Core & Main Inc.

03/24/2026 | Press release | Distributed by Public on 03/24/2026 05:33

Annual Report for Fiscal Year Ending February 1, 2023 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed below and elsewhere in this Annual Report on Form 10-K for a number of important factors, particularly those described under the caption "Cautionary Note Regarding Forward-Looking Statements."
Overview
Core & Main, Inc. ("Core & Main" and collectively with its subsidiaries, the "Company") is a leading specialty distributor dedicated to advancing reliable infrastructure with local service, nationwide. 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. 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 network of over 370 branches across the United States ("U.S.") and Canada. Our products include pipes, valves, fittings, storm drainage products, fire protection products, meter products and other products. We complement our core products through additional offerings, including smart meter systems, fusible high-density polyethylene ("fusible HDPE ") piping solutions, specifically engineered treatment plant products, geosynthetics and erosion control products. The Company's services and capabilities allow for integration with customers and form part of their sourcing and procurement function.
Basis of Presentation
The Company is a holding company that indirectly owns Core & Main LP through its ownership interest in Core & Main Holdings, LP ("Holdings"). Core & Main's primary material assets are its direct and indirect ownership interest in Holdings and deferred tax assets associated with such ownership. The consolidated financial information of Core & Main presented herein, including the accompanying audited consolidated financial statements included in this Annual Report on Form 10-K, includes the consolidated financial information of Holdings and its subsidiaries. The limited partner interests of Holdings ("Partnership Interests") not held by Core & Main are reflected as non-controlling interests in the condensed consolidated financial statements.
Fiscal Year
Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31st. Quarters within the fiscal year include 13-week periods, unless a fiscal year includes a 53rdweek, in which case the fourth quarter of the fiscal year will be a 14-week period. The fiscal year ended February 1, 2026 ("fiscal 2025") included 52 weeks, the fiscal year ended February 2, 2025 ("fiscal 2024") included 53 weeks and the fiscal year ended January 28, 2024 ("fiscal 2023") included 52 weeks. The next fiscal year ending January 31, 2027 ("fiscal 2026") will include 52 weeks.
Significant Events During Fiscal 2025
On December 1, 2025, the Company's board of directors authorized an increase of $500 million to the Company's share repurchase program (the "Repurchase Program"), bringing the total authorization to $1 billion. Shares repurchased under the Repurchase Program are retired immediately and are accounted for as a decrease to stockholders' equity. During fiscal 2025, the Company repurchased 3,173,594 shares of Class A common stock for a total of $155 million through open market transactions.
Significant Events During Fiscal 2024
On February 9, 2024, Core & Main LP amended the terms of the Senior ABL Credit Facility (as defined in Note 6 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K) in order to extend the maturity from July 27, 2026 to February 9, 2029.
On February 9, 2024, Core & Main LP entered into a $750 million senior term loan, which matures on February 9, 2031 (the "2031 Senior Term Loan"). Proceeds of the 2031 Senior Term Loan were used to, among other things, (a) repay total outstanding borrowings under the Senior ABL Credit Facility, (b) invest in organic growth and productivity initiatives, M&A, share repurchases or other initiatives aligned with Core & Main's capital allocation strategy and (c) pay related fees, premiums and expenses.
On February 12, 2024, Core & Main LP entered into an interest rate swap that has a starting notional amount of $750 million that increases to $1,500 million on July 27, 2026 through the instrument maturity on July 27, 2028. The instrument is intended to reduce the Company's exposure to variable interest rates under the senior term loan facilities.
On May 21, 2024, Core & Main LP amended the terms of the $1,500 million senior term loan (as amended, the "2028 Senior Term Loan"), in order to reduce the effective applicable margin from 2.60% to 2.00%.
On December 17, 2024, Core & Main LP amended the terms of the 2031 Senior Term Loan, in order to increase the principal balance by $200 million to $944 million with the proceeds utilized to repay outstanding borrowings under the 2028 Senior Term Loan. In addition, the amendment reduced the effective applicable margin from 2.25% to 2.00%.
Refer to Note 6 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further discussion of the amendment to the Senior ABL Credit Facility, the 2028 Senior Term Loan, the 2031 Senior Term Loan and the interest rate swap.
On June 12, 2024, the Company's board of directors authorized the repurchase of up to $500 million of the Company's Class A common stock under the Repurchase Program. During fiscal 2024, the Company repurchased 3,974,820 shares of Class A common stock for a total of $176 million through open market transactions.
Significant Events During Fiscal 2023
During fiscal 2023, the Company repurchased from certain selling stockholders affiliated with CD&R45,000,000 total Class A common stock and Partnership Interests for total consideration of $1,344 million. Refer to Note 1 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-Kfor further discussion of the share repurchase transactions completed in fiscal 2023.
