HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest
industrial distributors in North America, today reported Net sales
of $827.5 million for the third quarter of fiscal 2020 ended
November 1, 2020, an increase of $2.3 million, or 0.3 percent, as
compared to the third quarter of fiscal 2019.
“I am very proud of the team as their focused execution
continued to deliver improved results, in the face of turbulent end
markets and organizational change,” stated Joe DeAngelo, Chairman
and CEO of HD Supply. “It is a testament to their dedication to our
customers and their commitment to safely delivering best-in-class
service.”
Gross profit decreased $3.7 million, or 1.1 percent, to $348.3
million for the third quarter of fiscal 2020, as compared to $352.0
million for the third quarter of fiscal 2019. Gross profit was 42.1
percent of Net sales for the third quarter of fiscal 2020, a
decrease of approximately 60 basis points from 42.7 percent for the
third quarter of fiscal 2019.
Operating income decreased $4.9 million, or 3.9 percent, to
$121.0 million for the third quarter of fiscal 2020, as compared to
$125.9 million for the third quarter of fiscal 2019. Operating
income was 14.6 percent of Net sales for the third quarter of
fiscal 2020, down approximately 70 basis points from 15.3 percent
for the third quarter of fiscal 2019.
Net income increased $1,476.3 million to $1,608.2 million for
the third quarter of fiscal 2020, as compared to $131.9 million for
the third quarter of fiscal 2019. The increase in Net income was
primarily due to the gain on the sale of the Construction &
Industrial business. Net income per diluted share increased $9.26
to $10.06 for the third quarter of fiscal 2020, as compared to
$0.80 for the third quarter of fiscal 2019.
Adjusted EBITDA increased $0.5 million, or 0.3 percent, to
$148.0 million for the third quarter of fiscal 2020, as compared to
$147.5 million for the third quarter of fiscal 2019. Adjusted
EBITDA was 17.9 percent of Net sales for the third quarter of
fiscal 2020, flat as compared to the third quarter of fiscal
2019.
Adjusted net income decreased $0.5 million, or 0.7 percent, to
$74.8 million for the third quarter of fiscal 2020, as compared to
$75.3 million for the third quarter of fiscal 2019. Adjusted net
income per diluted share increased $0.01, or 2.2 percent, to $0.47
for the third quarter of fiscal 2020, as compared to $0.46 for the
third quarter of fiscal 2019.
As of November 1, 2020, our combined liquidity of $2,751.7
million was comprised of $2,315.0 million in cash and cash
equivalents and $436.7 million of additional available borrowings
(excluding $139.4 million of permitted borrowings on available cash
balances) under HD Supply, Inc.'s senior asset-based lending
facility, based on qualifying inventory and receivables. Our
combined liquidity as of November 1, 2020 increased by $1,756.2
million from the end of second-quarter fiscal 2020 and by $2,123.3
million from the end of fiscal year 2019.
Third-Quarter Monthly Sales
Performance
Net sales for August, September and October of fiscal 2020 were
$268.4 million, $247.3 million and $311.8 million, respectively.
There were 20 selling days in August, 19 selling days in September,
and 25 selling days in October of fiscal 2020 and fiscal 2019.
Average year-over-year daily sales changes for August, September
and October of fiscal 2020 as compared to fiscal 2019 were an
increase of 1.1 percent, a decrease of 0.7 percent and an increase
of 0.3 percent, respectively.
Preliminary November
Sales Results
Preliminary Net sales in November 2020 were approximately $222.0
million, which represents a year-over-year average daily increase
of approximately 2.9 percent. There were 18 selling days in both
November 2020 and November 2019.
Sale of Construction and
Industrial
On October 19, 2020, HD Supply completed the sale of its
Construction & Industrial business and received cash proceeds
of approximately $2.8 billion, net of transaction cost payments of
approximately $34.9 million. In the three and nine months ended
November 1, 2020, the Company recognized a gain on sale of the
Construction & Industrial business of approximately $1.5
billion, net of tax of $257.1 million. The sale is subject to a
post-closing working capital adjustment which the Company expects
to settle by early 2021.
Debt Transactions and Termination of Cash Flow
Hedge
On October 20, 2020, HD Supply used a portion of the net
proceeds from the sale of the Construction & Industrial
business to repay $524.3 million aggregate principal of its Term
B-5 Loans which included $10.4 million of original issue discount.
As a result, the Company incurred a $4.7 million loss on
extinguishment of debt, which includes write-offs of $1.2 million
and $3.5 million of unamortized original issue discount and
unamortized deferred financing costs, respectively.
Additionally the Company initiated a voluntary partial
termination for $500.0 million of the notional amount of the
outstanding interest rate swap agreement. The Company paid $44.4
million to the counterparty to settle the liability and accrued
interest as of the termination date. The Company recognized a $43.6
million loss on the termination.
Acquisition by The
Home Depot
On November 15, 2020, The Home Depot, Inc. entered into a
definitive agreement to acquire HD Supply (the “Merger Agreement”).
Under the terms of the Merger Agreement, The Home Depot, Inc. has
agreed to commence a tender offer (the “Offer”), through a
wholly-owned subsidiary, to acquire all of the outstanding shares
of HD Supply common stock for $56 per share (“Share”) in cash. The
Boards of Directors of both The Home Depot, Inc. and HD Supply have
unanimously approved the terms of the Merger Agreement, and the
Board of Directors of HD Supply has resolved to recommend that
shareholders accept the offer, once it is commenced. The
acquisition is structured as an all-cash Offer for all outstanding
issued common stock of HD Supply followed by a merger (“Merger”) in
which the remaining shares of HD Supply would be converted into the
same U.S. dollar per share consideration as the Offer. The
acquisition is expected to be completed during The Home Depot,
Inc.’s fiscal fourth quarter, which ends on January 31, 2021, and
is subject to applicable regulatory approval and customary closing
conditions.
