SUBSIDIARY GUARANTORS | 9 Months Ended |
Nov. 03, 2013 |
SUBSIDIARY GUARANTORS | ' |
SUBSIDIARY GUARANTORS | ' |
NOTE 13—SUBSIDIARY GUARANTORS |
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HDS (the ‘‘Debt Issuer’’) currently has outstanding First Priority Notes, Second Priority Notes, October 2012 Senior Unsecured Notes, and February 2013 Senior Unsecured Notes (collectively the ‘‘Notes’’) guaranteed by certain of its subsidiaries (the ‘‘Guarantor Subsidiaries’’). The Guarantor Subsidiaries are direct or indirect wholly-owned domestic subsidiaries of HDS. The subsidiaries of HDS that do not guarantee the Notes (‘‘Non-guarantor Subsidiaries’’) are direct or indirect wholly-owned subsidiaries of HDS and primarily include HDS’s operations in Canada and a non-operating subsidiary in the United States that previously held an investment of HDS’s 2007 Senior Subordinated Notes, which was eliminated in consolidation. During fiscal 2012, the investment in the 2007 Senior Subordinated Notes was contributed to the Debt Issuer in a non-cash transaction. The Debt Issuer retired this portion of the 2007 Senior Subordinated Notes. These transactions had no impact on the consolidated results of operations or financial position. |
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In connection with the Notes, HDS determined the need for compliance with Rule 3-10 of SEC Regulation S-X. In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, HDS has included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(f) of SEC Regulation S-X. The following supplemental financial information sets forth, on a consolidating basis under the equity method of accounting, the condensed statements of operations and comprehensive income (loss), the condensed balance sheets, and the condensed statements of cash flows for the parent company issuer of the Notes, HDS, for the Guarantor Subsidiaries and for the Non-guarantor Subsidiaries and total consolidated HDS and subsidiaries (amounts in millions): |
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CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
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| | Three Months Ended November 3, 2013 | |
| | Debt | | Guarantor | | Non- | | Eliminations | | Total HDS | |
Issuer | Subsidiaries | Guarantor |
| | Subsidiaries |
| | | | | | | | | | | |
Net Sales | | $ | — | | $ | 2,166 | | $ | 131 | | $ | — | | $ | 2,297 | |
Cost of sales | | — | | 1,529 | | 100 | | — | | 1,629 | |
Gross Profit | | — | | 637 | | 31 | | — | | 668 | |
Operating expenses: | | | | | | | | | | | |
Selling, general and administrative | | 15 | | 411 | | 21 | | — | | 447 | |
Depreciation and amortization | | 4 | | 56 | | 1 | | — | | 61 | |
Total operating expenses | | 19 | | 467 | | 22 | | — | | 508 | |
Operating Income (Loss) | | (19 | ) | 170 | | 9 | | — | | 160 | |
Interest expense | | 118 | | 75 | | — | | (75 | ) | 118 | |
Interest (income) | | (73 | ) | (1 | ) | (1 | ) | 75 | | — | |
Net (earnings) loss of equity affiliates | | (137 | ) | — | | — | | 137 | | — | |
Income (Loss) From Continuing Operations Before Provision (Benefit) for Income Taxes | | 73 | | 96 | | 10 | | (137 | ) | 42 | |
Provision (benefit) for income taxes | | 22 | | (33 | ) | 2 | | — | | (9 | ) |
Income (Loss) from Continuing Operations | | 51 | | 129 | | 8 | | (137 | ) | 51 | |
Income (loss) from discontinued operations, net of tax | | — | | — | | — | | — | | — | |
Net Income (Loss) | | $ | 51 | | $ | 129 | | $ | 8 | | $ | (137 | ) | $ | 51 | |
Other comprehensive income (loss) — foreign currency translation adjustment | | — | | — | | — | | — | | — | |
Total Comprehensive Income (Loss) | | $ | 51 | | $ | 129 | | $ | 8 | | $ | (137 | ) | $ | 51 | |