During fiscal 2023, certain shareholders affiliated with CD&R exchanged 43,406,925 Partnership Interests and shares of Class B common stock, which were retired, for a corresponding number of shares of Class A common stock.
Key Factors Affecting Our Business
End-Markets and General Economic Conditions
Historically, demand for our products has been tied to municipal infrastructure spending, non-residential construction and residential construction in the U.S. We estimate that, based on fiscal 2025 net sales, our exposure by end market was approximately 44% municipal, 38% non-residential and 18% residential. Infrastructure spending and the non-residential and residential construction markets are subject to cyclical market pressures. Municipal demand has been relatively steady over the long-term due to the consistent and immediate need to replace broken infrastructure; however, activity levels are subject to the availability of funding for municipal projects. Non-residential and residential construction activities are primarily driven by availability of credit, interest rates, general economic conditions, consumer confidence and other factors that are beyond our control. The length and magnitude of these cycles have varied over time and by market. Cyclicality can also have an impact on the products we procure for our customers or our related services, as further discussed under "-Price Fluctuations" below. Interest rate increases in fiscal 2023 were a contributing factor to slowing new lot development and contraction in the residential end market. Although the Federal Reserve Board of Governors ("FRB") cut certain benchmark interest rates in fiscal 2024 and fiscal 2025, it is uncertain if the FRB will raise or lower interest rates in the future and, if so, to what level and for how long. Interest rate increases or the lack of anticipated interest rate decreases may result in decreased levels of activity in the U.S. residential and non-residential construction markets.
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., the majority of which we believe has yet to be realized. In the coming years, including as a result of the IIJA, we expect, but cannot provide any assurance that, increased federal infrastructure investment to have a core focus on the upgrade, repair and replacement of municipal waterworks systems and to address demographic shifts and serve the growing population. We believe these dynamics create the backdrop for a favorable funding environment and accelerated investment in projects that will benefit our business.
Seasonality
Our operating results within a fiscal year are typically impacted by seasonality. Colder weather and shorter daylight hours historically have reduced construction, maintenance and repair activity. As a result, net sales are typically lower in our first and fourth fiscal quarters, especially in northern geographic regions. Abnormal levels of precipitation may negatively impact our operating results as it may result in the delay of construction projects across fiscal quarters. Our operating results may also be adversely affected by hurricanes, which typically occur during our third fiscal quarter. Our cash flows from operating activities are typically lower during the first and second fiscal quarters due to investment in working capital and annual incentive compensation payments and are typically higher during the third and fourth fiscal quarters due to cash inflows associated with receivable collections and reduced inventory purchases.
Price Fluctuations
Our financial performance is impacted by price fluctuations in the cost to procure substantially all the products we sell and our ability to reflect these changes, in a timely manner, in our customer pricing.
The costs to procure the products we sell are historically volatile and subject to fluctuations arising from changes in supply and demand, national and international economic conditions, labor and material costs, competition, market speculation, government regulation, weather events, trade policies and periodic delays in the delivery of our products. If we are able to pass through price increases to our customers, our net sales will increase; conversely, during periods of deflation, our customer pricing may decrease to remain competitive, resulting in decreased net sales. During fiscal 2022, we experienced supply chain disruption that contributed to significant price inflation and product surcharges with respect to certain products we sell. The supply chain disruption was due to several factors, including, but not limited to, unpredictable lead times and delays from our suppliers, labor availability, global logistics and the availability of raw materials. In fiscal 2023, we saw improvements in the supply chain and more predictable lead times for certain products that led to price stability, but for other products the supply chain remained constrained. Subsequently, certain suppliers and product lines experienced greater product availability that resulted in slightly lower selling prices for certain product lines. Additional supply chain disruptions may result in increases in product costs which we may not be able to pass on to our customers, loss of sales due to lack of product availability or potential customer claims from the inability to provide products in accordance with contractual terms. Greater product availability from supply chain improvements may lead to increased competition that may result in price and volume declines. We continue to monitor all of these factors and the resulting price impacts. In addition, the cost of products we purchase and sell may be impacted by the imposition of additional tariffs on imported goods from several geographic regions.
The U.S. government has announced tariffs and trade restrictions on certain goods produced outside the United States. In February 2026, the U.S. Supreme Court struck down certain of these tariffs, but the U.S. government has indicated it may impose replacement or supplemental tariffs in response to this decision. We believe our exposure to tariffs is limited as over three-quarters of products that we purchase are manufactured domestically. In addition, when price increases occur, we proactively evaluate our customer pricing and strategic buying opportunities. The potential direct and indirect impacts of tariffs on the broad economy and our end markets are uncertain and we continue to closely monitor and evaluate the ongoing situation.
We are also exposed to fluctuations in costs for petroleum as we distribute a substantial portion of our products by truck. In addition, we are exposed to fluctuations in prices for imported products due to logistical challenges and changes in labor, fuel, shipping container and other importation-related costs. We may also face price fluctuations on other products due to constrained labor availability and manufacturing capacity of our suppliers. Our ability to reflect these changes, in a timely manner, in our customer pricing may impact our financial performance.
Interest Rates
Certain of our indebtedness, including borrowings under the Senior Term Loan Credit Facility (as defined in Note 6 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K) and the Senior ABL Credit Facility, are subject to variable rates of interest and expose us to interest rate risk. The Senior Term Loan Credit Facility and the Senior ABL Credit Facility each bear interest based on term secured overnight financing rate ("Term SOFR"). If interest rates increase, our debt service obligations on our variable-rate indebtedness will increase and our net income would decrease, even though the amount borrowed under the facilities remains the same. As of February 1, 2026, we had $2,166 million of outstanding variable-rate debt. We seek to mitigate our exposure to interest rate volatility through the entry into interest rate swap instruments, such as our interest rate swaps, associated with borrowings under the Senior Term Loan Credit Facility, which effectively convert $700 million of our variable rate debt to fixed rate debt through the instrument maturity on July 27, 2026 and the interest rate swap thathas a starting notional amount of $750 million that increases to $1,500 million on July 27, 2026 through the instrument maturity on July 27, 2028. Despite these efforts, unfavorable movement in interest rates may further result in higher interest expense and cash payments.
Acquisitions
In addition to our organic growth strategy, we opportunistically pursue strategic asset and business acquisitions to grow our business. Below is a summary of the acquisitions that closed in fiscal 2025 (the "Fiscal 2025 Acquisitions"), fiscal 2024 (the "Fiscal 2024 Acquisitions") and fiscal 2023 (the "Fiscal 2023 Acquisitions") with an aggregate transaction value of $76 million, $769 million and $244 million, subject to working capital adjustments, respectively.
Product Lines Closing Date
Fiscal 2025
Pioneer Supply LLC Pipes, Valves & Fittings; Storm Drainage; Meter products January 2026
Canada Waterworks Inc. and Canada Waterworks Ottawa Inc. Pipes, Valves & Fittings; Storm Drainage September 2025
Fiscal 2024
ARGCO Northeast LLC
Fire Protection
November 2024
Eastcom Associates, Inc. Pipes, Valves & Fittings; Meter products
October 2024
Green Equipment Company Pipes, Valves & Fittings; Meter products September 2024
GroGreen Solutions Georgia, LLC Storm Drainage September 2024
HM Pipe Products LP and HM Pipe Products Kitchner LP
Pipes, Valves & Fittings; Storm Drainage August 2024
Geothermal Supply Company Inc. Pipes, Valves & Fittings May 2024
EGW Utilities Inc. Pipes, Valves & Fittings; Meter products April 2024
NW Geosynthetics Inc. Storm Drainage April 2024
DKC Group Holdings, LLC Pipes, Valves & Fittings; Storm Drainage; Meter products March 2024
Eastern Supply Inc. Storm Drainage February 2024
Fiscal 2023
Lee Supply Company Inc.
Pipes, Values & Fittings; Storm Drainage; Meter products
January 2024
Granite Water Works Inc.
Pipes, Values & Fittings; Storm Drainage; Meter products
December 2023
Enviroscape ECM, Ltd.
Storm Drainage November 2023
J.W. D'Angelo Co.
Pipes, Valves & Fittings; Fire Protection; Storm Drainage July 2023
Foster Supply, Inc.
Pipes, Valves & Fittings; Storm Drainage July 2023
Midwest Pipe Supply Inc.
Pipes, Valves & Fittings; Storm Drainage April 2023
UPSCO, Inc.
Pipes, Valves & Fittings; Meter products April 2023
Landscape & Construction Supplies LLC
Storm Drainage March 2023
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. There can be no assurance that the anticipated benefits of the acquisitions will be realized on the timeline we expect, or at all.
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 February 1, 2026, including municipalities, private water companies and professional contractors. We recognize sales, net of sales tax, customer incentives, returns and discounts. Net sales fluctuate as a result of changes in product costs as we seek to reflect these changes in our customer pricing in a timely manner. This will increase net sales if we are able to pass along price increases and decrease net sales if we are required to reduce our customer prices as a result of competitive dynamics.
We categorize our net sales into pipes, valves & fittings, storm drainage products, fire protection products and meter products:
•Pipe, valves, hydrants, fittings include these products and other complementary products and 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 controland other related products.
