UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
For the quarterly period endedOctober 31, 2024
For the transition period from to
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-42200
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
+1 -757 -874-7795
| (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) | ||||||||
Securities registered pursuant to Section 12(b) of the Act: | ||||||||
| Title of Each Class: | Trading Symbol: | Name of Each Exchange on Which Registered: | ||||||
| London Stock Exchange | ||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of December 3, 2024, the number of outstanding shares of common stock was 199,945,642 .
TABLE OF CONTENTS
| PAGE | |||||
CERTAIN TERMS
Unless otherwise specified or the context otherwise requires, the terms “Company,” “Ferguson,” “we,” “us,” and “our” and other similar terms used in this Quarterly Report on Form 10-Q (this “Quarterly Report”) refer to Ferguson Enterprises Inc. and its consolidated subsidiaries. Except as otherwise specified or the context otherwise requires, references to years indicate our fiscal year ended July 31 of the respective year. For example, references to “fiscal 2025” or similar references refer to the fiscal year ended July 31, 2025. References to the “Merger” refer to the merger transaction that resulted in (i) Ferguson plc becoming a direct, wholly owned subsidiary of Ferguson Enterprises Inc., (ii) the shareholders of Ferguson plc at the designated record time for the Merger no longer holding ordinary shares of Ferguson plc but instead holding shares of common stock of Ferguson Enterprises Inc., and (iii) Ferguson Enterprises Inc. becoming the successor issuer to Ferguson plc, which was renamed “Ferguson (Jersey) Limited” and converted into a private company.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included in this Quarterly Report is forward-looking, including within the meaning of the Private Securities Litigation Reform Act of 1995, and involves risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied by forward-looking statements. Forward-looking statements cover all matters which are not historical facts and include, without limitation, statements or guidance regarding or relating to our future financial position, results of operations and growth, plans and objectives for the future including our capabilities and priorities, risks associated with changes in global and regional economic, market and political conditions, ability to manage supply chain challenges, ability to manage the impact of product price fluctuations, our financial condition and liquidity, legal or regulatory changes, and other statements concerning the success of our business and strategies.
Forward-looking statements can be identified by the use of forward-looking terminology, including terms such as “believes,” “estimates,” “anticipates,” “expects,” “forecasts,” “intends,” “continues,” “plans,” “projects,” “goal,” “target,” “aim,” “may,” “will,” “would,” “could” or “should” or, in each case, their negative or other variations or comparable terminology and other similar references to future periods. Forward-looking statements speak only as of the date on which they are made. They are not assurances of future performance and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Therefore, you should not place undue reliance on any of these forward-looking statements. Although we believe that the forward-looking statements contained in this Quarterly Report are based on reasonable assumptions, you should be aware that many factors could cause actual results to differ materially from those contained in such forward-looking statements, including but not limited to:
•weakness in the economy, market trends, uncertainty and other conditions in the markets in which we operate, and other factors beyond our control, including disruption in the financial markets and any macroeconomic or other consequences of political unrest, disputes or war;
•failure to rapidly identify or effectively respond to direct and/or end customers’ wants, expectations or trends, including costs and potential problems associated with new or upgraded information technology systems or our ability to timely deploy new omni-channel capabilities;
•decreased demand for our products as a result of operating in highly competitive industries and the impact of declines in the residential and non‐residential markets;
•changes in competition, including as a result of market consolidation or competitors responding more quickly to emerging technologies (such as generative artificial intelligence (“AI”));
•failure of a key information technology system or process as well as exposure to fraud or theft resulting from payment‐related risks;
•privacy and protection of sensitive data failures, including failures due to data corruption, cybersecurity incidents or network security breaches;
•ineffectiveness of or disruption in our domestic or international supply chain or our fulfillment network, including delays in inventory availability at our distribution facilities and branches, increased delivery costs or lack of availability;
•failure to effectively manage and protect our facilities and inventory or to prevent personal injury to customers, suppliers or associates, including as a result of workplace violence;
1
•unsuccessful execution of our operational strategies;
•failure to attract, retain and motivate key associates;
•exposure of associates, contractors, customers, suppliers and other individuals to health and safety risks;
•risks associated with acquisitions, partnerships, joint ventures and other business combinations, dispositions or strategic transactions;
•regulatory, product liability and reputational risks and the failure to achieve and maintain a high level of product and service quality or comply with responsible sourcing standards;
•inability to renew leases on favorable terms or at all, as well as any remaining obligations under a lease when we close a facility;
•changes in, interpretations of, or compliance with tax laws;
•our indebtedness and changes in our credit ratings and outlook;
•fluctuations in product prices (e.g., commodity-priced materials, inflation/deflation) and foreign currency;
•funding risks related to our defined benefit pension plans;
•legal proceedings in the course of our business as well as failure to comply with domestic and foreign laws, regulations and standards, as those laws, regulations and standards or interpretations and enforcement thereof may change, or the occurrence of unforeseen developments such as litigation, investigations, governmental proceedings or enforcement actions;
•our failure to comply with the obligations associated with being a public company listed on the New York Stock Exchange and London Stock Exchange and the costs associated therewith;
•the costs and risk exposure relating to environmental, social and governance (“ESG”) matters, including sustainability issues, regulatory or legal requirements, and disparate stakeholder expectations;
•adverse impacts caused by a public health crisis; and
•other risks and uncertainties set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on September 25, 2024 (the “Annual Report”) and in other filings we make with the SEC in the future.
Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Other than in accordance with our legal or regulatory obligations, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
2
Part I - FINANCIAL INFORMATION
Item 1.Financial Statements
Ferguson Enterprises Inc.
Condensed Consolidated Statements of Earnings
(unaudited)
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions, except per share amounts) | 2024 | 2023 | |||||||||
| Net sales | $ | $ | |||||||||
| Cost of sales | ( | ( | |||||||||
| Gross profit | |||||||||||
| Selling, general and administrative expenses | ( | ( | |||||||||
| Depreciation and amortization | ( | ( | |||||||||
| Operating profit | |||||||||||
| Interest expense, net | ( | ( | |||||||||
| Other income (expense), net | ( | ||||||||||
| Income before income taxes | |||||||||||
| Provision for income taxes | ( | ( | |||||||||
| Net income | $ | $ | |||||||||
| Earnings per share - Basic | $ | $ | |||||||||
| Earnings per share - Diluted | $ | $ | |||||||||
| Weighted average number of shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
3
Ferguson Enterprises Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments | ( | ( | |||||||||
Pension adjustments, net of tax impacts of ($ | |||||||||||
| Total other comprehensive loss, net of tax | ( | ( | |||||||||
| Comprehensive income | $ | $ | |||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
4
Ferguson Enterprises Inc.
