NOTE 15—GUARANTOR SUBSIDIARIES

The Company has issued First Priority Notes, Second Priority Notes, 11.5% Senior Notes, 7.5% Senior Notes, Senior Subordinated Notes, and Old Senior Subordinated Notes (collectively the "Notes") guaranteed by certain of its subsidiaries (the "Guarantor Subsidiaries"). The Guarantor Subsidiaries are direct or indirect wholly-owned domestic subsidiaries of the Company. The subsidiaries of the Company that do not guarantee the Notes ("Non-guarantor Subsidiaries") are direct or indirect wholly-owned subsidiaries of the Company and primarily include the Company's operations in Canada and a non-operating subsidiary in the United States that previously held an investment of the Company's Old Senior Subordinated Notes, which was eliminated in consolidation. During fiscal 2012, the investment in the Old Senior Subordinated Notes was contributed to the Parent in a non-cash transaction. The Parent retired this portion of the Old Senior Subordinated Notes. These transactions had no impact on the consolidated results of operations or financial position.

In connection with the Notes, the Company determined the need for compliance with Rule 3-10 of SEC Regulation S-X ("Rule 3-10"). In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(d) of SEC Regulation S-X. The following supplemental financial information sets forth, on a consolidating basis, the condensed statements of operations and comprehensive income (loss), the condensed balance sheets, and the condensed statements of cash flows for the parent company issuer of the Notes, HD Supply, Inc., (the "Parent Issuer"), for the Guarantor Subsidiaries and for the Non-guarantor Subsidiaries and total consolidated HD Supply, Inc. and subsidiaries (amounts in millions):

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	Fiscal Year 2012

	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	7,608		$	428		$	(1	)	$	8,035
Cost of sales		—			5,398			317			—			5,715

Gross Profit		—			2,210			111			(1	)		2,320
Operating expenses:
Selling, general and administrative		64			1,504			94			(1	)		1,661
Depreciation and amortization		13			321			2			—			336
Goodwill & other intangible asset impairment		—			152			—			—			152

Total operating expenses		77			1,977			96			(1	)		2,149
Operating Income (Loss)		(77	)		233			15			—			171
Interest expense		715			301			1			(359	)		658
Interest (income)		(302	)		(3	)		(54	)		359			—
Net (earnings) loss of equity affiliates		14			—			—			(14	)		—
Loss on extinguishment of debt		709			—			—			—			709

Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes		(1,213	)		(65	)		68			14			(1,196	)
Provision (benefit) for income taxes		(22	)		—			25			—			3

Income (Loss) from Continuing Operations		(1,191	)		(65	)		43			14			(1,199	)
Income (loss) from discontinued operations, net of tax		12			8			—			—			20

Net Income (Loss)	$	(1,179	)	$	(57	)	$	43		$	14		$	(1,179	)

Other comprehensive income—foreign currency translation adjustment		—			—			—			—			—

Total Comprehensive Income (Loss)	$	(1,179	)	$	(57	)	$	43		$	14		$	(1,179	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Continued)

	Fiscal Year 2011

	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	6,630		$	398		$	—		$	7,028
Cost of sales		—			4,720			294			—			5,014

Gross Profit		—			1,910			104			—			2,014
Operating expenses:
Selling, general and administrative		78			1,372			82			—			1,532
Depreciation and amortization		12			313			2			—			327

Total operating expenses		90			1,685			84			—			1,859
Operating Income (Loss)		(90	)		225			20			—			155
Interest expense		722			298			1			(382	)		639
Interest (income)		(299	)		(3	)		(80	)		382			—
Net (earnings) loss of equity affiliates		30			—			—			(30	)		—

Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes		(543	)		(70	)		99			30			(484	)
Provision (benefit) for income taxes		32			10			37			—			79

Income (Loss) from Continuing Operations		(575	)		(80	)		62			30			(563	)
Income (loss) from discontinued operations, net of tax		32			(15	)		3			—			20

Net Income (Loss)	$	(543	)	$	(95	)	$	65		$	30		$	(543	)

Other comprehensive income—foreign currency translation adjustment		(1	)		—			(1	)		1			(1	)

Total Comprehensive Income (Loss)	$	(544	)	$	(95	)	$	64		$	31		$	(544	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Continued)

	Fiscal Year 2010

	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Net Sales	$	—		$	6,085		$	364		$	—		$	6,449
Cost of sales		—			4,339			269			—			4,608

Gross Profit		—			1,746			95			—			1,841
Operating expenses:
Selling, general and administrative		82			1,302			71			—			1,455
Depreciation and amortization		16			322			3			—			341
Restructuring		—			8			—			—			8