•Fire protection products primarily include fire protection pipe, sprinkler heads, fittings, valves and devices as well as custom fabrication services.
•Meter products primarily include smart meter products, meter sets, meter accessories, installation, software and other services.
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. Gross profit may be impacted by the time between changes in supplier costs 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.
Operating Expenses
Operating expenses are primarily comprised of selling, general and administrative costs, which include personnel expenses (salaries, wages, incentive compensation, benefits and payroll taxes), rent, insurance, utilities, professional fees, outbound freight, fuel and repair and maintenance.
Net Income
Net income represents net sales less cost of sales, operating expenses, depreciation and amortization, interest expense and the provision for income taxes.
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 subsequent secondary offerings, (d) expenses associated with acquisition and other activities and (e) other (income)/expense. Adjusted EBITDA includes amounts otherwise attributable to non-controlling interests as we manage the consolidated Company and evaluate operating performance in a similar manner. We use Adjusted EBITDA to assess the operating results and effectiveness of our business. See "-Non-GAAP Financial Measures" below 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.
Earnings Per Share
Earnings per share represents the Class A common stock basic and diluted earnings per share. 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.
Adjusted Diluted Earnings Per Share
We define Adjusted Diluted Earnings Per Share as diluted earnings per share adjusted for (a) amortization of intangible assets, (b) loss on debt modification and extinguishment, (c) equity-based compensation, (d) expenses associated with acquisition and other activities, (e) expenses associated with the initial public offering and subsequent secondary offerings, (f) other (income)/expense and (g) the tax impact of these Non-GAAP adjustments, divided by the weighted-average number of shares of our common stock outstanding on a fully diluted basis for the applicable period. We use Adjusted Diluted Earnings Per Share to assess the operating results and effectiveness of our business. See "-Non-GAAP Financial Measures" below for further discussion of Adjusted Diluted Earnings Per Share and a reconciliation to diluted earnings per share, the most directly comparable measure under U.S. GAAP.
Results of Operations
Fiscal Year Ended February 1, 2026 Compared with Fiscal Year Ended February 2, 2025
Amounts in millions (except per share data)
Fiscal Years Ended
February 1, 2026 February 2, 2025
Net sales
$ 7,647 $ 7,441
Cost of sales
5,588 5,461
Gross profit 2,059 1,980
Operating expenses:
Selling, general and administrative 1,154 1,078
Depreciation and amortization
183 183
Total operating expenses
1,337 1,261
Operating income
722 719
Interest expense
(120) (142)
Other income 5 -
Income before provision for income taxes
607 577
Provision for income taxes
145 143
Net income
462 434
Less: net income attributable to non-controlling interests 21 23
Net income attributable to Core & Main, Inc. $ 441 $ 411
Earnings per share:
Basic $ 2.32 $ 2.14
Diluted $ 2.31 $ 2.13
Non-GAAP Financial Data:
Adjusted EBITDA $ 931 $ 930
Adjusted Diluted Earnings Per Share $ 2.97 $ 2.78
Net Sales
Net sales for fiscal 2025 increased$206 million, or 2.8%, to $7,647 million compared with $7,441 million for fiscal 2024. Net sales increasedprimarily due to a 4.8% increase in average daily net sales driven by higher volumes and acquisitions partially offset by one less selling week compared to prior year. Average daily net sales increased for pipes, valves & fittings, storm drainage and meters primarily due to higher volumes and acquisitions. Average daily net sales increased for fire protection products primarily due to higher average selling prices and acquisitions.
Fiscal Years Ended
February 1, 2026 February 2, 2025 Percentage Change
Pipes, valves & fittings products
$ 5,137 $ 5,006 2.6 %
Storm drainage products
1,194 1,147 4.1 %
Fire protection products
600 596 0.7 %
Meter products
716 692 3.5 %
Total net sales
$ 7,647 $ 7,441 2.8 %
Gross Profit
Gross profit for fiscal 2025 increased $79 million, or 4.0%, to $2,059 million compared with $1,980 million for fiscal 2024. Gross profit as a percentage of net sales for fiscal 2025 was 26.9% compared with 26.6% for fiscal 2024. The overall increase in gross profit as a percentage of net sales was primarily attributable to favorable impacts from the execution of our gross margin initiatives and disciplined purchasing and pricing management.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for fiscal 2025 increased $76 million, or 7.1%, to $1,154 million compared with $1,078 million during fiscal 2024. SG&A expenses as a percentage of net sales was 15.1% for fiscal 2025 compared with 14.5% for fiscal 2024. The increase was primarily attributable to higher acquisition-related costs, higher personnel expenses, including higher variable compensation costs and higher employee benefits costs, increases in other distribution-related expenses driven by inflation and increased sales volume and investments in personnel and technology partially offset by one less selling week compared to prior year and cost reduction initiatives.
