GUARANTOR SUBSIDIARIES

12 Months Ended

Feb. 02, 2014

GUARANTOR SUBSIDIARIES

GUARANTOR SUBSIDIARIES

NOTE 15—GUARANTOR SUBSIDIARIES

        HDS (the "Debt Issuer") currently has outstanding First Priority Notes, Second Priority Notes, October 2012 Senior Unsecured Notes, and February 2013 Senior Unsecured 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 HDS. The subsidiaries of HDS that do not guarantee the Notes ("Non-guarantor Subsidiaries") are direct or indirect wholly-owned subsidiaries of HDS and primarily include HDS's operations in Canada and a non-operating subsidiary in the United States that previously held an investment of HDS's 2007 Senior Subordinated Notes, which was eliminated in consolidation. During fiscal 2012, the investment in the 2007 Senior Subordinated Notes was contributed to the Debt Issuer in a non-cash transaction. The Debt Issuer retired this portion of the 2007 Senior Subordinated Notes. These transactions had no impact on the consolidated results of operations or financial position.

        The Debt Issuer's payment obligations under the Notes are jointly and severally guaranteed by the guarantors and all guarantees are full and unconditional.

        These guarantees are subject to release under the circumstances as described below:

• (i)

  concurrently with any direct or indirect sale or disposition (by merger or otherwise) of any Subsidiary Guarantor or any interest therein in accordance with the terms of the applicable indebtedness by HDS or a restricted subsidiary, following which such Subsidiary Guarantor is no longer a restricted subsidiary of HDS;
  
  

  (ii)

  at any time that such Subsidiary Guarantor is released from all of its obligations under all of its guarantees of payment of any indebtedness of HDS or any Subsidiary Guarantor under all other indebtedness and is not a borrower under the ABL Facility;
  
  

  (iii)

  upon the merger or consolidation of any Subsidiary Guarantor with and into HDS or another Subsidiary Guarantor that is the surviving entity in such merger or consolidation, or upon the liquidation of such Subsidiary Guarantor following the transfer of all of its assets to HDS or another Subsidiary Guarantor;
  
  

  (iv)

  concurrently with any Subsidiary Guarantor becoming an unrestricted subsidiary;
  
  

  (v)

  during the period when the rating on the notes is changed to investment grade and certain covenants cease to apply while such investment grade rating is maintained, upon the merger or consolidation of any Subsidiary Guarantor with and into another subsidiary that is not a Subsidiary Guarantor with such other subsidiary being the surviving entity in such merger or consolidation, or upon liquidation of such Subsidiary Guarantor following the transfer of all of its assets to a subsidiary that is not a Subsidiary Guarantor;
  
  

  (vi)

  upon legal or covenant defeasance of HDS's obligations under the applicable indebtedness, or satisfaction and discharge of the indenture governing the applicable indebtedness; or
  
  

  (vii)

  subject to customary contingent reinstatement provisions, upon payment in full of the aggregate principal amount of all applicable indebtedness then outstanding and all other obligations guaranteed by a Subsidiary Guarantor then due and owing.

        In addition, HDS has the right, upon 30 days' notice to the applicable trustee, to cause any Subsidiary Guarantor that has not guaranteed payment of any indebtedness of HDS or any Subsidiary Guarantor under all other indebtedness and is not a borrower under the ABL Facility to be unconditionally released from all obligations under its Subsidiary Guarantee, and such Subsidiary Guarantee shall thereupon terminate and be discharged and of no further force or effect.

        In connection with the Notes, HDS determined the need for compliance with Rule 3-10 of SEC Regulation S-X. In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, HDS has included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(f) of SEC Regulation S-X. The following supplemental financial information sets forth, on a consolidating basis under the equity method of accounting, 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, HDS, for the Guarantor Subsidiaries and for the Non-guarantor Subsidiaries and total consolidated HDS and subsidiaries (amounts in millions).

Holdings

        Under the terms of the agreements governing the Notes issued by HDS, the Term Loan Facility entered into by HDS, and the Senior ABL Facility entered into by HDS and certain of its subsidiaries, HDS and substantially all of its existing and future 100%-owned U.S. subsidiaries are significantly restricted from making dividend payments, loans or advances to Holdings. These restrictions result in substantially all of the net assets of Holdings' 100%-owned U.S. subsidiaries being restricted (as defined in Rule 4-08(e)(3) of Regulation S-X).

        In lieu of Schedule I, the condensed statements of operations and comprehensive income (loss), the condensed balance sheets, and the condensed statements of cash flows of Holdings are included in the tables below.

        The condensed parent company financial information of Holdings has been provided in accordance with the rules and regulations of the SEC and should be read in conjunction with the Consolidated Financial Statements of Holdings and its subsidiaries. Pursuant to the SEC rules and regulations, the condensed parent company financial information does not include all of the financial information and notes normally included with financial statements prepared in accordance with GAAP.

