Ferguson Enterprises Inc DE

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):

(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.

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):

(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.

Cash flows from operating activities

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

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

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.

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.

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.

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.

(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.