A Portfolio of Best-in-Class Industrial Distributors - 6th November, 2012 - HD Supply
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A Portfolio of Best-in-Class
Industrial Distributors
6th November, 2012
Disclaimer
This presentation includes forward-looking information. Forward-looking statements 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 presentation is not a guarantee of future performance and that our actual results of operations, financial condition and
liquidity, and the development of the industries in which we operate may differ materially from those made in or suggested by
the forward-looking information contained in this presentation. A number of important factors could cause actual results to
differ materially from those contained in or implied by the forward-looking statements, including those factors discussed in our
annual report on Form 10K filed March 23, 2012 and subsequent filings with the SEC. Any forward-looking information
presented herein is made only as of the date of this presentation, 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, changes in future
operating results over time or otherwise. Comparisons of results for current and any prior periods are not intended to express
any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical
data.
In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles
(“GAAP”), the Company also disclosed in this presentation certain non-GAAP financial information including Adjusted
EBITDA. These financial measures are not recognized measures under GAAP, and are not intended to be and should not be
considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance
with GAAP.
2
Agenda
1. HD Supply Overview
2. Market Opportunity
3. Differentiated Growth
4. Financial Performance
5. Key Messages
3
At a Glance
A Portfolio of Best-in-Class Industrial Financial Summary
Distributors Serving the Large and Highly $582M
$508M
Fragmented U.S. and Canadian Infrastructure, $411M
Adj. EBITDA1
MRO and Construction Sectors $251M
$325M
Diverse Portfolio of Distribution Businesses that
Provide Approximately 1 Million SKUs to 440,000 ’10A ’11A Q2’12 YTD YTD
Professional Customers, Including Contractors, LTM Q2’11 Q2’12
Government Entities, Maintenance Sales $6.4B $7.0B $7.4B $3.5B $3.9B
Sales % VPY 2% 9% 12% 6% 12%
Professionals, Home Builders and Industrial Gross Profit $1.8B $2.0B $2.1B $1.0B $1.1B
Businesses GM % 28.5% 28.7% 28.7% 28.5% 28.7%
Adj. EBITDA % 6.4% 7.2% 7.8% 7.2% 8.3%
– Operate Approximately 630 Locations Across 46 Adj. EBITDA Growth 20% 24% 27% 24% 29%
U.S. States and 9 Canadian Provinces Cash Flow $0.7B $0.1B $0.2B ($0.1B) ($0.0B)
National Footprint
Broad Diversity in Product Portfolio, Customer
Base and Vendor Relationships Reduces the
Company’s Exposure to Any Single Segment,
Product or Customer
Size, Scale and National Presence Drive
Competitive Advantage in Large, Fragmented
Markets
Talent with Deep, Relevant Experience;
Pervasive Training Note: HD Supply Operates a Sourcing Office in China
1 See pg. 89 of 10-K Filed March 23, 2012 and pg. 21 of 10-Q Filed September 4, 2012 for a Discussion of Adj. EBITDA and Reconciliation to Income (Loss) From Continuing Operations
Portfolio of Best-in-Class Industrial Distributors
4
At a Glance
Sales Products Markets Market Size1
(’11A) ($ in Billions)
$1.9B HVAC, Appliances, Janitorial and Apartments, Hotels and Motels, $48B
Cleaning Supplies, Faucets and Assisted and Independent Living,
Showerheads, Kitchen and Bath, Skilled Nursing Facilities,
“Maintenance, Repair and Hardware, Lamps and Ballasts, Government Housing and Education
Improvement” Electrical, Lighting Fixtures, Maintenance, Repair and
Hospitality Supplies, Tools, Textiles, Improvement