Non-GAAP Financial Measures
HD Supply supplements its reporting of Net income and Income
from continuing operations with non-GAAP measurements, including
Adjusted EBITDA, Adjusted net income, and Adjusted net income per
diluted share. This supplemental information should not be
considered in isolation or as a substitute for the GAAP
measurements. Additional information regarding Adjusted EBITDA,
Adjusted net income, and Adjusted net income per diluted share
referred to in this press release is included below under
“Reconciliation of Non-GAAP Measures.”
About HD Supply
HD Supply (www.hdsupply.com) is one of the largest wholesale
distributors in North America. The company provides a broad range
of products and value-add services to approximately 300,000
customers with leadership positions in the maintenance, repair and
operations sector. Through approximately 44 distribution centers,
across 25 States and two Canadian Provinces, the company's
approximately 5,500 associates provide localized, customer-tailored
products, services and expertise. For more information, visit
www.hdsupply.com.
Forward-Looking Statements and Preliminary
Results
This press release includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements are based on management's beliefs and assumptions and
information currently available to management and are subject to
known and unknown risks and uncertainties, many of which may be
beyond our control. We caution you that the forward-looking
information presented in this press release is not a guarantee of
future results, and that actual results may differ materially from
those made in or suggested by the forward-looking information
contained in this press release. Forward-looking statements
generally can be identified by the use of forward-looking
terminology such as "may," "plan," "seek," "comfortable with,"
"will," "expect," "intend," "estimate," "anticipate," "believe" or
"continue" or the negative thereof or variations thereon or similar
terminology. A number of important factors could cause actual
events to differ materially from those contained in or implied by
the forward-looking statements, including, without limitation, (i)
the impact of the coronavirus disease 2019 outbreak (“COVID-19”) on
the maintenance, repair and operations sector, in general, and the
financial position and operating results of our company, in
particular, which cannot be predicted and could change rapidly;
(ii) uncertainties as to the timing of the Offer and the Merger;
(iii) uncertainties as to how many of our stockholders will tender
their Shares in the Offer; (iv) the possibility that competing
acquisition proposals will be made; (v) the possibility that we
will terminate the Merger Agreement to enter into an alternative
transaction; (vi) the possibility that various closing conditions
for the transactions contemplated by the Merger Agreement may not
be satisfied or waived; (vii) the risk that the Merger Agreement
may be terminated in circumstances requiring us to pay a
termination fee; (viii) the potential impact of the announcement or
consummation of the proposed transactions on our relationships,
including with employees, suppliers and customers; and (ix) those
"Risk factors" in our annual report on Form 10-K, for the fiscal
year ended February 2, 2020, filed on March 17, 2020 and those
described from time to time in our, and HD Supply, Inc.'s, other
filings with the U.S. Securities and Exchange Commission (the
“SEC”), which can be found at the SEC's website www.sec.gov. Any
forward-looking information presented herein is made only as of the
date of this press release, and we do not undertake any obligation
to update or revise any forward-looking information to reflect
changes in assumptions, the occurrence of unanticipated events, or
otherwise.
|
|
HD SUPPLY
HOLDINGS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME Amounts in millions, except share and
per share data, Unaudited |
|
|
Three Months Ended |
|
Nine Months Ended |
|
November1,
2020 |
|
November 3, 2019 |
|
November 1, 2020 |
|
November 3, 2019 |
Net Sales |
$ |
827.5 |
|
$ |
825.2 |
|
|
$ |
2,269.0 |
|
$ |
2,426.0 |
|
Cost of sales |
|
479.2 |
|
|
473.2 |
|
|
|
1,311.0 |
|
|
1,388.4 |
|
Gross Profit |
|
348.3 |
|
|
352.0 |
|
|
|
958.0 |
|
|
1,037.6 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
|
205.7 |
|
|
209.3 |
|
|
|
597.6 |
|
|
625.9 |
|
Depreciation and amortization |
