Company Quick10K Filing
HD Supply Holdings
Price40.01 EPS3
Shares169 P/E14
MCap6,747 P/FCF14
Net Debt2,134 EBIT679
TEV8,881 TEV/EBIT13
TTM 2019-11-03, in MM, except price, ratios
10-Q 2020-05-03 Filed 2020-06-09
10-K 2020-02-02 Filed 2020-03-17
10-Q 2019-11-03 Filed 2019-12-10
10-Q 2019-08-04 Filed 2019-09-10
10-Q 2019-05-05 Filed 2019-06-11
10-K 2019-02-03 Filed 2019-03-19
10-Q 2018-10-28 Filed 2018-12-04
10-Q 2018-07-29 Filed 2018-09-05
10-Q 2018-04-29 Filed 2018-06-05
10-K 2018-01-28 Filed 2018-03-13
10-Q 2017-10-29 Filed 2017-12-05
10-Q 2017-07-30 Filed 2017-09-06
10-Q 2017-04-30 Filed 2017-06-06
10-K 2017-01-29 Filed 2017-03-14
10-Q 2016-10-30 Filed 2016-12-06
10-Q 2016-07-31 Filed 2016-09-07
10-Q 2016-05-01 Filed 2016-06-07
10-K 2016-01-31 Filed 2016-03-18
10-Q 2015-11-01 Filed 2015-12-08
10-Q 2015-08-02 Filed 2015-09-09
10-Q 2015-05-03 Filed 2015-06-09
10-K 2015-02-01 Filed 2015-03-24
10-Q 2014-11-02 Filed 2014-12-09
10-Q 2014-08-03 Filed 2014-09-09
10-Q 2014-05-04 Filed 2014-06-10
10-K 2014-02-02 Filed 2014-03-25
10-Q 2013-08-04 Filed 2013-09-10
8-K 2020-06-08
8-K 2020-05-19
8-K 2020-03-27
8-K 2020-03-16
8-K 2019-12-09
8-K 2019-11-05
8-K 2019-10-11
8-K 2019-09-25
8-K 2019-09-24
8-K 2019-09-10
8-K 2019-07-23
8-K 2019-06-11
8-K 2019-05-21
8-K 2019-03-19
8-K 2018-12-04
8-K 2018-10-22
8-K 2018-10-11
8-K 2018-10-01
8-K 2018-10-01
8-K 2018-09-06
8-K 2018-09-05
8-K 2018-06-21
8-K 2018-06-05
8-K 2018-05-17
8-K 2018-04-18
8-K 2018-03-13
8-K 2018-03-05
8-K 2017-12-28

HDS 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Nature of Business and Basis of Presentation
Note 2 - Debt
Note 3 - Derivative Instruments
Note 4 - Fair Value Measurements
Note 5 - Income Taxes
Note 6 - Accumulated Other Comprehensive Income (Loss)
Note 7 - Basic and Diluted Weighted - Average Common Shares
Note 8 - Supplemental Balance Sheet and Cash Flow Information
Note 9 - Restructuring and Separation Activities
Note 10 - Commitments and Contingencies
Note 11 - Segment Information
Note 12 - Revenue
Note 13 - Recent Accounting Pronouncements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 hds-20200503xex31d1.htm
EX-31.2 hds-20200503xex31d2.htm
EX-31.3 hds-20200503xex31d3.htm
EX-31.4 hds-20200503xex31d4.htm
EX-32.1 hds-20200503xex32d1.htm
EX-32.2 hds-20200503xex32d2.htm
EX-32.3 hds-20200503xex32d3.htm
EX-32.4 hds-20200503xex32d4.htm

HD Supply Holdings Earnings 2020-05-03

Balance SheetIncome StatementCash Flow
10.07.85.73.51.4-0.82012201420172020
Assets, Equity
10.08.06.03.91.9-0.12012201420172020
Rev, G Profit, Net Income
2.51.60.6-0.3-1.3-2.22012201420172020
Ops, Inv, Fin

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 3, 2020

- OR -

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission File
Number

    

Exact name of Registrant as specified in its
charter, Address of principal executive offices
and Telephone number

    

State of incorporation

    

I.R.S. Employer
Identification Number

001-35979

HD SUPPLY HOLDINGS, INC.
3400 Cumberland Boulevard SE
Atlanta, Georgia 30339
(
770852-9000

Delaware

26-0486780

333-159809

HD SUPPLY, INC.
3400 Cumberland Boulevard SE
Atlanta, Georgia 30339
(770852-9000

Delaware

75-2007383

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class

   

Trading Symbol

   

Name of Each Exchange on Which Registered

HD Supply Holdings, Inc. common stock, par value $0.01 per share

HDS

The NASDAQ Stock Market LLC

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.

