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What changed in Core & Main, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Core & Main, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+422 added−456 removedSource: 10-K (2024-03-19) vs 10-K (2023-03-28)

Top changes in Core & Main, Inc.'s 2024 10-K

422 paragraphs added · 456 removed · 343 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

99 edited+11 added−9 removed22 unchanged
Biggest changeOur hydrants provide a point-of-access for fire fighters to quickly tap into pressurized water systems, and they vary based on local specifications and regulations. Our fittings and restraints, made from a variety of materials depending on local specifications and regulations, are used to connect pipe sections, valves and other devices to each other.
Biggest changeOur valves are used to control the flow of water within water transmission networks and are often specified to meet the needs of each project. Our hydrants provide a point-of-access for fire fighters to quickly tap into pressurized water systems, which vary based on local municipal specifications and regulations.
Our sales reach, technical knowledge, broad product portfolio, customer service, project planning and delivery capabilities, and ability to provide local expertise nationwide, make us a critical partner to both our customers and suppliers.
Our sales reach, technical product knowledge, broad product portfolio, customer service, project planning and delivery capabilities, and ability to provide local expertise, nationwide, make us a critical partner to both our customers and suppliers.
Our sales representatives are highly experienced with in-depth product and technical knowledge, significant local insights and strong long-term customer relationships, all of which are critical to our success. On average, our field sales representatives have over 13 years of experience in the water, wastewater, storm drainage and fire protection industries.
Our field sales representatives are highly experienced with in-depth product and technical knowledge, significant local insights and strong long-term customer relationships, all of which are critical to our success. On average, our field sales representatives have over 13 years of experience in the water, wastewater, storm drainage and fire protection industries.
Our mission is to serve as an industry leader, supplying local expertise, products and services to build innovative water, wastewater, storm drainage and fire protection solutions for the communities we serve. We support our customers and our communities in their efforts to find both short- and long-term solutions to conserve water.
Our mission is to serve as an industry leader, supplying local expertise, products and services to build innovative water, wastewater, storm drainage and fire protection infrastructure solutions for the communities we serve. We support our customers and our communities in their efforts to find both short- and long-term solutions to conserve water.
In 2007, a group of private equity investors acquired the HD Supply business from The Home Depot and subsequently executed an initial public offering in 2013. In August 2017, HD Supply Waterworks was acquired by Clayton, Dubilier & Rice, LLC (“CD&R”) from HD Supply and was subsequently rebranded as Core & Main.
In 2007, a group of private equity investors acquired HD Supply from The Home Depot and subsequently executed an initial public offering in 2013. In August 2017, HD Supply Waterworks was acquired by Clayton, Dubilier & Rice, LLC (“CD&R”) from HD Supply and was subsequently rebranded as Core & Main.
Noncompliance with these laws and regulations can subject us to penalties, fines or various forms of civil, administrative, or criminal actions, any of which could have a material effect on our financial condition, results of operations, cash flows or competitive position.
Noncompliance with these laws and regulations can subject us to penalties, fines or various forms of civil, administrative, or criminal actions, any of which could have a material adverse effect on our financial condition, results of operations, cash flows or competitive position.
The cost of compliance with environmental, health and safety laws and capital expenditures required to meet regulatory requirements is not currently anticipated to have a material effect on our financial condition, results of operations, cash flows or competitive position.
The cost of compliance with environmental, health and safety laws and capital expenditures required to meet regulatory requirements is not currently anticipated to have a material adverse effect on our financial condition, results of operations, cash flows or competitive position.
We believe this allows each local branch manager to tailor his or her branch’s strategy, marketing and product and service offerings to address the specific needs of customers in each of their markets, while maintaining many of the benefits of our company’s scale.
We believe this allows each local branch manager to tailor his or her branch’s strategy, marketing and product and service offerings to address the specific needs of customers in each branch’s markets, while maintaining many of the benefits of our Company’s scale.
Our branch associates have the opportunity to earn competitive compensation through our performance-based compensation plans, which are based on local performance. We support our network of approximately 320 branches with the following company-wide resources: strategic account management, product specialists, category management, sourcing, supply chain, finance, tax, accounting, payroll, marketing & communications, human resources, legal, safety and information technology.
Our branch associates have the opportunity to earn competitive compensation through our performance-based compensation plans, which are based on local performance. We support our network of approximately 335 branches with the following company-wide resources: strategic account management, product specialists, category management, sourcing, supply chain, finance, tax, accounting, payroll, marketing and communications, human resources, legal, safety and information technology.
Core & Main 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.
Core & Main is a leader in advancing reliable infrastructure with local service, nationwide. As a leading specialty 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.
We believe we are well-positioned to grow our share with these customers due to our dedicated sales team, which includes engineers and other experts who can provide significant insights on large, complex projects, including cases in which our customers are asked to design and build new water systems or wastewater treatment plants.
We believe we are well-positioned to grow our share with these customers due to our dedicated sales team, which includes engineers and other experts who can provide valuable insights on large, complex projects, including cases in which our customers are asked to design and build new water systems or wastewater treatment plants.
We face competition on a national level from only one other national distributor, but we are unique in our dedicated focus on water and fire protection infrastructure. The remainder of our market is served by hundreds of regional, local and specialty niche distributors, and through direct sales by manufacturers to end users.
We face competition on a national level from only one other national distributor, but we are unique in our dedicated focus on water and fire protection infrastructure. The remainder of our market is served by hundreds of regional, local and specialty niche distributors, and through direct sales by suppliers to end users.
Each branch carries approximately 4,500 SKUs on average, with many of them on hand as inventory and the rest available for delivery. Our branch managers have the autonomy to optimi ze their product and service offerings based on the local specifications, regulations and customer preferences within each local market.
Each branch sells approximately 4,500 SKUs on average, with many of them on hand as inventory and the rest available for delivery. Our branch managers have the autonomy to optimi ze their product and service offerings based on the local specifications, regulations and customer preferences within each local market.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website, free of charge, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the U.S.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website, free of charge, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC.
In the coming years, 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.
In the coming years, we expect increased federal infrastructure investment to have a core focus on the upgrade, repair and replacement of municipal water infrastructure systems, and to address demographic shifts and serve the growing population.
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 are one of only two national distributors operating across large and highly fragmented markets, which we estimate to represent approximately $40 billion in annual sales.
Our products and services are used primarily in the maintenance, repair, replacement and new construction of water, wastewater, storm drainage and fire protection infrastructure. We are one of only two national distributors operating across large and highly fragmented markets, which we estimate to represent approximately $39 billion in annual sales.
Through favorable purchasing capabilities, fixed cost leverage, facility optimization, access to products and working capital optimization, we have been able to generate significant margin improvement and synergistic value from businesses we acquire.
We have been able to generate margin improvement and synergistic value from businesses we acquire through favorable purchasing capabilities, fixed cost leverage, facility optimization, access to new products and working capital optimization.
Utilize Scale and Platform to Accelerate New Product Adoption We utilize our vast geographic footprint, customer relationships, local industry knowledge and training capabilities to introduce and accelerate the adoption of new products and technology in our industry.
Utilize National Platform to Accelerate New Product Adoption We utilize our vast geographic footprint, customer relationships, local industry knowledge and training capabilities to introduce and accelerate the adoption of new products and technology in our industry.
Each region is led by a regional vice president who manages a multistate territory. This regional structure enables us to address the specific management, strategic and operational needs of each region. Our Distribution Network Our branch-based b usiness model is the core of our operations and the primary component of our distribution network.
Each region is led by a regional vice president who manages a multi-state territory. This regional structure enables us to address the specific management, strategic and operational needs of each region. Our Distribution Network Our branch-based b usiness model is the core of our operations and the primary component of our distribution network.
We take a disciplined approach to sourcing, acquiring and integrating complementary businesses that help us expand into new geographic areas, acquire key talent or offer new products and services. In addition, we evaluate and pursue opportunistic acquisitions in industries adjacent to those we currently serve.
We take a disciplined approach to sourcing, acquiring and integrating complementary businesses that help us expand into new geographies, acquire key talent or offer new products and services. In addition, we evaluate and pursue opportunistic acquisitions in industries adjacent to those we currently serve.
Furthermore, we estimate that we had a near-equal mix of sales related to construction on new projects and existing repair and replace projects in fiscal 2022. Our company and our people are committed to advancing reliable infrastructure with local service, nationwide.
Furthermore, we estimate that we had a near-equal mix of sales related to construction on new projects and existing repair and replace projects in fiscal 2023. The Company and our people are committed to advancing reliable infrastructure with local service, nationwide.
We embrace our responsibility in contributing to the evolution of our industry over the long term, providing innovative technology solutions and giving visibility to the critical importance of reliable water infrastructure and fire protection systems. 3 Our History Our first legacy distribution company dates back to 1874 and over the years, our company has grown organically and through a series of mergers and acquisitions.
We embrace our responsibility in contributing to the evolution of our industry over the long term, providing innovative solutions and giving visibility to the critical importance of reliable water infrastructure systems. Our History Our first legacy distribution company dates back to 1874, and over the years, the Company has grown organically and through a series of mergers and acquisitions.
Our technical knowledge and experience are complemented by our proprietary customer facing digital technology tools, which enable us to work closely and efficiently with our customers in material management, timely inventory purchasing, quoting and coordinated jobsite delivery.
Our technical k nowledge and experience are complemented by our proprietary customer facing digital technology tools, which enable us to work closely and efficiently with our customers in material management, timely inventory purchasing, quoting and coordinated jobsite delivery.
Our storm drainage product offering includes corrugated HDPE and metal piping systems, retention basins, inline drains, manholes, grates, geosynthetics and erosion control products, and other related products. Our storm drainage product offering varies by market depending on local codes and engineering specifications. Storm drainage products accounted for approximately 14% of our net sales in fiscal 2022.
Our storm drainage product offering includes corrugated HDPE and metal piping systems, retention basins, inline drains, manholes, grates, geosynthetics and erosion control products, and other related products. Our storm drainage product offering varies by market depending on local codes and engineering specifications. Storm drainage products accounted for approximately 15% of our net sales in fiscal 2023.
We estimate that our net sales accounted for approximately 17% of our $40 billion addressable market in fiscal 2022. The principal competitive factors in our industry include the breadth, availability, access and pricing of products and services, technical knowledge and project planning capabilities, local expertise, as well as delivery capability and reliability.
We estimate that our net sales accounted for approximately 17% of our $39 billion addressable market in fiscal 2023. The principal competitive factors in our industry include the breadth, availability, access and pricing of products and services, technical knowledge and project planning capabilities, local expertise, as well as delivery capability and reliability.
Demand across the U.S. non-residential construction market has historically lagged residential construction activity as commercial development is necessary to support new housing development. Over the long term, we expect non-residential construction activity to increase as suburban communities expand and demand increases for our waterworks, storm drainage and fire protection products.
Demand across the U.S. non-residential construction market has historically lagged residential construction activity as commercial development is necessary to support new housing development. Over the long term, we expect non-residential construction activity to increase as suburban communities expand and demand increases for our clean water, wastewater, storm drainage and fire protection products.
While our sales representatives are typically assigned to a local branch and report to a branch manager, they can service an entire district and report to a district manager based on a specific customer or project need and the size of the branch.
While our field sales representatives are typically assigned to a local branch and report to a branch manager, they can service an entire district and report to a district manager based on a specific customer, product knowledge or project need, and the size of the branch or district.
Municipal demand has exhibited steady growth over the long term due to the critical and immediate need to replace aged water infrastructure.
Municipal demand has exhibited steady growth over the long term due to the critical need to replace aged water infrastructure.
We strategically conduct business with our top suppliers in order to optimize our scale advantages, but we also have the flexibility to source the majority of our products from a number of alternate suppliers when necessary. Our Competition The U.S. water, wastewater, storm drainage and fire protection products distribution industry, and the end markets we serve, are highly fragmented.
We strategically conduct business with our top suppliers in order to optimize our purchasing advantages, but we also have the flexibility to source the majority of our products from a number of alternate suppliers when necessary. Our Competition The U.S. wa ter, wastewater, storm drainage and fire protection products distribution industry, and the end markets we serve, are highly fragmented.
Our sales representatives also include approximately 550 field sales representatives who routinely visit existing customers, potential customers and jobsites. These field sales representatives remain attuned to activity in their local market, identifying and tracking active projects, and are responsible for generating sales and identifying new customers and projects.
Our customer support representatives also include approximately 575 field sales representatives who routinely visit existing customers, potential customers and jobsites. These field sales representatives remain attuned to activity in their local market, identifying and tracking active projects, and are responsible for generating sales and identifying new customers and projects.
We intend to continue pursuing opportunities to strengthen our presence in metropolitan statistical areas (“MSAs”) where we have an established footprint as well as in certain underserved markets. We believe we are well-positioned to do so through our market intelligence and our ability to attract and develop sales talent. We also intend to continue selectively driving greenfield expansion.
We intend to continue pursuing opportunities to strengthen our presence in metropolitan statistical areas (“MSAs”) where we have an established footprint as well as in certain underserved markets. We believe we are well-positioned to do so through our market intelligence and ability to attract and develop sales talent.
Our sales approach is highly consultative, as our representatives are often deeply involved in our customers’ processes and assist in project scoping, product selection and materials management.
O ur sales approach is highly consultative, as our representatives are often involved in our customers’ processes and assist in project scoping, product selection and materials management.
At Core & Main, our associates develop by learning from the best of the best—on the job, in our national learning center, through in-house subject matter experts and with virtual and online academies. Our learning team offers a wide range of award-winning training programs and courses such as sales, operations, product expertise, leadership, management and safety.
Our associates develop by learning from the best of the best—on the job, in our national learning center, through in-house subject matter experts and with virtual and online academies. Our learning team offers a wide range of award-winning sales, operations, product expertise, leadership and safety training programs and courses.
An end-to-end review of our pricing strategies identified key margin enhancement opportunities, including continued optimization of system-wide pricing through IT enhancements, data-driven customer and product analysis that enable us to identify price opportunities and mitigate potential margin impacts from price changes.
An end-to-end review of our pricing strategies identified key margin enhancement opportunities, including continued optimization of system-wide pricing through information technology (“IT”) enhancements and data-driven customer and product analysis that enable us to identify price optimization opportunities and mitigate potential margin impacts from changes in product costs.
Our Human Capital We believe our associates are the key drivers of our success, and we are focused on attracting, training, promoting and retaining industry-leading talent. Our authentic, purpose-driven culture enables our associates to thrive in our company and our industry. We have a strong track record of developing our associates for success and driving high employee engagement.
We are focused on attracting, training, promoting and retaining industry-leading talent. Our authentic, purpose-driven culture enables our associates to thrive in our company and our industry. We have a strong track record of developing our associates for success and driving high employee engagement.
Securities and Exchange Commission (“SEC”). Additionally, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at www.sec.gov.
Additionally, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us, at www.sec.gov.
These federal, state, and local laws and regulations include laws relating to wage and hour, permitting and licensing, state contractor laws, workers’ safety, transportation, tax, business with disadvantaged business enterprises, collective bargaining and other labor matters, environmental and associate benefits.
These federal, state, and local laws and regulations relate to wage and hour requirements, permitting and licensing, state contractor requirements, workers’ safety, transportation, tax, SEC regulations, business with disadvantaged business enterprises, collective bargaining and other labor matters, environmental and associate benefits.
Our specialized fleet of delivery equipment allows us to deliver materials to our customers’ worksites in a timely and cost-efficient manner. 8 We also offer direct distribution options to our customers on a wide range of products.
Our specialized fleet of delivery equipment enables delivery of materials to our customers’ worksites in a timely and cost-efficient manner. We also offer direct distribution options to our customers on a wide range of products.
Item 1. Business Our Company Core & Main, Inc. (“Core & Main” and collectively with its subsidiaries, the “Company,” “we,” “our” or “us”) is a holding company and its primary material asset is its direct and indirect ownership interest in Core & Main Holdings, LP, a Delaware limited partnership (“Holdings”).
Item 1. Business Our Company Core & Main, Inc. (“Core & Main” and collectively with its subsidiaries, the “Company,” “we,” “our” or “us”) 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.
Our leadership incentive programs link compensation levels to the achievement of branch or region-specific goals based on profitability and return on investment. Our “local service, nationwide” philosophy incentivizes both our sales force and our operations team to be entrepreneurial, making decisions grounded in a customer-centric approach.
