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EX-99.2 - EX-99.2 - HD Supply Holdings, Inc.a16-17815_1ex99d2.htm
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Exhibit 99.1

 

GRAPHIC

 

Investor Contact:

Charlotte McLaughlin

HD Supply Investor Relations

770-852-9100

InvestorRelations@hdsupply.com

 

Media Contact:

Quiana Pinckney

HD Supply Public Relations

770-852-9057

Quiana.Pinckney@hdsupply.com

 

HD Supply Holdings, Inc. Announces Fiscal 2016 Second-Quarter Results

 

ATLANTA, GA — September 7, 2016 — HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest industrial distributors in North America, today reported Net sales of $2.0 billion for the second quarter of fiscal 2016 ended July 31, 2016, an increase of $79 million, or 4.1 percent, as compared to the second quarter of fiscal 2015.  The company believes its sales performance represents growth of approximately 100 basis points in excess of its market growth estimate.

 

“We delivered solid growth, operating leverage and cash conversion in the quarter while simultaneously investing in long-term productivity and growth.” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We intend to continuously invest to ensure our customer experience is exceptional and to extend and evolve our leading market positions.”

 

Gross profit increased $32 million, or 4.9 percent, to $680 million for the second quarter of fiscal 2016 as compared to $648 million for the second quarter of fiscal 2015. Gross profit was 33.7 percent of Net sales for the second quarter of fiscal 2016, up approximately 20 basis points from 33.5 percent of Net sales for the second quarter of fiscal 2015.

 

Operating income increased $14 million, or 6.3 percent, to $237 million for the second quarter of fiscal 2016 as compared to $223 million for the second quarter of fiscal 2015. Operating income as a percentage of Net sales was 11.8 percent for the second quarter of fiscal 2016, up approximately 30 basis points from 11.5 percent for the second quarter of fiscal 2015.

 

Income from Continuing Operations declined $2 million to $102 million for the second quarter of fiscal 2016 as compared to $104 million for the second quarter of fiscal 2015, reflecting the normalization of the company’s effective tax rate following the reversal of the deferred tax asset valuation allowance in the fourth quarter of fiscal 2015. Income from Continuing Operations per diluted share decreased $0.01 to $0.51 for the second quarter of fiscal 2016, as compared to $0.52 for the second quarter of fiscal 2015.

 

Net Income declined $11 million to $98 million for the second quarter of fiscal 2016 as compared to $109 million for the second quarter of fiscal 2015. Net Income per diluted share decreased $0.05 to $0.49 for the second quarter of fiscal 2016, as compared to $0.54 for the second quarter of fiscal 2015.

 

Adjusted EBITDA increased $16 million, or 6.2 percent, to $273 million for the second quarter of fiscal 2016 as compared to $257 million for the second quarter of fiscal 2015. Adjusted EBITDA as a percentage of Net sales was

 

1



 

13.5 percent for the second quarter of fiscal 2016, up approximately 20 basis points from 13.3 percent for the second quarter of fiscal 2015.

 

Adjusted net income increased $57 million to $171 million for the second quarter of fiscal 2016 as compared to $114 million for the second quarter of fiscal 2015.  Adjusted net income per diluted share was $0.85 for the second quarter of fiscal 2016, as compared to $0.56 for the second quarter of fiscal 2015.

 

As of July 31, 2016, HD Supply’s combined liquidity of approximately $1,513 million was comprised of $313 million in cash and cash equivalents and $1,200 million of additional available borrowings under HD Supply, Inc.’s senior asset-backed lending facility, based on qualifying inventory and receivables.

 

For the second quarter of fiscal 2016, the ratio of Net debt(1) to Adjusted EBITDA was 4.4 times.

 

Business Unit Performance

 

Facilities Maintenance

 

Net sales increased $8 million, or 1.1 percent, to $741 million for the second quarter of fiscal 2016, as compared to $733 million for the second quarter of fiscal 2015.  Adjusted EBITDA decreased $5 million, or (3.2) percent, to $151 million for the second quarter of fiscal 2016 as compared to $156 million for the second quarter of fiscal 2015.  Adjusted EBITDA as a percentage of Net sales was 20.4 percent for the second quarter of fiscal 2016, down approximately 90 basis points from 21.3 percent for the second quarter of fiscal 2015.

