Attached files
| file | filename |
|---|---|
| 8-K - 8-K - ANIXTER INTERNATIONAL INC | psacquisitionclosing-8xkbo.htm |
| EX-99.3 - EXHIBIT 99.3 - ANIXTER INTERNATIONAL INC | exhibit993-axeproformafina.htm |
| EX-23.1 - EXHIBIT 23.1 - ANIXTER INTERNATIONAL INC | exhibit231-consentofpwc.htm |
| EX-99.2 - EXHIBIT 99.2 - ANIXTER INTERNATIONAL INC | exhibit992-proformaebitda.htm |
| EX-99.5 - EXHIBIT 99.5 - ANIXTER INTERNATIONAL INC | exhibit995-psauditedfinanc.htm |
| EX-99.1 - EXHIBIT 99.1 - ANIXTER INTERNATIONAL INC | exhibit991-psacquisitioncl.htm |
Exhibit 99.4
INDEX
HD Supply Power Solutions Business Unaudited Combined Financial Statements
Page | ||
Combined Statements of Operations and Comprehensive Income for the three and six months ended August 2, 2015 and August 3, 2014 (unaudited) | 1 | |
Combined Balance Sheets as of August 2, 2015 and February 1, 2015 (unaudited) | 2 | |
Combined Statements of Owner's Equity for the six months ended August 2, 2015 and August 3, 2014 (unaudited) | 3 | |
Combined Statements of Cash Flows for the six months ended August 2, 2015 and August 3, 2014 (unaudited) | 4 | |
Notes to Combined Financial Statements (unaudited) | 5 | |
HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
COMBINED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
Amounts in thousands, unaudited
Three Months Ended | Six Months Ended | ||||||||||||||
August 2, 2015 | August 3, 2014 | August 2, 2015 | August 3, 2014 | ||||||||||||
Net sales | $ | 525,263 | $ | 487,413 | $ | 1,025,590 | $ | 943,591 | |||||||
Cost of sales | 447,762 | 411,573 | 873,182 | 796,835 | |||||||||||
Gross Profit | 77,501 | 75,840 | 152,408 | 146,756 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 57,978 | 56,260 | 115,469 | 112,134 | |||||||||||
Depreciation and amortization | 6,542 | 6,648 | 13,277 | 13,050 | |||||||||||
Restructuring | — | 1,036 | — | 1,225 | |||||||||||
Total operating expenses | 64,520 | 63,944 | 128,746 | 126,409 | |||||||||||
Operating Income | 12,981 | 11,896 | 23,662 | 20,347 | |||||||||||
Interest (income) expense, net | (56 | ) | (109 | ) | (99 | ) | (231 | ) | |||||||
Other (income) expense, net | (25 | ) | 59 | (100 | ) | 30 | |||||||||
Income Before Provision for Income Taxes | 13,062 | 11,946 | 23,861 | 20,548 | |||||||||||
Provision for income taxes | 1,929 | 1,823 | 3,251 | 3,126 | |||||||||||
Net Income | $ | 11,133 | $ | 10,123 | $ | 20,610 | 17,422 | ||||||||
Other comprehensive income (loss) - foreign currency translation adjustment | (5,483 | ) | 890 | (2,205 | ) | 2,189 | |||||||||
Total Comprehensive Income | $ | 5,650 | $ | 11,013 | $ | 18,405 | $ | 19,611 | |||||||
The accompanying notes are an integral part of these combined financial statements.