    

Yes No

HD Supply, Inc.

Yes No

Indicate by check mark whether the Registrant has submitted electronically 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.

    

Yes No

HD Supply, Inc.

Yes No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

HD Supply Holdings, Inc.

    

    

    

Large accelerated filer

Accelerated filer

Smaller reporting company

Non-accelerated filer

Emerging growth company

HD Supply, Inc.

    

    

    

Large accelerated filer

Accelerated filer

Smaller reporting company

Non-accelerated filer

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

HD Supply Holdings, Inc.

HD Supply, Inc.

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.

    

Yes No

HD Supply, Inc.

Yes No

The number of shares of the Registrant’s common stock outstanding as of June 5, 2020:

HD Supply Holdings, Inc.

161,993,586 shares of common stock, par value $0.01 per share

HD Supply, Inc.

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.

Table of Contents

Table of Contents

INDEX TO FORM 10-Q

Page

Explanatory Note

4

Forward-looking statements and information

4

Part I.

Financial Information

Item 1.

Financial Statements

HD Supply Holdings, Inc.

Consolidated Statements of Operations and Comprehensive Income for the Three Months ended May 3, 2020 and May 5, 2019 (unaudited)

6

Consolidated Balance Sheets as of May 3, 2020 and February 2, 2020 (unaudited)

7

Consolidated Statements of Cash Flows for the Three Months ended May 3, 2020 and May 5, 2019 (unaudited)

8

Consolidated Statements of Stockholders’ Equity for the Three Months ended May 3, 2020 and May 5, 2019 (unaudited)

9

HD Supply, Inc.

Consolidated Statements of Operations and Comprehensive Income for the Three Months ended May 3, 2020 and May 5, 2019 (unaudited)

10

Consolidated Balance Sheets as of May 3, 2020 and February 2, 2020 (unaudited)

11

Consolidated Statements of Cash Flows for the Three Months ended May 3, 2020 and May 5, 2019 (unaudited)

12

Consolidated Statements of Stockholder’s Equity for the Three Months ended May 3, 2020 and May 5, 2019 (unaudited)

13

Notes to Consolidated Financial Statements (unaudited)

14

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

39

Item 4.

Controls and Procedures

39

Part II.

Other Information

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

41

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 6.

Exhibits

43

Signatures

45

3

Table of Contents

EXPLANATORY NOTE

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 2, 2020 and those described from time to time in our other filings with the U.S. Securities and Exchange Commission (the “SEC”).

Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations, financial condition and liquidity, and the development of the industries in which we operate include, but are not limited to the following, many of which are, and will be, amplified by the outbreak of a novel strain of coronavirus, now known as COVID-19, and classified as a pandemic by the World Health Organization on March 11, 2020:

the impact of the COVID-19 pandemic on our sales, operations and supply chain, as well as the impacts on our customers, suppliers, vendors and business partners;
our ability to successfully complete the previously announced separation of our Facilities Maintenance and Construction & Industrial businesses into two independent publicly traded companies and obtain the benefits therefrom;
the incurrence of significant transaction costs;
the increased demands on management to prepare for and accomplish the separation;
inherent risks of the maintenance, repair and operations market and the non-residential and residential construction markets;
our ability to 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;

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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 and the non-residential and residential construction markets;
our ability to identify and develop relationships with a sufficient number of qualified suppliers 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;
interruptions in the proper functioning of our information technology, or “IT” systems, including from cybersecurity threats;
potential material liabilities under our self-insured programs;
our ability to attract, train and retain highly-qualified associates and key personnel;
new and/or proposed trade policies could make sourcing product from foreign countries more difficult and more costly;
limitations on our income tax net operating loss carryforwards in the event of an ownership change; and
our ability to identify and integrate new products.

