Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 03, 2020 | Jun. 05, 2020 | |
Document Type | 10-Q | |
Document Period End Date | May 3, 2020 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-35979 | |
Entity Registrant Name | HD SUPPLY HOLDINGS, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 26-0486780 | |
Entity Address, Address Line One | 3400 Cumberland Boulevard SE | |
Entity Address, City or Town | Atlanta | |
Entity Address, State or Province | GA | |
Entity Address, Postal Zip Code | 30339 | |
City Area Code | 770 | |
Local Phone Number | 852-9000 | |
Title of 12(b) Security | HD Supply Holdings, Inc. common stock, par value $0.01 per share | |
Trading Symbol | HDS | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001573097 | |
Current Fiscal Year End Date | --02-02 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
HD Supply Holdings, Inc. | ||
Entity Common Stock, Shares Outstanding | 161,993,586 | |
HD Supply, Inc. (Total HDS) | ||
Entity File Number | 333-159809 | |
Entity Registrant Name | HD SUPPLY, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 75-2007383 | |
Entity Address, Address Line One | 3400 Cumberland Boulevard SE | |
Entity Address, City or Town | Atlanta | |
Entity Address, State or Province | GA | |
Entity Address, Postal Zip Code | 30339 | |
City Area Code | 770 | |
Local Phone Number | 852-9000 | |
Entity Current Reporting Status | No | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 1,000 | |
Entity Central Index Key | 0001465264 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (HD Supply Holdings, Inc.) - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||
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 |
CONSOLIDATED STATEMENTS OF OP_2
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Parenthetical) (HD Supply Holdings, Inc.) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||
Unrealized loss on cash flow hedge, tax | $ 6 | $ 1 |
CONSOLIDATED BALANCE SHEETS (HD
CONSOLIDATED BALANCE SHEETS (HD Supply Holdings, Inc.) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
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 |
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 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (HD Supply Holdings, Inc.) - USD ($) shares in Millions, $ in Millions | May 03, 2020 | Feb. 02, 2020 |
Receivables | ||
Receivables, allowance for credit losses | $ 24 | $ 19 |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000 | 1,000 |
Common stock, shares issued | 162 | 162 |
Common stock, shares outstanding | 161.4 | 161.4 |
Treasury stock | ||
Treasury stock, shares | 44.1 | 44.1 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (HD Supply Holdings, Inc.) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 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 | 0 | 0 |
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 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (HD Supply Holdings, Inc.) - USD ($) shares in Thousands, $ in Millions | Common Stock | Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total |
Beginning balance at Feb. 03, 2019 | $ 2 | $ 4,067 | $ (1,572) | $ (30) | $ (1,186) | |
Beginning balance (in shares) at Feb. 03, 2019 | 204,806 | (34,153) | ||||
Increase (decrease) in stockholders' equity | ||||||
Cumulative effect of accounting change | (3) | |||||
Net income | 107 | $ 107 | ||||
Unrealized loss on cash flow hedge, net of tax of $6 and $1 | (5) | (5) | ||||
Purchase of common stock | $ (12) | |||||
Purchase of common stock (in shares) | (271) | |||||
Shares issued under employee benefit plans | 5 | |||||
Shares issued under employee benefit plans (in shares) | 561 | |||||
Stock-based compensation | 7 | |||||
Shares withheld for taxes | $ (5) | |||||
Shares withheld for taxes (in shares) | (117) | |||||
Other | 1 | |||||
Ending balance at May. 05, 2019 | $ 2 | 4,079 | (1,467) | (35) | $ (1,203) | $ 1,376 |
Ending balance (in shares) at May. 05, 2019 | 205,367 | (34,541) | 170,826 | |||
Beginning balance at Feb. 02, 2020 | $ 2 | 4,097 | (1,122) | (52) | $ (1,573) | $ 1,352 |
Beginning balance (in shares) at Feb. 02, 2020 | 205,473 | (44,071) | ||||
Increase (decrease) in stockholders' equity | ||||||
Net income | 72 | 72 | ||||
Foreign currency translation adjustment | 1 | 1 | ||||
Unrealized loss on cash flow hedge, net of tax of $6 and $1 | (16) | (16) | ||||
Purchase of common stock | $ (1) | |||||
Purchase of common stock (in shares) | (27) | |||||
Shares issued under employee benefit plans | $ 2 | |||||
Shares issued under employee benefit plans (in shares) | 700 | 68 | ||||
Stock-based compensation | 7 | |||||
Shares withheld for taxes | $ (3) | |||||
Shares withheld for taxes (in shares) | (94) | |||||
Other | (1) | |||||
Ending balance at May. 03, 2020 | $ 2 | $ 4,103 | $ (1,050) | $ (67) | $ (1,575) | $ 1,413 |
Ending balance (in shares) at May. 03, 2020 | 206,173 | (44,124) | 162,049 |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY ( Parenthetical) (HD Supply Holdings, Inc) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY | ||
Unrealized loss on cash flow hedge, tax | $ 6 | $ 1 |
CONSOLIDATED STATEMENTS OF OP_3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (HD Supply, Inc.) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||
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 |
HD Supply, Inc. (Total HDS) | ||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||
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 |
CONSOLIDATED STATEMENTS OF OP_4
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Parenthetical) (HD Supply, Inc.) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
Unrealized gain (loss) on cash flow hedge | $ 6 | $ 1 |
HD Supply, Inc. (Total HDS) | ||
Unrealized gain (loss) on cash flow hedge | $ 6 | $ 1 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (HD Supply, Inc.) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
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 |
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; authorized 1,000 shares; issued and outstanding 1,000 shares at May 3, 2020 and February 2, 2020 | 2 | 2 |
Paid-in capital | 4,103 | 4,097 |
Accumulated deficit | (1,050) | (1,122) |
Accumulated other comprehensive loss | (67) | (52) |
Total stockholders' equity | 1,413 | 1,352 |
Total liabilities and stockholders' equity | 4,795 | 4,715 |
HD Supply, Inc. (Total HDS) | ||
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 |
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: | ||
Paid-in capital | 2,370 | 2,367 |
Accumulated deficit | (892) | (963) |
Accumulated other comprehensive loss | (67) | (52) |
Total stockholders' equity | 1,411 | 1,352 |
Total liabilities and stockholders' equity | $ 4,793 | $ 4,715 |
CONSOLIDATED BALANCE SHEETS (_3
CONSOLIDATED BALANCE SHEETS (Parenthetical) (HD Supply, Inc.) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
Receivables | ||
Receivables, allowance for credit losses | $ 24 | $ 19 |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 162,000,000 | 162,000,000 |
Common stock, shares outstanding | 161,400,000 | 161,400,000 |
HD Supply, Inc. (Total HDS) | ||
Receivables | ||
Receivables, allowance for credit losses | $ 24 | $ 19 |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,000 | 1,000 |
Common stock, shares issued | 1,000 | 1,000 |
Common stock, shares outstanding | 1,000 | 1,000 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (HD Supply, Inc.) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 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 | |
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: | ||
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 | (3) | (102) |
Effect of exchange rates on cash and cash equivalents | 0 | 0 |
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 |
HD Supply, Inc. (Total HDS) | ||
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) |
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 |
CONSOLIDATED STATEMENTS OF ST_3
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (HD Supply, Inc.) - USD ($) shares in Thousands, $ in Millions | HD Supply, Inc. (Total HDS)Common Stock | HD Supply, Inc. (Total HDS)Paid-in Capital | HD Supply, Inc. (Total HDS)Accumulated Deficit | HD Supply, Inc. (Total HDS)Accumulated Other Comprehensive Income (Loss) | HD Supply, Inc. (Total HDS) | Common Stock | Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total |
Beginning balance at Feb. 03, 2019 | $ 2,726 | $ (1,413) | $ (30) | $ 2 | $ 4,067 | $ (1,572) | $ (30) | |||
Beginning balance (in shares) at Feb. 03, 2019 | 1 | 204,806 | ||||||||
Increase (decrease) in stockholders' equity | ||||||||||
Cumulative effect of accounting change | (3) | (3) | ||||||||
Equity distribution to Parent | (14) | |||||||||
Stock-based compensation | 7 | 7 | ||||||||
Other | 1 | 1 | ||||||||
Net income | 107 | $ 107 | 107 | $ 107 | ||||||
Unrealized loss on cash flow hedge, net of tax of $8 | (5) | (5) | (5) | (5) | ||||||
Ending balance at May. 05, 2019 | 2,719 | (1,308) | (35) | $ 1,376 | $ 2 | 4,079 | (1,467) | (35) | $ 1,376 | |
Ending balance (in shares) at May. 05, 2019 | 1 | 1 | 205,367 | 170,826 | ||||||
Beginning balance at Feb. 02, 2020 | 2,367 | (963) | (52) | $ 1,352 | $ 2 | 4,097 | (1,122) | (52) | $ 1,352 | |
Beginning balance (in shares) at Feb. 02, 2020 | 1 | 205,473 | ||||||||
Increase (decrease) in stockholders' equity | ||||||||||
Equity distribution to Parent | (4) | |||||||||
Stock-based compensation | 7 | 7 | ||||||||
Other | (1) | (1) | ||||||||
Net income | 72 | 72 | 72 | 72 | ||||||
Unrealized loss on cash flow hedge, net of tax of $8 | (16) | (16) | (16) | (16) | ||||||
Foreign currency translation adjustment | 1 | 1 | 1 | 1 | ||||||
Ending balance at May. 03, 2020 | $ 2,370 | $ (892) | $ (67) | $ 1,411 | $ 2 | $ 4,103 | $ (1,050) | $ (67) | $ 1,413 | |
Ending balance (in shares) at May. 03, 2020 | 1 | 1 | 206,173 | 162,049 |
CONSOLIDATED STATEMENTS OF ST_4
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY ( Parenthetical) (HD Supply, Inc) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
Unrealized loss on cash flow hedge, tax | $ 6 | $ 1 |
HD Supply, Inc. (Total HDS) | ||
Unrealized loss on cash flow hedge, tax | $ 6 | $ 1 |
NATURE OF BUSINESS AND BASIS OF
NATURE OF BUSINESS AND BASIS OF PRESENTATION | 3 Months Ended |
May 03, 2020 | |
NATURE OF BUSINESS AND BASIS OF PRESENTATION | |
NATURE OF BUSINESS AND BASIS OF PRESENTATION | 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”). F iscal 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. 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. |
DEBT
DEBT | 3 Months Ended |
May 03, 2020 | |
DEBT | |
DEBT | 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. 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 15 th th 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. The October 2018 Senior Unsecured Notes are guaranteed, on a senior unsecured basis, by each of HDS’s direct and indirect existing and future subsidiaries that is a wholly owned domestic subsidiary (other than certain excluded subsidiaries), and by each other domestic subsidiary that is a borrower under the Senior ABL Facility or that guarantees HDS’s obligations under any credit facility or capital market securities. These guarantees are subject to release under customary circumstances as stipulated in the October 2018 Senior Unsecured Notes Indenture. The October 2018 Senior Unsecured Notes and related guarantees have not been, and are not required to be, registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction. Redemption HDS may redeem the October 2018 Senior Unsecured Notes, in whole or in part, at any time (1) prior to October 15, 2021, 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 October 2018 Senior Unsecured Notes Indenture and (2) on and after October 15, 2021, 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 2021 102.688 % 2022 101.344 % 2023 and thereafter 100.000 % In addition, at any time prior to October 15, 2021, HDS may redeem on one or more occasions up to 40% of the aggregate principal amount of the October 2018 Senior Unsecured Notes with the proceeds of certain equity offerings at a redemption price of 105.375% of the principal amount in respect of the October 2018 Senior Unsecured Notes being redeemed, plus accrued and unpaid interest to the redemption date, provided, however, that if the October 2018 Senior Unsecured Notes are redeemed, an aggregate principal amount of the October 2018 Senior Unsecured Notes equal to at least 50% of the original aggregate principal amount of October 2018 Senior Unsecured Notes must remain outstanding immediately after each such redemption of October 2018 Senior Unsecured Notes. Debt covenants HDS’s outstanding debt agreements contain various restrictive covenants including, but not limited to, limitations on the incurrence of additional indebtedness and dividend payments and restrictions on the use of proceeds from asset dispositions. As of May 3, 2020, HDS was in compliance with all such covenants that were in effect on such date. Furthermore, while these restrictions may, at times, limit the amount of dividends, distributions or intercompany transfers that HDS or a particular subsidiary guarantor may pay or make, as applicable, the Company believes that, as of May 3, 2020, it had no such limitations. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 3 Months Ended |
May 03, 2020 | |
DERIVATIVE INSTRUMENTS | |
DERIVATIVE INSTRUMENTS | NOTE 3 — DERIVATIVE INSTRUMENTS Hedge Strategy and Accounting Policy The Company enters into derivative financial instruments for hedging purposes. In hedging the exposure to variable cash flows on forecasted transactions, deferral accounting is applied when the derivative reduces the risk of the underlying hedged item effectively as a result of high inverse correlation with the value of the underlying exposure. If a derivative instrument either initially fails or later ceases to meet the criteria for deferral accounting, any subsequent gains or losses are recognized currently in income. Cash flows resulting from derivative financial instruments are classified in the same category as the cash flows from the items being hedged. Cash Flow Hedge On October 24, 2018, the Company entered into an interest rate swap agreement with a notional amount of $750 million, designated as a cash flow hedge in accordance with Accounting Standards Codification (“ASC”) 815, “Derivatives and Hedging ,” to hedge the variability of cash flows in interest payments associated with the Company’s variable-rate debt. The interest rate swap agreement swaps a LIBOR rate for a fixed rate of 3.07% and matures on October 17, 2023. The swap effectively converts a portion of the Company’s Term B-5 Loans from a rate of LIBOR plus 1.75% to a 4.82% fixed rate. As of May 3, 2020 and February 2, 2020, the fair value of the Company’s interest rate swap was a liability of $72 million and $50 million, respectively, which was reflected as $22 million and $12 million in Other current liabilities and $50 million and $38 million in Other liabilities, respectively, in the Consolidated Balance Sheets. The Company utilized Level 2 inputs, as defined in the fair value hierarchy in "Note 4 - Fair Value Measurements."Changes in the fair value of interest rate swap agreements designated as cash flow hedges are recorded as a component of Accumulated Other Comprehensive Income (Loss) (“AOCI”) within Stockholders’ Equity in the Consolidated Balance Sheets and are reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. See “Note 6 - Accumulated Other Comprehensive Income (Loss),” for further information. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
