HD Supply 4Q15 Earnings Call Notes

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HD Supply’s (HDS) CEO Joe DeAngelo on Q4 2015 Results

Debt to EBITDA down to 4.6x from 8x in June 2013

“The ratio of net debt for adjusted EBITDA was currently 4.6 times down from nearly eight times at our initial public offering in June 2013. And down 1.5 turns since fiscal year end 2014. We finished 2015 with solid performance in the fourth quarter is well. ”

Will Stengel

No material oil and gas exposure

“oil and gas impacts. We do not believe we have material direct oil and gas exposure. As we have previously disclosed, our exposure is second and third order effect, which is difficult to identify and quantify. We continue to see solid but varied performance in Texas, across city and business unit, Texas today represents approximately 11% of HD Supply annual sales.”

Competitive environment stable

“competitive environment. Our competitive environment is unchanged from when we spoke in December. We have always operated in intensely competitive profit pools, and respect both our small and well-capitalized competitors. We differentiate via customer-centric service excellence that has earned loyalty over many years. We leverage our scale but complement it with fast, agile and precise global execution. The core of our model is our knowledgeable HD Supply professionals, who stand shoulder to shoulder with our customers, to solve their toughest problems.”

Evan Levitt

February benefitted from favorable comps

“However, I note that February sales performance benefited from a favorable comparison. As we disclosed last year February 2015 was impacted by the full or partial closure of 60 branches and distribution centers across the country impacting approximately 140 facility there. For February 2015, the estimated weather represented an approximately 200 basis points sales growth headwind. This headwind did not repeat in 2016.”

3% end market growth

“Our current views for 2016 are for the residential construction market to increase mid single digits for non-residential construction to increase mid single digits. For water infrastructure to be down low single digits to up low single digits, and the MRO market to remain stable, increasing 1% to 2%. These specific end market estimates imply an approximate 3% end market growth estimate for HD Supply’s end markets in 2016. “