Core & Main, Inc. [CNM] Filings

10-Q 1 cnm-20240728.htm 10-Q cnm-20240728

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 28, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from to

Commission File Number 001-40650

Core & Main, Inc.

(Exact name of registrant as specified in its charter)


Delaware						86-3149194
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

1830 Craig Park Court

St. Louis, Missouri 63146

(314) 432-4700

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common stock, par value $0.01 per share

CNM

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of August 30, 2024, there were 192,647,223 shares of the registrant’s Class A common stock, par value $0.01 per share, and 8,483,709 shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding.

Table of Contents


			PAGE
Cautionary Note Regarding Forward-Looking Statements			3
Part I - Financial Information
Item 1. Financial Statements (unaudited)			5
Condensed Consolidated Balance Sheets as of July 28, 2024 and January 28, 2024 (unaudited)			5
Condensed Consolidated Statements of Operations for the three and six month periods ended July 28, 2024 and July 30, 2023 (unaudited)			6
Condensed Consolidated Statements of Comprehensive Income for the three and six month periods ended July 28, 2024 and July 30, 2023 (unaudited)			7
Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six month periods ended July 28, 2024 and July 30, 2023 (unaudited)			8
Condensed Consolidated Statements of Cash Flows for the six month periods ended July 28, 2024 and July 30, 2023 (unaudited)			10
Notes to the Condensed Consolidated Financial Statements (unaudited)			11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures about Market Risk			37
Item 4. Controls and Procedures			38

Part II - Other Information
Item 1. Legal Proceedings			39
Item 1A. Risk Factors			39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			39
Item 3. Defaults Upon Senior Securities			39
Item 4. Mine Safety Disclosures			39
Item 5. Other Information			40
Item 6. Exhibits			41
Signatures			42

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include, without limitation, all statements other than statements of historical facts contained in this Quarterly Report, including statements relating to our intentions, beliefs, assumptions or current expectations concerning, among other things, our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding expected growth, future capital expenditures, capital allocation and debt service obligations, and the anticipated impact on our business.

Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or the negative versions of these words or other comparable terms.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be outside our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition, cash flows and the development of the market in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed under the captions “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 (the “2023 Annual Report on Form 10-K”) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

•declines, volatility and cyclicality in the U.S. residential and non-residential construction markets;

•slowdowns in municipal infrastructure spending and delays in appropriations of federal funds;

•our ability to competitively bid for municipal contracts;

•price fluctuations in our product costs;

•our ability to manage our inventory effectively, including during periods of supply chain disruptions;

•risks involved with acquisitions and other strategic transactions, including our ability to identify, acquire, close or integrate acquisition targets successfully;

•the fragmented and highly competitive markets in which we compete and consolidation within our industry;

•the development of alternatives to distributors of our products in the supply chain;

•our ability to hire, engage and retain key personnel, including sales representatives, qualified branch, district and regional managers and senior management;

•our ability to identify, develop and maintain relationships with a sufficient number of qualified suppliers and the potential that our exclusive or restrictive supplier distribution rights are terminated;

•the availability of freight;

•the ability of our customers to make payments on credit sales;

•changes in supplier rebates or other terms of our supplier agreements;

•our ability to identify and introduce new products and product lines effectively;

•the spread of, and response to public health crises and the inability to predict the ultimate impact on us;

•costs and potential liabilities or obligations imposed by environmental, health and safety laws and requirements;

•regulatory change and the costs of compliance with regulation;

•changes in stakeholder expectations in respect of environmental, social and governance (“ESG”) and sustainability practices;

•exposure to product liability, construction defect and warranty claims and other litigation and legal proceedings;

•potential harm to our reputation;

•difficulties with or interruptions of our fabrication services;

•safety and labor risks associated with the distribution of our products;

•interruptions in the proper functioning of the Company’s and our third-party service providers’ information technology systems, including from cybersecurity threats;

•impairment in the carrying value of goodwill, intangible assets or other long-lived assets;

•our ability to continue our customer relationships with short-term contracts;

•risks associated with exporting our products internationally;

•our ability to maintain effective internal controls over financial reporting and remediate any material weaknesses;

•our indebtedness and the potential that we may incur additional indebtedness that might restrict our operating flexibility;

•the limitations and restrictions in the agreements governing our indebtedness, the Amended and Restated Limited Partnership Agreement of Holdings, as amended, and the Tax Receivable Agreements (each as defined herein);

•increases in interest rates;

•changes in our credit ratings and outlook;

•our ability to generate the significant amount of cash needed to service our indebtedness;

•our organizational structure, including our payment obligations under the Tax Receivable Agreements, which may be significant;

•our ability to sustain an active, liquid trading market for our Class A common stock; and

•risks related to other factors discussed under “Risk Factors” in our 2023 Annual Report on Form 10-K.

You should read this Quarterly Report on Form 10-Q and our 2023 Annual Report on Form 10-K completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this Quarterly Report on Form 10-Q are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CORE & MAIN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Amounts in millions (except share and per share data), unaudited


	July 28, 2024		January 28, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	13	$	1
Receivables, net of allowance for credit losses of $18 and $12, respectively	1,294		973
Inventories	959		766
Prepaid expenses and other current assets	52		33
Total current assets	2,318		1,773
Property, plant and equipment, net	163		151
Operating lease right-of-use assets	206		192
Intangible assets, net	954		784
Goodwill	1,843		1,561
Deferred income taxes	559		542
Other assets	55		66
Total assets	$	6,098	$	5,069

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	23	$	15
Accounts payable	738		504
Accrued compensation and benefits	80		106
Current operating lease liabilities	61		55
Other current liabilities	110		94
Total current liabilities	1,012		774
Long-term debt	2,404		1,863
Non-current operating lease liabilities	146		138
Deferred income taxes	84		48
Tax receivable agreement liabilities	701		706
Other liabilities	31		16
Total liabilities	4,378		3,545
Commitments and contingencies
Class A common stock, par value $0.01 per share, 1,000,000,000 shares authorized, 192,642,689 and 191,663,608 shares issued and outstanding as of July 28, 2024 and January 28, 2024, respectively	2		2
Class B common stock, par value $0.01 per share, 500,000,000 shares authorized, 8,483,709 and 9,630,186 shares issued and outstanding as of July 28, 2024 and January 28, 2024, respectively	—		—
Additional paid-in capital	1,225		1,214
Retained earnings	385		189
Accumulated other comprehensive income	32		46
Total stockholders’ equity attributable to Core & Main, Inc.	1,644		1,451
Non-controlling interests	76		73
Total stockholders’ equity	1,720		1,524
Total liabilities and stockholders’ equity	$	6,098	$	5,069

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CORE & MAIN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Amounts in millions (except share and per share data), unaudited


	Three Months Ended				Six Months Ended
	July 28, 2024		July 30, 2023		July 28, 2024		July 30, 2023

Net sales	$	1,964	$	1,861	$	3,705	$	3,435
Cost of sales	1,446		1,360		2,719		2,495
Gross profit	518		501		986		940
Operating expenses:
Selling, general and administrative	268		238		525		461
Depreciation and amortization	46		37		89		72
Total operating expenses	314		275		614		533
Operating income	204		226		372		407
Interest expense	36		22		70		39

Income before provision for income taxes	168		204		302		368
Provision for income taxes	42		40		75		71
Net income	126		164		227		297
Less: net income attributable to non-controlling interests	7		54		13		101
Net income attributable to Core & Main, Inc.	$	119	$	110	$	214	$	196

Earnings per share
Basic	$	0.62	$	0.66	$	1.11	$	1.16
Diluted	$	0.61	$	0.66	$	1.11	$	1.15
Number of shares used in computing EPS
Basic	192,797,961		167,312,292		192,495,255		169,474,741
Diluted	202,667,354		228,983,281		202,640,993		236,375,917