1
HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
COMBINED BALANCE SHEETS
Amounts in thousands, unaudited
August 2, 2015 | February 1, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 31,992 | $ | 23,656 | |||
Receivables, less allowance for doubtful accounts of $947 and $1,438 | 246,102 | 231,933 | |||||
Receivables from affiliates | 115 | 69 | |||||
Inventories | 337,880 | 310,948 | |||||
Deferred tax assets | 431 | 548 | |||||
Other current assets | 3,756 | 4,272 | |||||
Total current assets | 620,276 | 571,426 | |||||
Property and equipment, net | 29,641 | 32,903 | |||||
Goodwill | 210,440 | 210,820 | |||||
Intangible assets, net | 45,852 | 55,083 | |||||
Other assets | 4,317 | 4,329 | |||||
Total assets | $ | 910,526 | $ | 874,561 | |||
LIABILITIES AND OWNER’S EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 232,689 | $ | 216,208 | |||
Accrued compensation and benefits | 16,561 | 23,624 | |||||
Payables to affiliates | 86 | 205 | |||||
Other current liabilities | 22,613 | 21,687 | |||||
Total current liabilities | 271,949 | 261,724 | |||||
Other liabilities | 8,415 | 8,922 | |||||
Total liabilities | 280,364 | 270,646 | |||||
Owner’s Equity: | |||||||
Owner’s net investment | 647,290 | 618,838 | |||||
Accumulated Other Comprehensive Loss - foreign currency | (17,128 | ) | (14,923 | ) | |||
Total owner’s equity | 630,162 | 603,915 | |||||
Total liabilities and owner’s equity | $ | 910,526 | $ | 874,561 | |||
The accompanying notes are an integral part of these combined financial statements
2
HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
COMBINED STATEMENTS OF OWNER'S EQUITY
Amounts in thousands, unaudited
Owner's Net Investment | Accumulated Other Comprehensive Income (Loss) | Total Equity | |||||||||
Owner's equity at February 2, 2014 | $ | 633,895 | $ | (5,734 | ) | $ | 628,161 | ||||
Net Income | 17,422 | 17,422 | |||||||||
Net Distribution to Parent | (35,362 | ) | (35,362 | ) | |||||||
Other comprehensive income: | |||||||||||
Foreign currency translation adjustment | 2,189 | 2,189 | |||||||||
Owner's equity at August 3,2014 | $ | 615,955 | $ | (3,545 | ) | $ | 612,410 | ||||
Owner's equity at February 1, 2015 | $ | 618,838 | $ | (14,923 | ) | $ | 603,915 | ||||
Net Income | 20,610 | 20,610 | |||||||||
Net Contribution from Parent | 7,842 | 7,842 | |||||||||
Other comprehensive income: | |||||||||||
Foreign currency translation adjustment | (2,205 | ) | (2,205 | ) | |||||||
Owner's equity at August 2, 2015 | $ | 647,290 | $ | (17,128 | ) | $ | 630,162 | ||||
The accompanying notes are an integral part of these combined financial statements.
3
HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
COMBINED STATEMENTS OF CASH FLOWS
Amounts in thousands, unaudited
Six Months Ended | |||||||
August 2, 2015 | August 3, 2014 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 20,610 | $ | 17,423 | |||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 13,277 | 13,050 | |||||
Provision for uncollectibles | 661 | 273 | |||||
Non-cash allocation charges from parent | 5,323 | 3,423 | |||||
Stock-based compensation expense | 1,214 | 1,180 | |||||
Deferred income taxes | 203 | 295 | |||||
Other non-cash adjustments | 253 | 126 | |||||
Changes in assets and liabilities: | |||||||
Increase in receivables | (15,775 | ) | (6,245 | ) | |||
Increase in inventories | (27,625 | ) | (23,889 | ) | |||
Decrease (Increase) in other current assets | 507 | (252 | ) | ||||
(Increase) decrease in other assets | (93 | ) | 69 | ||||
Increase in accounts payable | 17,130 | 14,338 | |||||
Change in net receivables from /payables to affiliates | (165 | ) | 129 | ||||
(Decrease) increase in accrued liabilities | (5,920 | ) | 5,463 | ||||
Increase in other long-term liabilities | 113 | 937 | |||||
Net cash provided by operating activities | 9,713 | 26,320 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital expenditures | (1,752 | ) | (2,572 | ) | |||
Net cash used in investing activities | (1,752 | ) | (2,572 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Net cash contribution from (distribution to) parent | 1,408 | (40,071 | ) | ||||
Net cash provided by (used in) financing activities | 1,408 | (40,071 | ) | ||||
Effect of exchange rates on cash and cash equivalents | (1,033 | ) | 1,213 | ||||
Increase (decrease) in cash and cash equivalents | 8,336 | (15,110 | ) | ||||
Cash and cash equivalents at beginning of period | 23,656 | 31,743 | |||||
Cash and cash equivalents at end of period | $ | 31,992 | $ | 16,633 | |||
The accompanying notes are an integral part of these combined financial statements.