Paint and Sundries
$1.8B Pipe (PVC, Ductile Iron, HDPE); Fittings, Municipal, Residential, and Non- $10B
Valves, Fire Protection, Metering Residential Construction
Systems, Storm Drain, Hydrants;
Fusion Machine Rental, Valve Testing
“Infrastructure”
and Repair
$1.6B Wire, Hardware, Meters, Transformers, Non-Residential Construction, $110B
Connectors, Tools, Protective Electrical Consumption, and
Equipment, Molded Rubber, Lighting, Residential Construction
Conduit; Smart Grid Solutions, Project
Services
$1.0B Concrete Related Products, Forming Non-Residential and Residential $19B
and Shoring Braces, Chemicals, Power Construction
Tools and Accessories, Wood
Connectors; Equipment Rental, Rebar
“Specialty Construction” and Rebar Fabrication
$0.8B Building Materials; Fasteners, Repair and Remodel, Residential $5B+2
Flooring, Countertops, Cabinets Construction, and Non-Residential
Construction
1 Per Leading Global Consultant $7.0B ~$190B
2 Management Estimates
A LeadingofPortfolio
Portfolio of Distributors
Best-in-Class Industrial Distributors
5
Facilities Maintenance… At A Glance
Products and Customers and “Go to Market” Operating
Value-Added Services End Markets Execution Model
150,000+ SKUs 244,000+ Property Industry Specific 95% of U.S. Served
Management Catalogs, Tabloids, With Next-Day Delivery
Proprietary Brands Product Guides and
– Multi-Family 8 Call Centers
Fabrication and e-Business Portal
Installation Services – Hospitality 41 Distribution Centers
600+ Dedicated
Renovations Project – Healthcare Delivery Trucks
Management
– Institutional 950+ Sales Associates
– HVAC $48B Market Size1 With Average of 6 Years
– Appliances
of Service
– Janitorial and Cleaning EBITDA (Adj.2)
Supplies
VPY
– Faucets and
Showerheads $345M +15%
– Kitchen and Bath
Hardware
– Lamps and Ballasts
Electrical
– Lighting Fixtures
– Hospitality Supplies
– Tools LTM Q2’12
Revenue $1,994M +13%
– Textiles
Adj. EBITDA
– Paint and Sundries 36% of Sales Margin % 17.3% +25BPs
1 Per Leading Global Consultant
2 See pg. 89 of 10-K Filed March 23, 2012 and pg. 21 of 10-Q Filed September 4, 2012 for a Discussion of Adj. EBITDA and Reconciliation to Income (Loss) From Continuing Operations
#1 Distributor to Multi-Family Properties
6
Waterworks… At A Glance
Products and Customers and “Go to Market” Operating
Value-Added Services End Markets Execution Model
300,000+ SKUs 45,000 Professional Branch Based 96% Fill Rate
Contract Customers 235 Locations
Nation’s Largest
Distributor of Water, – Municipal 44 States
Sewer, Storm and Fire
Protection Products
– Residential 620+ Dedicated
– Non-Residential
Delivery Trucks
860+ Sales Associates;
– Pipe $10B Market Size1 With Average of 12
PVC
Years of Service
Ductile Iron
HDPE
EBITDA (Adj.2)
– Fittings
– Valves Customer Advantage
Programs;
– Fire Protection
Powerscope… Since VPY
– Metering Systems ’93 $125M +26%
– Storm Drain
– Hydrants
– Fusion Machine Rental LTM Q2’12
– Valve Testing and Repair Revenue $1,877M +11%
Adj. EBITDA
Margin % 6.7% +78BPs
1 Per Leading Global Consultant
2 See pg. 89 of 10-K Filed March 23, 2012 and pg. 21 of 10-Q Filed September 4, 2012 for a Discussion of Adj. EBITDA and Reconciliation to Income (Loss) From Continuing Operations
#1 National Industry Position
7
Power Solutions… At A Glance
Products and Customers and “Go to Market” Operating
Value-Added Services End Markets Execution Model
200,000+ SKUs 8,500+ Professional Branch Based and 101 Locations
North America’s Contractor Customers Customer Site
25 States; 4 Canadian
Largest Utilities – Non-Residential Provinces
Distributor and Full
Line Electrical – Utilities 240 Dedicated Delivery
Distributor of Trucks
– Residential
Construction, 550+ Sales Associates
Industrial and – Industrial
