Core & Main Announces Fiscal 2023 First Quarter Results
Fiscal 2023 First Quarter Highlights (Compared with Fiscal 2022 First Quarter)
-
Net sales decreased
1.5% to but increased$1,574 million 49.2% compared with the first quarter of fiscal 2021
-
Gross profit margin increased 160 basis points to
27.9%
-
Net income decreased
2.9% to$133 million
-
Adjusted EBITDA (Non-GAAP) increased
0.5% to$220 million
-
Adjusted EBITDA margin (Non-GAAP) increased 30 basis points to
14.0%
-
Net cash provided by operating activities was
compared with a$120 million outflow in the prior year$37 million
- Net Debt Leverage (Non-GAAP) was 1.7x as of April 30, 2023
-
Executed a
share repurchase concurrent with a 5-million share secondary offering, reducing diluted shares outstanding by 15-million$332 million
- Closed three acquisitions during the quarter and signed a definitive agreement to acquire another business subsequent to the quarter: Landscape & Construction Supplies, UPSCO, Midwest Pipe Supply and Foster Supply
-
Opened new locations in
San Diego, California andLincoln, Nebraska
-
Raising expectation for fiscal 2023 Adjusted EBITDA to be in the range of
to$820 $880 million
"First quarter net sales finished in line with our expectations, reflecting a return to more typical seasonality for the first quarter," said Steve LeClair, chief executive officer of Core & Main. "We had an excellent quarter from a profitability standpoint, with Adjusted EBITDA margin increasing 30 basis points to a new first quarter record of
"We made several growth investments during the quarter to expand our geographic footprint and make our products and expertise more accessible nationwide. Our record first quarter operating cash flow also contributed to the liquidity to fund a
Three Months Ended April 30, 2023
Net sales for the three months ended April 30, 2023 decreased
Gross profit for the three months ended April 30, 2023 increased
Selling, general and administrative (“SG&A”) expenses for the three months ended April 30, 2023 increased
Net income for the three months ended April 30, 2023 decreased
The Class A common stock basic earnings per share and diluted earnings per share for the three months ended April 30, 2023 were
Adjusted EBITDA for the three months ended April 30, 2023 increased
Liquidity and Capital Resources
Net cash provided by operating activities for the three months ended April 30, 2023 was
Net debt, calculated as gross consolidated debt net of cash and cash equivalents, as of April 30, 2023 was
As of April 30, 2023, our cash and cash equivalents totaled
As of April 30, 2023, we had
Fiscal 2023 Outlook
"Demand began improving in late April with the arrival of spring in the North and improved weather conditions along the West Coast," LeClair continued. "We expect net sales for the year to be slightly higher than fiscal 2022, and we are pleased that our end markets have remained resilient. Given our recent acquisitions and strong margin performance in the first quarter, we are raising our expectations for fiscal 2023 net sales and Adjusted EBITDA. We now expect net sales to be in the range of
Conference Call & Webcast Information
Core & Main will host a conference call and webcast on June 6, 2023 at 8:30 a.m. EDT to discuss the Company's financial results. The live webcast will be accessible via the events calendar at ir.coreandmain.com. The conference call may also be accessed by dialing (833) 470-1428 or +1 (404) 975-4839 (international). The passcode for the live call is 913151. 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 immediately following the call. A slide presentation highlighting Core & Main’s results will also be made available on the Investor Relations section of Core & Main’s website prior to the call.
About Core & Main
Based in
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
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.
