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Execution Delivers 5% Sales Growth and 15% Adjusted EBITDA Growth Versus Prior Year
- Net Sales increased 5 percent to $2,012 million
- Operating Income improved 28 percent to $229 million
- Adjusted EBITDA increased 15 percent to $265 million
- Adjusted Net Income per diluted share increased 61 percent to $0.66 (Net Income per diluted share of $1.24)
ATLANTA, Dec. 08, 2015 (GLOBE NEWSWIRE) -- HD Supply Holdings, Inc. (NASDAQ:HDS), one of the largest industrial distributors in North America, today reported Net sales of $2.0 billion for the third quarter of fiscal 2015 ended November 1, 2015, an increase of $98 million, or 5.1 percent, as compared to the third quarter of fiscal 2014. The company believes its sales performance represents growth of approximately 300 basis points in excess of its market growth estimate.
“I am very pleased with the team’s performance in the third quarter. We delivered 5 percent sales growth, 15 percent Adjusted EBITDA growth and 61 percent Adjusted Net Income per Diluted Share growth despite a challenging environment,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We also took action in the third quarter to further enhance our capital structure by redeeming $675 million of debt using the proceeds from the sale of the Power Solutions business unit. We continue to focus on controllable execution to grow in excess of market estimates, deliver operating leverage and generate cash.”
Gross profit increased $51 million, or 8.3 percent, to $666 million for the third quarter of fiscal 2015 compared to $615 million for the third quarter of fiscal 2014. Gross profit was 33.1 percent of Net sales for the third quarter of fiscal 2015, up approximately 100 basis points from 32.1 percent of Net sales for the third quarter of fiscal 2014. The improvement in Gross margin was primarily driven by category management initiatives and favorable mix of products and services.
Operating income increased $50 million, or 27.9 percent, to $229 million for the third quarter of fiscal 2015 compared to $179 million for the third quarter of fiscal 2014. Operating income as a percentage of Net sales increased approximately 200 basis points during the third quarter of fiscal 2015 as compared to the third quarter of fiscal 2014. The improvement was primarily driven by improvements in Gross margin, disciplined cost control and a reduction of amortization expense on certain acquisition-related intangible assets.
Adjusted EBITDA increased $35 million, or 15.2 percent, to $265 million for the third quarter of fiscal 2015 compared to $230 million for the third quarter of fiscal 2014. Adjusted EBITDA as a percentage of Net sales increased approximately 120 basis points to 13.2 percent in the third quarter of fiscal 2015 as compared to 12.0 percent in the third quarter of fiscal 2014. The increase in Adjusted EBITDA reflects the continued focus on initiative execution to drive growth in excess of estimates of market growth, category management and the leverage of fixed costs through sales volume increases.
Net income increased $190 million to $250 million for the third quarter of fiscal 2015 compared to $60 million for the third quarter of fiscal 2014. Net income for the third quarter of fiscal 2015 included $186 million pre-tax gain on the sale of the Power Solutions business unit and $100 million loss on extinguishment and modification of debt. Net income per diluted share increased $0.94 to $1.24 in the third quarter of fiscal 2015 compared to $0.30 in the third quarter of fiscal 2014.
Adjusted net income increased $51 million, or 62.2 percent to $133 million for the third quarter of fiscal 2015 as compared to an Adjusted net income of $82 million for the third quarter of fiscal 2014. Adjusted net income per diluted share increased $0.25, or 61.0 percent to $0.66 in the third quarter of fiscal 2015, as compared to $0.41 in the third quarter of fiscal 2014. The increase in Adjusted net income is primarily attributable to sales growth, gross margin expansion, the leverage of fixed costs through sales volume increases, and a reduction in interest expense.
As of November 1, 2015 HD Supply’s combined liquidity of approximately $1,258 million was comprised of $77 million in Cash and cash equivalents and $1,181 million of additional available borrowings under a Senior ABL Facility, based on qualifying inventory and receivables.
Business Unit Performance
Facilities Maintenance
Net sales increased $56 million, or 8.5 percent, to $716 million in the third quarter of fiscal 2015 as compared to $660 million in the third quarter of fiscal 2014. Adjusted EBITDA increased $10 million, or 7.2 percent, to $149 million during the third quarter of fiscal 2015 as compared to $139 million in the third quarter of fiscal 2014. Adjusted EBITDA as a percentage of Net sales decreased approximately 30 basis points to 20.8 percent in the third quarter of fiscal 2015 as compared to the third quarter of fiscal 2014.
Waterworks
Net sales increased $10 million, or 1.4 percent, to $705 million in the third quarter of fiscal 2015 as compared to $695 million in the third quarter of fiscal 2014. Adjusted EBITDA increased $6 million, or 9.4 percent, to $70 million during the third quarter of fiscal 2015 as compared to $64 million in the third quarter of fiscal 2014. Adjusted EBITDA as a percentage of Net sales increased approximately 70 basis points to 9.9 percent in the third quarter of fiscal 2015 as compared to the third quarter of fiscal 2014.
Construction & Industrial - White Cap
Net sales increased $40 million, or 9.7 percent, to $451 million in the third quarter of fiscal 2015 as compared to $411 million in the third quarter of fiscal 2014. Adjusted EBITDA increased $13 million, or 37.1 percent, to $48 million during the third quarter of fiscal 2015 as compared to $35 million in the third quarter of fiscal 2014. Adjusted EBITDA as a percentage of Net sales increased approximately 210 basis points to 10.6 percent in the third quarter of fiscal 2015 as compared to the third quarter of fiscal 2014.
Third-Quarter Monthly Sales Performance
Net sales for August, September and October were $646 million, $605 million and $761 million, respectively. There were 20 selling days in August, 19 selling days in September and 25 selling days in October. Average year-over-year daily sales growth for August, September and October were 5.9 percent, 4.8 percent and 4.8 percent, respectively.
Full Redemption of Second Priority Notes
On October 13, 2015, HD Supply, Inc. redeemed all of its outstanding $675 million 11% Senior Secured Second Priority Notes due 2020 using proceeds from the completion of the previously announced sale of its Power Solutions business. The redemption amount of $783 million included a make-whole premium of approximately $72 million and accrued interest of approximately $37 million. The reduction in future interest expense is expected to be approximately $75 million annually.
Term Loan Facility Amendment
On August 13, 2015, HD Supply, Inc. amended its Term Loan Facility to replace its $959 million, 4.0%, Secured Term Loans due 2018, with new $850 million, 3.75%, Secured Term Loans due 2021, which is a three year maturity extension.
Preliminary November Sales Results
Preliminary Net sales in November were $534 million which represents 6.0 percent growth versus prior year. Preliminary November year-over-year average daily sales growth by business is Facilities Maintenance 7.4 percent, Waterworks 3.9 percent, and Construction & Industrial - White Cap 11.5 percent. There were 18 selling days in November.
Fourth-Quarter 2015 Outlook
The company anticipates Net sales in the fourth quarter of fiscal 2015 to be in the range of $1,615 million to $1,665 million, Adjusted EBITDA in the range of $160 million to $170 million, and Adjusted net income per diluted share in the range of $0.21 to $0.26. The fourth quarter fiscal 2015 Adjusted net income per diluted share range assumes a fully diluted weighted average share count of 202 million.
Fiscal 2015 Third-Quarter Conference Call
As previously announced, HD Supply will hold a conference call on Tuesday, December 8, 2015 at 8:00 a.m. (Eastern Time) to discuss its third-quarter fiscal 2015 results. The conference call and presentation materials can be accessed via webcast by logging on from the Investor Relations section of the company's Web site at hdsupply.com. The online replay will remain available for a limited time following the call.
Non-GAAP Financial Measures
HD Supply supplements its reporting of Net income with non-GAAP measurements, including Adjusted EBITDA, Adjusted Net income and Adjusted Net income per share. This supplemental information should not be considered in isolation or as a substitute for the GAAP measurements. Additional information regarding Adjusted EBITDA, Adjusted Net income and Adjusted Net income per share referred to in this press release is included below under “––Reconciliation of Non-GAAP Measures.”