Condensed Consolidated Balance Sheets
(unaudited)
| As of | |||||||||||
| (In millions, except share amounts) | October 31, 2024 | July 31, 2024 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, less allowances of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid and other current assets | |||||||||||
| Assets held for sale | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Deferred income taxes, net | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders’ equity | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Short-term debt | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Long-term portion of operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
Ordinary shares, par value | |||||||||||
Common stock, par value $ | |||||||||||
| Paid-in capital | |||||||||||
| Retained earnings | |||||||||||
Treasury shares, | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
5
Ferguson Enterprises Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
| Three months ended | |||||||||||
| (In millions, except per share data) | October 31, 2024 | October 31, 2023 | |||||||||
Ordinary shares: | |||||||||||
| Balance at beginning of period | $ | $ | |||||||||
| Treasury shares canceled | ( | ||||||||||
| Ordinary shares canceled | ( | ||||||||||
| Balance at end of period | |||||||||||
| Common stock: | |||||||||||
| Balance at beginning of period | |||||||||||
| Common stock issued | |||||||||||
| Balance at end of period | |||||||||||
| Paid-in capital: | |||||||||||
| Balance at beginning of period | |||||||||||
| Share-based compensation expense | |||||||||||
| Ordinary shares canceled | |||||||||||
| Balance at end of period | |||||||||||
| Retained earnings: | |||||||||||
| Balance at beginning of period | |||||||||||
| Treasury shares canceled | ( | ||||||||||
| Net earnings | |||||||||||
Cash dividends declared of $ | ( | ( | |||||||||
| Shares issued under employee stock plans | ( | ( | |||||||||
| Balance at end of period | |||||||||||
| Treasury shares: | |||||||||||
| Balance at beginning of period | ( | ( | |||||||||
| Treasury shares canceled | |||||||||||
| Share repurchases | ( | ( | |||||||||
| Shares issued under employee share plans, net | |||||||||||
| Balance at end of period | ( | ( | |||||||||
| Employee Benefit Trust: | |||||||||||
| Balance at beginning of period | ( | ||||||||||
| Shares issued | |||||||||||
| Balance at end of period | ( | ||||||||||
| Accumulated other comprehensive loss: | |||||||||||
| Balance at beginning of period | ( | ( | |||||||||
| Other comprehensive income | ( | ( | |||||||||
| Balance at end of period | ( | ( | |||||||||
| Total stockholder's equity | $ | $ | |||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
6
Ferguson Enterprises Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
| (In millions) | Three months ended | ||||||||||
| October 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation | |||||||||||
| Changes in deferred income taxes | ( | ( | |||||||||
| Changes in inventories | ( | ( | |||||||||
| Changes in receivables and other assets | ( | ( | |||||||||
| Changes in accounts payable and other liabilities | ( | ||||||||||
| Changes in income taxes payable | |||||||||||
| Other operating activities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of businesses acquired, net of cash acquired | ( | ( | |||||||||
| Capital expenditures | ( | ( | |||||||||
| Other investing activities | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Purchase of treasury shares | ( | ( | |||||||||
| Repayments of debt | ( | ( | |||||||||
| Proceeds from debt | |||||||||||
| Change in bank overdrafts | |||||||||||
| Cash dividends | ( | ||||||||||
| Other financing activities | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Change in cash, cash equivalents and restricted cash | |||||||||||
| Effects of exchange rate changes | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| Supplemental Disclosures: | |||||||||||
| Cash paid for income taxes, net | $ | $ | |||||||||
| Cash paid for interest | |||||||||||
| Accrued capital expenditures | |||||||||||
| Accrued dividends | |||||||||||
See accompanying Notes to the Condensed Consolidated Financial Statements.
7
Ferguson Enterprises Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Note 1: Summary of significant accounting policies
Background
Ferguson Enterprises, Inc. (including subsidiaries, the “Company”) (NYSE: FERG; LSE: FERG) is a Delaware corporation. Ferguson is a value-added distributor serving the specialized professional in the residential and non-residential North American construction market. We help make our customers’ complex projects simple, successful and sustainable by providing expertise and a wide range of products and services from plumbing, HVAC, appliances, and lighting to PVF, water and wastewater solutions, and more. We sell through a common network of distribution centers, branches, counter service and specialist sales associates, showroom consultants and e-commerce channels. The corporate headquarters of the Company is located at 751 Lakefront Commons, Newport News, Virginia 23606.
Effective on August 1, 2024 (the “Effective Date”), the Company established a new corporate structure to domicile our ultimate parent company in the United States by completing a merger between entities under common control (the “Merger”). The Merger resulted in (i) Ferguson plc (the “predecessor”) becoming a direct, wholly owned subsidiary of Ferguson Enterprises Inc. (the “successor issuer”) and (ii) the shareholders of Ferguson plc at the designated record time for the Merger no longer holding ordinary shares of Ferguson plc but instead holding shares of common stock of Ferguson Enterprises Inc.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements and notes to the condensed consolidated financial statements are presented in accordance with the rules and regulations of the SEC and accounting principles generally accepted in the United States of America (“U.S. GAAP”), but do not include all disclosures normally required in annual consolidated financial statements. In the opinion of management, the unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented.
In light of the Merger, the July 31, 2024 condensed consolidated balance sheet was derived from the audited financial statements of the predecessor. For the three months ended October 31, 2023, the unaudited condensed consolidated statements of earnings, comprehensive income, stockholder’s equity, and cash flows represent the activities of the predecessor. The successor issuer had no operating activities prior to the Effective Date.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report. The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.
Use of estimates
The preparation of the Company's interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting certain reported amounts in the interim condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits with banks with original maturities of three months or less and overdrafts to the extent there is a legal right of offset and practice of net settlement with cash balances. Cash equivalents also include amounts due from third-party credit card processors as they are both short-term and highly liquid in nature and are typically converted to cash within a few days of the sales transaction.
Restricted cash primarily consists of deferred consideration for business combinations, subject to various settlement agreements. These amounts are recorded in prepaid and other current assets and other non-current assets in the Company’s condensed consolidated balance sheets.