Depreciation and Amortization Expense
Depreciation and amortization ("D&A") expense for both fiscal 2025and fiscal 2024 was $183 million.D&A expense was flat as decreases in amortization on existing intangible assets was offset by recent acquisitions.
Operating Income
Operating income for fiscal 2025 increased $3 million,or 0.4%, to $722 millioncompared with $719 millionduring fiscal 2024. The increasein operating income was primarily attributable to higher gross profit partially offset by higher SG&A expenses.
Interest Expense
Interest expense was $120 millionfor fiscal 2025compared with $142 millionfor fiscal 2024. The decreasewas primarily attributable to fiscal 2024 amendments to reduce the effective applicable margin under the Senior Term Loan Credit Facility, a decrease in interest rates and decreased borrowings under the Senior ABL Credit Facility.
Provision for Income Taxes
The provision for income taxes for fiscal 2025 increased $2 million, or 1.4%, to $145 million compared with $143 million for fiscal 2024. The increase was primarily attributable to an increase in operating income partially offset by a decrease in the effective tax rate. For fiscal 2025 and fiscal 2024, our effective tax rates were 23.9% and 24.8%, respectively. The effective tax rate for each period reflects only the portion of net income that is attributable to taxable entities. The decrease in the effective tax rate was primarily due to net benefits from tax credit investments and certain tax windfall benefits from equity award exercises.
Net Income
Net income for fiscal 2025 increased $28 million, or 6.5%, to $462 millioncompared with $434 millionfor fiscal 2024. The increasein net income was primarily attributable to a decrease in interest expense and an increase in operating income.
Net Income Attributable to Core & Main, Inc.
Net income attributable to Core & Main, Inc. for fiscal 2025 increased $30 million, or 7.3%, to $441 millioncompared with $411 millionfor fiscal 2024. The increase was primarily attributable to an increase in net income.
Earnings Per Share
The Class A common stock basic earnings per share for fiscal 2025 increased 8.4% to $2.32 compared with $2.14 for fiscal 2024. The Class A common stock diluted earnings per share for fiscal 2025 increased 8.5%to $2.31 compared with $2.13 for fiscal 2024. The basic and diluted earnings per share increaseddue to an increase in net income and lower Class A share counts following share repurchase transactions.
Adjusted EBITDA
Adjusted EBITDA for fiscal 2025 increased $1 million, or 0.1%, to $931 millioncompared with $930 millionfor fiscal 2024. The increasein Adjusted EBITDA was primarily attributable to higher gross profit partially offset by higher SG&A expenses.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."
Adjusted Diluted Earnings Per Share
Adjusted Diluted Earnings Per Share for fiscal 2025 increased 6.8%to $2.97compared with $2.78for fiscal 2024. The increasein Adjusted Diluted Earnings Per Share was primarily attributable to an increase in net income and lower Class A share counts following share repurchase transactions.For a reconciliation of Adjusted Diluted Earnings Per Share to diluted earnings per share, the most comparable GAAP financial metric, as applicable, see "-Non-GAAP Financial Measures."
Fiscal Year Ended February 2, 2025 Compared with Fiscal Year Ended January 28, 2024
A discussion of changes in our financial condition and results of operations during the fiscal year ended February 2, 2025, compared to the fiscal year ended January 28, 2024 has been omitted from this Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended February 2, 2025, filed with the SEC on March 25, 2025, which discussion is incorporated herein by reference and which is available, free of charge, on the SEC's website at www.sec.gov and on our website at www.coreandmain.com.
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, payments under the Tax Receivable Agreements, share repurchases (including under the Repurchase Program) and the Repurchase Transactions (as defined in Note 1 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K).
As of February 1, 2026, our cash and cash equivalents totaled $220 million. We maintain our cash deposits according to a banking policy that requires diversification across a variety of highly-rated financial institutions. However, this could result in a concentration of cash and cash equivalents across these financial institutions in excess of Federal Deposit Insurance Corporation-insured limits.
As of February 1, 2026, there were 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 February 1, 2026, after giving effect to approximately $24 million of letters of credit issued under the Senior ABL Credit Facility, Core & Main LP would have been able to borrow approximately $1,226 million under the Senior ABL Credit Facility, subject to borrowing base availability. Our short term debt obligations of $24 million are related to quarterly principal payments on the Senior Term Loan Credit Facility.