|
17.7 |
|
|
15.5 |
|
|
|
52.1 |
|
|
45.2 |
|
Restructuring and separation |
|
3.9 |
|
|
1.3 |
|
|
|
7.6 |
|
|
(0.4 |
) |
Total operating expenses |
|
227.3 |
|
|
226.1 |
|
|
|
657.3 |
|
|
670.7 |
|
Operating Income |
|
121.0 |
|
|
125.9 |
|
|
|
300.7 |
|
|
366.9 |
|
Interest expense |
|
22.0 |
|
|
27.4 |
|
|
|
71.1 |
|
|
83.4 |
|
Loss on extinguishment &
modification of debt |
|
5.5 |
|
|
— |
|
|
|
5.5 |
|
|
— |
|
Other (income) expense,
net |
|
43.6 |
|
|
— |
|
|
|
43.6 |
|
|
— |
|
Income from Continuing Operations Before Provision for
Income Taxes |
|
49.9 |
|
|
98.5 |
|
|
|
180.5 |
|
|
283.5 |
|
Provision for income
taxes |
|
14.4 |
|
|
25.1 |
|
|
|
46.6 |
|
|
71.1 |
|
Income Before Provision for Income Taxes |
|
35.5 |
|
|
73.4 |
|
|
|
133.9 |
|
|
212.4 |
|
Income from discontinued
operations, net of tax |
|
1,572.2 |
|
|
58.5 |
|
|
|
1,677.3 |
|
|
161.3 |
|
Net Income |
$ |
1,608.2 |
|
$ |
131.9 |
|
|
$ |
1,811.2 |
|
$ |
373.7 |
|
Other comprehensive income
(loss): |
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
14.7 |
|
|
— |
|
|
|
15.0 |
|
|
0.2 |
|
Unrealized gain (loss) on cash flow hedge, net of tax of $(12.5),
$0.1, $(7.5), and $7.1 |
|
35.6 |
|
|
(0.3 |
) |
|
|
21.1 |
|
|
(20.5 |
) |
Total Comprehensive Income |
$ |
1,658.5 |
|
$ |
131.6 |
|
|
$ |
1,847.3 |
|
$ |
353.4 |
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding (thousands) |
|
|
|
|
|
|
|
Basic |
|
159,057 |
|
|
164,638 |
|
|
|
160,271 |
|
|
168,062 |
|
Diluted |
|
159,804 |
|
|
165,142 |
|
|
|
160,753 |
|
|
168,645 |
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Share(1): |
|
|
|
|
|
|
|
Income from Continuing Operations |
$ |
0.22 |
|
$ |
0.45 |
|
|
$ |
0.84 |
|
$ |
1.26 |
|
Income from Discontinued Operations |
$ |
9.89 |
|
$ |
0.36 |
|
|
$ |
10.47 |
|
$ |
0.96 |
|
Net Income |
$ |
10.11 |
|
$ |
0.80 |
|
|
$ |
11.30 |
|
$ |
2.22 |
|
|
|
|
|
|
|
|
|
Diluted
Earnings Per Share(1): |
|
|
|
|
|
|
|
Income from Continuing Operations |
$ |
0.22 |
|
$ |
0.44 |
|
|
$ |
0.83 |
|
$ |
1.26 |
|
Income from Discontinued Operations |
$ |
9.84 |
|
$ |
0.35 |
|
|
$ |
10.43 |
|
$ |
0.96 |
|
Net Income |
$ |
10.06 |
|
$ |
0.80 |
|
|
$ |
11.27 |
|
$ |
2.22 |
|
(1) May not
foot due to rounding. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HD SUPPLY
HOLDINGS, INC.CONSOLIDATED BALANCE SHEETSAmounts
in millions, except per share data, Unaudited |
|
November 1,
2020 |
|
February 2, 2020 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
2,315.0 |
|
|
$ |
34.4 |
|
Receivables, less allowance for credit losses of $10.2 and
$7.6 |
|
400.1 |
|
|
|
362.1 |
|
Inventories |
|
388.6 |
|
|
|
427.1 |
|
Current assets of discontinued operations |
|
— |
|
|
|
748.0 |
|
Other current assets |
|
73.6 |
|
|
|
91.3 |
|
Total current assets |
|
3,177.3 |
|
|
|
1,662.9 |
|
Property and equipment,
net |
|
260.2 |
|
|
|
271.2 |
|
Operating lease right-of-use
assets |
|
228.7 |
|
|
|
233.2 |
|
Goodwill |
|
1,604.5 |
|
|
|
1,604.5 |
|
Intangible assets, net |
|
59.8 |
|
|
|
68.4 |
|
Deferred tax asset |
|
3.8 |
|
|
|
2.1 |
|
Non-current assets of
discontinued operations |
|
— |
|
|
|
861.5 |
|
Other assets |
|
9.2 |
|
|
|
11.7 |
|
Total assets |
$ |
5,343.5 |
|
|
$ |
4,715.5 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
270.0 |
|
|
$ |
218.7 |
|
Accrued compensation and benefits |
|
40.8 |
|
|
|
37.9 |
|
Current installments of long-term debt |
|
10.7 |
|
|
|
10.7 |
|
Current lease liabilities |
|
51.0 |
|
|
|
50.8 |
|
Current liabilities of discontinued operations |
|
— |
|
|
|
341.2 |
|
Accrued income taxes |
|
282.3 |
|
|
|
— |
|
Other current liabilities |
|
201.1 |
|
|
|
154.8 |
|
Total current liabilities |
|
855.9 |
|
|
|
814.1 |
|
Long-term debt, excluding
current installments |
|
1,250.8 |
|
|
|
2,035.4 |
|
Deferred tax liabilities |
|
22.0 |
|
|
|
32.7 |
|
Long-term lease
liabilities |
|
186.6 |
|
|
|
192.6 |
|
Non-current liabilities of
discontinued operations |
|
— |
|
|
|
203.8 |
|
Other liabilities |
|
75.9 |
|
|
|
84.7 |
|
Total liabilities |
|
2,391.2 |
|
|
|
3,363.3 |
|
Stockholders’
equity: |
|
|
|
|
|
|
|
Common stock, par value $0.01;
1 billion shares authorized; 155.6 million |
|
|
|
|
|
|
|
and 161.4 million shares issued and outstanding at November 1,
2020, and February 2, 2020, respectively |
|
2.1 |
|
|
|
2.0 |
|
Paid-in capital |
|
4,117.2 |
|
|
|
4,097.4 |
|
Retained Earnings (Accumulated
deficit) |
|
689.1 |
|
|
|
(1,122.1 |
) |
Accumulated other
