# Core & Main, Inc.: Form 10-Q for the period ended Oct 27, 2024

- Company: [Core & Main, Inc.](/companies/cnm.md) (CIK 1856525)
- Form: 10-Q
- Filed: 2024-12-03
- Accepted by EDGAR: Dec 3, 2024, 07:33 ET
- Period: 2024-10-27
- Accession: 0001856525-24-000118
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1856525/000185652524000118/cnm-20241027.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1856525/000185652524000118/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-10-27.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-29 to 2024-10-27 | $2.04bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-29 to 2024-10-27 | $5.74bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-29 to 2024-10-27 | $1.50bn | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-29 to 2024-10-27 | $4.21bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-29 to 2024-10-27 | $543.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-29 to 2024-10-27 | $1.53bn | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-29 to 2024-10-27 | $274.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-29 to 2024-10-27 | $799.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-29 to 2024-10-27 | $223.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-29 to 2024-10-27 | $595.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-29 to 2024-10-27 | $36.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-29 to 2024-10-27 | $106.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-29 to 2024-10-27 | $47.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-29 to 2024-10-27 | $122.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-29 to 2024-10-27 | $133.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-29 to 2024-10-27 | $347.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-29 to 2024-10-27 | $0.69 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-29 to 2024-10-27 | $1.79 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-29 to 2024-10-27 | $0.69 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-29 to 2024-10-27 | $1.81 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-29 to 2024-10-27 | 201,165,553 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-29 to 2024-10-27 | 202,146,712 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-29 to 2024-10-27 | $386.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-29 to 2024-10-27 | $24.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Share repurchases | 9 months, 2024-01-29 to 2024-10-27 | $121.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-10-27 | $10.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-10-27 | $2.38bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-10-27 | $6.21bn | us-gaap:Assets |
| Current liabilities | at 2024-10-27 | $1.11bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-10-27 | $4.46bn | us-gaap:Liabilities |
| Long-term debt | at 2024-10-27 | $2.38bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-10-27 | $23.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-10-27 | $1.67bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 54,102 characters.

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

### Overview

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

### Basis of Presentation

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

### Fiscal Year

The Company’s fiscal year is a 52- or 53-week period ending on the Sunday nearest to January 31st. Quarters within the fiscal year include 13-week periods, unless a fiscal year includes a 53rd week, in which case the fourth quarter of the fiscal year will be a 14-week period. Each of the three months ended October 27, 2024 and three months ended October 29, 2023 included 13 weeks and each of the nine months ended October 27, 2024 and nine months ended October 29, 2023 included 39 weeks. The current fiscal year ending February 2, 2025 (“fiscal 2024”) will include 53 weeks.

### Significant Events During the Nine Months Ended October 27, 2024

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

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

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

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

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

On June 12, 2024, the Company’s board of directors authorized a share repurchase program (the “Repurchase Program”), pursuant to which the Company may purchase up to $500 million of the Company’s Class A common stock. Shares repurchased under the Repurchase Program are retired immediately and are accounted for as a decrease to stockholders’ equity. For the nine months ended October 27, 2024 the Company repurchased 2,890,483 shares of Class A common stock for a total of $121 million through open market transactions.

### Key Factors Affecting Our Business

### End-Markets and General Economic Conditions

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

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

### Seasonality

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

### Price Fluctuations

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

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

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

### Interest Rates

Certain of our indebtedness, including borrowings under the Senior Term Loan Credit Facility (as defined in Note 6 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q) and the Senior ABL Credit Facility are subject to variable rates of interest and expose us to interest rate risk. The Senior Term Loan Credit Facility and the Senior ABL Credit Facility each bear interest based on term secured overnight financing rate (“Term SOFR”). If interest rates increase, our debt service obligations on our variable-rate indebtedness will increase and our net income would decrease, even though the amount borrowed under the facilities remains the same. As of October 27, 2024, we had $2,430 million of outstanding variable-rate debt. We seek to mitigate our exposure to interest rate volatility through the entry into interest rate swap instruments, such as our interest rate swap, associated with borrowings under the Senior Term Loan Credit Facility, which effectively converts $800 million of our variable rate debt to fixed rate debt, with notional amount decreases to $700 million on July 27, 2025 through the instrument maturity on July 27, 2026. On February 12, 2024, Core & Main LP entered into an additional interest rate swap, associated with borrowings under the Senior Term Loan Credit Facility, that has a starting notional amount of $750 million that increases to $1,500 million on July 27, 2026 through the instrument maturity on July 27, 2028, which effectively converts our variable rate debt to fixed rate debt. Despite these efforts, unfavorable movement in interest rates may further result in higher interest expense and cash payments.