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| | Three Months Ended October 28, 2012 | |
| | Debt | | Guarantor | | Non- | | Eliminations | | Total HDS | |
Issuer | Subsidiaries | Guarantor |
| | Subsidiaries |
| | | | | | | | | | | |
Net Sales | | $ | — | | $ | 2,036 | | $ | 110 | | $ | — | | $ | 2,146 | |
Cost of sales | | — | | 1,448 | | 82 | | — | | 1,530 | |
Gross Profit | | — | | 588 | | 28 | | — | | 616 | |
Operating expenses: | | | | | | | | | | | |
Selling, general and administrative | | 16 | | 381 | | 21 | | — | | 418 | |
Depreciation and amortization | | 3 | | 81 | | — | | — | | 84 | |
Total operating expenses | | 19 | | 462 | | 21 | | — | | 502 | |
Operating Income (Loss) | | (19 | ) | 126 | | 7 | | — | | 114 | |
Interest expense | | 178 | | 75 | | 1 | | (89 | ) | 165 | |
Interest (income) | | (75 | ) | (1 | ) | (13 | ) | 89 | | — | |
Net (earnings) loss of equity affiliates | | (71 | ) | — | | — | | 71 | | — | |
Income (Loss) From Continuing Operations Before Provision (Benefit) for Income Taxes | | (51 | ) | 52 | | 19 | | (71 | ) | (51 | ) |
Provision (benefit) for income taxes | | 3 | | (3 | ) | 2 | | — | | 2 | |
Income (Loss) from Continuing Operations | | (54 | ) | 55 | | 17 | | (71 | ) | (53 | ) |
Income (loss) from discontinued operations, net of tax | | 4 | | (1 | ) | — | | — | | 3 | |
Net Income (Loss) | | $ | (50 | ) | $ | 54 | | $ | 17 | | $ | (71 | ) | $ | (50 | ) |
Other comprehensive income — foreign currency translation adjustment | | — | | — | | — | | — | | — | |
Total Comprehensive Income (Loss) | | $ | (50 | ) | $ | 54 | | $ | 17 | | $ | (71 | ) | $ | (50 | ) |
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| | Nine Months Ended November 3, 2013 | |
| | Debt | | Guarantor | | Non- | | Eliminations | | Total HDS | |
Issuer | Subsidiaries | Guarantor |
| | Subsidiaries |
| | | | | | | | | | | |
Net Sales | | $ | — | | $ | 6,268 | | $ | 355 | | $ | (1 | ) | $ | 6,622 | |
Cost of sales | | — | | 4,429 | | 266 | | — | | 4,695 | |
Gross Profit | | — | | 1,839 | | 89 | | (1 | ) | 1,927 | |
Operating expenses: | | | | | | | | | | | |
Selling, general and administrative | | 56 | | 1,216 | | 65 | | (1 | ) | 1,336 | |
Depreciation and amortization | | 12 | | 167 | | 2 | | — | | 181 | |
Total operating expenses | | 68 | | 1,383 | | 67 | | (1 | ) | 1,517 | |
Operating Income (Loss) | | (68 | ) | 456 | | 22 | | — | | 410 | |
Interest expense | | 410 | | 223 | | 1 | | (225 | ) | 409 | |
Interest (income) | | (222 | ) | (2 | ) | (1 | ) | 225 | | — | |
Net (earnings) loss of equity affiliates | | (333 | ) | — | | — | | 333 | | — | |
Loss on extinguishment & modification of debt | | 87 | | — | | — | | — | | 87 | |
Other (income) expense, net | | 20 | | — | | — | | — | | 20 | |
Income (Loss) From Continuing Operations Before Provision (Benefit) for Income Taxes | | (30 | ) | 235 | | 22 | | (333 | ) | (106 | ) |
Provision (benefit) for income taxes | | 122 | | (79 | ) | 3 | | — | | 46 | |
Income (Loss) from Continuing Operations | | (152 | ) | 314 | | 19 | | (333 | ) | (152 | ) |
Income (loss) from discontinued operations, net of tax | | — | | — | | — | | — | | — | |
Net Income (Loss) | | $ | (152 | ) | $ | 314 | | $ | 19 | | (333 | ) | $ | (152 | ) |
Other comprehensive income (loss) — foreign currency translation adjustment | | (4 | ) | — | | (4 | ) | 4 | | (4 | ) |
Total Comprehensive Income (Loss) | | $ | (156 | ) | $ | 314 | | $ | 15 | | $ | (329 | ) | $ | (156 | ) |
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| | Nine Months Ended October 28, 2012 | |
| | Debt | | Guarantor | | Non- | | Eliminations | | Total HDS | |
Issuer | Subsidiaries | Guarantor |
| | Subsidiaries |
| | | | | | | | | | | |
Net Sales | | $ | — | | $ | 5,726 | | $ | 315 | | $ | — | | $ | 6,041 | |
