SEGMENT INFORMATION

3 Months Ended

May 04, 2014

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 HD Supply Canada, which is organized based on geographic location and Corporate, which provides general corporate overhead support. Both HD Supply Canada and Corporate are included within “Corporate & Other.” The Company determines the 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 four reportable segments, each of which is presented below:

· 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.

· 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.

· Power Solutions—Power Solutions distributes electrical transmission and distribution products, power plant MRO supplies and smart-grid products, and arranges materials management and procurement outsourcing for the power generation and distribution industries.

· Construction & Industrial - White Cap—Construction & Industrial distributes specialized hardware, tools, engineered materials and safety products to non-residential and residential contractors.

In addition to the reportable segments, our consolidated financial results include ‘‘Corporate & Other.’’ Corporate & Other is comprised of the following operating segments: Hardware Solutions, Interior Solutions, Home Improvement Solutions and HD Supply Canada. Hardware Solutions (previously known as Crown Bolt) is a retail distribution operator providing program and packaging solutions, sourcing, distribution, and in-store service, fasteners, builders’ hardware, rope and chain and plumbing accessories, primarily serving Home Depot and other hardware stores. Interior Solutions (previously known as Creative Touch Interiors) offers turnkey supply and installation services for multiple interior finish options, including flooring, cabinets, countertops, and window coverings, along with comprehensive design center services for non-residential, residential and senior living projects. Home Improvement Solutions (previously known as Repair & Remodel) 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. HD Supply Canada is an industrial distributor that primarily focuses on servicing fasteners/industrial supplies markets operating across six Canadian provinces. 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):

	Facilities Maintenance		Waterworks		Power Solutions		Construction & Industrial - White Cap		Corporate & Other			Total Continuing Operations
Three Months Ended May 4, 2014
Net Sales	$	604	$	551	$	461	$	344	$	201		$	2,161
Adjusted EBITDA	109		41		18		22		—			190
Depreciation(1) & Software Amortization	12		2		1		4		10			29
Other Intangible Amortization	20		1		5		5		3			34
Three Months Ended May 5, 2013
Net Sales	$	561	$	523	$	462	$	310	$	192		$	2,048
Adjusted EBITDA	100		38		18		14		(5		)	165
Depreciation(1) & Software Amortization	11		2		1		4		8			26
Other Intangible Amortization	20		1		5		5		3			34

(1) Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Reconciliation to Consolidated Financial Statements

	Three Months Ended
	May 4, 2014			May 5, 2013
Total Adjusted EBITDA	$	190		$	165
Depreciation and amortization (i)	63			60
Stock-based compensation	5			3
Restructuring	3			—
Management fee & related expenses paid to Equity Sponsors (ii)	—			1
Operating income	119			101
Interest expense, net	116			147
Loss on extinguishment & modification of debt	2			41
Other (income) expense, net	1			—
Income (Loss) from Continuing Operations Before Provision for Income Taxes	—			(87		)
Provision for income taxes	1			43
Income (loss) from continuing operations	(1		)	(130		)
Less Income (loss) from discontinued operations, net of tax	(11		)	(1		)
Net Income (loss)	$	(12	)	$	(131	)

(i) Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations.

(ii) The Company was previously party to consulting agreements with the Equity Sponsors whereby the Company paid the Equity Sponsors a $5 million annual aggregate management fee and related expenses.  These consulting agreements were terminated in conjunction with Holdings’ initial public offering in the second quarter of fiscal 2013.