With Average of 11
Communications Years of Service
Products
– Wire $110B Market Size1 MRO and Safety EBITDA (Adj.2)
– Hardware Offering
– Meters
– Transformers
– Connectors
– Tools
VPY
– Protective Equipment
– Molded Rubber $58M +12%
– Lighting
– Conduit
LTM Q2’12
– Smart Grid Solutions
Revenue $1,670M +7%
– Project Services Adj. EBITDA
Margin % 3.5% +14BPs
1 Per Leading Global Consultant
2 See pg. 89 of 10-K Filed March 23, 2012 and pg. 21 of 10-Q Filed September 4, 2012 for a Discussion of Adj. EBITDA and Reconciliation to Income (Loss) From Continuing Operations
#1 Leadership Position in U.S. and Canada for Utilities
8
White Cap… At A Glance
Products and Customers and “Go to Market” Operating
Value-Added Services End Markets Execution Model
200,000+ SKUs 53,000 Professional Branch Based; 134 Locations
Nation’s Leading Contractor Customers Open Warehouse
Format 31 States
Distributor of – Residential
Specialty Hardware, 620+ Dedicated
Tools and Materials – Non-Residential Delivery Trucks
– Industrial 920+ Sales Associates
With Average of 9 Years
of Service
– Concrete Related
Products $19B Market Size1 Catalog and EBITDA (Adj.2)
– Forming and Shoring Regional Traders
Braces
– Chemicals
– Power Tools and
Accessories
– Building Materials and VPY
Fasteners
– Erosion and $39M +39x
Waterproofing
– Safety Products LTM Q2’12
– Equipment Rental and Revenue $1,083M +22%
Tool Repair Adj. EBITDA
– Rebar Fabrication Margin % 3.6% +349BPs
1 Per Leading Global Consultant
2 See pg. 89 of 10-K Filed March 23, 2012 and pg. 21 of 10-Q Filed September 4, 2012 for a Discussion of Adj. EBITDA and Reconciliation to Income (Loss) From Continuing Operations
#1 National Industry Position
9
Agenda
1. HD Supply Overview
2. Market Opportunity
3. Differentiated Growth
4. Financial Performance
5. Key Messages
10End Market Overview
Infrastructure Maintenance & Repair Specialty Construction
Market
Opportunity1
$120B $48B+ $19B+
Demand Aging Overburdened Infrastructure Maintenance Required for Existing Single Family, Multifamily,
Drivers Coverage for Population Growth Stock of U.S. Multifamily, Hospitality, Commercial, Municipal and Repair
Healthcare and Institutional and Remodel Construction
Cost-Effective and Efficient Structures
Distribution of Water and Electricity Infrastructure Build Out for Growing
Repair and Remodel Construction Resource Base of Shale Gas
Infrastructure Build Out for Growing
Resource Base of Shale Gas
HD Supply
Businesses
HD Supply Scale, Information Technology and Comprehensive Product Assortment, Customer Service Differentiation
Competitive Pricing Rigor Superior Availability and Delivery (i.e., Delivery Times, Sales Expertise,
Advantages Deep Customer and Vendor Time Differentiation Value-Added Product)
Relationships with Solution Selling Superior National Distribution Product Assortment and Knowledge
Capabilities Capabilities
Industry Leading Management Lean Operating Cost Structure
Talent and Experience Leveraging ERP Technologies
“Endless, Critical Demand” “Continual Demand” “Niche Expertise”
1 Per Leading Global Consultant; Management Estimates
~$190B Market Opportunity, Solid Growth Drivers
11Addressable Opportunities
($ in billions)
Addressable Opportunity and HD Supply’s Position
Est. Market Size1 $110B
$48B
$19B
$10B
HD Supply Sales2 $1.6B $1.9B $1.0B $1.8B
Rank #1 3
#1 3
#1 #1
Share1 2% 4% 5% 18%
1 Per Leading Global Consultants
2 Sales for the Year Ending January 29, 2012
3.Power Solutions is the Largest Utilities Distributor; Facilities Maintenance is the Largest Distributor to Multifamily Properties
~$190B Opportunity…
Leading Positions, Large Opportunities 12End Market Diversity
HD Supply Sales
Estimated % of FYE Jan. ’12 Sales
