HD Supply Holdings, Inc. Announces Fiscal 2019 Third-Quarter Results

ATLANTA, Dec. 10, 2019 (GLOBE NEWSWIRE) — HD Supply Holdings, Inc. (NASDAQ: HDS), one of the largest industrial distributors in North America, today reported Net sales of $1.6 billion for the third quarter of fiscal 2019 ended November 3, 2019, an increase of $32 million, or 2.0 percent, as compared to the third quarter of fiscal 2018. 
“Our associates remain committed to delivering best–in-class service, despite a continued challenging environment and the ongoing activities of splitting the company into two market-leading, stand-alone businesses,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We remain focused on helping our customers succeed, and I am encouraged by our continued growth and strong cash flow generation.”Gross profit increased $11 million, or 1.7 percent, to $640 million for the third quarter of fiscal 2019, as compared to $629 million for the third quarter of fiscal 2018. Gross profit was 38.9 percent of Net sales for the third quarter of fiscal 2019, down 10 basis points from 39.0 percent for the third quarter of fiscal 2018.Operating income decreased $8 million, or 3.8 percent, to $205 million for the third quarter of fiscal 2019, as compared to $213 million for the third quarter of fiscal 2018. Operating income was 12.5 percent of Net sales for the third quarter of fiscal 2019, down 70 basis points from 13.2 percent for the third quarter of fiscal 2018.Net income increased $50 million, or 61.0 percent, to $132 million for the third quarter of fiscal 2019, as compared to $82 million for the third quarter of fiscal 2018. Net income per diluted share increased $0.35, or 77.8 percent, to $0.80 in the third quarter of fiscal 2019, as compared to $0.45 in the third quarter of fiscal 2018.Adjusted EBITDA decreased $1 million, or 0.4 percent, to $247 million for the third quarter of fiscal 2019, as compared to $248 million for the third quarter of fiscal 2018. Adjusted EBITDA was 15.0 percent of Net sales for the third quarter of fiscal 2019, down 40 basis points from 15.4 percent for the third quarter of fiscal 2018.Adjusted net income decreased $18 million, or 9.8 percent, to $166 million for the third quarter of fiscal 2019, as compared to $184 million for the third quarter of fiscal 2018.  Adjusted net income per diluted share increased $0.01, or 1.0 percent, to $1.01 in the third quarter of fiscal 2019, as compared to $1.00 in the third quarter of fiscal 2018.As of November 3, 2019, HD Supply’s combined liquidity of $651 million was comprised of $37 million in cash and cash equivalents and $614 million of additional available borrowings (excluding $5 million of borrowings on available cash balances) under HD Supply, Inc.’s senior asset-based lending facility, based on qualifying inventory and receivables.Business Unit PerformanceFacilities MaintenanceNet sales increased $16 million, or 2.0 percent, to $826 million in the third quarter of fiscal 2019, as compared to $810 million for the third quarter of fiscal 2018.  Adjusted EBITDA was flat in the third quarter of fiscal 2019 as compared to the third quarter of fiscal 2018.  Adjusted EBITDA was 18.0 percent of Net sales for the third quarter of fiscal 2019, down 40 basis points from 18.4 percent for the third quarter of fiscal 2018.Construction & IndustrialNet sales increased $15 million, or 1.9 percent, to $818 million in the third quarter of fiscal 2019, as compared to $803 million for the third quarter of fiscal 2018. Adjusted EBITDA decreased $1 million, or 1.0 percent, to $98 million for the third quarter of fiscal 2019, as compared to $99 million for the third quarter of fiscal 2018.  Adjusted EBITDA was 12.0 percent of Net sales for the third quarter of fiscal 2019, down 30 basis points from 12.3 percent for the third quarter of fiscal 2018.Third-Quarter Monthly Sales PerformanceNet sales for August, September and October of fiscal 2019 were $521 million, $494 million and $629 million, respectively.  There were 20 selling days in August, 19 selling days in September and 25 selling days in October in both fiscal 2019 and fiscal 2018.  Average year-over-year daily sales growth for August, September and October was 1.6 percent, 2.6 percent and 1.7 percent, respectively.Preliminary November Sales ResultsPreliminary Net sales in November 2019 were approximately $436 million, which represents year-over-year average daily sales growth of approximately 2.5 percent.  Preliminary November year-over-year average daily sales by business segment was a 2.5 percent increase in Facilities Maintenance and a 2.4 percent increase in Construction & Industrial.  There were 18 selling days in both November 2019 and November 2018.Fourth-Quarter 2019 and Fiscal Year 2019 OutlookFor the fourth quarter of fiscal 2019 and full-year fiscal 2019, the Company anticipates the following (amounts in millions, except per share data):     (1)  Assumes a fully diluted weighted average share count of 163 million for the fourth-quarter of fiscal 2019 and 167 million for the full-year fiscal 2019.The company will update its expectations for the market in 2020 during the fourth-quarter 2019 earnings conference call and in the earnings call presentation materials. Fiscal 2019 Third-Quarter Conference CallAs previously announced, HD Supply will hold a conference call on Tuesday, December 10th, 2019 at 8:00 a.m. (Eastern Time) to discuss its third-quarter fiscal 2019 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 MeasuresHD Supply supplements financial results that are determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) with non-GAAP measurements, including Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted 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 diluted share referred to in this press release is included below under “Reconciliation of Non-GAAP Measures.”About HD SupplyHD 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 the maintenance, repair and operations and specialty construction sectors. Through approximately 270 branches and 44 distribution centers in the U.S. and Canada, the company’s approximately 11,500 associates provide localized, customer-tailored products, services and expertise.Forward-Looking Statements and Preliminary ResultsThis press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and information currently available to management and 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 results, and that actual results may differ materially from those made in or suggested by the forward-looking information contained in this press release. 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 “Risk factors” in our annual report on Form 10-K, for the fiscal year ended February 3, 2019, filed on March 19, 2019 and those described from time to time in our, and HD Supply, Inc.’s, other filings with the U.S. Securities and Exchange Commission (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.Fourth-quarter 2019 and full-year fiscal 2019 estimates for Net sales, Net income, Net income per diluted share, Adjusted EBITDA and Adjusted net income per diluted share are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with quarter-end and year-end adjustments. Any variation between HD Supply’s actual results and the preliminary financial data set forth above may be material.
HD SUPPLY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Amounts in millions, except share and per share data, Unaudited
 (1)  May not foot due to rounding.      
HD SUPPLY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
Amounts in millions, except per share data, Unaudited