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CORE & MAIN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Amounts in millions, unaudited


	Three Months Ended				Six Months Ended
	July 28, 2024		July 30, 2023		July 28, 2024		July 30, 2023

Net income	$	126	$	164	$	227	$	297
Net interest rate swap (loss) gain, net of tax benefit (expense) of $11, $(1), $5 and $—, respectively	(33)		8		(15)		—
Total comprehensive income	93		172		212		297
Less: comprehensive income attributable to non-controlling interests	5		56		12		100
Total comprehensive income attributable to Core & Main, Inc.	$	88	$	116	$	200	$	197

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CORE & MAIN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Amounts in millions (except share data), unaudited


	Class A Common Stock			Class B Common Stock
	Shares	Amount		Shares	Amount		Additional Paid In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests		Total Stockholders’ Equity
Balances at January 28, 2024	191,663,608	$	2	9,630,186	$	—	$	1,214	$	189	$	46	$	73	$	1,524
Net income	—	—		—	—		—		95		—		6		101
Equity-based compensation	—	—		—	—		3		—		—		—		3
Net interest rate swap gain, net of tax	—	—		—	—		—		—		17		1		18
Distributions to non-controlling interest holders	—	—		—	—		(2)		—		—		(2)		(4)

Exchange of Partnership Interests and Class B Shares for Class A Shares	812,612	—		(816,654)	—		4		—		—		(4)		—
Establishment/adjustment of deferred tax asset associated with Core & Main investment in Core & Main Holdings, LP	—	—		—	—		13		—		—		—		13
Establishment of Tax Receivable Agreement liabilities	—	—		—	—		(10)		—		—		—		(10)
Tax withholdings under equity-based compensation plans	—	—		—	—		(2)		—		—		—		(2)
Activity under equity-based compensation plans, net of tax withholdings	158,097	—		—	—		1		—		—		—		1
Balances at April 28, 2024	192,634,317	2		8,813,532	—		1,221		284		63		74		1,644
Net income	—	—		—	—		—		119		—		7		126
Equity-based compensation	—	—		—	—		4		—		—		—		4
Net interest rate swap gain, net of tax	—	—		—	—		—		—		(31)		(2)		(33)
Distributions to non-controlling interest holders	—	—		—	—		(1)		—		—		(1)		(2)
Repurchase and Retirement of equity interests	(429,996)	—		—	—		(3)		(18)		—		—		(21)
Exchange of Partnership Interests and Class B Shares for Class A Shares	326,889	—		(329,823)	—		2		—		—		(2)		—
Establishment/adjustment of deferred tax asset associated with Core & Main investment in Core & Main Holdings, LP	—	—		—	—		5		—		—		—		5
Establishment of Tax Receivable Agreement liabilities	—	—		—	—		(4)		—		—		—		(4)
Activity under equity-based compensation plans, net of tax withholdings	111,479	—		—	—		1		—		—		—		1
Balances at July 28, 2024	192,642,689	$	2	8,483,709	$	—	$	1,225	$	385	$	32	$	76	$	1,720

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


	Class A Common Stock			Class B Common Stock
	Shares	Amount		Shares	Amount		Additional Paid In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Non-Controlling Interests		Total Stockholders’ Equity
Balances at January 29, 2023	172,765,161	$	2	73,229,675	$	1	$	1,241	$	458	$	45	$	663	$	2,410
Net income	—	—		—	—		—		86		—		47		133
Equity-based compensation	—	—		—	—		1		—		—		1		2
Net interest rate swap loss, net of tax	—	—		—	—		—		—		(5)		(3)		(8)
Distributions to non-controlling interest holders	—	—		—	—		—		—		—		(17)		(17)
Repurchase and Retirement of Class A and Class B shares and corresponding Partnership Interest	(9,377,183)	—		(5,622,817)	—		(83)		(141)		—		(108)		(332)
Exchange of Partnership Interests and Class B Shares for Class A Shares	2,325,080	—		(2,325,080)	—		18		—		1		(19)		—
Establishment/adjustment of deferred tax asset associated with Core & Main investment in Core & Main Holdings, LP	—	—		—	—		18		—		—		—		18
Establishment of Tax Receivable Agreement liabilities	—	—		—	—		(14)		—		—		—		(14)
Activity under equity-based compensation plans, net of tax withholdings	93,460	—		—	—		—		—		—		—		—
Balances at April 30, 2023	165,806,518	2		65,281,778	1		1,181		403		41		564		2,192
Net income	—	—		—	—		—		110		—		54		164
Equity-based compensation	—	—		—	—		2		—		—		1		3
Net interest rate swap gain, net of tax	—	—		—	—		—		—		6		2		8
Distributions to non-controlling interest holders	—	—		—	—		(2)		—		—		(10)		(12)
Repurchase and Retirement of Class A and Class B shares and corresponding Partnership Interest	(3,125,728)	—		(1,874,272)	—		(32)		(66)		—		(43)		(141)
Exchange of Partnership Interests and Class B Shares for Class A Shares	5,770,323	—		(5,773,493)	—		48		—		2		(50)		—
Establishment/adjustment of deferred tax asset associated with Core & Main investment in Core & Main Holdings, LP	—	—		—	—		45		—		—		—		45
Establishment of Tax Receivable Agreement liabilities	—	—		—	—		(47)		—		—		—		(47)
Activity under equity-based compensation plans, net of tax withholdings	139,877	—		—	—		1		—		—		—		1
Balances at July 30, 2023	168,590,990	$	2	57,634,013	$	1	$	1,196	$	447	$	49	$	518	$	2,213

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CORE & MAIN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in millions, unaudited


	Six Months Ended
	July 28, 2024		July 30, 2023
Cash Flows From Operating Activities:
Net income	$	227	$	297
Adjustments to reconcile net cash from operating activities:
Depreciation and amortization	95		75


Equity-based compensation expense	7		5
Deferred income tax expense	5		2
Other	7		3
Changes in assets and liabilities:
(Increase) decrease in receivables	(263)		(253)
(Increase) decrease in inventories	(105)		185
(Increase) decrease in other assets	(14)		—
Increase (decrease) in accounts payable	203		113
Increase (decrease) in accrued liabilities	(36)		(25)

Net cash provided by operating activities	126		402
Cash Flows From Investing Activities:
Capital expenditures	(16)		(15)
Acquisitions of businesses, net of cash acquired	(596)		(151)

Other	(6)		2
Net cash used in investing activities	(618)		(164)
Cash Flows From Financing Activities:
Repurchase and retirement of equity interests	(21)		(473)
Distributions to non-controlling interest holders	(7)		(25)
Payments pursuant to Tax Receivable Agreements	(11)		(5)
Borrowings on asset-based revolving credit facility	605		235
Repayments on asset-based revolving credit facility	(785)		(120)
Issuance of long-term debt	750		—
Repayments of long-term debt	(11)		(8)
Debt issuance costs	(14)		—



Other	(2)		1
Net cash provided by (used in) financing activities	504		(395)
Increase (decrease) in cash and cash equivalents	12		(157)
Cash and cash equivalents at the beginning of the period	1		177
Cash and cash equivalents at the end of the period	$	13	$	20

Cash paid for interest (excluding effects of interest rate swap)	$	95	$	59
Cash paid for taxes	84		61

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CORE & MAIN, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in millions, except as noted, unaudited

1) BASIS OF PRESENTATION & DESCRIPTION OF BUSINESS

Business and Organization

Core & Main, Inc. (“Core & Main” and collectively with its subsidiaries, the “Company”) is a leader in advancing reliable infrastructure with local service, nationwide. As a leading specialized distributor with a focus on water, wastewater, storm drainage and fire protection products and related services, the Company provides solutions to municipalities, private water companies and professional contractors across municipal, non-residential and residential end markets, nationwide. The Company’s specialty products and services are used in the maintenance, repair, replacement, and construction of water and fire protection infrastructure. The Company reaches customers through a nationwide network of approximately 350 branches across 49 states. The Company’s products include pipes, valves, fittings, storm drainage products, fire protection products, meter products and other products. The Company has complemented its core products through additional offerings, including smart meter systems, fusible high-density polyethylene (“fusible HDPE”) piping solutions, specifically engineered treatment plant products and geosynthetics and erosion control products. The Company’s services and capabilities allow for integration with customers and form part of their sourcing and procurement function. All of the Company’s long-lived assets are located within the United States (“U.S.”).