Our leadership incentive programs link compensation levels to the achievement of branch or region-specific profitability and working capital efficiency goals. Our “local service, nationwide” philosophy incentivizes both our sales force and our operations team to be entrepreneurial, making decisions grounded in a customer-centric approach.
Based on management’s estimates, we believe that our addressable market in the U.S. for the distribution of water, wastewater, storm drainage and fire protection products, and related services, represented approximately $40 billion in sales in fiscal 2022.
Based on management’s estimates, we believe that our addressable market in the U.S. for th e distribution of water, wastewater, storm drainage and fire protection products, and related services, represented approximately $39 billion in sales in fiscal 2023.
Our branches are strategically located near our customers and vary in size depending on local demand and customer needs. Our branches average approximately 10 associates and include branch management, sales representatives, warehouse staff and other support staff. In our larger branches, the staff may also include a sales manager, purchasing manager or estimator.
Our branches are strategically located near our customers and vary in size depending on local demand and customer needs. Our branches employ an average of 12 associates including branch management, sales representatives, warehouse staff and other support staff. In our larger branches, the staff may also include a sales manager, purchasing manager or estimator.
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 November 2021, the Infrastructure Investment and Jobs Act (“IIJA”) was signed into U.S. law, which included an allocation of $55 billion to invest in water infrastructure across the U.S.
Our Strategies We intend to capitalize on our competitive strengths to deliver profitable growth and create shareholder value through the following core strategies: Replicate Successful Expansion in Underpenetrated Geographies We have demonstrated an ability to successfully expand in underpenetrated geographies, having opened 15 new locations since 2017.
Our Strategies We intend to capitalize on our competitive strengths to deliver profitable growth and create shareholder value through the following core strategies: Replicate Successful Expansion in Underpenetrated Geographies We have demonstrated an ability to successfully expand in underpenetrated geographies.
Non-Residential We estimate that approximately 39% of our net sales in fiscal 2022 were directly related to clean water and wastewater infrastructure, storm drainage and fire protection systems supporting U.S. non-residential construction activity, including industrial, commercial, institutional, warehouse and multi-family development projects.
Non-Residential We estimate that approximately 38% of our net sales in fiscal 2023 were directly related to clean water and wastewater infrastructure, storm drainage and fire protection systems supporting U.S. non-residential construction activity, including commercial, industrial, institutional, warehousing, multi-family and highway and street projects.
Most other associates also participate in a profit sharing plan that aligns their compensation to profitability and return on investment. Training and Development Our associates are the most essential resource to our company. Their knowledge, expertise and growth are critical to our company’s success.
Most other associates also participate in a profit-sharing program that aligns their compensation to profitability and working capital efficiency. Training and Development Our associates are the most essential resource to our Company. Their knowledge, expertise and growth are critical to our Company’s success.
For specific smart metering, treatment plant, storm drainage or fusible HDPE pipe solutions, our sales associates partner with a deep and dedicated team of nearly 240 national and regional product specialists to assist customers in project scoping and specialized product selection.
For specific smart metering, treatment plant, storm drainage, geosynthetics and erosion control, or fusible HDPE pipe solutions, our sales associates partner with a deep and dedic ated team of over 350 national and regional product specialists to assist customers in project scoping and specialized product selection.
We believe that we can expand our presence in these underpenetrated product categories without investing significant capital or incurring substantial costs as a result of our existing branch network, favorable supplier relationships and low working capital requirements.
We believe that we can expand our presence in these underpenetrated product categories without investing significant capital or incurring substantial costs as a result of our existing branch network, favorable supplier relationships and low working capital requirements. Opportunistically Pursue Strategic Acquisitions We have a track record of acquiring and integrating businesses.
We also offer customized fabrication and kitting services, providing a comprehensive solution for all fire protection product needs. Our fire protection products meet strict quality standards, and our offering varies by market based on local specifications, regulations and fire codes. Fire protection products accounted for approximately 11% of our net sales in fiscal 2022.
We also offer customized fabrication and kitting services, providing a comprehensive solution for all fire protection product needs. Our fire protection products meet strict quality standards, and our offering varies by market based on local municipal specifications, regulations and fire codes.
We offer a comprehensive portfolio of more than 200,000 stock keeping units (“SKUs”) covering a full spectrum of specialized products and services, including pipes, valves & fittings, storm drainage products, fire protection products and fabrication services, and smart metering products and technology. Our products are generally unique to our industry and must meet local specifications.
We offer a comprehensive portfolio of more than 200,000 stock keeping units (“SKUs”) covering a full spectrum of specialized products and services, including pipes, valves & fittings, storm drainage products, fire protection products and fabrication services, and smart metering products and technology.
Our award-winning training programs enable us to accelerate development of our top talent to drive profitable growth while maintaining a supportive and mission-driven culture. We intend to continue investing in our already strong talent base by attracting and developing associates. Our training and leadership curricula and expanded diversity and inclusion programs drive high associate engagement and a positive associate experience.
Our award-winning training programs enable us to accelerate the development of our top talent to drive profitable growth while maintaining a supportive and mission-driven culture. We intend to continue investing in our already strong talent base by attracting and developing associates.
Our Sales Force As of January 29, 2023, we had approximately 1,700 sales representatives, the majority of whom were inside sales representatives based at local branches. Inside sales representatives are responsible for project management, coordinating incoming orders, providing estimates and ordering material.
Our Sales Force As of January 28, 2024, we employed approximately 1,800 customer support representatives, the majority of whom were inside sales representatives based at local branches. Inside sales representatives are responsible for project management, coordinating incoming orders, providing estimates and ordering material.
Our pipe products, which typically range in diameter from 1/2” to 60”, include materials such as PVC, ductile iron, HDPE, steel and copper. Our valves are used to control the flow of water within water transmission networks and are often specified to meet the needs of each project.
Pipes, Valves & Fittings Pipes, valves, hydrants and fittings are used in the distribution and flow control of water within water and wastewater transmission networks. Our pipe products, which typically range in diameter from 1/2” to 60”, include materials such as PVC, ductile iron, fusible HDPE, steel and copper.
Given our extensive geographic footprint and technical knowledge of products and local specifications, we believe we are well-equipped to anticipate and serve local needs as well as large private underground utility contractors who require national reach and an extensive product offering.
Municipalities establish local product specifications based on regulatory requirements and engineering standards. Given our extensive geographic footprint and technical knowledge of products and local municipal specifications, we believe we are well-equipped to anticipate and serve the needs of both local municipalities and large private underground utility contractors who require a national reach and an extensive product offering.
Pay for Performance We believe that our strong culture, consistent investment in our people and competitive compensation programs result in low turnover rates across key roles. Sales associates have the opportunity to earn competitive compensation through our performance-based compensation structure, which aligns our interests with those of our associates.
Approximately 105 of our associates were covered by collective bargaining agreements. Pay for Performance We believe that our strong culture, consistent investment in our people and competitive compensation programs help to retain talent across key roles. Sales associates have the opportunity to earn competitive compensation through our performance-based compensation structure, which aligns our interests with those of our associates.
Our Operating Structure We strategically organize our branch network to meet the specific needs of our customers in each local market, and we support our branches with the resources of a large company, delivered through district and regional management, including company-wide sales, operations and back-office functions.
We believe that we are a leader in the local markets that we serve, and our national reach gives us meaningful competitive advantages compared to our smaller competitors. 6 Our Operating Structure We strategically organize our branch network to meet the specific needs of our customers in each local market, and we support our branches with the resources of a large company, delivered through district and regional management, including company-wide sales, operations and back-office functions.
Our sales force also includes a deep and dedicated team of over 240 technical product specialists at the national and regional levels who have expertise in specific product and service offerings, and who support our other sales representatives with product training and technical support.
Our sales force also includes a knowledgeable and dedicated team of over 350 technical product specialists at the national and regional levels who have expertise in specific product and service offerings, and who support our other sales representatives with product training and technical support. 7 Our Human Capital We believe our associates are the key drivers of our success.
Sales through our strategic accounts program represented less than 5% of our fiscal 2022 net sales.
Sales through our strategic accounts program represented approximately 5% of our fiscal 2023 net sales.
Louis, MO 63146, and our telephone number is (314) 432-4700. Our website is www.coreandmain.com. We use our website as a routine channel for distribution of information that may be material to investors, including news releases, financial information, presentations and corporate governance information.
We use our website as a routine channel for distribution of information that may be material to investors, including news releases, financial information, presentations and corporate governance information.
Our size and scale, supplier relationships, and technical knowledge of products and local specifications enable us to obtain preferred access to specialized products and preferred access to products during periods of material shortages, or when shorter-than-usual lead times are required for certain projects. This provides us with a competitive advantage versus smaller competitors, particularly for large and complex projects.
Our size and national reach, supplier relationships, and technical knowledge of products and local municipal specifications enable us to obtain preferred access to specialized products and preferred access to products during periods of material shortages, or when shorter-than-usual lead times are required for certain projects.
As of January 29, 2023, we have a network of approximately 320 branch locations in 48 states across the U.S., which serve as a critical link between over 4,500 suppliers and a diverse and long-standing base of approximately 60,000 customers.
As of January 28, 2024, we had a network of approxi mately 335 bra nch locations in 48 states across the U.S., which serve as a critical link between approximately 5,000 suppliers and a diverse and long-standing base of over 60,000 customers.
Geosynthetics and erosion control is representative of these opportunities as it is a complementary product offering to existing customers in a large and fragmented market with significant growth opportunity.
We have identified a number of underpenetrated product categories in large and attractive markets where we can grow and enhance our market share. Geosynthetics and erosion control is representative of these opportunities as it is a complementary product offering to existing customers in a large and fragmented market with significant growth opportunity.
We believe our customer facing technology tools build customer loyalty and drive repeat business, and also create a competitive advantage over smaller competitors who may not have the scale or resources to provide similar technology or services. 7 Our Suppliers We have strong relationships with our suppliers due to our long history in the industry, substantial purchasing scale, national footprint and ability to reach a fragmented customer base.
We believe our customer facing technology tools build customer loyalty and drive repeat business, and also create a competitive advantage over smaller competitors who may not have the scale or resources to provide similar technology or services.
New laws or changes in or new interpretations of existing laws, the discovery of previously unknown contamination or the imposition of other environmental, health or safety liabilities or obligations in the future may lead to additional compliance or other costs, which could have a material effect on our financial condition, results of operations, cash flows or competitive position. 10 Organizational Structure Core & Main was incorporated on April 9, 2021 for the purpose of facilitating the IPO and other related transactions in order to carry on the business of Holdings and its consolidated subsidiaries.
New laws or changes in or new interpretations of existing laws, the discovery of previously unknown contamination or the imposition of other environmental, health or safety liabilities or obligations in the future may lead to additional compliance or other costs, which could have a material adverse effect on our financial condition, results of operations, cash flows or competitive position.
Our category management team has identified numerous opportunities to continue shifting spend to suppliers with the best pricing and payment programs in order to optimize supplier incentives to expand gross margins. 5 Additionally, we have a specialized team dedicated to driving sustainable margin improvement through pricing analytics.
Our national category management team actively manages our spending with suppliers in order to optimize pricing and supplier incentives to expand gross margins. 4 Additionally, we have a specialized team dedicated to driving sustainable margin improvement through pricing analytics.
This category also includes other complementary products and services used for the service, repair and replacement of underground water infrastructure. Pipes, valves & fittings products accounted for approximately 68% of our net sales in fiscal 2022. Storm Drainage Our storm drainage products are used in the construction of stormwater management systems to retain, detain and divert stormwater runoff.
Pipes, valves & fittings products accounted for approximately 67% of our net sales in fiscal 2023. Storm Drainage Our storm drainage products are used in the construction of stormwater management systems to retain, detain and divert stormwater runoff.
Furthermore, the IIJA provides funding to protect against droughts, floods, heat and wildfires, funding to repair roads and bridges, and funding to create more modern and resilient airport infrastructure, which could provide benefits for non-residential construction activity over the next several years. 4 Residential We estimate that approximately 22% of our net sales in fiscal 2022 were directly related to clean water and wastewater infrastructure projects to supply and service residential construction activity.
Furthermore, the IIJA provides funding to protect against droughts, floods, heat and wildfires, funding to repair roads and bridges, and funding to create more modern and resilient airport infrastructure, which could provide benefits for non-residential construction activity over the next several years.
Our Intellectual Property We rely on trademarks, trade names and licenses to maintain and improve our competitive position. We believe that we have the trademarks, trade names and licenses necessary for the operation of our business as we currently conduct it. We rely on both trademark registration and common law protection for trademarks.
We believe that we have the trademarks, trade names and licenses necessary for the operation of our business as we currently conduct it. We rely on both trademark registration and common law protection for trademarks. Trademark rights may potentially extend indefinitely and are dependent upon national laws and our continued use of the trademarks.
Our national footprint and reach to local communities are essential to our suppliers, as we have a highly developed understanding of the local markets, customer base and growth opportunities. We believe we are one of the largest volume customers for many of our suppliers, leading to favorable purchasing arrangements regarding product availability, payment terms and pricing.
We believe we are one of the largest volume customers for many of our suppliers, leading to favorable purchasing arrangements regarding product availability, payment terms and pricing.
“Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Initial Public Offering and Secondary Offerings”) and our holding company structure, see Note 1 to the consolidated financial statements included elsewhere in the Annual Report on Form 10-K. Available Information Our principal executive offices are located at 1830 Craig Park Court, St.
For more information regarding the IPO, the Reorganization Transactions (as defined below in Item 7. “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Initial Public Offering and Secondary Offerings”) and our holding company structure, see Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We believe we can efficiently open new branches in attractive markets given our highly capable talent pool, our ability to capitalize on our scale, and learning curve advantages based on past successes in entering new geographies.
We also intend to continue selectively driving greenfield expansion, having opened nearly 20 new locations since 2017. We believe we can efficiently open new branches in attractive markets given our talent pool, scale advantages and learning curve advantages based on past successes in entering new geographies.
Meters Our smart meters are used for water volume measurement and regulation and include automated meter reading and advanced metering infrastructure technologies. We offer multi-stage smart metering solutions to our customers, including meter accessories, meter installation, network infrastructure and software installation, training and long-term service contracts to deliver cost efficiencies to our customers.
We offer multi-stage smart metering solutions to our customers, including meter accessories, meter installation, network infrastructure and software installation, training and long-term service contracts to deliver cost efficiencies to our customers. Our smart meters and advanced metering technology provide labor savings benefits for our municipal customers and help reduce water loss through leak detection.
We also provide customized training, talent reviews and early career rotational programs for college graduates to develop as future leaders.
We also provide customized training, talent reviews and early career rotational programs for college graduates to develop as future leaders. We partner with our suppliers to enhance our knowledge base as new products and best practices are continually introduced.
We are deeply involved in our customers’ planning processes, and we have the ability to support our customers by converting engineered drawings and specifications into accurate and comprehensive material project plans.
Our local sales associates take a consultative sales approach, using knowledge of the local regulatory requirements and municipal specifications to provide customer-specific product and service solutions. We are deeply involved in our customers’ planning processes, and we have the ability to support our customers by converting engineered drawings into accurate and comprehensive material project plans.
The current under-build of housing in the U.S. compared with household formations implies significant pent-up demand and continued growth going forward.
Over the long-term, U.S. residential construction activity is expected to grow as a result of population growth, low housing inventory and demographic population shifts. The current under-build of housing in the U.S. compared with household formations implies significant pent-up demand and continued growth going forward.
Assertions by third parties that we violate their intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. Regulation We are subject to various federal, state, and local laws and regulations, compliance with which increases our operating costs and subjects us to the possibility of regulatory actions or proceedings.
Regulation We are subject to various federal, state, and local laws and regulations, compliance with which increases our operating costs and subjects us to the possibility of regulatory actions or proceedings.
We utilize our deep supply chain relationships to provide customers with a “one-stop-shop” experience and customized support in their efforts to maintain and construct water, wastewater, storm drainage and fire protection systems. Our scale and geographic footprint allows us to obtain preferred access to products for our customers, even during periods of material shortages.
Our customers choose us for our breadth of products and services, extensive industry knowledge, familiarity with local municipal specifications, convenient branch locations and project management capabilities. We utilize our deep supply chain relationships to provide customers with a “one-stop-shop” experience and customized support in their efforts to maintain and construct water, wastewater, storm drainage and fire protection systems.
