SEGMENT INFORMATION

3 Months Ended

May 03, 2020

NOTE 11 — 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 two reportable segments, each of which is presented below:

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Facilities Maintenance—Facilities Maintenance distributes maintenance, repair and operations products, provides value-add services and fabricates custom products to multifamily, hospitality, healthcare and institutional facilities.

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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 incurs costs related to the Company’s centralized support functions, which are comprised of finance, information technology, human resources, legal, supply chain and other support services. All Corporate overhead costs are allocated to the reportable segments. Eliminations include the adjustments necessary to eliminate intercompany transactions.

The following tables present Net sales, Adjusted EBITDA, and other measures for both of the reportable segments and total operations for the periods indicated (amounts in millions):


	Facilities		Construction				Total
	Maintenance		& Industrial		Eliminations		Operations
Three Months Ended May 3, 2020
Net sales	$	682	$	713	$	—	$	1,395
Adjusted EBITDA		98		65		—		163
Depreciation⁽¹⁾ & Software Amortization		13		10		—		23
Other Intangible Amortization		2		4		—		6

Three Months Ended May 5, 2019
Net sales	$	772	$	721	$	—	$	1,493
Adjusted EBITDA		134		69		—		203
Depreciation⁽¹⁾ & Software Amortization		10		11		—		21
Other Intangible Amortization		2		4		—		6

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

Reconciliation to Consolidated Financial Statements


	Three Months Ended
	May 3, 2020		May 5, 2019
Total Adjusted EBITDA	$	163	$	203
Depreciation and amortization⁽¹⁾		29		27
Stock-based compensation		7		7
Restructuring and separation⁽²⁾		6		(2)
Acquisition and integration costs⁽³⁾		—		1
Operating income		121		170
Interest expense		25		28
Income from Before Provision for Income Taxes		96		142
Provision for income taxes		24		35
Net income	$	72	$	107

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

(2)	Represents the costs related to separation activities and personnel changes, primarily severance and other employee-related costs. During the three months ended May 5, 2019, the costs include a favorable termination of the lease for the Company’s former corporate headquarters.

(3)	Represents the cost incurred in the acquisition and integration of business acquisitions.