UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event
reported):
Commission File Number |
Exact name of Registrant as specified in its charter, Address of principal executive offices and Telephone number |
State of incorporation |
I.R.S. Employer Identification Number | |||
( |
( |
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of Exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. Results of Operations and Financial Condition.
On December 10, 2019, HD Supply Holdings, Inc. (the “Company” or “HD Supply”), HD Supply, Inc.’s parent company, issued a press release, filed as Exhibit 99.1 and incorporated herein by reference, announcing the Company’s financial results for the three months ended November 3, 2019 and certain other information.
The information contained in Item 7.01 concerning the presentation to HD Supply investors is hereby incorporated into this Item 2.02 by reference.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01. Regulation FD Disclosure.
The slide presentation attached hereto as Exhibit 99.2, and incorporated herein by reference, will be presented to certain investors of HD Supply on December 10, 2019 and may be used by HD Supply in various other presentations to investors.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. | Description of Exhibit | |
99.1 | Press Release “HD Supply Holdings, Inc. Announces Fiscal 2019 Third-Quarter Results,” dated December 10, 2019 | |
99.2 | HD Supply presentation to investors | |
104 | Cover Page Interactive Data File (embedded within the inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: December 9, 2019 | HD Supply Holdings, Inc. | |
By: | /s/ Dan S. McDevitt | |
Dan S. McDevitt | ||
General Counsel and Corporate Secretary |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: December 9, 2019 | HD Supply, Inc. | |
By: | /s/ Dan S. McDevitt | |
Dan S. McDevitt | ||
General Counsel and Corporate Secretary |
Exhibit 99.1
Investor Contact:
Charlotte McLaughlin
HD Supply Investor Relations
770-852-9100
InvestorRelations@hdsupply.com
Media Contact:
Quiana Pinckney
HD Supply Public Relations
770-852-9057
Quiana.Pinckney@hdsupply.com
HD Supply Holdings, Inc. Announces Fiscal 2019 Third-Quarter Results
Atlanta, GA – December 10, 2019 – HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest industrial distributors in North America, today reported Net sales of $1.6 billion for the third quarter of fiscal 2019 ended November 3, 2019, an increase of $32 million, or 2.0 percent, as compared to the third quarter of fiscal 2018.
“Our associates remain committed to delivering best–in-class service, despite a continued challenging environment and the ongoing activities of splitting the company into two market-leading, stand-alone businesses,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We remain focused on helping our customers succeed, and I am encouraged by our continued growth and strong cash flow generation.”
Gross profit increased $11 million, or 1.7 percent, to $640 million for the third quarter of fiscal 2019, as compared to $629 million for the third quarter of fiscal 2018. Gross profit was 38.9 percent of Net sales for the third quarter of fiscal 2019, down 10 basis points from 39.0 percent for the third quarter of fiscal 2018.
Operating income decreased $8 million, or 3.8 percent, to $205 million for the third quarter of fiscal 2019, as compared to $213 million for the third quarter of fiscal 2018. Operating income was 12.5 percent of Net sales for the third quarter of fiscal 2019, down 70 basis points from 13.2 percent for the third quarter of fiscal 2018.
Net income increased $50 million, or 61.0 percent, to $132 million for the third quarter of fiscal 2019, as compared to $82 million for the third quarter of fiscal 2018. Net income per diluted share increased $0.35, or 77.8 percent, to $0.80 in the third quarter of fiscal 2019, as compared to $0.45 in the third quarter of fiscal 2018.
Adjusted EBITDA decreased $1 million, or 0.4 percent, to $247 million for the third quarter of fiscal 2019, as compared to $248 million for the third quarter of fiscal 2018. Adjusted EBITDA was 15.0 percent of Net sales for the third quarter of fiscal 2019, down 40 basis points from 15.4 percent for the third quarter of fiscal 2018.
Adjusted net income decreased $18 million, or 9.8 percent, to $166 million for the third quarter of fiscal 2019, as compared to $184 million for the third quarter of fiscal 2018. Adjusted net income per diluted share increased $0.01, or 1.0 percent, to $1.01 in the third quarter of fiscal 2019, as compared to $1.00 in the third quarter of fiscal 2018.
As of November 3, 2019, HD Supply’s combined liquidity of $651 million was comprised of $37 million in cash and cash equivalents and $614 million of additional available borrowings (excluding $5 million of borrowings on available cash balances) under HD Supply, Inc.'s senior asset-based lending facility, based on qualifying inventory and receivables.
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Business Unit Performance
Facilities Maintenance
Net sales increased $16 million, or 2.0 percent, to $826 million in the third quarter of fiscal 2019, as compared to $810 million for the third quarter of fiscal 2018. Adjusted EBITDA was flat in the third quarter of fiscal 2019 as compared to the third quarter of fiscal 2018. Adjusted EBITDA was 18.0 percent of Net sales for the third quarter of fiscal 2019, down 40 basis points from 18.4 percent for the third quarter of fiscal 2018.
Construction & Industrial
Net sales increased $15 million, or 1.9 percent, to $818 million in the third quarter of fiscal 2019, as compared to $803 million for the third quarter of fiscal 2018. Adjusted EBITDA decreased $1 million, or 1.0 percent, to $98 million for the third quarter of fiscal 2019, as compared to $99 million for the third quarter of fiscal 2018. Adjusted EBITDA was 12.0 percent of Net sales for the third quarter of fiscal 2019, down 30 basis points from 12.3 percent for the third quarter of fiscal 2018.
Third-Quarter Monthly Sales Performance
Net sales for August, September and October of fiscal 2019 were $521 million, $494 million and $629 million, respectively. There were 20 selling days in August, 19 selling days in September and 25 selling days in October in both fiscal 2019 and fiscal 2018. Average year-over-year daily sales growth for August, September and October was 1.6 percent, 2.6 percent and 1.7 percent, respectively.
Preliminary November Sales Results
Preliminary Net sales in November 2019 were approximately $436 million, which represents year-over-year average daily sales growth of approximately 2.5 percent. Preliminary November year-over-year average daily sales by business segment was a 2.5 percent increase in Facilities Maintenance and a 2.4 percent increase in Construction & Industrial. There were 18 selling days in both November 2019 and November 2018.