4
HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Dollars in thousands, unaudited
NOTE 1 - BASIS OF PRESENTATION & DESCRIPTION OF BUSINESS
Basis of Presentation
The accompanying combined financial statements present the results of operations, financial position and cash flows of HD Supply Power Solutions, Ltd., HDS Power Solutions, Inc. (MI), and a division of HD Supply Canada, Inc. (combined “HD Supply Power Solutions Business,” or the “Company,” or “Power Solutions”), each wholly- owned, indirect subsidiaries of HD Supply, Inc. (“HD Supply” or “Parent”).
The preparation of these financial statements includes the use of “push down” accounting procedures wherein certain assets, liabilities and expenses historically recorded or incurred at the Parent level, which related to or were incurred on behalf of the Company and have been identified and allocated or pushed down as appropriate to reflect the financial results of the Company for the periods presented. Assets include items such as rebate receivables; liabilities include items such as employee benefit accruals and insurance accruals; expenses include services for items such as human resources, tax, accounting, information technology, legal, internal audit, operations and treasury. Allocations were made based on specific identification where practicable. In instances where specific identification was deemed not practicable, allocations were made based on allocation-specific, appropriate metrics including, but not limited to, revenues, earnings before interest, taxes, depreciation and amortization (“EBITDA”), branch count and employee count. Management believes the methodology applied in the allocation of these costs is reasonable. HD Supply’s net investment in the Company is shown as owner’s net investment in the Combined Balance Sheets.
No third-party debt has been allocated to the Company from HD Supply. Interest expense included in these financial statements reflects the terms of the intercompany debt agreement between HD Supply Holdings, LLC, a wholly owned subsidiary of HD Supply, Inc., and the Company. These terms may not be indicative of terms reached on a third-party basis. These combined financial statements may not necessarily be indicative of the cost structure or results of operations that would have existed if the Company operated as a stand-alone, independent business. Further, a change in the parent company’s size and cost structure may result in additional or fewer expenses.
In management’s opinion, the unaudited financial information for the interim periods presented includes all adjustments necessary for a fair statement of the results of operations, financial position, and cash flows. All adjustments are of a normal recurring nature unless otherwise disclosed. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year. For a more complete discussion of the Company’s significant accounting policies and other information, you should read this report in conjunction with its annual report for the year ended February 1, 2015, which includes all disclosures required by generally accepted accounting principles (“GAAP”).
Description of Business
Power Solutions distributes electrical transmission and distribution products, power plant MRO supplies and smart grid products, and arranges materials management and procurement outsourcing for the power generation and distribution industries. The Company serves four distinct customer end markets: Investor-Owned Utilities (“IOU”), Public Power, Construction, and Industrial. Power Solutions serves electric power plant customers primarily through a bid based model and, to a lesser extent, sells MRO products through print catalogs. Products include conductors such as wire and cable, transformers, overhead transmission and distribution hardware, switches, protective devices and underground distribution, connectors used in the construction or maintenance and repair of electricity transmission and substation distribution infrastructure, and electrical wire and cable, switchgear, supplies, lighting and conduit used in non-residential and residential construction. Power Solutions also provides materials management and procurement outsourcing services. Power Solutions’ capabilities allow the Company to integrate with its customers and perform part of their sourcing and procurement function. The Company operates through a network of 125 branches in the United States across 31 states and 4 branches in Canada in 4 provinces.
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HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Dollars in thousands, unaudited
Principles of Combination
The combined financial statements present the results of operations, financial position and cash flows of Power Solutions. All material intercompany balances and transactions have been eliminated.
Fiscal Year
HD Supply Power Solutions' fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31. Fiscal years ended January 31, 2016 (“fiscal 2015”) and February 1, 2015 (“fiscal 2014”) both include 52 weeks. The three months ended August 2, 2015 (“second quarter 2015”) and August 3, 2014 (“second quarter 2014”) both include 13 weeks. The six months ended August 2, 2015 and August 3, 2014 both include 26 weeks.
