HDS
$39.55
HD Supply Hlds Cmm
$.05
.13%
Earnings Details
2nd Quarter July 2019
Tuesday, September 10, 2019 6:00:00 AM
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Summary

HD Supply Hlds Cmm Misses

HD Supply Hlds Cmm (HDS) reported 2nd Quarter July 2019 earnings of $1.08 per share on revenue of $1.6 billion. The consensus earnings estimate was $1.08 per share on revenue of $1.6 billion. The Earnings Whisper number was $1.11 per share. Revenue grew 1.5% on a year-over-year basis.

The company said it expects third quarter earnings of $0.96 to $1.05 per share on revenue of $1.62 billion to $1.67 billion. The current consensus earnings estimate is $1.05 per share on revenue of $1.70 billion for the quarter ending October 31, 2019. The company also said it now expects fiscal year earnings of $3.45 to $3.60 per share on revenue of $6.10 billion to $6.20 billion. The company's previous guidance was earnings of $3.52 to $3.70 per share on revenue of $6.25 billion to $6.35 billion and the current consensus earnings estimate is $3.56 per share on revenue of $6.28 billion for the year ending January 31, 2020.

HD Supply Holdings Inc is an industrial distributor in North America. It operates in three market sectors: Maintenance, Repair & Operations; Infrastructure & Power; and Specialty Construction.

Results
Reported Earnings
$1.08
Earnings Whisper
$1.11
Consensus Estimate
$1.08
Reported Revenue
$1.62 Bil
Revenue Estimate
$1.64 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

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

ATLANTA, Sept. 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 second quarter of fiscal 2019 ended August 4, 2019, an increase of $24 million, or 1.5 percent, as compared to the second quarter of fiscal 2018. 

“Despite a difficult start to 2019, I am proud of our more than 11,500 HD Supply associates who continue to provide exceptional service to our customers,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We remain confident in our ability to create value by focusing on what we can control, providing the best customer service in the industry, generating strong free cash flow and executing on our capital allocation strategy.”

Gross profit increased $11 million, or 1.8 percent, to $633 million for the second quarter of fiscal 2019, as compared to $622 million for the second quarter of fiscal 2018. Gross profit was 39.0 percent of Net sales for the second quarter of fiscal 2019, up approximately 10 basis points from 38.9 percent for the second quarter of fiscal 2018.

Operating income of $211 million was flat as compared to the second quarter of fiscal 2018. Operating income was 13.0 percent of Net sales for the second quarter of fiscal 2019, down approximately 20 basis points from 13.2 percent for the second quarter of fiscal 2018.

Net income increased $4 million, or 3.1 percent, to $135 million for the second quarter of fiscal 2019, as compared to $131 million for the second quarter of fiscal 2018.  Net income per diluted share increased $0.08, or 11.3 percent, to $0.79 in the second quarter of fiscal 2019, as compared to $0.71 in the second quarter of fiscal 2018.

Adjusted EBITDA decreased $2 million, or 0.8 percent, to $244 million for the second quarter of fiscal 2019, as compared to $246 million for the second quarter of fiscal 2018. Adjusted EBITDA was 15.0 percent of Net sales for the second quarter of fiscal 2019, down approximately 40 basis points from 15.4 percent for the second quarter of fiscal 2018.

Adjusted net income increased $1 million, or 0.5 percent, to $183 million for the second quarter of fiscal 2019, as compared to $182 million for the second quarter of fiscal 2018.  Adjusted net income per diluted share increased $0.09, or 9.1 percent, to $1.08 in the second quarter of fiscal 2019, as compared to $0.99 in the second quarter of fiscal 2018.

As of August 4, 2019, HD Supply’s combined liquidity of $730 million was comprised of $41 million in cash and cash equivalents and $689 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 Performance

Facilities Maintenance

Net sales increased $10 million, or 1.2 percent, to $830 million in the second quarter of fiscal 2019, as compared to $820 million for the second quarter of fiscal 2018.  Adjusted EBITDA decreased $1 million, or 0.7 percent, to $149 million for the second quarter of fiscal 2019, as compared to $150 million for the second quarter of fiscal 2018.  Adjusted EBITDA was 18.0 percent of Net sales for the second quarter of fiscal 2019, down approximately 30 basis points from 18.3 percent for the second quarter of fiscal 2018.

