the Buyer purchased from the Sellers (a) all of the issued and outstanding equity interests of: (i) HD Supply Power Solutions, Ltd., a Florida limited partnership (“HDS PS”), (ii) HDS Power Solutions, Inc., a Michigan corporation (“HDS Power Solutions”), and (iii) Pro Canadian Holdings I, ULC, a Nova Scotia unlimited liability company (“Pro Canadian”, and collectively with HDS PS and HDS Power Solutions, the “Purchased Companies” or “Power Solutions segment”), and (b) certain specified assets of the Sellers and certain affiliates of the Sellers (the “Transactions”).
The purchase price for the Transactions was $825 million in cash, which may be adjusted for certain working capital calculations. The Purchase Agreement also contains customary representations and warranties as well as covenants by each of the parties. Subject to certain limitations, the Buyer will be indemnified for damages resulting from breaches or inaccuracies of the Sellers’ representations, warranties and covenants in the Purchase Agreement. The Purchase Agreement does not provide for an escrow fund.
Basis of Presentation
The unaudited pro forma consolidated statements of operations for the fiscal years ended February 1, 2015, February 2, 2014, and February 3, 2013 give effect to the Transactions and have been derived from the audited consolidated financial statements and notes thereto included in Holdings’ Form 10-K for the fiscal year ended February 1, 2015 that has been filed with the U.S. Securities and Exchange Commission (“SEC”). The unaudited pro forma consolidated statement of operations for the six months ended August 2, 2015 and the unaudited pro forma consolidated statement of financial position as of August 2, 2015 give effect to the Transactions and have been derived from the unaudited consolidated financial statements and notes thereto included in Holdings’ Form 10-Q for the six months ended August 2, 2015 that has been filed with the SEC. The unaudited pro forma consolidated financial statements are based upon available information and assumptions that Holdings believes are reasonable.
The unaudited pro forma consolidated financial statements are provided for informational purposes only and do not purport to project the future financial position or operating results of Holdings, together with its direct and indirect subsidiaries, including HDS. In accordance with pro forma rules, the pro forma unaudited consolidated statements of operations have been prepared as if the Transactions occurred on the first day of the first period presented, except for the effect of the use of the proceeds to pay down debt and the associated reduction in interest expense which has only been reflected in pro forma unaudited consolidated statement of operations for the six months ended August 2, 2015 and the year ended February 1, 2015, and the pro forma unaudited consolidated statement of financial position, which has been prepared as if the Transactions occurred on August 2, 2015. The unaudited pro forma consolidated financial statements, including the notes thereto, should be read in conjunction with Holdings’ audited consolidated financial statements and notes thereto included in its Form 10-K for the fiscal year ended February 1, 2015 and Holdings’ unaudited consolidated financial statements and notes thereto included in its Form 10-Q for the six months ended August 2, 2015 that have been filed with the SEC.
The unaudited pro forma consolidated financial statements give effect to the following:
· the elimination of the Power Solutions segment;
· the use of $825 million sale proceeds to (i) pay an estimated $25 million of transaction costs and (ii) pay approximately $782 million to redeem $675 million outstanding principal of HDS’s 11% Senior Secured Second Priority Notes due 2020 (the “April 2012 Second Priority Notes”), including a make-whole premium of approximately $85 million and $22 million of accrued, but unpaid, interest.