In fiscal 2025, fiscal 2024 and fiscal 2023, the Company had a financing cash outflow related to the payment of $18 million, $11 million and $5 million, respectively, under the Tax Receivable Agreements. The annual payments under the Tax Receivable Agreements increased, and are expected to further increase, as a result of exchanges of Partnership Interests completed in fiscal 2023 and fiscal 2024. 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. 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. Based on the anticipated filing date of income tax returns and contractual payment terms in the Tax Receivable Agreements, we expect these payments to occur two fiscal years after we utilize the corresponding tax deductions. The timing of payments associated with the Tax Receivable Agreements are summarized below:
Fiscal 2026
$ 40
Fiscal 2027
42
Fiscal 2028
44
Fiscal 2029
44
Fiscal 2030
44
Thereafter 506
Total Tax Receivable Agreements liability $ 720
Further exchanges of Partnership Interest by Management Feeder will result in additional tax deductions to us and require additional payables pursuant to 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 audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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 Management Feeder representing the non-controlling interests of Core & Main, Inc. to fund their income tax obligations with various taxing authorities. Tax distributions to non-controlling interest holders were $7 million, $11 million and $41 million in fiscal 2025, fiscal 2024 and fiscal 2023, respectively. Further exchanges by Management Feeder may result in lower tax distributions subject to any changes to income before provision to income taxes.
Payments under the Tax Receivable Agreements may be accelerated if we elect an early termination in accordance with the terms of the Tax Receivable Agreements or negotiate a settlement of the Tax Receivable Agreements. An early termination or negotiated settlement of our obligations, or our successor's obligations, under such Tax Receivable Agreement to make payments thereunder would be based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to such Tax Receivable Agreement.
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. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Our growth strategy contemplates future acquisitions for which we will need sufficient access to capital. To finance future acquisitions, particularly larger acquisitions, we may issue additional equity or incur additional indebtedness. Any such additional indebtedness would increase our debt leverage. See "Risk Factors-Risks Related to Our Indebtedness" in this Annual Report on Form 10-K.
Additionally, we regularly evaluate our approach to our capital allocation, which may include acquisitions, capital expenditures, greenfields, debt reduction (including through open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and opportunistic refinancing of debt), stock repurchases, dividends, payments on Tax Receivable Agreements or other distributions. In fiscal 2025 and fiscal 2024, we completed $155 million and $176 million, respectively, of repurchases of Class A common stock under the Repurchase Program. For further details, refer to Note 1 to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We may continue to return capital to our shareholders through share repurchases, including pursuant to the Repurchase Program, or initiating dividend payments. 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. 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. These entities' ability to make distributions may be limited as a practical matter by our growth plans as well as Core & Main LP's Senior Term Loan Credit Facility and Senior ABL Credit Facility. The Senior Term Loan Credit 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 (as defined in the agreement governing the Senior Term Loan Credit Facility) is greater than or equal to 3.25. In addition, the Senior ABL Credit Facility requires us to comply with a consolidated fixed charge coverage ratio of greater than or equal to 1.00 when availability is less than 10.0% of the lesser of (i) the then applicable borrowing base and (ii) the then aggregate effective commitments under the Senior ABL Credit Facility. Substantially all of Core & Main LP's assets secure the Senior Term Loan Credit Facility and the Senior ABL Credit Facility.
Information about our cash flows, by category, is presented in the consolidated Statements of Cash Flows and is summarized as follows:
Fiscal Years Ended
February 1, 2026 February 2, 2025 January 28, 2024
Cash flows provided by operating activities
$ 650 $ 621 $ 1,069
Cash flows used in investing activities
(145) (788) (270)
Cash flows (used in) provided by financing activities
(293) 174 (975)
Increase (decrease) in cash and cash equivalents
$ 212 $ 7 $ (176)
Operating Activities
Net cash provided by operating activities increasedby $29 million to $650 million for fiscal 2025compared with $621 million for fiscal 2024. The increase in cash provided by operating activities was primarily due to lower interest payments, lower income tax payments and an increase in net income partially offset by a higher investment in working capital in fiscal 2025.
Investing Activities
Net cash used in investing activities decreasedby $643 million to $145 million for fiscal 2025 compared with $788 million for fiscal 2024, primarily attributable to a $680 million decrease in cash outflows for acquisitions during fiscal 2025 partially offset by $37 million of investments in tax advantaged limited partnerships and an $11 million increase in capital expenditures.
Financing Activities
Net cash used in financing activities was $293 million for fiscal 2025compared with net cash provided by financing activities of $174 million for fiscal 2024. The change of $467 million was primarily attributed to a $493 million change in net debt activity partially offset by a $21 million decrease in outflows related to the repurchases of Class A common stock under the Repurchase Program.
Fiscal Year Ended February 2, 2025 Compared with Fiscal Year Ended January 28, 2024
A discussion of changes in our cash flows during the fiscal year ended February 2, 2025, compared to the fiscal year ended January 28, 2024 has been omitted from this Annual Report on Form 10-K, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in our Annual Report on Form 10-K for the year ended February 2, 2025, filed with the SEC on March 25, 2025, which discussion is incorporated herein by reference and which is available, free of charge, on the SEC's website at www.sec.gov and on our website at www.coreandmain.com.