Core & Main is a holding company that indirectly owns Core & Main LP through its ownership interest in Core & Main Holdings, LP (“Holdings”). Core & Main’s primary material assets are its direct and indirect ownership interest in Holdings and deferred tax assets associated with such ownership.

Secondary Offerings and Repurchase Transactions

On June 12, 2024, the Company’s board of directors authorized a share repurchase program (the “Repurchase Program”), pursuant to which the Company may purchase up to $500 million of the Company’s Class A common stock. Shares repurchased under the Repurchase Program are retired immediately and are accounted for as a decrease to stockholders’ equity. For the six months ended July 28, 2024 the Company repurchased 429,996 shares of Class A common stock for a total of $21 million through open market transactions.

During the fiscal year ended January 28, 2024 (“fiscal 2023”), secondary public offerings of Class A common stock were completed by certain selling stockholders (the “Selling Stockholders”) affiliated with Clayton, Dubilier & Rice, LLC (“CD&R”). As part of the secondary public offerings the Selling Stockholders sold to the public (i) existing shares of our Class A common stock and (ii) shares of Class A common stock received in exchange for an equal number of limited partner interests of Holdings (“Partnership Interests”), together with the retirement of a corresponding number of shares of our Class B common stock. Below is a summary of the secondary public offerings completed during fiscal 2023 (the “Secondary Offerings”).


Secondary Offering Date	Existing Shares of Class A Common Stock Sold to the Public	Partnership Interests Exchanged for Class A Common Stock Prior to Sale to the Public	Shares of Class A Common Stock Sold to the Public	Price Per Share
January 25, 2024	12,366,683	7,415,404	19,782,087	$40.985
January 10, 2024(1)	12,084,902	7,465,098	19,550,000	$38.120
December 11, 2023(1)	10,783,760	6,466,240	17,250,000	$35.540
November 9, 2023(1)	13,659,431	8,190,569	21,850,000	$30.440
September 19, 2023	11,252,620	6,747,380	18,000,000	$29.015
June 12, 2023	8,752,038	5,247,962	14,000,000	$28.215
April 14, 2023	3,125,728	1,874,272	5,000,000	$22.151

(1) Includes shares of Class A common stock purchased by the underwriter, pursuant to the exercise in full of the option granted in connection with the secondary public offering.

The Company did not receive any of the proceeds from the Secondary Offerings. The Company paid the costs associated with the sale of shares by the Selling Stockholders in the Secondary Offerings, other than underwriting discounts and commissions.

Concurrently with the completion of the Secondary Offerings during fiscal 2023, (i) the Company repurchased from the Selling Stockholders shares of our Class A common stock, and Holdings redeemed from the Company a corresponding number of Partnership Interests, and (ii) Holdings redeemed from one of the Selling Stockholders Partnership Interests, with the Company repurchasing a corresponding number of shares of our Class B common stock from such Selling Stockholder for no additional consideration. Below is a summary of the repurchase transactions completed during fiscal 2023 (the “Repurchase Transactions”).


Repurchase Transaction Date	Shares of Class A Common Stock Repurchased	Partnership Interests Redeemed	Total Repurchase Amount	Price Per Share/Partnership Interest	Total Consideration Paid (in millions)
January 25, 2024	3,125,728	1,874,272	5,000,000	$40.985	$205
January 10, 2024	3,125,728	1,874,272	5,000,000	$38.120	$191
December 11, 2023	3,125,728	1,874,272	5,000,000	$35.540	$178
November 9, 2023	3,125,728	1,874,272	5,000,000	$30.440	$152
September 19, 2023	3,125,728	1,874,272	5,000,000	$29.015	$145
June 12, 2023	3,125,728	1,874,272	5,000,000	$28.215	$141
April 14, 2023	9,377,183	5,622,817	15,000,000	$22.151	$332

Shareholder Ownership

The shareholder ownership as of July 28, 2024 includes the following:

•the shareholders of Core & Main, excluding Core & Main Management Feeder, LLC (“Management Feeder”), collectively held 192,642,143 shares of Class A common stock;

•Core & Main, directly or indirectly through our wholly-owned subsidiary, held 192,642,689 Partnership Interests; and

•Management Feeder held 546 shares of Class A common stock, 8,483,709 Partnership Interests and 8,483,709 shares of Class B common stock.

Following the completion of the Secondary Offerings and the Repurchase Transactions during fiscal 2023 investors affiliated with CD&R no longer own shares of Core & Main.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements present the results of operations, financial position and cash flows of Core & Main and its subsidiaries, which includes the consolidated financial statements of Holdings and its consolidated subsidiary, Core & Main LP, as the legal entity that conducts the operations of the Company. All intercompany balances and transactions have been eliminated in consolidation. The Company records non-controlling interests related to Partnership Interests held by Management Feeder in Holdings.

In management’s opinion, the unaudited condensed consolidated financial information for the interim periods presented include all normal recurring adjustments necessary for a fair statement of the Company's results of operations, financial position and cash flows, which include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim unaudited condensed consolidated financial statements may not be the same as those for the full year. The January 28, 2024 condensed consolidated Balance Sheet was derived from audited financial statements as of that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the fiscal year ended January 28, 2024 included in our 2023 Annual Report on Form 10-K.

Fiscal Year

The Company’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31st. Quarters within the fiscal year include 13-week periods, unless a fiscal year includes a 53rd week, in which case the fourth quarter of the fiscal year will be a 14-week period. Each of the three months ended July 28, 2024 and three months ended July 30, 2023 included 13 weeks and each of the six months ended July 28, 2024 and six months ended July 30, 2023 included 26 weeks. The current fiscal year ending February 2, 2025 (“fiscal 2024”) will include 53 weeks.

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 the reported amounts of revenues and expenses in preparing the elements of these financial statements in conformity with U.S. GAAP. Actual results could differ from these estimates.

Accounting Policies

The Company’s significant accounting policies are discussed in Note 2 to the audited consolidated financial statements in our 2023 Annual Report on Form 10-K. There have been no significant changes to these policies which have had a material impact on the Company’s unaudited condensed consolidated financial statements and related notes during the three and six months ended July 28, 2024.

2) RECENT ACCOUNTING PRONOUNCEMENTS

Segment Reporting - In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). The new guidance expands reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 requires disclosure of (i) significant segment expenses that are regularly provided to the segment’s chief operating decision maker (“CODM”) and included within the segment measure of profit or loss, (ii) an amount and description of its composition for other segment items to reconcile to segment profit or loss, and (iii) the title and position of the Company’s CODM. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption of ASU 2023-07 is expected to result in additional disclosures, but not have a material impact on the consolidated financial statements.

Income Tax Disclosures - In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). The new guidance requires, on an annual basis, disclosure of specific categories in the rate reconciliation and disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The adoption of ASU 2023-09 is expected to result in additional disclosures, but not have a material impact on the consolidated financial statements.

