SEGMENT INFORMATION

9 Months Ended

12 Months Ended

Oct. 28, 2012

Jan. 29, 2012

Segment Information

NOTE 12 — 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.

EBITDA is defined as Net income (loss) less Income (loss) from discontinued operations, net of tax, plus (i) Interest expense and Interest income, net, (ii) Provision (benefit) for income taxes, and (iii) Depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted to exclude non-cash items and certain other adjustments to Consolidated Net Income.

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 (formerly “Utilities/Electrical”)—Distributes electrical transmission and distribution products, power plant MRO supplies, smart-grid technologies, and provides materials management and procurement outsourcing arrangements to the power generation and distribution industries 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. All material intersegment transactions have been eliminated.

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		Power Solutions		White Cap		Other, Corporate, & Eliminations		Total Continuing Operations
Three Months Ended Oct. 28, 2012
Net Sales	$	587	$	553	$	468	$	318	$	220	$	2,146
Adjusted EBITDA		112		42		21		22		7		204
Depreciation(1) & Software Amortization		9		3		2		3		7		24
Other Intangible Amortization		21		24		5		5		6		61
Three Months Ended Oct. 30, 2011
Net Sales	$	497	$	490	$	429	$	277	$	200	$	1,893
Adjusted EBITDA		87		37		17		13		1		155
Depreciation(1) & Software Amortization		8		1		1		2		9		21
Other Intangible Amortization		18		24		5		5		9		61

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

	Facilities Maintenance		Waterworks		Power Solutions		White Cap		Other, Corporate, & Eliminations		Total Continuing Operations
Nine Months Ended Oct. 28, 2012
Net Sales	$	1,655	$	1,541	$	1,323	$	891	$	631	$	6,041
Adjusted EBITDA		306		109		55		48		11		529
Depreciation(1) & Software Amortization		28		7		5		9		22		71
Other Intangible Amortization		59		72		14		15		21		181
Nine Months Ended Oct. 30, 2011
Net Sales	$	1,441	$	1,373	$	1,239	$	748	$	575	$	5,376
Adjusted EBITDA		254		91		43		17		1		406
Depreciation(1) & Software Amortization		22		3		3		10		26		64
Other Intangible Amortization		56		71		15		15		26		183

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

Reconciliation to Consolidated Financial Statements (amounts in millions)

	Three Months Ended						Nine Months Ended
	October  28, 2012			October  30, 2011			October  28, 2012			October  30, 2011
Total Adjusted EBITDA	$	204		$	155		$	529		$	406
Depreciation and amortization		85			82			252			247
Stock-based compensation		3			7			13			16
Management fees and expenses		1			1			4			4
Other		1			—			—			—
Operating income (loss)		114			65			260			139
Interest expense		165			160			489			477
Loss on extinguishment of debt		—			—			220			—
Other (income) expense, net		—			—			—			(1	)
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes		(51	)		(95	)		(449	)		(337	)
Provision (benefit) for income taxes		2			24			36			59
Income (loss) from continuing operations	$	(53	)	$	(119	)	$	(485	)	$	(396	)

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.