Total operating expenses		98			1,632			74			—			1,804
Operating Income (Loss)		(98	)		114			21			—			37
Interest expense		701			298			—			(376	)		623
Interest (income)		(298	)		(4	)		(74	)		376			—
Loss on extinguishment of debt		2			—			—			—			2
Other (income) expense, net		(3	)		—			—			—			(3	)
Net (earnings) loss of equity affiliates		178			—			—			(178	)		—

Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes		(678	)		(180	)		95			178			(585	)
Provision (benefit) for income taxes		(17	)		6			39			—			28

Income (Loss) from Continuing Operations		(661	)		(186	)		56			178			(613	)
Income (loss) from discontinued operations, net of tax		42			(49	)		1			—			(6	)

Net Income (Loss)	$	(619	)	$	(235	)	$	57		$	178		$	(619	)

Other comprehensive income:
Foreign currency translation adjustment		9			—			9			(9	)		9
Unrealized gains on derivatives, net of tax		1			—			—			—			1

Total Comprehensive Income (Loss)	$	(609	)	$	(235	)	$	66		$	169		$	(609	)

CONDENSED CONSOLIDATING BALANCE SHEETS

	As of February 3, 2013

	Parent Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	91		$	15	$	35	$	—		$	141
Cash equivalents restricted for debt redemption		936			—		—		—			936
Receivables, net		4			937		67		—			1,008
Inventories		—			928		59		—			987
Deferred tax asset		—			48		1		(7	)		42
Intercompany receivable		—			1		—		(1	)		—
Other current assets		9			37		3		—			49

Total current assets		1,040			1,966		165		(8	)		3,163

Property and equipment, net		66			323		6		—			395
Goodwill		—			3,132		6		—			3,138
Intangible assets, net		—			469		4		—			473
Deferred tax asset		48			—		6		(48	)		6
Investment in subsidiaries		2,854			—		—		(2,854	)		—
Intercompany notes receivable		2,774			634		—		(3,408	)		—
Other assets		153			6		—		—			159

Total assets	$	6,935		$	6,530	$	187	$	(6,318	)	$	7,334

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	14		$	638	$	41	$	—		$	693
Accrued compensation and benefits		46			108		6		—			160
Current installments of long-term debt		899			—		—		—			899
Deferred tax liabilities		7			—		—		(7	)		—
Intercompany payable		—			—		1		(1	)		—
Other current liabilities		183			98		10		—			291

Total current liabilities		1,149			844		58		(8	)		2,043

Long-term debt, excluding current installments		6,430			—		—		—			6,430
Deferred tax liabilities		—			152		—		(48	)		104
Intercompany notes payable		634			2,774		—		(3,408	)		—
Other liabilities		313			28		7		—			348

Total liabilities		8,526			3,798		65		(3,464	)		8,925

Stockholder's equity (deficit)		(1,591	)		2,732		122		(2,854	)		(1,591	)

Total liabilities and stockholder's equity (deficit)	$	6,935		$	6,530	$	187	$	(6,318	)	$	7,334

CONDENSED CONSOLIDATING BALANCE SHEETS (Continued)

	As of January 29, 2012

	Parent Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	49		$	12	$	50	$	—		$	111
Receivables, net		4			922		97		(21	)		1,002
Inventories		—			1,027		81		—			1,108
Deferred tax asset		—			89		2		(33	)		58
Other current assets		8			34		5		—			47

Total current assets		61			2,084		235		(54	)		2,326

Property and equipment, net		61			331		6		—			398
Goodwill		—			3,143		8		—			3,151
Intangible assets, net		—			731		4		—			735
Deferred tax asset		158			—		6		(164	)		—
Investment in subsidiaries		3,456			—		—		(3,456	)		—
Intercompany notes receivable		2,774			641		—		(3,415	)		—
Other assets		122			6		261		(261	)		128

Total assets	$	6,632		$	6,936	$	520	$	(7,350	)	$	6,738

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	21		$	648	$	45	$	—		$	714
Accrued compensation and benefits		42			93		5		—			140
Current installments of long-term debt		82			—		—		—			82
Deferred tax liabilities		33			—		—		(33	)		—
Other current liabilities		284			104		11		(21	)		378

Total current liabilities		462			845		61		(54	)		1,314

Long-term debt, excluding current installments		5,641			—		—		(261	)		5,380
Deferred tax liabilities		—			275		—		(164	)		111
Intercompany notes payable		641			2,774		—		(3,415	)		—
Other liabilities		316			37		8		—			361

Total liabilities		7,060			3,931		69		(3,894	)		7,166

Stockholder's equity		(428	)		3,005		451		(3,456	)		(428	)

Total liabilities and stockholder's equity (deficit)	$	6,632		$	6,936	$	520	$	(7,350	)	$	6,738