        The condensed parent company financial information has been prepared using the same accounting policies as described in Note 1 of Notes to Consolidated Financial Statements of Holdings and subsidiaries included herein, except for the investment in subsidiary. For the purposes of this schedule, Holdings' investment in HDS, its wholly-owned subsidiary, is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. Holdings' share of net income of its unconsolidated subsidiaries is included in consolidated income using the equity method. Holdings did not receive any dividends or distributions from subsidiaries during fiscal 2013, fiscal 2012 or fiscal 2011.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	Fiscal Year 2013
	Debt Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total HDS			Holdings
Net Sales	$	—		$	8,092		$	397		$	(2	)	$	8,487		$	—
Cost of sales		—			5,718			298			(1	)		6,015			—
Gross Profit		—			2,374			99			(1	)		2,472			—
Operating expenses:
Selling, general and administrative		62			1,600			72			(1	)		1,733			—
Depreciation and amortization		16			224			2			—			242			—
Restructuring		3			6			—			—			9			—
Total operating expenses		81			1,830			74			(1	)		1,984			—
Operating Income (Loss)		(81	)		544			25			—			488			—
Interest expense		530			293			1			(296	)		528			—
Interest (income)		(293	)		(3	)		—			296			—			—
Net (earnings) loss of equity affiliates		(348	)		—			—			348			—			218
Loss on extinguishment & modification of debt		87			—			—			—			87
Other income (expense), net		20			—			—			—			20			—
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes		(77	)		254			24			(348	)		(147	)		(218	)
Provision (benefit) for income taxes		141			(84	)		5			—			62			—
Income (Loss) from Continuing Operations		(218	)		338			19			(348	)		(209	)		(218	)
Income (loss) from discontinued operations, net of tax		—			(6	)		(3	)		—			(9	)		—
Net Income (Loss)	$	(218	)	$	332		$	16		$	(348	)	$	(218	)	$	(218	)
Other comprehensive income—foreign currency translation adjustment		(13	)		—			(13	)		13			(13	)		(13	)
Total Comprehensive Income (Loss)	$	(231	)	$	332		$	3		$	(335	)	$	(231	)	$	(231	)

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

	Fiscal Year 2012
	Debt Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total HDS			Holdings
Net Sales	$	—		$	7,608		$	336		$	(1	)	$	7,943		$	—
Cost of sales		—			5,398			246			—			5,644			—
Gross Profit		—			2,210			90			(1	)		2,299			—
Operating expenses:
Selling, general and administrative		64			1,504			70			(1	)		1,637			—
Depreciation and amortization		13			321			2			—			336			—
Goodwill & other intangible asset impairment		—			152			—			—			152			—
Total operating expenses		77			1,977			72			(1	)		2,125			—
Operating Income (Loss)		(77	)		233			18			—			174			—
Interest expense		715			301			1			(359	)		658			—
Interest (income)		(302	)		(3	)		(54	)		359			—			—
Net (earnings) loss of equity affiliates		14			—			—			(14	)		—			1,179
Loss on extinguishment of debt		709			—			—			—			709			—
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes		(1,213	)		(65	)		71			14			(1,193	)		(1,179	)
Provision (benefit) for income taxes		(22	)		—			26			—			4			—
Income (Loss) from Continuing Operations		(1,191	)		(65	)		45			14			(1,197	)		(1,179	)
Income (loss) from discontinued operations, net of tax		12			8			(2	)		—			18			—
Net Income (Loss)	$	(1,179	)	$	(57	)	$	43		$	14		$	(1,179	)	$	(1,179	)
Other comprehensive income—foreign currency translation adjustment		—			—			—			—			—			—
Total Comprehensive Income (Loss)	$	(1,179	)	$	(57	)	$	43		$	14		$	(1,179	)	$	(1,179	)

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

	Fiscal Year 2011
	Debt Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total HDS			Holdings
Net Sales	$	—		$	6,630		$	303		$	—		$	6,933		$	—
Cost of sales		—			4,720			222			—			4,942			—
Gross Profit		—			1,910			81			—			1,991			—
Operating expenses:
Selling, general and administrative		78			1,372			60			—			1,510			—
Depreciation and amortization		12			313			1			—			326			—
Total operating expenses		90			1,685			61			—			1,836			—
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			—			(1	)		(30	)		(1	)		543
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes		(543	)		(70	)		100			30			(483	)		(543	)
Provision (benefit) for income taxes		32			10			37			—			79			—
Income (Loss) from Continuing Operations		(575	)		(80	)		63			30			(562	)		(543	)
Income (loss) from discontinued operations, net of tax		32			(15	)		2			—			19			—
Net Income (Loss)	$	(543	)	$	(95	)	$	65		$	30		$	(543	)	$	(543	)
Other comprehensive income—foreign currency translation adjustment		(1	)		—			(1	)		1			(1	)		(1	)
Total Comprehensive Income (Loss)	$	(544	)	$	(95	)	$	64		$	31		$	(544	)	$	(544	)