Benefits Our comprehensive benefits program reflects our overall belief that benefits should address the whole associate experience, including health and well-being. We offer associates a comprehensive benefits package, which includes access to a concierge service to help them navigate their benefits. These efforts are representative of our focus on promoting a consistent, positive experience for all associates.
We offer associates a comprehensive benefits package, which includes access to a concierge service to help them navigate their benefits. These efforts are representative of our focus on promoting a consistent, positive experience for all associates. 8 Our Intellectual Property We rely on trademarks, trade names and licenses to maintain and improve our competitive position.
Examples include the advancement of smart metering and fusible high-density polyethylene (“HDPE”) solutions for municipal customers, fabrication and kitting assemblies for fire protection contractors, and geosynthetics and erosion control products for residential and non-residential developers. We have identified a number of underpenetrated product categories in large and attractive markets where we can grow and enhance our market share.
Examples include the advancement of smart metering, fusible high-density polyethylene (“fusible HDPE”) and treatment plant solutions for municipal customers, fabrication and kitting assemblies for fire protection contractors, and geosynthetics and erosion control products for residential and non-residential developers.
Trademark rights may potentially extend indefinitely and are dependent upon national laws and our continued use of the trademarks. Except for the Core & Main trademark and licenses of commercially available third-party software, we do not consider our trademarks, trade names or licenses to be material to the operation of our business taken as a whole.
Except for the Core & Main trademark and licenses of commercially available third-party software, we do not consider our trademarks, trade names or licenses to be material to the operation of our business as a whole. As we continue to execute on our private label distribution growth strategy, we anticipate the associated trademarks will grow in value.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, our Certificate of Incorporation and By-laws collectively: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • provide for a classified board of directors, which divides our board of directors into three classes, with members of each class serving staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting; • limit the ability of stockholders to remove directors if the CD&R Investors (together with their affiliates) cease to beneficially own shares of our common stock representing at least 40% of the total voting power of the outstanding shares of our common stock; • provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office; • prohibit stockholders from calling special meetings of stockholders if the CD&R Investors (together with their affiliates) cease to beneficially own shares of our common stock representing at least 40% of the total voting power of the outstanding shares of our common stock; • prohibit stockholder action by consent in writing or electronic transmission, thereby requiring all actions to be taken at a meeting of the stockholders, if the CD&R Investors (together with their affiliates) cease to beneficially own shares of our common stock representing at least 40% of the total voting power of the outstanding shares of our common stock; • opt out of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, or any successor provision to Section 203, until Section 203 by its terms would, but for the applicable provisions of our Certificate of Incorporation, apply to us and the CD&R Investors (together with their affiliates) cease to beneficially own shares of our common stock representing at least 5% of the total voting power of the outstanding shares of our common stock; • establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders; and • require the approval of holders of at least 66 2/3% of the voting power of the outstanding shares of our common stock then entitled to vote thereon to amend our By-laws and certain provisions of our Certificate of Incorporation if the CD&R Investors (together with their affiliates) cease to beneficially own shares of our common stock representing at least 40% of the total voting power of the outstanding shares of our common stock.
Biggest changeFor example, our Certificate of Incorporation and By-laws collectively: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • provide for a classified board of directors, which divides our board of directors into three classes, with members of each class serving staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting; • limit the ability of stockholders to remove directors without cause; • provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office; • prohibit stockholders from calling special meetings of stockholders; • prohibit stockholder action by consent in writing or electronic transmission, thereby requiring all actions to be taken at a meeting of the stockholders; • do not opt out of Section 203 of the Delaware General Corporation Law (the “DGCL”), which generally prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, or any successor provision to Section 203; 32 • establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders; and • require the approval of holders of at least 66 2/3% of the voting power of the outstanding shares of our common stock then entitled to vote thereon to amend our By-laws and certain provisions of our Certificate of Incorporation.
We are subject to risks associated with operating internationally. We export and import certain of our products to different jurisdictions outside the U.S., and the shipment of goods across international borders is subject to extensive trade laws and regulations.
We are subject to risks associated with operating internationally. We export and import certain of our products to different jurisdictions outside the U.S. The shipment of goods across international borders is subject to extensive trade laws and regulations.
Under the terms of the Amended and Restated Limited Partnership Agreement, Holdings is obligated to make tax distributions to holders of Partnership Interests, including us, to the extent that other distributions made by Holdings are otherwise insufficient to pay the tax liabilities of holders of Partnership Interests.
Under the terms of the Amended and Restated Limited Partnership Agreement of Holdings, Holdings is obligated to make tax distributions to holders of Partnership Interests, including us, to the extent that other distributions made by Holdings are otherwise insufficient to pay the tax liabilities of holders of Partnership Interests.
The agreements governing our indebtedness contain a number of covenants that limit Core & Main LP ’s ability and the ability of any of its future restricted subsidiaries to: • incur additional indebtedness or issue certain preferred shares; • pay dividends, redeem stock or make other distributions in respect of capital stock; • repurchase, prepay or redeem subordinated indebtedness; • make investments; • create restrictions on the ability of Core & Main LP ’s restricted subsidiaries to pay dividends to Core & Main LP or make other intercompany transfers; • incur additional liens; • transfer or sell assets; • make negative pledges; • consolidate, merge, sell or otherwise dispose of all or substantially all of Core & Main LP ’s assets; • change the nature of Core & Main LP ’s business; • enter into certain transactions with Core & Main LP ’s affiliates; and • designate subsidiaries as unrestricted subsidiaries.
The agreements governing our indebtedness contain a number of covenants that may limit Core & Main LP ’s ability and the ability of any of its future restricted subsidiaries to: • incur additional indebtedness or issue certain preferred shares; • pay dividends, redeem stock or make other distributions in respect of capital stock; • repurchase, prepay or redeem subordinated indebtedness; • make investments; • create restrictions on the ability of Core & Main LP ’s restricted subsidiaries to pay dividends to Core & Main LP or make other intercompany transfers; • incur additional liens; • transfer or sell assets; • make negative pledges; • consolidate, merge, sell or otherwise dispose of all or substantially all of Core & Main LP ’s assets; • change the nature of Core & Main LP ’s business; • enter into certain transactions with Core & Main LP ’s affiliates; and • designate subsidiaries as unrestricted subsidiaries.
Core & Main LP is required to make mandatory prepayments under (a) the Senior ABL Credit Facility, if aggregate outstanding borrowings exceed the then applicable borrowing base or the then effective commitments under the Senior ABL Credit Facility, and (b) the Senior Term Loan Facility (as defined in Note 6 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), from excess cash flow, asset sale proceeds, insurance recovery proceeds and proceeds from certain debt incurrences, in each case subject to certain limitations and conditions set forth in the agreements governing such facilities.
Core & Main LP is required to make mandatory prepayments under (a) the Senior ABL Credit Facility, if aggregate outstanding borrowings exceed the then applicable borrowing base or the then effective commitments under the Senior ABL Credit Facility, and (b) the 2028 Senior Term Loan (as defined in Note 6 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), from excess cash flow, asset sale proceeds, insurance recovery proceeds and proceeds from certain debt incurrences, in each case subject to certain limitations and conditions set forth in the agreements governing such facilities.
As described in Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the Continuing Limited Partners and Former Limited Partners exchanges of Partnership Interests may generate tax attributes for the Company for which we must pay 85% of the realized, or deemed to be realized, benefits to the exchanging party under the respective Tax Receivable Agreement.
As described in Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, exchanges of Partnership Interests by the Continuing Limited Partners and Former Limited Partners may generate tax attributes for the Company for which we must pay 85% of the realized, or deemed to be realized, benefits to the exchanging party under the respective Tax Receivable Agreement.
Moreover, consolidation in our industry could make it more difficult for us to maintain operating margins and could also increase competition for our potential acquisition targets and result in higher purchase price multiples. In addition, our expansion into new markets and product categories through acquisition may present competitive, distribution and regulatory challenges that differ from current ones.
Moreover, consolidation in our industry could make it more difficult for us to maintain operating margins and could also increase competition for our potential acquisition targets and result in higher purchase price multiples. In addition, our expansion into new markets and product categories through acquisition may present competitive, management, distribution and regulatory challenges that differ from current ones.
Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion of management’s attention and resources from other matters. 19 Further, while we may seek indemnification against potential liability for product liability claims from relevant parties, including, but not limited to, manufacturers and suppliers, we cannot guarantee that we will be able to recover under such indemnification claims.
Additionally, defending against these lawsuits and proceedings may involve significant expense and diversion of management’s attention and resources from other matters. Further, while we may seek indemnification against potential liability for product liability claims from relevant parties, including, but not limited to, manufacturers and suppliers, we cannot guarantee that we will be able to recover under such indemnification claims.
These risks are elevated during periods of supply chain disruption as we may simultaneously be unable to obtain certain products in a timely manner and increase on-hand quantities of other products. 13 Acquisitions and other strategic transactions involve a number of inherent risks, any of which could result in the benefits anticipated not being realized.
These risks are elevated during periods of supply chain disruption as we may simultaneously be unable to obtain certain products in a timely manner and increase on-hand quantities of other products. Acquisitions and other strategic transactions involve a number of inherent risks, any of which could result in the benefits anticipated not being realized.
As many rebate programs are calculated as a percentage of dollars spent, deflation in product costs can adversely impact rebates earned relative to historical periods. 16 We may not be able to identify new products and new product lines and integrate them into our distribution network, which could adversely affect our ability to compete.
As many rebate programs are calculated as a percentage of dollars spent, deflation in product costs can adversely impact rebates earned relative to historical periods. We may not be able to identify new products and new product lines and integrate them into our distribution network, which could adversely affect our ability to compete.
The laws and regulations concerning export activity, recordkeeping and reporting, export control, interactions with government officials and economic sanctions are complex and constantly changing, and we cannot provide assurance that we will not incur material costs or liabilities in connection with these or other regulatory requirements. In addition, we are subject to the U.S.
The laws and regulations concerning import-export activity, recordkeeping and reporting, import-export control, interactions with government officials and economic sanctions are complex and constantly changing, and we cannot provide assurance that we will not incur material costs or liabilities in connection with these or other regulatory requirements. In addition, we are subject to the U.S.
Our inability to supply a customer’s specific requirements from our branches could materially and adversely affect our relationship with that customer or increase our operating costs. Most of our net sales are made to customers that do not have contracts in place and are not contractually obligated to purchase products from us.
Our inability to supply a customer’s specific requirements from our branches could materially and adversely affect our relationship with that customer or increase our operating costs. 22 Most of our net sales are made to customers that do not have contracts in place and are not contractually obligated to purchase products from us.
Being forced to refinance these borrowings on less favorable terms or not being able to refinance these borrowings could have a material adverse effect on our business or financial condition. The Amended and Restated Limited Partnership Agreement of Holdings and the Tax Receivable Agreements limit our ability to incur additional indebtedness or refinance our existing indebtedness on favorable terms.
Being forced to refinance these borrowings on less favorable terms or not being able to refinance these borrowings could have a material adverse effect on our business or financial condition. 25 The Amended and Restated Limited Partnership Agreement of Holdings and the Tax Receivable Agreements limit our ability to incur additional indebtedness or refinance our existing indebtedness on favorable terms.
Our inability to replace a significant number of contracts lost through competitive bidding processes with other revenue sources within a reasonable time could have a material adverse effect on our business or financial condition. We are subject to price fluctuations in our product costs.
Our inability to replace a significant number of contracts lost through competitive bidding processes with other revenue sources within a reasonable time could have a material adverse effect on our business or financial condition. 12 We are subject to price fluctuations in our product costs.
See “—Risks Related to Our Indebtedness.” Our industry and the markets in which we operate are fragmented and highly competitive, and increased competitive pressures, including the pressure to consolidate, could adversely affect our business. The markets in which we operate are fragmented and highly competitive. Competition varies depending on product line, type of customer and geographic area.
See “—Risks Related to Our Indebtedness.” 14 Our industry and the markets in which we operate are fragmented and highly competitive, and increased competitive pressures, including the pressure to consolidate, could adversely affect our business. The markets in which we operate are fragmented and highly competitive. Competition varies depending on product line, type of customer and geographic area.
If we experience delays and defaults in client payments and we pay our suppliers before receiving payment from our customers for the related products or services, we could experience a material adverse effect on our business or financial condition. A change in supplier terms could adversely affect our income and margins .
If we experience delays and defaults in client payments and we pay our suppliers before receiving payment from our customers for the related products or services, we could experience a material adverse effect on our business or financial condition. 16 A change in supplier terms could adversely affect our income and margins .
Any increase in product costs that are not offset by an increase in our prices, or our inability to maintain price levels in an environment of declining product costs, could have a material adverse effect on our business or financial condition. We are subject to inventory management risks.
Any increase in product costs that are not offset by an increase in our prices, or our inability to maintain price levels in an environment of declining product costs, could have a material adverse effect on our business or financial condition. 13 We are subject to inventory management risks.
We have incurred, and expect to continue to incur, capital expenditures in addition to ordinary course costs to comply with applicable current and future environmental, health and safety laws. More stringent federal, state or local environmental rules or regulations could increase our operating costs and expenses.
We have incurred, and expect to continue to incur, capital expenditures in addition to ordinary course costs to comply with applicable current and future environmental, health and safety laws. More stringent or complicated federal, state or local environmental rules or regulations could increase our operating costs and expenses.
However, there can be no assurance that such contractual rights will be obtained or adequate, or that related indemnification claims will be successfully asserted by us. Any difficulties with, or interruptions of, our fabrication services could delay our output of products and harm our relationships with our customers.
However, there can be no assurance that such contractual rights will be obtained or adequate, or that related indemnification claims will be successfully asserted by us. 20 Any difficulties with, or interruptions of, our fabrication services could delay our output of products and harm our relationships with our customers.
As such, a liquidity crisis could also have an indirect material adverse effect on our business or financial condition. 23 Risks Related to Our Indebtedness Our indebtedness may adversely affect our financial health and our ability to raise additional capital or obtain financing in the future.
As such, a liquidity crisis could also have an indirect material adverse effect on our business or financial condition. Risks Related to Our Indebtedness Our indebtedness may adversely affect our financial health and our ability to raise additional capital or obtain financing in the future.
In addition, market disruptions, such as those experienced in 2008 and 2009 and more recently in 2022, as well as our indebtedness levels, may increase our cost of borrowing or adversely affect our ability to refinance our obligations as they become due.
In addition, market disruptions, such as those experienced in 2008, 2009, 2020 and more recently in 2022, as well as our indebtedness levels, may increase our cost of borrowing or adversely affect our ability to refinance our obligations as they become due.
Among the factors that could affect our stock price are: • industry, regulatory or general market conditions; • domestic and international economic factors unrelated to our performance; • new regulatory pronouncements and changes in regulatory guidelines; • lawsuits, enforcement actions and other claims by third parties or governmental authorities; • actual or anticipated fluctuations in our quarterly operating results; • lack of research coverage and reports by industry analysts or changes in any securities analysts’ estimates of our financial performance; • action by institutional stockholders or other large stockholders, including future sales of our Class A common stock; • failure to meet any guidance given by us or any change in any guidance given by us, or changes by us in our guidance practices; • announcements by us of significant impairment charges; • speculation in the press or investment community; • investor perception of us or our industry; • changes in market valuations or earnings of similar companies; • the impact of short selling or the impact of a potential “short squeeze” resulting from a sudden increase in demand for our Class A common stock; • announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships; • war, terrorist acts, epidemic disease or pandemic disease; • any future sales of our Class A common stock or other securities; • additions or departures of key personnel; and • misconduct or other improper actions of our associates .
Among the factors that could affect our stock price are: • industry, regulatory or general market conditions; • domestic and international economic factors unrelated to our performance; • new regulatory pronouncements and changes in regulatory guidelines; • lawsuits, enforcement actions and other claims by third parties or governmental authorities; • actual or anticipated fluctuations in our quarterly operating results; • lack of research coverage and reports by industry analysts or changes in any securities analysts’ estimates of our financial performance; • action by institutional stockholders or other large stockholders, including future sales of our Class A common stock; • failure to meet any guidance given by us or any change in any guidance given by us, or changes by us in our guidance practices; • changes in our share repurchase or dividend policy; • announcements by us of significant impairment charges; • speculation in the press or investment community; • investor perception of us or our industry; • changes in market valuations or earnings of similar companies; • the impact of short selling or the impact of a potential “short squeeze” resulting from a sudden increase in demand for our Class A common stock; • announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships; • war, terrorist acts, epidemic disease or pandemic disease; • any future sales of our Class A common stock or other securities; • additions or departures of key personnel; and • misconduct or other improper actions of our associates .