Legal Entity & Geographic Information
Power Solutions is the combination of HD Supply’s Utilities and Electrical businesses. These businesses, operating as one segment, are held in three legal entities: HD Supply Power Solutions, Ltd., HDS Power Solutions, Inc. (MI), and a division of HD Supply Canada, Inc. Effective February 4, 2013 (the first day of fiscal 2013), through a series of transactions, HD Supply Electrical, Ltd. was merged with HD Supply Utilities, Ltd., which was subsequently renamed HD Supply Power Solutions, Ltd.
Power Solutions operates in the United States and Canada. Net sales for Power Solutions outside the United States, primarily Canada, were $53,573 and $57,843 in the three months ended August 2, 2015 and August 3, 2014, respectively, and $96,936 and $112,628 in the six months ended August 2, 2015 and August 3, 2014, respectively. Long-lived assets of Power Solutions in Canada were $14,300 and $14,966 as of August 2, 2015 and February 1, 2015, respectively.
Estimates
Management has made a number of estimates and assumptions relating to the reporting of certain assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing the elements of these financial statements in conformity with GAAP. Actual results could differ from these estimates. Also, as discussed above, these financial statements include allocations and estimates that are not necessarily indicative of the costs and expenses that would have resulted if the Company had been operated as a separate entity or the future results of the Company.
Self-Insurance
HD Supply has a high deductible insurance program for most losses related to general liability, product liability, environmental liability, automobile liability, workers’ compensation, and is self-insured for medical claims and certain legal claims. The expected ultimate cost for claims incurred as of the balance sheet date is not discounted and is recognized as a liability in the accompanying Combined Balance Sheets. HD Supply's self-insurance losses for claims filed and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using loss development factors and actuarial assumptions followed in the insurance industry and historical loss development experience. These self-insurance programs have been allocated to the Company using reasonable methodologies such as sales, payroll and headcount information. At August 2, 2015 and February 1, 2015, the Company's self-insurance liabilities totaled $8,051 and $7,293, respectively.
NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
Interest - imputation of interest - In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-03, “Interest - Imputation of Interest, Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). The amended guidance requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. The amended guidance is limited to the presentation of
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HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Dollars in thousands, unaudited
debt issuance costs. ASU 2015-03 is effective for fiscal years, and interim periods, beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2015-03 is not expected to have a material impact on the Company’s financial position or results of operations.
Discontinued operations - In April 2014, the FASB issued ASU No. 2014-08, “Reporting discontinued operations and disclosure of disposals of components of an entity” (“ASU 2014-08”). The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. During the first quarter of fiscal 2015, the Company adopted ASU 2014-08. The impact on the Company of this adoption will depend on the nature and size of future disposals, if any, of a component of the Company.
Revenue recognition - In May 2014, the FASB issued ASU No. 2014-09, “Revenue from contracts with customers” (“ASU 2014-09”). The amended guidance outlines a single comprehensive revenue model for entities to use in accounting for revenue arising from contracts with customers. The guidance supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. In July 2015, the FASB decided on a one-year delay in the effective date of ASU 2014-09, to be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and a permission to early adopt for interim and annual periods beginning after December 15, 2016. The Company is currently evaluating the impact of adopting ASU 2014-09.
NOTE 3 - RELATED PARTY
HD Supply subsidiaries - The Company entered into transactions with HD Supply's subsidiaries for the sale of inventory for the financial statement periods presented. Sales to HD Supply's subsidiaries were approximately $312 and $261 in the three months ended August 2, 2015 and August 3, 2014, respectively, and $602 and $477 in the six months ended August 2, 2015 and August 3, 2014, respectively. Purchases from HD Supply’s subsidiaries were approximately $343 and $250 in the three months ended August 2, 2015 and August 3, 2014, respectively, and $763 and $535 in the six months ended August 2, 2015 and August 3, 2014, respectively. Sales with HD Supply’s subsidiaries are generally recorded at cost plus five percent. These amounts are reported in Net sales and Cost of sales, as the inventory is relieved through sales, in the Combined Statements of Operations.