Construction & Industrial

Net sales increased $14 million, or 1.8 percent, to $795 million in the second quarter of fiscal 2019, as compared to $781 million for the second quarter of fiscal 2018. Adjusted EBITDA decreased $1 million, or 1.0 percent, to $95 million for the second quarter of fiscal 2019, as compared to $96 million for the second quarter of fiscal 2018.  Adjusted EBITDA was 11.9 percent of Net sales for the second quarter of fiscal 2019, down approximately 40 basis points from 12.3 percent for the second quarter of fiscal 2018.

Second-Quarter Monthly Sales Performance

Net sales for May, June and July of fiscal 2019 were $464 million, $521 million and $639 million, respectively.  There were 19 selling days in May, 20 selling days in June and 24 selling days in July of fiscal 2019, compared to 20 selling days in May, 19 selling days in June and 24 selling days in July of fiscal 2018.  Average year-over-year daily sales growth for May, June and July was 0.2 percent, 1.9 percent and 2.1 percent, respectively.

Preliminary August Sales Results

Preliminary Net sales in August 2019 were approximately $521 million, which represents year-over-year average daily sales growth of approximately 1.6 percent.  Preliminary August year-over-year average daily sales growth by business segment was approximately 1.2 percent in Facilities Maintenance and approximately 2.0 percent in Construction & Industrial.  There were 20 selling days in both August 2019 and August 2018.

Third-Quarter 2019 and Fiscal Year 2019 Outlook

For the third quarter of fiscal 2019 and full-year fiscal 2019, the Company anticipates the following (amounts in millions, except per share data):

 Third-Quarter 2019 Full-Year Fiscal 2019
 Low End High End Low End High End
Net sales$1,620 $1,670 $6,100 $6,200
Net income 130  142  450  472
Adjusted EBITDA 240  255  855  885
Net income per share – diluted (1)$0.78 $0.86 $2.68 $2.81
Adjusted net income per share – diluted (1)$0.96 $1.05 $3.45 $3.60
        
(1) Assumes a fully diluted weighted average share count of 166 million for the third-quarter of fiscal 2019 and 168 million for the full-year fiscal 2019.
 

The company will provide further specifics on its end markets, the third quarter of fiscal 2019 outlook and the full-year fiscal 2019 outlook during the second quarter 2019 earnings conference call and in the earnings call presentation materials. 

Fiscal 2019 Second-Quarter Conference Call

As previously announced, HD Supply will hold a conference call on Tuesday, September 10th, 2019 at 8:00 a.m. (Eastern Time) to discuss its second-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 Measures

HD 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 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 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 Results

This 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.

Third-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

 Three Months Ended Six Months Ended
 August 4, July 29, August 4, July 29,
 2019 2018 2019 2018
Net Sales$ 1,624  $1,600 $ 3,117  $2,989 
Cost of sales 991   978  1,899   1,815 
Gross Profit 633   622  1,218   1,174 
Operating expenses:       
Selling, general and administrative 396   384  788   756 
Depreciation and amortization 26   25  51   47 
Restructuring    2  (2)  9 
Total operating expenses 422   411  837   812 
Operating Income 211   211  381   362 
Interest expense 28   35  56   69 
Interest (income)         (1)
Income from Continuing Operations Before Provision for Income Taxes 183   176  325   294 
Provision for income taxes 48   46  83   75 
Income from Continuing Operations $ 135  $130 $ 242  $219 
Income from discontinued operations, net of tax    1     1 
Net Income$ 135  $131 $ 242  $220 
Other comprehensive income (loss):       
Foreign currency translation adjustment    1     2 
Unrealized loss on cash flow hedge, net of tax of $5, $ - , $7, and $ - (16)    (21)   
Total Comprehensive Income$ 119  $132 $ 221  $222 
        
Weighted Average Common Shares Outstanding (thousands)       
Basic 169,546   182,992  169,773   183,659 
Diluted 170,057   183,822  170,386   184,456 
        
Basic Earnings Per Share(1):        
Income from Continuing Operations$ 0.80  $0.71 $ 1.43  $1.19 
Income from Discontinued Operations$    $0.01 $    $0.01 
Net Income$ 0.80  $0.72 $ 1.43  $1.20 
Diluted Earnings Per Share(1):        
Income from Continuing Operations$ 0.79  $0.71 $ 1.42  $1.19 
Income from Discontinued Operations$    $0.01 $    $0.01 
Net Income$ 0.79  $0.71 $ 1.42  $1.19 
 
(1) May not foot due to rounding.
 

