ferg-20240430

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2024


☐			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: 001-40066

Ferguson plc
(Exact name of registrant as specified in its charter)


Jersey, Channel Islands						98-1499339
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1020 Eskdale Road, Winnersh Triangle, Wokingham,

Berkshire, RG41 5TS, United Kingdom

(Address of principal executive offices and zip code)

+44 (0) 118 927 3800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares of 10 pence	FERG	New York Stock Exchange
		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.


Large accelerated filer	☒	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 May 31, 2024, the number of outstanding ordinary shares was 201,940,271.

TABLE OF CONTENTS


			PAGE


CERTAIN TERMS			1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			1
PART I – FINANCIAL INFORMATION			4
Item 1. Financial Statements			4
Condensed Consolidated Statements of Earnings			4
C ondensed C onsolidated Statements of Comprehensive Income			5
C ondensed C onsolidated Balance Sheets			6
C ondensed C onsolidated Statements of Shareholders’ Equity			7
C ondensed C onsolidated Statements of Cash Flows			9
Notes to the Condensed Consolidated Financial Statements			10
Note 1: Summary of significant accounting policies			10
Note 2: Revenue and segment information			12
Note 3: Weighted average shares			13
Note 4: Income tax			14
Note 5: Debt			14
Note 6: Assets and liabilities at fair value			15
Note 7: Commitments and contingencies			15
Note 8: Accumulated other comprehensive loss			15
Note 9: Retirement benefit obligations			16
Note 10: Shareholders’ equity			17
Note 11: Share-based compensation			17
Note 12: Acquisitions			18
Note 13: Related party transactions			20
Note 14: Subsequent event			20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			29
Item 4. Controls and Procedures			29
PART II - OTHER INFORMATION			30
Item 1. Legal Proceedings			30
Item 1A. Risk Factors			30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 6. Exhibits			36
SIGNATURES			37

EXPLANATORY NOTE

As previously disclosed in a Current Report on Form 8-K filed by Ferguson plc (the “Company”) with the Securities and Exchange Commission (“SEC”) on May 31, 2024, the Company held an extraordinary general meeting of shareholders on May 30, 2024 (the “Special Meeting”) at which the Company’s shareholders (i) approved the merger agreement (the “Merger Agreement”), dated as of February 29, 2024, by and among the Company, Ferguson Enterprises Inc., a newly incorporated corporation under the laws of Delaware (“New TopCo”), and Ferguson (Jersey) 2 Limited, a newly formed Jersey incorporated private limited company and direct, wholly owned subsidiary of New TopCo (“Merger Sub”) and (ii) on an advisory basis, voted on other matters relating to certain differences between the Company’s Memorandum and Articles of Association and the proposed Amended and Restated Certificate of Incorporation (the “New TopCo Proposed Certificate of Incorporation”) and proposed Amended and Restated Bylaws (the “New TopCo Proposed Bylaws” and, together with the New TopCo Proposed Certificate of Incorporation, the “New TopCo Proposed Organizational Documents”) of New TopCo. The Merger Agreement provides for the merger (the “Merger”) of Merger Sub with and into the Company, with the Company surviving the Merger as a direct, wholly owned subsidiary of New TopCo and Merger Sub ceasing to exist, at 12:01 a.m. Eastern Time on August 1, 2024 (the “Effective Time”), on the terms and subject to the conditions of the Merger Agreement. Following completion of the Merger, New TopCo would be the Company’s parent company and shareholders of the Company would become holders of common stock of New TopCo in accordance with the terms of the Merger Agreement.

On the terms of, subject to the conditions of and/or in connection with the Merger Agreement at the Effective Time, (i) each ordinary share, par value 10 pence per share, of Ferguson plc (collectively, the “Ferguson Shares” and each a, “Ferguson Share”) that is issued and outstanding at 6:00 p.m. Eastern Time on July 31, 2024 (the “Merger Record Time”) will automatically be cancelled without any repayment of capital and New TopCo will issue as consideration therefor new, duly authorized, validly issued, fully paid and non-assessable shares of common stock, par value $0.0001 per share, of New TopCo (the “New TopCo Common Stock”) to each holder of Ferguson Shares (collectively, the “Ferguson Shareholders” and each, a “Ferguson Shareholder”) on a one-for-one basis for each Ferguson Share held by such Ferguson Shareholder immediately preceding the Merger Record Time and (ii) each depositary interest (collectively, the “U.K. DIs” and each, a “U.K. DI”) issued through CREST by Computershare Investor Services PLC (the “Depositary”) representing a beneficial interest in an issued and outstanding Ferguson Share at the Merger Record Time will be cancelled and a depositary interest representing one share of New TopCo Common Stock will be issued through CREST by the Depositary as consideration therefor to each holder of U.K. DIs on a one-for-one basis for each U.K. DI held by such holder immediately preceding the Merger Record Time. All Ferguson Shares held in treasury will be cancelled as a result of the Merger.

Following completion of the Merger, New TopCo will be the Company’s parent company and will continue to pursue the Company’s current strategic initiatives and business operations. Further information about the expected Merger is available in the definitive proxy statement filed by the Company with the SEC on April 18, 2024 (the “Definitive Proxy Statement”). We encourage you to read that entire document carefully.