May 03, 2020 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 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 Company’s financial instruments that are not reflected at fair value on the Consolidated Balance Sheets were as follows as of May 3, 2020 and February 2, 2020 (amounts in millions): As of May 3, 2020 As of February 2, 2020 Recorded Estimated Recorded Estimated Amount (1) Fair Value Amount (1) Fair Value Senior ABL Facility $ 259 $ 259 $ 260 $ 260 Term Loans and Notes 1,804 1,784 1,807 1,862 Total $ 2,063 $ 2,043 $ 2,067 $ 2,122 (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, premiums, or deferred financing costs. The Company utilized Level 2 inputs, as defined in the fair value hierarchy, to measure the fair value of the long-term debt. Management’s fair value estimates were based on quoted prices for recent trades of HDS’s 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. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
May 03, 2020 | |
INCOME TAXES | |
INCOME TAXES | NOTE 5 — INCOME TAXES For the three months ended May 3, 2020 and May 5, 2019, the Company’s combined federal, state, and foreign effective tax rate for continuing operations was 25.0% and 24.6%, respectively. The Company’s 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 audit settlements. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act contains significant business tax provisions, including modifications to the rules limiting the deductibility of net operating losses (“NOLs”), expensing of qualified improvement property and business interest in Internal Revenue Code Sections 172(a) and 163(j), respectively. The effects of the new legislation are recognized upon enactment. The Company did not recognize any significant impact to income tax expense for the three months ended May 3, 2020 related to the CARES Act. As of May 3, 2020 and February 2, 2020, the Company’s unrecognized tax benefits in accordance with the income taxes principles of GAAP (ASC 740, “Income Taxes”) were $16 million and $17 million, respectively. The decrease of $1 million was a result of statute expirations during first quarter 2020. The Company’s ending net accrual for interest and penalties related to unrecognized tax benefits as of May 3, 2020 and February 2, 2020 was zero. As of May 3, 2020 and February 2, 2020, the Company’s valuation allowance on its U.S. deferred tax assets was approximately $6 million. Each reporting period, the Company assesses available positive and negative evidence and estimates if sufficient future taxable income will be generated to utilize the existing deferred tax assets. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 3 Months Ended |
May 03, 2020 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | NOTE 6 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) AOCI consists of accumulated net unrealized gains or losses associated with foreign currency translation adjustments and the changes in the fair value of derivatives designated as cash flow hedges. The balances and changes in AOCI, net of tax by component for the three months ended May 3, 2020 and May 5, 2019 was as follows (amounts in millions): Three Months Ended May 3, May 5, 2020 2019 Foreign currency translation adjustment: Beginning balance $ (15) $ (15) Other comprehensive income (loss) before reclassifications 1 — Amounts reclassified from accumulated OCI into earnings — — Ending balance $ (14) $ (15) Cash flow hedge, net of tax: Beginning balance $ (37) $ (15) Other comprehensive income (loss) before reclassifications (19) (6) Amounts reclassified from accumulated OCI into earnings (1) 3 1 Ending balance, net of tax of $19 and $7 $ (53) $ (20) Total ending balance of AOCI $ (67) $ (35) (1) Unrealized loss reclassified into Interest expense. |
BASIC AND DILUTED WEIGHTED-AVER
BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES | 3 Months Ended |
May 03, 2020 | |
BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES | |
BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES | NOTE 7 — BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES The following basic and diluted weighted-average common shares information is provided for Holdings. The reconciliation of basic to diluted weighted-average common shares for the three months ended May 3, 2020 and May 5, 2019 was as follows (in thousands): Three Months Ended May 3, 2020 May 5,2019 Weighted-average common shares 160,830 170,000 Effect of potentially dilutive stock plan securities 360 712 Diluted weighted-average common shares 161,190 170,712 Stock plan securities excluded from dilution (1) 3,573 2,519 (1) Represents securities not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. Stock plan securities consist of securities (stock options, restricted stock, restricted stock units, and performance share units) granted under Holdings’ stock-based compensation plans. |
SUPPLEMENTAL BALANCE SHEET AND
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION | 3 Months Ended |
May 03, 2020 | |
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION | |
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION | NOTE 8 — SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION Receivables Receivables as of May 3, 2020 and February 2, 2020 consisted of the following (amounts in millions): May 3, 2020 February 2, 2020 Trade receivables, net of allowance for credit losses $ 635 $ 674 Vendor rebate receivables 38 65 Other receivables 17 15 Total receivables, net $ 690 $ 754 Trade receivables arise primarily from sales on credit to customers. The Company establishes an allowance for credit losses to present the net amount of trade receivables expected to be collected. The allowance is determined using an estimation of loss rates based upon historical experience adjusted for factors that are relevant to determine the expected collectability of trade receivables. Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of trade receivables, and credit and liquidity quality indicators for certain industry groups, customer classes, or individual customers. Other Current Liabilities Other current liabilities as of May 3, 2020 and February 2, 2020 consisted of the following (amounts in millions): May 3, 2020 February 2, 2020 Accrued legal $ 50 $ 50 Accrued non-income taxes 29 33 Accrued interest 3 13 Other 106 112 Total other current liabilities $ 188 $ 208 As of May 3, 2020 and February 2, 2020, the $50 million legal accrual included in Other current liabilities is offset by a $50 million insurance recovery included in Other current assets and is related to litigation activities. For further information, see “Note 10, Commitments and Contingencies.” Supplemental Cash Flow Information Cash paid for interest in the three months ended May 3, 2020 and May 5, 2019 was $34 million and $37 million, respectively. Cash paid for income taxes, net of refunds, in the three months ended May 3, 2020 and May 5, 2019 was approximately zero and $4 million, respectively. During the three months ended May 3, 2020 and May 5, 2019, HDS executed equity cash distributions of $4 million and $14 million, respectively, to Holdings, via HDS’s direct parent, HDS Holding Corporation. The equity distribution from HDS and return of capital recognized by Holdings were eliminated in consolidation of Holdings and its wholly-owned subsidiaries, including HDS. FICA Payment Deferral The CARES Act allows employers to defer the payment of the employer share of Federal Insurance Contributions Act (“FICA”) taxes for the period from March 27, 2020 and ending December 31, 2020. The deferred amount will be payable as follows: ● 50% of the deferred amount will be paid December 31, 2021 ● Remaining 50% of the deferred amount will be paid December 31, 2022 In the three months ended May 3, 2020, the Company deferred FICA payments of $3 million under the CARES Act. The deferred payments are reflected in Other liabilities in the Consolidated Balance Sheets. The deferral had no impact on the Consolidated Statement of Operations and Comprehensive Income. Share Repurchases During fiscal 2014, Holdings’ Board of Directors authorized a share repurchase program to be funded from cash proceeds received from exercises of employee stock options (“April 2014 Plan”). This share repurchase program does not obligate Holdings to acquire any particular amount of common stock, and it may be terminated at any time at Holdings’ discretion. During November 2018 and March 2020, Holdings’ Board of Directors authorized two additional million Holdings’ share repurchases under these plans for the three months ended May 3, 2020 and May 5, 2019 were as follows (dollars in millions): Three Months Ended May 3, 2020 May 5, 2019 Number of Cost of Number of Cost of Shares Shares Shares Shares March 2020 Plan — $ — — $ — November 2018 Plan — — 170,419 7 April 2014 Plan 26,661 1 100,666 5 Total share repurchases 26,661 $ 1 271,085 $ 12 |