Fourth-Quarter 2019 and Fiscal Year 2019 Outlook
For the fourth quarter of fiscal 2019 and full-year fiscal 2019, the Company anticipates the following (amounts in millions, except per share data):
Fourth-Quarter 2019 | Full-Year Fiscal 2019 | |||||||||||||||
Low End | High End | Low End | High End | |||||||||||||
Net sales | $ | 1,355 | $ | 1,405 | $ | 6,116 | $ | 6,166 | ||||||||
Net income | 65 | 76 | 439 | 450 | ||||||||||||
Adjusted EBITDA | 161 | 176 | 855 | 870 | ||||||||||||
Net income per share – diluted (1) | $ | 0.40 | $ | 0.47 | $ | 2.63 | $ | 2.69 | ||||||||
Adjusted net income per share – diluted (1) | $ | 0.52 | $ | 0.58 | $ | 3.45 | $ | 3.51 |
(1) | Assumes a fully diluted weighted average share count of 163 million for the fourth-quarter of fiscal 2019 and 167 million for the full-year fiscal 2019. |
The company will update its expectations for the market in 2020 during the fourth-quarter 2019 earnings conference call and in the earnings call presentation materials.
Fiscal 2019 Third-Quarter Conference Call
As previously announced, HD Supply will hold a conference call on Tuesday, December 10th, 2019 at 8:00 a.m. (Eastern Time) to discuss its third-quarter fiscal 2019 results. The conference call and presentation materials can be accessed via webcast by logging on from the Investor Relations section of the company's Web site at hdsupply.com. The online replay will remain available for a limited time following the call.
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Non-GAAP Financial Measures
HD Supply supplements financial results that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) with non-GAAP measurements, including Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share. This supplemental information should not be considered in isolation or as a substitute for the GAAP measurements. Additional information regarding Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share referred to in this press release is included below under “Reconciliation of Non-GAAP Measures.”
About HD Supply
HD Supply (www.hdsupply.com) is one of the largest industrial distributors in North America. The company provides a broad range of products and value-add services to approximately 500,000 customers with leadership positions in the maintenance, repair and operations and specialty construction sectors. Through approximately 270 branches and 44 distribution centers in the U.S. and Canada, the company's approximately 11,500 associates provide localized, customer-tailored products, services and expertise.
Forward-Looking Statements and Preliminary Results
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management's beliefs and assumptions and information currently available to management and are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking information presented in this press release is not a guarantee of future results, and that actual results may differ materially from those made in or suggested by the forward-looking information contained in this press release. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "plan," "seek," "comfortable with," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology. A number of important factors could cause actual events to differ materially from those contained in or implied by the forward-looking statements, including those "Risk factors" in our annual report on Form 10-K, for the fiscal year ended February 3, 2019, filed on March 19, 2019 and those described from time to time in our, and HD Supply, Inc.'s, other filings with the U.S. Securities and Exchange Commission (the “SEC”), which can be found at the SEC's website www.sec.gov. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Fourth-quarter 2019 and full-year fiscal 2019 estimates for Net sales, Net income, Net income per diluted share, Adjusted EBITDA and Adjusted net income per diluted share are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between HD Supply’s actual results and the preliminary financial data set forth above may be material.
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HD SUPPLY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Amounts in millions, except share and per share data, Unaudited
Three Months Ended | Nine Months Ended | |||||||||||||||
November 3, 2019 | October 28, 2018 | November 3, 2019 | October 28, 2018 | |||||||||||||
Net Sales | $ | 1,644 | $ | 1,612 | $ | 4,761 | $ | 4,601 | ||||||||
Cost of sales | 1,004 | 983 | 2,903 | 2,798 | ||||||||||||
Gross Profit | 640 | 629 | 1,858 | 1,803 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 405 | 391 | 1,193 | 1,147 | ||||||||||||
Depreciation and amortization | 26 | 25 | 77 | 72 | ||||||||||||
Restructuring and separation | 4 | — | 2 | 9 | ||||||||||||
Total operating expenses | 435 | 416 | 1,272 | 1,228 | ||||||||||||
Operating Income | 205 | 213 | 586 | 575 | ||||||||||||
Interest expense | 27 | 32 | 83 | 101 | ||||||||||||
Interest (income) | — | — | — | (1 | ) | |||||||||||
Loss on extinguishment & modification of debt | — | 69 | — | 69 | ||||||||||||
Income from Continuing Operations Before Provision for Income Taxes | 178 | 112 | 503 | 406 | ||||||||||||
Provision for income taxes | 47 | 30 | 130 | 105 | ||||||||||||
Income from Continuing Operations | $ | 131 | $ | 82 | $ | 373 | $ | 301 | ||||||||
Income from discontinued operations, net of tax | 1 | — | 1 | 1 | ||||||||||||
Net Income | $ | 132 | $ | 82 | $ | 374 | $ | 302 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustment | — | — | — | 2 | ||||||||||||