You should read this report completely and with the understanding that actual future results may be materially different from expectations. These cautionary statements qualify all forward-looking statements made in this report. 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.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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

Three Months Ended

    

May 3, 2020

    

May 5, 2019

Net Sales

$

1,395

$

1,493

Cost of sales

845

 

908

Gross Profit

550

 

585

Operating expenses:

Selling, general, and administrative

396

 

392

Depreciation and amortization

27

 

25

Restructuring and separation

6

 

(2)

Total operating expenses

429

 

415

Operating Income

121

 

170

Interest expense

25

 

28

Income Before Provision for Income Taxes

96

142

Provision for income taxes

24

 

35

Net Income

$

72

$

107

Other comprehensive income (loss):

Foreign currency translation adjustment

1

 

Unrealized loss on cash flow hedge, net of tax of $6 and $1

(16)

(5)

Total Comprehensive Income

$

57

$

102

Weighted Average Common Shares Outstanding (thousands)

Basic

160,830

 

170,000

Diluted

161,190

170,712

Earnings Per Share:

Basic earnings per share

$

0.45

$

0.63

Diluted earnings per share

$

0.45

$

0.63

The accompanying notes are an integral part of these consolidated financial statements.

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HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

    

May 3, 2020

    

February 2, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

147

$

34

Receivables, less allowance for credit losses of $24 and $19

 

690

 

754

Inventories

 

832

 

771

Other current assets

 

89

 

104

Total current assets

 

1,758

 

1,663

Property and equipment, net

 

387

 

391

Operating lease right-of-use assets

474

480

Goodwill

 

1,991

 

1,991

Intangible assets, net

 

169

 

175

Deferred tax assets

2

2

Other assets

 

14

 

13

Total assets

$

4,795

$

4,715

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

455

$

414

Accrued compensation and benefits

 

58

 

71

Current installments of long-term debt

 

11

 

11

Current lease liabilities

122

110

Other current liabilities

 

188

 

208

Total current liabilities

 

834

 

814

Long-term debt, excluding current installments

 

2,033

 

2,035

Deferred tax liabilities

35

33

Long-term lease liabilities

365

383

Other liabilities

 

115

 

98

Total liabilities

 

3,382

 

3,363

Stockholders’ equity:

Common stock, par value $0.01; 1 billion shares authorized; 162.0 million and 161.4 million shares issued and outstanding at May 3, 2020 and February 2, 2020, respectively

 

2

 

2

Paid-in capital

 

4,103

 

4,097

Accumulated deficit

 

(1,050)

 

(1,122)

Accumulated other comprehensive loss

 

(67)

 

(52)

Treasury stock, at cost, 44.1 million shares at May 3, 2020 and February 2, 2020, respectively

(1,575)

(1,573)

Total stockholders’ equity

 

1,413

 

1,352

Total liabilities and stockholders’ equity

$

4,795

$

4,715

The accompanying notes are an integral part of these consolidated financial statements.

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HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in millions, unaudited

Three Months Ended

    

May 3, 2020

    

May 5, 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

72

$

107

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

Depreciation and amortization

29

 

27

Provision for credit losses

9

 

2

Non-cash interest expense

2

 

2

Stock-based compensation expense

7

 

7

Deferred income taxes

 

32

Other

 

1

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

(Increase) decrease in receivables

54

 

(51)

(Increase) decrease in inventories

(62)

 

(43)

(Increase) decrease in other current assets

1

 

(5)

Increase (decrease) in accounts payable and accrued liabilities

20

 

49

Increase (decrease) in other long term liabilities

5

 

Net cash provided by (used in) operating activities

137

 

128

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(21)

 

(26)

Proceeds from sales of property and equipment

2

Net cash provided by (used in) investing activities

(21)

 

(24)

CASH FLOWS FROM FINANCING ACTIVITIES:

Purchase of treasury shares

(1)

(12)

Repayments of long-term debt

(3)

 

(3)

Repayments of financing liabilities

(88)

Borrowings on long-term revolver debt

339

 

327

Repayments on long-term revolver debt

(337)

 

(325)

Proceeds from issuance of common stock under employee benefit plans

3

4

Tax withholdings on stock-based awards

(4)

(5)

Net cash provided by (used in) financing activities

(3)

 

(102)

Effect of exchange rates on cash and cash equivalents

 

Increase (decrease) in cash and cash equivalents

$

113

$

2

Cash and cash equivalents at beginning of period

34

 

38

Cash and cash equivalents at end of period

$

147

$

40

The accompanying notes are an integral part of these consolidated financial statements.

