SEGMENT INFORMATION

12 Months Ended

Jan. 29, 2012

SEGMENT INFORMATION

NOTE 15 – 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 and HD Supply Canada (included in Other), which is organized based on geographic location. The Company determines the reportable segments in accordance with the principles of segment reporting within U.S. GAAP (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.

During fiscal 2011, the reportable segment presentation for two operating segments changed as compared to prior periods. The CTI operating segment no longer met the quantitative threshold requirements of a reportable segment. In addition, the Electrical operating segment was merged into the Utilities operating segment, which is a reportable segment, and collectively titled Power Solutions. As a result, prior period disclosures reflect the change in reportable segments.

In conjunction with the change in reportable segments, management re-evaluated its use of key performance metrics. Historically, the Company has presented operating income excluding certain charges as its measure of operating performance for presentation of segment results. Management uses both operating income excluding certain charges and Adjusted EBITDA in its evaluation of operating segment performance. However, based on the recent evaluation, management concluded that Adjusted EBITDA is the primary metric management uses to assess operating performance. Therefore, current and prior period segment presentation reflects Adjusted EBITDA as the operating performance measure.

HD Supply has four reportable segments, each of which is presented below:

• Facilities Maintenance – Supplies maintenance, repair and operations (“MRO”) products and upgrade and renovation services largely to the multifamily, healthcare, hospitality, and institutional markets.

• Waterworks – Distributes complete lines of water and wastewater transmission products, serving contractors and municipalities in all aspects of the water and wastewater industries.

• Power Solutions – Distributes electrical transmission and distribution products, power plant maintenance, repair and operations supplies, smart-grid technologies, and provides materials management and procurement outsourcing arrangements to investor-owned utilities, municipal and provincial power authorities, rural electric cooperatives and utility contractors and distributes electrical products such as wire and cable, switch gear supplies, lighting and conduit to residential and commercial contractors.

• White Cap – Distributes specialized hardware, tools, building materials, and safety equipment to professional contractors.

In addition to the reportable segments, the Company’s consolidated financial results include an Other category, Corporate, & Eliminations. Other primarily consists of (i) Repair & Remodel, offering light remodeling and construction supplies primarily to small remodeling contractors and tradesmen; (ii) Crown Bolt, a retail distribution operator, providing program and packaging solutions, sourcing, distribution, and in-store service, primarily serving Home Depot; (iii) CTI, offering turnkey supply and installation services for multiple interior finish options, including flooring, cabinets, countertops, and window coverings, along with comprehensive design center services for residential, commercial, and senior living projects; and (iv) HD Supply Canada, comprised of HD Supply’s Canadian operations (other than the Canadian utilities operations, which is included in the Power Solutions segment, and Commercial Direct, which is included in the Facilities Maintenance segment). Corporate has enterprise management responsibility and centralized support functions for some of the segments, information technology, human resources, sourcing and support services. Eliminations remove intersegment transactions.

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

	Fiscal Year 2011
	Net     Sales		Adjusted     EBITDA		Depreciation(1)     & Software Amortization		Other Intangible      Amortization		Total     Assets(2)		Capital     Expen- ditures
Facilities Maintenance		$  1,870		$  318		$  30		$  75		$  2,264		$  32
Waterworks		1,772		112		5		95		1,562		5
Power Solutions		1,625		50		5		20		775		5
White Cap		981		17		14		19		481		16
Other, Corporate, & Eliminations		780		11		31		35		1,656		51
Total continuing operations		$  7,028		$  508		$  85		$  244		$  6,738		$  109

	Fiscal Year 2010
	Net     Sales		Adjusted     EBITDA		Depreciation(1)     & Software Amortization		Other Intangible      Amortization		Total     Assets(2)		Capital     Expen- ditures
Facilities Maintenance		$  1,682		$  282		$  28		$    75		$  2,265		$  20
Waterworks		1,659		94		5		94		1,582		2
Power Solutions		1,462		49		5		19		740		2
White Cap		852		(10)		20		19		439		3
Other, Corporate, & Eliminations		794		(4)		41		37		2,063		18
Total continuing operations		$  6,449		$  411		$    99		$  244		$  7,089		$  45

	Fiscal Year 2009
	Net     Sales		Adjusted     EBITDA		Depreciation(1)     & Software Amortization		Other Intangible      Amortization		Total     Assets(2)		Capital     Expen- ditures
Facilities Maintenance		$  1,609		$  279		$    24		$    73		$  2,341		$  28
Waterworks		1,652		99		5		95		1,695		2
Power Solutions		1,410		40		5		19		711		3
White Cap		872		(31)		25		20		487		4
Other, Corporate, & Eliminations		770		(44)		62		36		2,611		18
Total continuing operations		$  6,313		$  343		$  121		$  243		$  7,845		$  55

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

(2) Total Assets include amounts attributable to discontinued operations for the periods prior to the dispositions.

Reconciliation to Consolidated Financial Statements

	Fiscal 2011		Fiscal 2010		Fiscal 2009
Total Adjusted EBITDA		$   508		$   411		$   343
Depreciation and amortization		329		343		364
Stock-based compensation		20		17		18
Management fees and expenses		5		5		5
Restructuring		–		8		21
Goodwill impairment		–		–		219
Other		(1)		1		–
Operating income (loss)		155		37		(284)
Interest expense		639		623		602
Other (income) expense, net		–		(1)		(208)
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes		(484)		(585)		(678)
Provision (benefit) for income taxes		79		28		(198)
Income (loss) from continuing operations		$  (563)		$  (613)		$  (480)

Net sales for HD Supply outside the United States, primarily Canada, were $404 million, $365 million, and $330 million in fiscal 2011, fiscal 2010, and fiscal 2009, respectively. Long-lived assets of HD Supply outside the United States were $18 million and $29 million as of January 29, 2012 and January 30, 2011, respectively.