Unrealized loss on cash flow hedge, net of tax of $—, $1 , $7, and $1 | — | (4 | ) | (21 | ) | (4 | ) | |||||||||
Total Comprehensive Income | $ | 132 | $ | 78 | $ | 353 | $ | 300 | ||||||||
Weighted Average Common Shares Outstanding (thousands) | ||||||||||||||||
Basic | 164,638 | 182,730 | 168,062 | 183,349 | ||||||||||||
Diluted | 165,142 | 183,579 | 168,645 | 184,192 | ||||||||||||
Basic Earnings Per Share(1): | ||||||||||||||||
Income from Continuing Operations | $ | 0.80 | $ | 0.45 | $ | 2.22 | $ | 1.64 | ||||||||
Income from Discontinued Operations | $ | 0.01 | $ | — | $ | 0.01 | $ | 0.01 | ||||||||
Net Income | $ | 0.80 | $ | 0.45 | $ | 2.23 | $ | 1.65 | ||||||||
Diluted Earnings Per Share(1): | ||||||||||||||||
Income from Continuing Operations | $ | 0.79 | $ | 0.45 | $ | 2.21 | $ | 1.63 | ||||||||
Income from Discontinued Operations | $ | 0.01 | $ | — | $ | 0.01 | $ | 0.01 | ||||||||
Net Income | $ | 0.80 | $ | 0.45 | $ | 2.22 | $ | 1.64 |
(1) | May not foot due to rounding. |
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HD SUPPLY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
Amounts in millions, except per share data, Unaudited
November 3, 2019 | February 3, 2019 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 37 | $ | 38 | ||||
Receivables, less allowance for doubtful accounts of $19 and $18 | 863 | 732 | ||||||
Inventories | 802 | 766 | ||||||
Other current assets | 96 | 50 | ||||||
Total current assets | 1,798 | 1,586 | ||||||
Property and equipment, net | 397 | 370 | ||||||
Operating lease right-of-use assets | 425 | — | ||||||
Goodwill | 1,991 | 1,990 | ||||||
Intangible assets, net | 181 | 191 | ||||||
Deferred tax assets | 2 | 78 | ||||||
Other assets | 13 | 18 | ||||||
Total assets | $ | 4,807 | $ | 4,233 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 474 | $ | 367 | ||||
Accrued compensation and benefits | 87 | 109 | ||||||
Current installments of long-term debt | 11 | 11 | ||||||
Current lease liabilities | 115 | — | ||||||
Other current liabilities | 220 | 259 | ||||||
Total current liabilities | 907 | 746 | ||||||
Long-term debt, excluding current installments | 2,138 | 2,129 | ||||||
Deferred tax liabilities | 15 | — | ||||||
Long-term lease liabilities | 323 | — | ||||||
Other liabilities | 96 | 77 | ||||||
Total liabilities | 3,479 | 2,952 | ||||||
Stockholders’ equity: | ||||||||
Common stock, par value $0.01; 1 billion shares authorized; 162.8 million and 170.7 million shares issued and outstanding at November 3, 2019 and February 3, 2019, respectively | 2 | 2 | ||||||
Paid-in capital | 4,092 | 4,067 | ||||||
Accumulated deficit | (1,201 | ) | (1,572 | ) | ||||
Accumulated other comprehensive loss | (51 | ) | (30 | ) | ||||
Treasury stock, at cost, 42.6 and 34.2 million shares at November 3, 2019 and February 3, 2019, respectively | (1,514 | ) | (1,186 | ) | ||||
Total stockholders’ equity | 1,328 | 1,281 | ||||||
Total liabilities and stockholders’ equity | $ | 4,807 | $ | 4,233 |
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HD SUPPLY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in millions, Unaudited
Nine Months Ended | ||||||||
November 3, 2019 | October
28, | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 374 | $ | 302 | ||||
Reconciliation of net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 83 | 78 | ||||||
Provision for uncollectibles | 7 | 9 | ||||||
Non-cash interest expense | 5 | 15 | ||||||
Payment of discounts upon extinguishment of debt | — | (4 | ) | |||||
Loss on extinguishment of debt | — | 69 | ||||||
Stock-based compensation expense | 18 | 19 | ||||||
Deferred income taxes | 102 | 97 | ||||||
Other | 2 | (1 | ) | |||||
Changes in assets and liabilities, net of the effects of acquisitions & dispositions: | ||||||||
(Increase) decrease in receivables | (134 | ) | (204 | ) | ||||
(Increase) decrease in inventories | (34 | ) | (94 | ) | ||||
(Increase) decrease in other current assets | (2 | ) | (3 | ) | ||||
Increase (decrease) in accounts payable and accrued liabilities | 76 | 95 | ||||||
Increase (decrease) in other long-term liabilities | — | 1 | ||||||
Net cash provided by (used in) operating activities | 497 | 379 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Capital expenditures | (89 | ) | (79 | ) | ||||
Payments for businesses acquired, net of cash acquired | (9 | ) | (362 | ) | ||||
Proceeds from sales of property and equipment | 2 | — | ||||||
Net cash provided by (used in) investing activities | (96 | ) | (441 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Purchase of treasury shares | (320 | ) | (166 | ) | ||||
Borrowings of long-term debt | — | 930 | ||||||
Repayments of long-term debt | (8 | ) | (1,240 | ) | ||||
Repayments of financing liabilities | (88 | ) | — | |||||
Borrowings on long-term revolver debt | 978 | 100 | ||||||
Repayments on long-term revolver debt | (964 | ) | (49 | ) | ||||
Proceeds from issuance of common stock under employee benefit plans | 7 | 7 | ||||||
Tax withholdings on stock-based awards | (6 | ) | (6 | ) | ||||
Debt issuance costs | — | (18 | ) | |||||
Other financing activities | (1 | ) | (2 | ) | ||||
Net cash provided by (used in) financing activities | (402 | ) | (444 | ) | ||||
Effect of exchange rates on cash and cash equivalents | — | — | ||||||
Increase (decrease) in cash and cash equivalents | $ | (1 | ) | $ | (506 | ) | ||
Cash and cash equivalents at beginning of period | 38 | 558 | ||||||
Cash and cash equivalents at end of period | $ | 37 | $ | 52 |
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HD SUPPLY HOLDINGS, INC.