CORE & MAIN, INC. |
||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||
Amounts in millions (except share and per share data), unaudited |
||||||
|
Three Months Ended |
|||||
|
April 30, 2023 |
|
May 1, 2022 |
|||
|
|
|
|
|||
Net sales |
$ |
1,574 |
|
$ |
1,598 |
|
Cost of sales |
|
1,135 |
|
|
1,177 |
|
Gross profit |
|
439 |
|
|
421 |
|
Operating expenses: |
|
|
|
|||
Selling, general and administrative |
|
223 |
|
|
206 |
|
Depreciation and amortization |
|
35 |
|
|
35 |
|
Total operating expenses |
|
258 |
|
|
241 |
|
Operating income |
|
181 |
|
|
180 |
|
Interest expense |
|
17 |
|
|
13 |
|
Income before provision for income taxes |
|
164 |
|
|
167 |
|
Provision for income taxes |
|
31 |
|
|
30 |
|
Net income |
|
133 |
|
|
137 |
|
Less: net income attributable to non-controlling interests |
|
47 |
|
|
51 |
|
Net income attributable to Core & Main, Inc. |
$ |
86 |
|
$ |
86 |
|
|
|
|
|
|||
Earnings per share |
|
|
|
|||
Basic |
$ |
0.50 |
|
$ |
0.51 |
|
Diluted |
$ |
0.50 |
|
$ |
0.50 |
|
Number of shares used in computing EPS |
|
|
|
|||
Basic |
|
171,597,317 |
|
|
167,536,662 |
|
Diluted |
|
243,716,764 |
|
|
246,145,536 |
CORE & MAIN, INC. |
||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
Amounts in millions (except share and per share data), unaudited |
||||||
|
April 30, 2023 |
|
January 29, 2023 |
|||
ASSETS |
|
|
|
|||
Current assets: |
|
|
|
|||
Cash and cash equivalents |
$ |
1 |
|
$ |
177 |
|
Receivables, net of allowance for credit losses of |
|
1,098 |
|
|
955 |
|
Inventories |
|
1,030 |
|
|
1,047 |
|
Prepaid expenses and other current assets |
|
37 |
|
|
32 |
|
Total current assets |
|
2,166 |
|
|
2,211 |
|
Property, plant and equipment, net |
|
121 |
|
|
105 |
|
Operating lease right-of-use assets |
|
178 |
|
|
175 |
|
Intangible assets, net |
|
798 |
|
|
795 |
|
Goodwill |
|
1,536 |
|
|
1,535 |
|
Deferred income taxes |
|
49 |
|
|
— |
|
Other assets |
|
81 |
|
|
88 |
|
Total assets |
$ |
4,929 |
|
$ |
4,909 |
|
|
|
|
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|||
Current liabilities: |
|
|
|
|||
Current maturities of long-term debt |
$ |
15 |
|
$ |
15 |
|
Accounts payable |
|
581 |
|
|
479 |
|
Accrued compensation and benefits |
|
60 |
|
|
123 |
|
Current operating lease liabilities |
|
55 |
|
|
54 |
|
Other current liabilities |
|
87 |
|
|
55 |
|
Total current liabilities |
|
798 |
|
|
726 |
|
Long-term debt |
|
1,571 |
|
|
1,444 |
|
Non-current operating lease liabilities |
|
123 |
|
|
121 |
|
Deferred income taxes |
|
40 |
|
|
9 |
|
Payable to related parties pursuant to Tax Receivable Agreements |
|
183 |
|
|
180 |
|
Other liabilities |
|
22 |
|
|
19 |
|
Total liabilities |
|
2,737 |
|
|
2,499 |
|
Commitments and contingencies |
|
|
|
|||
Class A common stock, par value |
|
2 |
|
|
2 |
|
Class B common stock, par value |
|
1 |
|
|
1 |
|
Additional paid-in capital |
|
1,181 |
|
|
1,241 |
|
Retained earnings |
|
403 |
|
|
458 |
|
Accumulated other comprehensive income |
|
41 |
|
|
45 |
|
Total stockholders’ equity attributable to Core & Main, Inc. |
|
1,628 |
|
|
1,747 |
|
Non-controlling interests |
|
564 |
|
|
663 |
|
Total stockholders’ equity |
|
2,192 |
|
|
2,410 |
|
Total liabilities and stockholders’ equity |
$ |
4,929 |
|
$ |
4,909 |
CORE & MAIN, INC. |
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
Amounts in millions, unaudited |
||||||||
|
Three Months Ended |
|||||||
|
April 30, 2023 |
|
May 1, 2022 |
|||||
Cash Flows From Operating Activities: |
|
|
|
|||||
Net income |
$ |
133 |
|
|
$ |
137 |
|
|
Adjustments to reconcile net cash from operating activities: |
|
|
|
|||||
Depreciation and amortization |
|
37 |
|
|
|
36 |
|
|
Equity-based compensation expense |
|
2 |
|
|
|
3 |
|
|
Other |
|
— |
|
|
|
(2 |
) |
|
Changes in assets and liabilities: |
|
|
|
|||||
(Increase) decrease in receivables |
|
(135 |
) |
|
|
(227 |
) |
|
(Increase) decrease in inventories |
|
35 |
|
|
|
(207 |
) |
|
(Increase) decrease in other assets |
|
(4 |
) |
|
|
(1 |
) |
|
Increase (decrease) in accounts payable |
|
98 |
|
|
|
251 |
|
|
Increase (decrease) in accrued liabilities |
|
(46 |
) |
|
|
(28 |
) |
|
Increase (decrease) in other liabilities |
|
— |
|
|
|
1 |
|
|
Net cash provided by (used in) operating activities |
|
120 |
|
|
|
(37 |
) |
|
Cash Flows From Investing Activities: |
