SEGMENT INFORMATION

9 Months Ended

Oct. 30, 2016

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 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:

· 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.

· 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):

	Facilities Maintenance		Waterworks		Construction & Industrial — White Cap		Corporate & Other			Total Continuing Operations
Three Months Ended October 30, 2016
Net sales	$	724	$	733	$	499	$	52		$	2,008
Adjusted EBITDA	140		74		60		(10		)	264
Depreciation(1) & Software Amortization	8		2		6		5			21
Other Intangible Amortization	1		1		1		1			4

	Facilities Maintenance		Waterworks		Construction & Industrial — White Cap		Corporate & Other			Total Continuing Operations
Three Months Ended November 1, 2015
Net sales	$	716	$	705	$	472	$	49		$	1,942
Adjusted EBITDA	149		70		51		(7		)	263
Depreciation(1) & Software Amortization	11		3		6		4			24
Other Intangible Amortization	1		1		1		1			4
Nine Months Ended October 30, 2016
Net sales	$	2,142	$	2,071	$	1,435	$	157		$	5,805
Adjusted EBITDA	425		192		163		(28		)	752
Depreciation(1) & Software Amortization	23		7		20		14			64
Other Intangible Amortization	4		2		1		4			11
Nine Months Ended November 1, 2015
Net sales	$	2,084	$	1,977	$	1,334	$	144		$	5,539
Adjusted EBITDA	427		181		130		(29		)	709
Depreciation(1) & Software Amortization	34		8		19		13			74
Other Intangible Amortization	4		2		1		4			11

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

Reconciliation to Consolidated Financial Statements

	Three Months Ended					Nine Months Ended
	October 30, 2016			November 1, 2015		October 30, 2016			November 1, 2015
Total Adjusted EBITDA	$	264		$	263	$	752		$	709
Depreciation and amortization(1)	25			28		75			85
Stock-based compensation	4			4		15			14
Restructuring	4			4		16			4
Operating income	231			227		646			606
Interest expense, net	65			99		219			311
Loss on extinguishment & modification of debt(2)	59			100		174			100
Other (income) expense, net(3)	—			—		—			1
Income from Continuing Operations Before Provision (Benefit) for Income Taxes	107			28		253			194
Provision (benefit) for income taxes	43			13		101			(159		)
Income from continuing operations	64			15		152			353
Less: Income (loss) from discontinued operations, net of tax	(4		)	235		(8		)	248
Net income	$	60		$	250	$	144		$	601

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

(2) 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.

(3) Represents the costs expensed in connection with secondary offerings of Holdings’ common stock by certain of Holdings’ stockholders.