SEGMENT REPORTING
Amounts in millions, Unaudited
Facilities Maintenance | Construction & Industrial | Eliminations | Total Continuing Operations | |||||||||||||
Three Months Ended November 3, 2019 | ||||||||||||||||
Net sales | $ | 826 | $ | 818 | $ | — | $ | 1,644 | ||||||||
Adjusted EBITDA | 149 | 98 | — | 247 | ||||||||||||
Depreciation(1) & Software Amortization | 11 | 13 | — | 24 | ||||||||||||
Other Intangible Amortization | 2 | 3 | — | 5 | ||||||||||||
Three Months Ended October 28, 2018 | ||||||||||||||||
Net sales | $ | 810 | $ | 803 | $ | (1 | ) | $ | 1,612 | |||||||
Adjusted EBITDA | 149 | 99 | — | 248 | ||||||||||||
Depreciation(1) & Software Amortization | 10 | 12 | — | 22 | ||||||||||||
Other Intangible Amortization | 2 | 3 | — | 5 | ||||||||||||
Nine Months Ended November 3, 2019 | ||||||||||||||||
Net sales | $ | 2,428 | $ | 2,334 | $ | (1 | ) | $ | 4,761 | |||||||
Adjusted EBITDA | 432 | 262 | — | 694 | ||||||||||||
Depreciation(1) & Software Amortization | 32 | 34 | — | 66 | ||||||||||||
Other Intangible Amortization | 6 | 11 | — | 17 | ||||||||||||
Nine Months Ended October 28, 2018 | ||||||||||||||||
Net sales | $ | 2,353 | $ | 2,250 | $ | (2 | ) | $ | 4,601 | |||||||
Adjusted EBITDA | 422 | 262 | — | 684 | ||||||||||||
Depreciation(1) & Software Amortization | 28 | 34 | — | 62 | ||||||||||||
Other Intangible Amortization | 6 | 10 | — | 16 |
(1) | Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. |
Reconciliation of Non-GAAP Measures
Adjusted EBITDA and Adjusted net income are not recognized terms under GAAP and do not purport to be alternatives to Net income as a measure of operating performance. We present Adjusted EBITDA and Adjusted net income because each is a primary measure used by management to evaluate operating performance. In addition, we present Adjusted net income to measure our overall profitability as we believe it is an important measure of our performance. We believe the presentation of Adjusted EBITDA and Adjusted net income enhances investors' overall understanding of the financial performance of our business.
Adjusted EBITDA is based on "Consolidated EBITDA," a measure which is defined in our senior credit facilities and used in calculating financial ratios in several material debt covenants. Adjusted EBITDA is defined as Net income less Income from discontinued operations, net of tax, plus (i) Interest expense and Interest income, net, (ii) Provision for income taxes, (iii) depreciation and amortization and further adjusted to exclude loss on extinguishment of debt, non-cash items and certain other adjustments to Consolidated Net Income permitted in calculating Consolidated EBITDA under our senior credit facilities.
Adjusted net income is defined as Net income less Income from discontinued operations, net of tax, further adjusted for loss on extinguishment of debt, certain non-cash, non-recurring or unusual items, net of tax.
We compensate for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, our presentation of Adjusted EBITDA and Adjusted net income may not be comparable to other similarly titled measures of other companies.
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Adjusted EBITDA and Adjusted net income have limitations as analytical tools and should not be considered in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:
· | Adjusted EBITDA and Adjusted net income do not reflect changes in, or cash requirements for, our working capital needs; |
· | Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt; |
· | Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes; and |
· | Adjusted EBITDA and Adjusted net income do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements. |
Adjusted EBITDA
The following table presents a reconciliation of Net income, the most directly comparable financial measure under GAAP, to Adjusted EBITDA for the periods presented (amounts in millions):
Three Months Ended | Nine Months Ended | |||||||||||||||
November
3, 2019 | October 28, 2018 | November
3, 2019 | October 28, 2018 | |||||||||||||
Net income | $ | 132 | $ | 82 | $ | 374 | $ | 302 | ||||||||
Less income from discontinued operations, net of tax | 1 | — | 1 | 1 | ||||||||||||
Income from continuing operations | 131 | 82 | 373 | 301 | ||||||||||||
Interest expense, net | 27 | 32 | 83 | 100 | ||||||||||||
Provision for income taxes | 47 | 30 | 130 | 105 | ||||||||||||
Depreciation and amortization(1) | 29 | 27 | 83 | 78 | ||||||||||||
Loss on extinguishment & modification of debt(2) | — | 69 | — | 69 | ||||||||||||
Restructuring and separation charges(3) | 4 | — | 2 | 9 | ||||||||||||
Stock-based compensation | 6 | 7 | 18 | 19 | ||||||||||||
Acquisition and integration costs(4) | 4 | 2 | 5 | 5 | ||||||||||||
Other | (1 | ) | (1 | ) | — | (2 | ) | |||||||||
Adjusted EBITDA | $ | 247 | $ | 248 | $ | 694 | $ | 684 |
(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 repurchase or call the debt as well as the write-off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt. Also includes the costs of debt modifications. |
(3) | Represents the costs related to separation activities announced on September 24, 2019 and personnel changes, primarily severance and other employee-related costs. During the nine months ended November 3, 2019, the costs include the impacts of a favorable termination of the lease for the Company’s former corporate headquarters. For additional information, see “Note 11, Restructuring and separation activities,” in the Notes to Consolidated Financial Statements within Item 1 of our quarterly report on Form 10-Q for the quarterly period ended November, 3, 2019, filed on December 10, 2019. |
(4) | Represents the costs incurred in the acquisition and integration of business acquisitions, including A.H. Harris Construction Supplies. |
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Adjusted Net Income
The following table presents a reconciliation of Net income, the most directly comparable financial measure under U.S. GAAP, to Adjusted net income for the periods presented (amounts in millions, except share and per share data):
Three Months Ended | Nine Months Ended | |||||||||||||||
November 3, 2019 | October 28, 2018 | November 3, 2019 | October 28, 2018 | |||||||||||||
Net income | $ | 132 | $ | 82 | $ | 374 | $ | 302 | ||||||||
Less income from discontinued operations, net of tax | 1 | — | 1 | 1 | ||||||||||||
Income from continuing operations | 131 | 82 | 373 | 301 | ||||||||||||
Plus: Provision for income taxes | 47 | 30 | 130 | 105 | ||||||||||||
Less: Cash income taxes | (25 | ) | (4 | ) | (35 | ) | (9 | ) | ||||||||
Plus: Amortization of acquisition-related intangible assets (other than software) | 5 | 5 | 17 | 16 | ||||||||||||
Plus: Loss on extinguishment & modification of debt(1) | — | 69 | — | 69 | ||||||||||||
Plus: Restructuring and separation charges(2) | 4 | — | 2 | 9 | ||||||||||||
