NOTE 11 — SUBSIDIARY GUARANTORS

HDS (the “Debt Issuer”) has outstanding December 2014 First Priority Notes and April 2016 Senior Unsecured Notes (collectively the “Notes”), which are guaranteed by certain of its subsidiaries (the “Subsidiary Guarantors”). The Subsidiary Guarantors 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.

The Debt Issuer’s payment obligations under the Notes are jointly and severally guaranteed by the Subsidiary 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 Senior 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 Senior 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 issuance of 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, the condensed balance sheets and the condensed statements of cash flows for the Debt Issuer, for the Subsidiary Guarantors and the Non-guarantor Subsidiaries and total consolidated Debt Issuer and subsidiaries (amounts in millions).

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	Three Months Ended October 30, 2016
	Debt Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Total HDS
Net Sales	$	—		$	1,976		$	32		$	—		$	2,008
Cost of sales	—			1,308			17			—			1,325

Gross Profit	—			668			15			—			683
Operating expenses:
Selling, general and administrative	19			394			11			—			424
Depreciation and amortization	4			20			—			—			24
Restructuring	2			2			—			—			4

Total operating expenses	25			416			11			—			452
Operating Income (Loss)	(25		)	252			4			—			231
Interest expense	69			61			1			(66		)	65
Interest (income)	(61		)	(5		)	—			66			—
Net (earnings) loss of equity affiliates	(198		)	—			—			198			—
Loss on extinguishment & modification of debt	59			—			—			—			59

Income (Loss) from Continuing Operations Before Provision for Income Taxes	106			196			3			(198		)	107
Provision for income taxes	42			1			—			—			43

Income (Loss) from Continuing Operations	64			195			3			(198		)	64
Loss from discontinued operations, net of tax	(4		)	—			—			—			(4		)

Net Income (Loss)	$	60		$	195		$	3		$	(198	)	$	60

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

Total Comprehensive Income (Loss)	$	59		$	195		$	2		$	(197	)	$	59

	Three Months Ended November 1, 2015
	Debt Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Total HDS
Net Sales	$	—		$	1,912		$	31		$	(1	)	$	1,942
Cost of sales	—			1,278			17			(1		)	1,294

Gross Profit	—			634			14			—			648
Operating expenses:
Selling, general and administrative	18			362			11			—			391
Depreciation and amortization	4			22			—			—			26
Restructuring	—			4			—			—			4

Total operating expenses	22			388			11			—			421
Operating Income (Loss)	(22		)	246			3			—			227
Interest expense	100			61			—			(62		)	99
Interest (income)	(61		)	(1		)	—			62			—
Net (earnings) loss of equity affiliates	(198		)	—			—			198			—
Loss on extinguishment & modification of debt	100			—			—			—			100

Income (Loss) from Continuing Operations Before Provision for Income Taxes	37			186			3			(198		)	28
Provision for income taxes	9			—			4			—			13

Income (Loss) from Continuing Operations	28			186			(1		)	(198		)	15
Income (loss) from discontinued operations, net of tax	222			15			(2		)	—			235

Net Income (Loss)	$	250		$	201		$	(3	)	$	(198	)	$	250

Other comprehensive income (loss)—foreign currency translation adjustment	18			—			18			(18		)	18

Total Comprehensive Income (Loss)	$	268		$	201		$	15		$	(216	)	$	268

	Nine Months Ended October 30, 2016
	Debt Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries		Eliminations			Total HDS
Net Sales	$	—		$	5,712		$	94	$	(1	)	$	5,805
Cost of sales	—			3,783			51		(1		)	3,833

Gross Profit	—			1,929			43		—			1,972
Operating expenses:
Selling, general and administrative	59			1,147			33		—			1,239
Depreciation and amortization	10			60			1		—			71
Restructuring	4			12			—		—			16

Total operating expenses	73			1,219			34		—			1,326
Operating Income (Loss)	(73		)	710			9		—			646
Interest expense	231			182			1		(195		)	219
Interest (income)	(182		)	(13		)	—		195			—
Net (earnings) loss of equity affiliates	(543		)	—			—		543			—
Loss on extinguishment & modification of debt	174			—			—		—			174

Income (Loss) from Continuing Operations Before Provision for Income Taxes	247			541			8		(543		)	253
Provision for income taxes	97			2			2		—			101

