Core & Main, Inc. (CNM): history, ownership, mission, how it works & makes money

A Brief History of Core & Main, Inc.

Core & Main, Inc. has positioned itself as a leading distributor of waterworks and plumbing products in North America. The company was formed following the merger of HD Supply Waterworks and Core & Main Holdings, LLC in 2016, creating a robust platform for growth in the water and plumbing sectors.

Financial Performance Overview

As of the second quarter of 2024, Core & Main reported significant financial results:

For the six months ended July 28, 2024, the financial highlights included:

Acquisitions and Growth Strategy

Core & Main has focused on strategic acquisitions to bolster its market position. The company’s net sales growth has been significantly influenced by acquisitions, particularly in the pipes, valves, and fittings sectors, which saw a 6.0% increase in sales to $2,498 million in H1 2024. Other product categories, such as storm drainage products and meter products, also experienced growth of 13.4% and 39.7%, respectively.

Challenges and Market Conditions

The company faced challenges, including a decrease in selling prices and end-market volumes, particularly in fire protection products, which declined by 9.6% to $310 million for H1 2024. Higher selling, general, and administrative (SG&A) expenses, which increased by 13.9% to $525 million, also impacted profitability.

Debt and Financial Obligations

As of July 28, 2024, Core & Main's total liabilities and stockholders' equity stood at $6,098 million. The company maintained an aggregate principal capacity for various debt obligations amounting to $1,250 million under its Senior ABL Credit Facility, with $250 million outstanding. Interest expense for the six months reached $70 million, up from $39 million in the previous year, reflecting increased borrowings under its credit facilities.

Liquidity Position

Core & Main reported cash and cash equivalents of $13 million as of July 28, 2024. The company has agreements in place with suppliers for future purchases amounting to $1,147 million, which are expected to be settled in the coming fiscal years.

A Who Owns Core & Main, Inc. (CNM)

Ownership Structure

As of July 28, 2024, the ownership structure of Core & Main, Inc. (CNM) is as follows:

Major Shareholders

The major shareholders of Core & Main, Inc. include:

• Core & Main Management Feeder, LLC, holding 8,483,709 Partnership Interests and 8,483,709 shares of Class B common stock.
• Public investors holding Class A common stock, totaling 192,642,143 shares.

Recent Changes in Ownership

Following the completion of secondary offerings and repurchase transactions during fiscal 2023, investors affiliated with CD&R no longer own shares of Core & Main.

Financial Performance Overview

In the latest financial statements, Core & Main reported significant figures for the six months ended July 28, 2024:

Debt and Liquidity Position

As of July 28, 2024, Core & Main had the following key liquidity and debt figures:

Effective Tax Rate

The effective tax rate for the six months ended July 28, 2024, was 24.8%, compared to 19.3% for the same period in the previous year.

Goodwill and Intangible Assets

As of July 28, 2024, the carrying amount of goodwill was $1,843 million, an increase from $1,561 million as of January 28, 2024.

Core & Main, Inc. (CNM) Mission Statement

Overview of Mission Statement

The mission statement of Core & Main, Inc. focuses on providing high-quality products and services that enhance the infrastructure of communities. The company emphasizes its commitment to reliability, innovation, and customer service within the waterworks and plumbing sectors.

Financial Performance Metrics

As of July 28, 2024, Core & Main, Inc. reported the following key financial metrics:

Sales Breakdown by Product Category

For the three months ended July 28, 2024, the sales performance across different product categories was as follows:

Operational Highlights

Core & Main, Inc. continues to enhance its operational efficiencies through strategic acquisitions and investments in technology. The company's focus on smart meter technology has driven growth in meter product sales, reflecting a shift towards modernization in municipal infrastructure.

Recent Acquisitions and Financial Impact

In the first half of fiscal 2024, Core & Main completed several acquisitions, contributing to an increase in net sales:

Liquidity and Capital Resources

As of July 28, 2024, Core & Main's liquidity position is strong, with cash and cash equivalents totaling $13 million. The company also has significant borrowing capacity under its Senior ABL Credit Facility, which amounts to $1,250 million.

