HD Supply Reports 3.2% Net Sales Increase in 3Q

ATLANTA-- HD Supply, Inc. today reported net sales for the 2010 fiscal third quarter ended October 31, 2010 of $2.0 billion, an increase of $61 million, or 3.2 percent, compared to the third quarter of fiscal 2009. Operating income for the fiscal third quarter of 2010 was $38 million, an increase of $256 million compared to the third quarter of fiscal 2009, which included a $224 million pre-tax goodwill impairment charge.

ATLANTA-- HD Supply, Inc. today reported net sales for the 2010 fiscal third quarter ended October 31, 2010 of $2.0 billion, an increase of $61 million, or 3.2 percent, compared to the third quarter of fiscal 2009.

Operating income for the fiscal third quarter of 2010 was $38 million, an increase of $256 million compared to the third quarter of fiscal 2009, which included a $224 million pre-tax goodwill impairment charge. Excluding the goodwill impairment charge in fiscal 2009, operating income for the third quarter of fiscal 2010 increased $32 million compared to the third quarter of fiscal 2009. Liquidity at the end of the third quarter of fiscal 2010 was $1.3 billion, an increase of over $33 million versus the second quarter of fiscal 2010, and $436 million versus the end of fiscal 2009.

Consolidated loss from continuing operations for the third quarter of fiscal 2010 was $99 million, compared to a loss from continuing operations of $258 million for the same period in fiscal 2009. Loss from continuing operations in the third quarter of fiscal 2010 and fiscal 2009 included non-cash charges of $25 million and $1 million, respectively, to increase the valuation allowance against the company's deferred tax assets. Excluding the 2010 and 2009 charges for valuation allowances and the goodwill impairment charge in fiscal 2009 ($186 million net of tax), the loss from continuing operations of $74 million in the third quarter of fiscal 2010 compares with a loss from continuing operations of $71 million in the third quarter of fiscal 2009.

"In the face of continued economic headwinds, the third quarter's improved results reflect HD Supply's initiatives to accelerate sales and grow market share with unparalleled customer service. These measurable results and the teams' corresponding profitable growth momentum position the company well for immediate and long-term success," stated Joe DeAngelo, CEO, HD Supply.

Nine-Month Financial Results

Net sales for the first nine months of fiscal 2010 were $5.8 billion, a decline of $48 million, or 0.8 percent, compared to the first nine months of fiscal 2009. Operating income in the first nine months of fiscal 2010 was $43 million, an increase of $267 million compared to the first nine months of fiscal 2009, which included a $224 million pre-tax goodwill impairment charge. Excluding the goodwill impairment charge in fiscal 2009, operating income for the first nine months of fiscal 2010 increased $43 million compared to the first nine months of fiscal 2009.

Consolidated loss from continuing operations for the first nine months of fiscal 2010 was $416 million, compared to a loss from continuing operations of $337 million for the same period in fiscal 2009. Loss from continuing operations in the first nine months of fiscal 2010 and 2009 included $142 million and $6 million, respectively, of non-cash charges to increase the valuation allowance against the company's deferred tax assets. In addition, loss from continuing operations in the first nine months of fiscal 2009 included a goodwill impairment charge ($186 million after-tax) and a non-operating, non-cash pre-tax gain of $200 million ($123 million after-tax) resulting from the extinguishment of senior subordinated debt. Excluding these items, loss from continuing operations of $274 million in the first nine months of fiscal 2010 compares with a loss from continuing operations of $268 million in the first nine months of fiscal 2009.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of fiscal 2010 increased 10.7 percent, or $13 million, to $135 million from $122 million in the third quarter of fiscal 2009. Year-to-date Adjusted EBITDA increased 3.6 percent, or $12 million, to $347 million from $335 million in the first nine months of fiscal 2009. Year-to-date Adjusted EBITDA for fiscal 2010 was 6.0 percent of net sales versus 5.8 percent of net sales for the first nine months of fiscal 2009. The company presents Adjusted EBITDA to provide additional information to evaluate its operating performance and its ability to service its debt.

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