SEGMENT INFORMATION

3 Months Ended

Apr. 30, 2017

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

In addition to the reportable segments, the Company’s consolidated financial results include ‘‘Corporate.’’ Corporate 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		Corporate			Total Continuing Operations
Three Months Ended April 30, 2017
Net sales	$	682	$	657	$	536	$	(2	)	$	1,873
Adjusted EBITDA	117		51		55		(16		)	207
Depreciation(1) & Software Amortization	7		3		9		3			22
Other Intangible Amortization	1		—		—		2			3
Three Months Ended May 1, 2016
Net sales	$	677	$	605	$	501	$	(2	)	$	1,781
Adjusted EBITDA	134		48		49		(16		)	215
Depreciation(1) & Software Amortization	8		2		8		3			21
Other Intangible Amortization	1		1		—		2			4

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

Reconciliation to Consolidated Financial Statements

	Three Months Ended
	April 30, 2017		May 1, 2016
Total Adjusted EBITDA	$	207	$	215
Depreciation and amortization(1)	25		25
Stock-based compensation	6		6
Restructuring	—		7
Other	—		(1		)
Operating income	176		178
Interest expense, net	49		85
Loss on extinguishment of debt(2)	3		115
Other (income) expense, net	2		—
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes	122		(22		)
Provision (benefit) for income taxes	37		(8		)
Income (loss) from continuing operations	85		(14		)
Less Income from discontinued operations, net of tax	—		—
Net income (loss)	$	85	$	(14	)

(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 write-off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt.