HD Supply 1Q Net Sales Up 6%

The first quarter performance represents the sixteenth consecutive quarter of year-over-year average daily sales growth. The company believes its sales performance represents growth of approximately 400 basis points in excess of its market growth estimate.

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Atlanta, GA – HD Supply Holdings, Inc., one of the largest industrial distributors in North America, reported Net sales for the first quarter of fiscal 2014 ended May 4, 2014 of $2.2 billion, an increase of $113 million, or 6 percent, as compared to the first quarter of fiscal 2013. The first quarter performance represents the sixteenth consecutive quarter of year-over-year average daily sales growth. The company believes its sales performance represents growth of approximately 400 basis points in excess of its market growth estimate.

“I am pleased with our solid performance this quarter, despite the adverse impact of the severe weather we experienced throughout February and March. We remain cautiously optimistic that our end markets will continue to build on the emerging strength that we are seeing in select geographies,” stated Joe DeAngelo, CEO of HD Supply. “We remain focused on controllable execution to deliver profitable growth in excess of our market.”

Gross profit increased $38 million, or 6 percent, to $631 million for the first quarter of fiscal 2014 compared to $593 million for the first quarter of fiscal 2013. Gross profit was 29.2 percent of Net sales for the first quarter of fiscal 2014, up approximately 20 basis points from 29.0 percent of Net sales for the first quarter of fiscal 2013. Gross profit improvement was driven by execution of the company’s category management initiatives and mix of products and services.

Operating income increased $18 million, or 18 percent, to $119 million for the first quarter of fiscal 2014 compared to $101 million for the first quarter of fiscal 2013. Operating income as a percentage of Net sales increased approximately 60 basis points during the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013. The improvement was primarily driven by a reduction in selling, general and administrative expenses as a percentage of Net sales and improvements in gross margins.
Adjusted EBITDA increased $25 million, or 15 percent, to $190 million for the first quarter of fiscal 2014 compared to $165 million for the first quarter of fiscal 2013. The increase in Adjusted EBITDA was driven by Facilities Maintenance, Waterworks, and Construction & Industrial - White Cap, and reflects the continued focus on initiatives execution to drive growth in excess of our estimate of market growth.

Adjusted EBITDA as a percentage of Net sales increased approximately 70 basis points to 8.8 percent in the first quarter of fiscal 2014 as compared to 8.1 percent in the first quarter of fiscal 2013.

Net loss improved $119 million to $12 million for the first quarter of fiscal 2014 compared to a Net loss of $131 million for the first quarter of fiscal 2013. Net loss per diluted share was $0.06 in the first quarter of fiscal 2014, as compared to a Net loss per diluted share of $1.00 in the first quarter of fiscal 2013.

Adjusted net income increased $53 million to $39 million for the first quarter of fiscal 2014 as compared to an Adjusted net loss of $14 million in the first quarter of fiscal 2013. The increase in Adjusted net income is attributable to sales growth, improving gross margins, and a reduction in interest expense. Adjusted net income per diluted share was $0.20 in the first quarter of fiscal 2014, as compared to an

Adjusted net loss of $0.11 per diluted share in the first quarter of fiscal 2013.

Business Unit Performance

Facilities Maintenance

Net sales increased $43 million, or 8 percent, to $604 million in the first quarter of fiscal 2014 as compared to $561 million in the first quarter of fiscal 2013. Adjusted EBITDA increased $9 million, or 9 percent, to $109 million during the first quarter of fiscal 2014 as compared to $100 million in the first quarter of fiscal 2013. Adjusted EBITDA as a percentage of Net sales increased approximately 20 basis points in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013.

Waterworks

Net sales increased $28 million, or 5 percent, to $551 million in the first quarter of fiscal 2014 as compared to $523 million in the first quarter of fiscal 2013. Adjusted EBITDA increased $3 million, or 8 percent, to $41 million during the first quarter of fiscal 2014 as compared to $38 million in the first quarter of fiscal 2013. Adjusted EBITDA as a percentage of Net sales increased approximately 10 basis points in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013.

Power Solutions

Net sales declined $1 million, or less than one percent, to $461 million in the first quarter of fiscal 2014, as compared to $462 million in the first quarter of fiscal 2013. Adjusted EBITDA was flat at $18 million during the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013. Adjusted EBITDA as a percentage of Net sales was flat in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013.

Construction & Industrial - White Cap

Net sales increased $34 million, or 11 percent, to $344 million in the first quarter of fiscal 2014 as compared to $310 million in the first quarter of fiscal 2013. Adjusted EBITDA increased $8 million, or 57 percent, to $22 million during the first quarter of fiscal 2014 as compared to $14 million in the first quarter of fiscal 2013. Adjusted EBITDA as a percentage of Net sales increased approximately 190 basis points during the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013.

First-Quarter Monthly Sales Performance

Net sales for February, March and April were $609 million, $659 million and $893 million, respectively. There were 20 selling days in February, 20 selling days in March and 25 selling days in April. Average year-over-year daily sales growth for February, March and April were 4.1 percent, 4.2 percent and 7.5 percent, respectively.

Preliminary May Sales

Preliminary Net sales in May were $712 million which represents 9.6 percent growth versus prior year. There were 19 selling days in May and average daily sales were up 9.6 percent versus prior year.

Preliminary May year-over-year average daily sales growth by business is Facilities Maintenance 8.6 percent, Waterworks 12.3 percent, Power Solutions 6.4 percent, and Construction & Industrial – White Cap 13.7 percent.

Second-Quarter 2014 Outlook

The company anticipates Net sales in the second quarter of fiscal 2014 to be in the range of $2,350 million to $2,450 million, Adjusted EBITDA in the range of $240 million to $250 million, and Adjusted net income per diluted share in the range of $0.42 to $0.49. The second quarter fiscal 2014 Adjusted net income per diluted share range assumes a fully diluted weighted average share count of 200 million.

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