 

Waterworks

 

Net sales increased $31 million, or 4.4 percent, to $733 million for the second quarter of fiscal 2016, as compared to $702 million for the second quarter of fiscal 2015.  Adjusted EBITDA increased $4 million, or 6.1 percent, to $70 million for the second quarter of fiscal 2016 as compared to $66 million for the second quarter of fiscal 2015.  Adjusted EBITDA as a percentage of Net sales was 9.5 percent for the second quarter of fiscal 2016, up approximately 10 basis points from 9.4 percent for the second quarter of fiscal 2015.

 

Construction & Industrial — White Cap

 

Net sales increased $34 million, or 7.5 percent, to $489 million for the second quarter of fiscal 2016, as compared to $455 million for the second quarter of fiscal 2015.  Adjusted EBITDA increased $15 million, or 33.3 percent, to $60 million for the second quarter of fiscal 2016 as compared to $45 million for the second quarter of fiscal 2015.  Adjusted EBITDA as a percentage of Net sales was 12.3 percent for the second quarter of fiscal 2016, up approximately 240 basis points from 9.9 percent for the second quarter of fiscal 2015.

 

Second-Quarter Monthly Sales Performance

 

Net sales for May, June and July of fiscal 2016 were $609 million, $622 million and $785 million, respectively.  There were 20 selling days in May, 19 selling days in June and 24 selling days in July.  Average year-over-year daily sales growth for May, June and July of fiscal 2016 was 3.6 percent, 6.2 percent and 3.0 percent, respectively.

 

Sale of Interior Solutions

 

On May 31, 2016 we sold our Interior Solutions business unit, formerly known as Creative Touch Interiors.  In accordance with Accounting Standards Codification 205-20, “Discontinued Operations,” the results of Interior Solutions are classified as discontinued operations for all periods presented.

 


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

 

2



 

Preliminary August Sales Results

 

Preliminary Net sales in August were approximately $639 million, which represents year-over-year average daily sales growth of approximately 2 percent.  Preliminary August year-over-year average daily sales growth by business was Waterworks approximately 2 percent, Construction & Industrial approximately 6 percent and Facilities Maintenance flat.  There were 20 selling days in both August 2016 and August 2015.

 

Third-Quarter 2016 Outlook

 

For our third-quarter 2016, we anticipate revenue to be in the range of $1,985 million and $2,035 million, Adjusted EBITDA(2) in the range of $258 million and $268 million and Adjusted Net Income per diluted share(2) in the range of $0.77 and $0.82.  Our Adjusted Net Income per diluted share range assumes a fully diluted weighted average share count of approximately 202 million.  At the mid-point of the ranges, our third-quarter sales and Adjusted EBITDA translate into approximately +4 percent growth and flat, respectively, versus prior year.

 

Based on year-to-date progress and the current third quarter outlook, we now estimate that we will achieve between flat and 300 basis points of sales growth in excess of market for the fiscal year 2016  This equates to approximately 3 to 6 percent annual year over year sales growth. Additionally, based on year-to-date progress and the current third quarter outlook, we estimate that we will achieve an operating leverage range for the fiscal year 2016 of between 1.0 and 1.5 times.  We continue to believe that 300 basis points of growth in excess of market growth and 1.5 to 2.0 times operating leverage in 2017 and beyond is the appropriate target.

 

Fiscal 2016 Second-Quarter Conference Call

 

As previously announced, HD Supply will hold a conference call on Wednesday September 7th, 2016 at 8:00 a.m. (Eastern Time) to discuss its second-quarter fiscal 2016 results.  The conference call and presentation materials can be accessed via webcast by logging on from the Investor Relations section of the company’s Web site at hdsupply.com. The online replay will remain available for a limited time following the call.

 

Non-GAAP Financial Measures

 

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

 

About HD Supply

 

HD Supply (www.hdsupply.com) is one of the largest industrial distributors in North America. The company provides a broad range of products and value-add services to approximately 500,000 customers with leadership positions in maintenance, repair and operations, infrastructure and specialty construction sectors. Through approximately 500 locations across 48 states and six Canadian provinces, the company’s approximately 13,000 associates provide localized, customer-driven services including jobsite delivery, will call or direct-ship options, diversified logistics and innovative solutions that contribute to its customers’ success.

 


(2)  No reconciliation of the forecasted range for Adjusted EBITDA to Net income and Adjusted net income per diluted share to Net income per diluted share for the third quarter of fiscal 2016 is included in this press release because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

 

3



 

Forward-Looking Statements and Preliminary Results

 

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements are based on management’s beliefs and assumptions and information currently available to management and are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking information presented in this press release is not a guarantee of future results, and that actual results may differ materially from those made in or suggested by the forward-looking information contained in this press release. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “seek,” “comfortable with,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. A number of important factors could cause actual events to differ materially from those contained in or implied by the forward-looking statements, including those “Risk factors” in our annual report on Form 10-K, for the fiscal year ended January 31, 2016, filed on March 18, 2016 and those described from time to time in our, and HD Supply, Inc.’s, other filings with the U.S. Securities and Exchange Commission, which can be found at the SEC’s website www.sec.gov. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

 

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

 

4



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,
2016

 

August 2,
2015

 

July 31,
2016

 

August 2,
2015

 

Net Sales

 

$

2,016

 

$

1,937

 

$

3,797

 

$

3,597

 

Cost of sales

 

1,336

 

1,289

 

2,508

 

2,390

 

Gross Profit

 

680

 

648

 

1,289

 

1,207

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

414

 

397

 

815

 

773

 

Depreciation and amortization

 

24

 

28

 

47

 

55

 

Restructuring

 

5

 

 

12

 

 

Total operating expenses

 

443

 

425

 

874

 

828

 

Operating Income

 

237

 

223

 

415

 

379

 

Interest expense

 

69

 

106

 

154

 

212

 

Loss on extinguishment of debt

 

 

 

115

 

 

Other (income) expense, net

 

 

1

 

 

1

 

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

 

168

 

116

 

146

 

166

 

Provision (benefit) for income taxes

 

66

 

12

 

58

 

(172

)

Income from Continuing Operations

 

102

 

104

 

88

 

338

 

Income (loss) from discontinued operations, net of tax

 

(4

)

5

 

(4

)

13

 

Net Income

 

$

98

 

$

109

 

$

84

 

$

351

 

Other comprehensive income (loss) — foreign currency translation adjustment

 

(2

)

(7

)

2

 

(2

)

Total Comprehensive Income

 

$

96

 

$

102

 

$

86

 

$

349

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding (thousands)

 

 

 

 

 

 

 

 

 

Basic

 

199,250

 

196,893

 

199,029

 

196,120

 

Diluted

 

201,978

 

201,809

 

201,615

 

201,221

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share(1):

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.51

 

$

0.53

 

$

0.44

 

$

1.72

 

Income (Loss) from Discontinued Operations

 

$

(0.02

)

$

0.03

 

$

(0.02

)

$

0.07

 

Net Income

 

$

0.49

 

$

0.55

 

$

0.42

 

$

1.79

 

Diluted Earnings Per Share(1):

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.51

 

$

0.52

 

$

0.44

 

$

1.68

 

Income (Loss) from Discontinued Operations

 

$

(0.02

)

$

0.03

 

$

(0.02

)

$

0.06

 

Net Income

 

$

0.49

 

$

0.54

 

$

0.42

 

$

1.74

 

            


(1)May not foot due to rounding.