8
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows.
| As of | |||||||||||
| (In millions) | October 31, 2024 | July 31, 2024 | |||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
Supplier finance program
In October 2023, the Company began a supplier financing program with a third party wherein certain shipping and logistics providers in the United States can opt to receive early payment at a nominal discount. The Company’s obligations to suppliers are unchanged and payment terms are consistent with the Company’s normal payment terms. All outstanding payables related to the supplier finance program are classified within accounts payable within our condensed consolidated balance sheets and were $44 million and $46 million as of October 31, 2024 and July 31, 2024, respectively.
Recently issued accounting standard updates (“ASU”)
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions, including information about purchases of inventory, employee compensation, depreciation, and intangible asset amortization for each relevant expense caption on the face of the income statement. This ASU is expected to be effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The ASU can be adopted either prospectively or retrospectively. The Company is currently evaluating the ASU to determine the impact on its disclosures.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in this ASU are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company is currently evaluating the ASU to determine the impact on its disclosures.
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU expands public entities’ required segment disclosures, including disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets that are currently not required. This ASU is effective for fiscal years beginning after December 15, 2023, and interim reporting periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The impact to the Company’s consolidated financial statements and related disclosures is not expected to be material.
Recent accounting pronouncements pending adoption that are not discussed above are either not applicable, or will not have, or are not expected to have, a material impact on our consolidated financial condition, results of operations or cash flows.
9
Note 2: Revenue and segment information
The Company reports its financial results of operations on a geographical basis in the following two reportable segments: United States and Canada. Each segment generally derives its revenues in the same manner. The Company uses adjusted operating profit as its measure of segment profit. A reporting segment’s adjusted operating profit is defined as profit before tax, excluding central and other costs, restructuring costs, amortization of acquired intangible assets, net interest expenses, as well as other items typically recorded in net other (expense) income such as (loss)/gain on disposal of businesses, pension plan changes/closure costs and amounts recorded in connection with the Company’s interests in investees. Certain income and expenses are not allocated to the Company’s segments and, thus, the information that management uses to make operating decisions and assess performance does not reflect such amounts.
Segment results were as follows:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net sales: | |||||||||||
| United States | $ | $ | |||||||||
| Canada | |||||||||||
| Total net sales | $ | $ | |||||||||
| Adjusted operating profit: | |||||||||||
| United States | $ | $ | |||||||||
| Canada | |||||||||||
| Central and other costs | ( | ( | |||||||||
Corporate restructurings(1) | ( | ||||||||||
| Amortization of acquired intangible assets | ( | ( | |||||||||
| Interest expense, net | ( | ( | |||||||||
| Other income (expense), net | ( | ||||||||||
| Income before income taxes | $ | $ | |||||||||
(1)For the three months ended October 31, 2024, corporate restructurings primarily related to incremental costs in connection with transition activities following the establishment of our parent company’s domicile in the United States.
Our products are delivered through a common network of distribution centers, branches, counter service and specialist sales associates, showroom consultants and e-commerce channels. The Company recognizes revenue when a sales arrangement with a customer exists (e.g., contract, purchase orders, others), the transaction price is fixed or determinable, collection of consideration is probable and the Company has satisfied its performance obligation per the sales arrangement. The majority of the Company’s revenue originates from sales arrangements with a single performance obligation to deliver products, whereby the performance obligations are satisfied when control of the product is transferred to the customer which is the point the product is delivered to, or collected by, the customer.
10
The Company determined that disaggregating net sales by end market at the segment level achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows may be impacted by economic factors. The disaggregated net sales by end market are as follows:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| United States: | |||||||||||
| Residential | $ | $ | |||||||||
| Non-residential: | |||||||||||
| Commercial | |||||||||||
| Civil/Infrastructure | |||||||||||
| Industrial | |||||||||||
| Total Non-residential | |||||||||||
| Total United States | |||||||||||
| Canada | |||||||||||
| Total net sales | $ | $ | |||||||||
No sales to an individual customer accounted for more than 10% of net sales during any of the periods presented.
Note 3: Weighted average shares
The following table shows the calculation of diluted shares:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Weighted average number of shares outstanding: | |||||||||||
| Basic weighted average shares | |||||||||||
Effect of dilutive shares(1) | |||||||||||
| Diluted weighted average shares | |||||||||||
| Excluded anti-dilutive shares | |||||||||||
(1)Represents the potential dilutive impact of share-based awards.
11
Note 4: Income tax
As of August 1, 2024, Ferguson is a U.S. corporation. The provision for income taxes for fiscal 2025 consists of provisions for the U.S. plus non-U.S. tax rate differentials with respect to other locations in which Ferguson’s operations are based. For fiscal years prior to 2025, Ferguson’s provision for income taxes consists of provisions for the U.K. plus non-U.K. tax rate differentials with respect to other locations in which the predecessor operated. Accordingly, the consolidated income tax rate is a composite rate reflecting earnings in various locations and the applicable tax rates.
The Company’s tax provision for each period presented was calculated using an estimated annual tax rate, adjusted for discrete items occurring during the applicable period to arrive at an effective tax rate. The effective income tax rates for the relevant periods were as follows:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Effective tax rate | % | % | |||||||||
During the three months ended October 31, 2024, there were no material changes to the Company’s unrecognized tax benefits when compared to those items disclosed in the Annual Report.
Note 5: Debt
The Company’s debt obligations consisted of the following:
| As of | |||||||||||
| (In millions) | October 31, 2024 | July 31, 2024 | |||||||||
| Variable-rate debt: | |||||||||||
| Receivables Facility | $ | $ | |||||||||
| Term Loan | |||||||||||
| Fixed-rate debt: | |||||||||||
| Private placement notes | |||||||||||
| Unsecured senior notes, due April 2027 - April 2032 | |||||||||||
2034 Senior Notes, | |||||||||||
| Subtotal | $ | $ | |||||||||
| Less: current maturities of debt | ( | ( | |||||||||
| Unamortized discounts and debt issuance costs | ( | ( | |||||||||
| Interest rate swap - fair value adjustment | ( | ( | |||||||||
| Total long-term debt | $ | $ | |||||||||
Receivables Securitization Facility
The Company maintains a Receivables Securitization Facility (the “Receivables Facility”) which is primarily governed by the Receivables Purchase Agreement, dated July 31, 2013, as amended from time to time, among the following parties (the “Parties”): the Company, Ferguson Receivables, LLC (“FRL”) and certain other subsidiaries of the Company; the conduit purchasers, committed purchasers, and letter of credit banks from time to time party thereto; and Royal Bank of Canada, as administrative agent (the “Receivables Purchase Agreement”). Capitalized terms used in this summary have the meaning set forth in the Receivables Purchase Agreement, as amended by the Omnibus Amendment and Consent (Ferguson Receivables, LLC), dated October 29, 2024, among the Parties (the “Omnibus Amendment”).