Plus: Acquisition and integration costs(3) | 4 | 2 | 5 | 5 | ||||||||||||
Adjusted Net Income | $ | 166 | $ | 184 | $ | 492 | $ | 496 | ||||||||
Diluted weighted average common shares outstanding (thousands) | 165,142 | 183,579 | 168,645 | 184,192 | ||||||||||||
Adjusted net income per share – diluted | $ | 1.01 | $ | 1.00 | $ | 2.92 | $ | 2.69 |
(1) | Represents the loss on extinguishment of debt including the premium paid to repurchase or call the debt as well as the write-off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt. Also includes the costs of debt modifications. |
(2) | Represents the costs related to separation activities announced on September 24, 2019 and personnel changes, primarily severance and other employee-related costs. During the nine months ended November 3, 2019, the costs include the impacts of a favorable termination of the lease for the Company’s former corporate headquarters. For additional information, see “Note 11, Restructuring and separation activities,” in the Notes to Consolidated Financial Statements within Item 1 of our quarterly report on Form 10-Q for the quarterly period ended November, 3, 2019, filed on December 10, 2019. |
(3) | Represents the costs incurred in the acquisition and integration of business acquisitions, including A.H. Harris Construction Supplies. |
9
Fourth-Quarter 2019 and Full-Year Fiscal 2019 Outlook
The following table presents a reconciliation of the forecasted range of Net income to Adjusted EBITDA for the fourth-quarter 2019 and full-year fiscal 2019 outlook (amounts in millions):
Fourth-Quarter 2019 | Full-Year Fiscal 2019 | |||||||||||||||
Low End | High End | Low End | High End | |||||||||||||
Net income | $ | 65 | $ | 76 | $ | 439 | $ | 450 | ||||||||
Less: Income from discontinued operations, net of tax | - | - | 1 | 1 | ||||||||||||
Income from continuing operations | 65 | 76 | 438 | 449 | ||||||||||||
Interest expense, net | 27 | 27 | 110 | 110 | ||||||||||||
Provision for income taxes | 23 | 27 | 153 | 157 | ||||||||||||
Depreciation and amortization | 30 | 30 | 113 | 113 | ||||||||||||
Stock-based compensation | 7 | 7 | 25 | 25 | ||||||||||||
Other1 | 9 | 9 | 16 | 16 | ||||||||||||
Adjusted EBITDA | $ | 161 | $ | 176 | $ | 855 | $ | 870 |
(1) | Other includes restructuring, costs related to separation activities announced on September 24, 2019, and acquisition and integration costs. |
The following table presents a reconciliation of the forecasted range of Net income to Adjusted net income and Net income per diluted share to Adjusted net income per diluted share for the fourth-quarter 2019 and full-year fiscal 2019 outlook (amounts in millions, except per share data):
Fourth-Quarter 2019 | Full-Year Fiscal 2019 | |||||||||||||||
Low End | High End | Low End | High End | |||||||||||||
Net income | $ | 65 | $ | 76 | $ | 439 | $ | 450 | ||||||||
Less: Income from discontinued operations, net of tax | - | - | 1 | 1 | ||||||||||||
Income from continuing operations | 65 | 76 | 438 | 449 | ||||||||||||
Plus: Provision for income taxes | 23 | 27 | 153 | 157 | ||||||||||||
Less: Cash income taxes | (19 | ) | (23 | ) | (54 | ) | (58 | ) | ||||||||
Plus: Amortization of acquisition-related intangible assets (other than software) | 6 | 6 | 23 | 23 | ||||||||||||
Other1 | 9 | 9 | 16 | 16 | ||||||||||||
Adjusted net income | $ | 84 | $ | 95 | $ | 576 | $ | 587 | ||||||||
Diluted weighted average common shares outstanding | 163 | 163 | 167 | 167 | ||||||||||||
Net income per share – diluted | $ | 0.40 | $ | 0.47 | $ | 2.63 | $ | 2.69 | ||||||||
Adjusted net income per share – diluted | $ | 0.52 | $ | 0.58 | $ | 3.45 | $ | 3.51 |
(1) | Other includes restructuring, costs related to separation activities announced on September 24, 2019, and acquisition and integration costs. |
10
Exhibit 99.2
FINANCIAL RESULTS AND COMPANY OVERVIEW 2019 Third - Quarter Performance December 10 th , 2019
2 Disclaimer Forward - Looking Statements and Preliminary Results This presentation includes “forward - looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Sect ion 21E of the Securities Exchange Act of 1934. Forward - looking statements are based on management’s beliefs and assumptions and informatio n currently available to management and are subject to known and unknown risks and uncertainties, many of which may be beyond o ur control. We caution you that the forward - looking information presented in this presentation is not a guarantee of future results , and that actual results may differ materially from those made in or suggested by the forward - looking information contained in this presen tation. Forward - looking statements generally can be identified by the use of forward - looking terminology such as “may,” “plan,” “seek,” “comfortable with,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or var iations thereon or similar terminology. A number of important factors could cause actual events to differ materially from those contained in or imp lied by the forward - looking statements, including those “Risk factors” in our annual report on Form 10 - K, for the fiscal year ended February 3, 2019, filed on March 19, 2019 and those described from time to time in our, and HD Supply, Inc.’s, other filings with the U.S. Secu rit ies and Exchange Commission (the “SEC”), which can be found at the SEC’s website, www.sec.gov. Any forward - looking information presented herein is made only as of the date of this presentation, and we do not undertake any obligation to update or revise any forwa rd - looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise. Estimates for taxes, Net sales, Net income, Net income per diluted share, Adjusted EBITDA, Adjusted net income, Adjusted net inc ome per diluted share and Free cash flow and Net debt to LTM EBITDA are preliminary estimates and are subject to risks and uncertaint ies , including, among others, changes in connection with quarter - end and year - end adjustments. Any variation between HD Supply’s actu al results and the preliminary financial data set forth herein may be material. Non - GAAP Financial Measures HD Supply supplements its financial results that are determined in accordance with accounting principles generally accepted i n t he United States of America (“GAAP”) with non - GAAP measurements, including Adjusted EBITDA, Adjusted net income, Adjusted net income per diluted share, Net debt and Free cash flow. This supplemental information should not be considered in isolation or as a subst itu te for the GAAP measurements presented herein. Additional information regarding Adjusted EBITDA, Adjusted net income, Adjusted net incom e p er diluted share, Net debt and Free cash flow referred to in this presentation is included at the end of this presentation under “C apital Structure Overview,” “Reconciliation of Non - GAAP Measures” and “Reconciliation of Forecasted Range.”