The pro forma financial statements included in Form 8-K and filed with the SEC on July 22, 2015, reflected the use of proceeds of the sale as a prepayment on HDS’s term loan facility under its senior secured credit facility. On August 13, 2015, HDS entered into an incremental amendment to the credit agreement governing its existing term loan facility, pursuant to which HDS is permitted to pay down certain existing junior debt with asset sale proceeds, including the expected proceeds of the sale of the Power Solutions segment. The Company expects to use the net sale proceeds to redeem all of the outstanding 11% April 2012 Second Priority Notes.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATION
Amounts in millions, except share and per share data
|
|
|
Six Months ended August 2, 2015 |
| |||||||
|
|
|
As Reported(1) |
|
Adjustments(2) |
|
Pro Forma |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Sales |
|
$ |
3,728 |
|
$ |
— |
|
$ |
3,728 |
|
|
Cost of sales |
|
2,489 |
|
— |
|
2,489 |
| |||
|
Gross Profit |
|
1,239 |
|
— |
|
1,239 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Operating expenses: |
|
|
|
|
|
|
| |||
|
Selling, general and administrative |
|
806 |
|
— |
|
806 |
| |||
|
Depreciation and amortization |
|
56 |
|
— |
|
56 |
| |||
|
Restructuring |
|
— |
|
— |
|
— |
| |||
|
Total operating expenses |
|
862 |
|
— |
|
862 |
| |||
|
Operating Income |
|
377 |
|
— |
|
377 |
| |||
|
Interest expense |
|
212 |
|
(38 |
) |
174 |
| |||
|
Other (income) expense, net |
|
1 |
|
— |
|
1 |
| |||
|
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes |
|
164 |
|
38 |
|
202 |
| |||
|
Provision (benefit) for income taxes |
|
(170 |
) |
— |
|
(170 |
) | |||
|
Income (Loss) from Continuing Operations |
|
334 |
|
38 |
|
372 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Weighted average shares outstanding (thousands): |
|
|
|
|
|
|
| |||
|
Basic |
|
196,120 |
|
|
|
196,120 |
| |||
|
Diluted |
|
201,221 |
|
|
|
201,221 |
| |||
|
Income (loss) from continuing operations per share: |
|
|
|
|
|
|
| |||
|
Basic |
|
$ |
1.70 |
|
|
|
$ |
1.90 |
| |
|
Diluted |
|
$ |
1.66 |
|
|
|
$ |
1.85 |
| |
(1)As Reported Six Months Ended August 2, 2015 reflect the results of the Power Solutions segment as discontinued operations.
(2)Adjustments reflect: Reduction in interest expense to reflect the redemption of the April 2012 Second Priority Notes with net proceeds of the sale at the beginning of each of the periods presented; interest expense reduction includes cash interest and reduction in amortization of related deferred financing costs.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATION
Amounts in millions, except share and per share data
|
|
|
Year ended February 1, 2015 |
| |||||||
|
|
|
As Reported |
|
Adjustments(1) |
|
Pro Forma |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Sales |
|
$ |
8,882 |
|
$ |
(1,912 |
) |
$ |
6,970 |
|
|
Cost of sales |
|
6,324 |
|
(1,618 |
) |
4,706 |
| |||
|
Gross Profit |
|
2,558 |
|
(294 |
) |
2,264 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Operating expenses: |
|
|
|
|
|
|
| |||
|
Selling, general and administrative |
|
1,726 |
|
(216 |
) |
1,510 |
| |||
|
Depreciation and amortization |
|
207 |
|
(26 |
) |
181 |
| |||
|
Restructuring |
|
7 |
|
(1 |
) |
6 |
| |||
|
Total operating expenses |
|
1,940 |
|
(243 |
) |
1,697 |
| |||
|
Operating Income |
|
618 |
|
(51 |
) |
567 |
| |||
|
Interest expense |
|
461 |
|
(75 |
) |
386 |
| |||
|
Loss on extinguishment & modification of debt |
|
108 |
|
— |
|
108 |
| |||
|
Other (income) expense, net |
|
(3 |
) |
— |
|
(3 |
) | |||
|
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes |
|
52 |
|
24 |
|
76 |
| |||
|
Provision (benefit) for income taxes |
|
56 |
|
(14 |
) |
42 |
| |||
|
Income (Loss) from Continuing Operations |
|
(4 |
) |
38 |
|
34 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Weighted average shares outstanding (thousands): |
|
|
|
|
|
|
| |||
|
Basic |
|
193,962 |
|
|
|
193,962 |
| |||
|
Diluted |
|
193,962 |
|
|
|
199,842 |
| |||
|
Income (loss) from continuing operations per share: |
|
|
|
|
|
|
| |||
|
Basic |
|
$ |
(0.02 |
) |
|
|
$ |
0.18 |
| |
|
Diluted |
|
$ |
(0.02 |
) |
|
|
$ |
0.17 |
| |
(1)Adjustments reflect:
(A) Elimination of the historical revenue and expenses of the Power Solutions segment, as if the sale had occurred at the beginning of the first period presented. An estimated gain on sale has not been included in the unaudited pro forma statement of operations, but will be reflected in the statement of operations when the transaction is consummated.