The Receivables Facility consists of funding for up to $1.1 billion. Pursuant to the Omnibus Amendment, access to the swingline facility of up to $100 million in same day funding was terminated until such time as a Committed Purchaser agrees in writing to make Swingline Purchases. In addition, pursuant to the Omnibus Amendment, the termination date under the Receivables Purchase Agreement was extended to October 29, 2027 for all Purchase Groups except the TD Purchase Group, which has a termination date of October 7, 2025. Under the Receivables Facility, creditors of FRL have no recourse to the Company’s general credit and FRL’s assets can be used only to settle FRL’s obligations. As of October 31, 2024, $75 million in borrowings were outstanding under the Receivables Facility. There was no significant change in interest rates from those disclosed in the Annual Report.
12
Term Loan Agreement
The Company and Ferguson UK Holdings Limited previously maintained a Credit Agreement, dated October 7, 2022 (as amended from time to time, the “Term Loan Agreement”), providing for term loans (the “Term Loan”) in an aggregate principal amount of $500 million. In October 2024, the Term Loan was voluntarily repaid in full using a portion of the proceeds from the issuance of the 2034 Senior Notes (as defined below) and the Term Loan Agreement was terminated in accordance with its terms.
Revolving Credit Facility
The Company maintains a revolving credit facility (the “Revolving Facility”) that has aggregate total available credit commitments of $1.35 billion. As of October 31, 2024, no borrowings were outstanding under the Revolving Facility.
Private Placement Notes
Subsequent to October 31, 2024, the Company repaid $150 million related to the 3.44 % private placement notes that matured in November 2024.
In September 2025, $400 million of private placement notes will mature.
2034 Senior Notes
On October 3, 2024, Ferguson Enterprises Inc. (the “Issuer”) issued and sold $750 million aggregate principal amount of unsecured senior notes, maturing in October 2034 (the “2034 Senior Notes”). The 2034 Senior Notes bear interest at a rate of 5.00 %, payable semi-annually. The obligations of the Company under the 2034 Senior Notes are fully and unconditionally guaranteed by Ferguson UK Holdings Limited, an indirect subsidiary of the Company.
The 2034 Senior Notes may be redeemed, in whole or in part, (i) at 100 % of the principal amount on the notes being redeemed plus a “make-whole” prepayment premium at any time prior to three months before the maturity date (the “Notes Par Call Date”) or (ii) after the Notes Par Call Date at 100 % of the principal amount of the notes being redeemed plus accrued and unpaid interest on the principal being redeemed. The 2034 Senior Notes include covenants, subject to certain exceptions, which include limitations on the granting of liens and on mergers and acquisitions.
Other
The Company was in compliance with all debt covenants that were in effect as of October 31, 2024.
Note 6: Assets and liabilities at fair value
The Company has not changed its valuation techniques for measuring the fair value of any financial assets or liabilities during the periods presented. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and other debt instruments, such as the receivables securitization facility and term loans, approximated their fair values as of October 31, 2024 and July 31, 2024.
The Company’s derivatives (interest rate swaps which are considered fair value hedges) and investments in equity instruments are carried at fair value on the condensed consolidated balance sheets (Level 2 and Level 3 fair value inputs, respectively) and are not material. The notional amount of the Company’s outstanding fair value hedges was $300
Carrying amounts and the related estimated fair value of the Company’s long-term debt were as follows:
| October 31, 2024 | July 31, 2024 | ||||||||||||||||||||||
| (In millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Unsecured senior notes | $ | $ | $ | $ | |||||||||||||||||||
| Private placement notes | |||||||||||||||||||||||
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Note 7: Commitments and contingencies
The Company is, from time to time, involved in various legal proceedings considered to be normal course of business in relation to, among other things, the products that we supply, contractual and commercial disputes and disputes with employees. Provision is made if, on the basis of current information and professional advice, liabilities are considered probable. In the case of unfavorable outcomes, the Company may benefit from applicable insurance protection. The Company does not expect any of its pending legal proceedings to have a material adverse effect on its results of operations, financial position or cash flows.
Note 8: Accumulated other comprehensive loss
The change in accumulated other comprehensive loss was as follows:
| (In millions, net of tax) | Foreign currency translation | Pensions | Total | ||||||||||||||
Balance at July 31, 2024 | ($ | ($ | ($ | ||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | |||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | |||||||||||||||||
| Other comprehensive (loss) income | ( | ( | |||||||||||||||
| Balance at October 31, 2024 | ( | ( | ( | ||||||||||||||
| (In millions, net of tax) | Foreign currency translation | Pensions | Total | ||||||||||||||
Balance at July 31, 2023 | ($ | ($ | ($ | ||||||||||||||
| Other comprehensive loss before reclassifications | ( | ( | ( | ||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | |||||||||||||||||
| Other comprehensive (loss) income | ( | ( | |||||||||||||||
| Balance at October 31, 2023 | ( | ( | ( | ||||||||||||||
Amounts reclassified from accumulated other comprehensive loss related to pension and other post-retirement items include the related income tax impacts. Such amounts consisted of the following:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Amortization of actuarial losses | $ | $ | |||||||||
| Tax benefit | ( | ( | |||||||||
| Amounts reclassified from accumulated other comprehensive loss | $ | $ | |||||||||
Note 9: Retirement benefit obligations
The Company maintains pension plans in the U.K. and Canada. The components of net periodic pension cost, which are included in Other income (expense), net in the condensed consolidated statements of earnings, were as follows:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Interest cost | ($ | ($ | |||||||||
| Expected return on plan assets | |||||||||||
| Amortization of net actuarial losses | ( | ( | |||||||||
| Net periodic cost | ($ | ($ | |||||||||
The impact of exchange rate fluctuations is included in the amortization of net actuarial losses line above.