CERTAIN TERMS

Unless otherwise specified or the context otherwise requires, the terms “Company,” “Ferguson,” “we,” “us,” and “our” and other similar terms refer to Ferguson plc and its consolidated subsidiaries prior to the Effective Time and to Ferguson Enterprises Inc. and its consolidated subsidiaries after the Effective Time. 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 2024” or similar references refer to the fiscal year ended July 31, 2024.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information included in this quarterly report on Form 10-Q (“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, the Merger, the benefits of the Merger, our ability to manage the risks relating to the Merger, 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 in such forward-looking statements, including but not limited to:

•the Merger may be delayed, cancelled, suspended or terminated;

•unexpected costs relating to the Merger and other business uncertainties;

•the outcome of any legal proceedings that may be instituted against us following announcement of the Merger and related transactions;

•the risk that the Merger disrupts current plans and operations;

•the risk that Ferguson’s effective tax rate may increase in the future, including as a result of the Merger;

•the risk that Ferguson Shareholders may recognize taxable gain or other income with respect to their Ferguson Shares at the Effective Time;

•unanticipated adverse tax consequences to Ferguson, New TopCo and/or Ferguson Shareholders in connection with the Merger;

•our ability to adapt to operating under the laws of the State of Delaware and changes in shareholder rights as a result of the Merger;

•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, as well as the repair, maintenance and improvement (“RMI”) and new construction 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;

•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;

•inherent 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;

•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 in the United States, the United Kingdom, Switzerland or Canada;

•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 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;

•our failure to comply with the obligations associated with being a U.S. domestic issuer 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 this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended July 31, 2023 as filed with the SEC on September 26, 2023 (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.

Part I - FINANCIAL INFORMATION

Item 1.Financial Statements

Ferguson plc

Condensed Consolidated Statements of Earnings

(unaudited)


	Three months ended		Nine months ended
	April 30,		April 30,
(In millions, except per share amounts)	2024	2023	2024	2023
Net sales	$7,308	$7,140	$21,689	$21,896
Cost of sales	(5,076)	(5,000)	(15,097)	(15,273)
Gross profit	2,232	2,140	6,592	6,623
Selling, general and administrative expenses	(1,522)	(1,435)	(4,503)	(4,376)
Impairments and other charges	—	(127)	—	(127)
Depreciation and amortization	(85)	(81)	(248)	(243)
Operating profit	625	497	1,841	1,877
Interest expense, net	(43)	(48)	(132)	(136)
Other expense, net	(1)	(2)	(4)	(7)
Income before income taxes	581	447	1,705	1,734
Provision for income taxes	(138)	(111)	(421)	(429)


Net income	$443	$336	$1,284	$1,305


Earnings per share - Basic	$2.19	$1.64	$6.32	$6.30




Earnings per share - Diluted	$2.18	$1.63	$6.30	$6.28



Weighted average number of shares outstanding:
Basic	202.6	205.4	203.3	207.1
Diluted	203.2	206.1	203.9	207.9

See accompanying Notes to the Condensed Consolidated Financial Statements.

Ferguson plc

Condensed Consolidated Statements of Comprehensive Income

(unaudited)


	Three months ended		Nine months ended
	April 30,		April 30,
(In millions)	2024	2023	2024	2023
Net income	$443	$336	$1,284	$1,305
Other comprehensive income (loss):
Foreign currency translation adjustments	(19)	(7)	(33)	(25)
Pension adjustments, net of tax impacts of ($1), $0, ($3) and ($1), respectively.	2	4	7	11
Total other comprehensive loss, net of tax:	(17)	(3)	(26)	(14)
Comprehensive income	$426	$333	$1,258	$1,291

See accompanying Notes to the Condensed Consolidated Financial Statements.

Ferguson plc

Condensed Consolidated Balance Sheets

(unaudited)


	As of
(In millions, except share amounts)	April 30, 2024	July 31, 2023
Assets
Cash and cash equivalents	$691	$601
Accounts receivable, less allowances of $41 and $27, respectively	3,532	3,597
Inventories	4,115	3,898
Prepaid and other current assets	946	953
Assets held for sale	30	28
Total current assets	9,314	9,077
Property, plant and equipment, net	1,692	1,595
Operating lease right-of-use assets	1,511	1,474
Deferred income taxes, net	306	300
Goodwill	2,325	2,241
Other intangible assets, net	767	783
Other non-current assets	543	524
Total assets	$16,458	$15,994

Liabilities and shareholders’ equity
Accounts payable	$3,638	$3,408
Short-term debt	150	55
Current portion of operating lease liabilities	382	366
Other current liabilities	1,359	1,600
Total current liabilities	5,529	5,429
Long-term debt	3,518	3,711
Long-term portion of operating lease liabilities	1,155	1,126
Other long-term liabilities	734	691
Total liabilities	10,936	10,957

Shareholders’ equity:
Ordinary shares, par value 10 pence: 500,000,000 shares authorized, 232,171,182 shares issued	30	30
Paid-in capital	855	809
Retained earnings	9,301	8,557
Treasury shares, 29,993,774 and 27,893,680 shares, respectively at cost	(3,750)	(3,425)
Employee Benefit Trusts, 0 and 274,031 shares, respectively at cost	—	(46)
Accumulated other comprehensive loss	(914)	(888)
Total shareholders' equity	5,522	5,037
Total liabilities and shareholders' equity	$16,458	$15,994

See accompanying Notes to the Condensed Consolidated Financial Statements.