HD SUPPLY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
Amounts in millions, except per share data, Unaudited

 August 4, February 3,
 2019 2019
ASSETS   
Current assets:   
Cash and cash equivalents$ 41  $38 
Receivables, less allowance for doubtful accounts of $19 and $18 860   732 
Inventories 821   766 
Other current assets 41   50 
Total current assets 1,763   1,586 
Property and equipment, net 385   370 
Operating lease right-of-use assets 412    
Goodwill 1,989   1,990 
Intangible assets, net 179   191 
Deferred tax asset 12   78 
Other assets 16   18 
Total assets$ 4,756  $4,233 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$ 498  $367 
Accrued compensation and benefits 70   109 
Current installments of long-term debt 11   11 
Current lease liabilities 114    
Other current liabilities 165   259 
Total current liabilities 858   746 
Long-term debt, excluding current installments 2,062   2,129 
Long-term lease liabilities 310    
Other liabilities 95   77 
Total liabilities 3,325   2,952 
Stockholders’ equity:   
Common stock, par value $0.01; 1 billion shares authorized; 169.1 million and 170.7 million shares issued and outstanding at August 4, 2019 and February 3, 2019, respectively 2   2 
Paid-in capital 4,086   4,067 
Accumulated deficit (1,332)  (1,572)
Accumulated other comprehensive loss (51)  (30)
Treasury stock, at cost, 36.3 and 34.2 million shares at August 4, 2019 and February 3, 2019, respectively (1,274)  (1,186)
Total stockholders’ equity 1,431   1,281 
Total liabilities and stockholders’ equity$ 4,756  $4,233 
 

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

 Six Months Ended
 August 4, July 29,
 2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$ 242  $220 
Reconciliation of net income to net cash provided by (used in) operating activities:   
Depreciation and amortization 54    51 
Provision for uncollectibles 5    6 
Non-cash interest expense 3    11 
Stock-based compensation expense 12    12 
Deferred income taxes 75   70 
Other 1   (1)
Changes in assets and liabilities, net of the effects of acquisitions & dispositions:   
(Increase) decrease in receivables (133)  (183)
(Increase) decrease in inventories (56)  (104)
(Increase) decrease in other current assets (2)  (5)
Increase (decrease) in accounts payable and accrued liabilities 85   108 
Increase (decrease) in other long-term liabilities    1 
Net cash provided by (used in) operating activities 286   186 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Capital expenditures (54)  (47)
Proceeds from sales of property and equipment 2    
Payments for businesses acquired, net of cash acquired 3   (362)
Net cash provided by (used in) investing activities (49)  (409)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Purchase of treasury shares (78)  (93)
Repayments of long-term debt (5)  (5)
Repayments of financing liabilities (88)   
Borrowings on long-term revolver debt 578   10 
Repayments on long-term revolver debt (642)  (16)
Proceeds from issuance of common stock under employee benefit plans 7   6 
Tax withholdings on stock-based awards (5)  (6)
Other financing activities (1)  (3)
Net cash provided by (used in) financing activities (234)  (107)
Effect of exchange rates on cash and cash equivalents     
Increase (decrease) in cash and cash equivalents$ 3  $(330)
Cash and cash equivalents at beginning of period 38   558 
Cash and cash equivalents at end of period$ 41  $228 
 

HD SUPPLY HOLDINGS, INC.
SEGMENT REPORTING
Amounts in millions, Unaudited

 Facilities Construction   Total
 Maintenance & Industrial  Eliminations Operations
        
Three Months Ended August 4, 2019       
Net sales$ 830 $ 795 $ (1) $ 1,624
Adjusted EBITDA 149  95     244
Depreciation(1) & Software Amortization 11  10     21
Other Intangible Amortization 2  4     6
             
Three Months Ended July 29, 2018       
Net sales$820 $781 $(1) $1,600
Adjusted EBITDA 150  96     246
Depreciation(1) & Software Amortization 9  12     21
Other Intangible Amortization 2  4     6
        
Six Months Ended August 4, 2019       
Net sales$ 1,602 $ 1,516 $ (1) $ 3,117
Adjusted EBITDA 283  164     447
Depreciation(1) & Software Amortization 21  21     42
Other Intangible Amortization 4  8     12
             
Six Months Ended July 29, 2018       
Net sales$1,543 $1,447 $(1) $2,989
Adjusted EBITDA 273  163     436
Depreciation(1) & Software Amortization 18  22     40
Other Intangible Amortization 4  7     11
        
(1) Depreciation includes amounts recorded within Cost of sales in the Consolidated Statements of Operations.
 