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Note 10: Stockholders’ equity
The following table presents a summary of the Company’s share activity:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Ordinary shares: | |||||||||||
| Balance at beginning of period | |||||||||||
| Treasury shares canceled | ( | ||||||||||
| Ordinary shares canceled | ( | ||||||||||
| Balance at end of period | |||||||||||
| Common stock: | |||||||||||
| Balance at beginning of period | |||||||||||
| Common stock issued | |||||||||||
| Balance at end of period | |||||||||||
| Treasury shares: | |||||||||||
| Balance at beginning of period | ( | ( | |||||||||
| Treasury shares canceled | |||||||||||
| Share repurchases | ( | ( | |||||||||
| Treasury shares used to settle share-based compensation awards | |||||||||||
| Balance at end of period | ( | ( | |||||||||
| Employee Benefit Trusts: | |||||||||||
| Balance at beginning of period | ( | ||||||||||
| Employee Benefit Trust shares used to settle share-based compensation awards | |||||||||||
| Balance at end of period | ( | ||||||||||
| Total shares outstanding at end of period | |||||||||||
Employee Benefit Trusts
Share Repurchases
Share repurchases are being made under an authorization that allows up to $4.0 billion in share repurchases. As of October 31, 2024, the Company had completed $3.4 billion of the total authorized $4.0 billion share repurchase program.
Ordinary Shares and Treasury shares
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Note 11: Share-based compensation
The Company grants share-based compensation awards that can be broadly characterized by the underlying vesting conditions as follows:
•Time vested, restricted stock units (“RSU”) vest over time. RSU awards granted prior to fiscal 2025 cliff vest, typically at the end of three years . RSU awards granted in fiscal 2025 will vest in equal, annual installments over three years . The fair value of these awards is based on the closing share price on the date of grant.
•Single metric performance stock units (“PSU”) typically vest following three-year performance cycles. The number of shares issued will vary based upon the Company’s performance against an adjusted operating profit measure. The fair value of the award is based on the closing share price on the date of grant.
•Multiple metric performance stock units granted to certain members of management (“PSU-EX”) typically vest following three-year performance cycles. The number of shares issued will vary based upon adjusted EPS growth (diluted), return on capital employed (“ROCE”) and relative total shareholder return (“rTSR”). The fair value of awards vesting based upon EPS growth and ROCE are equal to the closing share price on the date of grant and the fair value of rTSR awards are determined using a Monte-Carlo simulation.
The following table summarizes the share-based incentive awards activity for the three months ended October 31, 2024:
| Number of shares | Weighted average grant date fair value | ||||||||||
Outstanding as of July 31, 2024 | $ | ||||||||||
| RSU awards granted | |||||||||||
| PSU awards granted | |||||||||||
| PSU-EX granted | |||||||||||
| Share adjustments based on performance | ( | ||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
Outstanding as of October 31, 2024 | $ | ||||||||||
The following table relates to RSU, PSU and PSU-EX awards activity:
| Three months ended | |||||
| October 31, | |||||
| (In millions, except per share amounts) | 2024 | ||||
| Fair value of awards vested | $ | ||||
| Weighted average grant date fair value per share granted | $ | ||||
The following table relates to all share-based compensation awards:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Share-based compensation expense (within SG&A) | $ | $ | |||||||||
| Income tax benefit | |||||||||||
Total unrecognized share-based compensation expense for all share-based payment plans was $112 million at October 31, 2024, which is expected to be recognized over a weighted average period of 2.5 years.
Stock Options
In October 2024, the Company granted 65,760 stock options to certain members of management with an exercise price equal to the closing share price of the Company's common stock on the last trading day prior to the date of grant. These options vest and become exercisable over three years , in equal, annual installments beginning one year from the date of grant, and expire 10 years from the date of grant. The fair value of the Company's stock options was estimated on the date of grant using the Black-Scholes option-pricing model. The share-based compensation expense of these stock options is not material.
16
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to convey management’s perspective regarding the Company’s operational and financial performance for the three months ended October 31, 2024 and 2023, respectively. This MD&A should be read in conjunction with the unaudited condensed consolidated financial statements and related notes appearing in “Item 1. Financial Statements” of this Quarterly Report (the “Condensed Consolidated Financial Statements”) and the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary Data” of the Annual Report.
The following discussion contains trend information and other forward-looking statements. Actual results could differ materially from those discussed in these forward-looking statements, as well as from our historical performance, due to various factors, including, but not limited to, those referred to in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report.
Overview
Ferguson is a value-added distributor serving the specialized professional in the residential and non-residential North American construction market. We help make our customers’ complex projects simple, successful and sustainable by providing expertise and a wide range of products and services from plumbing, HVAC, appliances, and lighting to PVF, water and wastewater solutions, and more.
The following table presents highlights of the Company’s performance for the periods below:
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions, except per share amounts) | 2024 | 2023 | |||||||||
| Net sales | $7,772 | $7,708 | |||||||||
| Operating profit | 665 | 739 | |||||||||
| Net income | 470 | 519 | |||||||||
| Earnings per share - diluted | 2.34 | 2.54 | |||||||||
| Net cash provided by operating activities | 345 | 557 | |||||||||
Supplemental non-GAAP financial measures:(1) | |||||||||||
| Adjusted operating profit | 706 | 773 | |||||||||
| Adjusted earnings per share - diluted | 2.45 | 2.65 | |||||||||
(1) The Company uses certain non-GAAP measures, which are not defined or specified under U.S. GAAP. See the section titled “Non-GAAP Reconciliations and Supplementary Information.”
For the first quarter of fiscal 2025, net sales increased by 0.8% compared to the first quarter of fiscal 2024, primarily due to higher sales volume and incremental revenue from acquisitions, partially offset by price deflation (approximately 2%), mainly within certain commodity categories.
For the first quarter of fiscal 2025, operating profit decreased by 10.0% (adjusted operating profit decreased 8.7%), compared with the first quarter of fiscal 2024. This decrease was primarily due to higher operating costs driven by sales volume growth, as well as inflation.
For the first quarter of fiscal 2025, diluted earnings per share was $2.34 (adjusted diluted earnings per share: $2.45), decreasing 7.9% compared with the first quarter of fiscal 2024 (7.5% on an adjusted basis) due to lower net income, partially offset by the impact of share repurchases.
Net cash provided by operating activities decreased to $0.3 billion in the first quarter of fiscal 2025 compared with $0.6 billion in the same period in fiscal 2024, primarily reflecting an increase in working capital period-over-period, along with lower net income after adjusting for non-cash items.