Construction, 39%
Infrastructure Non-Residential
and Other 26%
34%
$7B
Residential
13%
MRO
27%
39% Construction, 27% MRO, 34% Infrastructure
13End Market Outlook
Construction End Markets Apartment Outlook
Non-Residential Construction (26%) Residential Construction (13%) Multifamily
(Construction Spend Change, Index = '07) (SF Housing Starts Change, Index = '07) (U.S. Apartments
Vacancy Rate; Rev. Per Occupied Stock)
40% 8.0%
Vacancy
20% Rate
5.7% 5.2%
4.9%
'07A '08A '09A '10A '11A '12F '13F '14F '15F '07A '08A '09A '10A '11A '12F '13F '14F '15F 4.8%
Rev. / 4.1%
20% Occupied 4.0%
Stock
40%
'07A '08A '09A '10A '11A '12F '13F '14F '15F
-60%
Spend ($ in billions) Annual SF Starts (000s)
Actual
$239 $243 $165 $156 $163 1,035 616 445 471 431
(4.3%)
Forecast Range 535 695 1,224 1,467
High $164 $183 $206 $260
Low $154 $165 $187 $209 512 642 905 1,095
Sources: Management Estimates Based on Industry Data Source: REIS (“United States Apartment 2Q 2012 MetroTrend Futures”)
Growth Projected Going Forward
14Agenda
1. HD Supply Overview
2. Market Opportunity
3. Differentiated Growth
4. Financial Performance
5. Key Messages
15Differentiated Growth Investments
1 2 3 4 5 6 7
Existing New New Products New Value Improve New
Geographic
Customers Customers and Services Delivery Industry Competitive
Expansion
System Structure Arenas
Increase Share Sell More New Product and Redesign the Acquisitions Enter New Enter Entire New
of Wallet Products to New Service Business System Geographies Business
Customers Introduction by Which a Product Segment
or Service is
Delivered
Sales Force Talent… +11K SKUs Added e-Commerce Acquired Peachtree 3 Dist. Center
Effectiveness Segment Leaders Business Products 5 Expansions
Sales Training Talent… +10K SKUs Added Fusion Acquired RAMSCO 12 Greenfields Oil & Gas
Product Storm Drainage Equipment to Enter NY State 1 Expansion
Specialist Rental
(HDPE) Leader
Sales Force Talent… MRO Project Services Catalog 5 Greenfields Industrial
Effectiveness Specialist Automation Introduction 1 Expansion Oil & Gas
MSA Talent… +3K SKUs Added Catalog 2 Greenfields Oil & Gas
Leadership Executive Introduction 2 Expansions
Leadership
(President),
Merchandising ~$400M Strategic
Experts Investment1
Since ’10
1 Includes SG&A, Capital and Net Working Capital
Strategic Investments Through the Cycle
to Drive ROIC and Scale Differentiation 16Outpace Market Growth… LTM Q2’12
(Organic Sales Growth Versus Market)
+22%
+13%
+11%
+8 Pts +7%
+5% +26 Pts
+10 Pts
+1% +9 Pts
Market Market
Market FM Market WW PS WC
(2%)
(4%)
Source: 3rd Party Market Sources, Management Estimates
Total HD Supply… +10 Pts V Estimated Market Growth
17Agenda
1. HD Supply Overview
2. Market Opportunity
3. Differentiated Growth
4. Financial Performance
5. Key Messages
18Financial Performance
($ in billions,
Except Adj. EBITDA)
Adj. EBITDA1
$582M
$508M
$411M
$325M
$251M
’10A ’11A LTM YTD YTD
Q2’12 Q2 ’11 Q2 ’12
Sales $6.4B $7.0B $7.4B $3.5B $3.9B
Sales Growth VPY 2% 9% 12% 6% 12%
Gross Profit $1.8B $2.0B $2.1B $1.0B $1.1B
GM % 28.5% 28.7% 28.7% 28.5% 28.7%
Adj. EBITDA % 6.4% 7.2% 7.8% 7.2% 8.3%
Adj. EBITDA Growth VPY 20% 24% 27% 24% 29%
Cash Flow $0.7B $0.1B $0.2B ($0.1B) ($0.0B)
Net Debt $5.0B $5.4B $5.7B $5.4B $5.7B
1 See pg. 89 of 10-K Filed March 23, 2012 and pg. 21 of 10-Q Filed September 4, 2012 for a Discussion of Adj. EBITDA and Reconciliation to Income (Loss) From Continuing Operations
Nine Consecutive Quarters
of Year-Over-Year Sales Growth 19Agenda
1. HD Supply Overview
2. Market Opportunity
3. Differentiated Growth
4. Financial Performance
5. Key Messages
20We Build Your City…
Pipe, Meters and Fire
Hydrants
Utility Cable, Transformers
and Switches
… and Keep it Running
21We Build Your City…
Pipe, Meters and Fire