RESTRUCTURING AND SEPARATION AC
RESTRUCTURING AND SEPARATION ACTIVITIES | 3 Months Ended |
May 03, 2020 | |
RESTRUCTURING AND SEPARATION ACTIVITIES | |
RESTRUCTURING AND SEPARATION ACTIVITIES | NOTE 9 — RESTRUCTURING AND SEPARATION ACTIVITIES On September 24, 2019, the Company announced its intention to separate its Facilities Maintenance and Construction & Industrial businesses into two independent publicly traded companies with the separation expected to be completed by the middle of fiscal 2020. On March 30, 2020, the Company announced that due to materially changing market conditions caused by the COVID-19 pandemic, the previously announced timeline for the separation of its two businesses had been impacted. The Company remains committed to the separation of the two businesses and the strategic rationale is unchanged. The Company is continuing its preparations for separation when the markets sufficiently recover. During the three months ended May 3, 2020, the Company recognized $6 million in restructuring and separation charges. These charges were primarily related to professional fees incurred to execute the separation, and to a lesser extent, severance and other employee-related costs. As of May 3, 2020, remaining unpaid costs associated with these activities are immaterial. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
May 03, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 10 — COMMITMENTS AND CONTINGENCIES Legal Matters On July 10, 2017 and August 8, 2017, stockholders filed putative class action complaints in the U.S. District Court for the Northern District of Georgia, alleging that HD Supply and certain senior members of its management (collectively, the “securities litigation defendants”) made certain false or misleading public statements in violation of the federal securities laws between November 9, 2016 and June 5, 2017, inclusive (the “original securities complaints”). Subsequently, the two securities cases were consolidated, and, on November 16, 2017, the lead plaintiffs appointed by the Court filed a Consolidated Amended Class Action Complaint (the “Amended Complaint”) against the securities litigation defendants on behalf of all persons other than the securities litigation defendants who purchased or otherwise acquired the Company’s common stock between November 9, 2016 and June 5, 2017, inclusive. The Amended Complaint alleges that the securities litigation defendants made certain false or misleading public statements, primarily relating to the Company’s progress in addressing certain supply chain disruption issues encountered in the Company’s Facilities Maintenance business unit. The Amended Complaint asserts claims against the securities litigation defendants under Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5, and seeks class certification under the Federal Rules of Civil Procedure, as well as unspecified monetary damages, pre-judgment and post-judgment interest, and attorneys’ fees and other costs. On September 19, 2018, the Court granted in part and denied in part the securities litigation defendants’ motion to dismiss. On January 30, 2020, the parties executed a written stipulation and agreement to settle the litigation for a payment of $50 million, subject to court approval. On February 21, 2020, the Court approved the settlement on a preliminary basis and scheduled a final approval hearing for July 21, 2020. The full settlement amount is covered under the Company’s insurance policies. The Company and individual defendants continue to dispute the allegations in the complaints, and the settlement is without any admission of the allegations in the complaints. On August 8, 2017, two stockholder derivative complaints were filed in the U.S. District Court for the Northern District of Georgia, naming the Company as a “nominal defendant” and certain members of its senior management and board of directors as individual defendants. The complaints generally allege that the individual defendants caused the Company to issue false and misleading statements concerning the Company’s business, operations, and financial prospects, including misrepresentations regarding operating leverage and supply chain corrective actions. The complaints assert claims against the individual defendants under Section 14(a) of the Exchange Act, and allege breaches of fiduciary duties, unjust enrichment, corporate waste, and insider selling. The complaints assert a claim to recover any damages sustained by the Company as a result of the individual defendants’ allegedly wrongful actions, seek certain actions by the Company to modify its corporate governance and internal procedures, and seek to recover attorneys’ fees and other costs. On October 22, 2018, upon joint motion of the parties, the Court entered an order conditionally staying the proceedings and administratively closing the matter until after any summary judgment motion filed relating to the Amended Complaint is adjudicated. On August 29, 2018, a stockholder derivative complaint was filed in Delaware Chancery Court naming the Company as a “nominal defendant” and certain members of its senior management and board of directors as individual defendants. The complaint generally alleges that the individual defendants caused the Company to issue false and misleading statements concerning the Company’s business, operations, and financial prospects, including misrepresentations regarding supply chain corrective actions. The complaint asserts various common law breach of fiduciary duty claims against the individual defendants and claims of unjust enrichment and insider selling. The complaint seeks to recover any damages sustained by the Company as a result of the individual defendants’ allegedly wrongful actions, seeks certain actions by the Company to modify its corporate governance and internal procedures, and seeks to recover attorneys’ fees and other costs. The individual defendants moved to dismiss the complaint on November 2, 2018. On January 14, 2019, upon joint motion of the parties, the Court entered an order conditionally staying the proceedings until after any summary judgment motions filed relating to the Amended Complaint is adjudicated. The Company intends to defend the derivative lawsuits vigorously. Given the stage of the complaints and the claims and issues presented, the Company cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from these unresolved lawsuits. In March 2019, the Company received a subpoena from the U.S. Securities and Exchange Commission (“SEC”) requesting information and documents from calendar years 2016 and 2017 relating to, among other things, the Company’s Facilities Maintenance business unit and the allegations of the Amended Complaint described above. The Company has responded to the subpoena and intends to continue to cooperate with the SEC’s investigation. We cannot currently predict the timing or outcome of this ongoing 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 the opinion of management, based on current knowledge, all reasonably estimable and probable matters are believed to be adequately reserved for or covered by insurance and are not expected to have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows. For all other matters 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 consolidated financial position, results of operations or cash flows of the Company if disposed of unfavorably. For material matters with loss contingencies that are reasonably possible and reasonably estimable, including matters with loss contingencies 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. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
