ATLANTA — HD Supply Holdings, Inc. reported Net sales of $7.4 billion for the full-year fiscal 2016 ended January 29, 2017, an increase of $316 million, or 4.4 percent, as compared to fiscal 2015.
“I am pleased with the team’s performance in fiscal 2016. We delivered growth and solid cash flow while simultaneously transforming our business capabilities,” stated Joe DeAngelo, Chairman and CEO of HD Supply. “We are intensely focused on controllable execution that contributes to the success of our customers and I am encouraged with our momentum in 2017.”
Gross profit increased $143 million, or 6.0 percent, to $2,532 million for the full-year fiscal 2016 as compared to $2,389 million for the full-year fiscal 2015. Gross profit was 34.0 percent of Net sales for the full-year fiscal 2016, up approximately 50 basis points from 33.5 percent of Net sales for the full-year fiscal 2015.
Operating income increased $54 million, or 7.3 percent, to $791 million for the full-year fiscal 2016 as compared to $737 million for the full-year fiscal 2015. Operating income as a percentage of Net sales was 10.6% percent for the full-year fiscal 2016, up approximately 30 basis points from 10.3 percent for the full-year fiscal 2015.
Net income decreased $1,276 million, to $196 million for the full-year fiscal 2016 as compared to $1,472 million for the full-year fiscal 2015. Net income per diluted share decreased $6.34 to $0.97 for the full-year fiscal 2016 as compared to $7.31 for the full-year fiscal 2015. Net income for full-year fiscal 2015 included a $1,007 million tax benefit resulting from the reversal of the deferred tax asset valuation allowance, a $189 million non-cash tax credit from the settlement of an IRS audit, and a $186 million pre-tax gain on the sale of the Power Solutions business unit.
Adjusted EBITDA increased $45 million, or 5.1 percent, to $921 million for the full-year fiscal 2016 as compared to $876 million for the full-year fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 12.4 percent for the full-year fiscal 2016, up approximately 10 basis points from 12.3 percent for the full-year fiscal 2015.
Adjusted net income increased $181 million, or 51.6 percent, to $532 million for the full-year fiscal 2016 as compared to $351 million for the full-year fiscal 2015. Adjusted net income per diluted share was $2.63 in the full-year fiscal 2016, as compared to $1.74 in the full-year fiscal 2015.
Fourth-Quarter 2016 Results
Net Sales increased $50 million, or 3.2 percent, to $1,634 million for the fourth quarter of fiscal 2016 as compared to $1,584 million for the fourth quarter of fiscal 2015.
Gross profit increased $26 million, or 4.9 percent, to $560 million for the fourth quarter of fiscal 2016 as compared to $534 million for the fourth quarter of fiscal 2015. Gross profit was 34.3 percent of Net sales for the fourth quarter of fiscal 2016, up approximately 60 basis points from 33.7 percent of Net sales for the fourth quarter of 2015.
Operating income increased $14 million, or 10.7 percent, to $145 million for the fourth quarter of fiscal 2016 as compared to $131 million for the fourth quarter of fiscal 2015. Operating income as a percentage of Net sales was 8.9 percent for the fourth quarter of fiscal 2016, up approximately 60 basis points from 8.3 percent for the fourth quarter of fiscal 2015.
Net income decreased $819 million to $52 million for the fourth quarter of fiscal 2016 as compared to $871 million for the fourth quarter of fiscal 2015. Net income per diluted share decreased $4.07, to $0.26 for the fourth quarter of fiscal 2016 as compared to a $4.33 Net income per diluted share for the fourth quarter of fiscal 2015. Net income for the fourth quarter of fiscal 2015 included a $1,007 million tax benefit resulting from the reversal of the deferred tax asset valuation allowance.
Adjusted EBITDA increased $2 million, or 1.2 percent, to $169 million for the fourth quarter of fiscal 2016 as compared to $167 million for the fourth quarter of fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 10.3 percent for the fourth quarter of fiscal 2016, down approximately 20 basis points from 10.5 percent for the fourth quarter of fiscal 2015.
Adjusted net income increased $35 million to $90 million for the fourth quarter of fiscal 2016 as compared to $55 million for the fourth quarter of fiscal 2015. Adjusted net income per diluted share was $0.44 in the fourth quarter of fiscal 2016, as compared to $0.27 in the fourth quarter of fiscal 2015.
As of January 29, 2017, HD Supply’s combined liquidity of approximately $729 million was comprised of $75 million in cash and cash equivalents and $654 million of additional available borrowings (excluding $26 million of borrowings on available cash balances) under HD Supply, Inc.’s senior asset-backed lending facility, based on qualifying inventory and receivables.
Business Unit Performance
Facilities Maintenance
Full-Year Results
Net sales increased $72 million, or 2.7 percent, to $2,762 million in the full-year fiscal 2016, as compared to $2,690 million for the full-year fiscal 2015. Adjusted EBITDA decreased $6 million, or 1.1 percent, to $523 million for the full-year fiscal 2016 as compared to $529 million for the full-year fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 18.9 percent for the full-year fiscal 2016, down approximately 80 basis points from 19.7 percent for the full-year fiscal 2015.