Hydrants
Utility Cable, Transformers
and Switches
Concrete, Masonry Tools and
Accessories
Specialty Power Tools
Specialty Hardware and Tools
Safety
Doors, Windows, Building
Materials
Flooring
… and Keep it Running
22We Build Your City…
Pipe, Meters and Fire
Hydrants
Utility Cable, Transformers
and Switches
Concrete, Masonry Tools and
Accessories
Specialty Power Tools
Specialty Hardware and Tools
Safety
Doors, Windows, Building
Materials
Flooring
Cleaning and Hospitality
Products
Upgrade and Renovation
Services
… and Keep it Running
23Key Messages
1. We Had a Very Good Company in ’06 in Strong Markets… Great Company in ’12,
Obsessed with Being the Best of the Best
2. We are in the Early Innings of Our Amazing Full Potential
3. Our Businesses are Market Leaders in Highly Fragmented Markets with Large Profit Pools… We
Have Unique Capabilities to Consolidate Markets to Benefit Customers and Investors
4. We Invested Heavily Throughout the Downturn to Extend Our Advantage and Barriers to
Entry… Talent / Training, Technology Platforms, Processes, Products, Supplier Alignments,
Facilities, Geographies and Fleet
5. Our Initiative “Stack” Ensures We Always Grow Faster than Our Markets and Save as We Grow
6. Costs are Down and Capabilities are Up... Q2’12 LTM Sales +12% with EBITDA +27%
7. Distractions are Behind Us and We are Advantaged Together
Portfolio of Best-in-Class Industrial Distributors
24We Build Your City…
… and Keep it Running
25Appendix
GAAP Reconciliation
($ in millions)
Fiscal Fiscal LTM YTD YTD
2010 2011 Q2’12 Q2’11 Q2’12
Adjusted Cash Flow $658 $94 $214 ($140) ($20)
Reconciling Items:
Interest Paid (363) (356) (530) (177) (351)
Taxes (Paid) Received 216 (5) (2) (5) (2)
Capital Expenditures 49 115 132 35 52
Proceeds from Sale of PPE (4) (4) (2) (4) (2)
Management Fees & Expenses (5) (5) (5) (2) (2)
Other - (4) - (3) 1
GAAP Operating Cash Flows $551 ($165) ($193) ($296) ($324)
27GAAP Reconciliation
($ in millions)
Fiscal Fiscal LTM YTD YTD
2010 2011 Q2’12 Q2’11 Q2’12
Adjusted EBITDA $411 $508 $582 $251 $325
Reconciling Items:
Depreciation and Amortization (343) (329) (331) (165) (167)
Goodwill impairment - - - - -
Restructuring (8) - - - -
Stock Compensation (17) (20) (21) (9) (10)
Management Fee (5) (5) (5) (3) (3)
Other (1) 1 2 - 1
GAAP Operating Income (Loss) 37 155 227 74 146
Interest Expense, net (623) (639) (646) (317) (324)
Gain (loss) on extinguishment of debt - - (220) - (220)
Other Income (Expense) 1 - (1) 1 -
GAAP Pre-Tax Income (Loss) (585) (484) (640) (242) (398)
Tax Benefit (Expense) (28) (79) (78) (35) (34)
GAAP Net Income (Loss) Cont Ops ($613) ($563) ($718) ($277) ($432)
28Capital Structure Summary1
($ in millions,
other than Funded Debt and Net Debt)
Maturity S&P
Date Rating Notes
Secured Debt: $1,500M
Senior ABL Facility2 ($315M)
4/12/2017 BB-
Drawn
Senior Term Loan3 $971M 10/12/2017 B+
Sr. Secured 1st Lien Notes3 $1,273M 4/15/2019 B+
Sr. Secured 2nd Lien Notes $675M 4/15/2020 CCC+
Unsecured Notes:
Sr. Notes $1,000M 7/15/2020 CCC+
Senior Notes3 – Sponsor Owned $728M 10/12/2020 CCC+ PIK for min. 5½ years
Senior Sub. Notes – Public Owned4 $541M
– Sponsor Owned4 $348M 9/1/2015 CCC+
Funded Debt $5.9B
Net Debt $5.8B
1 As of 7/29/12; Pro Forma for Aug. $300M 1st Lien Add-on and Oct. $1B Senior Note Offering
2 Drawn ABL as at 7/29/2012 was $632M. $315M reflects the use of Sr. Sec. 1st Lien Add-on proceeds to pay down ABL
3 Including Applicable Premiums and Net of Applicable Discounts
4 Net of $1B of proceeds from issuance of Senior Notes less initial purchasers’ commissions and accrued interest and redemption premium on Senior Sub. Notes
Earliest Maturing Debt... September 2015
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