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. The Company determines the 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:

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.

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 and Eliminations.” 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 certain other measures for each of the reportable segments and total continuing operations for the periods indicated (amounts in millions):


	Fiscal Year 2018
							Total
	Facilities		Construction &		Corporate &		Continuing
	Maintenance		Industrial		Eliminations		Operations
Net sales	$	3,089	$	2,961	$	(3)	$	6,047
Adjusted EBITDA		546		325		—		871
Depreciation(1) & Software Amortization		40		44		—		84
Other Intangible Amortization		8		14		—		22
Total Assets(2)		2,481		1,358		394		4,233
Capital Expenditures(2)		58		31		26		115


	Fiscal Year 2017
							Total
	Facilities		Construction &		Corporate &		Continuing
	Maintenance		Industrial		Eliminations		Operations
Net sales	$	2,847	$	2,279	$	(5)	$	5,121
Adjusted EBITDA		499		232		—		731
Depreciation(1) & Software Amortization		36		42		—		78
Other Intangible Amortization		9		3		—		12
Total Assets(2)		2,390		877		1,051		4,318
Capital Expenditures(2)		22		34		38		94


	Fiscal Year 2016
							Total
	Facilities		Construction &		Corporate &		Continuing
	Maintenance		Industrial		Eliminations		Operations
Net sales	$	2,762	$	2,063	$	(6)	$	4,819
Adjusted EBITDA		482		198		—		680
Depreciation(1) & Software Amortization		38		38		—		76
Other Intangible Amortization		9		3		—		12
Total Assets(2)		2,358		808		2,541		5,707
Capital Expenditures(2)		22		32		27		81

(1)

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

(2)

Total Assets and capital expenditures include amounts attributable to discontinued operations for the periods prior to the dispositions.

Reconciliation to Consolidated Financial Statements


	Fiscal 2018		Fiscal 2017		Fiscal 2016
Total Adjusted EBITDA	$	871	$	731	$	680
Depreciation and amortization(1)		106		90		88
Stock-based compensation		26		26		20
Restructuring		9		6		7
Acquisition and integration costs(2)		6		—		—
Other		—		1		—
Operating income		724		608		565
Interest expense		130		166		269
Interest income		(1)		(2)		—
Loss on extinguishment & modification of debt(3)		69		84		179
Income from Continuing Operations Before Provision for Income Taxes		526		360		117
Provision for income taxes		135		193		51
Income from continuing operations	$	391	$	167	$	66

(1)

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

(2)

Represents the cost incurred in the acquisition and integration of A.H. Harris Construction Supplies.

(3)

Represents the loss on extinguishment of debt including 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.

Net sales for HD Supply outside the United States, primarily Canada, were $157 million, $146 million, and $124 million in fiscal 2018, fiscal 2017, and fiscal 2016, respectively. Long‑lived assets of HD Supply outside the United States, primarily Canada, were $6 million as of February 3, 2019 and January 28, 2018.

On March 5, 2018, the Company completed the acquisition of A.H. Harris for a purchase price of approximately $362 million, net of cash acquired. The acquisition reduced total assets of the Corporate reportable segment by the purchase price and increased total assets of the Construction & Industrial reportable segment by approximately $411 million.