About HD Supply
HD Supply (www.hdsupply.com) is one of the largest industrial distributors in North America. The company provides a broad range of products and value-add services to approximately 500,000 customers with leadership positions in maintenance, repair and operations, infrastructure and power and specialty construction sectors. Through approximately 550 locations across 48 states and six Canadian provinces, the company's approximately 14,000 associates provide localized, customer-driven services including jobsite delivery, will call or direct-ship options, diversified logistics and innovative solutions that contribute to its customers' success.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking information presented in this press release is not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “seek,” “comfortable with,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. A number of important factors could cause actual events to differ materially from those contained in or implied by the forward-looking statements, including those factors discussed in our filings with the U.S. Securities & Exchange Commission (the “SEC”), including our annual report on Form 10-K for the fiscal year ended February 1, 2015, and those described from time to time in our other filings with the SEC, which can be found at the SEC’s website www.sec.gov. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
HD SUPPLY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Amounts in millions, except share and per share data (Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| November 1, 2015 | November 2, 2014 | November 1, 2015 | November 2, 2014 | |||||||||||||
| Net Sales | $ | 2,012 | $ | 1,914 | $ | 5,740 | $ | 5,427 | ||||||||
| Cost of sales | 1,346 | 1,299 | 3,835 | 3,670 | ||||||||||||
| Gross Profit | 666 | 615 | 1,905 | 1,757 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | 405 | 390 | 1,211 | 1,152 | ||||||||||||
| Depreciation and amortization | 28 | 46 | 84 | 152 | ||||||||||||
| Restructuring | 4 | - | 4 | 6 | ||||||||||||
| Total operating expenses | 437 | 436 | 1,299 | 1,310 | ||||||||||||
| Operating Income | 229 | 179 | 606 | 447 | ||||||||||||
| Interest expense | 99 | 115 | 311 | 347 | ||||||||||||
| Loss on extinguishment & modification of debt | 100 | 0 | 100 | 2 | ||||||||||||
| Other (income) expense, net | - | (4 | ) | 1 | (3 | ) | ||||||||||
| Income from Continuing Operations Before Provision for Income Taxes | 30 | 68 | 194 | 101 | ||||||||||||
| Provision (benefit) for income taxes | 15 | 28 | (155 | ) | 41 | |||||||||||
| Income from Continuing Operations | 15 | 40 | 349 | 60 | ||||||||||||
| Income from discontinued operations, net of tax | 235 | 20 | 252 | 36 | ||||||||||||
| Net Income | $ | 250 | $ | 60 | $ | 601 | $ | 96 | ||||||||
| Other comprehensive income (loss) — foreign currency translation adjustment | 18 | (3 | ) | 16 | (1 | ) | ||||||||||
| Total Comprehensive Income | $ | 268 | $ | 57 | $ | 617 | $ | 95 | ||||||||
| Weighted Average Common Shares Outstanding (thousands) | ||||||||||||||||
| Basic | 197,529 | 194,288 | 196,589 | 193,806 | ||||||||||||
| Diluted | 201,546 | 200,151 | 201,354 | 199,689 | ||||||||||||
| Basic Earnings Per Share(1): | ||||||||||||||||
| Income from Continuing Operations | $ | 0.08 | $ | 0.21 | $ | 1.78 | $ | 0.31 | ||||||||
| Income from Discontinued Operations | $ | 1.19 | $ | 0.10 | $ | 1.28 | $ | 0.19 | ||||||||
| Net Income | $ | 1.27 | $ | 0.31 | $ | 3.06 | $ | 0.50 | ||||||||
| Diluted Earnings Per Share(1): | ||||||||||||||||
| Income from Continuing Operations | $ | 0.07 | $ | 0.20 | $ | 1.73 | $ | 0.30 | ||||||||
| Income from Discontinued Operations | $ | 1.17 | $ | 0.10 | $ | 1.25 | $ | 0.18 | ||||||||
| Net Income | $ | 1.24 | $ | 0.30 | $ |
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