CONDENSED CONSOLIDATING BALANCE SHEETS

	As of February 2, 2014
	Debt Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Total HDS			Holdings
ASSETS
Current assets:
Cash and cash equivalents	$	53		$	17	$	41	$	—		$	111		$	4
Receivables, net		2			984		60		—			1,046			—
Inventories		—			1,024		48		—			1,072			—
Deferred tax asset		—			58		1		(52	)		7			—
Other current assets		15			26		22		—			63			—
Total current assets		70			2,109		172		(52	)		2,299			4
Property and equipment, net		60			341		4		—			405			—
Goodwill		—			3,132		5		—			3,137			—
Intangible assets, net		—			335		3		—			338			—
Deferred tax asset		40			—		5		(40	)		5			—
Investment in subsidiaries		3,452			—		—		(3,452	)		—			(768	)
Intercompany notes receivable		2,192			605		—		(2,797	)		—			—
Other assets		128			6		2		—			136			—
Total assets	$	5,942		$	6,528	$	191	$	(6,341	)	$	6,320		$	(764	)
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	11		$	618	$	35	$	—		$	664		$	—
Accrued compensation and benefits		45			98		6		—			149			—
Current installments of long-term debt		10			—		—		—			10			—
Deferred tax liabilities		50			—		—		(50	)		—			—
Other current liabilities		148			103		19		—			270			—
Total current liabilities		264			819		60		(50	)		1,093			—
Long-term debt, excluding current installments		5,534			—		—		—			5,534			—
Deferred tax liabilities		—			156		—		(42	)		114			—
Intercompany notes payable		605			2,192		—		(2,797	)		—			—
Other liabilities		307			34		6		—			347			—
Total liabilities		6,710			3,201		66		(2,889	)		7,088			—
Stockholders' equity (deficit)		(768	)		3,327		125		(3,452	)		(768	)		(764	)
Total liabilities and stockholders' equity (deficit)	$	5,942		$	6,528	$	191	$	(6,341	)	$	6,320		$	(764	)

CONDENSED CONSOLIDATING BALANCE SHEETS (Continued)

	As of February 3, 2013
	Debt Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Total HDS			Holdings
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	)		—			(1,591	)
Intercompany notes receivable		2,774			634		—		(3,408	)		—			—
Other assets		153			6		—		—			159			—
Total assets	$	6,935		$	6,530	$	187	$	(6,318	)	$	7,334		$	(1,591	)
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			—
Stockholders' equity (deficit)		(1,591	)		2,732		122		(2,854	)		(1,591	)		(1,591	)
Total liabilities and stockholders' equity (deficit)	$	6,935		$	6,530	$	187	$	(6,318	)	$	7,334		$	(1,591	)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

	Fiscal 2013
	Debt Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total HDS			Holdings
Net cash flows from operating activities	$	(452	)	$	72		$	13		$	—		$	(367	)	$	—
Cash flows from investing activities
Capital expenditures		(20	)		(109	)		(2	)		—			(131	)		—
Proceeds from sale of property and equipment		—			8			—			—			8			—
Proceeds from sale of a business		4			—			—			—			4			—
Settlement of acquisition of a business		—			3			—			—			3			—
Proceeds from sale of investments		936			—			—			—			936			—
(Investments in) return of capital of equity affiliates		2			—			—			(2	)		—			(1,039	)
Proceeds from (payments of) intercompany notes		—			30			—			(30	)		—			—
Net cash flows from investing activities		922			(68	)		(2	)		(32	)		820			(1,039	)
Cash flows from financing activities
Proceeds from sale of common stock in initial public offering, net of transaction fees		—			—			—			—			—			1,039
Proceeds from stock options exercised		—			—			—			—			—			4
Equity contribution (return of capital)		1,039			(2	)		—			2			1,039			—
Borrowings (repayments) of intercompany notes		(30	)		—			—			30			—			—
Borrowings of long-term debt		79			—			—			—			79			—
Repayments of long-term debt		(1,624	)		—			—			—			(1,624	)		—
Borrowings on long-term revolver		858			—			—			—			858			—
Repayments of long-term revolver		(798	)		—			—			—			(798	)		—
Debt issuance and modification fees		(34	)		—			—			—			(34	)		—
Other financing activities		2			—			—			—			2			—
Net cash flows from financing activities		(508	)		(2	)		—			32			(478	)	$	1,043
Effect of exchange rates on cash		—			—			(5	)		—			(5	)		—
Net increase (decrease) in cash & cash equivalents	$	(38	)	$	2		$	6		$	—		$	(30	)	$	4
Cash and cash equivalents at beginning of period		91			15			35			—			141			—
Cash and cash equivalents at end of period	$	53		$	17		$	41		$	—		$	111		$	4

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Continued)

	Fiscal Year 2012
	Debt Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total HDS			Holdings
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
	Debt Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total HDS			Holdings
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		$	—