### Acquisitions

In addition to our organic growth strategy, we opportunistically pursue strategic asset and business acquisitions to grow our business. Below is a summary of the acquisitions that closed during the nine months ended October 27, 2024 (the “Fiscal 2024 Acquisitions”) and the nine months ended October 29, 2023 (the "Fiscal 2023 Acquisitions") with an aggregate transaction value of $748 million and $161 million, subject to working capital adjustments, respectively.

|  | Product Lines | Closing Date |
| --- | --- | --- |
| **Fiscal 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. (“Lee Supply”) | Pipes, Values & Fittings; Storm Drainage; Meter products | January 2024 |
| Granite Water Works Inc. (“Granite Water Works”) | Pipes, Values & Fittings; Storm Drainage; Meter products | December 2023 |
| Enviroscape ECM, Ltd. (“Enviroscape”) | 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 approximately 60,000 customers, as of January 28, 2024, 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 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.

### 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, 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. Non-controlling interests represent owners of Partnership Interests of Holdings other than Core & Main, Inc.

### 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. 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 10 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

### Results of Operations

### Three Months Ended October 27, 2024 Compared with Three Months Ended October 29, 2023

#### Amounts in millions (except per share data)

|  | Three Months Ended October 27, 2024 | October 29, 2023 |
| --- | ---: | ---: |
| Net sales | $2,038 | $1,827 |
| Cost of sales | 1,495 | 1,333 |
| Gross profit | 543 | 494 |
| Operating expenses: |  |  |
| Selling, general and administrative | 274 | 240 |
| Depreciation and amortization | 46 | 37 |
| Total operating expenses | 320 | 277 |
| Operating income | 223 | 217 |
| Interest expense | 36 | 20 |
| Income before provision for income taxes | 187 | 197 |
| Provision for income taxes | 47 | 39 |
| Net income | 140 | 158 |
| Less: net income attributable to non-controlling interests | 7 | 46 |
| Net income attributable to Core & Main, Inc. | $133 | $112 |
| Earnings per share: |  |  |
| Basic | $0.69 | $0.65 |
| Diluted | $0.69 | $0.65 |
| Non-GAAP Financial Data: |  |  |
| Adjusted EBITDA | $277 | $260 |

#### Net Sales

Net sales for the three months ended October 27, 2024 increased $211 million, or 11.5%, to $2,038 million compared with $1,827 million for the three months ended October 29, 2023. Net sales increased primarily due to acquisitions and comparably higher end-market volumes partially offset by slightly lower selling prices. Net sales increased for pipes, valves & fittings due to acquisitions and comparably higher end-market volumes partially offset by slightly lower selling prices. Net sales increased for storm drainage products due to acquisitions and our ability to drive the adoption of advanced storm water management systems. Net sales for fire protection products declined due to lower selling prices and comparably lower end-market volumes. Net sales of meter products benefited from our ability to drive the adoption of smart meter technology through municipalities, increased product availability and acquisitions.

|  | Three Months Ended October 27, 2024 | October 29, 2023 | Percentage Change |
| --- | ---: | ---: | ---: |
| Pipes, valves & fittings products | $1,386 | $1,222 | 13.4% |
| Storm drainage products | 327 | 290 | 12.8% |
| Fire protection products | 145 | 170 | (14.7)% |
| Meter products | 180 | 145 | 24.1% |
| **Total net sales** | $2,038 | $1,827 |  |

29

#### Gross Profit

Gross profit for the three months ended October 27, 2024 increased $49 million, or 9.9%, to $543 million compared with $494 million for the three months ended October 29, 2023. Gross profit as a percentage of net sales for the three months ended October 27, 2024 was 26.6% compared with 27.0% for the three months ended October 29, 2023. The overall decline in gross profit as a percentage of net sales was primarily attributable to larger prior year benefits from strategic inventory investments during an inflationary period partially offset by favorable impacts from the execution of our gross margin initiatives and accretive acquisitions.

#### Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses for the three months ended October 27, 2024 increased $34 million, or 14.2%, to $274 million compared with $240 million during the three months ended October 29, 2023. The increase was generally attributable to acquisitions. Other SG&A costs increased slightly due to investments in growth and higher inflation. SG&A expenses as a percentage of net sales were 13.4% for the three months ended October 27, 2024 compared with 13.1% for the three months ended October 29, 2023. The increase was primarily attributable to acquisitions, investments in growth and inflationary cost impacts.

#### Depreciation and Amortization (“D&A”) Expense

D&A expense for the three months ended October 27, 2024 was $46 million compared with $37 million during the three months ended October 29, 2023. The increase was primarily attributable to recent acquisitions.

#### Operating Income

Operating income for the three months ended October 27, 2024 increased $6 million, or 2.8%, to $223 million compared with $217 million during the three months ended October 29, 2023. The increase in operating income was primarily attributable to higher gross profit partially offset by higher SG&A and amortization expenses.

#### Interest Expense

Interest expense was $36 million for the three months ended October 27, 2024 compared with $20 million for the three months ended October 29, 2023. The increase was primarily attributable to increased borrowings under the 2031 Senior Term Loan and the Senior ABL Credit Facility.

#### Provision for Income Taxes

The provision for income taxes for the three months ended October 27, 2024 increased $8 million, or 20.5%, to $47 million compared with $39 million for the three months ended October 29, 2023. The increase was primarily attributable to an increase in the effective tax rate and an increase in operating income. For the three months ended October 27, 2024 and October 29, 2023, our effective tax rate was 25.1% and 19.8%, respectively. The effective tax rate for each period reflects only the portion of net income that is attributable to taxable entities. The increase in the effective tax rate was primarily attributable to a decrease in the non-controlling interest ownership that increased the allocation of net income to taxable entities.

#### Net Income

Net income for the three months ended October 27, 2024 decreased $18 million, or 11.4%, to $140 million compared with $158 million for the three months ended October 29, 2023. The decrease in net income was primarily attributable to an increase in interest expense and income tax expense partially offset by an increase in operating income.

#### Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests for the three months ended October 27, 2024 decreased $39 million to $7 million compared with $46 million for the three months ended October 29, 2023. The decrease was primarily attributable to exchanges of Partnership Interests by non-controlling interest holders and a decline in net income.

#### Net Income Attributable to Core & Main, Inc.

Net income attributable to Core & Main, Inc. for the three months ended October 27, 2024 increased $21 million, or 18.8%, to $133 million compared with $112 million for the three months ended October 29, 2023. The increase was primarily attributable to a decreased allocation to non-controlling interest holders following exchanges of Partnership Interests partially offset by a decline in net income.

#### Earnings Per Share

The Class A common stock basic and diluted earnings per share for the three months ended October 27, 2024 both increased 6.2% to $0.69 compared with $0.65 for the three months ended October 29, 2023. The increase in basic earnings per share was attributable to an increase in net income attributable to Core & Main, Inc. partially offset by higher Class A share counts from exchanges of Partnership Interests. Diluted earnings per share increased due to lower share counts following the share repurchase transactions executed throughout fiscal 2023 and fiscal 2024 partially offset by a decline in net income.

#### Adjusted EBITDA

Adjusted EBITDA for the three months ended October 27, 2024 increased $17 million, or 6.5%, to $277 million compared with $260 million for the three months ended October 29, 2023. The increase in 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.”

### Nine Months Ended October 27, 2024 Compared with Nine Months Ended October 29, 2023

#### Amounts in millions (except per share data)

|  | Nine Months Ended October 27, 2024 | October 29, 2023 |
| --- | ---: | ---: |
| Net sales | $5,743 | $5,262 |
| Cost of sales | 4,214 | 3,828 |
| Gross profit | 1,529 | 1,434 |
| Operating expenses: |  |  |
| Selling, general and administrative | 799 | 701 |
| Depreciation and amortization | 135 | 109 |
| Total operating expenses | 934 | 810 |
| Operating income | 595 | 624 |
| Interest expense | 106 | 59 |
| Income before provision for income taxes | 489 | 565 |
| Provision for income taxes | 122 | 110 |
| Net income | 367 | 455 |
| Less: net income attributable to non-controlling interests | 20 | 147 |
| Net income attributable to Core & Main, Inc. | $347 | $308 |
| Earnings per share: |  |  |
| Basic | $1.81 | $1.81 |
| Diluted | $1.79 | $1.80 |
| Non-GAAP Financial Data: |  |  |
| Adjusted EBITDA | $751 | $750 |

