8-K
Core & Main, Inc. (CNM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 8-K
___________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 14, 2021
___________________________
Core & Main, Inc.
(Exact name of registrant as specified in its charter)
___________________________
| Delaware | 001-40650 | 86-3149194 |
|---|---|---|
| (State or other jurisdiction <br>of incorporation) | (Commission <br>File Number | (IRS Employer <br>Identification No.) |
| 1830 Craig Park Court | ||
| --- | --- | |
| St. Louis, Missouri | 63146 | |
| (Address of principal executive offices) | (Zip Code) |
(314) 432-4700
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
___________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Class | Trading Symbol | Name of Each Exchange <br>on Which Registered |
|---|---|---|
| Class A common stock, par value $0.01 per share | CNM | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Conditions.
On September 14, 2021, Core & Main, Inc. (“Core & Main”) issued a press release announcing its results of operations for the fiscal second quarter and six months ended August 1, 2021. A copy of the press release is attached hereto as Exhibit 99.1.
On September 14, 2021, Core & Main posted to the “Investor Relations” section of its website the presentation that accompanied the earnings conference call. A copy of the investor presentation is attached hereto as Exhibit 99.2.
The information provided pursuant to this Item 2.02 and in Exhibit 99.1 and Exhibit 99.2 is being “furnished” herewith and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by Core & Main under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in such filings, except as shall be expressly set forth by specific reference in any such filings.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Earnings release dated September 14, 2021 - Core & Main Announces Fiscal 2021 Second Quarter Results** |
| 99.2 | Investor presentation dated September 14, 2021** |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document)* |
* Filed herewith.
** Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Core & Main, Inc. | |
|---|---|
| By: | /s/ Stephen O. LeClair |
| Name: | Stephen O. LeClair |
| Title: | Chief Executive Officer |
Date: September 14, 2021
Document
Core & Main Announces Fiscal 2021 Second Quarter Results
ST. LOUIS, Sept. 14, 2021 — Core & Main, Inc. (NYSE: CNM) (“Core & Main”), a leading specialized distributor of water, wastewater, storm drainage and fire protection products, and related services, today announced unaudited financial results for the second fiscal quarter and six months ended August 1, 2021.
Fiscal 2021 Second Quarter Highlights (Compared with Fiscal 2020 Second Quarter)
•Net sales increased 35.7% to $1,297.6 million
•Gross profit margin increased 100 basis points to 25.1%
•Net income decreased 47.5% to $9.5 million
•Adjusted EBITDA (Non-GAAP) increased 56.8% to $155.2 million
•Adjusted EBITDA margin (Non-GAAP) increased 160 basis points to 12.0%
•Net Debt Leverage (Non-GAAP) (using Adjusted EBITDA on a trailing twelve-month basis) decreased to 3.3x as of August 1, 2021 compared with 5.2x as of May 2, 2021
•Closed two acquisitions subsequent to the quarter: L & M Bag & Supply Company, Inc. and Pacific Pipe Company, Inc.
“Core & Main delivered exceptionally strong performance in the second quarter, achieving record net sales with nearly 36% growth compared with the prior year, all while operating in a very dynamic environment,” said Steve LeClair, Chief Executive Officer of Core & Main.
“We benefited from strong end market demand attributable to continued growth in municipal water infrastructure spending and robust housing demand. This materialized into strong volume gains as well as improved pricing, in part due to the inflationary trends across many of our product lines. The market momentum and rising material costs put pressure on the industry’s supply chain and our internal resources, and I am very proud of how our team has managed these challenging conditions to provide consistent, reliable products and services to our customers. As a result of this execution and continued traction against our defined growth initiatives, we believe we outperformed our end markets and delivered core market share gains in the quarter.”
“During and subsequent to the second quarter, we successfully completed our initial public offering of approximately 40 million shares of Class A common stock, inclusive of the full exercise of the underwriters’ over-allotment option, generating gross proceeds of approximately $802 million. We used proceeds from the offering to deleverage the balance sheet, positioning us with greater flexibility to pursue our growth strategies.”
LeClair concluded, “We remained active in M&A during the quarter, announcing the acquisitions of L & M Bag & Supply Company and Pacific Pipe Company, both of which closed subsequent to the quarter. We also continued to pursue and expand our acquisition pipeline, positioning us for future growth. The outlook for our end markets remains positive, and we are confident in our ability to deliver above market results for our stakeholders in 2021 and beyond.”
Three Months Ended August 1, 2021
Net sales for the three months ended August 1, 2021 increased $341.7 million, or 35.7%, to $1,297.6 million compared with $955.9 million in the prior year period. The increase in net sales was primarily attributable to strong volume growth and price inflation, with price inflation representing approximately half of the net sales increase, which helped drive growth in all product lines.
Gross profit for the three months ended August 1, 2021 increased $94.6 million, or 41.0%, to $325.2 million compared with $230.6 million in the prior year period. Gross profit as a percentage of net sales for the three months ended August 1, 2021 was 25.1% compared with 24.1% in the prior year period, an improvement of 100 basis points. The overall increase in gross profit as a percentage of net sales was primarily attributable to sourcing and pricing improvements.
Selling, general and administrative (“SG&A”) expenses for the three months ended August 1, 2021 increased $55.0 million, or 40.2%, to $191.8 million compared with $136.8 million in the prior year period. The increase was primarily attributable to an increase in personnel expenses, which was primarily driven by higher variable compensation costs resulting from higher sales volume and increased headcount due to furloughs and headcount reductions in response to COVID-19 in the prior year period, and lower discretionary spending in response to COVID-19 in the prior year period. In addition, SG&A expenses increased by $17.2 million related to higher equity-based compensation expense due to accounting for equity awards in the second quarter of fiscal 2021 and $1.3 million related to costs in connection with Core & Main’s initial public offering (the “IPO Transaction”).
Net income for the three months ended August 1, 2021 decreased $8.6 million, or 47.5%, to $9.5 million compared with $18.1 million in the prior year period. The decrease in net income was primarily attributable to a $50.4 million loss on debt modification and extinguishment and a $17.2 million incremental equity-based compensation charge, partially offset by higher operating income.
Adjusted EBITDA (Non-GAAP) for the three months ended August 1, 2021 increased $56.2 million, or 56.8%, to $155.2 million compared with $99.0 million in the prior year period. Growth in Adjusted EBITDA was primarily attributable to higher net sales and improved gross profit, partially offset by higher SG&A expenses, primarily attributable to higher variable compensation costs during the period and lower SG&A expenses in the prior year period due to COVID-19-related decreases in headcount and discretionary spending. Adjusted EBITDA margin increased 160 basis points to 12.0% from 10.4% in the prior year period.
Six Months Ended August 1, 2021
Net sales for the six months ended August 1, 2021 increased $554.7 million, or 30.9%, to $2,352.7 million compared with $1,798.0 million in the prior year period. The increase in net sales was primarily attributable to strong volume growth and price inflation, which helped drive growth in all product lines. Net sales also benefited from the acquisition of R&B Co. in March 2020.
Gross profit for the six months ended August 1, 2021 increased $152.2 million, or 35.4%, to $582.0 million compared with $429.8 million in the prior year period. Gross profit as a percentage of net sales for the six months ended August 1, 2021 was 24.7% compared with 23.9% in the prior year period, an improvement of 80 basis points. The overall increase in gross profit as a percentage of net sales was primarily attributable to sourcing and pricing improvements.
SG&A expenses for the six months ended August 1, 2021 increased $71.9 million, or 26.3%, to $345.7 million compared with $273.8 million in the prior year period. The increase was primarily attributable to an increase in personnel expenses, which was primarily driven by higher variable compensation costs resulting from higher sales volume and increased headcount due to furloughs and headcount reductions in response to COVID-19 in the prior year period, lower discretionary spending in response to COVID-19 in the prior year period, and incremental costs from acquisitions. In addition, SG&A expenses increased by $17.2 million related to higher equity-based compensation expense due to accounting for equity awards during the six months ended August 1, 2021 and $3.6 million related to costs in connection with the IPO Transaction.
Net income for the six months ended August 1, 2021 increased $22.0 million to $36.9 million compared with $14.9 million in the prior year period. The increase in net income was primarily attributable to higher net sales and improved gross profit, partially offset by higher variable SG&A expenses, the $50.4 million loss on debt modification and extinguishment and a $17.2 million incremental equity-based compensation charge.
Adjusted EBITDA (Non-GAAP) for the six months ended August 1, 2021 increased $96.6 million, or 57.6%, to $264.3 million compared with $167.7 million in the prior year period. Growth in Adjusted EBITDA was primarily attributable to higher net sales and improved gross profit, partially offset by higher SG&A expenses, primarily attributable to higher variable compensation costs and costs from acquisitions during the period and lower SG&A expenses in the prior year period due to COVID-19-related decreases in headcount and discretionary spending. Adjusted EBITDA margin increased 190 basis points to 11.2% from 9.3% in the prior year period.
Balance Sheet and Liquidity
Net debt, calculated as gross consolidated debt net of cash and cash equivalents, as of August 1, 2021 was $1,433.4 million. At the end of the quarter, Net Debt Leverage (defined as the ratio of net debt to Adjusted EBITDA for the last twelve months) was 3.3x, an improvement of 1.9x from 5.2x as of May 2, 2021. The improvement was primarily attributable to the net proceeds generated from the IPO Transaction, the subsequent refinancing transactions and an increase in Adjusted EBITDA.
As of August 1, 2021, Core & Main had total liquidity of $907.5 million, consisting of $66.6 million of cash and cash equivalents and approximately $840.9 million of excess availability under our asset-based revolving credit facility, which is net of approximately $9.1 million of outstanding letters of credit.
Fiscal 2021 Outlook
“We expect the demand and pricing trends we experienced in the first half of the fiscal year to continue into the second half, though tempered against tougher prior year comps and anticipated supply chain constraints,” LeClair continued. “Each of our end markets appears poised for continued growth based on bidding activity and order flow, and the execution of our growth initiatives is expected to continue driving core market share gains. As a result, we expect full year fiscal 2021 Adjusted EBITDA to be in the range of $470 million to $510 million, representing a year-over-year increase of 37% to 49%.”
Conference Call & Webcast Information
Core & Main management will host a conference call and webcast on September 14, 2021 at 8:30 a.m. EDT to discuss Core & Main’s financial results. The live webcast will be accessible via the Events Calendar at https://ir.coreandmain.com. The conference call also may be accessed by dialing (844) 200-6205 or +44 208 0682 558 (international). The passcode for the live call is 211964. To ensure participants are connected for the full call, please dial-in at least 10 minutes prior to the start of the call. An archived version of the webcast will be available following the call. A slide presentation highlighting Core & Main’s results and key performance indicators will also be made available on the Investor Relations section of Core & Main’s website prior to the call.
About Core & Main
Based in St. Louis, Core & Main is a leading specialized distributor of water, wastewater, storm drainage and fire protection products, and related services, to municipalities, private water companies and professional contractors across municipal, non-residential and residential end markets nationwide. With more than 285 locations, the company provides its customers local expertise backed by a national supply chain. Core & Main’s 3,700 associates are committed to helping their communities thrive with safe and sustainable infrastructure. Visit https://coreandmain.com to learn more.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this press release include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include information concerning Core & Main’s financial and operating outlook, as well as any other statement that does not directly relate to any historical or current fact. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “forecasts,” “expects,” “intends,” “plans,” “anticipates,” “projects,” “outlook,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “preliminary,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. These forward-looking statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements.
Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation, declines, volatility and cyclicality in the U.S. residential and non-residential construction markets; slowdowns in municipal infrastructure spending and delays in appropriations of federal funds; price fluctuations in our product costs, particularly with respect to the commodity-based products that we sell; the spread of, and response to, COVID-19, and the inability to predict the ultimate impact on us; general business and economic conditions; risks involved with acquisitions and other strategic transactions, including our ability to identify, acquire, close or integrate acquisition targets successfully; the impact of seasonality and weather-related impacts, including natural disasters or similar extreme weather events; the fragmented and highly competitive markets in which we compete and consolidation within our industry; our ability to competitively bid for municipal contracts; the development of alternatives to distributors of our products in the supply chain; our ability to hire, engage and retain key personnel, including sales representatives, qualified branch, district and region managers and senior management; our ability to identify, develop and maintain relationships with a sufficient number of qualified suppliers and the potential that our exclusive or restrictive supplier distribution rights are terminated; the availability and cost of freight and energy, such as fuel; the ability of our customers to make payments on credit sales; our ability to identify and introduce new products and product lines effectively; our ability to manage our inventory effectively; costs and potential liabilities or obligations imposed by environmental, health and safety laws and requirements; regulatory change and the costs of compliance with regulation; exposure to product liability, construction defect and warranty claims and other litigation and legal proceedings; potential harm to our reputation; difficulties with or interruptions of our fabrication services; safety and labor risks associated with the distribution of our products as well as work stoppages and other disruptions due to labor disputes; impairment in the carrying value of goodwill, intangible assets or other long-lived assets; the domestic and international political environment with regard to trade relationships and tariffs, as well as difficulty sourcing products as a result of import constraints; our ability to operate our business consistently through highly dispersed locations across the United States; interruptions in the proper functioning of our IT systems, including from cybersecurity threats; risks associated with raising capital; our ability to continue our customer relationships with short-term contracts; changes in vendor rebates or other terms of our vendor agreements; risks associated with exporting our products internationally; our ability to renew or replace our existing leases on favorable terms or at all; our ability to maintain effective internal controls over financial reporting and remediate any material weaknesses; our substantial indebtedness and the potential that we may incur additional indebtedness; the limitations and restrictions in the agreements governing our indebtedness, the Second Amended and Restated Agreement of Limited Partnership of Core & Main Holdings, LP and the Tax Receivable Agreements (as defined in the prospectus (File No. 333-256382), dated July 22, 2021, filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on July 26, 2021 (the “Prospectus”)); increases in interest rates and the impact of transitioning from the London Interbank Offered Rate as the benchmark rate in contracts; changes in our credit ratings and outlook; our ability to generate the significant amount of cash needed to service our indebtedness; our organizational structure, including our payment obligations under the Tax Receivable Agreements, which may be significant; the significant influence that Clayton, Dubilier & Rice, LLC (“CD&R”) has over us and potential conflicts between the interests of CD&R and other stockholders; and risks related to other factors discussed under “Risk Factors” in the Prospectus.
Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Contact:
Robyn Bradbury
VP, Investor Relations and FP&A
(314) 995 – 9116
InvestorRelations@coreandmain.com
CORE & MAIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Amounts in millions (except share and per share data), unaudited
| Three Months Ended | Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| August 1, 2021 | August 2, 2020 | August 1, 2021 | August 2, 2020 | |||||
| Net sales | $ | 1,297.6 | $ | 955.9 | $ | 2,352.7 | $ | 1,798.0 |
| Cost of sales | 972.4 | 725.3 | 1,770.7 | 1,368.2 | ||||
| Gross profit | 325.2 | 230.6 | 582.0 | 429.8 | ||||
| Operating expenses: | ||||||||
| Selling, general and administrative | 191.8 | 136.8 | 345.7 | 273.8 | ||||
| Depreciation and amortization | 33.6 | 34.3 | 67.4 | 67.8 | ||||
| Total operating expenses | 225.4 | 171.1 | 413.1 | 341.6 | ||||
| Operating income | 99.8 | 59.5 | 168.9 | 88.2 | ||||
| Interest expense | 36.8 | 35.0 | 72.3 | 68.2 | ||||
| Loss on debt modification and extinguishment | 50.4 | — | 50.4 | — | ||||
| Income before provision for income taxes | 12.6 | 24.5 | 46.2 | 20.0 | ||||
| Provision for income taxes | 3.1 | 6.4 | 9.3 | 5.1 | ||||
| Net income | 9.5 | $ | 18.1 | 36.9 | $ | 14.9 | ||
| Less: net loss attributable to non-controlling interests | (17.0) | (17.0) | ||||||
| Net income attributable to Core & Main, Inc. | $ | 26.5 | $ | 53.9 | ||||
| Loss per share (1) | ||||||||
| Basic | $ | (0.14) | $ | (0.14) | ||||
| Diluted | $ | (0.14) | $ | (0.14) | ||||
| Number of shares used in computing EPS (1) | ||||||||
| Basic | 138,978,366 | 138,978,366 | ||||||
| Diluted | 138,978,366 | 138,978,366 |
(1)Represents basic and diluted loss per share of Class A common stock and weighted average shares of Class A common stock outstanding for the period from July 23, 2021 through August 1, 2021, the period following the Reorganization Transactions (as defined in our Quarterly Report on Form 10-Q for the quarterly period ended August 1, 2021).
CORE & MAIN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts in millions (except share and per share data), unaudited
| August 1, 2021 | January 31, 2021 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 66.6 | $ | 380.9 |
| Receivables, net of allowance for credit losses of $5.0 and $4.6 | 832.9 | 556.8 | ||
| Inventories | 593.2 | 383.8 | ||
| Prepaid expenses and other current assets | 15.6 | 15.6 | ||
| Total current assets | 1,508.3 | 1,337.1 | ||
| Property, plant and equipment, net | 82.2 | 86.2 | ||
| Operating lease right-of-use assets | 144.2 | 128.5 | ||
| Intangible assets, net | 861.7 | 919.2 | ||
| Goodwill | 1,452.5 | 1,452.7 | ||
| Other assets | 4.4 | — | ||
| Total assets | $ | 4,053.3 | $ | 3,923.7 |
| LIABILITIES AND PARTNERS' CAPITAL/STOCKHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Current maturities of long-term debt | $ | 15.0 | $ | 13.0 |
| Accounts payable | 564.9 | 325.7 | ||
| Accrued compensation and benefits | 68.0 | 70.7 | ||
| Current operating lease liabilities | 45.4 | 42.8 | ||
| Other current liabilities | 51.5 | 70.1 | ||
| Total current liabilities | 744.8 | 522.3 | ||
| Long-term debt | 1,462.0 | 2,251.7 | ||
| Non-current operating lease liabilities | 98.8 | 85.9 | ||
| Deferred income taxes | 87.8 | 232.1 | ||
| Payable to related parties pursuant to Tax Receivable Agreements | 88.6 | — | ||
| Other liabilities | 23.3 | 31.0 | ||
| Total liabilities | 2,505.3 | 3,123.0 | ||
| Commitments and contingencies | ||||
| Partners' capital | — | 800.7 | ||
| Class A common stock, par value $0.01 per share, 1,000,000,000 shares authorized, 154,834,603 shares issued and outstanding as of August 1, 2021 | 1.5 | — | ||
| Class B common stock, par value $0.01 per share, 500,000,000 shares authorized, 85,853,383 shares issued and outstanding as of August 1, 2021 | 0.9 | — | ||
| Additional paid-in capital | 1,090.3 | — | ||
| Accumulated deficit | (20.0) | — | ||
| Accumulated other comprehensive loss | (0.8) | — | ||
| Total partners' capital/stockholders equity attributable to Core & Main, Inc. | 1,071.9 | 800.7 | ||
| Non-controlling interests | 476.1 | — | ||
| Total partners' capital/stockholders equity | 1,548.0 | 800.7 | ||
| Total liabilities and partners' capital/stockholders equity | $ | 4,053.3 | $ | 3,923.7 |
CORE & MAIN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in millions, unaudited
| Six Months Ended | ||||
|---|---|---|---|---|
| August 1, 2021 | August 2, 2020 | |||
| Cash Flows From Operating Activities: | ||||
| Net income | $ | 36.9 | $ | 14.9 |
| Adjustments to reconcile net cash from operating activities: | ||||
| Depreciation and amortization | 75.2 | 75.6 | ||
| Provision for bad debt | 0.9 | 1.6 | ||
| Non-cash inventory charge | — | 0.6 | ||
| Equity-based compensation expense | 19.5 | 2.0 | ||
| Loss on debt modification and extinguishment | 48.4 | — | ||
| Other | (3.6) | (0.2) | ||
| Changes in assets and liabilities: | ||||
| (Increase) decrease in receivables | (276.5) | (79.9) | ||
| (Increase) decrease in inventories | (209.4) | (21.2) | ||
| (Increase) decrease in other assets | (0.3) | 4.0 | ||
| Increase (decrease) in accounts payable | 238.7 | 91.6 | ||
| Increase (decrease) in accrued liabilities | (23.8) | (3.0) | ||
| Increase (decrease) in other liabilities | (5.1) | 7.2 | ||
| Net cash (used in) provided by operating activities | (99.1) | 93.2 | ||
| Cash Flows From Investing Activities: | ||||
| Capital expenditures | (8.1) | (5.7) | ||
| Acquisitions of businesses, net of cash acquired | — | (206.1) | ||
| Settlement of interest rate swap | (5.2) | — | ||
| Proceeds from the sale of property and equipment | 0.4 | 0.1 | ||
| Net cash used in investing activities | (12.9) | (211.7) | ||
| Cash Flows From Financing Activities: | ||||
| IPO proceeds, net of underwriting discounts and commissions | 663.7 | — | ||
| Payments for offering costs | (5.1) | — | ||
| Partnership investment | 0.3 | 0.8 | ||
| Partnership distributions | (19.5) | (6.8) | ||
| Borrowings on asset-based revolving credit facility | — | 460.0 | ||
| Repayments on asset-based revolving credit facility | — | (460.0) | ||
| Issuance of long-term debt | 1,500.0 | 250.0 | ||
| Repayments of long-term debt | (2,311.1) | (6.5) | ||
| Payment of contingent consideration | (0.3) | — | ||
| Payment of debt redemption premiums | (17.5) | — | ||
| Debt issuance costs | (12.8) | (8.1) | ||
| Net cash (used in) provided by financing activities | (202.3) | 229.4 | ||
| (Decrease) increase in cash and cash equivalents | (314.3) | 110.9 | ||
| Cash and cash equivalents at the beginning of the period | 380.9 | 180.9 | ||
| Cash and cash equivalents at the end of the period | $ | 66.6 | $ | 291.8 |
Non-GAAP Financial Measures
In addition to providing results that are determined in accordance with GAAP, we present EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Net Debt Leverage, 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 attributable to Core & Main, Inc., 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 attributable to Core & Main, Inc. adjusted for non-controlling interest, 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 (a) loss on debt modification and extinguishment, (b) equity-based compensation, (c) expenses associated with the IPO Transaction 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 define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales. We define Net Debt Leverage as total consolidated debt (gross of unamortized discounts and debt issuance costs), net of cash and cash equivalents, divided by Adjusted EBITDA for the last twelve months.
We use EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Net Debt Leverage 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.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Net Debt Leverage are not alternative measures of financial performance or liquidity under GAAP and therefore should be considered in conjunction with net income attributable to Core & Main, Inc. and other performance measures such as gross profit or net cash provided by or used in operating, investing or financing activities and not as alternatives to such GAAP measures. In evaluating Adjusted EBITDA, you should be aware that, in the future, we may incur expenses similar to those eliminated in this presentation.
No reconciliation of the estimated range for Adjusted EBITDA for fiscal 2021 is included herein because we are unable to quantify certain amounts that would be required to be included in net income attributable to Core & Main, Inc., the most directly comparable GAAP measure, without unreasonable efforts due to the high variability and difficulty to predict certain items excluded from Adjusted EBITDA. Consequently, we believe such reconciliation would imply a degree of precision that would be misleading to investors. In particular, the effects of acquisition expenses and associated taxes cannot be reasonably predicted in light of the inherent difficulty in quantifying such items on a forward-looking basis. We expect the variability of these excluded items may have an unpredictable, and potentially significant, impact on our future GAAP financial results.
The following tables set forth a reconciliation of net income attributable to Core & Main, Inc. to EBITDA and Adjusted EBITDA for the periods presented, as well as a calculation of Adjusted EBITDA margin for the periods presented:
| (Amounts in millions, unaudited) | Three Months Ended | Six Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| August 1, 2021 | August 2, 2020 | August 1, 2021 | August 2, 2020 | |||||||||
| Net income attributable to Core & Main, Inc. | $ | 26.5 | $ | 53.9 | ||||||||
| Plus: net loss attributable to non-controlling interests | (17.0) | (17.0) | ||||||||||
| Net income | $ | 9.5 | $ | 18.1 | $ | 36.9 | $ | 14.9 | ||||
| Depreciation and amortization (1) | 34.4 | 35.3 | 69.1 | 69.7 | ||||||||
| Provision for income taxes | 3.1 | 6.4 | 9.3 | 5.1 | ||||||||
| Interest expense | 36.8 | 35.0 | 72.3 | 68.2 | ||||||||
| EBITDA | $ | 83.8 | $ | 94.8 | $ | 187.6 | $ | 157.9 | ||||
| Loss on debt modification and extinguishment | 50.4 | — | 50.4 | — | ||||||||
| Equity-based compensation | 18.5 | 1.0 | 19.5 | 2.0 | ||||||||
| Acquisition expenses (2) | 1.2 | 3.2 | 3.2 | 7.8 | ||||||||
| IPO Transaction expenses (3) | 1.3 | — | 3.6 | — | ||||||||
| Adjusted EBITDA | $ | 155.2 | $ | 99.0 | $ | 264.3 | $ | 167.7 | ||||
| Adjusted EBITDA Margin: | ||||||||||||
| Net Sales | $ | 1,297.6 | $ | 955.9 | $ | 2,352.7 | $ | 1,798.0 | ||||
| Adjusted EBITDA / Net Sales | 12.0 | % | 10.4 | % | 11.2 | % | 9.3 | % | ||||
| (Amounts in millions, unaudited) | Twelve Months Ended | |||||||||||
| --- | --- | --- | --- | --- | ||||||||
| August 1, 2021 | May 2, 2021 | |||||||||||
| Net income attributable to Core & Main, Inc. | $ | 76.3 | ||||||||||
| Plus: net loss attributable to non-controlling interests | (17.0) | |||||||||||
| Net income | $ | 59.3 | $ | 67.9 | ||||||||
| Depreciation and amortization (1) | 140.2 | 141.1 | ||||||||||
| Provision for income taxes | 13.3 | 16.6 | ||||||||||
| Interest expense | 143.2 | 141.4 | ||||||||||
| EBITDA | $ | 356.0 | $ | 367.0 | ||||||||
| Loss on debt modification and extinguishment | 50.4 | — | ||||||||||
| Equity-based compensation | 21.6 | 4.1 | ||||||||||
| Acquisition expenses (2) | 7.3 | 9.3 | ||||||||||
| IPO Transaction expenses (3) | 3.6 | 2.3 | ||||||||||
| Adjusted EBITDA | $ | 438.9 | $ | 382.7 |
(1)Includes depreciation of certain assets which are reflected in “cost of sales” in our historical statement of operations.
(2)Represents expenses associated with acquisition activities, including transaction costs, post-acquisition employee retention bonuses, severance payments, expense recognition of purchase accounting fair value adjustments (excluding amortization) and contingent consideration adjustments.
(3)Represents costs related to the IPO Transaction.
The following table sets forth a calculation of Net Debt Leverage for the periods presented:
| (Amounts in millions, unaudited) | As Of | |||
|---|---|---|---|---|
| August 1, 2021 | May 2, 2021 | |||
| ABL Facility | $ | — | $ | — |
| Senior Term Loan due 2024 | — | 1,257.8 | ||
| 2024 Senior Unsecured Notes | — | 300.0 | ||
| 2025 Senior Unsecured Notes | — | 750.0 | ||
| Senior Term Loan due 2028 | 1,500.0 | — | ||
| Total Debt | $ | 1,500.0 | $ | 2,307.8 |
| Less: Cash & Cash Equivalents | (66.6) | (320.2) | ||
| Net Debt | $ | 1,433.4 | $ | 1,987.6 |
| Twelve Months Ended Adjusted EBITDA | 438.9 | 382.7 | ||
| Net Debt Leverage | 3.3x | 5.2x |
fiscal2021secondquarterf
Fiscal 2021 Second Quarter Financial Results
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Cautionary Statements 2 Cautionary Note Regarding Forward-Looking Statements This presentation and accompanying discussion may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or the negative versions of these words or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, our financial position, results of operations, cash flows, prospects and growth strategies. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be outside our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in subsequent periods. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this presentation. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation: declines, volatility and cyclicality in the U.S. residential and non-residential construction markets; slowdowns in municipal infrastructure spending and delays in appropriations of federal funds; price fluctuations in our product costs, particularly with respect to the commodity-based products that we sell; the spread of, and response to, COVID-19, and the inability to predict the ultimate impact on us; general business and economic conditions; risks involved with acquisitions and other strategic transactions, including our ability to identify, acquire, close or integrate acquisition targets successfully; the impact of seasonality and weather-related impacts, including natural disasters or similar extreme weather events; the fragmented and highly competitive markets in which we compete and consolidation within our industry; our ability to competitively bid for municipal contracts; the development of alternatives to distributors of our products in the supply chain; our ability to hire, engage and retain key personnel, including sales representatives, qualified branch, district and region managers and senior management; our ability to identify, develop and maintain relationships with a sufficient number of qualified suppliers and the potential that our exclusive or restrictive supplier distribution rights are terminated; the availability and cost of freight and energy, such as fuel; the ability of our customers to make payments on credit sales; our ability to identify and introduce new products and product lines effectively; our ability to manage our inventory effectively; costs and potential liabilities or obligations imposed by environmental, health and safety laws and requirements; regulatory change and the costs of compliance with regulation; exposure to product liability, construction defect and warranty claims and other litigation and legal proceedings; potential harm to our reputation; difficulties with or interruptions of our fabrication services; safety and labor risks associated with the distribution of our products as well as work stoppages and other disruptions due to labor disputes; impairment in the carrying value of goodwill, intangible assets or other long-lived assets; the domestic and international political environment with regard to trade relationships and tariffs, as well as difficulty sourcing products as a result of import constraints; our ability to operate our business consistently through highly dispersed locations across the United States; interruptions in the proper functioning of our IT systems, including from cybersecurity threats; risks associated with raising capital; our ability to continue our customer relationships with short-term contracts; changes in vendor rebates or other terms of our vendor agreements; risks associated with exporting our products internationally; our ability to renew or replace our existing leases on favorable terms or at all; our ability to maintain effective internal controls over financial reporting and remediate any material weaknesses; our substantial indebtedness and the potential that we may incur additional indebtedness; the limitations and restrictions in the agreements governing our indebtedness, the Second Amended and Restated Agreement of Limited Partnership of Core & Main Holdings, LP (“Holdings”) and the Tax Receivable Agreements (as defined in the prospectus (File No. 333-256382), dated July 22, 2021, filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on July 26, 2021 (the “Prospectus”)); increases in interest rates and the impact of transitioning from LIBOR as the benchmark rate in contracts; changes in our credit ratings and outlook; our ability to generate the significant amount of cash needed to service our indebtedness; our organizational structure, including our payment obligations under the Tax Receivable Agreements, which may be significant; the significant influence that Clayton, Dubilier & Rice, LLC (“CD&R”) has over us and potential conflicts between the interests of CD&R and other stockholders; and risks related to other factors described under “Risk Factors” in the Prospectus. These factors are not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, which speak only as of the date of this presentation. Use of Non-GAAP Financial Measures In addition to providing results that are determined in accordance with GAAP, we present EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Net Debt Leverage, all of 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 attributable to Core & Main, Inc., cash provided by or used in operating, investing or financing activities or other financial statement data presented in the financial statements as an indicator of our financial performance or liquidity. We use EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Net Debt Leverage to assess the operating results and effectiveness and efficiency of our business. 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. Reconciliations of such non-GAAP measures to the most directly comparable GAAP measure and calculations of the non-GAAP measures are set forth in the appendix of this presentation. No reconciliation of the estimated range for Adjusted EBITDA for fiscal 2021 is included herein because we are unable to quantify certain amounts that would be required to be included in net income attributable to Core & Main, Inc., the most directly comparable GAAP measure, without unreasonable efforts due to the high variability and difficulty to predict certain items excluded from Adjusted EBITDA. Consequently, we believe such reconciliation would imply a degree of precision that would be misleading to investors. In particular, the effects of acquisition expenses and associated taxes cannot be reasonably predicted in light of the inherent difficulty in quantifying such items on a forward-looking basis. We expect the variability of these excluded items may have an unpredictable, and potentially significant, impact on our future GAAP results. Presentation of Financial Information The accompanying unaudited financial information presents the results of operations, financial position and cash flows of Core & Main, Inc. (“Core & Main” or the “Company”) and its subsidiaries, which includes the consolidated financial information of Holdings and its consolidated subsidiary, Core & Main LP, as the legal entity that conducts the operations of the Company. Core & Main is the primary beneficiary and general partner of Holdings and has decision making authority that significantly affects the economic performance of the entity. As a result, Core & Main consolidates the consolidated financial statements of Holdings. All intercompany balances and transactions have been eliminated in consolidation. The Company records non-controlling interests related to Partnership Interests (as defined in the Prospectus) held by the Continuing Limited Partners (as defined in the Prospectus) in Holdings. 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. Both the three months ended August 1, 2021 and three months ended August 2, 2020 included 13 weeks, and both the six months ended August 1, 2021 and six months ended August 2, 2020 included 26 weeks. The current fiscal year ending January 30, 2022 (“fiscal 2021”) will include 52 weeks.
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Today’s Presenters 3 000 Steve LeClair Chief Executive Officer Mark Witkowski Chief Financial Officer Robyn Bradbury VP, Investor Relations and FP&A
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Agenda 4 1 Company Overview & Business Update 2 Financial Highlights 3 Q&A and Closing Remarks
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Company Overview 5 Key Business Highlights(1) Branch Footprint(3) End Markets(1) 45% 37% 18% Municipal Construction Non-Residential Construction Residential Construction 55% 45% Repair & Replace New Construction Est. End Market Mix Est. New Construction vs. Repair & Replace ▪ Leading U.S. specialty distributor of water, wastewater, storm drainage and fire protection products and related services ▪ ~$27 billion highly fragmented market(2) ▪ 1 of only 2 national distributors ▪ Over 285 branches in 48 states across the U.S.(3) ▪ 60,000+ customers, including municipalities, private water companies and professional contractors ▪ Offering approximately 200,000 SKUs ▪ 4,500+ suppliers (1) Operational metrics are as of the fiscal year ended January 31, 2021 unless otherwise noted. (2) Based on management estimates and independent 3rd party support. (3) As of September 14, 2021. Corporate HQ
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Product & Service Offering 6
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Why Core & Main 7 Value Proposition To Suppliers ▪ Broadens sales force / geographic reach ▪ Access to fragmented customer base ▪ Highly developed understanding of the market and growth opportunities ▪ Ability to drive adoption of new technologies ▪ Logistics of last mile delivery and customer support Value Proposition To Customers ▪ Broad product offering ▪ Deep knowledge of products and local specifications ▪ Consultative sales approach, with involvement in project design and value-added services ▪ Coordinated jobsite delivery ▪ Trusted source to validate new products and technologies ✓ Market leadership in fragmented market ✓ Ability to play multiple macro tailwinds ✓ Critical partner in “hourglass market” structure ✓ Differentiated value proposition ✓ Diversified revenue base ✓ Strong organic growth + efficient operating model ✓ Proven M&A platform in fragmented industry ✓ ESG commitment inherent in business
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Multiple Growth Drivers 8 Multiple Levers To Drive Profitable Growth And Generate Shareholder Value ✓ Strong underlying market fundamentals ✓ Grow share locally ✓ Underpenetrated markets and product categories ✓ Accelerate new product adoption ✓ Consolidate existing market positions ✓ Expansion into new markets ✓ Expansion into new and underpenetrated product categories ✓ Key talent and capability enhancement Acquisitions ✓ Private label & global sourcing ✓ Product margin expansion ✓ Category management optimization ✓ SG&A productivity and leverage Margin Expansion Organic Growth
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Proven Track Record Of Acquisitions 9 Dedicated & Highly Experienced M&A Team Aug’17 Core & Main Separation Oct’17 Jun’18 Jul’18 Aug’18 Jan’19 Feb’19 Jul’19 Oct’19 Oct’19 Mar’20 Aug’20 Why We Succeed Robust Target Pipeline Acquirer of Choice ✓ Reputation in the industry ✓ Entrepreneurial culture ✓ Investment in our people Mar’21 Aug’21 Aug’21 Significant Synergy Opportunities Diligence Execution and Integration Acquisition Focus ✓ Consolidate existing market positions ✓ Expand geographic footprint ✓ Product line expansion ✓ Expansion of presence in underpenetrated product categories ✓ Key talent and capability enhancement
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Recent Acquisitions 10 Geographic Expansion New Product Lines & Service Capabilities August 2021 L & M Bag and Supply Co.Pacific Pipe Co. Acquisition Date Annualized Net Sales(1) Strategic Rationale August 2021 ~$70M ~$60M Geography / State Number of Locations Product Line HI GA, TX, PA, NC, KY, CO 4 11 Waterworks Erosion Control & Geotextiles (1) Represents historical net sales for Pacific Pipe Co. and L & M Bag and Supply Co. for the fiscal year ended December 31, 2020.