(B) Reduction in interest expense to reflect the redemption of the April 2012 Second Priority Notes with net proceeds of the sale at the beginning of each of the periods presented; interest expense reduction includes cash interest and reduction in amortization of related deferred financing costs.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATION
Amounts in millions, except share and per share data
|
|
|
Year ended February 2, 2014 |
| |||||||
|
|
|
As Reported |
|
Adjustments(1) |
|
Pro Forma |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Sales |
|
$ |
8,228 |
|
$ |
(1,841 |
) |
$ |
6,387 |
|
|
Cost of sales |
|
5,870 |
|
(1,563 |
) |
4,307 |
| |||
|
Gross Profit |
|
2,358 |
|
(278 |
) |
2,080 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Operating expenses: |
|
|
|
|
|
|
| |||
|
Selling, general and administrative |
|
1,649 |
|
(206 |
) |
1,443 |
| |||
|
Depreciation and amortization |
|
228 |
|
(24 |
) |
204 |
| |||
|
Restructuring |
|
9 |
|
(3 |
) |
6 |
| |||
|
Total operating expenses |
|
1,886 |
|
(233 |
) |
1,653 |
| |||
|
Operating Income |
|
472 |
|
(45 |
) |
427 |
| |||
|
Interest expense |
|
528 |
|
— |
|
528 |
| |||
|
Loss on extinguishment & modification of debt |
|
87 |
|
— |
|
87 |
| |||
|
Other (income) expense, net |
|
20 |
|
— |
|
20 |
| |||
|
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes |
|
(163 |
) |
(45 |
) |
(208 |
) | |||
|
Provision (benefit) for income taxes |
|
58 |
|
(14 |
) |
44 |
| |||
|
Income (Loss) from Continuing Operations |
|
(221 |
) |
(31 |
) |
(252 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Weighted average shares outstanding (thousands): |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
166,905 |
|
|
|
166,905 |
| |||
|
Income (loss) from continuing operations per share: |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
$ |
(1.32 |
) |
|
|
$ |
(1.51 |
) | |
(1)Adjustments reflect: Elimination of the historical revenue and expenses of the Power Solutions segment, as if the sale had occurred at the beginning of the first period presented.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATION
Amounts in millions, except share and per share data
|
|
|
Year ended February 3, 2013 |
| |||||||
|
|
|
As Reported |
|
Adjustments(1) |
|
Pro Forma |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Sales |
|
$ |
7,647 |
|
$ |
(1,786 |
) |
$ |
5,861 |
|
|
Cost of sales |
|
5,495 |
|
(1,515 |
) |
3,980 |
| |||
|
Gross Profit |
|
2,152 |
|
(271 |
) |
1,881 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Operating expenses: |
|
|
|
|
|
|
| |||
|
Selling, general and administrative |
|
1,551 |
|
(199 |
) |
1,352 |
| |||
|
Depreciation and amortization |
|
306 |
|
(25 |
) |
281 |
| |||
|
Restructuring |
|
— |
|
— |
|
— |
| |||
|
Total operating expenses |
|
1,857 |
|
(224 |
) |
1,633 |
| |||
|
Operating Income |
|
295 |
|
(47 |
) |
248 |
| |||
|
Interest expense |
|
658 |
|
— |
|
658 |
| |||
|
Loss on extinguishment & modification of debt |
|
709 |
|
— |
|
709 |
| |||
|
Other (income) expense, net |
|
— |
|
— |
|
— |
| |||
|
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes |
|
(1,072 |
) |
(47 |
) |
(1,119 |
) | |||
|
Provision (benefit) for income taxes |
|
39 |
|
(13 |
) |
26 |
| |||
|
Income (Loss) from Continuing Operations |
|
(1,111 |
) |
(34 |
) |
(1,145 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Weighted average shares outstanding (thousands): |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
130,561 |
|
|
|
130,561 |
| |||
|