3 Q3’19 Execution Highlights Focused on Controllable Execution 1 See appendix slides 18 and 19 for a reconciliation of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per Dilute d S hare to Net Income and Net Income per Diluted Share 2 Free Cash Flow is defined as LTM Operating Cash Flow of $702M, Less Capital Expenditures of $125M Note: “VPY” denotes Versus Prior Year, “LTM” denotes Last Twelve Months ▪ 2% Net Sales Growth VPY ▪ 4% Decline in Operating Income VPY ▪ 61% Net Income Growth VPY ▪ $1M Decline in Adjusted EBITDA 1 VPY ▪ 78% Net Income per Diluted Share Growth VPY ▪ 1% Adjusted Net Income per Diluted Share 1 Growth VPY ▪ $577M LTM Free Cash Flow 2
4 Transaction On Track for Completion by Middle of Fiscal 2020 Transaction Update Transaction Structure Timing / Other Matters Financial Implications ▪ Pro - rata distribution expected to be tax - free to HD Supply shareholders for U.S. tax purposes ▪ Both companies’ shares expected to be listed on a national securities exchange ▪ Closing subject to customary conditions, including final HD Supply Board approval ▪ Both companies expected to be well - capitalized and well - positioned for growth ▪ Targeting high non - investment grade credit rating at both companies within 2 - 3x Net debt to LTM EBITDA ▪ Expecting dis - synergies of 50 - 100 BPs of sales for both Facilities Maintenance and White Cap, including public company costs, sourcing, and technology ▪ Positions both companies for success with best - in - class margin profiles ▪ Strong cash flow generation ▪ The separation is expected to be completed by the middle of Fiscal 2020, subject to customary closing conditions ▪ Separation planning and implementation underway with significant progress made on talent alignment, systems, and processes ▪ Form 10 Registration Statement expected to be filed by White Cap with the SEC in early 2020 ▪ Investor meetings middle of 2020
5 Atlanta Distribution Center Operations Largely Recovered Continue to Pass on Gross Margin Dollars; Margin Rate Contraction Likely Topics of Recent Investor Interest Topic Consideration 3. Pricing 2. Hospitality 4. Operational Recovery Tighter Budgets and Reduced Spending Focused on Shareholder Value Challenging Market Dynamics from Tariff and Labor Costs 1. MRO End Market Key Leadership Appointments Made 6. White Cap Management Continued Choppiness in Non - Residential Market 5. Construction End Markets
6 ($ in millions, except per share data) 1 See appendix slides 18 and 19 for a reconciliation of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per Dilute d S hare to Net Income and Net Income per Diluted Share Q3’18 VPY Q3’19 +$ 32 +2.0% Net Sales Growth VPY Q3’19 Financial Results $1,612 $1,644 Net Sales + 2 % Gross Profit $629 $640 +2% Gross Margin % 39.0% 38.9% - 10 BPs Operating Income $213 $205 - 4% Op. Income % 13.2% 12.5% - 70 BPs Net Income $82 $132 +61% Per Diluted Share $0.45 $0.80 +$0.35 Adj. EBITDA 1 $248 $247 Flat Adj. EBITDA % 15.4% 15.0% - 40 BPs Adj. Net Income 1 $184 $166 - 10% Per Diluted Share $1.00 $1.01 +1%
7 Sales Growth in Both Business Units Q3’19 Segment Performance Q3’19 Adj. EBITDA $149 $ 98 Net Sales Q3’18 $ 149 VPY +2% Flat VPY +2% - 1% $ 99 Q3’19 Q3’18 $803 $810 $826 organic $818 ($ in millions)
8 Q3’19 Taxes and Cash Flow ▪ ~$35M in Tax - affected State NOLs 1 ▪ Cash Taxes $25M in Q3’19 $19M - $23M Estimated in Q4’19 $54M - $58M Estimated in FY’19 ▪ Effective Rate ~26% for Q3’19 Expected 26% for FY’19 ▪ $2.2B Net Debt 2 at the End of Q3’19 2.4x Net Debt to LTM Adjusted EBITDA ▪ $577M Q3’19 LTM Free Cash Flow 3 ▪ $35M of Capital Expenditures in Q3’19 Note: Contains forward - looking information; please see Disclaimer on slide 2 1 Net Operating Loss Carryforwards 2 Reconciled on slide 14 3 Free Cash Flow is defined as LTM Operating Cash Flow of $702M, Less Capital Expenditures of $125M Taxes Cash Flow Future Cash Tax Payments Approximately Equal Tax Provision
9 17.7% 1.6% 19.4% 2.6% 16.3% 1.7% 14.6% 2.5% 9.9% 10.9% 7.7% 6.8% +2.0% Q3’19 Average Daily Sales Growth Q3’19 Monthly Average Daily Sales (%) Nov. (Preliminary) Aug. Sep. Oct. Q3’19 HD Supply Average Daily Sales Growth VPY Note: Contains forward - looking information; please see Disclaimer on slide 2 Q4’19 Total Prior Year ADS Organic Prior Year ADS Total Current Year ADS Facilities Maintenance 6.0% 1.2% 9.6% 1.7% 7.1% 2.7% 7.0% 2.5% Construction & Industrial 33.1% 2.0% 31.4% 3.5% 26.8% 0.6% 23.1% 2.4% HD Supply Net Sales $513 $521 $481 $494 $618 $629 $426 $436 ’19 Selling Days 20 19 25 18 ’18 Selling Days 20 19 25 18 ’17 Selling Days 20 19 25 18 2.5%