May 03, 2020 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | NOTE 11 — SEGMENT INFORMATION HD Supply’s 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 its 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 Supply’s 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 two reportable segments, each of which is presented below: ● Facilities Maintenance —Facilities Maintenance distributes maintenance, repair and operations products, provides value-add services and fabricates custom products to multifamily, hospitality, healthcare and institutional facilities. ● Construction & Industrial —Construction & Industrial distributes specialized hardware, tools, engineered materials and safety products to non-residential and residential contractors. Construction & Industrial also 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. In addition to the reportable segments, the Company’s consolidated financial results include Corporate. Corporate incurs costs related to the Company’s centralized support functions, which are comprised of finance, information technology, human resources, legal, supply chain and other support services. All Corporate overhead costs are allocated to the reportable segments. Eliminations include the adjustments necessary to eliminate intercompany transactions. The following tables present Net sales, Adjusted EBITDA, and other measures for both of the reportable segments and total operations for the periods indicated (amounts in millions): Facilities Construction Total Maintenance & Industrial Eliminations Operations Three Months Ended May 3, 2020 Net sales $ 682 $ 713 $ — $ 1,395 Adjusted EBITDA 98 65 — 163 Depreciation (1) 13 10 — 23 Other Intangible Amortization 2 4 — 6 Three Months Ended May 5, 2019 Net sales $ 772 $ 721 $ — $ 1,493 Adjusted EBITDA 134 69 — 203 Depreciation (1) 10 11 — 21 Other Intangible Amortization 2 4 — 6 (1) Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. Reconciliation to Consolidated Financial Statements Three Months Ended May 3, 2020 May 5, 2019 Total Adjusted EBITDA $ 163 $ 203 Depreciation and amortization (1) 29 27 Stock-based compensation 7 7 Restructuring and separation (2) 6 (2) Acquisition and integration costs (3) — 1 Operating income 121 170 Interest expense 25 28 Income from Before Provision for Income Taxes 96 142 Provision for income taxes 24 35 Net income $ 72 $ 107 (1) Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. (2) Represents the costs related to separation activities and personnel changes, primarily severance and other employee-related costs. During the three months ended May 5, 2019, the costs include a favorable termination of the lease for the Company’s former corporate headquarters. (3) Represents the cost incurred in the acquisition and integration of business acquisitions. |
REVENUE
REVENUE | 3 Months Ended |
May 03, 2020 | |
REVENUE | |
REVENUE | NOTE 12 — REVENUE The Company’s revenues are earned from contracts with customers. Contracts include written agreements, as well as arrangements that are implied by customary practices or law. Nature of Products and Services Both Facilities Maintenance and Construction & Industrial serve unique end markets. Facilities Maintenance offers products that serve the maintenance, repair and operations (“MRO”) end market as well as value-added services. Construction & Industrial offers products used broadly across both the residential and non-residential construction end markets as well as light remodeling supplies for small remodeling contractors and trade professionals. For additional information regarding the nature of products and services offered by the Company’s reportable segments, see “Description of segments” within Item 2 of this quarterly report on Form 10-Q. Revenue Recognition The Company recognizes revenue, net of allowances for returns and discounts and any taxes collected from the customer, when an identified performance obligation is satisfied by the transfer of control of promised products or services to the customer. The Company ships products to customers by internal fleet and third-party carriers. Transfer of control to the customer for products generally occurs at the point of destination (i.e., upon transfer of title and risk of loss of product). Transfer of control to the customer for services occurs when the customer has the right to direct the use of and obtain substantially all the remaining benefits of the asset that is created or enhanced from the service. The Company accounts for shipping and handling costs associated with outbound freight as a fulfillment cost. Such costs are included in Selling, general, and administrative expenses. Disaggregation of Revenue The Company elected to disaggregate the revenue of Facilities Maintenance by its demand types: MRO and Property Improvement, and Construction & Industrial by its end markets: Non-Residential Construction, Residential Construction, and Other. The Company believes this disaggregation appropriately meets the objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The table below represents disaggregated revenue for Facilities Maintenance and Construction & Industrial with Inter-segment eliminations (amounts in millions): Three Months Ended May 3, 2020 May 5, 2019 Facilities Maintenance Maintenance, Repair, and Operations $ 610 $ 692 Property Improvement 72 80 Total Facilities Maintenance Net Sales 682 772 Construction & Industrial Non-Residential Construction 488 497 Residential Construction 183 180 Other 42 44 Total Construction & Industrial Net Sales 713 721 Inter-segment Eliminations — — Total HD Supply Net Sales $ 1,395 $ 1,493 |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
May 03, 2020 | |
RECENT ACCOUNTING PRONOUNCEMENTS | |
RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 13 — RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements Cloud Computing Arrangements – In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2018-15”). The new guidance aligns the requirements for capitalizing implementation costs in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update also provides for additional disclosure requirements regarding the nature of an entity’s hosting arrangements that are service contracts. The ASU is effective for annual and interim periods beginning after December 15, 2019. The Company adopted the guidance in ASU 2018-15 on February 3, 2020 (the first day of fiscal 2020) prospectively to all implementation costs incurred after the date of adoption with no material impact to the Company's financial position, results of operations or cash flows. Financial Instruments Recently Issued Accounting Pronouncements Not Yet Adopted or Applied Income Taxes – In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). The new guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during quarters, and the recognition of deferred tax liabilities for outside basis differences. The guidance also simplifies aspects of the accounting for franchise taxes, enacted changes in tax laws, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The ASU is effective for fiscal years and interim periods beginning after December 15, 2020. Early adoption is permitted. Certain amendments in this update should be adopted on either a retrospective basis for all periods presented or on a modified retrospective base with a cumulative-effect adjustment through retained earnings. The remaining other amendments should be adopted on a prospective basis. The Company is currently evaluating the impact of adopting ASU 2019-12. Reference Rate - In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). The new guidance provides optional expedients and exceptions for applying GAAP to certain contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued. The guidance is effective upon issuance and can be applied through December 31, 2022. An entity may elect to the apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company is currently evaluating the impact of applying ASU 2020-04. |