comprehensive loss |
|
(16.0 |
) |
|
|
(52.1 |
) |
Treasury stock, at cost, 50.6
million and 44.1 million shares at November 1, |
|
|
|
|
|
|
|
2020 and February 2, 2020, respectively |
|
(1,840.1 |
) |
|
|
(1,573.0 |
) |
Total stockholders’ equity |
|
2,952.3 |
|
|
|
1,352.2 |
|
Total liabilities and stockholders’ equity |
$ |
5,343.5 |
|
|
$ |
4,715.5 |
|
|
|
|
|
|
|
|
|
HD SUPPLY HOLDINGS, INC.CONSOLIDATED STATEMENTS OF
CASH FLOWSAmounts in millions, Unaudited |
|
Nine Months Ended |
|
November 1, 2020 |
|
November 3, 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
Net income |
$ |
1,811.2 |
|
|
$ |
373.7 |
|
Reconciliation of net income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
|
78.2 |
|
|
|
82.7 |
|
Provision for credit losses |
|
11.8 |
|
|
|
7.4 |
|
Non-cash interest expense |
|
4.5 |
|
|
|
4.6 |
|
Loss on extinguishment & modification of debt |
|
5.5 |
|
|
|
— |
|
Gain on sale of business |
|
(1,762.0 |
) |
|
|
— |
|
Stockbased compensation expense |
|
14.7 |
|
|
|
18.1 |
|
Deferred income taxes |
|
(27.4 |
) |
|
|
101.8 |
|
Other |
|
— |
|
|
|
2.7 |
|
Changes in assets and liabilities, net of the effects of
acquisitions & dispositions: |
|
|
|
(Increase) decrease in receivables |
|
(83.1 |
) |
|
|
(133.7 |
) |
(Increase) decrease in inventories |
|
17.3 |
|
|
|
(34.3 |
) |
(Increase) decrease in other current assets |
|
8.2 |
|
|
|
(2.5 |
) |
(Increase) decrease in other assets |
|
(2.1 |
) |
|
|
0.3 |
|
Increase (decrease) in accounts payable and accrued
liabilities |
|
425.2 |
|
|
|
75.8 |
|
Increase (decrease) in other long-term liabilities |
|
21.9 |
|
|
|
— |
|
Net cash provided by operating activities |
|
523.9 |
|
|
|
496.6 |
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
Capital
expenditures |
|
(54.6 |
) |
|
|
(89.1 |
) |
Proceeds
from sales of property and equipment |
|
0.3 |
|
|
|
(9.4 |
) |
Proceeds
from sales of businesses, net |
|
2,845.5 |
|
|
|
— |
|
Payments
for businesses acquired, net of cash acquired |
|
— |
|
|
|
2.7 |
|
Net cash provided by (used in) investing activities |
|
2,791.2 |
|
|
|
(95.8 |
) |
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
Purchase
of treasury shares |
|
(246.9 |
) |
|
|
(320.5 |
) |
Repayments of long-term debt |
|
(532.3 |
) |
|
|
(8.0 |
) |
Repayments of financing liabilities |
|
— |
|
|
|
(87.9 |
) |
Borrowings on long-term revolver debt |
|
434.1 |
|
|
|
978.0 |
|
Repayments on long-term revolver debt |
|
(693.6 |
) |
|
|
(964.3 |
) |
Proceeds
from issuance of common stock under employee benefit plans |
|
8.9 |
|
|
|
6.8 |
|
Tax
withholdings on stock-based awards |
|
(3.8 |
) |
|
|
(5.5 |
) |
Debt
issuance and modification costs |
|
— |
|
|
|
(0.1 |
) |
Other
financing activities |
|
(1.0 |
) |
|
|
(0.8 |
) |
Net cash provided by (used in) financing activities |
|
(1,034.6 |
) |
|
|
(402.3 |
) |
Effect
of exchange rates on cash and cash equivalents |
|
0.1 |
|
|
|
— |
|
Increase
(decrease) in cash and cash equivalents |
$ |
2,280.6 |
|
|
$ |
(1.5 |
) |
Cash and
cash equivalents at beginning of period |
|
34.4 |
|
|
|
38.0 |
|
Cash and
cash equivalents at end of period |
$ |
2,315.0 |
|
|
$ |
36.5 |
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Measures
Adjusted EBITDA and Adjusted net income are not recognized terms
under GAAP and do not purport to be alternatives to Net income as a
measure of operating performance. We present Adjusted EBITDA and
Adjusted net income because each is a primary measure used by
management to evaluate operating performance. In addition, we
present Adjusted net income to measure our overall profitability as
we believe it is an important measure of our performance. We
believe the presentation of Adjusted EBITDA and Adjusted net income
enhances investors' overall understanding of the financial
performance of our business.
Adjusted EBITDA is based on "Consolidated EBITDA," a measure
which is defined in our senior credit facilities and used in
calculating financial ratios in several material debt covenants.
Adjusted EBITDA is defined as Net income less Income from
discontinued operations, net of tax, plus (i) Interest expense and
Interest income, net, (ii) Provision for income taxes, (iii)
Depreciation and amortization and further adjusted to exclude loss
on extinguishment of debt, non-cash items and certain other
adjustments to Consolidated Net Income permitted in calculating
Consolidated EBITDA under our senior credit facilities.
