HD Supply Holdings, Inc. Unaudited Pro Forma Financial Statements
Exhibit 99.1
HD Supply Holdings, Inc.
Unaudited Pro Forma Financial Statements
Overview
On July 15, 2015, HD Supply, Inc., (“HDS”), an indirect wholly-owned subsidiary of HD Supply Holdings, Inc. (“Holdings”) entered into a Purchase Agreement (the “Purchase Agreement”) with HD Supply Holdings, LLC, a Florida limited liability company (“HDS LLC”), HD Supply GP & Management, Inc., a Delaware corporation (“HDS GP”), HD Supply Power Solutions Group, Inc., a Delaware corporation (“HDS PS Group”), Brafasco Holdings II, Inc., a Delaware corporation (“Brafasco”, and collectively with the HDS, HDS LLC, HDS GP and HDS PS Group, the “Sellers”) and Anixter Inc., a Delaware corporation (the “Buyer”).
Pursuant to the Purchase Agreement, the Sellers and certain affiliates of the Sellers will sell to the Buyer, and Buyer will purchase from the Sellers, (a) all of the issued and outstanding equity interests of: (i) HD Supply Power Solutions, Ltd., a Florida limited partnership (“HDS PS”), (ii) HDS Power Solutions, Inc., a Michigan corporation (“HDS Power Solutions”), and (iii) Pro Canadian Holdings I, ULC, a Nova Scotia unlimited liability company (“Pro Canadian”, and collectively with HDS PS and HDS Power solutions, the “Purchased Companies”), and (b) certain specified assets of the Sellers and certain affiliates of the Sellers (the “Transactions”).
The purchase price for the Transactions will be $825 million in cash, which may be adjusted for certain working capital calculations.
The Transactions are currently expected to close during the third quarter of 2015, subject to the satisfaction of customary closing conditions, including among others, regulatory approvals in the United States and Canada and the continuing accuracy of representations and warranties.
Basis of Presentation
The unaudited pro forma consolidated statements of operations for the fiscal years ended February 1, 2015, February 2, 2014, and February 3, 2013 give effect to the Transactions and have been derived from the audited consolidated financial statements and notes thereto included in Holdings’ Form 10-K for the fiscal year ended February 1, 2015 that has been filed with the U.S. Securities and Exchange Commission (“SEC”). The unaudited pro forma consolidated statement of operations for the three months ended May 3, 2015 and the unaudited pro forma consolidated statement of financial position as of May 3, 2015 give effect to the Transactions and have been derived from the unaudited consolidated financial statements and notes thereto included in Holdings’ Form 10-Q for the three months ended May 3, 2015 that has been filed with the SEC. The unaudited pro forma consolidated financial statements are based upon available information and assumptions that Holdings believes are reasonable.
The unaudited pro forma consolidated financial statements are provided for informational purposes only and do not purport to project the future financial position or operating results of Holdings, together with its direct and indirect subsidiaries, including HDS. In accordance with pro forma rules, the pro forma unaudited consolidated statements of operations have been prepared as if the Transactions occurred on the first day of each period presented, except for the pro forma unaudited consolidated statement of operations for the three months ended May 3, 2015 which has been prepared as if the Transaction occurred on the first day of the prior fiscal year, and the pro forma unaudited consolidated statement of financial position has been prepared as if the Transactions occurred on May 3, 2015. The unaudited pro forma consolidated financial statements, including the notes thereto, should be read in conjunction with Holdings’ audited consolidated financial statements and notes thereto included in its Form 10-K for the fiscal year ended February 1, 2015 and Holdings’ unaudited consolidated financial statements and notes thereto included in its Form 10-Q for the three months ended May 3, 2015 that have been filed with the SEC.
The unaudited pro forma consolidated financial statements give effect to the following:
· the elimination of the Power Solutions segment;
· the use of $825 million sale proceeds to (i) pay an estimated $25 million of transaction costs and (ii) pay an $800 million prepayment on HDS’s term loan facility under its senior secured credit facility.