An active, liquid trading market for our common stock may not be sustained. Although our Class A common stock is currently listed on the NYSE under the symbol “CNM,” an active trading market for our shares may not be sustained.
Although our Class A common stock is currently listed on the NYSE under the symbol “CNM,” an active trading market for our shares may not be sustained.
In particular, we have been and continue to be subject to claims related to asbestos containing products, including for claims relating to products sold by businesses prior to being acquired by us.
In particular, we have been and continue to be subject to claims related to asbestos containing products, including for claims relating to products sold by businesses prior to such businesses being acquired by us.
Furthermore, our collections efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward. In addition, if our collections process fails to collect money due from a customer, we may be forced to initiate litigation against such customer to compel payment. Any such litigation could be costly, and the outcome would be uncertain.
Furthermore, our collections efforts with respect to non-paying or slow-paying customers could negatively impact our customer relations going forward. If our collections process fails to collect money due from a customer, we may be forced to initiate litigation against such customer to compel payment. Any such litigation could be costly, and the outcome would be uncertain.
In the event any tax benefits initially claimed by us and for which payment has been made are successfully challenged, such prior payments under the applicable Tax Receivable Agreements will not be reimbursed but any such detriment will generally be taken into account as a reduction in future payments due under the applicable Tax Receivable Agreement.
In the event any tax benefits initially claimed by us and for which payment has been made are successfully challenged by a taxing authority, such prior payments under the applicable Tax Receivable Agreements will not be reimbursed but any such detriment will generally be taken into account as a reduction in future payments due under the applicable Tax Receivable Agreement.
If Core & Main LP cannot make scheduled payments on its indebtedness under the Senior ABL Credit Facility and/or the Senior Term Loan Facility, it will be in default and the lenders under the Senior ABL Credit Facility and/or the Senior Term Loan Facility could terminate their commitments to loan money or foreclose against the assets securing the borrowings, and Core & Main LP could be forced into bankruptcy or liquidation.
If Core & Main LP cannot make scheduled payments on its indebtedness under the Senior ABL Credit Facility, the 2028 Senior Term Loan, and/or the 2031 Senior Term Loan, it will be in default and the lenders under the Senior ABL Credit Facility, the 2028 Senior Term Loan and/or the 2031 Senior Term Loan could terminate their commitments to loan money or foreclose against the assets securing the borrowings, and Core & Main LP could be forced into bankruptcy or liquidation.
In addition, we fabricate and install certain products, either internally or through third parties, which may increase our exposure to product liability claims. We cannot predict with certainty whether or how we may become liable under environmental and product liability statutes, rules, regulations and case law.
In addition, we fabricate and install certain products, either internally or through third parties, which may increase our exposure to product liability claims. We cannot predict whether or how we may become liable under environmental and product liability statutes, rules, regulations and case law.
Furthermore, our future obligation to make payments under the Tax Receivable Agreements could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are the subject of the Tax Receivable Agreements.
Furthermore, our future obligation to make payments under the Tax Receivable Agreements could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot realize some or all of the tax benefits that are the subject of the Tax Receivable Agreements.
If we acquire any of these liabilities, and they are not adequately covered by insurance or an enforceable indemnity or similar agreement from a creditworthy counterparty, we may be responsible for significant out-of-pocket expenditures.
If we acquire any of these liabilities, and they are not adequately covered by insurance or an enforceable indemnity or similar agreement from a creditworthy counterparty or are otherwise mitigated, we may be responsible for significant out-of-pocket expenditures.
An increase in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability, increase cash outflows, decrease our liquidity or impact our solvency. Our indebtedness under the Senior ABL Credit Facility and under the Senior Term Loan Facility bears interest at variable rates.
An increase in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability, increase cash outflows, decrease our liquidity or impact our solvency. Our indebtedness under the Senior ABL Credit Facility, the 2028 Senior Term Loan and the 2031 Senior Term Loan bears interest at variable rates.
Further, if we do not adapt to or comply with investor or other stakeholder expectations and standards, which are evolving, or if we are perceived not to have responded appropriately or quickly enough to growing concern for ESG and sustainability issues, our business could suffer, including from reputational damage. Additionally, activist shareholders may submit proposals to promote an ESG-related position.
Further, if we do not adapt to or comply with investor or other stakeholder expectations and standards, which are evolving, or if we are perceived not to have responded appropriately to growing concern for ESG and sustainability issues, our business could suffer, including from reputational damage. Additionally, activist shareholders may submit proposals to promote or oppose an ESG-related position.
Approximately 98% of our net sales volume in fiscal 2022 was facilitated through the extension of credit to our customers whose ability to pay is dependent, in part, upon the economic strength of the industry in the areas in which they operate.
Approximately 98% of our net sales volume in fiscal 2023 was facilitated through the extension of credit to our customers whose ability to pay is dependent, in part, upon the economic strength of the industry in the areas in which they operate.
Any failure to compete with our national, regional or local competitors could have a material adverse effect on our business or financial condition. There has also been some consolidation of customers within our industry who are increasingly aware of the total costs of fulfillment and of the need to have consistent sources of supply at multiple locations.
Any failure to compete with our national, regional or local competitors could have a material advers e effect on our business or financial condition. There has also been some consolidation of customers within our industry who are increasingly aware of the total costs of fulfillment and of the need to have consistent sources of supply at multiple locations.
The full exchange by the Continuing Limited Partners will also decrease our aforementioned deferred tax asset associated with our investment in Holdings by $145 million. These amounts are estimates only and are subject to change.
The full exchange by the Continuing Limited Partners will also decrease our aforementioned deferred tax asset associated with our investment in Holdings by $4 million. These amounts are estimates only and are subject to change.
Even if our rebate programs are not adversely effected through negotiation, we may not earn rebates at level commensurate with historical periods and our gross margin percentage may be adversely impacted.
Even if our rebate programs are not adversely affected through negotiation, we may not earn rebates at level commensurate with historical periods and our gross margin percentage may be adversely impacted.
Therefore, there is no certainty as to the timing, frequency or magnitude of any dividends that we may pay on our Class A common stock, and the success of an investment in shares of our common stock depends upon any future appreciation in their value.
Therefore, there is no certainty as to the timing, frequency and magnitude of any dividends that we may pay on our Class A common stock for the foreseeable future, and the success of an investment in shares of our common stock depends upon any future appreciation in their value.
We have only one major national competitor, but we also face competition from regional and local competitors and a limited number of manufacturers who sell directly to large customers within our customer base. We estimate that our net sales accounted for approximately 17% of our $40 billion addressable market in fiscal 2022.
We have only one major national competitor, but we also face competition from regional and local competitors and a limited number of manufacturers who sell directly to large customers within our customer base. We estimate that our net sales accounted for approximately 17% of our $39 billion addressable market in fiscal 2023.
Risks Related to Our Class A Common Stock The market price of our Class A common stock may be volatile and could decline. Volatility in the market price of our Class A common stock may prevent you from being able to sell your shares at or above the price you paid for your shares.
Risks Related to Our Class A Common Stock The market price of our Class A common stock may be volatile and could decline. Volatility in the market price of our Class A common stock may prevent our shareholders from being able to sell shares at or above the price you paid for such shares.
We currently do not have an approved plan to pay dividends on our Class A common stock and, consequently, your ability to achieve a return on your investment depends on appreciation in the price of our Class A common stock.
We currently do not have an approved plan to pay dividends on our Class A common stock or repurchase shares and, consequently, your ability to achieve a return on your investment depends on appreciation in the price of our Class A common stock.
The Exchange Agreement also provides that in connection with any such exchange, to the extent that Holdings has, since consummation of the Reorganization Transactions and our IPO, made distributions to the applicable Continuing Limited Partner that are proportionately lesser or greater than the distributions made to us, on a pro rata basis, the number of shares of Class A common stock to be issued or cash to be paid to such Continuing Limited Partner will be adjusted to take into account the amount of such discrepancy that is allocable to the Partnership Interests, and Class B common stock, subject to such exchange.
The Exchange Agreement also provides that in connection with any such exchange, to the extent that Holdings has, since consummation of the Reorganization Transactions and our IPO, made distributions to Management Feeder that are proportionately lesser or greater than the distributions made to us, on a pro rata basis, the number of shares of Class A common stock to be issued or cash to be paid to Management Feeder will be adjusted to take into account the amount of such discrepancy that is allocable to the Partnership Interests, and Class B common stock, subject to such exchange.
As permitted by Delaware law, our Certificate of Incorporation provides that, unless we consent in writing to the election of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, the Exchange Act, and the rules and regulations thereunder.
As permitted by Delaware law, our Certificate of Incorporation provides that, unless we consent in writing to the election of an alternative forum, the U.S. federal district courts will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, the Exchange Act, and the rules and regulations thereunder.
As of January 29, 2023, assuming all Senior ABL Credit Facility revolving loans were fully drawn, and excluding the impact of any interest rate hedging instruments, each one percentage point change in interest rates would have resulted in an approximately $27 million increase in annual interest expense on the Senior ABL Credit Facility and the Senior Term Loan Facility.
As of January 28, 2024, assuming all Senior ABL Credit Facility revolving loans were fully drawn, and excluding the impact of any interest rate hedging instruments, each one percentage point change in interest rates would have resulted in an approximately $27 million increase in annual interest expense on the Senior ABL Credit Facility and the 2028 Senior Term Loan.
Item 1A. Risk Factors Risks Related to Our Business You should carefully consider the factors described below, in addition to the other information set forth in this Annual Report on Form 10-K. These risk factors are important to understanding the contents of this Annual Report on Form 10-K and of other reports.
Item 1A. Risk Factors You should carefully consider the factors described below, in addition to the other information set forth in this Annual Report on Form 10-K. These risk factors are important to understanding the contents of this Annual Report on Form 10-K and of other reports.
“Business—Regulation.” We deliver products to many of our customers through our own fleet of vehicles. The U.S. Department of Transportation (the “DOT”) regulates our operations in domestic interstate commerce.
We deliver products to many of our customers through our own fleet of vehicles. The U.S. Department of Transportation (the “DOT”) regulates our operations in domestic interstate commerce.
Interruptions in the proper functioning of our and our third-party service providers’ information technology (“IT”) systems or compromise of our or our customers’ confidential data, including from cybersecurity threats, could disrupt operations and cause unanticipated reputational harm, litigation and regulatory risk, as well as increases in costs or decreases in net sales, or both.
Interruptions in the proper functioning of the Company’s and our third-party service providers’ IT systems or compromise of our or our customers’ confidential data, including from cybersecurity threats, could disrupt operations and cause unanticipated reputational harm, litigation and regulatory risk, as well as increases in costs or decreases in net sales, or both.
The Second Amended and Restated Agreement of Limited Partnership of Holdings (as amended, the “Amended and Restated Limited Partnership Agreement of Holdings”) restricts our ability to incur additional indebtedness or refinance our existing indebtedness in a manner that would materially and adversely affect Holdings’ ability to make tax distributions to holders of limited partner interests of Holdings (“Partnership Interests”) or distributions to us to fund payments under the Tax Receivable Agreements (as defined below under “Risks Related to our Organizational Structure”).
The Second Amended and Restated Agreement of Limited Partnership of Holdings (as amended, the “Amended and Restated Limited Partnership Agreement of Holdings”) may restrict our ability to incur additional indebtedness or refinance our existing indebtedness in a manner that would materially and adversely affect Holdings’ ability to make tax distributions to holders of Partnership Interests or distributions to us to fund payments under the Tax Receivable Agreements (as defined below under “Risks Related to our Organizational Structure”).
Additionally, pursuant to the terms of the Exchange Agreement and subject to certain restrictions set forth therein and as described elsewhere in this Annual Report on Form 10-K, the Continuing Limited Partners have the right to exchange their Partnership Interests, together with the retirement of a corresponding number of shares of our Class B common stock, for shares of our Class A common stock on a one-for-one basis or, at the election of a majority of the disinterested members of our board of directors, for cash from a substantially concurrent public offering or private sale (based on the price of our Class A common stock sold in such public offering or private sale), net of any underwriting discounts and commissions, for each Partnership Interest exchanged, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions.
Additionally, pursuant to the terms of the Exchange Agreement and subject to certain restrictions set forth therein and as described elsewhere in this Annual Report on Form 10-K, Management Feeder (or its permitted transferees) has the right to exchange its Partnership Interests, together with the retirement of a corresponding number of shares of our Class B common stock, for shares of our Class A common stock on a one-for-one basis or, at the election of a majority of the disinterested members of our board of directors, for cash from a substantially concurrent public offering or private sale (based on the price of our Class A common stock sold in such public offering or private sale), net of any underwriting discounts and commissions, for each Partnership Interest exchanged, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions.
We expect to cause Holdings to make overall distributions to its partners in such a manner as generally to limit increases to the number of shares of Class A common stock to be issued or cash to be paid to exchanging Continuing Limited Partners in connection with the adjustment described in the preceding sentence.
We expect to cause Holdings to make overall distributions to its partners in such a manner as generally to limit increases to the number of shares of Class A common stock to be issued or cash to be paid to Management Feeder in connection with the adjustment described in the preceding sentence.
Acquisitions frequently result in the recording of goodwill and other intangible or long-lived assets. As of January 29, 2023, goodwill and amortizing intangible assets, net of accumulated amortization, represented 31% and 16%, respectively, of our total assets. Goodwill is not amortized and is subject to impairment testing at least annually using a fair value-based approach.
Our acquisitions frequently result in the recording of goodwill and other intangible or long-lived assets. As of January 28, 2024, goodwill and amortizing intangible assets, net of accumulated amortization, represented 31% and 15%, respectively, of our total assets. Goodwill is not amortized and is subject to impairment testing at least annually using a fair value-based approach.
For example, the U.S. is currently experiencing a shortage of qualified professional commercial truck drivers, which has impacted our suppliers’ ability to deliver products to us and our ability to deliver products on a timely basis.
For example, the U.S. has experienced a shortage of qualified professional commercial truck drivers, which has impacted our suppliers’ ability to deliver products to us and our ability to deliver products on a timely basis.
Unless our board of directors elects to settle these obligations in cash pursuant to the terms of the Exchange Agreement, we expect that these arrangements will result in a substantial number of additional shares of Class A common stock being issued to the Continuing Limited Partners.
Unless our board of directors elects to settle these obligations in cash pursuant to the terms of the Exchange Agreement, we expect that these arrangements will result in a substantial number of additional shares of Class A common stock being issued to Management Feeder.
Based upon certain assumptions, described in greater detail in Note 7 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we estimate that if we exercised our termination right as of January 29, 2023, the amount of the termination payment pursuant to the Tax Receivable Agreements recorded on the Consolidated Balance Sheets for the exchange of Partnership Interests would be approximately $123 million and the amount of the termination payment to Continuing Limited Partners holding the remaining exchangeable Partnership Interests would be approximately $262 million.
Based upon certain assumptions, described in greater detail in Note 7 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we estimate that if we had exercised our termination right as of January 28, 2024, the amount of the termination payment pursuant to the Tax Receivable Agreements recorded on the Consolidated Balance Sheets for the exchange of Partnership Interests would be approximately $470 million and the amount of the termination payment to the Continuing Limited Partners holding the remaining exchangeable Partnership Interests would be approximately $58 million.
Because of our indebtedness: • our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements, pay dividends and make other distributions or to purchase, redeem or retire capital stock or for general corporate purposes and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future; • a portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes; • we are exposed to the risk of increased interest rates because a significant portion of our borrowings are at variable rates of interest; • it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; • we may be at a competitive disadvantage compared to our competitors with proportionately less indebtedness or with comparable indebtedness on more favorable terms and, as a result, they may be better positioned to withstand economic downturns; • our ability to refinance indebtedness may be limited or the associated costs may increase; • our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited; • our ability to pay dividends and make other distributions or to purchase, redeem or retire capital stock may be limited; and • we may be prevented from carrying out capital spending and restructurings that are necessary or important to our growth strategy and efforts to improve our operating margins.