Adjusted net income is defined as Net income less Income from
discontinued operations, net of tax, further adjusted for loss on
extinguishment of debt, certain non-cash, non-recurring or unusual
items, net of tax.
We compensate for the limitations of using non-GAAP financial
measures by using them to supplement GAAP results to provide a more
complete understanding of the factors and trends affecting the
business than GAAP results alone. Because not all companies use
identical calculations, our presentation of Adjusted EBITDA and
Adjusted net income may not be comparable to other similarly titled
measures of other companies.
Adjusted EBITDA and Adjusted net income have limitations as
analytical tools and should not be considered in isolation or as
substitutes for analyzing our results as reported under GAAP. Some
of these limitations are:
- Adjusted EBITDA and Adjusted net income
do not reflect changes in, or cash requirements for, our working
capital needs;
- Adjusted EBITDA does not reflect our
interest expense, or the requirements necessary to service interest
or principal payments on our debt;
- Adjusted EBITDA does not reflect our
income tax expenses or the cash requirements to pay our taxes;
- Adjusted EBITDA and Adjusted net income
do not reflect historical cash expenditures or future requirements
for capital expenditures or contractual commitments; and
- although depreciation and amortization
charges are non-cash charges, the assets being depreciated and
amortized will often have to be replaced in the future, and
Adjusted EBITDA does not reflect any cash requirements for such
replacements.
Adjusted EBITDA
The following table presents a reconciliation of Net income, the
most directly comparable financial measure under U.S. GAAP, to
Adjusted EBITDA for the periods presented
(amounts in millions):
|
Three Months Ended |
|
Nine Months Ended |
|
November 1,
2020 |
|
November 3,
2019 |
|
November 1,
2020 |
|
November 3,
2019 |
Net income |
$ |
1,608.2 |
|
$ |
131.9 |
|
$ |
1,811.2 |
|
$ |
373.7 |
|
Less income from discontinued
operations, net of tax |
|
1,572.7 |
|
|
58.5 |
|
|
1,677.3 |
|
|
161.3 |
|
Income from continuing
operations |
|
35.5 |
|
|
73.4 |
|
|
133.9 |
|
|
212.4 |
|
Interest expense, net |
|
22.0 |
|
|
27.4 |
|
|
71.1 |
|
|
83.4 |
|
Provision for income
taxes |
|
14.4 |
|
|
25.1 |
|
|
46.6 |
|
|
71.1 |
|
Depreciation and
amortization |
|
17.7 |
|
|
15.5 |
|
|
52.1 |
|
|
45.2 |
|
Loss on extinguishment &
modification of debt (1) |
|
5.5 |
|
|
— |
|
|
5.5 |
|
|
— |
|
Voluntary interest rate swap
termination (2) |
|
43.6 |
|
|
— |
|
|
43.6 |
|
|
— |
|
Restructuring and separation
charges (3) |
|
3.9 |
|
|
1.3 |
|
|
7.6 |
|
|
(0.4 |
) |
Stock-based compensation |
|
5.3 |
|
|
3.6 |
|
|
13.8 |
|
|
11.9 |
|
Acquisition and integration
costs (4) |
|
— |
|
|
1.2 |
|
|
— |
|
|
1.3 |
|
Other |
|
0.1 |
|
|
— |
|
|
— |
|
|
— |
|
Adjusted EBITDA |
$ |
148.0 |
|
$ |
147.5 |
|
$ |
374.2 |
|
$ |
424.9 |
|
(1) Represents the loss on
extinguishment of debt, including the write-off of unamortized
deferred financing costs, original issue discount, and other assets
or liabilities associated with such debt.(2) Represents
the loss incurred to terminate $500 million notional value of the
Company’s interest rate swap during the three months ended November
1, 2020.(3) Represents the costs related to separation
activities and personnel changes, primarily severance and other
employee-related costs, and costs related to deferring certain
projects during the separation preparations. For the nine months
ended November 3, 2019, the Company recognized a favorable
termination of the lease for its former corporate
headquarters.(4) Represents the costs incurred in the
acquisition and integration of business acquisitions.