#### Net Sales

Net sales for the nine months ended October 27, 2024 increased $481 million, or 9.1%, to $5,743 million compared with $5,262 million for the nine months ended October 29, 2023. Net sales increased primarily due to acquisitions and higher end-market volumes partially offset by slightly lower selling prices. Net sales increased for pipes, valves & fittings due to acquisitions partially offset by slightly lower selling prices. Net sales increased for storm drainage due to acquisitions and our ability to drive the adoption of advanced storm water management systems. Net sales for fire protection products declined due to slightly lower selling prices and end-market volumes partially offset by acquisitions. Net sales of meter products benefited from our ability to drive the adoption of smart meter technology through municipalities, increased product availability and acquisitions.

|  | Nine Months Ended October 27, 2024 | October 29, 2023 | Percentage Change |
| --- | ---: | ---: | ---: |
| Pipes, valves & fittings products | $3,884 | $3,579 | 8.5% |
| Storm drainage products | 886 | 783 | 13.2% |
| Fire protection products | 455 | 513 | (11.3)% |
| Meter products | 518 | 387 | 33.9% |
| **Total net sales** | $5,743 | $5,262 |  |

#### Gross Profit

Gross profit for the nine months ended October 27, 2024 increased $95 million, or 6.6%, to $1,529 million compared with $1,434 million for the nine months ended October 29, 2023. Gross profit as a percentage of net sales for the nine months ended October 27, 2024 was 26.6% compared with 27.3% for the nine months ended October 29, 2023. The overall decrease in gross profit as a percentage of net sales was primarily attributable to larger prior year benefits from strategic inventory investments during an inflationary period partially offset by favorable impacts from the execution of our gross margin initiatives and accretive acquisitions.

#### SG&A Expenses

SG&A expenses for the nine months ended October 27, 2024 increased $98 million, or 14.0%, to $799 million compared with $701 million during the nine months ended October 29, 2023. The increase includes $68 million in personnel expenses primarily related to acquisitions. The remaining increase is driven by acquisitions, inflation and other growth investments. SG&A expenses as a percentage of net sales were 13.9% for the nine months ended October 27, 2024 compared with 13.3% for the nine months ended October 29, 2023. The increase was primarily attributable to acquisitions, investments in growth and inflationary cost impacts.

#### D&A Expense

D&A expense was $135 million for the nine months ended October 27, 2024 compared with $109 million for the nine months ended October 29, 2023. The increase was primarily attributable to recent acquisitions.

#### Operating Income

Operating income for the nine months ended October 27, 2024 decreased $29 million, or 4.6%, to $595 million compared with $624 million during the nine months ended October 29, 2023. The decrease in operating income was primarily attributable to higher SG&A and amortization expenses partially offset by higher gross profit.

#### Interest Expense

Interest expense was $106 million for the nine months ended October 27, 2024 compared with $59 million for the nine months ended October 29, 2023. The increase was primarily attributable to increased borrowings under the 2031 Senior Term Loan and the Senior ABL Credit Facility.

#### Provision for Income Taxes

The provision for income taxes for the nine months ended October 27, 2024 increased $12 million, or 10.9%, to $122 million compared with $110 million for the nine months ended October 29, 2023. The increase was primarily attributable to an increase in the effective tax rate partially offset by lower operating income. For the nine months ended October 27, 2024 and October 29, 2023, our effective tax rate was 24.9% and 19.5%, respectively. The effective tax rate for each period reflects only the portion of net income that is attributable to taxable entities. The increase in the effective tax rate was primarily attributable to a decrease in the non-controlling interest ownership that increased the allocation of net income to taxable entities.

#### Net Income

Net income for the nine months ended October 27, 2024 decreased $88 million, or 19.3% to $367 million compared with $455 million for the nine months ended October 29, 2023. The decrease in net income was primarily attributable to a decrease in operating income, an increase in interest expenses and an increase in income tax expenses.

#### Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests for the nine months ended October 27, 2024 decreased $127 million to $20 million compared with $147 million for the nine months ended October 29, 2023. The decrease was primarily attributable to exchanges of Partnership Interests by non-controlling interest holders and a decline in net income.

#### Net Income Attributable to Core & Main, Inc.

Net income attributable to Core & Main, Inc. for the nine months ended October 27, 2024 increased $39 million, or 12.7%, to $347 million compared with $308 million for the nine months ended October 29, 2023. The increase was primarily attributable to a decreased allocation to non-controlling interest holders following exchanges of Partnership Interests partially offset by a decline in net income.