Because of our indebtedness: • our ability to obtain additional financing for working capital, make capital expenditures, complete acquisitions, meet debt service requirements, make Tax Receivable Agreements payments, pay dividends and make other distributions or to purchase, redeem or retire capital stock or for general corporate purposes and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future; • a portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes; • we are exposed to the risk of increased interest rates because a significant portion of our borrowings are at variable rates of interest; • it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; • we may be at a competitive disadvantage compared to our competitors with proportionately less indebtedness or with comparable indebtedness on more favorable terms and, as a result, they may be better positioned to withstand economic downturns; • our ability to refinance indebtedness may be limited or the associated costs may increase; • our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited; • our ability to pay dividends and make other distributions or to purchase, redeem or retire capital stock may be limited; and • we may be prevented from carrying out capital spending and restructurings that are necessary or important to our growth strategy and efforts to improve our operating margins. 24 Despite our indebtedness levels, we and our subsidiaries may be able to incur substantially more indebtedness, which may increase the risks to our financial condition and results of operations created by our indebtedness.
Although the majority of our overall product offerings relate to distribution for which we engage in no significant manufacturing, we do perform light fabrication services for certain product categories, including fire protection, storm drainage and fusible piping products, which collectively accounted for less than 5% of our net sales in fiscal 2022 and which we believe are products with significant opportunities for growth.
Although the majority of our overall product offerings relate to distribution for which we engage in no significant manufacturing, we do perform light fabrication services for certain product categories, including fire protection, storm drainage, geosynthetics and erosion control, meter sets and fusible HDPE piping products, which collectively accounted for less than 5% of our net sales in fiscal 2023 and which we believe are products with significant opportunities for growth.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting. Beginning with this annual report we are required to provide a management report on internal control over financial reporting.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal control over financial reporting. We are required to provide a management report on internal control over financial reporting.
If a municipality is experiencing budget difficulties, or if a municipality is unable to access capital through the municipal bond market or state revolving funds, it may allocate less funding to infrastructure projects, which could also adversely affect our net sales. Fluctuations in federal funding can also negatively impact municipal spending.
In addition, municipal budget processes and conditions in the municipal bond market can impact municipal spending. If a municipality is experiencing budget difficulties, or if a municipality is unable to access capital through the municipal bond market or state revolving funds, it may allocate less funding to infrastructure projects, which could also adversely affect our net sales.
Payments under the Tax Receivable Agreements are not conditioned on any holder’s continued ownership of Partnership Interests or our common stock. As of January 29, 2023, the Company had recorded a $185 million payable to related parties pursuant to the Tax Receivable Agreements.
Payments under the Tax Receivable Agreements are not conditioned on any holder’s continued ownership of Partnership Interests or our common stock. As of January 28, 2024, the Company had recorded a $717 million payable to related parties pursuant to the Tax Receivable Agreements.
The amount of future partner distributions and the number of shares issuable pursuant to such provision of the Exchange Agreement will fluctuate based on a number of factors, including our financial performance, the actual tax rates applied to the applicable Continuing Limited Partners (or their permitted transferees), any changes in tax rates or tax laws and future share prices for our Class A common stock.
The amount of future partner distributions and the number of shares issuable pursuant to such provision of the Exchange Agreement will fluctuate based on a number of factors, including our financial performance, the actual tax rates applied to Management Feeder (or its permitted transferees), any changes in tax rates or tax laws and future share prices for our Class A common stock.
We buy our products and supplies from suppliers that manufacture and source products from the United States and abroad. We enter into agreements with many of our suppliers that provide us with exclusive or restrictive distribution rights, limiting our competitors’ ability to source materials from such suppliers.
We buy our products and supplies from suppliers that manufacture and source products from the U.S. and abroad. We enter into agreements with many of our suppliers that provide us with exclusive or limited distribution rights, limiting our competitors’ ability to source materials from such suppliers.
Reduced federal funding and corresponding reductions in federal fund appropriations can adversely affect many of our customers, who derive funding from federal, state and local bodies, which in turn can reduce the demand for our products and services.
Fluctuations in federal funding can also negatively impact municipal spending. Reduced federal funding and corresponding reductions in federal fund appropriations can adversely affect many of our customers, who derive funding from federal, state and local bodies, which in turn can reduce the demand for our products and services.
Due to supply chain constraints, distributors may have increased inventory levels to ensure product availability. As the supply chain improves and product lead time becomes more predictable, distributors may reduce their inventory levels. This may increase competition by suppliers based on price and contribute to deflation.
As the supply chain improves and product lead time becomes more predictable, distributors may reduce their inventory levels. This may increase competition by suppliers based on price and contribute to deflation.
Disruptions in transportation lines, such as the March 2021 blockage of the Suez Canal and the adverse impact to the global shipping industry, may also cause global supply chain issues that affect us or our suppliers.
Disruptions in transportation lines, such as the March 2021 blockage of the Suez Canal and the adverse impact to the global shipping industry, may also cause global supply chain issues that affect us or our suppliers. Global economic conditions may also result in global supply chain issues that adversely impact our access to products and supplies.
Continued rate increases may result in a downturn in U.S. residential and non-residential construction markets that could have a material adverse effect on our business or financial condition. We cannot predict the duration of the residential or non-residential construction industry market conditions or the timing of the recovery of residential or non-residential construction activity back to the historical averages.
Continued interest rate increases or the lack of anticipated interest rate decreases may suppress the U.S. residential and non-residential construction markets that could have a material adverse effect on our business or financial condition. 11 We cannot predict the duration of the residential or non-residential construction industry market conditions or the timing of the recovery of residential or non-residential construction activity back to historical averages.
Our top ten largest suppliers accounted for approximately 47% of our total purchases in fiscal 2022. We generally have multiple sources of supply, however, in some cases, materials are provided by a single supplier.
In fiscal 2023, our top supplier accounted for approximately 8% of our product expenditures. Our top ten largest suppliers accounted for approximately 45% of our total purchases in fiscal 2023. We generally have multiple sources of supply, however, in some cases, materials are provided by a single supplier.
Additionally, building codes may affect the products our customers are allowed to use, and consequently, changes in building codes may affect the saleability of our products. In addition, changes to U.S. federal, state and local tax laws and regulations could have a material impact on us. See Item 1.
Additionally, building codes may affect the products our customers are allowed to use, and consequently, changes in building codes may affect the saleability of our products. Changes to U.S. federal, state and local tax laws and regulations could have a material impact on us. See Item 1. “Business—Regulation” of this Annual Report on Form 10-K.
Additionally, we do not carry insurance for all categories of risk that our business may encounter (including asbestos claims for which insurance is not attainable). Any significant liability that is uninsured or not fully insured may require us to pay substantial amounts. See additional discussion in Item 1.
Additionally, we do not carry insurance for all categories of risk that our business may encounter (including asbestos claims for which insurance is not attainable). Any significant liability that is uninsured or not fully insured may require us to pay substantial amounts. See additional discussion in Item 1. “Business—Legal Proceedings” of this Annual Report on Form 10-K.
If we fail to identify, develop and maintain relationships with a sufficient number of qualified suppliers or our exclusive or restrictive supplier distribution rights are terminated, our ability to timely and efficiently access products that meet our standards for quality could be adversely affected or we may experience an increase in the costs of our products that could reduce our overall profitability.
The loss of their services could limit our ability to grow our business and cause disruptions in our operations. 15 If we fail to identify, develop and maintain relationships with a sufficient number of qualified suppliers or our exclusive or limited supplier distribution rights are terminated, our ability to timely and efficiently access products that meet our standards for quality could be adversely affected or we may experience an increase in the costs of our products that could reduce our overall profitability.
“Business—Legal Proceedings.” We also may, from time to time, be involved in government inquiries, investigations and proceedings. We cannot predict with certainty the outcomes of these inquiries, investigations and proceedings.
We also may, from time to time, be involved in government inquiries, investigations and proceedings. We cannot predict the outcomes of these inquiries, investigations and proceedings.
For example, interest rate increases throughout calendar 2022 and into 2023 are a contributing factor to slowing new lot development and contraction in the residential end market. It is uncertain if the Federal Reserve Board will continue to raise rates in the future and if so to what level and for how long.
For example, interest rate increases throughout calendar year 2023 were a contributing factor to slowing new lot development and contraction in the residential end market. It is uncertain if the Federal Reserve Board of Governors will raise or lower interest rates in the future and, if so, to what level and for how long.
In addition, if the Continuing Limited Partners exchanged their remaining Partnership Interests on January 29, 2023, utilizing assumptions described in Note 7 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we would recognize a deferred tax asset (subject to offset with existing deferred tax liabilities) of approximately $511 million and a Continuing Limited Partners Tax Receivable Agreement liability of approximately $434 million, payable to the Continuing Limited Partners over the life of the Continuing Limited Partners Tax Receivable Agreement.
In addition, if the Continuing Limited Partners exchanged their remaining Partnership Interests on January 28, 2024, utilizing assumptions described in Note 7 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we would recognize an additional deferred tax asset (subject to offset with existing deferred tax liabilities) of approximately $108 million and a Continuing Limited Partners Tax Receivable Agreement liability of approximately $92 million.
Sales of substantial amounts of our Class A common stock in the public market, or the perception that these sales could occur, could cause the market price of our Class A common stock to decline.
Future sales of shares by us or our existing stockholders could cause our stock price to decline. Sales of substantial amounts of our Class A common stock in the public market, or the perception that these sales could occur, could cause the market price of our Class A common stock to decline.
Our access to third-party freight carriers is not guaranteed, and we may be unable to transport our products at economically attractive rates in certain circumstances, particularly in cases of adverse market conditions or disruptions to transportation infrastructure.
Our operating results are sensitive to the availability of freight. We are dependent on third-party freight carriers to transport some of our products. Our access to third-party freight carriers is not guaranteed, and we may be unable to transport our products at economically attractive rates in certain circumstances, particularly in cases of adverse market conditions or disruptions to transportation infrastructure.
Accordingly, we will generally incur U.S. federal income taxes on our allocable share of any net taxable income of Holdings. In addition, our allocable share of Holdings’ net taxable income will increase over time as the Continuing Limited Partners continue to exchange their Partnership Interests for shares of our Class A common stock.
Accordingly, we will generally incur U.S. federal income taxes on our allocable share of any net taxable income of Holdings. In addition, our allocable share of Holdings’ net taxable income will increase over time as Management Feeder continues to exchange its Partnership Interests for shares of our Class A common stock.
In addition, after giving effect to $12 million of letters of credit issued under the Senior ABL Credit Facility, as of January 29, 2023, Core & Main LP would have been able to borrow an additional $1,238 million under the Senior ABL Credit Facility, subject to borrowing base availability.
In addition, after giving effect to $16 million of letters of credit issued under the Senior ABL Credit Facility, as of January 28, 2024, Core & Main LP would have been able to borrow an additional $804 million under the Senior ABL Credit Facility, subject to borrowing base availability.
In addition, our internal control over financial reporting will not prevent or detect all errors and fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
Investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment funds and other influential investors and rating agencies are also increasingly focused on ESG and sustainability practices and matters and on the implications and social cost of their investments and loans.
Investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment funds and other influential investors and rating agencies are also increasingly focused on ESG and sustainability practices and matters and on the implications and social cost of their investments and loans while other market participants have evidenced opposition to certain companies’ consideration of such practices and matters.
For example, recent events surrounding Silicon Valley Bank, First Republic Bank and Signature Bank created temporary uncertainty on their customers’ cash deposits in excess of Federal Deposit Insurance Corporation (“FDIC”) limits prior to actions taken by governmental entities. We have no direct exposure to Silicon Valley Bank, First Republic Bank or Signature Bank.
For example, the events in March 2023 surrounding Silicon Valley Bank, First Republic Bank and Signature Bank created temporary uncertainty on their customers’ cash deposits in excess of Federal Deposit Insurance Corporation limits prior to actions taken by governmental entities.
From time to time, we are involved in litigation and other legal proceedings and claims (including government inquiries, investigations and proceedings) in the ordinary course of business related to a range of matters, including, without limitation, environmental, contract, employment claims, product liability, construction defect and warranty claims.
From time to time, we are involved in litigation and other legal proceedings and claims (including government inquiries, investigations and proceedings) in the ordinary course of business related to a range of matters, including, without limitation, environmental, contract, employment claims, product liability, construction defect and warranty claims. 19 We rely on manufacturers and other suppliers to provide us with most of the products we sell and distribute.
If our customers do not renew orders, our business or financial condition could be negatively affected. 21 While a portion of our net sales are made to customers with whom we have contractual relationships, many of these contracts are requirements contracts under which we supply a percentage of a customer’s requirements over a period of time, without any specific commitment by the customer to purchase a particular unit volume.
While a portion of our net sales are made to customers with whom we have contractual relationships, many of these contracts are requirements contracts under which we supply a percentage of a customer’s requirements over a period of time, without any specific commitment by the customer to purchase a particular unit volume.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur facilities typically include a small office space, an in-store counter and/or merchandising display area, inside warehouse space and a yard for outside s torage. In addition, we have 12 distribution fac ilities strategically located around the U.S. to maximize efficiency of product distribution.
Biggest changeOur facilities typically include a small office space, an in-store counter and/or merchandising display area, inside warehouse space and a yard for outside storage. In addition, we have 12 distribution facilities strategically located around the U.S. to maximize efficiency of product distribution. We enter into leases with terms typically ra nging from three to five years that include renewal options.
Item 2. Properties We own our headquarters, located in St. Louis, Missouri, which we use for our principal corporate activities. In addition to our headquarters, as of January 29, 2023, we leased 282 properties and owned 35 properties.
Item 2. Properties We own our headquarters, located in St. Louis, Missouri, which we use for our principal corporate activities. In addition to our headquarters, as of January 28, 2024, we leased 292 properties and owned 43 properties.
We enter into leases with terms typically ranging from two to five years that include renewal options. We believe that these facilities are well-maintained and adequate to support the current needs of our business. 35
We believe that these facilities are well-maintained and adequate to support the current needs of our business. 35

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest change“Risk Factors—Risks Related to Our Business—The nature of our business exposes us to product liability, construction defect and warranty claims and other litigation and legal proceedings.” Item 4. Mine Safety Disclosures Not applicable. PART II - OTHER INFORMATION
Biggest change“Risk Factors—Risks Related to Our Business—The nature of our business exposes us to product liability, construction defect and warranty claims and other litigation and legal proceedings” in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. PART II - OTHER INFORMATION

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIndexed Returns Quarters Ended Company/Index July 23, 2021 August 1, 2021 October 31, 2021 January 30, 2022 May 1, 2022 July 31, 2022 October 30, 2022 January 29, 2023 Core & Main (1) $ 100.00 $ 111.81 $ 115.44 $ 98.95 $ 100.25 $ 101.86 $ 99.41 $ 91.43 S&P 500 Index 100.00 99.63 104.39 100.45 93.66 93.62 88.42 92.27 Russell 2000 Index 100.00 100.75 103.96 89.07 84.36 85.32 83.58 86.51 S&P MidCap 400 Industrials Index 100.00 101.33 105.17 96.77 91.52 95.11 93.99 102.27 (1) For the July 23, 2021 initial investment in Core & Main, we utilized the closing market price of $23.70. 37 Issuer Purchases of Equity Securities The following is a summary of our repurchases of shares of Class A common stock during the fiscal quarter ended January 29, 2023: Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) or Shares (or Units) that May Yet Be Purchased Under the Plans or Programs October 31, 2022 - November 30, 2022 366 $ 23.00 N/A N/A December 1, 2022 -December 31, 2022 — — N/A N/A January 1, 2023 - January 29, 2023 3,793 21.42 N/A N/A 4,159 $ 21.56 — — (1) The repurchases of Class A common stock during fiscal 2022 were pursuant to employee tax withholding obligations and strike price settlement upon exercise of unit appreciation rights and vesting of restricted stock units pursuant to terms of the Company’s 2021 Omnibus Equity Incentive Plan.