Income (Loss) from Continuing Operations	150			539			6		(543		)	152
Loss from discontinued operations, net of tax	(6		)	(2		)	—		—			(8		)

Net Income (Loss)	$	144		$	537		$	6	$	(543	)	$	144

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

Total Comprehensive Income (Loss)	$	145		$	537		$	7	$	(544	)	$	145

	Nine Months Ended November 1, 2015
	Debt Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries		Eliminations			Total HDS
Net Sales	$	—		$	5,447		$	94	$	(2	)	$	5,539
Cost of sales	—			3,635			50		(1		)	3,684

Gross Profit	—			1,812			44		(1		)	1,855
Operating expenses:
Selling, general and administrative	60			1,070			35		(1		)	1,164
Depreciation and amortization	11			69			1		—			81
Restructuring	—			4			—		—			4

Total operating expenses	71			1,143			36		(1		)	1,249
Operating Income (Loss)	(71		)	669			8		—			606
Interest expense	315			182			—		(186		)	311
Interest (income)	(182		)	(4		)	—		186			—
Net (earnings) loss of equity affiliates	(519		)	—			—		519			—
Loss on extinguishment & modification of debt	100			—			—		—			100
Other (income) expense, net	1			—			—		—			1

Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes	214			491			8		(519		)	194
Provision (benefit) for income taxes	(165		)	2			4		—			(159		)

Income (Loss) from Continuing Operations	379			489			4		(519		)	353
Income from discontinued operations, net of tax	222			20			6		—			248

Net Income (Loss)	$	601		$	509		$	10	$	(519	)	$	601

Other comprehensive income (loss) —foreign currency translation adjustment	16			—			16		(16		)	16

Total Comprehensive Income (Loss)	$	617		$	509		$	26	$	(535	)	$	617

CONDENSED CONSOLIDATING BALANCE SHEETS

	As of October 30, 2016
	Debt Issuer		Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations			Total HDS
ASSETS
Current assets:
Cash and cash equivalents	$	104	$	21	$	19	$	—		$	144
Receivables, net	2		1,082		19		—			1,103
Inventories	—		870		18		—			888
Intercompany receivables	—		1		—		(1		)	—
Other current assets	18		20		1		—			39

Total current assets	124		1,994		57		(1		)	2,174

Property and equipment, net	69		245		2		—			316
Goodwill	—		2,869		—		—			2,869
Intangible assets, net	—		114		2		—			116
Deferred tax asset	665		—		3		(76		)	592
Investment in subsidiaries	2,651		—		—		(2,651		)	—
Intercompany notes receivable	2,192		527		—		(2,719		)	—
Other assets	15		3		—		—			18

Total assets	$	5,716	$	5,752	$	64	$	(5,447	)	$	6,085

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	11	$	657	$	13	$	—		$	681
Accrued compensation and benefits	37		84		3		—			124
Current installments of long-term debt	14		—		—		—			14
Intercompany payables	—		—		1		(1		)	—
Other current liabilities	55		113		6		—			174

Total current liabilities	117		854		23		(1		)	993

Long-term debt, excluding current installments	4,083		—		—		—			4,083
Deferred tax liabilities	—		76		—		(76		)	—
Intercompany notes payable	527		2,192		—		(2,719		)	—
Other liabilities	88		18		2		—			108

Total liabilities	4,815		3,140		25		(2,796		)	5,184

Stockholder’s equity	901		2,612		39		(2,651		)	901

Total liabilities and stockholder’s equity	$	5,716	$	5,752	$	64	$	(5,447	)	$	6,085

	As of January 31, 2016
	Debt Issuer		Subsidiary Guarantors		Non-Guarantor Subsidiaries		Eliminations			Total HDS
ASSETS
Current assets:
Cash and cash equivalents	$	233	$	18	$	15	$	—		$	266
Receivables, net	5		852		15		—			872
Inventories	—		753		17		—			770
Current assets of discontinued operations	—		43		—		—			43
Other current assets	9		19		1		—			29

Total current assets	247		1,685		48		—			1,980

Property and equipment, net	55		253		2		—			310
Goodwill	—		2,869		—		—			2,869
Intangible assets, net	—		125		2		—			127
Deferred tax asset	759		—		2		(76		)	685
Non-current assets of discontinued operations	—		20		—		—			20
Investment in subsidiaries	2,623		—		—		(2,623		)	—
Intercompany notes receivable	2,192		627		—		(2,819		)	—
Other assets	20		2		—		—			22