#### Earnings Per Share

The Class A common stock basic earnings per share for the nine months ended October 27, 2024 and the nine months ended October 29, 2023 was $1.81 in each period. The Class A common stock diluted earnings per share for the nine months ended October 27, 2024 decreased 0.6% to $1.79 compared with $1.80 for the nine months ended October 29, 2023. The basic earnings per share was flat due to an increase in net income attributable to Core & Main, Inc. offset by higher Class A share counts from exchanges of Partnership Interests. Diluted earnings per share decreased due to a decline in net income partially offset by lower share counts following the share repurchase transactions executed throughout fiscal 2023 and fiscal 2024.

#### Adjusted EBITDA

Adjusted EBITDA for the nine months ended October 27, 2024 increased $1 million, or 0.1%, to $751 million compared with $750 million for the nine months ended October 29, 2023. The increase in 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.”

### 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, share repurchases (including under the Repurchase Program) and the Repurchase Transactions (as defined in Note 1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

As of October 27, 2024, our cash and cash equivalents totaled $10 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 October 27, 2024, we had $235 million 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 October 27, 2024, after giving effect to approximately $15 million of letters of credit issued under the Senior ABL Credit Facility, Core & Main LP would have been able to borrow approximately $1,000 million under the Senior ABL Credit Facility, subject to borrowing base availability. Our short term debt obligations of $23 million are related to quarterly amortization principal payments on the Senior Term Loan Credit Facility.

In fiscal 2024, the Company had a financing cash outflow related to the payment of $11 million under the Tax Receivable Agreements. The annual payments under the Tax Receivable Agreements are expected to increase as a result of exchanges, including those exchanges made as part of the secondary offerings completed in fiscal 2023. 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.

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 unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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. 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 $9 million for the nine months ended October 27, 2024. Further exchanges by Management Feeder may result in lower tax distributions subject to any changes to income before provision to income taxes.

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” in Part I, Item 1A of the 2023 Annual Report on Form 10-K.

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. During the nine months ended October 27, 2024, we completed $121 million of repurchases of Class A common stock under the Repurchase Program. For further details, refer to Note 1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We may continue to return capital to our shareholders through share repurchases including pursuant to the Repurchase Program and/or dividends. 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 Condensed Consolidated Statements of Cash Flows and is summarized as follows:

|  | Nine Months Ended October 27, 2024 | October 29, 2023 |
| --- | ---: | ---: |
| Cash flows provided by operating activities | $386 | $775 |
| Cash flows used in investing activities | (757) | (182) |
| Cash flows provided by (used in) financing activities | 380 | (669) |
| Increase (decrease) in cash and cash equivalents | $9 | $(76) |

### Operating Activities

Net cash provided by operating activities was $386 million for the nine months ended October 27, 2024 compared with $775 million for the nine months ended October 29, 2023. The $389 million decrease in cash provided by operating activities was primarily driven by more typical investment in working capital in the nine months ended October 27, 2024 compared with a reduction in inventory during fiscal 2023 due to inventory optimization subsequent to supply chain improvements. Increased interest payments and higher income tax payments due to higher taxable income of Core & Main, Inc. following exchanges of Partnership Interests throughout fiscal 2023 also reduced cash flows.

### Investing Activities

Net cash used in investing activities increased by $575 million to $757 million for the nine months ended October 27, 2024 compared with $182 million for the nine months ended October 29, 2023, primarily attributable to a $571 million increase in cash outflows for acquisitions during fiscal 2024.

### Financing Activities

Net cash provided by financing activities was $380 million for the nine months ended October 27, 2024 compared with net cash used in financing activities of $669 million for the nine months ended October 29, 2023. The change of $1,049 million was primarily attributed to the $750 million issuance of the 2031 Senior Term Loan, a $497 million reduction in outflows related to the Repurchase Transactions and $24 million reduction in distributions to non-controlling interest holders during fiscal 2024. These factors were partially offset by a $195 million decrease in net borrowings on the Senior ABL Credit Facility and a $14 million of debt issuance costs associated with the debt offerings during fiscal 2024.

### Financing

As of October 27, 2024, our debt obligations (in millions) consist of the following:

|  | Aggregate Principal/Borrowing Capacity | Maturity Date | Interest |
| --- | ---: | --- | --- |
| 2028 Senior Term Loan | $1,451 | 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 Quarterly Report on Form 10-Q). The weighted average interest rate, excluding the effects of the interest rate swaps, was 6.86% as of October 27, 2024. |
| 2031 Senior Term Loan | 744 | February 9, 2031 | (i) Term SOFR plus, in each case, an applicable margin of 2.25%, or (ii) the base rate (described elsewhere in this Form 10-Q). The weighted average interest rate, excluding the effects of the interest rate swaps, was 7.11% as of October 27, 2024. |
| 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(2) | 800 | 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(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 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 $235 million outstanding under the Senior ABL Credit Facility as of October 27, 2024.