NATURE OF BUSINESS AND BASIS _2
NATURE OF BUSINESS AND BASIS OF PRESENTATION (Policies) | 3 Months Ended |
May 03, 2020 | |
NATURE OF BUSINESS AND BASIS OF PRESENTATION | |
Nature of Business | 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 | 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 | F iscal 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 | 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 | 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 | 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. |
DEBT (Tables)
DEBT (Tables) | 3 Months Ended |
May 03, 2020 | |
DEBT | |
Schedule of long-term 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. |
October 2018 Senior Unsecured Notes due 2026 | |
DEBT | |
Schedule of notes redemption on and after October 15, 2021, at the applicable redemption price set forth below (expressed as a percentage of principal amount) | Year Percentage 2021 102.688 % 2022 101.344 % 2023 and thereafter 100.000 % |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
May 03, 2020 | |
FAIR VALUE MEASUREMENTS | |
Schedule of financial instruments that are not reflected at fair value on the balance sheet | The Company’s financial instruments that are not reflected at fair value on the Consolidated Balance Sheets were as follows as of May 3, 2020 and February 2, 2020 (amounts in millions): As of May 3, 2020 As of February 2, 2020 Recorded Estimated Recorded Estimated Amount (1) Fair Value Amount (1) Fair Value Senior ABL Facility $ 259 $ 259 $ 260 $ 260 Term Loans and Notes 1,804 1,784 1,807 1,862 Total $ 2,063 $ 2,043 $ 2,067 $ 2,122 (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, premiums, or deferred financing costs. |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 3 Months Ended |
May 03, 2020 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | |
Schedule of changes in AOCI | Three Months Ended May 3, May 5, 2020 2019 Foreign currency translation adjustment: Beginning balance $ (15) $ (15) Other comprehensive income (loss) before reclassifications 1 — Amounts reclassified from accumulated OCI into earnings — — Ending balance $ (14) $ (15) Cash flow hedge, net of tax: Beginning balance $ (37) $ (15) Other comprehensive income (loss) before reclassifications (19) (6) Amounts reclassified from accumulated OCI into earnings (1) 3 1 Ending balance, net of tax of $19 and $7 $ (53) $ (20) Total ending balance of AOCI $ (67) $ (35) (1) Unrealized loss reclassified into Interest expense. |
BASIC AND DILUTED WEIGHTED-AV_2
BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES (Tables) | 3 Months Ended |
May 03, 2020 | |
BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES | |
Schedule of reconciliation of basic to diluted weighted-average common shares | The reconciliation of basic to diluted weighted-average common shares for the three months ended May 3, 2020 and May 5, 2019 was as follows (in thousands): Three Months Ended May 3, 2020 May 5,2019 Weighted-average common shares 160,830 170,000 Effect of potentially dilutive stock plan securities 360 712 Diluted weighted-average common shares 161,190 170,712 Stock plan securities excluded from dilution (1) 3,573 2,519 (1) Represents securities not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. |
SUPPLEMENTAL BALANCE SHEET AN_2
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION (Tables) | 3 Months Ended |
May 03, 2020 | |
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION | |
Schedule of Receivables | Receivables as of May 3, 2020 and February 2, 2020 consisted of the following (amounts in millions): May 3, 2020 February 2, 2020 Trade receivables, net of allowance for credit losses $ 635 $ 674 Vendor rebate receivables 38 65 Other receivables 17 15 Total receivables, net $ 690 $ 754 |
Schedule of other current liabilities | Other current liabilities as of May 3, 2020 and February 2, 2020 consisted of the following (amounts in millions): May 3, 2020 February 2, 2020 Accrued legal $ 50 $ 50 Accrued non-income taxes 29 33 Accrued interest 3 13 Other 106 112 Total other current liabilities $ 188 $ 208 |
Schedule of share repurchases | Holdings’ share repurchases under these plans for the three months ended May 3, 2020 and May 5, 2019 were as follows (dollars in millions): Three Months Ended May 3, 2020 May 5, 2019 Number of Cost of Number of Cost of Shares Shares Shares Shares March 2020 Plan — $ — — $ — November 2018 Plan — — 170,419 7 April 2014 Plan 26,661 1 100,666 5 Total share repurchases 26,661 $ 1 271,085 $ 12 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
May 03, 2020 | |
SEGMENT INFORMATION | |
Schedule of net sales, Adjusted EBITDA, and other measures for each of the reportable segments and total continuing operations | The following tables present Net sales, Adjusted EBITDA, and other measures for both of the reportable segments and total operations for the periods indicated (amounts in millions): Facilities Construction Total Maintenance & Industrial Eliminations Operations Three Months Ended May 3, 2020 Net sales $ 682 $ 713 $ — $ 1,395 Adjusted EBITDA 98 65 — 163 Depreciation (1) 13 10 — 23 Other Intangible Amortization 2 4 — 6 Three Months Ended May 5, 2019 Net sales $ 772 $ 721 $ — $ 1,493 Adjusted EBITDA 134 69 — 203 Depreciation (1) 10 11 — 21 Other Intangible Amortization 2 4 — 6 (1) Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. |
Schedule of reconciliation of adjusted EBITDA to income (loss) from continuing operations | Reconciliation to Consolidated Financial Statements Three Months Ended May 3, 2020 May 5, 2019 Total Adjusted EBITDA $ 163 $ 203 Depreciation and amortization (1) 29 27 Stock-based compensation 7 7 Restructuring and separation (2) 6 (2) Acquisition and integration costs (3) — 1 Operating income 121 170 Interest expense 25 28 Income from Before Provision for Income Taxes 96 142 Provision for income taxes 24 35 Net income $ 72 $ 107 (1) Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. (2) Represents the costs related to separation activities and personnel changes, primarily severance and other employee-related costs. During the three months ended May 5, 2019, the costs include a favorable termination of the lease for the Company’s former corporate headquarters. (3) Represents the cost incurred in the acquisition and integration of business acquisitions. |
REVENUE (Tables)
REVENUE (Tables) | 3 Months Ended |
May 03, 2020 | |
REVENUE | |
Schedule of Facilities Maintenance and Construction & Industrial with Inter-segment eliminations | The table below represents disaggregated revenue for Facilities Maintenance and Construction & Industrial with Inter-segment eliminations (amounts in millions): Three Months Ended May 3, 2020 May 5, 2019 Facilities Maintenance Maintenance, Repair, and Operations $ 610 $ 692 Property Improvement 72 80 Total Facilities Maintenance Net Sales 682 772 Construction & Industrial Non-Residential Construction 488 497 Residential Construction 183 180 Other 42 44 Total Construction & Industrial Net Sales 713 721 Inter-segment Eliminations — — Total HD Supply Net Sales $ 1,395 $ 1,493 |