 

5



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

Amounts in millions, except per share data, Unaudited

 

 

 

July 31,
2016

 

January 31,
2016

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

313

 

$

269

 

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

 

1,101

 

872

 

Inventories

 

887

 

770

 

Current assets of discontinued operations

 

 

43

 

Other current assets

 

42

 

29

 

Total current assets

 

2,343

 

1,983

 

Property and equipment, net

 

306

 

310

 

Goodwill

 

2,869

 

2,869

 

Intangible assets, net

 

119

 

127

 

Deferred tax asset

 

633

 

685

 

Non-current assets of discontinued operations

 

 

20

 

Other assets

 

19

 

22

 

Total assets

 

$

6,289

 

$

6,016

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

721

 

$

490

 

Accrued compensation and benefits

 

117

 

142

 

Current installments of long-term debt

 

9

 

9

 

Current liabilities of discontinued operations

 

 

30

 

Other current liabilities

 

200

 

200

 

Total current liabilities

 

1,047

 

871

 

Long-term debt, excluding current installments

 

4,299

 

4,302

 

Non-current liabilities of discontinued operations

 

 

1

 

Other liabilities

 

102

 

98

 

Total liabilities

 

5,448

 

5,272

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01; 1 billion shares authorized; 200.9 million and 200.1 million shares issued and outstanding at July 31, 2016 and January 31, 2016, respectively

 

2

 

2

 

Paid-in capital

 

3,934

 

3,909

 

Accumulated deficit

 

(3,076

)

(3,150

)

Accumulated other comprehensive loss

 

(14

)

(16

)

Treasury stock, at cost, 0.13 million and 0.06 million shares at July 31, 2016 and January 31, 2016, respectively

 

(5

)

(1

)

Total stockholders’ equity

 

841

 

744

 

Total liabilities and stockholders’ equity

 

$

6,289

 

$

6,016

 

 

6



 

HD SUPPLY HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in millions, Unaudited

 

 

 

Six Months Ended

 

 

 

July 31, 2016

 

August 2, 2015

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

84

 

$

351

 

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

 

 

 

 

 

Depreciation and amortization

 

51

 

72

 

Provision for uncollectibles

 

3

 

4

 

Non-cash interest expense

 

9

 

 

Loss on extinguishment of debt

 

115

 

 

Stock-based compensation expense

 

11

 

10

 

Deferred income taxes

 

52

 

19

 

(Gain) Loss on sale of a business

 

3

 

 

Other

 

 

(1

)

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

 

 

 

 

 

(Increase) decrease in receivables

 

(232

)

(252

)

(Increase) decrease in inventories

 

(118

)

(153

)

(Increase) decrease in other current assets

 

(9

)

(2

)

Increase (decrease) in accounts payable and accrued liabilities

 

196

 

217

 

Increase (decrease) in other long-term liabilities

 

(1

)

(181

)

Net cash provided by (used in) operating activities

 

164

 

98

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(32

)

(43

)

Proceeds from sales of property and equipment

 

1

 

1

 

Proceeds from sale of a business

 

37

 

 

Net cash provided by (used in) investing activities

 

6

 

(42

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from issuance of common stock under employee benefit plans

 

14

 

41

 

Purchase of treasury shares

 

(14

)

(31

)

Borrowings of long-term debt

 

1,000

 

 

Repayments of long-term debt

 

(1,110

)

(16

)

Borrowings on long-term revolver debt

 

 

562

 

Repayments on long-term revolver debt

 

 

(526

)

Debt issuance and modification costs

 

(15

)

 

Other financing activities

 

(2

)

(1

)

Net cash provided by (used in) financing activities

 

(127

)

29

 

Effect of exchange rates on cash and cash equivalents

 

1

 

(1

)

Increase (decrease) in cash and cash equivalents

 

$

(44

)

$

84

 

Cash and cash equivalents at beginning of period

 

269

 

85

 

Cash and cash equivalents at end of period

 

$

313

 

$

169

 

 

7



 

HD SUPPLY HOLDINGS, INC.