HDS has not yet definitively determined how it will use the net proceeds from the Transactions and continues to evaluate additional debt repayment options in regards to the use of the net proceeds therefrom.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATION
Amounts in millions, except share and per share data
|
|
|
Three Months ended May 3, 2015 |
| |||||||
|
|
|
As Reported |
|
Adjustments* |
|
Proforma |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Sales |
|
$ |
2,221 |
|
$ |
(499 |
) |
$ |
1,722 |
|
|
Cost of sales |
|
1,572 |
|
(424 |
) |
1,148 |
| |||
|
Gross Profit |
|
649 |
|
(75 |
) |
574 |
| |||
|
Operating expenses: |
|
|
|
|
|
|
| |||
|
Selling, general and administrative |
|
447 |
|
(56 |
) |
391 |
| |||
|
Depreciation and amortization |
|
35 |
|
(7 |
) |
28 |
| |||
|
Restructuring |
|
— |
|
— |
|
— |
| |||
|
Total operating expenses |
|
482 |
|
(63 |
) |
419 |
| |||
|
Operating Income |
|
167 |
|
(12 |
) |
155 |
| |||
|
Interest expense |
|
106 |
|
(10 |
) |
96 |
| |||
|
Other (income) expense, net |
|
— |
|
— |
|
— |
| |||
|
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes |
|
61 |
|
(2 |
) |
59 |
| |||
|
Provision (benefit) for income taxes |
|
(181 |
) |
(2 |
) |
(183 |
) | |||
|
Income (Loss) from Continuing Operations |
|
242 |
|
— |
|
242 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Weighted average shares outstanding (thousands): |
|
|
|
|
|
|
| |||
|
Basic |
|
195,347 |
|
|
|
195,347 |
| |||
|
Diluted |
|
200,716 |
|
|
|
200,716 |
| |||
|
Income (loss) from continuing operations per share: |
|
|
|
|
|
|
|
|
| |
|
Basic |
|
$ |
1.24 |
|
|
|
$ |
1.24 |
| |
|
Diluted |
|
$ |
1.21 |
|
|
|
$ |
1.21 |
| |
*Adjustments reflect:
(1) Elimination of the historical revenue and expenses of Power Solutions, as if the sale had occurred at the beginning of the prior fiscal year.
(2) Reduction in interest expense to reflect the paydown of the term loan with net proceeds of the sale at the beginning of each of the periods presented; interest expense reduction includes cash interest and reduction in amortization of related debt discount and deferred financing costs. The Company has not yet definitively determined how it will use the net proceeds and continues to evaluate additional debt repayment options in regards to the use thereof.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATION
Amounts in millions, except share and per share data
|
|
|
Year ended February 1, 2015 |
| |||||||
|
|
|
As Reported |
|
Adjustments* |
|
Proforma |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Sales |
|
$ |
8,882 |
|
$ |
(1,912 |
) |
$ |
6,970 |
|
|
Cost of sales |
|
6,324 |
|
(1,618 |
) |
4,706 |
| |||
|
Gross Profit |
|
2,558 |
|
(294 |
) |
2,264 |
| |||
|
Operating expenses: |
|
|
|
|
|
|
| |||
|
Selling, general and administrative |
|
1,726 |
|
(216 |
) |
1,510 |
| |||
|
Depreciation and amortization |
|
207 |
|
(26 |
) |
181 |
| |||
|
Restructuring |
|
7 |
|
(1 |
) |
6 |
| |||
|
Total operating expenses |
|
1,940 |
|
(243 |
) |
1,697 |
| |||
|
Operating Income |
|
618 |
|
(51 |
) |
567 |
| |||
|
Interest expense |
|
461 |
|
(41 |
) |
420 |
| |||
|
Loss on extinguishment & modification of debt |
|
108 |
|
— |
|
108 |
| |||
|
Other (income) expense, net |
|
(3 |
) |
— |
|
(3 |
) | |||
|
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes |
|
52 |
|
(10 |
) |
42 |
| |||
|
Provision (benefit) for income taxes |
|
56 |
|
(14 |
) |
42 |
| |||
|
Income (Loss) from Continuing Operations |
|
(4 |
) |
4 |
|
— |
| |||
|
|
|
|
|
|
|
|
| |||
|
Weighted average shares outstanding (thousands): |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
193,962 |
|
|
|
193,962 |
| |||
|
Income (loss) from continuing operations per share: |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
$ |
(0.02 |
) |
|
|
$ |
— |
| |
*Adjustments reflect:
(1) Elimination of the historical revenue and expenses of Power Solutions, as if the sale had occurred at the beginning of the period presented.