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

	Fiscal Year 2012

	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Net cash flows from operating activities	$	(813	)	$	110		$	73		$	(51	)	$	(681	)

Cash flows from investing activities
Capital expenditures		(26	)		(87	)		(2	)		—			(115	)
Proceeds from sale of property and equipment		—			17			—			—			17
Payment for a business acquired		—			(248	)		—			—			(248	)
Proceeds from sale of a business		480			—			1			—			481
Purchase of other investments		(1,921	)		—			—			—			(1,921	)
Proceeds from sale of investments		985			—			—			—			985
Purchase of debt investments		—			—			(1	)		1			—
Proceeds from (payments of) intercompany notes		—			6			—			(6	)		—
Investments (return of capital) in equity affiliates		(169	)		—			—			169			—
Other investing activities		—			1			—			—			1

Net cash flows from investing activities		(651	)		(311	)		(2	)		164			(800	)

Cash flows from financing activities
Dividend payment		—			—			(51	)		51			—
Equity contribution (return of capital)		—			204			(35	)		(169	)		—
Borrowings (repayments) of intercompany notes		(6	)		—			—			6			—
Borrowings of long-term debt		6,365			—			—			—			6,365
Repayments of long-term debt		(5,023	)		—			—			(1	)		(5,024	)
Borrowings on long-term revolver		1,291			—			10			—			1,301
Repayments of long-term revolver		(991	)		—			(10	)		—			(1,001	)
Debt issuance and modification fees		(132	)		—			—			—			(132	)
Other financing activities		2			—			—			—			2

Net cash flows from financing activities		1,506			204			(86	)		(113	)		1,511

Net increase (decrease) in cash & cash equivalents	$	42		$	3		$	(15	)	$	—		$	30
Cash and cash equivalents at beginning of period		49			12			50			—			111

Cash and cash equivalents at end of period	$	91		$	15		$	35		$	—		$	141

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Continued)

	Fiscal Year 2011

	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Net cash flows from operating activities	$	(629	)	$	458		$	6		$	—		$	(165	)
Cash flows from investing activities
Capital expenditures		(15	)		(98	)		(2	)		—			(115	)
Proceeds from sales of property and equipment		—			4			—			—			4
Payments for businesses acquired		—			(21	)		—			—			(21	)
Proceeds from sale of a business		117			—			11			—			128
Purchase of investments		(21	)		(2	)		—			—			(23	)
Proceeds from sale of investments		21			—			—			—			21
Proceeds from (payments of) intercompany notes		—			(337	)		—			337			—

Net cash flows from investing activities		102			(454	)		9			337			(6	)
Cash flows from financing activities
Borrowings (repayments) of intercompany notes		337			—			—			(337	)		—
Repayments of long-term debt		(10	)		—			—			—			(10	)
Borrowings on long-term revolver		1,053			—			—			—			1,053
Repayments of long-term revolver		(1,053	)		—			—			—			(1,053	)

Net cash flows from financing activities		327			—			—			(337	)		(10	)
Effect of exchange rates on cash		—			—			—			—			—

Net increase (decrease) in cash & cash equivalents	$	(200	)	$	4		$	15		$	—		$	(181	)
Cash and cash equivalents at beginning of period		249			8			35			—			292

Cash and cash equivalents at end of period	$	49		$	12		$	50		$	—		$	111

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Continued)

	Fiscal Year 2010

	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Net cash flows from operating activities	$	452		$	83		$	16		$	—		$	551
Cash flows from investing activities
Capital expenditures		(6	)		(41	)		(2	)		—			(49	)
Proceeds from sales of property and equipment		—			4			—			—			4
Proceeds from (payments of) intercompany notes		—			(46	)		—			46			—
Return of investment		33			—			—			(33	)		—

Net cash flows from investing activities		27			(83	)		(2	)		13			(45	)
Cash flows from financing activities
Equity contribution (return of capital)		1			—			(33	)		33			1
Borrowings (repayments) of intercompany notes		46			—			—			(46	)		—
Repayments of long-term debt		(40	)		—			—			—			(40	)
Borrowings on long-term revolver		178			—			—			—			178
Repayments of long-term revolver		(860	)		—			—			—			(860	)
Debt modification and issuance costs		(34	)		—			—			—			(34	)

Net cash flows from financing activities		(709	)		—			(33	)		(13	)		(755	)
Effect of exchange rates on cash		—			—			2			—			2

Net increase (decrease) in cash & cash equivalents	$	(230	)	$	—		$	(17	)	$	—		$	(247	)
Cash and cash equivalents at beginning of period		479			8			52			—			539

Cash and cash equivalents at end of period	$	249		$	8		$	35		$	—		$	292