Ferguson plc

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited)


	Three Months Ended April 30, 2024
(In millions, except per share data)	Ordinary Shares	Paid-in Capital	Retained Earnings	Treasury Shares	Accumulated Other Comprehensive Loss	Total Shareholders’ Equity
Balance at January 31, 2024	$30	$842	$9,018	($3,575)	($897)	$5,418
Share-based compensation	—	13	—	—	—	13
Net income	—	—	443	—	—	443
Cash dividends declared ($0.79) per share	—	—	(160)	—	—	(160)
Other comprehensive loss	—	—	—	—	(17)	(17)
Share repurchases	—	—	—	(175)	—	(175)


Balance at April 30, 2024	$30	$855	$9,301	($3,750)	($914)	$5,522


	Nine months ended April 30, 2024
(In millions, except per share data)	Ordinary Shares	Paid-in Capital	Retained Earnings	Treasury Shares	Employee Benefit Trusts	Accumulated Other Comprehensive Loss	Total Shareholders’ Equity
Balance at July 31, 2023	$30	$809	$8,557	($3,425)	($46)	($888)	$5,037
Share-based compensation	—	44	—	—	—	—	44
Net income	—	—	1,284	—	—	—	1,284
Cash dividends declared ($2.33) per share	—	—	(472)	—	—	—	(472)
Other comprehensive loss	—	—	—	—	—	(26)	(26)
Share repurchases	—	—	—	(351)	—	—	(351)
Shares issued under employee share plans	—	—	(68)	26	45	—	3
Other	—	2	—	—	1	—	3
Balance at April 30, 2024	$30	$855	$9,301	($3,750)	$—	($914)	$5,522


	Three Months Ended April 30, 2023
(In millions, except per share data)	Ordinary Shares	Paid-in Capital	Retained Earnings	Treasury Shares	Employee Benefit Trusts	Accumulated Other Comprehensive Loss	Total Shareholders’ Equity
Balance at January 31, 2023	$30	$789	$7,945	($3,151)	($47)	($841)	$4,725
Share-based compensation	—	10	—	—	—	—	10
Net income	—	—	336	—	—	—	336
Other comprehensive loss	—	—	—	—	—	(3)	(3)
Cash dividends declared ($0.75) per share	—	—	(152)	—	—	—	(152)
Share repurchases	—	—	—	(195)	—	—	(195)
Shares issued under employee share plans	—	—	(1)	—	1	—	—

Balance at April 30, 2023	$30	$799	$8,128	($3,346)	($46)	($844)	$4,721


	Nine months ended April 30, 2023
(In millions, except per share data)	Ordinary Shares	Paid-in Capital	Retained Earnings	Treasury Shares	Employee Benefit Trusts	Accumulated Other Comprehensive Loss	Total Shareholders’ Equity
Balance at July 31, 2022	$30	$760	$7,594	($2,782)	($107)	($830)	$4,665
Share-based compensation	—	39	—	—	—	—	39
Net income	—	—	1,305	—	—	—	1,305
Other comprehensive loss	—	—	—	—	—	(14)	(14)
Cash dividends declared ($3.41) per share	—	—	(704)	—	—	—	(704)
Share repurchases	—	—	—	(570)	—	—	(570)
Shares issued under employee share plans	—	—	(67)	6	61	—	—

Balance at April 30, 2023	$30	$799	$8,128	($3,346)	($46)	($844)	$4,721

See accompanying Notes to the Condensed Consolidated Financial Statements.

Ferguson plc

Condensed Consolidated Statements of Cash Flows

(unaudited)


(In millions)	Nine months ended
	April 30,
	2024	2023
Cash flows from operating activities:
Net income	$1,284	$1,305


Depreciation and amortization	248	243
Share-based compensation	39	38
Non-cash impact of impairments and net loss on disposal of assets	—	127
Change in deferred income taxes	(14)	(88)
(Increase) decrease in inventories	(194)	315
Decrease in receivables and other assets	107	313
Increase (decrease) in accounts payable and other liabilities	107	(441)
Decrease in income taxes payable	(69)	(12)
Other operating activities	(1)	6
Net cash provided by operating activities of continuing operations	1,507	1,806
Net cash used in operating activities of discontinued operations	—	(4)
Net cash provided by operating activities	1,507	1,802

Cash flows from investing activities:
Purchase of businesses acquired, net of cash acquired	(185)	(179)
Capital expenditures	(263)	(361)
Other investing activities	30	(3)


Net cash used in investing activities	(418)	(543)

Cash flows from financing activities:
Purchase of treasury shares	(421)	(

SEC Form 10-Q filed by Ferguson plc