Investment in HD Supply Holdings, Inc.

6 Months Ended

Aug. 03, 2014

Investments, All Other Investments [Abstract]

Investment In HD Supply Holdings, Inc.

INVESTMENT IN HD SUPPLY HOLDINGS, INC.

At the end of fiscal 2013, the Company owned 16.3 million shares of HD Supply Holdings, Inc. ("HD Supply") common stock, which represented approximately 8% of the shares of HD Supply common stock outstanding. This investment is accounted for using the cost method, as there are significant restrictions in place on the Company's ability to sell or transfer its HD Supply shares. The restrictions are controlled by the three largest shareholders of HD Supply (the "Principal Shareholders"). The carrying value of the HD Supply shares was impaired by the Company to a zero cost basis in fiscal 2009. During the first quarter of fiscal 2014, the Principal Shareholders elected to sell shares in a secondary public offering of HD Supply common stock. Under the terms of a registration rights agreement among the Company, HD Supply and the Principal Shareholders, the Company had the right to include a portion of its shares in the offering, and the Company elected to do so. As a result, the restrictions on 3.9 million shares were lifted so that they could be sold in the offering. The Company received $97 million of proceeds from the sale of these shares and recognized a corresponding gain in the first quarter of fiscal 2014.

In the second quarter of fiscal 2014, the underwriters of the secondary public offering exercised their overallotment option to sell additional shares of HD Supply common stock to the public. As a result, the Company sold 600 thousand additional shares of HD Supply common stock and received $15 million of proceeds from the sale of these shares and recognized a corresponding gain in the second quarter of fiscal 2014. The total gain of $112 million is included in Interest and Investment Income in the accompanying Consolidated Statements of Earnings for the six months ended August 3, 2014. The remaining 11.8 million shares owned by the Company, which represent approximately 6% of the shares of HD Supply common stock outstanding, continue to be accounted for using the cost method as the restrictions on these shares remain in place.