Biggest changeIndexed Returns Years Ended Company/Index July 23, 2021 January 30, 2022 January 29, 2023 January 28, 2024 Core & Main (1) $ 100.00 $ 98.95 $ 91.43 $ 171.10 S&P 500 Index 100.00 100.45 92.27 110.86 Russell 2000 Index 100.00 89.07 86.51 89.53 S&P MidCap 400 Industrials Index 100.00 96.77 102.27 121.62 (1) For the July 23, 2021 initial investment in Core & Main, we utilized the closing market price of $23.70. 37 Issuer Purchases of Equity Securities The following is a summary of our repurchases of shares of Class A common stock during the fiscal quarter ended January 28, 2024: Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) or Shares (or Units) that May Yet Be Purchased Under the Plans or Programs October 30, 2023 - November 30, 2023 (1)(2) 3,133,012 $ 30.45 N/A N/A December 1, 2023 -December 31, 2023 (1)(3) 3,140,097 35.54 N/A N/A January 1, 2024 - January 28, 2024 (1)(4) 6,256,112 39.55 N/A N/A 12,529,221 $ 36.27 — — (1) Reflects repurchases by the Company of shares of our Class A common stock pursuant to employee tax withholding obligations and strike price settlement upon exercise of unit appreciation rights and vesting of restricted stock units pursuant to terms of the Company’s 2021 Omnibus Equity Incentive Plan, except for the transactions described in footnotes (2), (3) and (4) below.
Our Class B common stock is not entitled to receive dividends, or to receive a distribution upon our liquidation, dissolution or winding-up. 36 Performance Graph The following graph and table compare the total shareholder return from July 23, 2021, the date on which our Class A common stock commenced trading on the New York Stock Exchange, through January 29, 2023 of (i) our Class A common stock, (ii) the Standard and Poor's 500 Stock Index, or S&P 500 Index, (iii) the Russell 2000 Index and (iv) the S&P MidCap 400 Industrials Index.
Our Class B common stock is not entitled to receive dividends, or to receive a distribution upon our liquidation, dissolution or winding-up. 36 Performance Graph The following graph and table compare the total shareholder return from July 23, 2021, the date on which our Class A common stock commenced trading on the New York Stock Exchange, through January 28, 2024 of (i) our Class A common stock, (ii) the Standard and Poor’s 500 Stock Index, or S&P 500 Index, (iii) the Russell 2000 Index and (iv) the S&P MidCap 400 Industrials Index.
Holders of Record As of January 29, 2023, there were six holders of record of our Class A common stock. We believe there are a significantly larger number of beneficial owners of our common stock because many shares are held by brokers and other institutions on behalf of stockholders.
Holders of Record As of January 28, 2024, there were five holders of record of our Class A common stock. We believe there are a significantly larger number of beneficial owners of our common stock because many shares are held by brokers and other institutions on behalf of stockholders.
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(2) Includes the repurchase by the Company of 3,125,728 shares of our Class A common stock for a price per share of $30.440 on November 9, 2023 in connection with the Repurchase Transactions (as defined elsewhere in this Annual Report on Form 10-K).
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The Company also repurchased 1,874,272 shares of our Class B common stock in connection with the repurchase transaction completed on November 9, 2023 for no additional consideration. (3) Includes the repurchase by the Company of 3,125,728 shares of our Class A common stock for a price per share of $35.540 on December 11, 2023 in connection with the Repurchase Transactions.
Added
The Company also repurchased 1,874,272 shares of our Class B common stock in connection with the repurchase transaction completed on December 11, 2023 for no additional consideration.
Added
(4) Includes the repurchase by the Company of 3,125,728 shares of our Class A common stock for a price per share of $38.120 on January 10, 2024 and 3,125,728 shares of our Class A common stock for a price per share of $40.985 on January 25, 2024 in connection with the Repurchase Transactions.
Added
The Company also repurchased 1,874,272 shares and 1,874,272 shares of our Class B common stock on January 10, 2024 and January 25, 2024, respectively, in connection with the repurchase transactions completed on January 10, 2024 and January 25, 2024 for no additional consideration. Item 6. [Reserved] 38

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+39 added−56 removed47 unchanged
Biggest changeThe outflows were partially offset by net proceeds from the IPO and the IPO Overallotment Option Exercise of approximately $756 million, after deducting underwriting discounts, commissions and offering expenses paid. 51 Financing Our debt obligations (in millions) consist of the following: Original Aggregate Principal/Borrowing Capacity Maturity Date Interest Senior Term Loan $ 1,500 July 27, 2028 (i) Term SOFR plus, in each case, an applicable margin of 2.50% and a credit spread adjustment of 0.10%, 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%.
Biggest changeThis was partially offset by fiscal 2021 inflows related to net proceeds from the IPO and IPO Overallotment Option Exercise ( as defined in Note 1 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K ) of approximately $756 million, after deducting underwriting discounts, commissions and offering expenses paid. 48 Financing Our debt obligations (in millions) through the period covered by this report consist of the following: Original Aggregate Principal/Borrowing Capacity Maturity Date Interest 2028 Senior Term Loan $ 1,463 July 27, 2028 (i) Term SOFR plus, in each case, an applicable margin of 2.60%, 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%. 2031 Senior Term Loan 750 February 9, 2031 (i) Term SOFR plus, in each case, an applicable margin of 2.25%, 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 1.25%.
Investing Activities Net cash used in investing activities decreased by $51 million to $152 million for fiscal 2022 compared with $203 million for fiscal 2021, primarily attributable to a $51 million decrease in cash outflows for acquisitions and the fiscal 2021 cash outflow of $5 million for the payment for the settlement of an interest rate swap.
Net cash used in investing activities decreased by $51 million to $152 million for fiscal 2022 compared with $203 million for fiscal 2021, primarily attributable to a $51 million decrease in cash outflows for acquisitions and the fiscal 2021 cash outflow of $5 million for the payment for the settlement of an interest rate swap.
Except to the extent that any benefits are deemed realized, we will receive the full benefit in tax savings from relevant taxing authorities and provide payment of 85% of the amount of any of our actual or deemed tax benefits to the Former Limited Partners or Continuing Limited Partners, as applicable, or their permitted transferees.
Except to the extent that any benefits are realized, we will receive the full benefit in tax savings from relevant taxing authorities and provide payment of 85% of the amount of any of our actual or deemed tax benefits to the Former Limited Partners or Continuing Limited Partners, as applicable, or their permitted transferees.
The Continuing Limited Partners Tax Receivable Agreement provides for the payment by us to the Continuing Limited Partners, or their permitted transferees, of 85% of the benefits, if any, that we realize, or in some circumstances are deemed to realize, as a result of (i) increases in tax basis or other similar tax benefits as a result of exchanges of Partnership Interests for cash or shares of our Class A common stock pursuant to the Exchange Agreement, dated as of July 22, 2021 (the “Exchange Agreement”) , by and among Core & Main, Holdings, CD&R Waterworks Holdings, LLC and Management Feeder, (ii) our allocable share of existing tax basis acquired in connection with the IPO attributable to the Continuing Limited Partners and in connection with exchanges of Partnership Interests for cash or shares of our Class A common stock pursuant to the Exchange Agreement and (iii) our utilization of certain other tax benefits related to our entering into the Continuing Limited Partners Tax Receivable Agreement, including tax benefits attributable to payments under the Continuing Limited Partners Tax Receivable Agreement.
The Continuing Limited Partners Tax Receivable Agreement provides for the payment by us to the Continuing Limited Partners, or their permitted transferees, of 85% of the benefits, if any, that we realize, or in some circumstances are deemed to realize, as a result of (i) increases in tax basis or other similar tax benefits as a result of exchanges of Partnership Interests for cash or shares of our Class A common stock pursuant to the Exchange Agreement, dated as of July 22, 2021 (as amended, the “Exchange Agreement”) , by and among Core & Main, Holdings, CD&R Waterworks Holdings, LLC and Management Feeder, (ii) our allocable share of existing tax basis acquired in connection with the IPO attributable to the Continuing Limited Partners and in connection with exchanges of Partnership Interests for cash or shares of our Class A common stock pursuant to the Exchange Agreement and (iii) our utilization of certain other tax benefits related to our entering into the Continuing Limited Partners Tax Receivable Agreement, including tax benefits attributable to payments under the Continuing Limited Partners Tax Receivable Agreement.
Refer to Note 6 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our debt obligations and the timing of future principal and interest payments including impacts from our interest rate swap.
Refer to Note 6 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our debt obligations and the timing of future principal and interest payments including impacts from our interest rate swap.
Net income attributable to Core & Main, Inc. is the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA. 52 We use EBITDA and Adjusted EBITDA to assess the operating results and effectiveness and efficiency of our business.
Net income attributable to Core & Main, Inc. is the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA. We use EBITDA and Adjusted EBITDA to assess the operating results and effectiveness and efficiency of our business.
The execution of these, and other, capital allocation activities may be at the discretion of, and subject to the approval by, our board of directors and will depend on our financial condition, earnings, liquidity and capital requirements, market conditions, level of indebtedness, contractual restrictions, compliance with our debt covenants, restrictions imposed by Delaware law, general business conditions and any other factors that our board of directors deems relevant in making any such determination.
The execution of these, and other, capital allocation activities may be at the discretion of, and subject to the approval by, our board of directors and will depend on our financial condition, earnings, liquidity and capital requirements, market conditions, level of indebtedness, contractual restrictions, compliance with our debt covenants, restrictions imposed by applicable law, general business conditions and any other factors that our board of directors deems relevant in making any such determination.
We believe that our current sources of liquidity, which include cash generated from operations, existing cash and cash equivalents and available borrowing capacity under the Senior ABL Credit Facility, will be sufficient to meet our working capital, capital expenditures and other cash commitments, including obligations relating to our indebtedness and the Tax Receivable Agreements, over at least the next 12 months.
We believe that our current sources of liquidity, which include cash generated from operations, existing cash and cash equivalents and available borrowing capacity under the Senior ABL Credit Facility, will be sufficient to meet our working capital, capital expenditures and other cash commitments, including obligations relating to our indebtedness and the Tax Receivable Agreements, over the next 12 months, at minimum.
Pipe includes PVC, ductile iron, fusible HDPE, steel and copper tubing. • Storm drainage products primarily include corrugated piping systems, retention basins, manholes, grates, geosynthetics, erosion control and other related products. • Fire protection products primarily include fire protection pipe, sprinkler heads and devices as well as custom fabrication services. • Meter products primarily include smart meter products, meter accessories, installation, software and other services.
Pipe includes PVC, ductile iron, fusible HDPE and copper tubing. • Storm drainage products primarily include corrugated piping systems, retention basins, manholes, grates, geosynthetics, erosion control and other related products. • Fire protection products primarily include fire protection pipe, sprinkler heads and devices as well as custom fabrication services. • Meter products primarily include smart meter products, meter sets, meter accessories, installation, software and other services.
The cost 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 costs, competition, market speculation, government regulation, weather events, trade policies and periodic delays in the delivery of our products.
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.
The Senior Term Loan Facility may require accelerated repayment based upon cash flows generated in excess of operating and investing requirements when Core & Main LP’s net total leverage ratio is greater than or equal to 3.25.
The 2028 Senior Term Loan may require accelerated repayment based upon cash flows generated in excess of operating and investing requirements when Core & Main LP’s net total leverage ratio is greater than or equal to 3.25.
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.
As a leading specialty 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.
Operating Expenses Operating expenses are primarily comprised of selling, general and administrative costs, which include personnel expenses (salaries, wages, incentive compensation, associate benefits and payroll taxes), rent, insurance, utilities, professional fees, freight out, fuel and repair and maintenance.
Operating Expenses Operating expenses are primarily comprised of selling, general and administrative costs, which include personnel expenses (salaries, wages, incentive compensation, associate benefits and payroll taxes), rent, insurance, utilities, professional fees, outbound freight, fuel and repair and maintenance.
Adjusted EBITDA We define Adjusted EBITDA as EBITDA further adjusted for certain items management believes are not reflective of the underlying operations of our business, including (a) loss on debt modification and extinguishment, (b) equity-based compensation, (c) expenses associated with the IPO and subsequent secondary offerings and (d) expenses associated with acquisition activities.
We define Adjusted EBITDA as EBITDA as further adjusted for certain items management believes are not reflective of the underlying operations of our business, including but not limited to (a) loss on debt modification and extinguishment, (b) equity-based compensation, (c) expenses associated with the IPO and subsequent secondary offerings and (d) expenses associated with acquisition activities.
Net Income Net income represents our net sales less our cost of sales, operating expenses, depreciation and amortization, interest expense, other expense and our provision for income taxes. Net Income Attributable to Core & Main, Inc. Net income attributable to Core & Main, Inc. represents net income less income attributable to non-controlling interests.
Net Income Net income represents net sales less cost of sales, operating expenses, depreciation and amortization, interest expense, other expense and the provision for income taxes. Net Income Attributable to Core & Main, Inc. Net income attributable to Core & Main, Inc. represents net income less income attributable to non-controlling interests.
We expect to benefit from the remaining 15% of any cash tax savings, except to the extent of any deemed realizations. For the Tax Receivable Agreements, we assess the tax attributes to determine if it is more likely than not that the benefit of any deferred tax assets will be realized.
We expect to benefit from the remaining 15% of any cash tax savings, except to the extent of any deemed realizations that do not ultimately become realized. For the Tax Receivable Agreements, we assess the tax attributes to determine if it is more likely than not that the benefit of any deferred tax assets will be realized.
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 320 branches across 48 states.
Our 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 335 branches across 48 states.
The carrying value of inventory includes the capitalization of inbound freight costs and is net of supplier rebates and purchase discounts for an estimate of products not yet sold. Acquisitions We enter into acquisitions to strategically expand in underpenetrated products and markets.
The carrying value of inventory includes the capitalization of inbound freight costs and is net of supplier rebates and purchase discounts for an estimate of products not yet sold. Acquisitions We enter into acquisitions to, among other things, strategically expand in underpenetrated products and markets.
Seasonality Our operating results within a fiscal year are typically impacted by seasonality. Although weather patterns affect our operating results throughout the year, 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.
Although weather patterns affect our operating results throughout the year, 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.
The amount of these payments are dependent upon various factors, including the amount of taxable income allocated to them from Holdings, changes in the ownership percentage of the non-controlling interest holders, changes in tax rates and the timing of distributions relative to the corresponding tax year. Tax distributions to non-controlling interest holders were $57 million in fiscal 2022 .
The amount of these payments are dependent upon various factors, including the amount of taxable income allocated to them from Holdings, changes in the ownership percentage of the non-controlling interest holders, changes in tax rates and the timing of distributions relative to the corresponding tax year. Tax distributions to non-controlling interest holders were $41 million in fiscal 2023 .
There can be no assurance that the anticipated benefits of the acquisitions will be realized on the timeline we expect, or at all. 42 Key Business Metrics Net Sales We generate net sales primarily from the sale of water, wastewater, storm drainage and fire protection products and the provision of related services to approximately 60,000 customers, as of January 29, 2023, including municipalities, private water companies and professional contractors.
There can be no assurance that the anticipated benefits of the acquisitions will be realized on the timeline we expect, or at all. 42 Key Business Metrics Net Sales We generate net sales primarily from the sale of water, wastewater, storm drainage and fire protection products and the provision of related services to over 60,000 customers, as of January 28, 2024, including municipalities, private water companies and professional contractors.
We seek to mitigate our exposure to interest rate volatility through the entry into interest rate swap instruments, such as our current interest rate swap, associated with borrowings under the Senior Term Loan Facility, which effectively converts $1,000 million of our variable rate debt to fixed rate debt, with notional amount decreases to $900 million on July 27, 2023, $800 million on July 27, 2024, and $700 million on July 27, 2025 through the instrument maturity on July 27, 2026.
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 2028 Senior Term Loan, which effectively converts $900 million of our variable rate debt to fixed rate debt, with notional amount decreases to $800 million on July 27, 2024, and $700 million on July 27, 2025 through the instrument maturity on July 27, 2026.
Net sales of meter products benefited from higher volumes due to an increasing adoption of smart meter technology by municipalities and an improving supply chain.
Net sales of meter products benefited from higher selling prices, higher volumes due to an increasing adoption of smart meter technology by municipalities, acquisitions and an improving supply chain.
Depreciation and Amortization Expense Depreciation and amortization (“D&A”) expense for fiscal 2022 was $140 million compared with $138 million during fiscal 2021 . The increase primarily was attributable to amortization related to recent acquisitions, partially offset by lower amortization on existing customer relationship intangible assets.