|
|
|
|||||
Capital expenditures |
|
(10 |
) |
|
|
(6 |
) |
|
Acquisitions of businesses, net of cash acquired |
|
(64 |
) |
|
|
(6 |
) |
|
Proceeds from the sale of property and equipment |
|
— |
|
|
|
1 |
|
|
Net cash used in investing activities |
|
(74 |
) |
|
|
(11 |
) |
|
Cash Flows From Financing Activities: |
|
|
|
|||||
Repurchase and retirement of partnership interests |
|
(332 |
) |
|
|
— |
|
|
Distributions to non-controlling interest holders |
|
(10 |
) |
|
|
(5 |
) |
|
Payments pursuant to Tax Receivable Agreements |
|
(5 |
) |
|
|
— |
|
|
Payments for withholding tax on equity compensation plans |
|
(1 |
) |
|
|
— |
|
|
Borrowings on asset-based revolving credit facility |
|
130 |
|
|
|
57 |
|
|
Repayments of long-term debt |
|
(4 |
) |
|
|
(4 |
) |
|
Net cash (used in) provided by financing activities |
|
(222 |
) |
|
|
48 |
|
|
Decrease in cash and cash equivalents |
|
(176 |
) |
|
|
— |
|
|
Cash and cash equivalents at the beginning of the period |
|
177 |
|
|
|
1 |
|
|
Cash and cash equivalents at the end of the period |
$ |
1 |
|
|
$ |
1 |
|
|
|
|
|
|
|||||
Cash paid for interest (excluding effects of interest rate swap) |
$ |
28 |
|
|
$ |
12 |
|
|
Cash paid for taxes |
|
27 |
|
|
|
28 |
|
Non-GAAP Financial Measures
In addition to providing results that are determined in accordance with
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 (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. 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, 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 or Adjusted EBITDA margin for fiscal 2023 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 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 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, as well as a calculation of Adjusted EBITDA margin for the periods presented:
(Amounts in millions) |
Three Months Ended |
|
Twelve Months Ended |
|||||||||||||
|
April 30, 2023 |
|
May 1, 2022 |
|
April 30, 2023 |
|
May 1, 2022 |
|||||||||
Net income attributable to Core & Main, Inc. |
$ |
86 |
|
|
$ |
86 |
|
|
$ |
366 |
|
|
$ |
225 |
|
|
Plus: net income attributable to non-controlling interest |
|
47 |
|
|
|
51 |
|
|
|
211 |
|
|
|
110 |
|
|
Net income |
|
133 |
|
|
|
137 |
|
|
|
577 |
|
|
|
335 |
|
|
Depreciation and amortization (1) |
|
36 |
|
|
|
36 |
|
|
|
143 |
|
|
|
143 |
|
|
Provision for income taxes |
|
31 |
|
|
|
30 |
|
|
|
129 |
|
|
|
75 |
|
|
Interest expense |
|
17 |
|
|
|
13 |
|
|
|
70 |
|
|
|
75 |
|
|
EBITDA |
$ |
217 |
|
|
$ |
216 |
|
|
$ |
919 |
|
|
$ |
628 |
|
|
Loss on debt modification and extinguishment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
51 |
|
|
Equity-based compensation |
|
2 |
|
|
|
3 |
|
|
|
10 |
|
|
|
27 |
|
|
Acquisition expenses (2) |
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
5 |
|
|
Offering expenses (3) |
|
1 |
|
|
|
— |
|
|
|
2 |
|
|
|
3 |
|
|
Adjusted EBITDA |
$ |
220 |
|
|
$ |
219 |
|
|
$ |
936 |
|
|
$ |
714 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA Margin: |
|
|
|
|
|
|
|
|||||||||
Net Sales |
$ |
1,574 |
|
|
$ |
1,598 |
|
|
$ |
6,627 |
|
|
$ |
5,547 |
|
|
Adjusted EBITDA / Net Sales |
|
14.0 |
% |
|
|
13.7 |
% |
|
|
14.1 |
% |
|
|
12.9 |
% |
(1) |
Includes depreciation of certain assets which is 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, expense recognition of purchase accounting fair value adjustments (excluding amortization) and contingent consideration adjustments. |
|
|
||
(3) |
Represents costs related to secondary offerings reflected in SG&A expenses in our Statement of Operations. |
The following table sets forth a calculation of Net Debt Leverage for the periods presented:
(Amounts in millions) |
|
As of |
||||||
|
|
April 30, 2023 |
|
May 1, 2022 |
||||
Senior ABL Credit Facility due July 2026 |
|
$ |
130 |
|
|
$ |
57 |
|
Senior Term Loan due July 2028 |
|
|
1,474 |
|
|
|
1,489 |
|
Total Debt |
|
|
1,604 |
|
|
|
1,546 |
|
Less: Cash & Cash Equivalents |
|
|
(1 |
) |
|
|
(1 |
) |
Net Debt |
|
$ |
1,603 |
|
|
$ |
1,545 |
|
Twelve Months Ended Adjusted EBITDA |
|
|
936 |
|
|
|
714 |
|
Net Debt Leverage |
|
1.7x |
|
2.2x |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230605005724/en/
Investor Relations:
Robyn Bradbury, 314-995-9116
InvestorRelations@CoreandMain.com
Source: Core & Main, Inc.