Financing
As of February 1, 2026, our debt obligations (in millions) consist of the following:
Aggregate Principal/Borrowing Capacity
Maturity Date Interest
2028 Senior Term Loan
$ 1,233 July 27, 2028
(i) Term SOFR plus, in each case, an effective applicable margin of 2.00%, or (ii) the base rate (described in Note 6 included elsewhere in this Annual Report on Form 10-K).
The weighted average interest rate, excluding the effects of the interest rate swaps, was 5.69% as of February 1, 2026.
2031 Senior Term Loan
933 February 9, 2031
(i) Term SOFR plus, in each case, an effective applicable margin of 2.00%, or (ii) the base rate (described in Note 6 included elsewhere in this Annual Report on Form 10-K).
The weighted average interest rate, excluding the effects of the interest rate swaps, was 5.69% as of February 1, 2026.
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.
Interest Rate Swap 700 July 27, 2026
Effective fixed rate of 2.693%, based upon the 0.693% fixed rate plus an applicable margin of 2.00% associated with the Senior Term Loan Credit Facility.
Interest Rate Swap(2)
750 July 27, 2028
Effective fixed rate of 5.913%, based upon the 3.913% fixed rate plus an applicable margin of 2.00% associated with the Senior Term Loan Credit Facility.
(1)Aggregate amount of commitments under the asset-based revolving credit facility of $1,250 million overall, subject to borrowing base availability. There were no outstanding borrowings under the Senior ABL Credit Facility as of February 1, 2026.
(2)Interest rate swap entered into on February 12, 2024 for a notional amount of $750 million. The notional amount increases to $1,500 million on July 27, 2026 through the instrument maturity on July 27, 2028.
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.
Purchase Obligations
As of February 1, 2026, the Company had agreements in place with various suppliers to purchase goods and services, primarily inventory, in the aggregate amount of $992 million. These purchase obligations are generally cancellable, but the Company does not currently intend to cancel. Payment is dependent on lead times from our suppliers, and could be extended due to supply chain disruptions. Payment is generally expected to be made during fiscal 2026 for these obligations.
Leases
The Company occupies certain facilities and operates certain equipment and vehicles under operating leases that expire at various dates through the year 2038. Future aggregate rental payments under non-cancelable operating leases as of February 1, 2026 were as follows: $89 million in fiscal 2026, $76 million in fiscal 2027, $58 million in fiscal 2028, $38 million in fiscal 2029,$24 million in fiscal 2030 and $40 million thereafter.
Non-GAAP Financial Measures
In addition to providing results that are determined in accordance with GAAP, we present EBITDA, Adjusted EBITDA and Adjusted Diluted Earnings Per Share, 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 should not be considered in isolation or as alternatives to GAAP measures such as net income, net income attributable to Core & Main, Inc. or diluted earnings per share, as applicable, cash provided by or used in operating, investing or financing activities or other financial statement data presented in our financial statements as an indicator of our financial performance or liquidity.
We define EBITDA as net income, or net income attributable to Core & Main, Inc., as applicable, adjusted for non-controlling interests, depreciation and amortization, provision for income taxes and interest expense. 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 initial public offering and subsequent secondary offerings, (d) expenses associated with acquisition and other activities and (e) other income. Net income attributable to Core & Main, Inc. is the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA.
We define Adjusted Diluted Earnings Per Share as diluted earnings per share adjusted for (a) amortization of intangible assets, (b) loss on debt modification and extinguishment, (c) equity-based compensation, (d) expenses associated with acquisition and other activities, (e) expenses associated with the initial public offering and subsequent secondary offerings, (f) other income and (g) the tax impact of these Non-GAAP adjustments, divided by the weighted-average number of shares of our common stock outstanding on a fully diluted basis for the applicable period. Diluted earnings per share is the most directly comparable GAAP measure to Adjusted Diluted Earnings Per Share.
We use EBITDA, Adjusted EBITDA and Adjusted Diluted Earnings Per Share to assess the operating results and effectiveness and efficiency of our business. Adjusted EBITDA and Adjusted Diluted Earnings Per Share include amounts otherwise attributable to non-controlling interests as we manage the consolidated Company and evaluate operating performance in a similar manner. We present these non-GAAP financial measures because we believe that investors consider them to be important supplemental measures of performance, and we believe that these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Non-GAAP financial measures as reported by us may not be comparable to similarly titled metrics reported by other companies and may not be calculated in the same manner. These measures have limitations as analytical tools, and investors should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:
• do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on debt;
• do not reflect income tax expenses, the cash requirements to pay taxes or related distributions;
• do not reflect cash requirements to replace in the future any assets being depreciated and amortized; and
• exclude certain transactions or expenses as allowed by the various agreements governing our indebtedness.
