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 (the “Board”). Such non-GAAP adjustments include amortization of acquired intangible assets, discrete tax items, certain significant acquisition-related transaction and integration costs associated with acquisitions that are outside the Company’s typical acquisition profile 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 and nine months ended September 30, 2026 and 2025, corporate restructuring expenses primarily related to incremental costs in connection with transition activities following the establishment of our parent company’s domicile in the United States.

(2)For the three and nine months ended September 30, 2025, business restructuring expenses primarily related to the Company’s implementation of targeted actions to streamline operations, enhancing speed and efficiency to better serve customers and drive further profitable growth.

(3)For the three and nine months ended September 30, 2026, acquisition and integration costs related to the Company’s incremental costs in connection with the FloWorks Acquisition.

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 and nine months ended September 30, 2026 and 2025, corporate restructuring expenses 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 and nine months ended September 30, 2025, business restructuring expenses primarily related to the Company’s implementation of targeted actions to streamline operations, enhancing speed and efficiency to better serve customers and drive further profitable growth.

(4)For the three and nine months ended September 30, 2026, acquisition and integration costs related to the Company’s incremental costs in connection with the FloWorks Acquisition.

(5)For the three and nine months ended September 30, 2026, the Company disposed of a non-operating entity at a loss. This loss is included in other expense, net in the Company’s consolidated statement of earnings.

(6)For the three and nine months ended September 30, 2026 and 2025, discrete tax adjustments primarily related to the release of uncertain tax positions due to lapses in statutes of limitations, the tax treatment of certain compensation items that were not individually significant, and, for the year-to-date periods, adjustments related to prior-year tax positions.

(7)For the three and nine months ended September 30, 2026, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles, and, to a lesser extent, certain costs related to the FloWorks Acquisition. For the three and nine months ended September 30, 2025, the tax impact on non-GAAP adjustments primarily related to the amortization of acquired intangibles, along with the tax impact of certain restructuring expenses.

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 capital expenditures, acquisitions, dividend payments, share repurchases, required debt payments and other contractual obligations through the next several 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 Transition Report other than items updated in this Quarterly Report.

Cash flows

As of September 30, 2026 and December 31, 2025, the Company had cash and cash equivalents of $476 million and $557 million, respectively. In addition to cash, the Company had $2.45 billion of available liquidity from undrawn debt facilities as of September 30, 2026.

As of September 30, 2026, the Company’s total debt was $6.2 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 $1,472 million and $1,884 million for the year-to-date periods of 2026 and 2025, respectively. The $412 million decrease was mainly due to an increased investment in working capital, higher cash tax payments and the timing of incentive compensation payouts due to the transition to a calendar year-end, partially offset by higher net income (adjusted for non-cash items). The increase in working capital was primarily driven by an increase in receivables due to the timing of collections year-over-year and the timing of vendor payments compared with the prior year.

Cash flows from investing activities

Capital expenditures totaled $342 million and $247 million for the year-to-date periods of 2026 and 2025, 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 $2,257 million and $276 million in new acquisitions for the nine months ended September 30, 2026 and 2025, respectively, including $1.6 billion in 2026 related to the FloWorks Acquisition.

Cash flows from financing activities

Dividends paid to shareholders were $519 million and $493 million for the year-to-date periods of 2026 and 2025, respectively.

Share repurchases under the Company’s authorized share repurchase programs were $438 million and $611 million for the year-to-date periods of 2026 and 2025, respectively. The Company has temporarily paused its share repurchase program in connection with the FloWorks Acquisition. We expect to resume share repurchases once certain leverage targets are achieved, subject to market conditions, capital allocation priorities and other relevant factors.

Net proceeds from debt transactions were $2,044 million compared with net payments of $78 million for the year-to-date periods of 2026 and 2025, respectively. In the year-to-date period of 2026, the Company received $1,194 million in net proceeds from the issuance of the August 2026 Senior Notes (as defined below) and net borrowings of $850 million under the Term Loan Facility (as defined below). In the year-to-date period of 2025, the Company had net repayments of $78 million, including debt repayments of $400 million in connection with the maturity of certain Private Placement Notes and net repayments of $425 million under the Company’s Receivables Facility (each, as defined below), partially offset by $747 million in proceeds from the issuance of certain unsecured senior notes.

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 September 30, 2026, $300 million in Private Placement Notes remain outstanding.

In November 2026, $150 million of private placement notes will mature. The remaining $150 million of private placement notes will mature in September 2027.

Unsecured Senior Notes

The Company has issued $5.05 billion in various issuances of unsecured senior notes, including the August 2026 issuance of $700 million aggregate principal amount of unsecured senior notes due August 2029 and $500 million aggregate principal amount of unsecured senior notes due August 2036 (together, the “August 2026 Senior Notes”).

In April 2027, $300 million of unsecured senior notes will mature.

Receivables Securitization Facility

The Company maintains a Receivables Securitization Facility with an aggregate total available amount of $900 million (the “Receivables Facility”). 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. As of September 30, 2026, no borrowings were outstanding under the Receivables Facility.

In November 2026, the Company and certain of its subsidiaries entered into an amendment and restatement of the agreements governing the Receivables Facility. Among other things, the amendments extended the scheduled termination date of the Receivables Facility until November 2029. For additional information, see Part II, Item 5, "Other Information.”

Revolving Credit Facility

The Company, pursuant to a revolving credit agreement (the “Revolving Credit Agreement”), maintains a revolving credit facility that has aggregate total available credit commitments of $1.5 billion (the “Revolving Facility”). The Revolving Credit Agreement provides the Company with the ability to increase from time to time the aggregate capacity of the facility by $500 million under certain conditions, including the receipt of additional or increased lender commitments. As of September 30, 2026, no borrowings were outstanding under the Revolving Facility.

Term Loan and Bridge Credit Facilities

In August 2026, the Company entered into an unsecured $900 million term loan facility (the “Term Loan Facility”) and an unsecured $700 million bridge facility (the “Bridge Facility”) to finance a portion of the purchase price, fees and expenses associated with the FloWorks Acquisition. The FloWorks Acquisition was funded through net proceeds from the August 2026 Senior Notes, a borrowing under the Term Loan Facility and available cash on hand, and the Bridge Facility was never drawn. The commitments under the Bridge Facility were terminated in full on August 14, 2026. The Term Loan Facility matures on August 31, 2029. As of September 30, 2026, $850 million of the borrowing was outstanding under the Term Loan Facility.

Other

The Company was in compliance with all debt covenants that were in effect as of September 30, 2026.

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 Transition Report for further details.

There have been no significant changes to the Company’s policies on accounting for, valuing or managing the risk of financial instruments during the three months ended September 30, 2026.

Guarantor Disclosures

Ferguson Enterprises Inc. (the “Issuer”) is the issuer of the 4.350% Senior Notes due 2031, 5.000% Senior Notes due 2034, 4.800% Senior Notes due 2029 and 5.600% Senior Notes due 2036. The obligations under these series of 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 Transition Report.

(1)Includes income from intercompany transaction 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 Transition Report.