Reconciliation of Non-GAAP Measures

Adjusted 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; and
  • Adjusted 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 EBITDA

The 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):

 Three Months Ended Six Months Ended
 August 4, July 29, August 4, July 29,
 2019 2018 2019 2018
Net income$ 135 $131  $ 242  $220 
Less income from discontinued operations, net of tax   1      1 
Income  from continuing operations 135  130   242   219 
Interest expense 28  35   56   68 
Provision for income taxes 48  46   83   75 
Depreciation and amortization(1) 27  27   54   51 
Restructuring charges(2)   2   (2)  9 
Stock-based compensation 5  6   12   12 
Acquisition and integration costs(3)   1   1   3 
Other 1  (1)  1   (1)
Adjusted EBITDA$ 244 $246  $ 447  $436 
 
(1) Depreciation and amortization includes amounts recorded within Cost of sales in the Consolidated Statements of Operations.
(2) For the six months ended August 4, 2019, the Company recognized a favorable termination of the lease for its former corporate headquarters.
(3) Represents the costs incurred in the acquisition and integration of A.H. Harris Construction Supplies.
 

Adjusted Net Income

The 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):

 Three Months Ended Six Months Ended
 August 4, July 29, August 4, July 29,
 2019 2018 2019 2018
Net income$ 135  $131  $ 242  $220 
Less income from discontinued operations, net of tax    1      1 
Income from continuing operations 135   130   242   219 
Plus: Provision for income taxes 48   46   83   75 
Less: Cash income taxes (6)  (3)  (10)  (5)
Plus: Amortization of acquisition-related intangible assets (other than software) 6   6   12   11 
Plus: Restructuring charges(1)    2   (2)  9 
Plus: Acquisition and integration costs(2)    1   1   3 
Adjusted Net Income$ 183  $182  $ 326  $312 
        
Diluted weighted average common shares outstanding (thousands) 170,057   183,822   170,386   184,456 
Adjusted net income per share - diluted$ 1.08  $0.99  $ 1.91  $1.69 
 
(1) For the six months ended August 4, 2019, the Company recognized a favorable termination of the lease for its former corporate headquarters.
(2) Represents the costs incurred in the acquisition and integration of A.H. Harris Construction Supplies.
 

Third-Quarter 2019 and Full-Year Fiscal 2019 Outlook

The following table presents a reconciliation of the forecasted range of Net income to Adjusted EBITDA for the third-quarter 2019 and full-year fiscal 2019 outlook (amounts in millions):

 Third-Quarter 2019 Full-Year Fiscal 2019
 Low End High End Low End High End
Net income$  130 $  142 $  450 $  472
Interest expense, net 27  27  109  109
Provision for income taxes 47  50  158  166
Depreciation and amortization 27  27  111  111
Stock-based compensation 7  7  25  25
Other 2  2  2  2
Adjusted EBITDA$240 $255 $855 $885
 

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 third-quarter 2019 and full-year fiscal 2019 outlook (amounts in millions, except per share data):

 Third-Quarter 2019 Full-Year Fiscal 2019
 Low End High End Low End High End
Net income$130  $142  $450  $472 
Plus: Provision for income taxes 47   50   158   166 
Less: Cash income taxes (24)  (25)  (53)  (58)
Plus: Amortization of acquisition-related intangible assets (other than software) 5   5   23   23 
Other 2   2   2   2 
Adjusted net income$160  $174  $580  $605 
        
Diluted weighted average common shares outstanding 166   166   168   168 
Net income per share – diluted$0.78  $0.86  $2.68  $2.81 
Adjusted net income per share – diluted$0.96  $1.05  $3.45  $3.60 
 

Investor Contact:
Charlotte McLaughlin
HD Supply Investor Relations
770-852-9100
InvestorRelations@hdsupply.com

Media Contact:
Quiana Pinckney, APR
HD Supply Public Relations
770-852-9057
Quiana.Pinckney@hdsupply.com

HDS_wrd_3C_pos.jpg

Source: HD Supply Holdings, Inc.