Cost of sales | | — | | 4,075 | | 233 | | — | | 4,308 | |
Gross Profit | | — | | 1,651 | | 82 | | — | | 1,733 | |
Operating expenses: | | | | | | | | | | | |
Selling, general and administrative | | 52 | | 1,107 | | 64 | | — | | 1,223 | |
Depreciation and amortization | | 10 | | 239 | | 1 | | — | | 250 | |
Total operating expenses | | 62 | | 1,346 | | 65 | | — | | 1,473 | |
Operating Income (Loss) | | (62 | ) | 305 | | 17 | | — | | 260 | |
Interest expense | | 545 | | 225 | | 1 | | (282 | ) | 489 | |
Interest (income) | | (225 | ) | (3 | ) | (54 | ) | 282 | | — | |
Net (earnings) loss of equity affiliates | | (143 | ) | — | | — | | 143 | | — | |
Loss on extinguishment & modification of debt | | 220 | | — | | — | | — | | 220 | |
Income (Loss) From Continuing Operations Before Provision (Benefit) for Income Taxes | | (459 | ) | 83 | | 70 | | (143 | ) | (449 | ) |
Provision (benefit) for income taxes | | 19 | | (6 | ) | 23 | | — | | 36 | |
Income (Loss) from Continuing Operations | | (478 | ) | 89 | | 47 | | (143 | ) | (485 | ) |
Income (loss) from discontinued operations, net of tax | | 12 | | 7 | | — | | — | | 19 | |
Net Income (Loss) | | $ | (466 | ) | $ | 96 | | $ | 47 | | $ | (143 | ) | $ | (466 | ) |
Other comprehensive income — foreign currency translation adjustment | | — | | — | | — | | — | | — | |
Total Comprehensive Income (Loss) | | $ | (466 | ) | $ | 96 | | $ | 47 | | $ | (143 | ) | $ | (466 | ) |
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CONDENSED CONSOLIDATING BALANCE SHEETS |
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| | As of November 3, 2013 | |
| | Debt | | Guarantor | | Non- | | Eliminations | | Total HDS | |
Issuer | Subsidiaries | Guarantor |
| | Subsidiaries |
ASSETS | | | | | | | | | | | |
Current assets: | | | | | | | | | | | |
Cash and cash equivalents | | $ | 63 | | $ | 17 | | $ | 40 | | $ | — | | $ | 120 | |
Receivables, net | | 6 | | 1,129 | | 89 | | — | | 1,224 | |
Inventories | | — | | 1,014 | | 56 | | — | | 1,070 | |
Deferred tax asset | | — | | 48 | | 2 | | (48 | ) | 2 | |
Intercompany receivable | | — | | 2 | | — | | (2 | ) | — | |
Other current assets | | 12 | | 26 | | 3 | | — | | 41 | |
Total current assets | | 81 | | 2,236 | | 190 | | (50 | ) | 2,457 | |
Property and equipment, net | | 64 | | 335 | | 5 | | — | | 404 | |
Goodwill | | — | | 3,133 | | 6 | | — | | 3,139 | |
Intangible assets, net | | — | | 368 | | 4 | | — | | 372 | |
Deferred tax asset | | 53 | | — | | 6 | | (53 | ) | 6 | |
Investment in subsidiaries | | 2,919 | | — | | — | | (2,919 | ) | — | |
Intercompany notes receivable | | 2,774 | | 591 | | — | | (3,365 | ) | — | |
Other assets | | 135 | | 5 | | — | | — | | 140 | |
Total assets | | $ | 6,026 | | $ | 6,668 | | $ | 211 | | $ | (6,387 | ) | $ | 6,518 | |
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LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | |
Accounts payable | | $ | 15 | | $ | 747 | | $ | 47 | | $ | — | | $ | 809 | |
Accrued compensation and benefits | | 36 | | 78 | | 5 | | — | | 119 | |
Current installments of long-term debt | | 10 | | — | | — | | — | | 10 | |
Deferred tax liabilities | | 49 | | — | | — | | (48 | ) | 1 | |
Intercompany payable | | — | | — | | 2 | | (2 | ) | — | |
Other current liabilities | | 51 | | 107 | | 14 | | — | | 172 | |
Total current liabilities | | 161 | | 932 | | 68 | | (50 | ) | 1,111 | |
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Long-term debt, excluding current installments | | 5,656 | | — | | — | | — | | 5,656 | |
Deferred tax liabilities | | — | | 150 | | — | | (53 | ) | 97 | |
Intercompany notes payable | | 591 | | 2,774 | | — | | (3,365 | ) | — | |
Other liabilities | | 316 | | 29 | | 7 | | — | | 352 | |