© Core & Main All Rights Reserved. Confidential and Proprietary Information. ESG Characteristics 11 ▪ Ability to attract top talent and drive engagement is a competitive advantage and allows us to develop diverse industry leaders ▪ Award-winning training is woven into the fabric of our culture with teaching and mentorship led by technical experts and industry veterans ▪ Women’s Network led by high-performing women committed to mentoring others ▪ Diversity and Inclusion Advisory Council ensures a consistent voice and positive experience and wellbeing for all associates SocialEnvironmental ▪ Our 10-member Board of Directors includes 5 independent members ▪ 30% of the Board is diverse ▪ Our Code of Conduct applies to all of our officers, associates and directors ▪ Our Code of Financial Ethics applies to our senior financial officers ▪ Together with the Code of Conduct, the Code of Financial Ethics sets forth concrete guidelines based on our philosophy and culture Governance ▪ Preserving the Earth’s most valuable resource is at the core of our business and the need for water infrastructure maintenance and repair is growing ▪ Drive a local, regional and global impact on communities through sustainable infrastructure offerings ▪ Drive the adoption of solutions that advance water safety, conservation, and access ▪ Commitment to Earth-friendly practices
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Second Quarter Execution Highlights 12 ✓ Successfully executed an initial public offering of ~40 million shares of Class A common stock – Inclusive of the underwriters’ over-allotment option that was exercised subsequent to the end of the quarter – Generated gross proceeds of approximately $800 million ✓ Record Q2 Net Sales of nearly $1.3 billion, a 36% increase compared with the prior year period ✓ Net Income decreased 48% compared with the prior year period to $9.5 million – Includes $50.4 million loss on debt modification and extinguishment – Includes $17.2 million incremental equity-based compensation charge ✓ Adjusted EBITDA increased 57% compared with the prior year period to $155 million ✓ Navigating continued supply chain uncertainty, heavy demand, resource constraints and price inflation – Anticipate additional supply chain impacts as a result of Hurricane Ida ✓ Signed definitive agreements to acquire L & M Bag & Supply Co. and Pacific Pipe Co. – Closed on both acquisitions subsequent to the end of the quarter ✓ Closely monitoring the resurgence of COVID-19 across the U.S. – Prepared to reinstate COVID-19 protocols as necessary to keep our associates and customers safe ✓ Historic federal investment in U.S. infrastructure passed by the Senate – Well-positioned to capitalize on the potential tailwinds
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Agenda 13 1 Company Overview & Business Update 2 Financial Highlights 3 Q&A and Closing Remarks
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Second Quarter Operating Results 14 Net Sales Gross Profit Adjusted EBITDA(1) Adjusted Net Income(1) (1) Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Net Income are non-GAAP financial measures. Refer to the appendix of the presentation for a reconciliation to the nearest GAAP measure. $956 $1,298 Q2'20 Q2'21 $231 $325 Q2'20 Q2'21 $99 $155 Q2'20 Q2'21 % Margin 24.1% 25.1% 10.4% 12.0% ($ in Millions) ($ in Millions) ($ in Millions) +100 bps +57% +36% +41% +160 bps% Margin(1) $19 $61 Q2'20 Q2'21 ($ in Millions) +215%
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Net Debt Leverage & Liquidity 15 Net Debt Leverage Liquidity(2) ($ in Millions) ($ in Millions) (1) Net debt leverage represents gross consolidated debt net of cash & cash equivalents divided by Adjusted EBITDA for the last twelve months, which is a non-GAAP financial measure. Refer to the appendix of the presentation for a reconciliation to the nearest GAAP metric. (2) Represents excess availability under our asset-based revolving credit facility plus cash & cash equivalents. ABL Facility Available Cash & Cash Equivalents $1,988 $1,433 Q1'21 Q2'21 Net Debt Leverage(1) 5.2x 3.3x $1,002 $907 Q1'21 Q2'21
© Core & Main All Rights Reserved. Confidential and Proprietary Information. 2H’21 Outlook 16 ✓ Growth trends expected to remain positive – End market demand remains strong supported by healthy backlog and bidding activity – Continued traction against our growth initiatives expected to drive additional market share gains ✓ Supplier capacity and product availability constraints expected to continue or worsen – Prices expected to remain high in the near term ✓ Pacific Pipe and L & M Bag & Supply acquisitions will generate incremental sales growth ✓ Strong pipeline of additional M&A targets ✓ Gross margin initiatives expected to deliver year-over-year margin expansion, though tempered compared to the first half ✓ Fiscal 2021 Adjusted EBITDA expected to be in the range of $470 to $510 million, representing year-over-year growth of 37% to 49%
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Agenda 17 1 Company Overview & Business Update 2 Financial Highlights 3 Q&A and Closing Remarks
© Core & Main All Rights Reserved. Confidential and Proprietary Information. 18 Leading position with size and scale in a fragmented market1 Multiple levers for organic growth3 Proven ability to execute and integrate acquisitions4 Strong value proposition & pivotal role in shaping our industry2 Why Core & Main? Beneficial industry trends with secular growth drivers5 Resilient financial profile with efficient operating model6
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Appendix
© Core & Main All Rights Reserved. Confidential and Proprietary Information. Org Structure & Tax Receivable Agreements 20 Organizational Structure Tax Receivable Agreements (“TRA”) ▪ Class A & Class B common stock have the same voting rights ▪ Public ownership = 16.3% ▪ Non-controlling interests (represents Class B common stock ownership): – Reduces over time when partnership interests in Core & Main Holdings, LP and shares of Class B common stock are exchanged for shares of Class A common stock, or if more shares of Class A common stock are issued – Non-controlling interests result in adjustments to net income and equity within the financial statements Former Limited Partner TRA ▪ Relates to $104 million of tax benefits belonging to entities that merged with and into Core & Main, Inc. in connection with the Up-C structuring (tax basis step-up generated from LBO in 2017) ▪ Core & Main, Inc. will obtain 100% of these tax benefits, which will lower our cash tax rate ▪ TRA liabilities represent 85% of the tax benefits expected to be utilized ▪ TRA liabilities are payable within 120 days after the filing of the first Core & Main, Inc. tax return. First payment is expected in 2023 and annually thereafter for 15 years ▪ Q2’21 TRA liability balance: $88.6 million ▪ Relates to anticipated tax benefits totaling $827 million(1) as shares of Class B common stock and partnership interests in Core & Main Holdings, LP are exchanged for share of Class A common stock, resulting in additional tax basis step-up (estimate based on current tax rates and other factors) ▪ Core & Main will obtain 100% of the tax benefits, which will lower our future cash tax rate, and pay exchanging holders 85% of the amount of tax benefits realized ▪ TRA liability is only generated to the extent that associated tax savings are realized ▪ Q2’21 TRA liability balance: $0 ▪ Estimated TRA liability of $703 million not deemed a debt-like item due to the cash tax savings offset ▪ TRA payments will be made over the horizon that tax benefits are realized. This may be over 15 years from when exchanges occur ▪ Early terminations are possible in certain circumstances 160M 35% Continuing Limited Partner TRA Class A Common Stock Class B Common Stock 86M 65% 100%Total 246M % of TotalShare Count (1) Based on estimates and assuming the full exchange of all outstanding shares of Class B common stock and partnership interests in Core & Main Holdings, LP into shares of Class A common stock as of August 1, 2021. This calculation includes a $26.50 per share, the closing stock price on July 30, 2021, and a 25.1% combined federal and state tax rate.
© Core & Main All Rights Reserved. Confidential and Proprietary Information. 21 Adjusted EBITDA and Adjusted EBITDA Margin Adjusted Net Income ($ in Millions) ($ in Millions) (1) Includes depreciation of certain assets which are reflected in “cost of sales” in our historical statement of operations. (2) Represents expenses associated with acquisition activities, including transaction costs, post-acquisition employee retention bonuses, severance payments, expense recognition of purchase accounting fair value adjustments (excluding amortization) and contingent consideration adjustments. (3) Represents costs related to the initial public offering. Reconciliation of Non-GAAP Measures (1) Core & Main, Inc. is subject to U.S. federal, state and other income taxes with respect to its allocable share of any net taxable income of Core & Main Holdings, LP. The adjustment to the provision for income tax reflects the effective tax rates assuming Core & Main, Inc. owns 100% of Core & Main Holdings, LP. (2) Reflects the application of the annual effective tax rate after giving effect to the full exchange and elimination of the above adjustments. The effective income tax rate for adjusted net income was 28.0% for the three months ended August 1, 2021 and 33.0% for the three months ended August 2, 2020. Aug. 2, 2020 Aug. 1, 2021 Net income attributable to Core & Main, Inc. $26.5 Plus: Net loss attributable to non-controlling interests (17.0) Net income $18.1 $9.5 Depreciation and amortization (1) 35.3 34.4 Provision for income taxes 6.4 3.1 Interest expense 35.0 36.8 EBITDA $94.8 $83.8 Loss on debt modification & extinguishment - 50.4 Equity-based compensation 1.0 18.5 Acquisition expenses (2) 3.2 1.2 IPO transaction expenses (3) - 1.3 Adjusted EBITDA $99.0 $155.2 Adjusted EBITDA Margin: Net Sales $955.9 $1,297.6 Adjusted EBITDA / Net Sales 10.4% 12.0% Three Months Ended Aug. 2, 2020 Aug. 1, 2021 Net income attributable to Core & Main, Inc. $18.1 $26.5 Plus: Net loss attributable to non-controlling interests - (17.0) Pro forma income tax provision adjustment (1) (4.5) (2.4) Tax-effected net income $13.6 $7.1 Loss on debt modification & extinguishment - 50.4 Equity-based compensation 1.0 18.5 Acquisition expenses 3.2 1.2 IPO transaction expenses - 1.3 Tax adjustment (2) 1.4 (18.0) Adjusted net income $19.2 $60.5 Three Months Ended
© Core & Main All Rights Reserved. Confidential and Proprietary Information. 22 Adjusted EBITDA Net Debt Leverage ($ in Millions) ($ in Millions) Reconciliation of Non-GAAP Measures May 2, 2021 Aug. 1, 2021 Net income attributable to Core & Main, Inc. $76.3 Plus: Net loss attributable to non-controlling interests (17.0) Net income $67.9 $59.3 Depreciation and amortization (1) 141.1 140.2 Provision for income taxes 16.6 13.3 Interest expense 141.4 143.2 EBITDA $367.0 $356.0 Loss on debt modification & extinguishment - 50.4 Equity-based compensation 4.1 21.6 Acquisition expenses (2) 9.3 7.3 IPO transaction expenses (3) 2.3 3.6 Adjusted EBITDA $382.7 $438.9 Twelve Months Ended May 2, 2021 Aug. 1, 2021 ABL Facility - - Senior Term Loan due 2024 1,257.8 - 2024 Senior Unsecured Notes 300.0 - 2025 Senior Unsecured Notes 750.0 - Senior Term Loan due 2028 - 1,500.0 Total Debt $2,307.8 $1,500.0 Less: Cash & Cash Equivalents (320.2) (66.6) Net Debt $1,987.6 $1,433.4 Twelve Months Ended Adjusted EBITDA 382.7 438.9 Net Debt Leverage 5.2x 3.3x As Of (1) Includes depreciation of certain assets which are reflected in “cost of sales” in our historical statement of operations. (2) Represents expenses associated with acquisition activities, including transaction costs, post-acquisition employee retention bonuses, severance payments, expense recognition of purchase accounting fair value adjustments (excluding amortization) and contingent consideration adjustments. (3) Represents costs related to the initial public offering.