Adjusted Net Income
The following table presents a reconciliation of Net income and
Income from continuing operations, the most directly comparable
financial measure under U.S. GAAP, to Adjusted net income for the
periods presented (amounts in millions):
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
November 1, 2020 |
|
November 3, 2019 |
|
November 1, 2020 |
|
November 3, 2019 |
Net income |
|
$ |
1,608.2 |
|
|
$ |
131.9 |
|
|
$ |
1,811.2 |
|
|
$ |
373.7 |
|
Less income from discontinued
operations, net of tax |
|
|
1,572.7 |
|
|
|
58.5 |
|
|
|
1,677.3 |
|
|
|
161.3 |
|
Income from continuing
operations |
|
|
35.5 |
|
|
|
73.4 |
|
|
|
133.9 |
|
|
|
212.4 |
|
Plus: Restructuring and
separation charges (1) |
|
|
3.9 |
|
|
|
1.3 |
|
|
|
7.6 |
|
|
|
(0.4 |
) |
Plus: Loss on extinguishment
& modification of debt (2) |
|
|
5.5 |
|
|
|
— |
|
|
|
5.5 |
|
|
|
— |
|
Plus: Voluntary interest rate
swap termination (3) |
|
|
43.6 |
|
|
|
— |
|
|
|
43.6 |
|
|
|
— |
|
Plus: Acquisition and
integration costs (4) |
|
|
— |
|
|
|
1.2 |
|
|
|
— |
|
|
|
1.3 |
|
Plus: Tax on adjustments
(5) |
|
|
(13.7 |
) |
|
|
(0.6 |
) |
|
|
(14.7 |
) |
|
|
(0.2 |
) |
Adjusted Net
Income |
|
$ |
74.8 |
|
|
$ |
75.3 |
|
|
$ |
175.9 |
|
|
$ |
213.1 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted average
common shares outstanding |
|
|
159,804 |
|
|
|
165,142 |
|
|
|
160,753 |
|
|
|
168,645 |
|
Adjusted net income per share
– diluted |
|
$ |
0.47 |
|
|
$ |
0.46 |
|
|
$ |
1.09 |
|
|
$ |
1.26 |
|
(1) Represents the costs related to
separation activities and personnel changes, primarily severance
and other employee-related costs, and costs related to deferring
certain projects during the separation preparations. For the nine
months ended November 3, 2019, the Company recognized a favorable
termination of the lease for its former corporate
headquarters.(2) Represents the loss on extinguishment
of debt, including the write-off of unamortized deferred financing
costs, original issue discount, and other assets or liabilities
associated with such debt.(3) Represents the loss
incurred to terminate $500 million notional value of the Company’s
interest rate swap during the three months ended November 1,
2020.(4) Represents the costs incurred in the
acquisition and integration of business
acquisitions.(5) Adjustments to Net income have been tax
effected at the Company’s combined annual federal and statutory tax
rates of 25.8% for the three and nine months ended November 1, 2020
and 25.7% for the three and nine months ended November 3, 2019.
Results Revised for Discontinued Operations
On October 19, 2020, the Company completed the sale of its
Construction & Industrial business. In accordance with
Accounting Standards Codification (“ASC”) 205-20, “Discontinued
Operations,” as amended, the results of the Construction &
Industrial business are classified as discontinued operations. The
presentation of discontinued operations includes revenues and
expenses of the discontinued operations and gain/loss on the
disposition of businesses, net of tax, as one line item on the
Consolidated Statements of Operations and Comprehensive Income.
The following tables present HD Supply’s quarterly results of
operations for the second quarter of fiscal 2020, the first quarter
of fiscal 2020, and fiscal 2019, revised to reflect the
Construction & Industrial operations as discontinued operations
(amounts in millions, except share and per share amounts,
unaudited):
|
Q1-20 |
|
Q2-20 |
Net sales |
$ |
681.4 |
|
$ |
760.1 |
Cost of sales |
|
384.5 |
|
|
447.3 |
Gross profit |
|
296.9 |
|
|
312.8 |
Operating expenses: |
|
|
|
Selling, general and administrative |
|
205.4 |
|
|
186.5 |
Depreciation and amortization |
|
16.9 |
|
|
17.5 |
Restructuring & separation charges |
|
2.1 |
|
|
1.6 |
Total operating expenses |
|
224.4 |
|
|
205.6 |
Operating income |
|
72.5 |
|
|
107.2 |
Interest expense |
|
25.5 |
|
|
23.6 |
Income from continuing operations before provision for income
taxes |
|
47.0 |
|
|
83.6 |
Provision for income
taxes |
|
11.4 |
|
|
20.8 |
Income from continuing operations |
|
35.6 |
|
|
62.8 |
Income from discontinued
operations, net of tax |
|
36.1 |
|
|
68.5 |
Net income |
$ |
71.7 |
|
|
131.3 |
|
|
|
|
Weighted Average Common Shares Outstanding
(thousands) |
|
|
|
Basic |
|
160,830 |
|
|
160,925 |
Diluted |
|