Total liabilities | | 6,724 | | 3,885 | | 75 | | (3,468 | ) | 7,216 | |
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Stockholder’s equity (deficit) | | (698 | ) | 2,783 | | 136 | | (2,919 | ) | (698 | ) |
Total liabilities and stockholder’s equity (deficit) | | $ | 6,026 | | $ | 6,668 | | $ | 211 | | $ | (6,387 | ) | $ | 6,518 | |
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| | As of February 3, 2013 | |
| | Debt | | Guarantor | | Non- | | Eliminations | | Total HDS | |
Issuer | Subsidiaries | Guarantor |
| | Subsidiaries |
ASSETS | | | | | | | | | | | |
Current assets: | | | | | | | | | | | |
Cash and cash equivalents | | $ | 91 | | $ | 15 | | $ | 35 | | $ | — | | $ | 141 | |
Cash equivalents restricted for debt redemption | | 936 | | — | | — | | — | | 936 | |
Receivables, net | | 4 | | 937 | | 67 | | — | | 1,008 | |
Inventories | | — | | 928 | | 59 | | — | | 987 | |
Deferred tax asset | | — | | 48 | | 1 | | (7 | ) | 42 | |
Intercompany receivable | | — | | 1 | | — | | (1 | ) | — | |
Other current assets | | 9 | | 37 | | 3 | | — | | 49 | |
Total current assets | | 1,040 | | 1,966 | | 165 | | (8 | ) | 3,163 | |
Property and equipment, net | | 66 | | 323 | | 6 | | — | | 395 | |
Goodwill | | — | | 3,132 | | 6 | | — | | 3,138 | |
Intangible assets, net | | — | | 469 | | 4 | | — | | 473 | |
Deferred tax asset | | 48 | | — | | 6 | | (48 | ) | 6 | |
Investment in subsidiaries | | 2,854 | | — | | — | | (2,854 | ) | — | |
Intercompany notes receivable | | 2,774 | | 634 | | — | | (3,408 | ) | — | |
Other assets | | 153 | | 6 | | — | | — | | 159 | |
Total assets | | $ | 6,935 | | $ | 6,530 | | $ | 187 | | $ | (6,318 | ) | $ | 7,334 | |
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LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT) | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | |
Accounts payable | | $ | 14 | | $ | 638 | | $ | 41 | | $ | — | | $ | 693 | |
Accrued compensation and benefits | | 46 | | 108 | | 6 | | — | | 160 | |
Current installments of long-term debt | | 899 | | — | | — | | — | | 899 | |
Deferred tax liabilities | | 7 | | — | | — | | (7 | ) | — | |
Intercompany payable | | — | | — | | 1 | | (1 | ) | — | |
Other current liabilities | | 183 | | 98 | | 10 | | — | | 291 | |
Total current liabilities | | 1,149 | | 844 | | 58 | | (8 | ) | 2,043 | |
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Long-term debt, excluding current installments | | 6,430 | | — | | — | | — | | 6,430 | |
Deferred tax liabilities | | — | | 152 | | — | | (48 | ) | 104 | |
Intercompany notes payable | | 634 | | 2,774 | | — | | (3,408 | ) | — | |
Other liabilities | | 313 | | 28 | | 7 | | — | | 348 | |
Total liabilities | | 8,526 | | 3,798 | | 65 | | (3,464 | ) | 8,925 | |
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Stockholder’s equity (deficit) | | (1,591 | ) | 2,732 | | 122 | | (2,854 | ) | (1,591 | ) |
Total liabilities and stockholder’s equity (deficit) | | $ | 6,935 | | $ | 6,530 | | $ | 187 | | $ | (6,318 | ) | $ | 7,334 | |
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CONDENSED CONSOLIDATING CASH FLOW STATEMENTS |
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| | Nine Months Ended November 3, 2013 | |
| | Debt | | Guarantor | | Non- | | Eliminations | | Total HDS | |
Issuer | Subsidiaries | Guarantor |
| | Subsidiaries |
Net cash flows from operating activities | | $ | (549 | ) | $ | 31 | | $ | 8 | | $ | — | | $ | (510 | ) |
Cash flows from investing activities | | | | | | | | | | | |
Capital expenditures | | (16 | ) | (79 | ) | (1 | ) | — | | (96 | ) |
Proceeds from sale of property and equipment | | — | | 6 | | — | | — | | 6 | |
Settlement of acquisition of a business | | — | | 2 | | — | | — | | 2 | |
Proceeds from sale of investments | | 936 | | — | | — | | — | | 936 | |