Amounts due to HD Supply's subsidiaries were approximately $86 at August 2, 2015 and $205 at February 1, 2015. Amounts due from HD Supply’s subsidiaries were approximately $115 at August 2, 2015 and $69 at February 1, 2015. Such amounts are included in the Combined Balance Sheets.
HD Supply - The Company has significant transactions with HD Supply through HD Supply's centralized approach to managing the cash and the financing of the Company's business. Under HD Supply's centralized cash management system, cash requirements of the Company are provided directly by HD Supply, and cash generated by the operations of the Company are remitted directly to HD Supply. The resulting receivables and payables are then periodically contributed from or distributed to HD Supply as changes to owner’s equity. Additionally, during the six months ended August 2, 2015 and August 3, 2014 net non-cash contributions from HD Supply of $1,111 and $1,286, respectively, are included as changes to owner’s equity.
HD Supply affiliates - The Company purchased product from affiliates of HD Supply’s owners (“Equity Sponsors”) and Board of Directors for approximately $9,591 and $11,506 in the three months ended August 2, 2015 and August 3, 2014, respectively, and $21,161 and $23,561 in the six months ended August 2, 2015 and August 3, 2014, respectively. The Company believes these transactions were conducted at prices that an unrelated third party would pay.
7
HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Dollars in thousands, unaudited
Agile Sourcing Partners - The Company holds a 35% ownership in Agile Sourcing Partners (“Agile”). Agile provides supply chain and sourcing services for electric and gas utilities, suppliers and contractors, primarily in California, Nevada, Virginia and Maryland. Additional capabilities include logistics, product staging, cross docking, kitting, assembly, inspection, on site auditing, staffing, consulting, and project management. The Company accounts for its ownership in Agile under the equity method of accounting in accordance with ASC 323, Investments-Equity Method and Joint Ventures. The Company recorded its pro rata portion of earnings (losses) of Agile of approximately $25 and $(59) in the three months ended August 2, 2015 and August 3, 2014, respectively, and $100 and $(30) in the six months ended August 2, 2015 and August 3, 2014, respectively. The Agile investment was $2,147 at August 2, 2015 and $2,047 at February 1, 2015. Power Solutions sold product to Agile for approximately $5,163 and $2,819 in the three months ended August 2, 2015 and August 3, 2014, respectively, and $9,959 and $4,711 in the six months ended August 2, 2015 and August 3, 2014, respectively. The Company believes these transactions were conducted at prices that an unrelated third party would pay.
NOTE 4 - INCOME TAXES
For the three and six months ended August 2, 2015, the Company’s combined federal, state, and foreign effective tax rate for continuing operations is 14.6% and 13.5%, respectively. For both the three and six months ended August 3, 2014, the Company’s combined federal, state, and foreign effective tax rate for continuing operations is 15.2%. The income tax expense was mainly driven by income derived from foreign operations and the taxability of the partnership income for certain state jurisdictions. The Company’s US activity is conducted as a mixed structure consisting of a partnership and a corporation for income tax purposes. The Company’s US activities conducted within the corporation are included within the accompanying financial statements. For U.S. Federal and most state income taxes, a partnership is not subject to income tax. Instead, all of the Company’s partnership U.S. income tax activity flows into and is included in HD Supply’s U.S. consolidated federal income tax return. The Company’s partnership state taxable income, with the exception of Texas and Tennessee, flows into HD Supply’s U.S. state income tax filings. Texas and Tennessee subjects partnerships to income tax. Therefore, Texas and Tennessee partnership state income tax expense and related state income tax balances are included in the accompanying combined financial statements.
The Company’s Canada activity is included as a division in HD Supply’s Canada tax return. As a result, Canadian income tax expense and related income tax balances included in the accompanying combined financial statements have been calculated as if the Company operated as a separate entity.
Cash paid for income taxes on behalf of the Company was $2,561 and $2,612 in the six months ended August 2, 2015 and August 3, 2014, respectively. These payments are included in the contribution to and distribution from the Company in the changes in owner’s equity.