NATURE OF BUSINESS AND BASIS _3
NATURE OF BUSINESS AND BASIS OF PRESENTATION - Nature of Business (Details) | 3 Months Ended |
May 03, 2020employeesegmentitemcustomercategoryproduct | |
Nature of Business | |
Number of distinct market sectors in which entity specializes | category | 2 |
Number of customers | customer | 500,000 |
Number of SKUs offered | product | 600,000 |
Number of reportable segments | segment | 2 |
Minimum | |
Nature of Business | |
Number of associates | employee | 11,000 |
U.S. and Canada | |
Nature of Business | |
Number of branches | 270 |
Number of distribution centers | 44 |
NATURE OF BUSINESS AND BASIS _4
NATURE OF BUSINESS AND BASIS OF PRESENTATION - Fiscal Year (Details) | 3 Months Ended | 12 Months Ended | ||
May 03, 2020 | May 05, 2019 | Jan. 31, 2021 | Feb. 02, 2020 | |
Length of fiscal year (in days) | 364 days | 364 days | ||
Length of fiscal quarter (in days) | 91 days | 91 days | ||
Minimum | ||||
Length of fiscal year (in days) | 364 days | |||
Maximum | ||||
Length of fiscal year (in days) | 371 days |
NATURE OF BUSINESS AND BASIS _5
NATURE OF BUSINESS AND BASIS OF PRESENTATION - Self-Insurance (Details) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
NATURE OF BUSINESS AND BASIS OF PRESENTATION | ||
Self-insurance reserves | $ 52 | $ 50 |
DEBT - Gross Long-term Debt - I
DEBT - Gross Long-term Debt - Interest Rate - Tabular Disclosure (Details) - HDS | May 03, 2020 | Feb. 02, 2020 | Oct. 11, 2018 |
Secured debt | Credit facility | Senior ABL Facility due 2022 | |||
DEBT | |||
Interest rate, rate at end of period (as a percent) | 2.08% | 3.15% | |
Secured debt | Credit facility | Term B-5 Loans due 2023 | |||
DEBT | |||
Interest rate, rate at end of period (as a percent) | 2.15% | 3.40% | |
Unsecured debt | October 2018 Senior Unsecured Notes due 2026 | |||
DEBT | |||
Interest rate, stated rate (as a percent) | 5.375% | 5.375% | 5.375% |
DEBT - Gross Long-term Debt - O
DEBT - Gross Long-term Debt - Outstanding Principal - Tabular Disclosure (Details) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
DEBT | ||
Total gross long-term debt | $ 2,063 | $ 2,067 |
HDS | Secured debt | Credit facility | Senior ABL Facility due 2022 | ||
DEBT | ||
Total gross long-term debt | 259 | 260 |
HDS | Secured debt | Credit facility | Term B-5 Loans due 2023 | ||
DEBT | ||
Total gross long-term debt | 1,054 | 1,057 |
HDS | Unsecured debt | October 2018 Senior Unsecured Notes due 2026 | ||
DEBT | ||
Total gross long-term debt | $ 750 | $ 750 |
DEBT - Total Net Long-term Debt
DEBT - Total Net Long-term Debt - Tabular Disclosure (Details) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
DEBT | ||
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 |
DEBT - Total Long-term Debt, Ex
DEBT - Total Long-term Debt, Excluding Current Installments - Tabular Disclosure (Details) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
DEBT | ||
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 |
DEBT - Senior ABL Facility (Det
DEBT - Senior ABL Facility (Details) $ in Millions | 3 Months Ended | |
May 03, 2020USD ($)facility | Feb. 02, 2020USD ($) | |
DEBT | ||
Outstanding borrowings | $ 2,063 | $ 2,067 |
Secured debt | HDS | Credit facility | Senior ABL Facility due 2022 | ||
DEBT | ||
Aggregate principal amount | 1,000 | |
Line of credit facility, Excess Availability for borrowing | 717 | |
Letter of credit facility outstanding | 24 | |
Line of credit facility, available for borrowing on qualifying cash balances | $ 85 | |
The minimum number of incremental term loan facilities permitted to be included in the Senior ABL Facility | facility | 1 | |
The minimum number of revolving credit facility commitments permitted to be included in the Senior ABL Facility | facility | 1 | |
Outstanding borrowings | $ 259 | $ 260 |
Canada | Secured debt | HDS | Credit facility | Senior ABL Facility | ||
DEBT | ||
Outstanding borrowings | $ 51 |
DEBT - Senior Term Loan Facilit
DEBT - Senior Term Loan Facility (Details) - HDS - Secured debt - Credit facility $ in Millions | 3 Months Ended |
May 03, 2020USD ($) | |
Term Loan Facility | |
DEBT | |
Aggregate principal amount | $ 1,070 |
Term B-5 Loans due 2023 | |
DEBT | |
Amortization of debt, aggregate annual amounts as a percentage of original principal amount (as a percent) | 1.00% |
Senior ABL Facility due 2022 | |
DEBT | |
Aggregate principal amount | $ 1,000 |
LIBOR | Term B-5 Loans due 2023 | |
DEBT | |
Percentage added to reference rate (as a percent) | 1.75% |
Base | Term B-5 Loans due 2023 | |
DEBT | |
Percentage added to reference rate (as a percent) | 0.75% |
DEBT - 5.375% Senior Unsecured
DEBT - 5.375% Senior Unsecured Notes due 2026 (Details) - Unsecured debt - October 2018 Senior Unsecured Notes due 2026 - USD ($) $ in Millions | 3 Months Ended | ||
May 03, 2020 | Feb. 02, 2020 | Oct. 11, 2018 | |
Prior to October 15, 2021 | |||
DEBT | |||
Threshold percentage for debt that must remain after each redemption | 50.00% | ||
HDS | |||
DEBT | |||
Aggregate principal amount | $ 750 | ||
Note issued, interest rate | 5.375% | 5.375% | 5.375% |
HDS | Prior to October 15, 2021 | |||
DEBT | |||
Optional prepayment price percentage | 100.00% | ||
Percentage limit on amount that can be redeemed | 40.00% | ||
Prepayment percentage price as a percent of the principal, with proceeds from certain equity offerings | 105.375% | ||
HDS | 2021 | |||
DEBT | |||
Optional prepayment price percentage | 102.688% | ||
HDS | 2022 | |||
DEBT | |||
Optional prepayment price percentage | 101.344% | ||
HDS | 2023 and thereafter | |||
DEBT | |||
Optional prepayment price percentage | 100.00% |
DERIVATIVE INSTRUMENTS (Details
DERIVATIVE INSTRUMENTS (Details) - Derivatives designated as hedging instruments - Interest rate swap - Cash flow hedges - USD ($) $ in Millions | Oct. 23, 2018 | May 03, 2020 | Feb. 02, 2020 | Oct. 24, 2018 |
DERIVATIVE INSTRUMENTS | ||||
Notional amount of derivative liability | $ 750 | |||
Fixed interest rate percentage | 3.07% | |||
Cash flow hedge liabilities at fair value | $ 72 | $ 50 | ||
Other current liabilities | ||||
DERIVATIVE INSTRUMENTS | ||||
Cash flow hedge liabilities at fair value | 22 | 12 | ||
Other liabilities | ||||
DERIVATIVE INSTRUMENTS | ||||
Cash flow hedge liabilities at fair value | $ 50 | $ 38 | ||
LIBOR | Term B-5 Loans due 2023 | ||||
DERIVATIVE INSTRUMENTS | ||||
Effective interest rate percentage | 4.82% | |||
Percentage added to reference rate (as a percent) | 1.75% |
FAIR VALUE MEASUREMENTS - Fair
FAIR VALUE MEASUREMENTS - Fair value on consolidated balance sheets (Details) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
Recorded Amount | ||
Financial instruments not reflected at fair value on the balance sheet | ||
Senior ABL Facility | $ 259 | $ 260 |
Term Loans and Notes | 1,804 | 1,807 |
Total | 2,063 | 2,067 |
Estimated Fair Value | Significant Other Observable Inputs (Level 2) | ||
Financial instruments not reflected at fair value on the balance sheet | ||
Senior ABL Facility | 259 | 260 |
Term Loans and Notes | 1,784 | 1,862 |
Total | $ 2,043 | $ 2,122 |
INCOME TAXES - Tax items (Detai
INCOME TAXES - Tax items (Details) - USD ($) $ in Millions | 3 Months Ended | ||
May 03, 2020 | May 05, 2019 | Feb. 02, 2020 | |
INCOME TAXES | |||
Combined federal, state and foreign effective tax rate for continuing operations (benefit) | 25.00% | 24.60% | |
Unrecognized tax benefits | $ 16 | $ 17 | |
Decrease in unrecognized tax benefits due to statute expirations | 1 | ||
Net accrual for interest and penalties related to unrecognized tax benefits | 0 | $ 0 | |
Deferred tax assets, valuation allowance | $ 6 |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
Changes in accumulated other comprehensive income (loss) | ||
Beginning balance | $ (52) | |