Total assets	$	5,896	$	5,581	$	54	$	(5,518	)	$	6,013

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	12	$	469	$	9	$	—		$	490
Accrued compensation and benefits	38		101		3		—			142
Current installments of long-term debt	9		—		—		—			9
Current liabilities of discontinued operations	—		30		—		—			30
Other current liabilities	93		99		7		—			199

Total current liabilities	152		699		19		—			870

Long-term debt, excluding current installments	4,302		—		—		—			4,302
Deferred tax liabilities	—		76		—		(76		)	—
Non-current liabilities of discontinued operations	—		1		—		—			1
Intercompany notes payable	627		2,192		—		(2,819		)	—
Other liabilities	73		22		3		—			98

Total liabilities	5,154		2,990		22		(2,895		)	5,271

Stockholder’s equity	742		2,591		32		(2,623		)	742

Total liabilities and stockholder’s equity	$	5,896	$	5,581	$	54	$	(5,518	)	$	6,013

CONDENSED CONSOLIDATING CASH FLOW STATEMENTS

	Nine Months Ended October 30, 2016
	Debt Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries		Eliminations			Total HDS
Net cash flows from operating activities	$	355		$	(54	)	$	3	$	—		$	304

Cash flows from investing activities
Capital expenditures	(14		)	(45		)	—		—			(59		)
Proceeds from sale of property and equipment	—			2			—		—			2
Proceeds from sale of a business, net	28			—			—		—			28
Proceeds from (payments of) intercompany notes	—			101			—		(101		)	—

Net cash flows from investing activities	$	14		$	58		$	—	$	(101	)	$	(29	)


Cash flows from financing activities
Borrowings of (repayments of) intercompany notes	(101		)	—			—		101			—
Borrowings of long-term debt	1,547			—			—		—			1,547
Repayments of long-term debt	(2,435		)	—			—		—			(2,435		)
Borrowings of long-term revolver debt	510			—			—		—			510
Debt issuance and modification fees	(19		)	—			—		—			(19		)
Other financing activities	—			(1		)	—		—			(1		)

Net cash flows from financing activities	(498		)	(1		)	—		101			(398		)

Effect of exchange rates on cash	—			—			1		—			1

Net increase (decrease) in cash & cash equivalents	$	(129	)	$	3		$	4	$	—		$	(122	)
Cash and cash equivalents at beginning of period	233			18			15		—			266

Cash and cash equivalents at end of period	$	104		$	21		$	19	$	—		$	144

	Nine Months Ended November 1, 2015
	Debt Issuer			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Total HDS
Net cash flows from operating activities	$	130		$	29		$	14		$	—		$	173

Cash flows from investing activities
Capital expenditures	(9		)	(52		)	—			—			(61		)
Proceeds from sale of property and equipment	—			2			—			—			2
Proceeds from sale of a business, net	810			—			—			—			810
Proceeds from (payments of) intercompany notes	—			16			—			(16		)	—
Investments in equity affiliates — Return of capital	34			—			—			(34		)	—

Net cash flows from investing activities	$	835		$	(34	)	$	—		$	(50	)	$	751

Cash flows from financing activities
Equity contribution (return of capital)	—			(2		)	(32		)	34			—
Borrowings of (repayments of) intercompany notes	(16		)	—			—			16			—
Borrowings of long-term debt	287			—			—			—			287
Repayments of long-term debt	(1,150		)	—			—			—			(1,150		)
Borrowings on long-term revolver	784			—			—			—			784
Repayments on long-term revolver	(850		)	—			—			—			(850		)
Debt issuance and modification fees	(6		)	—			—			—			(6		)
Other financing activities	1			—			—			—			(1		)

Net cash flows from financing activities	(950		)	(2		)	(32		)	50			(934		)

Effect of exchange rates on cash	—			—			(2		)	—			(2		)

Net increase (decrease) in cash & cash equivalents	$	15		$	(7	)	$	(20	)	$	—		$	(12	)
Cash and cash equivalents at beginning of period	28			25			32			—			85

Cash and cash equivalents at end of period	$	43		$	18		$	12		$	—		$	73