Income (loss) from continuing operations per share: |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
$ |
(8.51 |
) |
|
|
$ |
(8.77 |
) | |
(1)Adjustments reflect: Elimination of the historical revenue and expenses of the Power Solutions segment, as if the sale had occurred at the beginning of the first period presented.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
Amounts in millions
|
|
|
As of August 2, 2015 |
| |||||||
|
|
|
As Reported |
|
Adjustments(1) |
|
Pro Forma |
| |||
|
Assets |
|
|
|
|
|
|
| |||
|
Current assets: |
|
|
|
|
|
|
| |||
|
Cash and cash equivalents |
|
$ |
169 |
|
$ |
18 |
(A), (B) |
$ |
187 |
|
|
Receivables |
|
1,103 |
|
— |
|
1,103 |
| |||
|
Inventories |
|
883 |
|
— |
|
883 |
| |||
|
Deferred tax asset |
|
15 |
|
— |
|
15 |
| |||
|
Current assets of discontinued operations |
|
574 |
|
(574 |
)(A) |
— |
| |||
|
Other current assets |
|
43 |
|
— |
|
43 |
| |||
|
Total current assets |
|
2,787 |
|
(556 |
) |
2,231 |
| |||
|
Property and equipment, net |
|
328 |
|
— |
|
328 |
| |||
|
Goodwill |
|
2,869 |
|
— |
|
2,869 |
| |||
|
Intangible assets, net |
|
138 |
|
— |
|
138 |
| |||
|
Non-current assets of discontinued operations |
|
283 |
|
(283 |
)(A) |
— |
| |||
|
Other assets |
|
100 |
|
(9 |
)(B) |
91 |
| |||
|
Total assets |
|
$ |
6,505 |
|
$ |
(848 |
) |
$ |
5,657 |
|
|
|
|
|
|
|
|
|
| |||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
| |||
|
Current liabilities: |
|
|
|
|
|
|
| |||
|
Accounts payable |
|
$ |
715 |
|
$ |
— |
|
$ |
715 |
|
|
Accrued compensation and benefits |
|
115 |
|
— |
|
115 |
| |||
|
Current installments of long—term debt |
|
— |
|
— |
|
— |
| |||
|
Current liabilities of discontinued operations |
|
253 |
|
(253 |
)(A) |
— |
| |||
|
Other current liabilities |
|
238 |
|
(22 |
)(B) |
216 |
| |||
|
Total current liabilities |
|
1,321 |
|
(275 |
) |
1,046 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Long term debt, excluding current installments |
|
5,279 |
|
(675 |
)(B) |
4,604 |
| |||
|
Deferred tax liabilities |
|
190 |
|
— |
|
190 |
| |||
|
Other liabilities |
|
108 |
|
— |
|
108 |
| |||
|
Total liabilities |
|
6,898 |
|
(950 |
) |
5,948 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Stockholders’ equity (deficit): |
|
|
|
|
|
|
| |||
|
Common stock |
|
2 |
|
— |
|
2 |
| |||
|
Paid—in capital |
|
3,869 |
|
— |
|
3,869 |
| |||
|
Accumulated deficit |
|
(4,207 |
) |
87 |
(A), (B) |
(4,120 |
) | |||
|
Accumulated other comprehensive loss — cumulative currency translation adjustment |
|
(30 |
) |
15 |
(A) |
(15 |
) | |||
|
Treasury stock |
|
(27 |
) |
— |
|
(27 |
) | |||
|
Total stockholders’ equity (deficit) |
|
(393 |
) |
102 |
|
(291 |
) | |||
|
Total liabilities and stockholders’ equity (deficit) |
|
$ |
6,505 |
|
$ |
(848 |
) |
$ |
5,657 |
|
(1)Adjustments reflect:
(A) Elimination of the assets, liabilities, and cumulative currency translation adjustment of the Power Solutions segment, receipt of cash proceeds of $825, payment of approximately $25 of transaction fees and recognition of related gain on sale of $181, as if the sale occurred on August 2, 2015.
(B) Use of approximately $782 cash to redeem $675 outstanding principal of April 2012 Second Priority Notes, including a make-whole premium of approximately $85 and $22 of accrued, but unpaid, interest, as if the redemption had occurred on August 2, 2015. Also reflects the write-off of related unamortized deferred financing costs of $9 and recognition of an approximately $94 loss on extinguishment of debt.