3) REVENUE

Disaggregation of Revenue

The following table represents net sales disaggregated by product category:


	Three Months Ended				Six Months Ended
Product Category	July 28, 2024		July 30, 2023		July 28, 2024		July 30, 2023
Pipes, valves & fittings products	$	1,329	$	1,283	$	2,498	$	2,357
Storm drainage products	306		278		559		493
Fire protection products	143		174		310		343
Meter products	186		126		338		242
Total net sales	$	1,964	$	1,861	$	3,705	$	3,435

4) ACQUISITIONS

The Company made various acquisitions during the six months ended July 28, 2024 (the “Fiscal 2024 Acquisitions”) and the six months ended July 30, 2023 (the "Fiscal 2023 Acquisitions") with an aggregate transaction value of $623 million and $161 million, subject to working capital adjustments, respectively. These transactions were funded with cash and borrowings under the Senior Term Loan Credit Facility (as defined in Note 6 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Fiscal 2024 Acquisitions

•On May 6, 2024, the Company acquired certain assets and assumed certain liabilities of Geothermal Supply Company Inc. (“GSC”). GSC has one location and is a distributor and fabricator of fusible HDPE pipe and other related products, primarily serving the geothermal, water and sewer industries.

•On April 30, 2024, the Company acquired certain assets and assumed certain liabilities of EGW Utilities Inc. (“EGW”). EGW has one location and is a provider of underground utility infrastructure products and services.

•On April 1, 2024, the Company acquired all of the outstanding shares of NW Geosynthetics Inc. (“ACF West”). ACF West has six locations and is a distributor of geosynthetic materials and provider of soil stabilization solutions.

•On March 7, 2024, the Company acquired all of the membership interests of DKC Group Holdings, LLC, and associated entities (collectively, “Dana Kepner”). Dana Kepner has twenty-one locations and is a distributor of water, wastewater, storm drainage, and geotextile products, along with specialty tools and accessories.

•On February 12, 2024, the Company acquired certain assets and assumed certain liabilities of Eastern Supply Inc. and a related entity (collectively, “Eastern Supply”). Eastern Supply has two locations and is a distributor of a broad range of storm drainage products, with custom fabrication capabilities.

Fiscal 2023 Acquisitions

•On July 12, 2023, the Company acquired all of the outstanding shares of J.W. D’Angelo Company, Inc. (“D’Angelo”). D’Angelo has three locations and is a full-service provider of fire protection and waterworks products.

•On July 10, 2023, the Company acquired certain assets and assumed certain liabilities of Foster Supply Inc. and R.P. Foster Inc. (collectively, “Foster Supply”). Foster Supply has seven locations and is a full-service provider of precast concrete structures, pipe, drainage materials and related geosynthetics products.

•On April 17, 2023, the Company acquired certain assets and assumed certain liabilities of Midwest Pipe Supply Inc. (“Midwest Pipe”). Midwest Pipe has one location and is a distributor of drainage and waterworks products.

•On April 10, 2023, the Company acquired certain assets and assumed certain liabilities of UPSCO Manufacturing & Distribution Company, UPSCO, Inc. and TMB Holdings, LLC (collectively, “UPSCO”). UPSCO is a provider of utility infrastructure products and services.

•On March 6, 2023, the Company acquired certain assets and assumed certain liabilities of Landscape & Construction Supplies LLC (“Landscape & Construction Supplies”). Landscape & Construction Supplies has two locations and is a provider of geosynthetics products.

The following table represents the preliminary allocation of the transaction price to the fair value of identifiable assets acquired and liabilities assumed in the Fiscal 2024 Acquisitions and final allocation of the transaction price to the fair value of identifiable assets acquired and liabilities assumed in the Fiscal 2023 Acquisitions. The allocations are preliminary for items including review of working capital balances and the completion of intangible asset valuations.


	Fiscal 2024 Acquisitions(1)		Fiscal 2023 Acquisitions
Cash	$	31	$	5
Receivables	66		28
Inventories	91		38
Intangible assets	233		76
Goodwill	281		17
Property, plant and equipment	12		24
Operating lease right-of-use assets	12		7
Other assets, current and non-current	1		4
Total assets acquired	727		199
Accounts payable	30		9
Deferred income taxes	38		8

Operating lease liabilities, current and non-current	12		7
Deferred consideration	13		9
Other liabilities, current and non-current	7		7
Net assets acquired	$	627	$	159

(1) Amounts include the preliminary purchase price allocation of Dana Kepner net assets of $257 million to goodwill, $184 million to intangible assets, $92 million to net working capital, $29 million to cash and $8 million to fixed assets. Additionally, includes a deferred income tax liability of $33 million for the Dana Kepner acquisition.

The net outflow of cash in respect of the purchase of businesses is as follows:


	Fiscal 2024 Acquisitions		Fiscal 2023 Acquisitions
Net assets acquired	$	627	$	159
Less: Working capital adjustment	—		(3)
Less: Cash acquired in acquisition	(31)		(5)



Total consideration, net of cash; investing cash outflow	$	596	$	151

In the above transactions, to the extent applicable, the excess of purchase price over net tangible and intangible assets acquired resulted in goodwill, which represents the assembled workforce and anticipated long-term growth in new markets, customers and products. Goodwill of $195 million and $3 million associated with the Fiscal 2024 Acquisitions and Fiscal 2023 Acquisitions, respectively, are fully deductible by the Company for U.S. income tax purposes.

Intangible Assets

For the Fiscal 2024 Acquisitions and Fiscal 2023 Acquisitions, the intangible assets acquired consist of customer relationships and trademarks.

The customer relationship intangible assets represent the value associated with those customer relationships in place at the date of each transaction included in the Fiscal 2024 Acquisitions and Fiscal 2023 Acquisitions. The Company valued the customer relationships using an excess earnings method including various inputs such as customer attrition rate, revenue growth rate, gross margin percentage and discount rate. Cash flows associated with the existing relationships are expected to diminish over time due to customer turnover. The Company reflected this expected diminishing cash flow through the utilization of an annual customer attrition rate assumption and in its method of amortization.

The trademark intangible asset represents the value associated with the brand names in place at the date of the applicable closing.

A summary of the intangible asset acquired and assumptions utilized in the valuation for the Fiscal 2024 Acquisitions and Fiscal 2023 Acquisitions is as follows:


	Intangible Asset Amount		Weighted Average Amortization Period	Weighted Average Discount Rate		Weighted Average Attrition Rate
Customer Relationships

Fiscal 2024 Acquisitions (1)	$	230	10 years	13.4	%	12.5	%
Fiscal 2023 Acquisitions	76		10 years	16.2	%	12.6	%

Trademark
Fiscal 2024 Acquisitions	$	3	5 years	13.0	%	N/A

(1) Customer relationships acquired and assumptions utilized in the valuation for the Dana Kepner acquisition were as follows: $181 million customer relationship intangible asset, 10 years amortization period, 13.0% discount rate and 12.5% attrition rate.

Pro Forma Financial Information

The following pro forma information presents a summary of the results of operations for the periods indicated as if the Dana Kepner acquisition had been completed as of January 30, 2023. The pro forma financial information is based on the historical financial information for the Company and Dana Kepner, along with certain pro forma adjustments. These pro forma adjustments consist primarily of:

•increased amortization and depreciation expense related to the intangible assets and fixed assets acquired, respectively, in the Dana Kepner acquisition;

•increased interest expense to reflect the borrowings under the Senior Term Loan Credit Facility including the interest and amortization of deferred financing costs;

•reclassification of direct acquisition transaction costs, retention bonuses and inventory fair value adjustments from the period incurred to periods these expenses would have been recognized given the assumed transaction date identified above; and

•the related income tax effects of the aforementioned adjustments to the provision for income taxes for Core & Main.