HD SUPPLY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in millions, Unaudited

HD SUPPLY HOLDINGS, INC.
SEGMENT REPORTING
Amounts in millions, Unaudited
(1)  Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations.Reconciliation of Non-GAAP MeasuresAdjusted EBITDA and Adjusted net income are not recognized terms under GAAP and do not purport to be alternatives to Net income as a measure of operating performance. We present Adjusted EBITDA and Adjusted net income because each is a primary measure used by management to evaluate operating performance. In addition, we present Adjusted net income to measure our overall profitability as we believe it is an important measure of our performance. We believe the presentation of Adjusted EBITDA and Adjusted net income enhances investors’ overall understanding of the financial performance of our business.Adjusted EBITDA is based on “Consolidated EBITDA,” a measure which is defined in our senior credit facilities and used in calculating financial ratios in several material debt covenants. Adjusted EBITDA is defined as Net income less Income from discontinued operations, net of tax, plus (i) Interest expense and Interest income, net, (ii) Provision for income taxes, (iii) depreciation and amortization and further adjusted to exclude loss on extinguishment of debt, non-cash items and certain other adjustments to Consolidated Net Income permitted in calculating Consolidated EBITDA under our senior credit facilities.Adjusted net income is defined as Net income less Income from discontinued operations, net of tax, further adjusted for loss on extinguishment of debt, certain non-cash, non-recurring or unusual items, net of tax.We compensate for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, our presentation of Adjusted EBITDA and Adjusted net income may not be comparable to other similarly titled measures of other companies.Adjusted EBITDA and Adjusted net income have limitations as analytical tools and should not be considered in isolation or as substitutes for analyzing our results as reported under GAAP. Some of these limitations are:Adjusted EBITDA and Adjusted net income do not reflect changes in, or cash requirements for, our working capital needs;Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt;Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes; andAdjusted EBITDA and Adjusted net income do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.Adjusted EBITDAThe following table presents a reconciliation of Net income, the most directly comparable financial measure under GAAP, to Adjusted EBITDA for the periods presented (amounts in millions):(1) Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations. (2) Represents the loss on extinguishment of debt including the 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. (3) Represents the costs related to separation activities announced on September 24, 2019 and personnel changes, primarily severance and other employee-related costs. During the nine months ended November 3, 2019, the costs include the impacts of a favorable termination of the lease for the Company’s former corporate headquarters. For additional information, see “Note 11, Restructuring and separation activities,” in the Notes to Consolidated Financial Statements within Item 1 of our quarterly report on Form 10-Q for the quarterly period ended November, 3, 2019, filed on December 10, 2019. (4) Represents the costs incurred in the acquisition and integration of business acquisitions, including A.H. Harris Construction Supplies.
Adjusted Net IncomeThe following table presents a reconciliation of Net income, the most directly comparable financial measure under U.S. GAAP, to Adjusted net income for the periods presented (amounts in millions, except share and per share data):(1) Represents the loss on extinguishment of debt including the 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. (2) Represents the costs related to separation activities announced on September 24, 2019 and personnel changes, primarily severance and other employee-related costs. During the nine months ended November 3, 2019, the costs include the impacts of a favorable termination of the lease for the Company’s former corporate headquarters. For additional information, see “Note 11, Restructuring and separation activities,” in the Notes to Consolidated Financial Statements within Item 1 of our quarterly report on Form 10-Q for the quarterly period ended November, 3, 2019, filed on December 10, 2019. (3) Represents the costs incurred in the acquisition and integration of business acquisitions, including A.H. Harris Construction Supplies.
Fourth-Quarter 2019 and Full-Year Fiscal 2019 OutlookThe following table presents a reconciliation of the forecasted range of Net income to Adjusted EBITDA for the fourth-quarter 2019 and full-year fiscal 2019 outlook (amounts in millions):(1)  Other includes restructuring, costs related to separation activities announced on September 24, 2019, and acquisition and integration costs.
The following table presents a reconciliation of the forecasted range of Net income to Adjusted net income and Net income per diluted share to Adjusted net income per diluted share for the fourth-quarter 2019 and full-year fiscal 2019 outlook (amounts in millions, except per share data):(1)  Other includes restructuring, costs related to separation activities announced on September 24, 2019, and acquisition and integration costs.
Investor Contact:
Charlotte McLaughlin
HD Supply Investor Relations
770-852-9100
[email protected]
Media Contact:
Quiana Pinckney, APR
HD Supply Public Relations
770-852-9057
[email protected]
 

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