17
Results of Operations
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net sales | $7,772 | $7,708 | |||||||||
| Cost of sales | (5,432) | (5,377) | |||||||||
| Gross profit | 2,340 | 2,331 | |||||||||
| Selling, general and administrative expenses | (1,585) | (1,512) | |||||||||
| Depreciation and amortization | (90) | (80) | |||||||||
| Operating profit | 665 | 739 | |||||||||
| Interest expense, net | (46) | (45) | |||||||||
| Other income (expense), net | 5 | (3) | |||||||||
| Income before income taxes | 624 | 691 | |||||||||
| Provision for income taxes | (154) | (172) | |||||||||
| Net income | $470 | $519 | |||||||||
Net sales
Net sales were $7.8 billion in the first quarter of fiscal 2025, an increase of $0.1 billion, or 0.8%, compared with the same period in fiscal 2024. The increase in net sales was driven by higher sales volume and incremental sales from acquisitions of 1.1%, partially offset by price deflation of approximately 2%, mainly within certain commodity categories. The Company’s increase in net sales was primarily driven by its United States segment, mainly due to growth in non-residential sales.
For further discussion on the Company’s net sales, see the “Segment results” section below.
Gross profit
Gross profit in the first quarter of fiscal 2025 increased $9 million, or 0.4%, compared with the same period in fiscal 2024, primarily reflecting increased net sales. Gross profit as a percentage of sales was 30.1% and 30.2% in the first quarters of fiscal 2025 and fiscal 2024, respectively. The decrease of 0.1% primarily reflected the impact of deflation in certain commodity categories.
Selling, general and administrative (“SG&A”) expenses
SG&A expenses in the first quarter of fiscal 2025 increased $73 million, or 4.8%, compared with the same period in fiscal 2024. SG&A as a percentage of sales was 20.4% and 19.6% in the first quarters of fiscal 2025 and fiscal 2024, respectively. The increase in SG&A as a percent of sales primarily reflects the impact of labor and infrastructure cost inflation, as well as an increase in associates in connection with sales volume growth.
Income tax
Income tax expense was $154 million for the first quarter of fiscal 2025, a decrease of $18 million, or 10.5%, compared to the same period in fiscal 2024 in connection with lower income before income taxes. The Company’s effective tax rates were 24.7% and 24.9% for the first quarters of fiscal 2025 and 2024, respectively. The decrease in the effective tax rate was primarily due to a discrete tax benefit recorded in the first quarter of fiscal 2025.
Net income
Net income for the first quarter of fiscal 2025 was $470 million, a decrease of $49 million, or 9.4%, compared with the same period in fiscal 2024 due to the various elements described in the sections above.
18
Segment results
United States
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net sales | $7,369 | $7,329 | |||||||||
Adjusted operating profit | 697 | 766 | |||||||||
Net sales for the United States segment were $7.4 billion in the first quarter of fiscal 2025, an increase of $40 million, or 0.5%, compared to the same period in fiscal 2024. The increase in net sales was primarily driven by higher sales volume and incremental sales from acquisitions of 0.9%, partially offset by price deflation of approximately 2%, mainly within certain commodity categories. Net sales in non-residential markets increased 0.9% in connection with growth in Industrial and Civil/Infrastructure sales compared with the same period in fiscal 2024. Net sales in residential markets were even with the same period in fiscal 2024.
Adjusted operating profit for the United States segment was $697 million in the first quarter of fiscal 2025, a decrease of $69 million, or 9.0%, compared to the same period in fiscal 2024, primarily reflecting the impact of labor and infrastructure cost inflation, as well as an increase in associates in connection with sales volume growth.
Canada
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net sales | $403 | $379 | |||||||||
Adjusted operating profit | 23 | 23 | |||||||||
Net sales for the Canada segment were $403 million in the first quarter of fiscal 2025, an increase of $24 million, or 6.3%, compared to the same period in fiscal 2024. This increase in net sales was primarily driven by incremental sales from an acquisition of 5.6%, price inflation of approximately 1% and higher sales volume, partially offset by the impact of foreign currency exchange rates of 0.6%.
Adjusted operating profit for the Canada segment in the first quarter of fiscal 2025 was even with the first quarter of fiscal 2024.
19
Non-GAAP Reconciliations and Supplementary Information
The Company reports its financial results in accordance with U.S. GAAP. However, the Company believes certain non-GAAP financial measures provide users of the Company’s financial information with additional meaningful information to assist in understanding financial results and assessing the Company’s performance from period to period. These non-GAAP financial measures include adjusted operating profit, adjusted net income and adjusted earnings per share (“adjusted EPS”) - diluted. Management believes these measures are important indicators of operations because they exclude items that may not be indicative of our core operating results and provide a better baseline for analyzing trends in our underlying businesses, and they are consistent with how business performance is planned, reported and assessed internally by management and the Company’s Board of Directors. Such non-GAAP adjustments include amortization of acquired intangible assets, discrete tax items, and any other items that are non-recurring. Non-recurring items may include various restructuring charges, gains or losses on the disposals of businesses which by their nature do not reflect primary operations, as well as certain other items deemed non-recurring in nature and/or that are not a result of the Company’s primary operations. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for results reported under U.S. GAAP. These non-GAAP financial measures reflect an additional way of viewing aspects of operations that, when viewed with U.S. GAAP results, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review the Company’s financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
Reconciliation of net income to adjusted operating profit
The following table reconciles net income (U.S. GAAP) to adjusted operating profit (non-GAAP):
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net income | $470 | $519 | |||||||||
| Provision for income taxes | 154 | 172 | |||||||||
| Interest expense, net | 46 | 45 | |||||||||
| Other expense, net | (5) | 3 | |||||||||
| Operating profit | 665 | 739 | |||||||||
Corporate restructurings(1) | 3 | — | |||||||||
| Amortization of acquired intangibles | 38 | 34 | |||||||||
| Adjusted operating profit | $706 | $773 | |||||||||
(1)For the three months ended October 31, 2024, corporate restructurings primarily related to incremental costs in connection with transition activities following the establishment of our parent company’s domicile in the United States.
20
Reconciliation of net income to adjusted net income and adjusted EPS - diluted
The following table reconciles net income (U.S. GAAP) to adjusted net income and adjusted EPS - diluted (non-GAAP):
| Three months ended | |||||||||||||||||||||||
| October 31, | |||||||||||||||||||||||
| (In millions, except per share amounts) | 2024 | 2023 | |||||||||||||||||||||
per share(1) | per share(1) | ||||||||||||||||||||||
| Net income | $470 | $2.34 | $519 | $2.54 | |||||||||||||||||||
Corporate restructurings(2) | 3 | 0.01 | — | — | |||||||||||||||||||
| Amortization of acquired intangibles | 38 | 0.19 | 34 | 0.16 | |||||||||||||||||||
Discrete tax adjustments(3) | (7) | (0.04) | — | — | |||||||||||||||||||
Tax impact on non-GAAP adjustments(4) | (10) | (0.05) | (10) | (0.05) | |||||||||||||||||||
| Adjusted net income | $494 | $2.45 | $543 | $2.65 | |||||||||||||||||||
| Diluted weighted average shares outstanding | 201.3 | 204.6 | |||||||||||||||||||||
(1)Per share on a dilutive basis.