The following pro forma information has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the Dana Kepner acquisition occurred on the assumed date, nor is it necessarily an indication of future operating results. In addition, the pro forma information does not reflect the cost of any integration activities, benefits from any synergies that may be derived from the Dana Kepner acquisition or revenue growth that may be anticipated.


	Three Months Ended			Six Months Ended
		July 30, 2023		July 28, 2024		July 30, 2023
Net sales		$	1,956	$	3,734	$	3,604
Net income		164		228		292

As a result of integration of the Dana Kepner acquisition with existing operations of the Company it is impracticable to identify the discrete financial performance associated with the Dana Kepner acquisition. As such, the Company has not presented the post-acquisition net sales and net income for the Dana Kepner acquisition.

5) GOODWILL AND INTANGIBLE ASSETS

Goodwill

The carrying amount of the Company’s goodwill included in its Balance Sheets is as follows:


	July 28, 2024		January 28, 2024
Gross Goodwill	$	1,843	$	1,561
Accumulated Impairment	—		—
Net Goodwill	$	1,843	$	1,561

The changes in the carrying amount of goodwill are as follows:


	Six Months Ended
	July 28, 2024
Beginning Balance	$	1,561
Goodwill acquired during the year	281
Goodwill adjusted during the year	1
Ending balance	$	1,843

Goodwill acquired during the six months ended July 28, 2024 was related to the Fiscal 2024 Acquisitions, as further described in Note 4.

Goodwill represents the excess of purchase price over the fair value of net assets acquired. The Company does not amortize goodwill, but does assess the recoverability of goodwill on an annual basis during the fourth quarter. If an event occurs or circumstances change that would “more likely than not” reduce the fair value of a reporting unit below its carrying value, an interim impairment test would be performed between annual tests.

Intangible Assets

The Company’s intangible assets included in its Balance Sheets consist of the following:


	July 28, 2024						January 28, 2024
	Gross Intangible		Accumulated Amortization		Net Intangible		Gross Intangible		Accumulated Amortization		Net Intangible
Customer relationships	$	1,726	$	790	$	936	$	1,496	$	718	$	778
Other intangible assets	23		5		18		10		4		6
Total	$	1,749	$	795	$	954	$	1,506	$	722	$	784

Amortization expense related to intangible assets was as follows:


	Three Months Ended				Six Months Ended
	July 28, 2024		July 30, 2023		July 28, 2024		July 30, 2023
Amortization expense	$	38	$	31	$	73	$	60

The estimated aggregate amortization expense on intangible assets owned by the Company for the remainder of fiscal 2024 and the next four full fiscal years is expected to be as follows:


Fiscal 2024	$	75
Fiscal 2025	141
Fiscal 2026	131
Fiscal 2027	123
Fiscal 2028	114

6) DEBT

Debt consisted of the following:


	July 28, 2024				January 28, 2024
	Principal		Unamortized Discount and Debt Issuance Costs		Principal		Unamortized Discount and Debt Issuance Costs
Current maturities of long-term debt:
Senior Term Loan due July 2028	$	15	$	—	$	15	$	—
Senior Term Loan due February 2031	8		—		—		—
	23		—		15		—
Long-term debt:
Senior ABL Credit Facility due February 2029	250		—		430		—
Senior Term Loan due July 2028	1,440		14		1,448		15
Senior Term Loan due February 2031	739		11		—		—
	2,429		25		1,878		15
Total	$	2,452	$	25	$	1,893	$	15

The Company’s debt obligations as of July 28, 2024 include the following debt agreements:

Senior Term Loan Credit Facility

On July 27, 2021, Core & Main LP entered into a Senior Term Loan Credit Facility (as defined herein) under which it can incur tranches of indebtedness. On May 21, 2024, Core & Main LP amended the terms of the $1,500 million senior term loan (as amended, the “2028 Senior Term Loan”), in order to reduce the effective applicable margin from 2.60% to 2.00%. The 2028 Senior Term Loan principal balance did not change, still matures on July 27, 2028 and requires quarterly principal payments on the last business day of each fiscal quarter in an amount equal to approximately 0.25% of the original principal amount. The remaining balance is payable upon final maturity of the 2028 Senior Term Loan on July 27, 2028. The 2028 Senior Term Loan bears interest at a rate equal to (i) term secured overnight financing rate (“Term SOFR”) plus, in each case, an effective applicable margin of 2.00% or (ii) the base rate, which will be the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) the overnight federal funds rate plus 0.50% per annum and (z) one-month Term SOFR (adjusted for maximum reserves) plus 1.00% per annum, plus, in each case, an applicable margin of 1.50%. The 2028 Senior Term Loan is subject to a Term SOFR “floor” of 0.00%. The weighted average interest rate, excluding the effect of the interest rate swap, of Core & Main LP’s outstanding borrowings under the 2028 Senior Term Loan as of July 28, 2024 was 7.34%. See further discussion of the interest rate swap below. Based on quotes from financial institutions (i.e., level 2 of the fair value hierarchy), the fair value of the 2028 Senior Term Loan was $1,459 million as of July 28, 2024.

On February 9, 2024, Core & Main LP entered into an additional $750 million senior term loan, which matures on February 9, 2031 (the “2031 Senior Term Loan” and, together with the 2028 Senior Term Loan, the “Senior Term Loan Credit Facility”). The 2031 Senior Term Loan requires quarterly principal payments, payable on the last business day of each fiscal quarter in an amount equal to approximately 0.25% of the original principal amount of the 2031 Senior Term Loan. The remaining balance is payable upon final maturity of the 2031 Senior Term Loan on February 9, 2031. The 2031 Senior Term Loan bears interest at a rate equal to (i) Term SOFR plus, in each case, an applicable margin of 2.25% or (ii) an alternate base rate plus an applicable margin of 1.25%. The 2031 Senior Term Loan is subject to a Term SOFR “floor” of 0.00%. The weighted average interest rate, excluding the effect of the interest rate swap, of Core & Main LP’s outstanding borrowings under the 2031 Senior Term Loan as of July 28, 2024 was 7.59%. See further discussion of the interest rate swap below. Based on quotes from financial institutions (i.e., level 2 of the fair value hierarchy), the fair value of the 2031 Senior Term Loan was $750 million as of July 28, 2024.

Asset-Based Credit Facility

On February 9, 2024, Core & Main LP amended the terms of the credit agreement governing its senior asset-based revolving credit facility (as amended, the “Senior ABL Credit Facility”) in order to, among other things, extend the maturity from July 27, 2026 to February 9, 2029 and amend the credit agreement governing the Senior ABL Credit Facility to the extent necessary or appropriate to reflect the extension of the amended maturity. The Senior ABL Credit Facility has a borrowing capacity of up to $1,250 million, subject to borrowing base availability. Borrowings under the Senior ABL Credit Facility bear interest at either a Term SOFR rate plus an applicable margin ranging from 1.25% to 1.75%, or an alternate base rate plus an applicable margin ranging from 0.25% to 0.75%, depending on the borrowing capacity under the Senior ABL Credit Facility. Additionally, Core & Main LP pays a fee of 0.25% on unfunded commitments under the Senior ABL Credit Facility. As of July 28, 2024 and January 28, 2024 there were $250 million and $430 million amounts outstanding, respectively, under the Senior ABL Credit Facility with a weighted average interest rate of 6.58% as of July 28, 2024.