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HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Dollars in millions, shares in thousands, unaudited

Three Months Ended

May 3, 2020

May 5, 2019

    

Shares

    

Amount

    

Shares

    

Amount

Common Stock

 

  

 

  

 

  

 

  

Beginning balance

 

205,473

$

2

 

204,806

$

2

Shares issued under employee benefit plans

 

700

 

 

561

 

Ending balance

 

206,173

$

2

 

205,367

$

2

Paid-in Capital

 

  

 

 

  

 

  

Beginning balance

 

$

4,097

 

$

4,067

Stock-based compensation

 

 

7

 

 

7

Shares issued under employee benefit plans

 

 

 

 

5

Other

 

 

(1)

 

 

Ending balance

 

$

4,103

 

$

4,079

Accumulated Deficit

 

  

 

 

  

 

Beginning balance

 

$

(1,122)

 

$

(1,572)

Cumulative effect of accounting change

(3)

Net Income

 

 

72

 

 

107

Other

1

Ending balance

 

$

(1,050)

$

(1,467)

Accumulated Other Comprehensive Income (Loss)

 

  

 

 

  

 

Beginning balance

 

$

(52)

 

$

(30)

Unrealized loss on cash flow hedge, net of tax of $6 and $1

 

 

(16)

 

 

(5)

Foreign currency translation adjustment

 

 

1

 

 

Ending balance

 

$

(67)

 

$

(35)

Treasury Stock

 

  

 

 

  

 

Beginning balance

 

(44,071)

$

(1,573)

 

(34,153)

$

(1,186)

Purchase of common stock

 

(27)

 

(1)

 

(271)

 

(12)

Shares issued under employee benefit plans

68

2

Shares withheld for taxes

 

(94)

 

(3)

 

(117)

 

(5)

Ending balance

 

(44,124)

$

(1,575)

 

(34,541)

$

(1,203)

Total Stockholders’ Equity

 

162,049

$

1,413

 

170,826

$

1,376

The accompanying notes are an integral part of these consolidated financial statements.

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HD SUPPLY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Amounts in millions, unaudited

Three Months Ended

    

May 3, 2020

    

May 5, 2019

    

Net Sales

$

1,395

$

1,493

Cost of sales

845

 

908

Gross Profit

550

 

585

Operating expenses:

Selling, general, and administrative

396

 

392

Depreciation and amortization

27

 

25

Restructuring and separation

6

 

(2)

Total operating expenses

429

 

415

Operating Income

121

 

170

Interest expense

25

 

28

Income Before Provision for Income Taxes

96

142

Provision for income taxes

24

35

Net Income

$

72

$

107

Other comprehensive income (loss):

Foreign currency translation adjustment

1

Unrealized loss on cash flow hedge, net of tax of $6 and $1

(16)

(5)

Total Comprehensive Income

$

57

$

102

The accompanying notes are an integral part of these consolidated financial statements.

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HD SUPPLY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

    

May 3, 2020

    

February 2, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

145

$

34

Receivables, less allowance for credit losses of $24 and $19

 

690

 

754

Inventories

 

832

 

771

Other current assets

 

89

 

104

Total current assets

 

1,756

 

1,663

Property and equipment, net

 

387

 

391

Operating lease right-of-use assets

474

480

Goodwill

 

1,991

 

1,991

Intangible assets, net

 

169

 

175

Deferred tax assets

2

2

Other assets

 

14

 

13

Total assets

$

4,793

$

4,715

LIABILITIES AND STOCKHOLDER’S EQUITY

Current liabilities:

Accounts payable

$

455

$

414

Accrued compensation and benefits

 

58

 

71

Current installments of long-term debt

 

11

 

11

Current lease liabilities

122

110

Other current liabilities

 

188

 

208

Total current liabilities

 

834

 

814

Long-term debt, excluding current installments

 

2,033

 

2,035

Deferred tax liabilities

35

33

Long-term lease liabilities

365

383

Other liabilities

 

115

 

98

Total liabilities

 

3,382

 

3,363

Stockholder’s equity:

Common stock, par value $0.01; authorized 1,000 shares; issued and outstanding 1,000 shares at May 3, 2020 and February 2, 2020

 

 

Paid-in capital

 

2,370

 

2,367

Accumulated deficit

 

(892)

 

(963)

Accumulated other comprehensive loss

 

(67)

 

(52)

Total stockholder’s equity

 

1,411

 

1,352

Total liabilities and stockholder’s equity

$

4,793

$

4,715

The accompanying notes are an integral part of these consolidated financial statements.