Depreciation and Amortization Expense Depreciation and amortization (“D&A”) expense for fiscal 2023 was $147 million compared with $140 million during fiscal 2022 . The increase was attributable to amortization related to recent acquisitions partially offset by lower amortization on existing customer relationship intangible assets.
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 fiscal 2022 net sales, our exposure by end market was approximately 39% municipal, 39% non-residential and 22% residential.
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 fiscal 2023 net sales, our exposure by end market was approximately 42% municipal, 38% non-residential and 20% residential.
We define Adjusted EBITDA as EBITDA as further adjusted for certain items management believes are not reflective of the underlying operations of our business, including (a) loss on debt modification and extinguishment, (b) equity-based compensation, (c) expenses associated with the IPO and subsequent secondary offerings and (d) expenses associated with acquisition activities.
Adjusted EBITDA We define Adjusted EBITDA as EBITDA further adjusted for certain items management believes are not reflective of the underlying operations of our business, including but not limited to (a) loss on debt modification and extinguishment, (b) equity-based compensation, (c) expenses associated with the public offerings and (d) expenses associated with acquisition activities.
Senior ABL Credit Facility (1) 1,250 July 27, 2026 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.
Senior ABL Credit Facility (1) 1,250 February 9, 2029 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.
Depending on the ultimate scope and duration of supply chain disruptions, we may experience 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.
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.
Post establishment of the Tax Receivable Agreement liabilities we may remeasure the liabilities due to changes in estimates which could result in an impact to earnings. Off-Balance Sheet Arrangements We had no off-balance sheet arrangements as of January 29, 2023. 55
Following establishment of the tax receivable agreement liabilities we may remeasure the liabilities due to changes in estimates which could result in an impact to earnings. Off-Balance Sheet Arrangements We had no off-balance sheet arrangements as of January 28, 2024.
Substantially all of Core & Main LP’s assets secure the Senior Term Loan Facility and the Senior ABL Credit Facility. 50 Information about our cash flows, by category, is presented in the consolidated Statements of Cash Flows and is summarized as follows: Fiscal Years Ended January 29, 2023 January 30, 2022 January 31, 2021 Cash flows provided by (used in) operating activities $ 401 $ (31) $ 214 Cash flows (used in) investing activities (152) (203) (229) Cash flows (used in) provided by financing activities (73) (146) 215 Increase (decrease) in cash and cash equivalents $ 176 $ (380) $ 200 Operating Activities Net cash provided by operating activities increased by $432 million to $401 million of cash inflow for fiscal 2022 compared with cash used in operating activities of $31 million for fiscal 2021 .
Substantially all of Core & Main LP’s assets secure the 2028 Senior Term Loan and the Senior ABL Credit Facility. 47 Information about our cash flows, by category, is presented in the consolidated Statements of Cash Flows and is summarized as follows: Fiscal Years Ended January 28, 2024 January 29, 2023 January 30, 2022 Cash flows provided by (used in) operating activities $ 1,069 $ 401 $ (31) Cash flows used in investing activities (270) (152) (203) Cash flows used in financing activities (975) (73) (146) (Decrease) increase in cash and cash equivalents $ (176) $ 176 $ (380) Operating Activities Net cash provided by operating activities increased by $668 million to $1,069 million for fiscal 2023 compared with $401 million for fiscal 2022 .
Basis of Presentation The Company is a holding company and its primary material asset is its direct and indirect ownership interest in Holdings. 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.
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.
As of January 29, 2023, after giving effect to approximately $12 million of letters of credit issued under the Senior ABL Credit Facility, Core & Main LP would have been able to borrow approximately $1,238 million under the Senior ABL Credit Facility, subject to borrowing base availability.
As of January 28, 2024, after giving effect to approximately $16 million of letters of credit issued under the Senior ABL Credit Facility, Core & Main LP would have been able to borrow approximately $804 million under the Senior ABL Credit Facility, subject to borrowing base availability.
There were no amounts outstanding under the Senior ABL Credit Facility as of January 29, 2023. (2) Notional amount of $1,000 million as of January 29, 2023 . The notional amount decreases to $900 million on July 27, 2023, $800 million on July 27, 2024, and $700 million on July 27, 2025 through the instrument maturity on July 27, 2026.
There was $430 million outstanding under the Senior ABL Credit Facility as of January 28, 2024. (2) Notional amount of $900 million as of January 28, 2024 . The notional amount decreases to $800 million on July 27, 2024 and $700 million on July 27, 2025 through the instrument maturity on July 27, 2026.
Purchase Obligations As of January 29, 2023, the Company had agreements in place with various suppliers to purchase goods and services, primarily inventory, in the aggregate amount of $1,423 million. These purchase obligations are generally cancellable, but the Company foresees no intent to cancel. Payment is generally expected to be made during fiscal 2023 for these obligations.
Purchase Obligations As of January 28, 2024, the Company had agreements in place with various suppliers to purchase goods and services, primarily inventory, in the aggregate amount of $1,033 million. These purchase obligations are generally cancellable, but the Company does not currently intend to cancel. Payment is generally expected to be made during fiscal 2024 for these obligations.
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.
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.
These contracts include written agreements and purchase orders as well as arrangements that are implied by customary business practices or law. The revenue contracts are primarily single performance obligations for the sale of product or performance of services for customers.
Our critical accounting policies and estimates are described below. Revenue Recognition Our revenues are earned from contracts with customers. These contracts include written agreements and purchase orders as well as arrangements that are implied by customary business practices or law. The revenue contracts are primarily single performance obligations for the sale of product or performance of services for customers.
The establishment of the $91 million liability under the Former Limited Partners Tax Receivable Agreements and the $94 million liability under the Continuing Limited Partners Tax Receivable Agreements as of January 29, 2023 did not impact earnings as the payments were recorded against equity since Core & Main entered into the Tax Receivable Agreements as part of common control transactions.
The establishment of the $717 million liability under the Tax Receivable Agreements as of January 28, 2024 did not impact earnings as the payments were recorded against equity since Core & Main entered into the Tax Receivable Agreements as part of common control transactions.
The fiscal years ended January 29, 2023, January 30, 2022 and January 31, 2021 included 52 weeks. The next fiscal year ending January 28, 2024 (“fiscal 2023”) will also include 52 weeks.
The fiscal years ended January 28, 2024, January 29, 2023 and January 30, 2022 included 52 weeks. The next fiscal year ending February 2, 2025 (“fiscal 2024”) will include 53 weeks.
If during the measurement period (a period not to exceed 12 months from the acquisition date) we receive additional information that existed as of the acquisition date but at the time of the original allocation described above was unknown to us, we make the appropriate adjustments to the purchase price allocation in the reporting period that the amounts are determined.
If during the measurement period (a period not to exceed 12 months from the acquisition date) we receive additional information that existed as of the acquisition date but at the time of the original allocation described above was unknown to us, we make the appropriate adjustments to the purchase price allocation in the reporting period that the amounts are determined. 51 For each acquisition, we value intangible assets acquired which may include customer relationships, non-compete agreements and/or trademarks.
Over the course of fiscal 2022 and fiscal 2021, we experienced increasing pressure on our supply chain 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 part due to the impact of COVID-19 on the global economy and the conflict in Ukraine that limited product availability and further exacerbated the effects of inflation.
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 part due to the conflict in Ukraine that limited product availability and further exacerbated the effects of inflation.
Additionally, we continuously evaluate our approach to our capital allocation, which may include acquisitions, greenfields, debt reduction (including through open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and opportunistic refinancing of debt), stock repurchases, dividends or other distributions. In fiscal 2023, we expect to return capital to our shareholders through dividends and/or share repurchases.
Additionally, we regularly evaluate our approach to our capital allocation, which may include acquisitions, greenfields, debt reduction (including through open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and opportunistic refinancing of debt), stock repurchases, dividends or other distributions. In fiscal 2023, we completed the Repurchase Transactions for total consideration of $1,344 million.
Gross profit may not be comparable to those of other companies, as other companies may include all of the costs related to their distribution network in cost of sales.
Gross profit may be impacted by the time between changes in supplier costs, tariffs and changes in our customer pricing. Gross profit may not be comparable to those of other companies, as other companies may include all of the costs related to their distribution network in cost of sales.
The timing of payments associated with the Tax Receivable Agreements are summarized below: Fiscal 2023 $ 5 Fiscal 2024 12 Fiscal 2025 11 Fiscal 2026 11 Fiscal 2027 11 Thereafter 135 Total Tax Receivable Agreements liability $ 185 Further exchanges by the Continuing Limited Partners will result in additional tax deductions to us and require additional payables pursuant to Tax Receivable Agreements.
The timing of payments associated with the Tax Receivable Agreements are summarized below: 46 Fiscal 2024 $ 11 Fiscal 2025 18 Fiscal 2026 40 Fiscal 2027 40 Fiscal 2028 41 Thereafter 567 Total Tax Receivable Agreements liability $ 717 Further exchanges by Management Feeder will result in additional tax deductions to us and require additional payables pursuant to Tax Receivable Agreements.
Interest Rate Swap (2) 1,000 July 27, 2026 Effective fixed rate of 3.293%, based upon the 0.693% fixed rate plus an applicable margin of 2.50% and a credit spread adjustment of 0.10% both associated with the Senior Term Loan Facility. (1) Aggregate amount of commitments under the asset-based revolving credit facility of $1,250 million overall, subject to borrowing base availability.
Interest Rate Swap (3) 750 July 27, 2028 Effective fixed rate of 6.163%, based upon the 3.913% fixed rate plus an applicable margin of 2.25% associated with the 2031 Senior Term Loan. (1) Aggregate amount of commitments under the asset-based revolving credit facility of $1,250 million overall, subject to borrowing base availability.
The following table sets forth a reconciliation of net income or net income attributable to Core & Main, Inc. to EBITDA and Adjusted EBITDA for the periods presented: Fiscal Years Ended January 29, 2023 January 30, 2022 January 31, 2021 Net income attributable to Core & Main, Inc. $ 366 $ 166 Plus: net income attributable to non-controlling interests 215 59 Net income 581 225 $ 37 Depreciation and amortization (1) 143 142 141 Provision for income taxes 128 51 9 Interest expense 66 98 139 EBITDA $ 918 $ 516 $ 326 Loss on debt modification and extinguishment — 51 — Equity-based compensation 11 25 4 Acquisition expenses (2) 5 7 12 Offering expenses (3) 1 5 — Adjusted EBITDA $ 935 $ 604 $ 342 (1) Includes depreciation of certain assets which are reflected in “cost of sales” in our Statement of Operations.
The following table sets forth a reconciliation of net income or net income attributable to Core & Main, Inc. to EBITDA and Adjusted EBITDA for the periods presented: Fiscal Years Ended January 28, 2024 January 29, 2023 January 30, 2022 Net income attributable to Core & Main, Inc. $ 371 $ 366 $ 166 Plus: net income attributable to non-controlling interests 160 215 59 Net income 531 581 225 Depreciation and amortization (1) 149 143 142 Provision for income taxes 128 128 51 Interest expense 81 66 98 EBITDA $ 889 $ 918 $ 516 Loss on debt modification and extinguishment — — 51 Equity-based compensation 10 11 25 Acquisition expenses (2) 6 5 7 Offering expenses (3) 5 1 5 Adjusted EBITDA $ 910 $ 935 $ 604 (1) Includes depreciation of certain assets which are reflected in “cost of sales” in our Statement of Operations. 50 (2) Represents expenses associated with acquisition activities, including transaction costs, post-acquisition employee retention bonuses, severance payments, expense recognition of purchase accounting fair value adjustments (excluding amortization) and contingent consideration adjustments.
(“R&B”) Pipes, Valves & Fittings; Storm Drainage March 2020 215 As we integrate these and other acquisitions into our existing operations, we may not be able to identify the specific financial statement impacts associated with these acquisitions.
( “ Pacific Pipe ” ) Pipes, Valves & Fittings; Storm Drainage August 2021 Triple T Pipe & Supply, LLC (“Triple T”) Pipes, Values & Fittings March 2021 As we integrate these and other acquisitions into our existing operations, we may not be able to identify the specific financial statement impacts associated with these acquisitions.
The Company did not receive any of the proceeds from the sales. For a further description of the IPO and Secondary Offerings, see Note 1 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K .
For a further description of the Secondary Offerings and the Repurchase Transactions, refer to Note 1 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Payments under the Tax Receivable Agreements are only required to be made to the extent that we utilize the corresponding tax deductions to reduce payments to federal, state and local taxing authorities. These payments are in an amount that represents 85% of the reduction in payments to federal, state and local taxing authorities.
Payments under the Tax Receivable Agreements are only required to be made to the extent that we realize or are deemed to have realized the benefit of the corresponding tax deductions to reduce payments to federal, state and local taxing authorities.
As such, the cash savings from the incremental tax deductions are expected to exceed the payments under the Tax Receivable Agreements over the life of these arrangements.
These payments are in an amount that represents 85% of the reduction in payments to federal, state and local taxing authorities. As such, the cash savings from the incremental tax deductions are expected to exceed the payments under the Tax Receivable Agreements over the life of these arrangements.
Gross Profit Gross profit represents the difference between the product cost from suppliers (net of earned rebates and discounts and including the cost of inbound freight) and the net sale price to our customers. Gross profit may be impacted by the time between changes in supplier costs and changes in our customer pricing.
Gross Profit Gross profit represents the difference between the product cost inclusive of material costs from suppliers (net of earned rebates and discounts and including the cost of inbound freight), labor and overhead costs and depreciation and the net sale price to our customers.
Non-GAAP Financial Measures In addition to providing results that are determined in accordance with GAAP, we present EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. These measures are not considered measures of financial performance or liquidity under GAAP and the items excluded therefrom are significant components in understanding and assessing our financial performance or liquidity.
These measures are not considered measures of financial performance or liquidity under GAAP and the items excluded therefrom are significant components in understanding and assessing our financial performance or liquidity.
Recently Issued and Adopted Accounting Pronouncements and Accounting Pronouncements Issued But Not Yet Adopted See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 53 Critical Accounting Policies and Estimates A summary of our significant accounting policies is included in Note 2 of our audited consolidated annual financial statements.
(3) Represents costs related to the IPO and subsequent secondary offerings reflected in SG&A expenses in our Statement of Operations. Recently Issued and Adopted Accounting Pronouncements and Accounting Pronouncements Issued But Not Yet Adopted See Note 2 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
These factors were partially offset by a $5 million increase in capital expenditures. Net cash used in investing activities decreased by $26 million to $203 million for fiscal 2021 compared with $229 million for fiscal 2020.
These factors were partially offset by a $5 million increase in capital expenditures. Financing Activities Net cash used in financing activities was $975 million for fiscal 2023 compared with $73 million for fiscal 2022 .
Fiscal Years Ended January 29, 2023 January 30, 2022 Percentage Change (dollars in millions) Pipes, valves & fittings products $ 4,548 $ 3,361 35.3 % Storm drainage products 949 687 38.1 % Fire protection products 701 565 24.1 % Meter products 453 391 15.9 % Total net sales $ 6,651 $ 5,004 44 Gross Profit Gross profit for fiscal 2022 increased $515 million, or 40.2%, to $1,795 million compared with $1,280 million for fiscal 2021 .
Fiscal Years Ended January 28, 2024 January 29, 2023 Percentage Change Pipes, valves & fittings products $ 4,504 $ 4,548 (1.0) % Storm drainage products 985 949 3.8 % Fire protection products 688 701 (1.9) % Meter products 525 453 15.9 % Total net sales $ 6,702 $ 6,651 0.8 % 44 Gross Profit Gross profit for fiscal 2023 increased $23 million, or 1.3%, to $1,818 million compared with $1,795 million for fiscal 2022 .
The increase in net sales contributed an additional $422 million of gross profit and the increase in gross profit as a percentage of net sales contributed $93 million. Gross profit as a percentage of net sales for fiscal 2022 was 27.0% compared with 25.6% for fiscal 2021 .
Gross profit increased due to an increase in net sales and an increase in gross profit as a percentage of net sales. Gross profit as a percentage of net sales for fiscal 2023 was 27.1% compared with 27.0% for fiscal 2022 .