The aforementioned debt agreements include customary affirmative and negative covenants, which include, among other things, restrictions on Core & Main LP’s ability to make distributions, pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. The Senior Term Loan Credit Facility may require accelerated repayment based upon cash flows generated in excess of operating and investing requirements when the Consolidated Secured Leverage Ratio (as defined in the agreement governing the Senior Term Loan Credit Facility) is greater than or equal to 3.25. In addition, the Senior ABL Credit Facility requires Core & Main LP to comply with a consolidated fixed charge coverage ratio of greater than or equal to 1.00 when availability under the Senior ABL Credit Facility is less than 10.0% of the lesser of (i) the then applicable borrowing base or (ii) the then aggregate effective commitments. The Company was in compliance with all debt covenants as of July 28, 2024.

Substantially all of Core & Main LP’s assets are pledged as collateral for the Senior Term Loan Credit Facility and the Senior ABL Credit Facility.

The aggregate amount of debt payments for the remainder of fiscal 2024 and the next four full fiscal years are as follows:


Fiscal 2024	$	12
Fiscal 2025	23
Fiscal 2026	23
Fiscal 2027	23
Fiscal 2028	1,410

Interest Rate Swaps

Core & Main LP entered into an instrument in which it makes payments to a third party based upon a fixed interest rate of 0.693% and receives payments based upon the one-month Term SOFR rate. The interest rate swap has a notional amount of $800 million as of July 28, 2024. The notional amount decreases to $700 million on July 27, 2025 through the instrument maturity on July 27, 2026. This instrument is intended to reduce the Company's exposure to variable interest rates under the Senior Term Loan Credit Facility. As of July 28, 2024, this instrument resulted in an effective fixed rate of 2.693%, based upon the 0.693% fixed rate plus an effective applicable margin of 2.00%.

On February 12, 2024, Core & Main LP entered into an additional instrument pursuant to which it will make payments to a third party based upon a fixed interest rate of 3.913% and receive payments based upon the one-month Term SOFR rate. The interest rate swap has a starting notional amount of $750 million that increases to $1,500 million on July 27, 2026 through the instrument maturity on July 27, 2028. The instrument is intended to reduce the Company’s exposure to variable interest rates under the Senior Term Loan Credit Facility. As of July 28, 2024, this instrument resulted in an effective fixed rate of 6.163%, based upon the 3.913% fixed rate plus an effective applicable margin of 2.25%.

The fair value of these cash flow interest rate swaps was a $54 million asset and a $7 million liability as of July 28, 2024, which is included within other assets and other current liabilities, respectively, in the Balance Sheet. The aggregate fair value of these cash flow interest rate swaps was a $67 million asset as of January 28, 2024, which is included within other assets in the Balance Sheet.


	Three Months Ended				Six Months Ended
Accumulated Other Comprehensive Income	July 28, 2024		July 30, 2023		July 28, 2024		July 30, 2023
Beginning of period balance	$	66	$	62	$	48	$	70
Measurement adjustment (loss) gain for interest rate swap	(31)		20		6		21
Reclassification of (income) to interest expense	(13)		(11)		(26)		(21)
Tax benefit (expense) on interest rate swap adjustments
Measurement adjustment (loss) gain for interest rate swap	8		(4)		(1)		(4)
Reclassification of (income) to interest expense	3		3		6		4
End of period balance	$	33	$	70	$	33	$	70

The cash flows related to settlement of the interest rate swaps are classified in the consolidated statements of cash flows based on the nature of the underlying hedged items. Fair value is based upon the present value of future cash flows under the terms of the contract and observable market inputs (level 2). Significant inputs used in determining fair value include forward-looking one-month Term SOFR rates and the discount rate applied to projected cash flows.

As of July 28, 2024, the Company estimates $39 million of the cash flow interest rate swap gains will be reclassified from accumulated other comprehensive income into earnings over the next 12 months.

7) INCOME TAXES

For the three months ended July 28, 2024 and July 30, 2023, the Company’s effective tax rate was 25.0% and 19.6%, respectively. For the six months ended July 28, 2024 and July 30, 2023, the Company's effective tax rate was 24.8% and 19.3%, respectively. The variation between the Company's estimated effective tax rate and the U.S. and state statutory rates for the three and six months ended July 30, 2023 is primarily due to the portion of the Company's earnings attributable to non-controlling interests. The effective tax rate for the three and six months ended July 28, 2024 increased primarily due to a substantial decrease in the non-controlling interest ownership that increased the allocation of net income to taxable entities.

Tax Receivable Agreements

The Company is party to a tax receivable agreement with certain stockholders affiliated with CD&R that transferred all of their Partnership Interests at the time of the initial public offering (the “Former Limited Partners Tax Receivable Agreement”) and a tax receivable agreement with certain stockholders affiliated with CD&R and Management Feeder that continued to own Partnership Interests beyond the time of the initial public offering (the “Continuing Limited Partners Tax Receivable Agreement”) (collectively, the “Tax Receivable Agreements”). The Company has generated tax attributes, and expects to generate additional tax attributes with future exchanges of Partnership Interests, that will reduce amounts that it would otherwise pay in the future to various tax authorities. The Tax Receivable Agreements provide payments to the parties subject to the Tax Receivable Agreements, or their permitted transferees, of 85% of the tax benefits realized by the Company, or in some circumstances are deemed to be realized.

The Company recorded payables to related parties pursuant to the Tax Receivable Agreements of $720 million and $717 million as of July 28, 2024 and January 28, 2024, respectively. Payments under the Tax Receivable Agreements within the next 12 months are expected to be $19 million, which is included within other current liabilities in the Balance Sheet.

The actual amount and timing of any payments under the Tax Receivable Agreements will vary depending upon a number of factors, including the timing of exchanges by the holders of Partnership Interests, the amount of gain recognized by such holders of Partnership Interests, the amount and timing of the taxable income the Company generates in the future and the federal tax rates then applicable. Assuming (i) that Management Feeder exchanged all of its remaining Partnership Interests at $53.53 per share of our Class A common stock (the closing stock price on July 26, 2024), (ii) no material changes in relevant tax law, (iii) a constant corporate tax rate of 25.1%, which represents a pro forma tax rate that includes a provision for U.S. federal income taxes and assumes the highest statutory rate apportioned to each state and local jurisdiction and (iv) that the Company earns sufficient taxable income in each year to realize on a current basis all tax benefits, the Company would recognize an additional deferred tax asset (subject to offset with existing deferred tax liabilities) of approximately $135 million and a liability of approximately $115 million, payable over the life of the Continuing Limited Partners Tax Receivable Agreement. The full exchange will also decrease Core & Main's aforementioned deferred tax asset associated with its investment in Holdings by $6 million. The foregoing amounts are estimates and subject to change.

8) SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Receivables

Receivables consisted of the following:


	July 28, 2024		January 28, 2024
Trade receivables, net of allowance for credit losses	$	1,207	$	888
Supplier rebate receivables	87		85
Receivables, net of allowance for credit losses	$	1,294	$	973

Accrued Compensation and Benefits

Accrued compensation and benefits consisted of the following:


	July 28, 2024		January 28, 2024
Accrued bonuses and commissions	$	56	$	82
Other compensation and benefits	24		24
Accrued compensation and benefits	$	80	$	106

Leases

The table below presents cash and non-cash impacts associated with leases:


	Six Months Ended
	July 28, 2024		July 30, 2023
Operating cash flow payments for operating lease liabilities	$	31	$	26
Operating cash flow payments for non-lease components	15		12

Right-of-use assets obtained in exchange for new operating lease liabilities	$	33	$	29

The non-cash impact related to right-of-use assets obtained in exchange for new operating lease liabilities in the table above excludes the impact from acquisitions.