SEGMENT REPORTING

Amounts in millions, Unaudited

 

 

 

Facilities
Maintenance

 

Waterworks

 

Construction &
Industrial –
White Cap

 

Corporate &
Other

 

Total
Continuing
Operations

 

Three Months Ended July 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

741

 

$

733

 

$

489

 

$

53

 

$

2,016

 

Adjusted EBITDA

 

151

 

70

 

60

 

(8

)

273

 

Depreciation(1) & Software Amortization

 

7

 

3

 

7

 

5

 

22

 

Other Intangible Amortization

 

2

 

 

 

1

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 2, 2015

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

733

 

$

702

 

$

455

 

$

47

 

$

1,937

 

Adjusted EBITDA

 

156

 

66

 

45

 

(10

)

257

 

Depreciation(1) & Software Amortization

 

11

 

3

 

7

 

5

 

26

 

Other Intangible Amortization

 

2

 

 

 

1

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended July 31, 2016

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,418

 

$

1,338

 

$

936

 

$

105

 

$

3,797

 

Adjusted EBITDA

 

285

 

118

 

103

 

(18

)

488

 

Depreciation(1) & Software Amortization

 

15

 

5

 

14

 

9

 

43

 

Other Intangible Amortization

 

3

 

1

 

 

3

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended August 2, 2015

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,368

 

$

1,272

 

$

862

 

$

95

 

$

3,597

 

Adjusted EBITDA

 

278

 

111

 

79

 

(22

)

446

 

Depreciation(1) & Software Amortization

 

23

 

5

 

13

 

9

 

50

 

Other Intangible Amortization

 

3

 

1

 

 

3

 

7

 

 


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

 

Reconciliation of Non-GAAP Measures

 

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

 

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

 

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

 

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

 

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

 

8



 

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

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

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

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

 

Adjusted EBITDA

 

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,
2016

 

August 2,
2015

 

July 31,
2016

 

August 2,
2015

 

Net income

 

$

98

 

$

109

 

$

84

 

$

351

 

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

 

(4

)

5

 

(4

)

13

 

Income from continuing operations

 

102

 

104

 

88

 

338

 

Interest expense, net

 

69

 

106

 

154

 

212

 

Provision (benefit) for income taxes (1)

 

66

 

12

 

58

 

(172

)

Depreciation and amortization (2)

 

25

 

29

 

50

 

57

 

Loss on extinguishment of debt (3)

 

 

 

115

 

 

Restructuring charges (4)

 

5

 

 

12

 

 

Stock-based compensation

 

5

 

5

 

11

 

10

 

Costs related to public offerings (5)

 

 

1

 

 

1

 

Other

 

1

 

 

 

 

Adjusted EBITDA

 

$

273

 

$

257

 

$

488

 

$

446

 

 


(1)         During the six months ended August 2, 2015, the Company recorded a reduction in unrecognized tax benefits as a result of IRS and state audit settlements. See “Note 5, Income Taxes.”

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

(3)         Represents the loss on extinguishment of debt including the premium paid to redeem the debt as well as the write-off of unamortized deferred financing costs and other assets or liabilities associated with such debt.

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

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

 

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Adjusted Net Income

 

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,
2016

 

August 2,
2015

 

July 31,
2016

 

August 2,
2015

 

Net income

 

$

98

 

$

109

 

$

84

 

$

351

 

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

 

(4

)

5

 

(4

)

13

 

Income from continuing operations

 

102

 

104

 

88

 

338

 

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

 

66

 

12

 

58

 

(172

)

Less: Cash income taxes

 

(5

)

(6

)

(6

)

(9

)

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

 

3

 

3

 

7

 

7

 

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

 

 

 

115

 

 

Restructuring charges (3)

 

5

 

 

12

 

 

Costs related to public offerings (4)

 

 

1

 

 

1

 

Adjusted Net Income

 

$

171

 

$

114

 

$

274

 

$

165

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

201,978

 

201,809

 

201,615

 

201,221

 

Adjusted net income per share – diluted

 

$

0.85

 

$

0.56

 

$

1.36

 

$

0.82

 

 


(1)         During the six months ended August 2, 2015, the Company recorded a reduction in unrecognized tax benefits as a result of IRS and state audit settlements. See “Note 5, Income Taxes.”

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

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

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

 

No reconciliation of the forecasted range for Adjusted EBITDA to Net income and Adjusted net income per diluted share to Net income per diluted share for the third quarter of fiscal 2016 is included in this press release because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

 

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