10 Current Outlook Summary HD Supply Current Outlook 1 Full year growth rates adjusted for fiscal 2018’s 53 rd Week by subtracting $104 million in sales, $10 million in Net income, $13 million in Adjusted EBITDA and $13 million in Adjus te d Net Income 2 Assumes a fully diluted weighted average share count of 163 million for the fourth - quarter of fiscal 2019 and 167 million for th e full - year fiscal 2019 (amounts in millions, except per share amounts) Note: Contains forward - looking information; please see Disclaimer on slide 2. Forecasted reconciliation of Non - GAAP Measures: Ne t income to Adjusted EBITDA, Net income to Adjusted net income and Net Income per diluted share to Adjusted Net income per diluted share can be found on slides 20 and 21 Low End High End Low End High End Net Sales $1,355 $1,405 $6,116 $6,166 3% at FY’19 Midpoint VPY¹ Net Income $65 $76 $439 $450 16 % at FY’19 Midpoint VPY¹ Adjusted EBITDA $161 $176 $855 $870 1% at FY’19 Midpoint VPY¹ Net Income per Share - Diluted² $0.40 $0.47 $2.63 $2.69 25% at FY’19 Midpoint VPY¹ Adjusted Net Income per Share - Diluted² $0.52 $0.58 $3.45 $3.51 5% at FY’19 Midpoint VPY¹ Q4’19 FY’19
11 Q&A Q&A
12 Concluding Remarks One Team, Driving Customer Success and Value Creation ▪ Recap of Q3’19 2% Net Sales Growth VPY 61% Net Income Growth VPY 78% Net Income per Diluted Share Growth VPY 1% Adjusted Net Income per Diluted Share Growth 1 VPY ▪ Deliver on Customer Promise Through a Volatile Environment 1 See appendix slides 18 and 19 for a reconciliation of Adjusted EBITDA, Adjusted Net Income and Adjusted Net Income per Dilute d S hare to Net Income and Net Income per Diluted Share
13 Q&A APPENDIX
14 ~$1.7B Net Debt Capital Structure Overview Debt as of Nov 3, 2019 Senior ABL Facility Term B - 5 Loans Oct. 2018 Senior Unsecured Notes Outstanding Debt 4 Less: Cash and Cash Equivalents Net Debt Balance Maturity 1 Represents the stated rate of interest, without including the effect of discounts or interest rate swaps 2 Subject to applicable redemption price terms 3 Ratings per Moody’s Investor’s Service (“Moody’s”) and S&P Global Ratings (“S&P”). Corporate family ratings shown for Outsta nd ing Debt. 4 Excludes unamortized discounts of $3 and unamortized deferred financing costs of $19 ($ in millions) Interest Rate 1 Soft Call Date 2 3.32% 3.54% 5.375% 4/5/ 22 10/17/ 23 10/15/ 26 n/a Now 10/15/ 21 Plus: Letters of Credit $362 750 $2,158 (37) $2,171 1,059 24 Moody’s / S&P 3 Not Rated , BBB – Ba1, BBB – Ba2, BB – Ba1 Stable, BB+ Stable
15 Facil. Maint. $211 $227 $298 $225 $238 $309 $228 $268 $334 $266 $249 $311 $216 Const. & Ind. $215 $228 $268 $198 $222 $301 $237 $253 $305 $255 $245 $318 $221 ’19 Selling Days 18 19 24 20 20 25 19 20 24 20 19 25 18 ’18 Selling Days 18 20 28 20 20 25 20 19 24 20 19 25 18 ’17 Selling Days 18 20 23 20 20 25 20 19 24 20 19 25 18 $436M Preliminary November Sales Monthly Net Sales ($) ($ in millions) HD Supply Net Sales (Preliminary) FY’18 1 Inorganic Sales in March 2019 Represent $1 million 2 Contains an extra selling week as compared with other years. Fiscal 2018 contains 53 weeks Note: Contains forward - looking information; please see Disclaimer on slide 2. Contribution from Presto Maintenance Supply Not Se parately Disclosed FY’19 $426 $455 $565 $423 $460 $610 $464 $521 $639 $521 $494 $629 $436 $397 $427 $535 $400 Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Total Net Sales Organic Net Sales 1 2
16 Facil . Maint . 7.0% 9.2% 3.2% 6.0% 6.0% 7.9% (2.4%) 2.2% 3.0% 1.2% 1.7% 2.7% 2.5% Const. & Ind. 6.6% 9.7% 5.8% (2.4%) 11.6% 4.3% 2.8% 1.7% 1.0% 2.0% 3.5% 0.6% 2.4% ’19 Selling Days 18 19 24 20 20 25 19 20 24 20 19 25 18 ’18 Selling Days 18 20 28 20 20 25 20 19 24 20 19 25 18 ’17 Selling Days 18 20 23 20 20 25 20 19 24 20 19 25 18 14.6% 16.7% 10.3% 8.1% 8.8% 6.1% 0.2% 1.9% 2.1% 1.6% 2.6% 1.7% 4.8% 6.8% 9.5% 4.3% 2.2% 8.6% Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. +2.5% Preliminary Organic Average Daily Sales Growth in November Average Daily Sales – Organic 1 (VPY%) HD Supply Organic Average Daily Sales Growth VPY 1 (VPY%) 1 Adjusted for Acquisitions, Divestitures, and Selling Days 2 Contains an extra selling week as compared with other years. Fiscal 2018 contains 53 weeks Note: Contains forward - looking information; please see Disclaimer on slide 2. Contribution from Presto Maintenance Supply Not Separate ly Disclosed (Preliminary) FY’18 FY’19 Total ADS Growth VPY% Organic ADS Growth VPY% 2 2.5%
17 FY’19 Revised Outlook FY’19 Growth Rates Excluding the Impact of the 53 rd Week in FY’18 1: The impact of the 53 rd week on fiscal 2018 was $104 million in sales, $13 million in Adjusted EBITDA, $13 million in Adjusted net income, and $10 mi ll ion in Net income Note: Contains forward - looking information; please see Disclaimer on slide 2. Forecasted reconciliation of Non - GAAP Measures: Net income to Adjusted EBITDA, Net income to Adjusted net income and Net Incom e per diluted share to Adjusted Net income per diluted share can be found on slides 20 and 21 $6,047 FY’18 53 rd Week 1 Core Business Growth FY’19 Net Sales ($ in millions) Adj. EBITDA Midpoint Midpoint ($104) $6,166 $6,116 $5,943 FY’18 Adj. $871 FY’18 53 rd Week 1 FY’19 ($13) $870 $855 $858 FY’18 Adj. $6,141 $863 +1% +3% Core Business Growth
