Core & Main(CNM) - 2024 Q1 - Quarterly Report

Part I Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for the three-month period ended April 30, 2023, covering key financial positions, performance, and cash flows, with accompanying notes Condensed Consolidated Balance Sheet Highlights (in millions) | Account | April 30, 2023 | January 29, 2023 | | :--- | :--- | :--- | | Total Assets | $4,929 | $4,909 | | Total current assets | $2,166 | $2,211 | | Goodwill | $1,536 | $1,535 | | Total Liabilities | $2,737 | $2,499 | | Long-term debt | $1,571 | $1,444 | | Total Stockholders' Equity | $2,192 | $2,410 | Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | Three Months Ended April 30, 2023 | Three Months Ended May 1, 2022 | | :--- | :--- | :--- | | Net sales | $1,574 | $1,598 | | Gross profit | $439 | $421 | | Operating income | $181 | $180 | | Net income | $133 | $137 | | Net income attributable to Core & Main, Inc. | $86 | $86 | | Diluted EPS | $0.50 | $0.50 | Condensed Consolidated Statements of Cash Flows (in millions) | Activity | Three Months Ended April 30, 2023 | Three Months Ended May 1, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $120 | $(37) | | Net cash used in investing activities | $(74) | $(11) | | Net cash (used in) provided by financing activities | $(222) | $48 | - In April 2023, the company completed the acquisition of UPSCO, Inc. for $40 million, with other acquisitions totaling $32 million during the quarter, all funded with cash[64][68][70] - Concurrently with a secondary offering in April 2023, the company repurchased 9.4 million shares of Class A common stock and 5.6 million shares of Class B common stock for a total consideration of $332 million[34] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's first-quarter fiscal 2023 financial performance, highlighting a slight decrease in net sales offset by improved gross profit margins and a strong liquidity position Q1 2023 vs Q1 2022 Performance Summary (in millions) | Metric | Q1 2023 | Q1 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,574 | $1,598 | $(24) | (1.5)% | | Gross Profit | $439 | $421 | $18 | 4.3% | | Operating Income | $181 | $180 | $1 | 0.6% | | Net Income | $133 | $137 | $(4) | (2.9)% | | Adjusted EBITDA | $220 | $219 | $1 | 0.5% | - Net sales experienced a 1.5% decrease primarily due to reduced residential lot development and seasonality, partially offset by higher selling prices and acquisitions, while meter product sales grew 8.4% due to smart meter adoption[106][107] - Gross profit margin improved to 27.9% from 26.3% in the prior-year period, driven by strategic inventory investments, gross margin initiatives, and accretive acquisitions[109] - Operating cash flow significantly improved to $120 million provided by operations, compared to $37 million used in the prior year, primarily due to a smaller inventory investment as product lead times became more predictable[122] - As of April 30, 2023, the company held $1 million in cash and approximately $1,108 million available under its Senior ABL Credit Facility, ensuring sufficient liquidity for at least the next 12 months[118][120] Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, primarily interest rate, credit, and price risks, and the strategies employed to mitigate them - The company is exposed to interest rate risk with $1,604 million in variable-rate debt as of April 30, 2023, where a one percentage point change in interest rates would alter annual interest expense by approximately $15 million, excluding swap impacts[141] - Credit risk is mitigated by a diverse customer base, with the 50 largest customers contributing only about 12% of net sales in fiscal 2022[142] - The company manages price risk from product cost fluctuations through purchasing economies, inventory management, and passing cost increases to customers[143] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of April 30, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[144] - No material changes occurred in the company's internal control over financial reporting during the fiscal quarter[146] Part II Legal Proceedings The company is not currently a party to any material legal proceedings, though it is involved in ordinary course litigation, including product liability claims - The company is not currently party to any material legal proceedings but is subject to ordinary course litigation, including personal injury, workers' compensation, and product liability claims[150] Risk Factors This section indicates that there have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended January 29, 2023 - There have been no material changes from the risk factors disclosed in the company's Fiscal 2022 Annual Report on Form 10-K[151] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities and details repurchases of Class A common stock during the quarter, including a significant repurchase transaction in April 2023 Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 30 - Feb 28 | 19,110 | $23.02 | | Mar 1 - Mar 31 | 18,784 | $21.49 | | Apr 1 - Apr 30 | 9,384,946 | $22.15 | | Total | 9,422,840 | $22.15 | - Repurchases included 9,377,183 shares of Class A common stock at $22.151 per share on April 14, 2023, as part of the Repurchase Transaction, which also involved repurchasing 5,622,817 shares of Class B common stock for no additional consideration[154] Defaults Upon Senior Securities The company reports that there were no defaults upon its senior securities during the period - There were no defaults upon senior securities during the period[155] Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company's operations[156] Other Information The company reports no other information required to be disclosed under this item for the period - No other information is required to be disclosed under this item for the period[157] Exhibits This section lists the exhibits filed with the Form 10-Q, including the Purchase and Redemption Agreement, CEO/CFO certifications, and Inline XBRL documents - A list of exhibits filed with the report is provided, including the Purchase and Redemption Agreement, CEO/CFO certifications, and XBRL data files[158]