Fourth Quarter Results
Net sales increased $14 million, or 2.3 percent, to $620 million in the fourth quarter of fiscal 2016, as compared to $606 million for the fourth quarter of fiscal 2015. Adjusted EBITDA decreased $4 million, or 3.9 percent, to $98 million for the fourth quarter of fiscal 2016 as compared to $102 million for the fourth quarter of fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 15.8 percent for the fourth quarter of fiscal 2016, down approximately 100 basis points from 16.8 percent for the fourth quarter of fiscal 2015.
Waterworks
Full-Year Results
Net sales increased $112 million, or 4.5 percent, to $2,622 million in the full-year fiscal 2016, as compared to $2,510 million for the full-year fiscal 2016. Adjusted EBITDA increased $12 million, or 5.4 percent, to $234 million for the full-year fiscal 2015 as compared to $222 million for the full-year fiscal 2015. Adjusted EBITDA as a 3 percentage of Net sales was 8.9 percent for the full-year fiscal 2016, up approximately 10 basis points from 8.8 percent for the full-year fiscal 2015.
Fourth Quarter Results
Net sales increased $18 million, or 3.4 percent, to $551 million in the fourth quarter of fiscal 2016, as compared to $533 million for the fourth quarter of fiscal 2015. Adjusted EBITDA increased $1 million, or 2.4 percent, to $42 million for the fourth quarter of fiscal 2016 as compared to $41 million for the fourth quarter of fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 7.6 percent for the fourth quarter of fiscal 2016, down approximately 10 basis points from 7.7 percent for the fourth quarter of fiscal 2015.
Construction & Industrial
Beginning in the fourth quarter of fiscal 2016, management combined the Home Improvement Solutions operations with Construction & Industrial. All periods presented have been revised to reflect the combined business unit.
Full-Year Results
Net sales increased $131 million, or 6.8 percent, to $2,063 million in the full-year fiscal 2016, as compared to $1,932 million for the full-year fiscal 2015. Adjusted EBITDA increased $40 million, or 21.7 percent, to $224 million for the full-year fiscal 2016 as compared to $184 million for the full-year fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 10.9 percent for the full-year fiscal 2016, up approximately 140 basis points from 9.5 percent for the full-year fiscal 2015.
Fourth Quarter Results
Net sales increased $19 million, or 4.3 percent, to $466 million in the fourth quarter of fiscal 2016, as compared to $447 million for the fourth quarter of fiscal 2015. Adjusted EBITDA increased $6 million, or 17.6 percent, to $40 million for the fourth quarter of fiscal 2016 as compared to $34 million for the fourth quarter of fiscal 2015. Adjusted EBITDA as a percentage of Net sales was 8.6 percent for the fourth quarter of fiscal 2016, up approximately 100 basis points from 7.6 percent for the fourth quarter of fiscal 2015.
Fourth-Quarter Monthly Sales Performance
Net sales for November, December and January of fiscal 2016 were $526 million, $527 million and $581 million, respectively. There were 18 selling days in November, 20 selling days in December and 23 selling days in January. Average year-over-year daily sales growth for November, December and January was 2.3 percent, 3.6 percent and 3.4 percent, respectively.
Capital Structure Activities
On January 26, 2017, the company used cash flow from operations to repay $200 million aggregate principal of HD Supply, Inc.’s Term B-1 Loans. As a result, the company incurred a $5 million loss on extinguishment of debt, which includes write-offs of $2 million and $3 million of unamortized original issue discount and unamortized deferred financing costs, respectively. In the fourth quarter of fiscal 2016, the ratio of Net debt1 to Adjusted EBITDA was 4.1 times, reduced approximately 0.5 turns since fiscal year-end 2015.
Preliminary February Sales Results
Preliminary Net sales in February were approximately $535 million, which represents year-over-year average daily sales growth of approximately 6.4 percent. Preliminary February year-over-year average daily sales growth by business was Facilities Maintenance approximately 0.2 percent, Waterworks approximately 15 percent, and Construction & Industrial approximately 5.3 percent. There were 20 selling days in February 2017.
Fiscal Year 2017 and First-Quarter 2017 Outlook
For fiscal year 2017, the company estimates end market growth of approximately 2-3 percent. The company estimates 300 basis points of sales growth in excess of the estimated market growth and operating leverage in the range of 1.5 to 2.0 times for fiscal year 2017.
For first-quarter 2017, the company anticipates Net sales to be in the range of $1,840 million to $1,890 million, Adjusted EBITDA in the range of $205 million to $220 million, and Adjusted net income per diluted share in the range of $0.60 to $0.68. The first-quarter 2017 Adjusted net income per diluted share range assumes a fully diluted weighted average share count of 203 million. At the mid-point of the ranges, our first-quarter 2017 Net sales and Adjusted EBITDA translate into approximately 5 percent growth and -1 percent growth, respectively, versus prior year.
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