As of February 1, 2015, the Company’s unrecognized tax benefits were $2,164. During the three and six months ended August 2, 2015, the Company’s basis and interest related to unrecognized tax benefits increased by $203 and $362, respectively. The Company’s ending accrual for interest and penalties related to unrecognized tax benefits as of February 1, 2015 was $470 and increased to $589 as of August 2, 2015.
8
HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Dollars in thousands, unaudited
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Encumbered Assets
Substantially all of the Company’s assets serve as collateral for HD Supply’s secured credit facilities. The Company is a guarantor of HD Supply’s secured credit facilities. In addition, the US entities of the Company are guarantors of HD Supply’s long-term notes.
Build-to-Suit Lease
In 2014, the Company entered into a build-to-suit lease arrangement for the construction of an approximately 15,000 square foot warehousing and office facility on an approximately 5 acre site located in Andrews, Texas. Due to the Company’s involvement with the construction of the facility, the Company was deemed to be the owner of the facility for accounting purposes during the construction phase. During the second quarter of fiscal 2015, construction was completed and the Company entered into a lease of the facility and land for an initial period of 10 years. In accordance with Accounting Standards Codification (“ASC”) 840, Leases, the lease is classified as an operating lease. The sale-leaseback transaction resulted in a gain of approximately $224, which will be amortized into rent expense over the life of the lease.
Legal Matters
The Company is involved in various legal proceedings arising in the normal course of its business. In management’s opinion, none of the proceedings are material in relation to the operations, cash flows, or financial position of Power Solutions and the Company has adequate reserves to cover its estimated probable loss exposure.
The Company establishes reserves for litigation and similar matters when those matters present loss contingencies that it determines to be both probable and reasonably estimable in accordance with ASC 450, Contingencies. In the opinion of management, based on current knowledge, all reasonably estimable and probable matters are believed to be adequately reserved for or covered by insurance and are not expected to have a material adverse effect on the Company’s combined financial condition, results of operations or cash flows. For all other matters, management believes the possibility of losses from such matters is not probable, the potential loss from such matters is not reasonably estimable, or such matters are of such kind or involve such amounts that would not have a material adverse effect on the financial position, results of operations or cash flows of the Company if disposed of unfavorably. There are no material matters that are reasonably possible and reasonably estimable, including matters that are probable and estimable but for which the amount that is reasonably possible is in excess of the amount that the Company has accrued for. If a material loss is probable or reasonably possible, and in either case estimable, the Company has considered it in the analysis and it is included in the discussion set forth above.
NOTE 6 - SUPPLEMENTAL BALANCE SHEET INFORMATION
Receivables
Receivables as of August 2, 2015 and February 1, 2015 consisted of the following:
August 2, 2015 | February 1, 2015 | ||||||
Trade receivables, net of allowance for doubtful accounts | $ | 232,271 | $ | 215,305 | |||
Vendor rebate receivables | 7,844 | 12,570 | |||||
Other receivables | 5,987 | 4,058 | |||||
Total receivables, net | $ | 246,102 | $ | 231,933 | |||
9
HD SUPPLY POWER SOLUTIONS BUSINESS
(A BUSINESS OF HD SUPPLY, INC.)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Dollars in thousands, unaudited
Other Current Liabilities
Other current liabilities as of August 2, 2015 and February 1, 2015 consisted of the following:
August 2, 2015 | February 1, 2015 | ||||||
Deferred revenue | $ | 12,059 | $ | 12,088 | |||
Accrued non-income taxes | 5,825 | 4,538 | |||||
Other | 4,729 | 5,061 | |||||
Total other current liabilities | $ | 22,613 | $ | 21,687 | |||
During fiscal 2014, the Company entered into an agreement for the provision of products to a customer for use in the customer’s construction projects. Due to the unpredictable timing of the construction projects, the customer prepaid for certain of the product prior to taking possession. The Company recognizes the revenue for these products when the customer is deemed to have taken possession of the product. The deferred revenue as of August 2, 2015 is expected to be fully recognized in the next twelve months.
NOTE 7 - SUBSEQUENT EVENTS
The Company has evaluated all subsequent event activity through October 5, 2015, the date these Financial Statements were made available to be issued.
10