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HD SUPPLY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in millions, unaudited

Three Months Ended

    

May 3, 2020

    

May 5, 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

72

$

107

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

Depreciation and amortization

 

29

 

27

Provision for credit losses

 

9

 

2

Non-cash interest expense

 

2

 

2

Stock-based compensation expense

 

7

 

7

Deferred income taxes

 

 

32

Other

 

 

1

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

(Increase) decrease in receivables

 

54

 

(51)

(Increase) decrease in inventories

 

(62)

 

(43)

(Increase) decrease in other current assets

 

1

 

(5)

Increase (decrease) in accounts payable and accrued liabilities

 

20

 

49

Increase (decrease) in other long term liabilities

 

5

 

Net cash provided by (used in) operating activities

 

137

 

128

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

 

(21)

 

(26)

Proceeds from sales of property and equipment

 

 

2

Net cash provided by (used in) investing activities

 

(21)

 

(24)

CASH FLOWS FROM FINANCING ACTIVITIES:

Equity distribution to Parent

(4)

(14)

Repayments of long-term debt

 

(3)

 

(3)

Repayments of financing liabilities

(88)

Borrowings on long-term revolver debt

 

339

 

327

Repayments on long-term revolver debt

 

(337)

 

(325)

Net cash provided by (used in) financing activities

 

(5)

 

(103)

Effect of exchange rates on cash and cash equivalents

 

 

Increase (decrease) in cash and cash equivalents

$

111

$

1

Cash and cash equivalents at beginning of period

34

 

38

Cash and cash equivalents at end of period

$

145

$

39

The accompanying notes are an integral part of these consolidated financial statements.

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HD SUPPLY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

Dollars in millions, shares in thousands, unaudited

Three Months Ended

    

May 3, 2020

    

May 5, 2019

Shares

Amount

Shares

Amount

Common Stock

 

  

 

  

Beginning balance

1

$

1

$

Ending balance

1

$

1

$

Paid-in Capital

 

  

 

  

Beginning balance

$

2,367

$

2,726

Equity distribution to Parent

 

(4)

 

(14)

Stock-based compensation

 

7

 

7

Ending balance

$

2,370

$

2,719

Accumulated Deficit

 

 

Beginning balance

$

(963)

$

(1,413)

Cumulative effect of accounting change

(3)

Net Income

 

72

 

107

Other

(1)

1

Ending balance

$

(892)

$

(1,308)

Accumulated Other Comprehensive Income (Loss)

 

 

Beginning balance

$

(52)

$

(30)

Unrealized loss on cash flow hedge, net of tax of $6 and $1

 

(16)

 

(5)

Foreign currency translation adjustment

 

1

 

Ending balance

$

(67)

$

(35)

Total Stockholder's Equity

1

$

1,411

1

$

1,376

The accompanying notes are an integral part of these consolidated financial statements.

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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 two distinct market sectors: Maintenance, Repair & Operations and Specialty Construction. Through approximately 270 branches and 44 distribution centers in the U.S. and Canada, the Company serves these markets with an integrated go-to-market strategy. HD Supply has more than 11,000 associates delivering localized, customer-tailored products, services and expertise. The Company serves approximately 500,000 customers, which include contractors, maintenance professionals, industrial businesses, and government entities. HD Supply’s broad range of end-to-end product lines and services includes approximately 600,000 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 construction to maintenance, repair and operations.

HD Supply is managed primarily on a product line basis and reports results of operations in two reportable segments. The reportable segments are Facilities Maintenance and Construction & Industrial. In addition, the consolidated financial statements include Corporate and Eliminations, which is comprised of enterprise-wide functional departments.

Basis of Presentation

In management’s 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 Company’s significant accounting policies and other information, you should read this report in conjunction with the Company’s annual report on Form 10-K for the year ended February 2, 2020, which includes all disclosures required by generally accepted accounting principles in the United States of America (“GAAP”).

Fiscal Year

HD Supply’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. The fiscal years ending January 31, 2021 ("fiscal 2020") and February 2, 2020 (“fiscal 2019”) both include 52 weeks. The three months ended May 3, 2020 ("first quarter 2020”) and May 5, 2019 ("first quarter 2019”) both include 13 weeks.

Principles of Consolidation

The consolidated financial statements of Holdings present the results of operations, financial position and cash flows of Holdings and its wholly-owned subsidiaries, including HDS. The consolidated financial statements of HDS present the results of operations, financial position and cash flows of HDS 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.

