NOTE 10 — 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 three reportable segments, each of which is presented below:
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Facilities Maintenance—Facilities Maintenance distributes maintenance, repair and operations (‘‘MRO’’) products, provides value-add services and fabricates custom products to multifamily, hospitality, healthcare and institutional facilities. |
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·
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Waterworks—Waterworks distributes complete lines of water and wastewater transmission products, serving contractors and municipalities in the water and wastewater industries for non-residential and residential uses. |
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·
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Construction & Industrial - White Cap—Construction & Industrial - White Cap distributes specialized hardware, tools, engineered materials and safety products to non-residential and residential contractors. |
In addition to the reportable segments, the Company’s consolidated financial results include ‘‘Corporate & Other.’’ Corporate & Other includes the operating segment Home Improvement Solutions, which 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. Corporate & Other also includes costs related to our centralized support functions, which are comprised of finance, information technology, human resources, legal, supply chain and other support services, and removes inter-segment transactions.
The following tables present Net sales, Adjusted EBITDA, and other measures for each of the reportable segments and total continuing operations for the periods indicated (amounts in millions):
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Facilities
Maintenance
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Waterworks
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Construction &
Industrial –
White Cap
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Corporate &
Other
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Total
Continuing
Operations
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Three Months Ended May 1, 2016
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|
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|
|
|
|
|
|
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Net sales
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$
|
677
|
|
$
|
605
|
|
$
|
447
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|
$
|
52
|
|
$
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1,781
|
|
|
Adjusted EBITDA
|
|
134
|
|
48
|
|
43
|
|
(10
|
)
|
215
|
|
|
Depreciation(1) & Software Amortization
|
|
8
|
|
2
|
|
7
|
|
4
|
|
21
|
|
|
Other Intangible Amortization
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|
1
|
|
1
|
|
—
|
|
2
|
|
4
|
|
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Three Months Ended May 3, 2015
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|
|
|
|
|
|
|
|
|
|
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Net sales
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|
$
|
635
|
|
$
|
570
|
|
$
|
407
|
|
$
|
48
|
|
$
|
1,660
|
|
|
Adjusted EBITDA
|
|
122
|
|
45
|
|
34
|
|
(12
|
)
|
189
|
|
|
Depreciation(1) & Software Amortization
|
|
12
|
|
2
|
|
6
|
|
4
|
|
24
|
|
|
Other Intangible Amortization
|
|
1
|
|
1
|
|
—
|
|
2
|
|
4
|
|
|
(1)
| |
Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. |
Reconciliation to Consolidated Financial Statements
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Three Months Ended
|
|
|
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May 1, 2016
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May 3, 2015
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|
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Total Adjusted EBITDA
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|
$
|
215
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|
$
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189
|
|
|
Depreciation and amortization(1)
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|
25
|
|
28
|
|
|
Stock-based compensation
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6
|
|
5
|
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Restructuring
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7
|
|
—
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Other
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(1
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)
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—
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|
|
|
|
|
|
|
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Operating income
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|
178
|
|
156
|
|
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Interest expense, net
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85
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106
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Loss on extinguishment of debt(2)
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115
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|
—
|
|
|
|
|
|
|
|
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Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes
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(22
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)
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50
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|
|
Provision (benefit) for income taxes
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(8
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)
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(184
|
)
|
|
|
|
|
|
|
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Income (loss) from continuing operations
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(14
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)
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234
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|
|
|
|
|
|
|
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Less Income from discontinued operations, net of tax
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—
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|
8
|
|
|
|
|
|
|
|
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Net income (loss)
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$
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(14
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)
|
$
|
242
|
|
|
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|
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|
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(1)
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Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. |
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(2)
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Represents the loss on extinguishment of debt including the premium paid to redeem the debt as well as the write-off of unamortized deferred financing costs and other assets or liabilities associated with such debt. Also includes the costs of debt modification. |