In evaluating Adjusted EBITDA and Adjusted Diluted Earnings Per Share, investors should be aware that, in the future, we may incur expenses similar to those eliminated in this presentation.
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
February 1, 2026 February 2, 2025 January 28, 2024
Net income attributable to Core & Main, Inc. $ 441 $ 411 $ 371
Plus: net income attributable to non-controlling interests 21 23 160
Net income 462 434 531
Depreciation and amortization (1)
186 186 149
Provision for income taxes 145 143 128
Interest expense 120 142 81
EBITDA $ 913 $ 905 $ 889
Equity-based compensation 17 14 10
Acquisition and other expenses (2)
6 11 6
Offering expenses (3)
- - 5
Other income (5) - -
Adjusted EBITDA $ 931 $ 930 $ 910
(1)Includesdepreciation of certain assets which are reflected in "cost of sales" in our Statement of Operations.
(2)Represents expenses associated with acquisition and other 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.
(3)Represents costs related to the subsequent secondary offerings reflected in SG&A expenses in our Statement of Operations.
The following table sets forth a reconciliation of diluted earnings per share to Adjusted Diluted Earnings Per Share for the periods presented:
Fiscal Years Ended
February 1, 2026 February 2, 2025 January 28, 2024
Diluted earnings per share $ 2.31 $ 2.13 $ 2.15
Amortization of intangible assets 0.75 0.75 0.54
Equity-based compensation 0.09 0.07 0.04
Acquisition and other expenses (1)
0.03 0.05 0.03
Offering expenses - - 0.02
Other income (0.03) - -
Income tax impact of adjustments (2)
(0.18) (0.22) (0.16)
Adjusted Diluted Earnings Per Share
$ 2.97 $ 2.78 $ 2.62
(1)Represents expenses associated with acquisition and other 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.
(2)Represents the tax impact on the above non-GAAP adjustments.
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.
Critical Accounting Policies and Estimates
A summary of our significant accounting policies is included in Note 2 of 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. 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. 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. Revenue is recognized when title is passed to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for the products and services, which is net of sales tax, customer incentives, returns and discounts. For product sales, the transfer of title generally occurs at the point of destination for products shipped by internal fleet and at the point of shipping for products shipped by third-party carriers. Estimates for expected customer incentives, returns and discounts are based on historical experience, anticipated performance and management's judgment. Generally, our contracts do not contain significant financing as the standard sales terms are short term in nature.
Inventories
Inventories consist primarily of finished goods and are carried at the lower of cost or net realizable value. The cost of substantially all inventories is determined by the weighted average cost method. We evaluate our inventory value at the end of each quarter to ensure that it is carried at the lower of cost or net realizable value. This evaluation includes an analysis of historical physical inventory results and a review of potential excess and obsolete inventories based on inventory aging and anticipated future demand. Periodically, perpetual inventory records are adjusted to reflect any declines in net realizable value below inventory carrying cost. To the extent historical physical inventory results are not indicative of future results and if future events impact, either favorably or unfavorably, the salability of our products or our relationship with certain key suppliers, our inventory reserves could differ significantly, resulting in either higher or lower future inventory provisions. 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. When we acquire a business or assets that are determined to meet the definition of a business, we allocate the purchase consideration paid to acquire the business to the assets and liabilities acquired based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill. 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.
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. 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. 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. Trademark intangible assets represent the value associated with the brand names in place at the date of the acquisition.
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. The Tax Receivable Agreements provide payments to the parties subject thereto, or their permitted transferees, of 85% of the tax benefits realized by the Company, or in some circumstances are deemed to be realized. We expect to obtain an increase in our share of the tax basis in the net assets of Holdings as Partnership Interests are exchanged by Management Feeder. We intend to treat any exchanges of Partnership Interests as direct purchases of Partnership Interests for U.S. federal income tax purposes. These increases in tax basis are expected to reduce amounts owed to various tax authorities in the future.
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 parties subject to Tax Receivable Agreements, as applicable, or their permitted transferees. 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. Following that assessment, we recognize a liability under the applicable Tax Receivable Agreements, reflecting approximately 85% of the expected future realization of such tax benefits. Amounts payable under the Tax Receivable Agreements are contingent upon, among other things, (i) generation of sufficient future taxable income during the term of the applicable Tax Receivable Agreements and (ii) future changes in tax laws. The establishment of the $720 million liability under the Tax Receivable Agreements as of February 1, 2026 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. 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 February 1, 2026.
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