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.

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HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

HD SUPPLY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 certain legal claims and medical claims, while maintaining per employee stop-loss coverage. 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, 2020 and February 2, 2020, self-insurance reserves totaled approximately $52 million and $50 million, respectively.

NOTE 2 — DEBT

HDS’s long-term debt as of May 3, 2020 and February 2, 2020 consisted of the following (dollars in millions):

May 3, 2020

February 2, 2020

    

Outstanding

    

Interest

    

Outstanding

    

Interest

Principal

Rate %(1)

Principal

Rate %(1)

Senior ABL Facility due 2022

$

259

 

2.08

$

260

 

3.15

Term B-5 Loans due 2023

1,054

2.15

1,057

3.40

October 2018 Senior Unsecured Notes due 2026

750

5.375

750

5.375

Total gross long-term debt

$

2,063

$

2,067

Less unamortized discount

(2)

(3)

Less unamortized deferred financing costs

(17)

(18)

Total net long-term debt

$

2,044

$

2,046

Less current installments

 

(11)

 

(11)

Total net long-term debt, excluding current installments

$

2,033

$

2,035

(1)Represents the stated rate of interest, without including the effect of discounts, premiums, or interest rate swap agreements.

Senior Credit Facilities

Senior ABL Facility

The Senior Asset Based Lending Facility due 2022 (the “Senior ABL Facility”) provides for senior secured revolving loans and letters of credit of up to a maximum aggregate principal amount of $1,000 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, 2020, HDS had $717 million of Excess Availability (as defined in the Senior ABL Facility agreement) under the Senior ABL Facility (after giving effect to the borrowing base limitations and approximately $24 million in letters of credit issued and including $85 million of borrowings available on qualifying cash balances). As of May 3, 2020, approximately $51 million of the outstanding borrowings on the Senior ABL Facility are denominated in Canadian dollars.

At HDS’s 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 (as defined in the Senior ABL Facility agreement) plus an applicable margin and (ii) in the case of Canadian dollar-denominated loans, either the Bankers’ Acceptance (“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 agreement governing the Senior ABL Facility, 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 Senior ABL Facility agreement) then in effect for LIBOR Loans and an unused commitment fee subject to a pricing grid, included in the agreement governing the Senior ABL Facility, based on Excess Availability.

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HD SUPPLY HOLDINGS, INC. AND SUBSIDIARIES

HD SUPPLY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

Senior Term Loan Facility

HDS’s Senior Term Facility (the “Senior Term Facility”) consists of a senior secured term loan facility (the ‘‘Term Loan Facility,’’ and the term loans thereunder, the ‘‘Term Loans’’) providing for Term Loans in an original aggregate principal amount of $1,070 million (the “Term B-5 Loans”). The Term B-5 Loans will mature on October 17, 2023 and amortize in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount of the Term Loans with the balance payable at the maturity date. The Term B-5 Loans bear interest at the applicable margin for borrowings of 1.75% for LIBOR borrowings and 0.75% for base rate borrowings.

For additional information on HDS’s Senior ABL Facility or Senior Term Facility (collectively, the “Senior Credit Facilities”), including guarantees and security, please refer to the Notes to Consolidated Financial Statements of our annual report on Form 10-K for the fiscal year ended February 2, 2020.

Unsecured Notes

5.375% Senior Unsecured Notes due 2026

HDS issued $750 million aggregate principal amount of 5.375% Senior Unsecured Notes due 2026 (the “October 2018 Senior Unsecured Notes”) under an Indenture, dated as of October 11, 2018 (the “October 2018 Senior Unsecured Notes Indenture”) among HDS, certain subsidiaries of HDS as guarantors (the “Subsidiary Guarantors”) and the Trustee. The October 2018 Senior Unsecured Notes bear interest at a rate of 5.375% per annum and will mature on October 15, 2026. Interest is paid semi-annually on April 15th and October 15th of each year.

The October 2018 Senior Unsecured Notes are unsecured senior indebtedness of HDS and rank equal in right of payment with all of HDS’s existing and future senior indebtedness, senior in right of payment to all of HDS’s existing and future subordinated indebtedness, and effectively subordinated to all of HDS’s existing and future secured indebtedness, including, without limitation, indebtedness under the Senior Credit Facilities, to the extent of the value of the collateral securing each indebtedness.