(Investments in) return of capital of equity affiliates | | 2 | | — | | — | | (2 | ) | — | |
Proceeds from (payments of) intercompany notes | | — | | 44 | | — | | (44 | ) | — | |
Net cash flows from investing activities | | 922 | | (27 | ) | (1 | ) | (46 | ) | 848 | |
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Cash flows from financing activities | | | | | | | | | | | |
Equity contribution (return of capital) | | 1,039 | | (2 | ) | — | | 2 | | 1,039 | |
Borrowings (repayments) of intercompany notes | | (44 | ) | — | | — | | 44 | | — | |
Borrowings of long-term debt | | 79 | | — | | — | | — | | 79 | |
Repayments of long-term debt | | (1,621 | ) | — | | — | | — | | (1,621 | ) |
Borrowings on long-term revolver | | 736 | | — | | — | | — | | 736 | |
Repayments of long-term revolver | | (556 | ) | — | | — | | — | | (556 | ) |
Debt issuance and modification fees | | (34 | ) | — | | — | | — | | (34 | ) |
Net cash flows from financing activities | | (401 | ) | (2 | ) | — | | 46 | | (357 | ) |
Effect of exchange rates on cash | | — | | — | | (2 | ) | — | | (2 | ) |
Net increase (decrease) in cash & cash equivalents | | $ | (28 | ) | $ | 2 | | $ | 5 | | $ | — | | $ | (21 | ) |
Cash and cash equivalents at beginning of period | | 91 | | 15 | | 35 | | — | | 141 | |
Cash and cash equivalents at end of period | | $ | 63 | | $ | 17 | | $ | 40 | | $ | — | | $ | 120 | |
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| | Nine Months Ended October 28, 2012 | |
| | Parent | | Guarantor | | Non- | | Eliminations | | Total | |
Issuer | Subsidiaries | Guarantor |
| | Subsidiaries |
Net cash flows from operating activities | | $ | (368 | ) | $ | 19 | | $ | 72 | | $ | (50 | ) | $ | (327 | ) |
Cash flows from investing activities | | | | | | | | | | | |
Capital expenditures | | (19 | ) | (59 | ) | (2 | ) | — | | (80 | ) |
Proceeds from sale of property and equipment | | — | | 5 | | — | | — | | 5 | |
Purchase of debt investments | | — | | — | | (1 | ) | 1 | | — | |
Purchase of other investments | | (985 | ) | — | | — | | — | | (985 | ) |
Proceeds from sale of a business | | 480 | | — | | 1 | | — | | 481 | |
Payment for a business acquired | | — | | (196 | ) | — | | — | | (196 | ) |
Proceeds from (payments of) intercompany notes | | — | | 33 | | — | | (33 | ) | — | |
(Investments in) return of capital of equity affiliates | | (169 | ) | — | | — | | 169 | | — | |
Other investing activities | | — | | — | | (2 | ) | — | | (2 | ) |
Net cash flows from investing activities | | (693 | ) | (217 | ) | (4 | ) | 137 | | (777 | ) |
Cash flows from financing activities | | | | | | | | | | | |
Dividend payment | | — | | — | | (50 | ) | 50 | | — | |
Equity contribution (return of capital) | | — | | 204 | | (35 | ) | (169 | ) | — | |
Borrowings (repayments) of intercompany notes | | (33 | ) | — | | — | | 33 | | — | |
Borrowings of long-term debt | | 4,140 | | — | | — | | — | | 4,140 | |
Repayments of long-term debt | | (3,289 | ) | — | | — | | (1 | ) | (3,290 | ) |
Borrowings on long-term revolver | | 1,192 | | — | | — | | — | | 1,192 | |
Repayments of long-term revolver | | (797 | ) | — | | — | | — | | (797 | ) |
Debt issuance and modification fees | | (95 | ) | — | | — | | — | | (95 | ) |
Other financing activities | | 1 | | — | | — | | — | | 1 | |
Net cash flows from financing activities | | 1,119 | | 204 | | (85 | ) | (87 | ) | 1,151 | |
Net increase (decrease) in cash & cash equivalents | | $ | 58 | | $ | 6 | | $ | (17 | ) | $ | — | | $ | 47 | |
Cash and cash equivalents at beginning of period | | 49 | | 12 | | 50 | | — | | 111 | |
Cash and cash equivalents at end of period | | $ | 107 | | $ | 18 | | $ | 33 | | $ | — | | $ | 158 | |
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