(2)For the three months ended October 31, 2024, corporate restructurings primarily related to incremental costs in connection with transition activities following the establishment of our parent company’s domicile in the United States.
(3)For the three months ended October 31, 2024, discrete tax adjustments mainly related to the tax treatment of certain compensation items that is not material.
(4)For the three months ended October 31, 2024 and 2023, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles.
Liquidity and Capital Resources
The Company believes its current cash position coupled with cash flow anticipated to be generated from operations and access to capital should be sufficient to meet its operating cash requirements for the next 12 months and will also enable the Company to invest and fund acquisitions, capital expenditures, dividend payments, share repurchases, required debt payments and other contractual obligations through the next several fiscal years. The Company also anticipates that it has the ability to obtain alternative sources of financing, if necessary.
The Company’s material cash requirements include contractual and other obligations arising in the normal course of business. These obligations primarily include debt service and related interest payments, operating lease obligations and other purchase obligations. The nature and composition of such existing cash requirements have not materially changed from those disclosed in the Annual Report other than items updated in this Quarterly Report.
Cash flows
As of October 31, 2024 and July 31, 2024, the Company had cash and cash equivalents of $601 million and $571 million, respectively. In addition to cash, the Company had $2.4 billion of available liquidity from undrawn debt facilities as of October 31, 2024.
As of October 31, 2024, the Company’s total debt was $4.0 billion. The Company anticipates that it will be able to meet its debt obligations as they become due.
21
Cash flows from operating activities
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net cash provided by operating activities | $345 | $557 | |||||||||
Net cash provided by operating activities was $345 million for the first quarter of fiscal 2025 compared to $557 million in the same period in fiscal 2024. The $212 million decrease was primarily driven by a decrease in payables due to the timing of vendor payments and lower earnings in fiscal 2024 after adjusting for non-cash charges. These decreases in cash flow were partially offset by the timing of receivables collections year-over-year.
Cash flows from investing activities
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net cash used in investing activities | ($99) | ($96) | |||||||||
Net cash used in investing activities was $99 million for the first quarter of fiscal 2025 compared to $96 million in the same period in fiscal 2024.
Capital expenditures totaled $77 million and $91 million for the first quarter of fiscal 2025 and fiscal 2024, respectively. These investments were primarily for strategic projects to support future growth, such as new market distribution centers, our branch network and new technology. In addition, the Company invested $22 million and $12 million in new acquisitions in the first quarter of fiscal 2025 and fiscal 2024, respectively.
Cash flows from financing activities
| Three months ended | |||||||||||
| October 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Net cash used in financing activities | ($214) | ($313) | |||||||||
Net cash used in financing activities was $214 million for the first quarter of fiscal 2025 compared with $313 million in the same period in fiscal 2024.
The Company generally pays dividends in the fiscal quarter following the fiscal quarter in which the dividend was declared. However, the dividends declared in the fourth quarter of fiscal 2024 were also paid in the fourth quarter of fiscal 2024 due to the Merger. As such, no dividends were paid in the first quarter of fiscal 2025. Dividends paid to shareholders were $152 million for the first quarter of fiscal 2024.
Share repurchases under the Company’s announced share repurchase program were $256 million and $108 million for the first quarter of fiscal 2025 and fiscal 2024, respectively.
Net proceeds from debt transactions were $71 million compared with net payments of $50 million for the first quarter of fiscal 2025 and fiscal 2024, respectively. In the first quarter of fiscal 2025, the Company received $746 million in net proceeds from the issuance of 2034 Senior Notes, partially offset by the repayment of the Company’s $500 million Term Loans and $175 million in net repayments under the Receivables Facility. In the first quarter of fiscal 2024, the Company made net repayments of $50 million under the Receivables Facility.
22
Debt facilities
The following section summarizes certain material provisions of our long-term debt facilities and current obligations. The following description is only a summary, does not purport to be complete and is qualified in its entirety by reference to the documents governing such indebtedness.
| As of | |||||||||||
| (In millions) | October 31, 2024 | July 31, 2024 | |||||||||
| Short-term debt | $550 | $150 | |||||||||
| Long-term debt | 3,447 | 3,774 | |||||||||
| Total debt | $3,997 | $3,924 | |||||||||
Private Placement Notes
In June 2015 and November 2017, Wolseley Capital, Inc., a wholly-owned subsidiary of the Company, privately placed fixed rate notes (the “Private Placement Notes”). As of October 31, 2024, $850 million in Private Placement Notes remain outstanding.
Subsequent to October 31, 2024, the Company repaid $150 million of Private Placement Notes that matured. In September 2025, an additional $400 million of such notes will mature.
Unsecured Senior Notes
Ferguson Finance plc, a wholly-owned subsidiary of the Company, has issued $2.35 billion in various issuances of unsecured senior notes (collectively, the “Unsecured Senior Notes”).
In October 2024, Ferguson Enterprises Inc. issued $750 million aggregate principal amount of unsecured senior notes due October 2034 (the “2034 Senior Notes”). See Note 5, Debt to the Condensed Consolidated Financial Statements for further discussion of the 2034 Senior Notes.
The Unsecured Senior Notes and 2034 Senior Notes (together, the “Senior Notes”) are fully and unconditionally guaranteed on a direct, unsubordinated and unsecured senior basis and generally carry the same terms and conditions with interest paid semi-annually. The Senior Notes may be redeemed, in whole or in part, (i) at 100% of the principal amount on the notes being redeemed plus a “make-whole” prepayment premium at any time prior to three months before the Senior Notes respective maturity date (the “Notes Par Call Date”) or (ii) after the Notes Par Call Date at 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest on the principal being redeemed. The Senior Notes include covenants, subject to certain exceptions, which include limitations on the granting of liens and on mergers and acquisitions.
Term Loan
The Company and Ferguson UK Holdings Limited previously maintained a Credit Agreement, dated October 7, 2022 (as amended from time to time, the “Term Loan Agreement”), providing for term loans (the “Term Loan”) in an aggregate principal amount of $500 million. In October 2024, the Term Loan was voluntarily repaid in full using a portion of the proceeds from the issuance of the 2034 Senior Notes and the Term Loan Agreement was terminated in accordance with its terms.