161,190 |
|
|
161,282 |
Basic Earnings Per Share(1): |
|
|
|
Income from continuing operations |
$ |
0.22 |
|
$ |
0.39 |
Income from discontinued operations |
|
0.22 |
|
|
0.43 |
Net income |
$ |
0.45 |
|
$ |
0.82 |
Diluted Earnings Per
Share(1): |
|
|
|
Income from continuing operations |
$ |
0.22 |
|
$ |
0.39 |
Income from discontinued operations |
|
0.22 |
|
|
0.42 |
Net income (loss) |
$ |
0.44 |
|
$ |
0.81 |
Non-GAAP financial data: |
|
|
|
Adjusted EBITDA |
$ |
96.2 |
|
$ |
130.0 |
Adjusted Net Income |
$ |
37.2 |
|
$ |
63.9 |
Weighted
Average Common Shares Outstanding (thousands) |
|
|
|
Basic |
|
160,830 |
|
|
160,925 |
Diluted |
|
161,190 |
|
|
161,282 |
Adjusted Net income per share - Basic |
$ |
0.23 |
|
$ |
0.40 |
Adjusted Net income per share - Diluted |
$ |
0.23 |
|
$ |
0.40 |
|
|
|
|
|
|
(1) May not foot due to rounding. |
|
|
|
|
|
|
|
|
|
|
|
|
Q1-19 |
|
Q2-19 |
|
Q3-19 |
|
Q4-19 |
|
Fiscal 2019 |
Net sales |
$ |
771.6 |
|
|
$ |
829.2 |
|
$ |
825.2 |
|
$ |
700.8 |
|
$ |
3,126.8 |
Cost of sales |
|
437.1 |
|
|
|
478.1 |
|
|
473.2 |
|
|
399.4 |
|
|
1,787.8 |
Gross profit |
|
334.5 |
|
|
|
351.1 |
|
|
352.0 |
|
|
301.4 |
|
|
1,339.0 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
208.7 |
|
|
|
207.9 |
|
|
209.3 |
|
|
191.1 |
|
|
817.0 |
Depreciation and amortization |
|
14.3 |
|
|
|
15.4 |
|
|
15.5 |
|
|
17.6 |
|
|
62.8 |
Restructuring charge |
|
(1.7 |
) |
|
|
— |
|
|
1.3 |
|
|
1.3 |
|
|
0.9 |
Total operating expenses |
|
221.3 |
|
|
|
223.3 |
|
|
226.1 |
|
|
210.0 |
|
|
880.7 |
Operating income |
|
113.2 |
|
|
|
127.8 |
|
|
125.9 |
|
|
91.4 |
|
|
458.3 |
Interest expense |
|
28.3 |
|
|
|
27.7 |
|
|
27.4 |
|
|
26.7 |
|
|
110.1 |
Income from continuing operations before provision for income
taxes |
|
84.9 |
|
|
|
100.1 |
|
|
98.5 |
|
|
64.7 |
|
|
348.2 |
Provision for income
taxes |
|
20.5 |
|
|
|
25.5 |
|
|
25.1 |
|
|
20.1 |
|
|
91.2 |
Income from continuing operations |
|
64.4 |
|
|
|
74.6 |
|
|
73.4 |
|
|
44.6 |
|
|
257.0 |
Income from discontinued
operations, net of tax |
|
42.6 |
|
|
|
60.2 |
|
|
58.5 |
|
|
33.6 |
|
|
194.9 |
Net income |
$ |
107.0 |
|
|
$ |
134.8 |
|
$ |
131.9 |
|
$ |
78.2 |
|
$ |
451.9 |
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding
(thousands) |
|
|
|
|
|
|
|
|
|
Basic |
|
170,000 |
|
|
|
169,546 |
|
|
164,638 |
|
|
161,436 |
|
|
166,405 |
Diluted |
|
170,712 |
|
|
|
170,057 |
|
|
165,142 |
|
|
162,040 |
|
|
166,989 |
Basic Earnings Per Share(1): |
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
0.38 |
|
|
$ |
0.44 |
|
$ |
0.45 |
|
$ |
0.28 |
|
$ |
1.54 |
Income from discontinued operations |
|
0.25 |
|
|
|
0.36 |
|
|
0.36 |
|
|
0.21 |
|
|
1.17 |
Net income |
$ |
0.63 |
|
|
$ |
0.80 |
|
$ |
0.80 |
|
$ |
0.48 |
|
$ |
2.72 |
Diluted Earnings Per
Share(1): |
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
0.38 |
|
|
$ |
0.44 |
|
$ |
0.44 |
|
$ |
0.28 |
|
$ |
1.54 |
Income from discontinued operations |
|
0.25 |
|
|
|
0.35 |
|
|
0.35 |
|
|
0.21 |
|
|
1.17 |
Net income |
$ |
0.63 |
|
|
$ |
0.79 |
|
$ |
0.80 |
|
$ |
0.48 |
|
$ |
2.71 |
Non-GAAP financial data: |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
130.8 |
|
|
$ |
146.6 |
|
$ |
147.5 |
|
$ |
113.6 |
|
$ |
538.5 |
Adjusted Net Income |
$ |
63.2 |
|
|
$ |
74.6 |
|
$ |
75.3 |
|
$ |
45.5 |
|
$ |
258.6 |
Weighted
Average Common Shares Outstanding (thousands) |
|
|
|
|
|
|
|
|
|
Basic |
|
170,000 |
|
|
|
169,546 |
|
|
164,638 |
|
|
161,436 |
|
|
166,405 |
Diluted |
|
170,712 |
|
|
|
170,057 |
|
|
165,142 |
|
|
162,040 |
|
|
166,989 |
Adjusted Net income per share - Basic |
$ |
0.37 |
|
|
$ |
0.44 |
|
$ |
0.46 |
|
$ |
0.28 |
|
$ |
1.55 |
Adjusted Net income per share - Diluted |
$ |
0.37 |
|
|
$ |
0.44 |
|
$ |
0.46 |
|
$ |
0.28 |
|
$ |
1.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) May not foot due to rounding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table represents a reconciliation of Net income
and income from continuing operations, the most directly comparable
financial measures under U.S. GAAP, for the first and second
quarters of fiscal 2020 as well as fiscal 2019, revised to reflect
the Construction & Industrial operations as discontinued
operations for all periods presented, to Adjusted EBITDA for the
periods presented (amounts in millions):
|
Q1-20 |
Q2-20 |
|
|
|
Net income |
$ |
71.1 |
$ |
131.3 |
|
|
|
|