(2) Reduction in interest expense to reflect the paydown of the term loan with net proceeds of the sale at the beginning of each of the periods presented; interest expense reduction includes cash interest and reduction in amortization of related debt discount and deferred financing costs. The Company has not yet definitively determined how it will use the net proceeds and continues to evaluate additional debt repayment options in regards to the use thereof.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATION
Amounts in millions, except share and per share data
|
|
|
Year ended February 2, 2014 |
| |||||||
|
|
|
As Reported |
|
Adjustments* |
|
Proforma |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Sales |
|
$ |
8,228 |
|
$ |
(1,841 |
) |
$ |
6,387 |
|
|
Cost of sales |
|
5,870 |
|
(1,563 |
) |
4,307 |
| |||
|
Gross Profit |
|
2,358 |
|
(278 |
) |
2,080 |
| |||
|
Operating expenses: |
|
|
|
|
|
|
| |||
|
Selling, general and administrative |
|
1,649 |
|
(206 |
) |
1,443 |
| |||
|
Depreciation and amortization |
|
228 |
|
(24 |
) |
204 |
| |||
|
Restructuring |
|
9 |
|
(3 |
) |
6 |
| |||
|
Total operating expenses |
|
1,886 |
|
(233 |
) |
1,653 |
| |||
|
Operating Income |
|
472 |
|
(45 |
) |
427 |
| |||
|
Interest expense |
|
528 |
|
— |
|
528 |
| |||
|
Loss on extinguishment & modification of debt |
|
87 |
|
— |
|
87 |
| |||
|
Other (income) expense, net |
|
20 |
|
— |
|
20 |
| |||
|
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes |
|
(163 |
) |
(45 |
) |
(208 |
) | |||
|
Provision (benefit) for income taxes |
|
58 |
|
(14 |
) |
44 |
| |||
|
Income (Loss) from Continuing Operations |
|
(221 |
) |
(31 |
) |
(252 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Weighted average shares outstanding (thousands): |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
166,905 |
|
|
|
166,905 |
| |||
|
Income (loss) from continuing operations per share: |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
$ |
(1.32 |
) |
|
|
$ |
(1.51 |
) | |
*Adjustments reflect:
(1) Elimination of the historical revenue and expenses of Power Solutions, as if the sale had occurred at the beginning of the period presented.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATION
Amounts in millions, except share and per share data
|
|
|
Year ended February 3, 2013 |
| |||||||
|
|
|
As Reported |
|
Adjustments* |
|
Proforma |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Sales |
|
$ |
7,647 |
|
$ |
(1,786 |
) |
$ |
5,861 |
|
|
Cost of sales |
|
5,495 |
|
(1,515 |
) |
3,980 |
| |||
|
Gross Profit |
|
2,152 |
|
(271 |
) |
1,881 |
| |||
|
Operating expenses: |
|
|
|
|
|
|
| |||
|
Selling, general and administrative |
|
1,551 |
|
(199 |
) |
1,352 |
| |||
|
Depreciation and amortization |
|
306 |
|
(25 |
) |
281 |
| |||
|
Restructuring |
|
— |
|
— |
|
— |
| |||
|
Total operating expenses |
|
1,857 |
|
(224 |
) |
1,633 |
| |||
|
Operating Income |
|
295 |
|
(47 |
) |
248 |
| |||
|
Interest expense |
|
658 |
|
— |
|
658 |
| |||
|
Loss on extinguishment & modification of debt |
|
709 |
|
— |
|
709 |
| |||
|
Other (income) expense, net |
|
— |
|
— |
|
— |
| |||
|
Income (Loss) from Continuing Operations Before Provision (Benefit) for Income Taxes |
|
(1,072 |
) |
(47 |
) |
(1,119 |
) | |||
|
Provision (benefit) for income taxes |
|
39 |
|
(13 |
) |
26 |
| |||
|
Income (Loss) from Continuing Operations |
|
(1,111 |
) |
(34 |
) |
(1,145 |
) | |||
|
|
|
|
|
|
|
|
| |||
|
Weighted average shares outstanding (thousands): |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
130,561 |
|
|
|
130,561 |
| |||
|
Income (loss) from continuing operations per share: |
|
|
|
|
|
|
| |||
|
Basic and Diluted |
|
$ |
(8.51 |
) |
|
|
$ |
(8.77 |
) | |
*Adjustments reflect:
(1) Elimination of the historical revenue and expenses of Power Solutions, as if the sale had occurred at the beginning of the period presented.