(2) Notional amount of $800 million as of October 27, 2024. The notional amount decreases to $700 million on July 27, 2025 through the instrument maturity on July 27, 2026.

(3) 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 unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q 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 October 27, 2024, the Company had agreements in place with various suppliers to purchase goods and services, primarily inventory, in the aggregate amount of $1,009 million. These purchase obligations are generally cancellable, but the Company foresees no intent to cancel. Payments are generally expected to be made during fiscal 2024 and the fiscal year ended February 1, 2026 for these obligations.

### 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 should not be considered in isolation or as alternatives to GAAP measures such as net income or net income attributable to Core & Main, Inc., 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 and (d) expenses associated with acquisition activities. 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. 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 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 you 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, you 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:

|  | Three Months Ended October 27, 2024 | October 29, 2023 | Nine Months Ended October 27, 2024 | October 29, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income attributable to Core & Main, Inc. | $133 | $112 | $347 | $308 |
| Plus: net income attributable to non-controlling interest | 7 | 46 | 20 | 147 |
| Net income | 140 | 158 | 367 | 455 |
| Depreciation and amortization (1) | 46 | 38 | 137 | 111 |
| Provision for income taxes | 47 | 39 | 122 | 110 |
| Interest expense | 36 | 20 | 106 | 59 |
| EBITDA | $269 | $255 | $732 | $735 |
| Equity-based compensation | 4 | 3 | 11 | 8 |
| Acquisition expenses (2) | 4 | 1 | 8 | 4 |
| Offering expenses (3) | — | 1 | — | 3 |
| Adjusted EBITDA | $277 | $260 | $751 | $750 |

(1) Includes depreciation of certain assets which are reflected in “cost of sales” in our Statement of Operations.

(2) Represents expenses associated with acquisition activities, including transaction costs, post-acquisition employee retention bonuses, severance payments and expense recognition of purchase accounting fair value adjustments (excluding amortization).

(3) Represents costs related to 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

Refer to Note 2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

### Critical Accounting Policies and Estimates

A summary of our significant accounting policies are discussed in Note 2 to the audited consolidated financial statements in our 2023 Annual Report on Form 10-K. The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed 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. There have been no significant changes to these policies which have had a material impact on the Company’s interim unaudited condensed consolidated financial statements and related notes during the three and nine months ended October 27, 2024.

### Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of October 27, 2024.

## Market risk

As filed, 3,509 characters.

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, foreign currency exchange 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. The Senior Term Loan Credit 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 Credit Facility and the Senior ABL Credit Facility. As of October 27, 2024, our net borrowings under the Senior Term Loan Credit Facility and the Senior ABL Credit Facility were $2,430 million. As such, excluding the impact of any interest rate swap, each one percentage point change in interest rates would result in an approximately $22 million change in the annual interest expense on the Senior Term Loan Credit Facility. As of October 27, 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. See “Item 2. 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. 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 evaluate the solvency of our customers on an ongoing basis to determine if additional allowances for doubtful accounts receivable need to be recorded. We have historically not been exposed to a material amount of uncollectible receivable balances.

### Price Risk

We are exposed to 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. Our operating performance may be affected by both upward and downward price fluctuations. We have a limited ability to control the timing and amount of changes in the cost to procure our products including vendor pricing, transportation and governmental fees. We seek to recover increases in our product costs by passing product cost increases on to our customers. 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 of a reduction to our gross profit margins. We seek to minimize this risk through strategic inventory investments ahead of announced price increases, management of our inventory levels, our variable compensation plans for associates and the execution of our gross margin initiatives. 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. Such price fluctuations have from time to time produced volatility in our financial performance and could do so in the future.

## Controls and procedures

As filed, 3,684 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports under the Exchange Act that we file with the U.S. Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) concluded that, as of October 27, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this Quarterly Report on Form 10-Q relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected.

## Risk factors

As filed, 147 characters.

There have been no material changes from the risk factors disclosed in Part I, Item1A "Risk Factors” in our Fiscal 2023 Annual Report on Form 10-K.

Filed Dec 3, 2024.
Source: SEC EDGAR, the filing index for accession 0001856525-24-000118. Last ingested by Listed: Nov 5, 2026, 13:52 ET. No prices; not investment advice.