0001832433July 312023Q3FALSEP1Y00018324332022-08-012023-04-3000018324332023-05-31xbrli:shares00018324332023-02-012023-04-30iso4217:USD00018324332022-02-012022-04-3000018324332021-08-012022-04-30iso4217:USDxbrli:shares00018324332023-04-3000018324332022-07-31iso4217:GBPxbrli:shares0001832433us-gaap:CommonStockMember2023-01-310001832433us-gaap:AdditionalPaidInCapitalMember2023-01-310001832433us-gaap:RetainedEarningsMember2023-01-310001832433us-gaap:TreasuryStockCommonMember2023-01-310001832433ferg:EmployeeBenefitTrustMember2023-01-310001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-3100018324332023-01-310001832433us-gaap:AdditionalPaidInCapitalMember2023-02-012023-04-300001832433us-gaap:RetainedEarningsMember2023-02-012023-04-300001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-02-012023-04-300001832433us-gaap:TreasuryStockCommonMember2023-02-012023-04-300001832433ferg:EmployeeBenefitTrustMember2023-02-012023-04-300001832433us-gaap:CommonStockMember2023-04-300001832433us-gaap:AdditionalPaidInCapitalMember2023-04-300001832433us-gaap:RetainedEarningsMember2023-04-300001832433us-gaap:TreasuryStockCommonMember2023-04-300001832433ferg:EmployeeBenefitTrustMember2023-04-300001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-300001832433us-gaap:CommonStockMember2022-07-310001832433us-gaap:AdditionalPaidInCapitalMember2022-07-310001832433us-gaap:RetainedEarningsMember2022-07-310001832433us-gaap:TreasuryStockCommonMember2022-07-310001832433ferg:EmployeeBenefitTrustMember2022-07-310001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-310001832433us-gaap:AdditionalPaidInCapitalMember2022-08-012023-04-300001832433us-gaap:RetainedEarningsMember2022-08-012023-04-300001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-08-012023-04-300001832433us-gaap:TreasuryStockCommonMember2022-08-012023-04-300001832433ferg:EmployeeBenefitTrustMember2022-08-012023-04-300001832433us-gaap:CommonStockMember2022-01-310001832433us-gaap:AdditionalPaidInCapitalMember2022-01-310001832433us-gaap:RetainedEarningsMember2022-01-310001832433us-gaap:TreasuryStockCommonMember2022-01-310001832433ferg:EmployeeBenefitTrustMember2022-01-310001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-3100018324332022-01-310001832433us-gaap:AdditionalPaidInCapitalMember2022-02-012022-04-300001832433us-gaap:RetainedEarningsMember2022-02-012022-04-300001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-02-012022-04-300001832433us-gaap:TreasuryStockCommonMember2022-02-012022-04-300001832433us-gaap:CommonStockMember2022-04-300001832433us-gaap:AdditionalPaidInCapitalMember2022-04-300001832433us-gaap:RetainedEarningsMember2022-04-300001832433us-gaap:TreasuryStockCommonMember2022-04-300001832433ferg:EmployeeBenefitTrustMember2022-04-300001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-3000018324332022-04-300001832433us-gaap:CommonStockMember2021-07-310001832433us-gaap:AdditionalPaidInCapitalMember2021-07-310001832433us-gaap:RetainedEarningsMember2021-07-310001832433us-gaap:TreasuryStockCommonMember2021-07-310001832433ferg:EmployeeBenefitTrustMember2021-07-310001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-3100018324332021-07-310001832433us-gaap:AdditionalPaidInCapitalMember2021-08-012022-04-300001832433us-gaap:RetainedEarningsMember2021-08-012022-04-300001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-08-012022-04-300001832433us-gaap:TreasuryStockCommonMember2021-08-012022-04-300001832433ferg:EmployeeBenefitTrustMember2021-08-012022-04-30ferg:segment0001832433ferg:UnitedStatesSegmentMember2023-02-012023-04-300001832433ferg:UnitedStatesSegmentMember2022-02-012022-04-300001832433ferg:UnitedStatesSegmentMember2022-08-012023-04-300001832433ferg:UnitedStatesSegmentMember2021-08-012022-04-300001832433ferg:CanadaSegmentMember2023-02-012023-04-300001832433ferg:CanadaSegmentMember2022-02-012022-04-300001832433ferg:CanadaSegmentMember2022-08-012023-04-300001832433ferg:CanadaSegmentMember2021-08-012022-04-300001832433ferg:CorporateRestructuringMember2023-02-012023-04-300001832433ferg:CorporateRestructuringMember2022-02-012022-04-300001832433ferg:CorporateRestructuringMember2022-08-012023-04-300001832433ferg:CorporateRestructuringMember2021-08-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:ResidentialMember2023-02-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:ResidentialMember2022-02-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:ResidentialMember2022-08-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:ResidentialMember2021-08-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialCommercialMember2023-02-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialCommercialMember2022-02-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialCommercialMember2022-08-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialCommercialMember2021-08-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialCivilInfrastructureMember2023-02-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialCivilInfrastructureMember2022-02-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialCivilInfrastructureMember2022-08-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialCivilInfrastructureMember2021-08-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialIndustrialMember2023-02-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialIndustrialMember2022-02-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialIndustrialMember2022-08-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialIndustrialMember2021-08-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialMember2023-02-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialMember2022-02-012022-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialMember2022-08-012023-04-300001832433ferg:UnitedStatesSegmentMemberferg:NonResidentialMember2021-08-012022-04-300001832433us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2023-02-012023-04-300001832433ferg:LeasesAndRelatedFixedAssetsMember2023-02-012023-04-30ferg:branchxbrli:pure0001832433ferg:VariableRateReceivableSecuritizationMemberus-gaap:CorporateDebtSecuritiesMember2023-04-300001832433ferg:VariableRateReceivableSecuritizationMemberus-gaap:CorporateDebtSecuritiesMember2022-07-310001832433ferg:VariableRateTermLoanMemberus-gaap:UnsecuredDebtMember2023-04-300001832433ferg:VariableRateTermLoanMemberus-gaap:UnsecuredDebtMember2022-07-310001832433ferg:PrivatePlacementNotesDueSeptember2022Memberus-gaap:SecuredDebtMember2023-04-300001832433ferg:PrivatePlacementNotesDueSeptember2022Memberus-gaap:SecuredDebtMember2022-07-310001832433us-gaap:SecuredDebtMemberferg:PrivatePlacementNotesDueNovember2023Member2023-04-300001832433us-gaap:SecuredDebtMemberferg:PrivatePlacementNotesDueNovember2023Member2022-07-310001832433ferg:PrivatePlacementNotesDueNovember2024Memberus-gaap:SecuredDebtMember2023-04-300001832433ferg:PrivatePlacementNotesDueNovember2024Memberus-gaap:SecuredDebtMember2022-07-310001832433ferg:PrivatePlacementNotesDueSeptember2025Memberus-gaap:SecuredDebtMember2023-04-300001832433ferg:PrivatePlacementNotesDueSeptember2025Memberus-gaap:SecuredDebtMember2022-07-310001832433ferg:PrivatePlacementNotesDueNovember2026Memberus-gaap:SecuredDebtMember2023-04-300001832433ferg:PrivatePlacementNotesDueNovember2026Memberus-gaap:SecuredDebtMember2022-07-310001832433ferg:PrivatePlacementNotesDueSeptember2027Memberus-gaap:SecuredDebtMember2023-04-300001832433ferg:PrivatePlacementNotesDueSeptember2027Memberus-gaap:SecuredDebtMember2022-07-310001832433us-gaap:SeniorNotesMemberferg:UnsecuredSeniorNotesDueOctober2028Member2023-04-300001832433us-gaap:SeniorNotesMemberferg:UnsecuredSeniorNotesDueOctober2028Member2022-07-310001832433ferg:UnsecuredSeniorNotesDueJune2030Memberus-gaap:SeniorNotesMember2023-04-300001832433ferg:UnsecuredSeniorNotesDueJune2030Memberus-gaap:SeniorNotesMember2022-07-310001832433ferg:UnsecuredSeniorNotesDueApril2027Memberus-gaap:SeniorNotesMember2023-04-300001832433ferg:UnsecuredSeniorNotesDueApril2027Memberus-gaap:SeniorNotesMember2022-07-310001832433us-gaap:SeniorNotesMemberferg:UnsecuredSeniorNotesDueApril2032Member2023-04-300001832433us-gaap:SeniorNotesMemberferg:UnsecuredSeniorNotesDueApril2032Member2022-07-310001832433ferg:BilateralLoanAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-03-250001832433ferg:BilateralLoanAgreementMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-03-252022-03-250001832433ferg:VariableRateTermLoanMemberus-gaap:UnsecuredDebtMember2022-10-070001832433ferg:VariableRateTermLoanMemberferg:SecuredOvernightFinancingRateSOFRMemberus-gaap:UnsecuredDebtMember2022-10-072022-10-070001832433ferg:VariableRateTermLoanMemberferg:SecuredOvernightFinancingRateSOFRMemberus-gaap:UnsecuredDebtMembersrt:MinimumMember2022-10-072022-10-070001832433ferg:VariableRateTermLoanMemberferg:SecuredOvernightFinancingRateSOFRMembersrt:MaximumMemberus-gaap:UnsecuredDebtMember2022-10-072022-10-070001832433us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-10-070001832433ferg:SecuredOvernightFinancingRateSOFRMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2022-10-072022-10-070001832433ferg:SecuredOvernightFinancingRateSOFRMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMembersrt:MinimumMember2022-10-072022-10-070001832433ferg:SecuredOvernightFinancingRateSOFRMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberus-gaap:LineOfCreditMember2022-10-072022-10-070001832433us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2023-04-300001832433ferg:VariableRateReceivableSecuritizationMemberus-gaap:CorporateDebtSecuritiesMember2022-10-310001832433ferg:VariableRateReceivableSecuritizationMemberus-gaap:CorporateDebtSecuritiesMember2022-10-012022-10-310001832433ferg:VariableRateReceivableSecuritizationMemberferg:SecuredOvernightFinancingRateSOFRMemberus-gaap:CorporateDebtSecuritiesMember2022-10-012022-10-310001832433us-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2023-04-300001832433us-gaap:FairValueInputsLevel2