HD SUPPLY HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
Amounts in millions
|
|
|
As of May 3, 2015 |
| |||||||
|
|
|
As Reported |
|
Adjustments * |
|
Proforma |
| |||
|
Assets |
|
|
|
|
|
|
| |||
|
Current assets: |
|
|
|
|
|
|
| |||
|
Cash and cash equivalents |
|
$ |
155 |
|
$ |
— |
|
$ |
155 |
|
|
Receivables |
|
1,166 |
|
(215 |
) |
951 |
| |||
|
Inventories |
|
1,183 |
|
(330 |
) |
853 |
| |||
|
Deferred tax asset |
|
11 |
|
(0 |
) |
11 |
| |||
|
Other current assets |
|
60 |
|
(4 |
) |
56 |
| |||
|
Total current assets |
|
2,575 |
|
(549 |
) |
2,026 |
| |||
|
Property and equipment, net |
|
369 |
|
(33 |
) |
336 |
| |||
|
Goodwill |
|
3,071 |
|
(202 |
) |
2,869 |
| |||
|
Intangible assets, net |
|
192 |
|
(50 |
) |
142 |
| |||
|
Other assets |
|
114 |
|
(5 |
) |
109 |
| |||
|
Total assets |
|
$ |
6,321 |
|
$ |
(839 |
) |
$ |
5,482 |
|
|
|
|
|
|
|
|
|
| |||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
| |||
|
Current liabilities: |
|
|
|
|
|
|
| |||
|
Accounts payable |
|
$ |
887 |
|
$ |
(227 |
) |
$ |
660 |
|
|
Accrued compensation and benefits |
|
87 |
|
(8 |
) |
79 |
| |||
|
Current installments of long—term debt |
|
— |
|
— |
|
— |
| |||
|
Other current liabilities |
|
201 |
|
(23 |
) |
178 |
| |||
|
Total current liabilities |
|
1,175 |
|
(258 |
) |
917 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Long term debt, excluding current installments |
|
5,361 |
|
(800 |
) |
4,561 |
| |||
|
Deferred tax liabilities |
|
173 |
|
— |
|
173 |
| |||
|
Other liabilities |
|
110 |
|
(3 |
) |
107 |
| |||
|
Total liabilities |
|
6,819 |
|
(1,061 |
) |
5,758 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Stockholders’ equity (deficit): |
|
|
|
|
|
|
| |||
|
Common stock |
|
2 |
|
— |
|
2 |
| |||
|
Paid—in capital |
|
3,842 |
|
— |
|
3,842 |
| |||
|
Accumulated deficit |
|
(4,315 |
) |
212 |
|
(4,103 |
) | |||
|
Accumulated other comprehensive loss |
|
(23 |
) |
10 |
|
(13 |
) | |||
|
Treasury stock |
|
(4 |
) |
— |
|
(4 |
) | |||
|
Total stockholders’ equity (deficit) |
|
(498 |
) |
222 |
|
(276 |
) | |||
|
Total liabilities and stockholders’ equity (deficit) |
|
$ |
6,321 |
|
$ |
(839 |
) |
$ |
5,482 |
|
*Adjustments reflect:
(1) Elimination of the assets & liabilities of Power Solutions and record the gain on sale, as if the sale occurred on May 3, 2015.
(2) Reduction of term loan with the net proceeds of the sale. The Company has not yet definitively determined how it will use the net proceeds and continues to evaluate its options in regards to the use thereof, including, without limitation, repayment of indebtedness other than the term loan facility.