Less income from discontinued
operations, net of tax |
|
36.1 |
|
68.5 |
|
|
|
|
Income
from continuing operations |
|
35.6 |
|
62.8 |
|
|
|
|
Interest expense, net |
|
25.5 |
|
23.6 |
|
|
|
|
Provision for income
taxes |
|
11.4 |
|
20.8 |
|
|
|
|
Depreciation and
amortization |
|
16.9 |
|
17.5 |
|
|
|
|
Stock-based compensation |
|
4.6 |
|
3.9 |
|
|
|
|
Restructuring charges (i) |
|
2.1 |
|
1.6 |
|
|
|
|
Other |
|
0.1 |
|
(0.2 |
) |
|
|
|
Adjusted
EBITDA |
$ |
96.2 |
|
130.0 |
|
|
|
|
|
Q1-19 |
|
Q2-19 |
|
Q3-19 |
|
Q4-19 |
|
Fiscal 2019 |
Net income (loss) |
$ |
107.0 |
|
|
$ |
134.8 |
|
|
$ |
131.9 |
|
$ |
78.2 |
|
$ |
451.9 |
Less income from discontinued
operations, net of tax |
|
42.6 |
|
|
|
60.2 |
|
|
|
58.5 |
|
|
33.6 |
|
|
194.9 |
Income (loss) from
continuing operations |
|
64.4 |
|
|
|
74.6 |
|
|
|
73.4 |
|
|
44.6 |
|
|
257.0 |
Interest expense, net |
|
28.3 |
|
|
|
27.7 |
|
|
|
27.4 |
|
|
26.7 |
|
|
110.1 |
Provision (benefit) for income
taxes |
|
20.5 |
|
|
|
25.5 |
|
|
|
25.1 |
|
|
20.1 |
|
|
91.2 |
Depreciation and
amortization |
|
14.3 |
|
|
|
15.4 |
|
|
|
15.5 |
|
|
17.6 |
|
|
62.8 |
Stock-based compensation |
|
4.9 |
|
|
|
3.4 |
|
|
|
3.6 |
|
|
3.1 |
|
|
15.0 |
Restructuring charges (i) |
|
(1.7 |
) |
|
|
— |
|
|
|
1.3 |
|
|
1.3 |
|
|
0.9 |
Acquisition and integration
costs (ii) |
|
— |
|
|
|
0.1 |
|
|
|
1.2 |
|
|
0.1 |
|
|
1.4 |
Other |
|
0.1 |
|
|
|
(0.1 |
) |
|
|
— |
|
|
0.1 |
|
|
0.1 |
Adjusted
EBITDA |
$ |
130.8 |
|
|
$ |
146.6 |
|
|
$ |
147.5 |
|
$ |
113.6 |
|
$ |
538.5 |
(i) Represents the costs related to
separation activities and personnel changes, primarily severance
and other employee-related costs, and costs related to deferring
certain projects during the separation preparations. During fiscal
2019, the Company recognized a favorable termination of the lease
for its former corporate headquarters.(ii) Represents the
costs incurred in the acquisition and integration of business
acquisitions.
The following table represents a reconciliation of Net income
and Income from continuing operations, the most directly comparable
financial measures under U.S. GAAP, for the first and second
quarters of fiscal 2020 as well as fiscal 2019, revised to reflect
the Construction & Industrial operations as discontinued
operations for all periods presented, to Adjusted Net Income for
the periods presented (amounts in millions):
|
Q1-20 |
Q2-20 |
|
|
|
Net income |
$ |
71.1 |
|
$ |
131.3 |
|
|
|
|
Less income from discontinued
operations, net of tax |
|
36.1 |
|
|
68.5 |
|
|
|
|
Income from continuing
operations |
|
35.6 |
|
|
62.8 |
|
|
|
|
Restructuring charges (i) |
|
2.1 |
|
|
1.6 |
|
|
|
|
Tax on adjustments (ii) |
|
(0.5 |
) |
|
(0.5 |
) |
|
|
|
Adjusted
Net income |
$ |
37.2 |
|
$ |
63.9 |
|
|
|
|
|
Q1-19 |
|
Q2-19 |
|
Q3-19 |
|
Q4-19 |
|
Fiscal 2019 |
Net income (loss) |
$ |
107.0 |
|
|
$ |
134.8 |
|
|
$ |
131.9 |
|
|
$ |
78.2 |
|
|
$ |
451.9 |
|
Less income from discontinued
operations, net of tax |
|
42.6 |
|
|
|
60.2 |
|
|
|
58.5 |
|
|
|
33.6 |
|
|
|
194.9 |
|
Income (loss) from
continuing operations |
|
64.4 |
|
|
|
74.6 |
|
|
|
73.4 |
|
|
|
44.6 |
|
|
|
257.0 |
|
Restructuring charges (i) |
|
(1.7 |
) |
|
|
— |
|
|
|
1.3 |
|
|
|
1.3 |
|
|
|
0.9 |
|
Acquisition and integration
costs (iii) |
|
— |
|
|
|
0.1 |
|
|
|
1.2 |
|
|
|
0.1 |
|
|
|
1.4 |
|
Tax on adjustments (ii) |
|
0.5 |
|
|
|
(0.1 |
) |
|
|
(0.6 |
) |
|
|
(0.5 |
) |
|
|
(0.7 |
) |
Adjusted
Net income |
$ |
63.2 |
|
|
$ |
74.6 |
|
|
$ |
75.3 |
|
|
$ |
45.5 |
|
|
$ |
258.6 |
|
(i) Represents the costs related to
separation activities and personnel changes, primarily severance
and other employee-related costs, and costs related to deferring
certain projects during the separation preparations. During fiscal
2019, the Company recognized a favorable termination of the lease
for its former corporate headquarters.(ii) Adjustments
to Net income have been tax effected at the Company’s combined
annual federal and statutory tax rates of 25.8% for each quarter in
fiscal 2020 and 25.7% for each quarter in fiscal
2019.(iii) Represents the costs incurred in the acquisition
and integration of business acquisitions.
Investor and Media Contact:Charlotte
McLaughlinHD Supply Investor
Relations770-852-9100InvestorRelations@hdsupply.com Charlotte.McLaughlin@hdsupply.com
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