Market Overview

HD Supply Holdings, Inc. Announces 2017 Third-Quarter Results, Raises Full-Year Guidance

Share:

ATLANTA, Dec. 05, 2017 (GLOBE NEWSWIRE) -- HD Supply Holdings, Inc. (NASDAQ:HDS), one of the largest industrial distributors in North America, today reported Net sales of $1.4 billion for the third quarter of fiscal 2017 ended October 29, 2017, an increase of $95 million, or 7.5 percent, as compared to the third quarter of fiscal 2016. 

"I am proud of the team's performance in the third quarter.  We delivered strong overall results including 7.5 percent sales growth, which allowed us to raise our full year guidance. The team is committed to delivering long term profitable growth in excess of market and improved operating leverage," stated Joe DeAngelo, Chairman, President & CEO of HD Supply. 

Gross profit increased $30 million, or 5.9 percent, to $542 million for the third quarter of fiscal 2017 as compared to $512 million for the third quarter of fiscal 2016. Gross profit was 39.6 percent of Net sales for the third quarter of fiscal 2017, down approximately 60 basis points from 40.2 percent of Net sales for third quarter of fiscal 2016.

Operating income increased $23 million, or 14.5 percent, to $182 million for the third quarter of fiscal 2017 as compared to $159 million for the third quarter of fiscal 2016. Operating income as a percentage of Net sales was 13.3 percent for the third quarter of fiscal 2017, an increase of approximately 80 basis points from 12.5 percent for the third quarter of fiscal 2016.

Net income increased $392 million to $452 million for the third quarter of fiscal 2017 as compared to $60 million for the third quarter of fiscal 2016. The increase in Net income was primarily due to the gain on the sale of our Waterworks business. Net income per diluted share increased $2.12 to $2.42 for the third quarter of fiscal 2017 as compared to $0.30 for the third quarter of fiscal 2016.

Adjusted EBITDA increased $26 million, or 13.8 percent, to $214 million for the third quarter of fiscal 2017 as compared to $188 million for the third quarter of fiscal 2016. Adjusted EBITDA as a percentage of Net sales was 15.6 percent for the third quarter of fiscal 2017, increasing approximately 90 basis points from 14.7 percent for the third quarter of fiscal 2016.

Adjusted net income increased $55 million, or 58.5 percent, to $149 million for the third quarter of fiscal 2017 as compared to $94 million for the third quarter of fiscal 2016.  Adjusted net income per diluted share increased 70.2 percent to $0.80 for the third quarter of fiscal 2017, as compared to $0.47 for the third quarter of fiscal 2016. 

As of October 29, 2017, HD Supply's combined liquidity of approximately $1.2 billion was comprised of $461 million in cash and cash equivalents and $744 million of additional available borrowings under HD Supply, Inc.'s ("HDS") senior asset-backed lending facility, based on qualifying inventory and receivables. 

Business Unit Performance

Facilities Maintenance

Net sales increased $30 million, or 4.1 percent, to $754 million for the third quarter of fiscal 2017 as compared to $724 million for the third quarter of fiscal 2016.  Adjusted EBITDA increased $13 million, or 9.3 percent, to $153 million for the third quarter of fiscal 2017 as compared to $140 million for the third quarter of fiscal 2016.  This represents an operating leverage of 2.3x. Adjusted EBITDA as a percentage of Net sales was 20.3 percent for the third quarter of fiscal 2017, increasing approximately 100 basis points from 19.3 percent for the third quarter of fiscal 2016. 

Construction & Industrial

Net sales increased $65 million, or 11.8 percent, to $617 million for the third quarter of fiscal 2017 as compared to $552 million for the third quarter of fiscal 2016.  Adjusted EBITDA increased $9 million, or 13.4 percent, to $76 million for the third quarter of fiscal 2017 as compared to $67 million for the third quarter of fiscal 2016. This represents an operating leverage of 1.1x.  Adjusted EBITDA as a percentage of Net sales was 12.3 percent for the third quarter of fiscal 2017, an increase of approximately 20 basis points from 12.1 percent for the third quarter of fiscal 2016.

Third-Quarter Monthly Sales Performance

Net sales for August, September and October of fiscal 2017 were $436 million, $403 million and $531 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 of fiscal 2017 was 6.7 percent, 5.2 percent and 10.0 percent, respectively.

Preliminary November Sales Results

Preliminary Net sales in November were approximately $372 million, which represents year-over-year average daily sales growth of approximately 9.8 percent. Preliminary November year-over-year average daily sales growth for Facilities Maintenance was approximately 4.3 percent and for Construction & Industrial was approximately 16.4 percent.  There were 18 selling days in both November 2017 and November 2016. 

Fourth-Quarter 2017 Outlook

For the fourth quarter of fiscal 2017, Net sales are anticipated to be in the range of $1,142 million and $1,182 million, Adjusted EBITDA1 in the range of $135 million and $147 million and Adjusted net income per diluted share1 in the range of $0.41 and $0.47.  Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 186 million.  The company will provide further specifics on its outlook during the third-quarter fiscal 2017 earnings conference call and in the earnings call presentation materials. 

For the full year fiscal 2017, Net sales are anticipated to be in the range of $5,080 million and $5,120 million, Adjusted EBITDA1 in the range of $714 million and $726 million and Adjusted net income per diluted share1 in the range of $2.23 and $2.29.  Adjusted net income per diluted share range assumes a fully diluted weighted average share count of approximately 194 million.

Fiscal 2017 Third-Quarter Conference Call

As previously announced, HD Supply will hold a conference call on Tuesday, December 5th, 2017 at 8:00 a.m. (Eastern Time) to discuss its third-quarter fiscal 2017 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 diluted share and Net Debt. 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 maintenance, repair and operations, and specialty construction sectors. Through approximately 220 branches and 44 distribution centers, in the U.S. and Canada,  the company's approximately 11,000 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 and Preliminary Results

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 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. 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 "Risk factors" in our annual report on Form 10-K, for the fiscal year ended January 29, 2017, filed on March 14, 2017, our quarterly report on Form 10-Q, for the fiscal quarter ended October 29, 2017, filed on December 5, 2017 and those described from time to time in our, and HD Supply, Inc.'s, other filings with the U.S. Securities and Exchange Commission, 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.

Estimates for Net sales, 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 adjustments. Any variation between HD Supply's actual results and the preliminary financial data set forth above may be material.

1 No reconciliation of the forecasted range for Adjusted EBITDA to Net income or Income from Continuing Operations and Adjusted net income per diluted share to Net income per diluted share or Income from Continuing Operations per diluted share for the fourth quarter of fiscal 2017 and the full year fiscal 2017 is included in this press release because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable efforts. In addition, the company believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

HD SUPPLY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Amounts in millions, except share and per share data, Unaudited

       
  Three Months Ended   Nine Months Ended
  October 29,
2017
  October 30,
2016
  October 29,
2017
  October 30,
2016
Net Sales $ 1,370     $ 1,275     $ 3,938     $ 3,734
Cost of sales   828       763       2,373       2,240
Gross Profit   542       512       1,565       1,494
Operating expenses:              
Selling, general and administrative   336       329       1,008       954
Depreciation and amortization   21       21       63       63
Restructuring   3       3       3       14
Total operating expenses   360       353       1,074       1,031
Operating Income   182       159       491       463
Interest expense   36       65       134       219
Interest income   (1 )           (1 )    
Loss on extinguishment & modification of debt   78       59       81       174
Income from Continuing Operations Before Provision for Income Taxes   69       35       277       70
Provision for income taxes   23       15       92    
View Comments and Join the Discussion!