Ending balance | (67) | |
Accumulated OCI, tax | 6 | $ 1 |
AOCI, net of tax | ||
Changes in accumulated other comprehensive income (loss) | ||
Ending balance | (67) | (35) |
Foreign currency translation adjustment | ||
Changes in accumulated other comprehensive income (loss) | ||
Beginning balance | (15) | (15) |
Other comprehensive income (loss) before reclassifications | 1 | |
Ending balance | (14) | (15) |
Cash flow hedge, net of tax | ||
Changes in accumulated other comprehensive income (loss) | ||
Beginning balance | (37) | (15) |
Other comprehensive income (loss) before reclassifications | (19) | (6) |
Amounts reclassified from AOCI into earnings | 3 | 1 |
Ending balance | (53) | (20) |
Accumulated OCI, tax | $ 19 | $ 7 |
BASIC AND DILUTED WEIGHTED-AV_3
BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES - Reconciliation of Basic to Diluted Weighted-Average Common Shares (Details) - shares shares in Thousands | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
Reconciliation of basic to diluted weighted-average common shares | ||
Weighted-average common shares outstanding | 160,830 | 170,000 |
Effect of potentially dilutive stock plan securities | 360 | 712 |
Diluted weighted-average common shares outstanding | 161,190 | 170,712 |
BASIC AND DILUTED WEIGHTED-AV_4
BASIC AND DILUTED WEIGHTED-AVERAGE COMMON SHARES - Anti-dilutive Securities (Details) - shares shares in Thousands | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
Anti-dilutive securities | ||
Stock plan securities excluded from dilution | 3,573 | 2,519 |
SUPPLEMENTAL BALANCE SHEET AN_3
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION - Receivables (Details) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
Receivables | ||
Trade receivables, net of allowance for credit losses | $ 635 | $ 674 |
Vendor rebate receivables | 38 | 65 |
Other receivables | 17 | 15 |
Total receivables, net | $ 690 | $ 754 |
SUPPLEMENTAL BALANCE SHEET AN_4
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION - Other Current Liabilities (Details) - USD ($) $ in Millions | May 03, 2020 | Feb. 02, 2020 |
Other Current Liabilities | ||
Accrued legal | $ 50 | $ 50 |
Accrued non-income taxes | 29 | 33 |
Accrued interest | 3 | 13 |
Other | 106 | 112 |
Total other current liabilities | 188 | 208 |
Other current liabilities | ||
Other Current Liabilities | ||
Accrued legal | 50 | 50 |
Other current assets | ||
Other Current Liabilities | ||
Insurance recovery | $ 50 | $ 50 |
SUPPLEMENTAL BALANCE SHEET AN_5
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION - Supplemental Cash Flow Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
Supplemental Cash Flow Information | ||
Cash paid for interest | $ 34 | $ 37 |
Cash paid for income taxes, net of refunds | 0 | 4 |
Other liabilities | ||
Supplemental Cash Flow Information | ||
Deferred FICA payments | 3 | |
HD Supply, Inc. (Total HDS) | ||
Supplemental Cash Flow Information | ||
Cash equity distribution | $ 4 | $ 14 |
SUPPLEMENTAL BALANCE SHEET AN_6
SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION - Stock Repurchases (Details) - Common Stock $ in Millions | 1 Months Ended | 3 Months Ended | ||||
Mar. 31, 2020USD ($)item | Nov. 30, 2018USD ($)item | May 03, 2020USD ($)shares | May 05, 2019USD ($)shares | Jan. 31, 2020USD ($) | Aug. 31, 2017USD ($) | |
Share repurchases | ||||||
Number of Shares | shares | 26,661 | 271,085 | ||||
Cost of Shares | $ 1 | $ 12 | ||||
Share Repurchase Program of March 2020 | ||||||
Share repurchases | ||||||
Number of share repurchase programs | item | 2 | |||||
Authorized share repurchase amount | $ 500 | |||||
Share Repurchase Program of November 2018 Plan | ||||||
Share repurchases | ||||||
Number of share repurchase programs | item | 2 | |||||
Authorized share repurchase amount | $ 500 | $ 500 | $ 500 | |||
Share Repurchase Program of August 2017 Plan | ||||||
Share repurchases | ||||||
Number of Shares | shares | 170,419 | |||||
Cost of Shares | $ 7 | |||||
Share Repurchase Program of April 2014 Plan | ||||||
Share repurchases | ||||||
Number of Shares | shares | 26,661 | 100,666 | ||||
Cost of Shares | $ 1 | $ 5 |
RESTRUCTURING AND SEPARATION _2
RESTRUCTURING AND SEPARATION ACTIVITIES (Details) $ in Millions | Sep. 24, 2019item | May 03, 2020USD ($)item | May 05, 2019USD ($) |
Restructuring activities | |||
Restructuring charges | $ 6 | $ (2) | |
Separation of Facilities Maintenance and Construction and Industrial businesses | Separation of business | |||
Restructuring activities | |||
Number of companies after separation | item | 2 | 2 | |
Separation of Facilities Maintenance and Construction and Industrial businesses | Lease termination | |||
Restructuring activities | |||
Restructuring charges | $ 6 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Legal Matters (Details) $ in Millions | Jan. 30, 2020USD ($) | May 03, 2020USD ($) | Aug. 08, 2017complaint |
Legal Matters | |||
Settlement amount | $ 50 | ||
Number of shareholder derivative complaints | complaint | 2 | ||
Minimum | |||
Legal Matters | |||
Estimated aggregate potential loss | $ 0 | ||
Maximum | |||
Legal Matters | |||
Estimated aggregate potential loss | $ 10 |
SEGMENT INFORMATION - General I
SEGMENT INFORMATION - General Information (Details) | 3 Months Ended |
May 03, 2020segment | |
SEGMENT INFORMATION | |
Number of reportable segments | 2 |
SEGMENT INFORMATION - Net Sales
SEGMENT INFORMATION - Net Sales for Each Reportable Segment (Details) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
SEGMENT INFORMATION | ||
Net sales | $ 1,395 | $ 1,493 |
Facilities Maintenance | Reportable segment | ||
SEGMENT INFORMATION | ||
Net sales | 682 | 772 |
Construction & Industrial | Reportable segment | ||
SEGMENT INFORMATION | ||
Net sales | $ 713 | $ 721 |
SEGMENT INFORMATION - Adjusted
SEGMENT INFORMATION - Adjusted EBITDA, Depreciation & Software Amortization, Other Intangible Amortization for Each Reportable Segment (Details) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
SEGMENT INFORMATION | ||
Adjusted EBITDA | $ 163 | $ 203 |
Depreciation & Software Amortization | 23 | 21 |
Other Intangible Amortization | 6 | 6 |
Facilities Maintenance | Reportable segment | ||
SEGMENT INFORMATION | ||
Adjusted EBITDA | 98 | 134 |
Depreciation & Software Amortization | 13 | 10 |
Other Intangible Amortization | 2 | 2 |
Construction & Industrial | Reportable segment | ||
SEGMENT INFORMATION | ||
Adjusted EBITDA | 65 | 69 |
Depreciation & Software Amortization | 10 | 11 |
Other Intangible Amortization | $ 4 | $ 4 |
SEGMENT INFORMATION - Reconcili
SEGMENT INFORMATION - Reconciliation to Consolidated Financial Statements (Details) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
SEGMENT INFORMATION | ||
Total Adjusted EBITDA | $ 163 | $ 203 |
Depreciation and amortization | 29 | 27 |
Stock-based compensation | 7 | 7 |
Restructuring and separation | 6 | (2) |
Acquisition and integration costs | 1 | |
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 |
REVENUE - Disaggregation of Rev
REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | |
May 03, 2020 | May 05, 2019 | |
Disaggregation of Revenue | ||
Net sales | $ 1,395 | $ 1,493 |
Facilities Maintenance | ||
Disaggregation of Revenue | ||
Net sales | 682 | 772 |
Facilities Maintenance | Maintenance, Repair, and Operations | ||
Disaggregation of Revenue | ||
Net sales | 610 | 692 |
Facilities Maintenance | Property Improvement | ||
Disaggregation of Revenue | ||
Net sales | 72 | 80 |
Construction & Industrial | ||
Disaggregation of Revenue | ||
Net sales | 713 | 721 |
Construction & Industrial | Non-Residential Construction | ||
Disaggregation of Revenue | ||
Net sales | 488 | 497 |
Construction & Industrial | Residential Construction | ||
Disaggregation of Revenue | ||
Net sales | 183 | 180 |
Construction & Industrial | Other | ||
Disaggregation of Revenue | ||
Net sales | $ 42 | $ 44 |