Depreciation Expense

Depreciation expense is classified within cost of sales and depreciation and amortization within the Statement of Operations. Depreciation expense related to property, plant and equipment, including capitalized software, was as follows:


	Three Months Ended				Six Months Ended
	July 28, 2024		July 30, 2023		July 28, 2024		July 30, 2023
Depreciation expense	$	9	$	7	$	17	$	13

9) NON-CONTROLLING INTERESTS

Core & Main is the general partner of Holdings and operates and controls all of the business and affairs of Holdings and, through Holdings and its subsidiaries, conducts the Company's business. Accordingly, Core & Main consolidates the consolidated financial statements of Holdings and attributes a portion of net income and equity of Holdings to non-controlling interests related to the vested Partnership Interests not held by the Company. Income or loss is attributed to the non-controlling interests based on the weighted average percentage of Partnership Interests held by Management Feeder, excluding unvested Partnership Interests held, relative to all Partnership Interests of Holdings during the period. Holdings equity is attributed to non-controlling interests based on the Partnership Interests not held by the Company, excluding unvested Partnership Interests, relative to all Partnership Interests as of the balance sheet date. The non-controlling interests’ ownership percentage may fluctuate over time as Partnership Interests are exchanged, together with the retirement of a corresponding number of shares of Class B common stock, for shares of Class A common stock and Partnership Interests held by Management Feeder vest. The following table summarizes the ownership of Partnership Interests of Holdings (excluding unvested Partnership Interests held by Management Feeder):


	Partnership Interests			Ownership Percentage
	Core & Main	Management Feeder	Total	Core & Main		Management Feeder		Total
Balances as of January 28, 2024	191,663,608	9,243,276	200,906,884	95.4	%	4.6	%	100.0	%
Retirement of Partnership Interests	(429,996)	—	(429,996)	—		—		—
Issuance of Partnership Interests	269,576	—	269,576	—		—		—
Exchange of Partnership Interests	1,139,501	(1,146,477)	(6,976)	0.6		(0.6)		—

Vesting of Partnership Interests	—	159,749	159,749	(0.1)		0.1		—
Balances as of July 28, 2024	192,642,689	8,256,548	200,899,237	95.9	%	4.1	%	100.0	%

10) BASIC AND DILUTED EARNINGS PER SHARE

The following table presents the calculation of basic and diluted earnings per share for the three and six months ended July 28, 2024 and July 30, 2023.

Basic earnings per share is computed by dividing net income attributable to Core & Main for the period by the weighted average number of shares of Class A common stock outstanding during the same period. Shares of Class A common stock issued or redeemed during the period were weighted for the portion of the period in which the shares of Class A common stock were outstanding. The Company did not apply the two-class method because shares of Class B common stock do not participate in earnings or losses of Core & Main. As a result, the shares of Class B common stock are not considered participating securities and are not included in the weighted average shares outstanding for purposes of earnings per share. Net income allocated to holders of non-controlling interests was excluded from net income available to the Class A common stock. There were no preferred dividends and no shares of preferred stock outstanding for the period.

The diluted earnings per share calculation includes the basic weighted average number of shares of Class A common stock outstanding plus the dilutive impact of potential outstanding shares of Class A common stock that would be issued upon exchange of Partnership Interests, together with the retirement of a corresponding number of shares of Class B common stock, under the if-converted method, if dilutive. The treasury stock method is applied to outstanding awards, including unvested Partnership Interests and outstanding stock appreciation rights, restricted stock units and stock options.


	Three Months Ended				Six Months Ended
Basic earnings per share:	July 28, 2024		July 30, 2023		July 28, 2024		July 30, 2023
Net income	$	126	$	164	$	227	$	297
Net income attributable to non-controlling interests	7		54		13		101
Net income available to Class A common stock	119		110		214		196
Weighted average shares outstanding	192,797,961		167,312,292		192,495,255		169,474,741
Net income per share	$	0.62	$	0.66	$	1.11	$	1.16
Diluted earnings per share:
Net income available to common shareholders - basic	$	119	$	110	$	214	$	196
Increase to net income attributable to dilutive instruments	5		40		10		75
Net income available to common shareholders - diluted	124		150		224		271
Weighted average shares outstanding - basic	192,797,961		167,312,292		192,495,255		169,474,741
Incremental shares of common stock attributable to dilutive instruments	9,869,393		61,670,989		10,145,738		66,901,176
Weighted average shares outstanding - diluted	202,667,354		228,983,281		202,640,993		236,375,917
Net income per share - diluted	$	0.61	$	0.66	$	1.11	$	1.15

11) RELATED PARTIES

The Company has entered into the Tax Receivable Agreements and the Exchange Agreement, dated as of July 22, 2021 (as amended, the “Exchange Agreement”) with related parties, that are discussed in Note 14 to the audited consolidated financial statements in our 2023 Annual Report on Form 10-K. There have been no significant changes to these related party agreements.

12) SUBSEQUENT EVENTS

Management has evaluated events or transactions that may have occurred that would merit recognition or disclosure in the condensed consolidated financial statements. No subsequent events were identified.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto of Core & Main, Inc. for the fiscal year ended January 28, 2024 included in our 2023 Annual Report on Form 10-K. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed below and elsewhere in this Quarterly Report on Form 10-Q for a number of important factors, particularly those described under the caption “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Part I, Item 1A of the 2023 Annual Report on Form 10-K.

Overview

Core & Main, Inc. (“Core & Main” and collectively with its subsidiaries, the “Company”) is a leader in advancing reliable infrastructure with local service, nationwide. As a leading specialized distributor with a focus on water, wastewater, storm drainage and fire protection products, and related services, we provide solutions to municipalities, private water companies and professional contractors across municipal, non-residential and residential end markets, nationwide. Our specialty products and services are used primarily in the maintenance, repair, replacement and new construction of water, wastewater, storm drainage and fire protection infrastructure. We reach customers through a nationwide network of approximately 350 branches across 49 states. Our products include pipes, valves, fittings, storm drainage products, fire protection products, meter products and other products. We complement our core products through additional offerings, including smart meter systems, fusible high-density polyethylene (“fusible HDPE “) piping solutions, specifically engineered treatment plant products, geosynthetics and erosion control products. Our services and capabilities allow for integration with customers and form part of their sourcing and procurement function.

Basis of Presentation

The Company is a holding company and its primary material assets are its direct and indirect ownership interest in Core & Main Holdings, LP, a Delaware limited partnership (“Holdings”) and deferred tax assets associated with this ownership. Holdings has no operations and no material assets of its own other than its indirect ownership interest in Core & Main LP, a Florida limited partnership, the legal entity that conducts the operations of Core & Main. The condensed consolidated financial information of Core & Main, within this Quarterly Report on Form 10-Q, includes the consolidated financial information of Holdings and its subsidiaries. The limited partner interests of Holdings (“Partnership Interests”) not held by Core & Main are reflected as non-controlling interests in the condensed consolidated financial statements.

Fiscal Year

Significant Events During the Six Months Ended July 28, 2024

On February 9, 2024, Core & Main LP amended the terms of the Senior ABL Credit Facility (as defined in Note 6 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q) in order to extend the maturity from July 27, 2026 to February 9, 2029.

On February 9, 2024, Core & Main LP entered into a $750 million senior term loan, which matures on February 9, 2031 (the “2031 Senior Term Loan”). Proceeds of the 2031 Senior Term Loan were used or may be used in the future to, among other things, (a) repay total outstanding borrowings under the Senior ABL Credit Facility, (b) invest in organic growth and productivity initiatives, mergers and acquisitions, share repurchases or other initiatives aligned with Core & Main’s capital allocation strategy and (c) pay related fees, premiums and expenses.

On February 12, 2024, Core & Main LP entered into an interest rate swap that has a starting notional amount of $750 million that increases to $1,500 million on July 27, 2026 through the instrument maturity on July 27, 2028. The instrument is intended to reduce the Company’s exposure to variable interest rates under the senior term loan facilities.