18 Reconciliation of Non - GAAP Measures: Net Income to Adjusted EBITDA ($ in millions) 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 repurchase or call the debt as well as the write - off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt. Also includes the costs of debt modifications 3 Represents the costs related to separation activities announced on September 24, 2019 and personnel changes, primarily severa nce and other employee - related costs. During the nine months ended November 3, 2019, the costs include the impacts of a favorable termination of the lease for the Company’s former corporate headquarters. For ad dit ional information, see “Note 11, Restructuring and separation activities,” in the Notes to Consolidated Financial Statements within Item 1 of our quarterly report on Form 10 - Q for the quarterly period ended November, 3, 2019, filed on December 10, 2019 4 Represents the costs incurred in the acquisition and integration of business acquisitions, including A.H. Harris Construction Su pplies Three Months Ended Nine Months Ended Nov. 3, 2019 Oct. 28, 2018 Nov. 3, 2019 Oct. 28, 2018 Net income $ 132 $ 82 $ 374 $ 302 Less income from discontinued operations, net of tax 1 — 1 1 Income from continuing operations 131 82 373 301 Interest expense, net 27 32 83 100 Provision for income taxes 47 30 130 105 Depreciation and amortization 1 29 27 83 78 Loss on extinguishment & modification of debt 2 — 69 — 69 Restructuring and separation charges 3 4 — 2 9 Stock - based compensation 6 7 18 19 Acquisition and integration costs 4 4 2 5 5 Other (1) (1) — (2) Adjusted EBITDA $ 247 $ 248 $ 694 $ 684
19 Reconciliation of Non - GAAP Measures: Net Income to Adjusted Net Income and Adjusted Net Income Per Share ($ in millions, except share and per share amounts) 1 Represents the loss on extinguishment of debt including the premium paid to repurchase or call the debt as well as the write - off of unamortized deferred financing costs, original issue discount, and other assets or liabilities associated with such debt. Also includes the costs of debt modifications 2 Represents the costs related to separation activities announced on September 24, 2019 and personnel changes, primarily severa nce and other employee - related costs. During the nine months ended November 3, 2019, the costs include the impacts of a favorable termination of the lease for the Company’s former corporate headquarters. For additi ona l information, see “Note 11, Restructuring and separation activities,” in the Notes to Consolidated Financial Statements within Item 1 of our quarterly report on Form 10 - Q for the quarterly period ended November, 3, 2019, filed on December 10, 2019 3 Represents the costs incurred in the acquisition and integration of business acquisitions, including A.H. Harris Construction Su pplies Net income $ 132 $ 82 $ 374 $ 302 Less income from discontinued operations, net of tax 1 — 1 1 Income from continuing o perations 131 82 373 301 Plus: Provision for income taxes 47 30 130 105 Less: Cash income taxes ( 25) (4) (35) (9) Plus: Amortization of acquisition related intangible assets (other than software) 5 5 17 16 Plus: Loss on extinguishment & modification of debt 1 — 69 — 69 Plus: Restructuring and separation charges 2 4 — 2 9 Plus: Acquisition and integration costs 3 4 2 5 5 Adjusted Net Income $ 166 $ 184 $ 492 $ 496 Diluted Weighted average common shares 165,142 183,579 168,645 184,192 Adjusted Net Income per share $ 1.01 $ 1.00 $ 2.92 $ 2.69 Three Months Ended Nine Months Ended Nov. 3, 2019 Oct. 28, 2018 Nov. 3, 2019 Oct. 28, 2018 Net Income per share $ 0.80 $ 0.45 $ 2.22 $ 1.64
20 Reconciliation of Forecasted Range Net income to Adjusted EBITDA ($ in millions) Note: Contains forward - looking information; please see Disclaimer on slide 2. Low End High End Low End High End Net income $65 $76 $439 $450 Interest expense, net 27 27 110 110 Provision for income taxes 23 27 153 157 Depreciation and amortization 30 30 113 113 Stock - based compensation 7 7 25 25 Other 1 9 9 16 16 Adjusted EBITDA $161 $176 $855 $870 Q4’19 FY’19 Less: Income from Discontinued Operations, net of tax - - 1 1 $65 $76 $438 $449 1 Other includes restructuring, costs related to separation activities announced on September 24, 2019, and acquisition and int eg ration costs Income from Continuing Operations
21 Reconciliation of Forecasted Range Net income to Adjusted net income (amounts in millions, except per share amounts) Note: Contains forward - looking information; please see Disclaimer on slide 2. Low End High End Low End High End Net income $65 $76 $439 $450 Plus: Provision for income taxes 23 27 153 157 Less: Cash incomes taxes ( 19 ) (23) (54) (58) Plus: Amortization of acquisition - related intangible assets (other than software) 6 6 23 23 Other 1 9 9 16 16 Adjusted net income $84 $95 $576 $587 Diluted weighted average common shares outstanding 163 163 167 167 Net income per share - diluted $0.40 $0.47 $2.63 $2.69 Adjusted net income per share - diluted $0.52 $0.58 $3.45 $3.51 Q4’19 FY’19 Less: Income from Discontinued Operations, net of tax - - 1 1 $65 $76 $438 $449 1 Other includes restructuring, costs related to separation activities announced on September 24, 2019, and acquisition and int eg ration costs Income from C ontinuing Operations
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