These factors were partially offset by a $92 million increase in tax payments due to higher income before provision for income taxes. Net cash used in operating activities was $31 million for fiscal 2021 compared with net cash from operating activities of $214 million for fiscal 2020 .
These factors were partially offset by a $92 million increase in tax payments due to higher income before provision for income taxes.
Trademark intangible assets represent the value associated with the brand names in place at the date of the acquisition. 54 Tax Receivable Agreements Under the Tax Receivable Agreements, we expect to generate tax attributes that will reduce amounts that we would otherwise pay in the future to various tax authorities.
Tax Receivable Agreements Under the Tax Receivable Agreements, we expect to generate tax attributes that will reduce amounts that we would otherwise pay in the future to various tax authorities.
Our short term debt obligations of $15 million are related to quarterly amortization principal payments on the Senior Term Loan Facility. We are required to make cash payments in future periods under the Tax Receivable Agreements.
Our short term debt obligations of $15 million are related to quarterly principal payments on the 2028 Senior Term Loan. We commenced payments under the Tax Receivable Agreements in fiscal 2023, as the Company had a financing cash outflow related to the payment of $5 million under the Tax Receivable Agreements.
The actual amount and timing of the additional payments under the Tax Receivable Agreements will vary depending upon a number of factors as discussed further in Note 7 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 49 In addition to making distributions to Core & Main, Inc. to fund tax obligations and payments under the Tax Receivable Agreements, in accordance with the Partnership Agreement, Holdings also makes distributions to the Continuing Limited Partners representing the non-controlling interests of Core & Main, Inc. to fund their income tax obligations with various taxing authorities.
The actual amount and timing of the additional payments under the Tax Receivable Agreements will vary depending upon a number of factors as discussed further in Note 7 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions are based on historical experiences and changes in the business environment. However, actual results may differ from estimates under different conditions, sometimes materially.
Our estimates and assumptions are based on historical experiences and changes in the business environment. However, actual results may differ from estimates under different conditions, sometimes materially. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results of operations and require management judgment.
The Senior Term Loan Facility and the Senior ABL Credit Facility each bear interest based on Term SOFR. If interest rates further increase, our debt service obligations on our variable-rate indebtedness will further increase and our net income would decrease, even though the amount borrowed under the facilities remains the same.
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 January 28, 2024, we had $1,893 million of outstanding variable-rate debt.
During fiscal 2022, interest rate increases slowed home buying and new lot development, which was a contributing factor to a decline in the residential end market in the fourth quarter of fiscal 2022 compared with the comparable prior year period.
Interest rate increases in 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. 40 In November 2021, the IIJA was signed into law, which includes $55 billion to invest in water infrastructure across the U.S.
We are also exposed to fluctuations in costs for petroleum as we distribute a substantial portion of our products by truck. Petroleum prices have fluctuated as a result of the conflict in Ukraine and other factors.
Petroleum prices have fluctuated as a result of the conflict in Ukraine and other factors. 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.
Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses for fiscal 2022 increased $163 million, or 22.7%, to $880 million compared with $717 million during fiscal 2021 . The increase was primarily attributable to an increase of $127 million in personnel expenses, which was primarily driven by higher variable compensation costs and increased headcount.
Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses for fiscal 2023 increased $51 million, or 5.8%, to $931 million compared with $880 million during fiscal 2022 . The increase was primarily attributable to an increase of $23 million in personnel expenses along with higher facility and distribution costs related to inflation and acquisitions.
During the fourth quarter of fiscal 2021, we experienced a period where customers accelerated certain orders due to product availability constraints and inflation, diverging from typical seasonality trends. 40 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.
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 overall increase in gross profit as a percentage of net sales was primarily attributable to strategic inventory investments ahead of announced price increases, a favorable pricing environment, the execution of our gross margin initiatives and accretive acquisitions.
The overall increase in gross profit as a percentage of net sales was primarily attributable to execution of our gross margin initiatives partially offset by normalization of larger prior year benefits from strategic inventory investments during an inflationary environment.
We value customer relationships using an excess earnings method using 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.
Customer relationship intangible assets represent the value associated with those customer relationships in place at the date of the acquisition. We value customer relationships using an excess earnings method using various inputs such as customer attrition rate, revenue growth rate, gross margin percentage and discount rate.
Our products include pipes, valves, fittings, storm drainage products, fire protection products, meter products and other products for use in the construction, maintenance and repair of water and wastewater systems as well as fire protection systems.
Our products include pipes, valves, fittings, storm drainage products, fire protection products, meter products and other products for use in the construction, maintenance and repair of water and wastewater infrastructure systems. We complement our core products through additional offerings, including smart meter systems, fusible HDPE piping solutions, specifically engineered treatment plant products and geosynthetics and erosion control products.
However, this still results in concentration of cash and cash equivalents across these financial institutions in excess of FDIC-insured limits. As of January 29, 2023, we had no outstanding borrowings on our Senior ABL Credit Facility, which provides for borrowings of up to $1,250 million, subject to borrowing base availability.
As of January 28, 2024, we had $430 million outstanding borrowings on our Senior ABL Credit Facility, which provides for borrowings of up to $1,250 million, subject to borrowing base availability.
Net sales growth for pipes, valves & fittings and storm drainage products benefited from end-market growth, acquisitions and higher average selling prices. Net sales growth for fire protection products also benefited from end-market growth and higher average selling prices.
Net sales growth for storm drainage products benefited from higher selling prices, volume growth and acquisitions. Net sales for fire protection products declined due to lower selling prices and lower volume partially offset by acquisitions.
See “—Non-GAAP Financial Measures” for further discussion of Adjusted EBITDA and a reconciliation to net income or net income attributable to Core & Main, Inc., the most directly comparable measure under U.S. generally accepted accounting principles (“GAAP”), as applicable . 43 Results of Operations Fiscal Year Ended January 29, 2023 Compared with Fiscal Year Ended January 30, 2022 Fiscal Years Ended January 29, 2023 January 30, 2022 (dollars in millions) Net sales $ 6,651 $ 5,004 Cost of sales 4,856 3,724 Gross profit 1,795 1,280 Operating expenses: Selling, general and administrative 880 717 Depreciation and amortization 140 138 Total operating expenses 1,020 855 Operating income 775 425 Interest expense 66 98 Loss on debt modification and extinguishment — 51 Income before provision for income taxes 709 276 Provision for income taxes 128 51 Net income 581 225 Less: net income attributable to non-controlling interests 215 59 Net income attributable to Core & Main, Inc. $ 366 $ 166 Earnings per share: Basic $ 2.16 $ 0.57 Diluted $ 2.13 $ 0.55 Non-GAAP Financial Data: Adjusted EBITDA $ 935 $ 604 Net Sales Net sales for fiscal 2022 increased $1,647 million, or 32.9%, to $6,651 million compared with $5,004 million for fiscal 2021 .
For a further description of basic and diluted earnings per share, refer to Note 12 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 43 Results of Operations Fiscal Year Ended January 28, 2024 Compared with Fiscal Year Ended January 29, 2023 Amounts in millions (except per share data) Fiscal Years Ended January 28, 2024 January 29, 2023 Net sales $ 6,702 $ 6,651 Cost of sales 4,884 4,856 Gross profit 1,818 1,795 Operating expenses: Selling, general and administrative 931 880 Depreciation and amortization 147 140 Total operating expenses 1,078 1,020 Operating income 740 775 Interest expense 81 66 Income before provision for income taxes 659 709 Provision for income taxes 128 128 Net income 531 581 Less: net income attributable to non-controlling interests 160 215 Net income attributable to Core & Main, Inc. $ 371 $ 366 Earnings per share: Basic $ 2.15 $ 2.16 Diluted $ 2.15 $ 2.13 Non-GAAP Financial Data: Adjusted EBITDA $ 910 $ 935 Net Sales Net sales for fiscal 2023 increased $51 million, or 0.8%, to $6,702 million compared with $6,651 million for fiscal 2022 .
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 Facility and the Senior ABL Credit Facility , are subject to variable rates of interest and expose us to interest rate risk.
Interest Rates Certain of our indebtedness, including borrowings under the 2028 Senior Term Loan and the Senior ABL Credit Facility , are subject to variable rates of interest and expose us to interest rate risk. The 2028 Senior Term Loan and the Senior ABL Credit Facility each bear interest based on term secured overnight financing rate (“Term SOFR”).
We reflect this expected diminishing cash flow through the utilization of an annual customer attrition rate assumption and in its method of amortization. Non-compete intangible assets represent the value associated with non-compete agreements for former executives in place at the date of the acquisition.
Cash flows associated with the existing relationships are expected to diminish over time due to customer turnover. We reflect this expected diminishing cash flow through the utilization of an annual customer attrition rate assumption and in its method of amortization.
Therefore, there can be no assurance that we will engage in any or all of these actions or to what amount of capital we will allocate to each option. Our affiliates may also purchase our debt from time to time, through open market purchases or other transactions.
Therefore, there can be no assurance that we will engage in any or all of these actions or to what amount of capital we will allocate to each option. The execution of certain initiatives under our capital allocation policy may require distributions by Holdings and Core & Main LP.
For each acquisition, we value intangible assets acquired which may include customer relationships, non-compete agreements and/or trademarks. Customer relationship intangible assets represent the value associated with those customer relationships in place at the date of the acquisition.
Non-compete intangible assets represent the value associated with non-compete agreements for former executives in place at the date of the acquisition. Trademark intangible assets represent the value associated with the brand names in place at the date of the acquisition.
In addition, we are exposed to fluctuations in prices for imported products due to logistical challenges and changes in labor, fuel, 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.
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.
Further exchanges by the Continuing Limited Partners may result in lower tax distributions subject to any changes to income before provision to income taxes.
However, there will be an increase in payments to taxing authorities by Core & Main due to its increased allocation of taxable income following the Secondary Offerings and Repurchase Transactions. Further exchanges by the Continuing Limited Partners may result in lower tax distributions subject to any changes to income before provision to income taxes.
For a reconciliation of Adjusted EBITDA to net income or net income attributable to Core & Main, Inc., the most comparable GAAP financial metric, as applicable, see “—Non-GAAP Financial Measures.” Liquidity and Capital Resources Historically, we have financed our liquidity requirements through cash flows from operating activities, borrowings under our credit facilities, issuances of equity and debt securities and working capital management activities.
Liquidity and Capital Resources Historically, we have financed our liquidity requirements through cash flows from operating activities, borrowings under our credit facilities, issuances of equity and debt securities and working capital management activities. Our principal historical liquidity requirements have been for working capital, capital expenditures, acquisitions, servicing indebtedness and the Repurchase Transactions.
The decrease was attributable to a $38 million decrease in acquisitions partially offset by an $8 million increase in capital expenditures and a $5 million payment in fiscal 2021 for the settlement of an interest rate swap. Financing Activities Net cash used in financing activities was $73 million for fiscal 2022 compared with $146 million for fiscal 2021 .
These factors were partially offset by a $430 million increase in net borrowings on the Senior ABL Credit Facility and a $16 million decrease in distributions to non-controlling interest holders during fiscal 2023. Net cash used in financing activities was $73 million for fiscal 2022 compared with $146 million for fiscal 2021 .
Future aggregate rental payments under non-cancelable operating leases as of January 29, 2023 were as follows: $57 million in fiscal 2023 , $46 million in fiscal 2024 , $36 million in fiscal 2025 , $23 million in fiscal 2026, $15 million in fiscal 2027 and $21 million thereafter.
Future aggregate rental payments under non-cancelable operating leases as of January 28, 2024 were as follows: $65 million in fiscal 2024 , $53 million in fiscal 2025 , $40 million in fiscal 2026 , $29 million in fiscal 2027, $15 million in fiscal 2028 and $16 million thereafter. 49 Non-GAAP Financial Measures In addition to providing results that are determined in accordance with GAAP, we present EBITDA and Adjusted EBITDA, which are non-GAAP financial measures.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+1 added−1 removed2 unchanged
Biggest changeBoth the Senior Term Loan Facility and the Senior ABL Credit Facility bear interest generally equal to Term SOFR plus an applicable margin. As a result, we are exposed to fluctuations in interest rates to the extent of our net borrowings under the Senior Term Loan Facility and the Senior ABL Credit Facility.
Biggest changeAs a result, we are exposed to fluctuations in interest rates to the extent of our net borrowings under the 2028 Senior Term Loan and the Senior ABL Credit Facility. As of January 28, 2024, our net borrowings under the 2028 Senior Term Loan and Senior ABL Credit Facility were $1,893 million.
We seek to minimize the effects of changing prices through economies of purchasing, inventory management based on the predictability of product lead teams and recovering product costs by passing cost increases on to customers. Such price fluctuations have from time to time produced volatility in our financial performance and could do so in the future. 56
We seek to minimize the effects of changing prices through economies of purchasing, inventory management based on the predictability of product lead teams and recovering product costs by passing cost increases on to customers. Such price fluctuations have from time to time produced volatility in our financial performance and could do so in the future. 53
In fiscal 2022 , our 50 largest customers accounted for approximately 12% of our net sales, with our largest customer accounting for less than 1% of net sales. We maintain provisions for potential credit losses and such losses to date have normally been within our expectations.
In fiscal 2023 , our 50 largest customers accounted for approximately 12% of our net sales, with our largest customer accounting for less than 1% of net sales. We maintain provisions for potential credit losses and such losses to date have normally been within our expectations.
We have a limited ability to control the timing an amount of changes in the cost to procure our products. We seek to recover increases in our product costs by passing product cost increases on to our customers.
We have a limited ability to control the timing and amount of changes in the cost to procure our products. We seek to recover increases in our product costs by passing product cost increases on to our customers.
“Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Key Factors Affecting Our Business—Interest Rates.” Credit Risk We are exposed to credit risk on accounts receivable balances. This risk is mitigated due to our large, diverse customer base.
See Item 7. “Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Key Factors Affecting Our Business—Interest Rates” of this Annual Report on Form 10-K. Credit Risk We are exposed to credit risk on accounts receivable balances. This risk is mitigated due to our large, diverse customer base.
Conversely, decreases in our product costs can correspondingly lower the price levels of the products we sell in order to remain competitive in our markets.
Conversely, decreases in our product costs can correspondingly lower the price levels of the products we sell in order to remain competitive in our markets. Changes to product costs may lead to a risk of a reduction to our margins.
As of January 29, 2023, our Senior Term Loan Facility had borrowings of $1,478 million. As such, excluding the impact of any interest rate swap, each one percentage point change in interest rates would result in an approximately $15 million change in the annual interest expense on the Senior Term Loan Facility.
As such, excluding the impact of any interest rate swap, each one percentage point change in interest rates would result in an approximately $15 million change in the annual interest expense on the 2028 Senior Term Loan.
We are also exposed to fluctuations in petroleum costs as we deliver a substantial portion of the products we sell by truck and fluctuations in prices for imported products due to logistical challenges.
We seek to minimize this risk through strategic inventory investments ahead of announced price increases, the execution of our gross margin initiatives and accretive acquisitions. We are also exposed to fluctuations in petroleum costs as we deliver a substantial portion of the products we sell by truck and fluctuations in prices for imported products due to logistical challenges.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of conducting business, we are exposed to certain risks associated with potential changes in market conditions. These risks include fluctuations in interest rates and prices, including price fluctuations related to substantially all of our products. Interest Rate Risk Our credit facilities bear interest at a floating rate.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of conducting business, we are exposed to certain risks associated with potential changes in market conditions.
As of January 29, 2023, assuming availability under our Senior ABL Credit Facility was fully utilized, each one percentage point change in interest rates would result in an approximately $12 million change in annual interest expense. See Item 7.
As of January 28, 2024, assuming availability under our Senior ABL Credit Facility was fully utilized, each one percentage point change in interest rates would result in an approximately $12 million change in annual interest expense. On February 9, 2024, Core & Main LP entered into an incremental $750 million term loan in conjunction with the 2031 Senior Term Loan.
Removed
Changes to product costs may lead to a risk of a reduction to our margins, which we seek to minimize through strategic inventory investments ahead of announced price increases, the execution of our gross margin initiatives and accretive acquisitions.
Added
These risks include fluctuations in interest rates and prices, including price fluctuations related to substantially all of our products. 52 Interest Rate Risk Our credit facilities bear interest at a floating rate. Both the 2028 Senior Term Loan and the Senior ABL Credit Facility bear interest generally equal to Term SOFR plus an applicable margin.

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