Conclusion of Financial Performance

Core & Main, Inc.'s financial performance in 2024 reflects its strategic focus on growth, innovation, and operational efficiency. The company continues to adapt to market demands while strengthening its position in the infrastructure sector.

How Core & Main, Inc. (CNM) Works

Company Overview

Core & Main, Inc. is a leading specialized distributor of water, wastewater, storm drainage, and fire protection products. The company serves municipalities, private water companies, and professional contractors across various end markets in the United States. Core & Main operates approximately 350 branches across 49 states, providing a wide array of products including pipes, valves, fittings, and meter products.

Financial Performance

As of the second quarter ending July 28, 2024, Core & Main reported the following financial metrics:

Six-Month Financial Overview

For the six months ended July 28, 2024:

Segment Performance

The breakdown of net sales by product category for the six months ended July 28, 2024 is as follows:

Operating Expenses

Core & Main's operating expenses for the six months ended July 28, 2024 included:

Liquidity and Capital Resources

As of July 28, 2024, Core & Main reported:

• Cash and cash equivalents: $13 million
• Outstanding borrowings under Senior ABL Credit Facility: $250 million
• Aggregate principal of debt obligations: $1,455 million (2028 Senior Term Loan)
• Interest rate on 2028 Senior Term Loan: 7.34%
• Interest expense for the six months: $70 million

Cash Flow Analysis

For the six months ended July 28, 2024:

Market Position and Trends

Core & Main continues to expand its market presence through strategic acquisitions and the adoption of advanced technologies in smart metering systems. The company anticipates further growth driven by infrastructure investments and the demand for reliable water and fire protection solutions.

How Core & Main, Inc. (CNM) Makes Money

Revenue Sources

Core & Main, Inc. generates revenue primarily through the distribution of various products related to water, wastewater, storm drainage, and fire protection. The breakdown of net sales by product category for the six months ended July 28, 2024, is as follows:

Gross Profit and Margins

For the six months ended July 28, 2024, gross profit increased by $46 million to $986 million, representing a gross profit margin of 26.6%, compared to 27.4% in the prior year. The decline in gross profit margin is attributed to larger benefits from strategic inventory investments in the prior year, offset by successful gross margin initiatives and acquisitions.

Operating Income and Expenses

Operating income for the six months ended July 28, 2024, was $372 million, a decrease of $35 million or 8.6% compared to $407 million for the same period in 2023. This decrease was primarily due to:

• Increased Selling, General and Administrative (SG&A) expenses of $525 million, up from $461 million (13.9% increase).
• Higher Depreciation and Amortization (D&A) expenses of $89 million, compared to $72 million.

Net Income

Net income for the six months ended July 28, 2024, decreased by $70 million or 23.6% to $227 million compared to $297 million in the prior year. The net income attributable to Core & Main, Inc. stood at $214 million, up from $196 million, indicating an increase of 9.2% due to lower allocations to non-controlling interest holders.

Interest Expense

Interest expense for the six months ended July 28, 2024, was $70 million, an increase from $39 million in the same period last year, driven by higher borrowings under the Senior ABL Credit Facility and the 2031 Senior Term Loan.

Cash Flow and Liquidity

As of July 28, 2024, Core & Main, Inc. reported cash and cash equivalents totaling $13 million. The company had $250 million in outstanding borrowings under its Senior ABL Credit Facility, which provides a borrowing capacity of up to $1,250 million. The cash flows for the six months ended July 28, 2024, are summarized as follows:

Recent Acquisitions

During the six months ended July 28, 2024, Core & Main, Inc. completed several acquisitions with an aggregate transaction value of $623 million, enhancing its market position and product offerings.

Conclusion

Core & Main, Inc. continues to leverage its diverse product portfolio and strategic acquisitions to drive revenue growth while managing operational expenses and interest obligations effectively.