SEGMENT INFORMATION

3 Months Ended

May 03, 2015

SEGMENT INFORMATION

SEGMENT INFORMATION

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 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 - White Cap 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: Interior Solutions, Home Improvement Solutions and HD Supply Canada. Interior Solutions 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 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 3, 2015
Net Sales	$	635	$	570	$	499	$	388	$	129		$	2,221
Adjusted EBITDA	122		45		21		32		(12		)	208
Depreciation(1) & Software Amortization	12		2		2		6		6			28
Other Intangible Amortization	1		1		5		—		1			8
Three Months Ended May 4, 2014
Net Sales	$	604	$	551	$	461	$	344	$	134		$	2,094
Adjusted EBITDA	109		41		18		22		(7		)	183
Depreciation(1) & Software Amortization	12		2		1		4		8			27
Other Intangible Amortization	20		1		5		5		1			32

(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 3, 2015			May 4, 2014
Total Adjusted EBITDA	$	208		$	183
Depreciation and amortization (1)	36			59
Stock-based compensation	5			5
Restructuring	—			3
Operating income	167			116
Interest expense, net	106			116
Loss on extinguishment & modification of debt	—			2
Other (income) expense, net	—			1
Income (Loss) from Continuing Operations Before Provision for Income Taxes	61			(3		)
Provision (benefit) for income taxes (2)	(181		)	1
Income (loss) from continuing operations	242			(4		)
Less Income (loss) from discontinued operations, net of tax	—			(8		)
Net Income (loss)	$	242		$	(12	)

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

(2) During the three months ended May 3, 2015, the Company recorded a reduction in unrecognized tax benefits as a result of IRS and state audit settlements. See “Note 5, Income Taxes” and “Note 9, Commitments and Contingencies” for discussion of the IRS audit settlement.