On May 21, 2024, Core & Main LP amended the terms of the $1,500 million senior term loan (as amended, the “2028 Senior Term Loan”), in order to reduce the effective applicable margin from 2.60% to 2.00%.

Refer to Note 6 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion of the amendment to the Senior ABL Credit Facility, the 2028 Senior Term Loan, the 2031 Senior Term Loan and the interest rate swap.

On June 12, 2024, the Company’s board of directors authorized a share repurchase program (the “Repurchase Program”), pursuant to which the Company may purchase up to $500 million shares of Class A common stock. Shares repurchased under the Repurchase Program are retired immediately and are accounted for as a decrease to stockholders’ equity. For the six months ended July 28, 2024, the Company repurchased 429,996 shares of Class A common stock for a total of $21 million through open market transactions.

Key Factors Affecting Our Business

End-Markets and General Economic Conditions

Historically, demand for our products has been closely tied to municipal infrastructure spending, non-residential construction and residential construction in the U.S. We estimate that, based on net sales for the fiscal year ended January 28, 2024 (“fiscal 2023”), our exposure by end market was approximately 42% municipal, 38% non-residential and 20% residential. Infrastructure spending and the non-residential and residential construction markets are subject to cyclical market pressures. Municipal demand has been relatively steady over the long term due to the consistent and immediate need to replace broken infrastructure; however, activity levels are subject to the availability of funding for municipal projects. Non-residential and residential construction activities are primarily driven by availability of credit, interest rates, general economic conditions, consumer confidence and other factors that are beyond our control. The length and magnitude of these cycles have varied over time and by market. Cyclicality can also have an impact on the products we procure for our customers or our related services, as further discussed under “—Price Fluctuations” below. Interest rate increases in the fiscal year ended January 29, 2023 (“fiscal 2022”) and fiscal 2023 slowed home buying and new lot development, which was a contributing factor to a decline in the residential end market compared with the prior year. Future changes in interest rates or deviations from expectations of declining rates may contribute to an increase or further decline in residential and non-residential end market volume, respectively.

In November 2021, the Infrastructure Investment and Jobs Act (“IIJA”) was signed into law, which includes $55 billion to invest in water infrastructure across the U.S. In the coming years, including as a result of the IIJA, we expect increased federal infrastructure investment to have a core focus on the upgrade, repair and replacement of municipal waterworks systems and to address demographic shifts and serve the growing population. We believe these dynamics, coupled with expanding municipal budgets, create the backdrop for a favorable funding environment and accelerated investment in projects that will benefit our business.

Seasonality

Our operating results within a fiscal year are typically impacted by seasonality. Colder weather and shorter daylight hours historically have reduced construction, maintenance and repair activity. As a result, net sales are typically lower in our first and fourth fiscal quarters, especially in northern geographic regions. Abnormal levels of precipitation may negatively impact our operating results as it may result in the delay of construction projects. Our operating results may also be adversely affected by hurricanes, which typically occur during our third fiscal quarter. Our cash flows from operating activities are typically lower during the first and second fiscal quarters due to investment in working capital and annual incentive compensation payments and are typically higher during the third and fourth fiscal quarters due to cash inflows associated with receivable collections and reduced inventory purchases.

Price Fluctuations

Our financial performance is impacted by price fluctuations in the cost to procure substantially all the products we sell and our ability to reflect these changes, in a timely manner, in our customer pricing.

The costs to procure the products we sell are historically volatile and subject to fluctuations arising from changes in supply and demand, national and international economic conditions, labor and material costs, competition, market speculation, government regulation, weather events, trade policies and periodic delays in the delivery of our products. If we are able to pass through price increases to our customers, our net sales will increase; conversely, during periods of deflation, our customer pricing may decrease to remain competitive, resulting in decreased net sales. During fiscal 2022 and the fiscal year ended January 29, 2022 (“fiscal 2021”), we experienced supply chain disruption that contributed to significant price inflation and product surcharges with respect to certain products we sell. The supply chain disruption was due to several factors, including, but not limited to, unpredictable lead times and delays from our suppliers, labor availability, global logistics and the availability of raw materials. In fiscal 2023, we saw improvements in the supply chain and more predictable lead times for certain products, but for other products the supply chain remained constrained. This led to price stability in fiscal 2023 compared to the price inflation we experienced during fiscal 2022 and fiscal 2021. For fiscal 2024, for certain suppliers and product lines we have experienced greater product availability that has resulted in increased risk of lower selling prices for these product lines. Additional supply chain disruptions may result in increases in product costs which we may not be able to pass on to our customers, loss of sales due to lack of product availability or potential customer claims from the inability to provide products in accordance with contractual terms. Greater product availability from supply chain improvements may lead to increased competition that may result in price and volume declines. We continue to monitor all of these factors and the resulting price impacts.

We are also exposed to fluctuations in costs for petroleum as we distribute a substantial portion of our products by truck. In addition, we are exposed to fluctuations in prices for imported products due to logistical challenges and changes in labor, fuel, shipping container and other importation-related costs. We may also face price fluctuations on other products due to constrained labor availability and manufacturing capacity of our suppliers. Our ability to reflect these changes, in a timely manner, in our customer pricing may impact our financial performance.

Interest Rates

Certain of our indebtedness, including borrowings under the Senior Term Loan Credit Facility (as defined in Note 6 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q) and the Senior ABL Credit Facility are subject to variable rates of interest and expose us to interest rate risk. The Senior Term Loan Credit Facility and the Senior ABL Credit Facility each bear interest based on term secured overnight financing rate (“Term SOFR”). If interest rates increase, our debt service obligations on our variable-rate indebtedness will increase and our net income would decrease, even though the amount borrowed under the facilities remains the same. As of July 28, 2024, we had $2,452 million of outstanding variable-rate debt. We seek to mitigate our exposure to interest rate volatility through the entry into interest rate swap instruments, such as our interest rate swap, associated with borrowings under the Senior Term Loan Credit Facility, which effectively converts $800 million of our variable rate debt to fixed rate debt, with notional amount decreases to $700 million on July 27, 2025 through the instrument maturity on July 27, 2026. On February 12, 2024, Core & Main LP entered into an additional interest rate swap, associated with borrowings under the Senior Term Loan Credit Facility, that has a starting notional amount of $750 million that increases to $1,500 million on July 27, 2026 through the instrument maturity on July 27, 2028, which effectively converts our variable rate debt to fixed rate debt. Despite these efforts, unfavorable movement in interest rates may further result in higher interest expense and cash payments.

Acquisitions

In addition to our organic growth strategy, we opportunistically pursue strategic asset and business acquisitions to grow our business. Below is a summary of the acquisitions that closed during the six months ended July 28, 2024 (the “Fiscal 2024 Acquisitions”) and the six months ended July 30, 2023 (the "Fiscal 2023 Acquisitions") with an aggregate transaction value of $623 million and $161 million, subject to working capital adjustments, respectively.

Product Lines

Closing Date

Fiscal 2024

Geothermal Supply Company Inc.

Pipes, Valves & Fittings

May 2024

EGW Utilities Inc.

Pipes, Valves & Fittings; Meter products

April 2024

NW Geosynthetics Inc.

Core & Main, Inc. [CNM] Filings
10-Q	[2024-09-04]
10-Q	[2024-06-04]
10-K	[2024-03-19]
10-Q	[2023-12-05]
10-Q	[2023-09-06]
10-Q	[2023-06-06]
10-K	[2023-03-28]
10-Q	[2022-12-13]
10-Q	[2022-09-13]
10-Q	[2022-06-14]
10-K	[2022-03-30]
S-1	[2022-01-03]
10-Q	[2021-12-07]
10-Q	[2021-09-14]
S-1	[2021-05-21]