Revolving Credit Facility
The Company maintains a Revolving Facility with aggregate total available credit commitments of $1.35 billion. As of October 31, 2024, no borrowings were outstanding under the Revolving Facility.
Receivables Securitization Facility
The Company maintains a Receivables Facility with an aggregate total available amount of $1.1 billion. The Company has the ability to increase the aggregate total available amount under the Receivables Facility up to a total of $1.5 billion from time to time, subject to lender participation. In October 2024, the Company extended the termination date of the Receivables Facility and made other changes to the terms and conditions of the Receivables Facility. See Note 5, Debt to the Condensed Consolidated Financial Statements for further details of such changes.
As of October 31, 2024, $75 million in borrowings were outstanding under the Receivables Facility.
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Other
The Company was in compliance with all debt covenants that were in effect as of October 31, 2024.
See Note 5, Debt to the Condensed Consolidated Financial Statements and the notes to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” of the Annual Report for further details regarding the Company’s debt.
There have been no significant changes to the Company’s policies on accounting for, valuing or managing the risk of financial instruments during the first quarter of fiscal 2025.
Guarantor Disclosures
On October 3, 2024, Ferguson Enterprises Inc. (the “Issuer”) issued and sold $750 million aggregate principal amount of 2034 Senior Notes. The obligations under the 2034 Senior Notes are unsecured and are fully and unconditionally guaranteed on an unsecured basis by Ferguson UK Holdings Limited (the “Guarantor” and together with the Issuer, the “Obligor Group”).
The Issuer is a holding company that primarily repurchases shares and pays dividends, issues and services third-party debt obligations, and engages in certain corporate and headquarters activities, as well as holds an investment in its direct subsidiary, that primarily holds investments in and borrows from the Guarantor. The Guarantor is a holding company that primarily issues and services third-party debt obligations and holds investments in, borrows from and lends to non-guarantor subsidiary operating companies. These activities are generally funded by non-guarantor subsidiaries. The Guarantor is a private limited company incorporated under the laws of England and Wales and an indirect subsidiary of the Issuer.
Summarized Financial Information of Obligor Group
The following tables present the summarized financial information specified in Rule 1-02(bb)(1) of Regulation S-X for the Obligor Group on a combined basis, after elimination of intercompany transactions and balances between the Obligor Group, and excluding the investments in and equity in the earnings of any non-guarantor subsidiaries. The summarized financial information has been prepared in accordance with Rule 13-01 of Regulation S-X. The summarized financial information should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included herein and the audited consolidated financial statements and notes thereto included in the Annual Report.
| As of | |||||||||||
| (In millions) | October 31, 2024 | July 31, 2024 | |||||||||
| Current assets | $47 | $69 | |||||||||
| Non-current assets | 65 | 59 | |||||||||
| Current liabilities | 202 | 23 | |||||||||
| Non-current liabilities | 747 | 500 | |||||||||
| Due from non-guarantor subsidiaries | 10,512 | 5,474 | |||||||||
| Three months ended | |||||
| October 31, | |||||
| (In millions) | 2024 | ||||
| Net sales | $— | ||||
| Gross profit | — | ||||
| Operating loss | (3) | ||||
| Net loss | (30) | ||||
| Other interest income, net to non-guarantor subsidiaries | 175 | ||||
Other income, net from non-guarantor subsidiaries(1) | $4,549 | ||||
(1)Includes income from intercompany transactions with non-guarantor subsidiaries, primarily from non-cash dividend transactions.
Critical accounting policies and estimates
There have been no material changes to our critical accounting policies as disclosed in the Annual Report.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the quantitative and qualitative disclosures about market risk disclosed in the Annual Report.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has carried out an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of October 31, 2024. The term “disclosure controls and procedures” means controls and other procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well conceived and operated, can only provide reasonable assurance that the objectives of the disclosure controls and procedures are met.
Based on their evaluation as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended October 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. With respect to such lawsuits, claims and proceedings, the Company records reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not expect any of its pending legal proceedings to have a material adverse effect on its results of operations, financial position or cash flows. The Company maintains liability insurance for certain risks that are subject to certain self-insurance limits.
Item 1A.Risk Factors
As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Issuer purchases of equity shares
The following table presents the number and average price of shares purchased in each month of the first quarter of fiscal 2025:
| (In millions, except share count and per share amount) | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Program(1) | (d) Maximum Value of Shares that May Yet Be Purchased Under the Program(1) | ||||||||||||||||||||||
| August 1 - August 31, 2024 | 290,446 | $206.30 | 290,446 | $844 | ||||||||||||||||||||||
| September 1 - September 30, 2024 | 494,509 | $198.09 | 494,509 | $746 | ||||||||||||||||||||||
| October 1 - October 31, 2024 | 525,208 | $196.57 | 525,208 | $643 | ||||||||||||||||||||||
| 1,310,163 | 1,310,163 | |||||||||||||||||||||||||
(1)In September 2021, the Company announced a program to repurchase up to $1.0 billion of shares. In March 2022, September 2022, June 2023 and June 2024, the Company announced increases of $1.0 billion, $0.5 billion, $0.5 billion and $1.0 billion, respectively, bringing the total authorized repurchase program to $4.0 billion. As of October 31, 2024, the Company had completed $3.4 billion of the total authorized $4.0 billion share repurchase program.
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Item 6.Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
| (a) | Exhibits | ||||
| Exhibit | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 10.1 | ||||||||
| 10.2 | ||||||||
| 10.3 | ||||||||
| 10.4 | ||||||||
| 10.5 | ||||||||
| 10.6 | ||||||||
| 10.7 | ||||||||
| 10.8 | ||||||||
| 10.9 | ||||||||
| 10.10 | ||||||||
| 10.11 | ||||||||
| 10.12 | ||||||||
| 10.13 | ||||||||
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| 10.14 | ||||||||
| 22.1 | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS* | Inline XBRL Instance Document—this instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
* Filed herewith
** Furnished herewith
The Registrant agrees to furnish to the SEC, upon request, copies of any instruments that define the rights of holders of long-term debt of the Registrant that are not filed as Exhibits to this Quarterly Report.
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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 thereunto duly authorized.
December 10, 2024
Ferguson Enterprises Inc. | ||||||||
| /s/ William Brundage | ||||||||
| Name: | William Brundage | |||||||
| Title: | Chief Financial Officer | |||||||
| (Principal Financial Officer and Duly Authorized Officer) | ||||||||
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