Memberus-gaap:SeniorNotesMember2022-07-310001832433us-gaap:FairValueInputsLevel2Memberus-gaap:SecuredDebtMember2023-04-300001832433us-gaap:FairValueInputsLevel2Memberus-gaap:SecuredDebtMember2022-07-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2022-07-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-07-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2022-08-012022-10-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-08-012022-10-3100018324332022-08-012022-10-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2022-10-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-10-310001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-10-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2022-11-012023-01-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-11-012023-01-3100018324332022-11-012023-01-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2023-01-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-01-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2023-02-012023-04-300001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-02-012023-04-300001832433us-gaap:AccumulatedTranslationAdjustmentMember2023-04-300001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-04-300001832433us-gaap:AccumulatedTranslationAdjustmentMember2021-07-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-07-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2021-08-012021-10-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-08-012021-10-3100018324332021-08-012021-10-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2021-10-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-10-310001832433us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-10-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2021-11-012022-01-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-11-012022-01-3100018324332021-11-012022-01-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2022-01-310001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-01-310001832433us-gaap:AccumulatedTranslationAdjustmentMember2022-02-012022-04-300001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-02-012022-04-300001832433us-gaap:AccumulatedTranslationAdjustmentMember2022-04-300001832433us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-04-300001832433us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-02-012023-04-300001832433us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-02-012022-04-300001832433us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-08-012023-04-300001832433us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-08-012022-04-300001832433us-gaap:CommonStockMember2023-02-012023-04-300001832433us-gaap:CommonStockMember2022-02-012022-04-300001832433us-gaap:CommonStockMember2022-08-012023-04-300001832433us-gaap:CommonStockMember2021-08-012022-04-300001832433us-gaap:TreasuryStockMember2023-01-310001832433us-gaap:TreasuryStockMember2022-01-310001832433us-gaap:TreasuryStockMember2022-07-310001832433us-gaap:TreasuryStockMember2021-07-310001832433us-gaap:TreasuryStockMember2023-02-012023-04-300001832433us-gaap:TreasuryStockMember2022-02-012022-04-300001832433us-gaap:TreasuryStockMember2022-08-012023-04-300001832433us-gaap:TreasuryStockMember2021-08-012022-04-300001832433us-gaap:TreasuryStockMember2023-04-300001832433us-gaap:TreasuryStockMember2022-04-300001832433ferg:EmployeeBenefitTrustMember2022-02-012022-04-30ferg:trust00018324332021-09-3000018324332022-03-3100018324332022-09-3000018324332021-09-012023-04-300001832433us-gaap:SubsequentEventMember2023-06-300001832433us-gaap:EmployeeStockMemberferg:FergusonGroupOrdinarySharePlanMember2022-08-012023-04-300001832433ferg:FergusonGroupPerformanceSharePlanMemberus-gaap:EmployeeStockMember2022-08-012023-04-300001832433us-gaap:EmployeeStockMemberferg:FergusonGroupLongTermIncentivePlanMember2022-08-012023-04-300001832433us-gaap:EmployeeStockMemberferg:FergusonGroupLongTermIncentivePlanMember2023-04-300001832433us-gaap:EmployeeStockMemberferg:FergusonGroupLongTermIncentivePlanMember2022-07-310001832433ferg:TimeVestedAwardsMember2022-08-012023-04-300001832433us-gaap:PerformanceSharesMember2022-08-012023-04-300001832433ferg:LongTermIncentiveAwardsLiabilitySettledMember2022-08-012023-04-300001832433ferg:PerformanceShareAdjustmentsMember2022-08-012023-04-300001832433ferg:TimeVestedPerformanceVestedAndLongTermIncentiveAwardsMember2022-08-012023-04-300001832433ferg:MonarkPremiumApplianceMember2022-08-310001832433ferg:GuarinoDistributingCompanyLLCMember2022-11-300001832433ferg:AirefcoIncMember2022-12-310001832433ferg:PowerProcessEquipmentMember2022-12-310001832433ferg:PipelinesIncMember2023-01-310001832433us-gaap:TradeNamesMember2023-04-300001832433us-gaap:CustomerRelationshipsMember2023-04-300001832433us-gaap:OtherIntangibleAssetsMember2023-04-300001832433srt:MinimumMember2022-08-012023-04-300001832433srt:MaximumMember2022-08-012023-04-300001832433ferg:NonExecutiveDirectorsMember2023-02-012023-04-300001832433ferg:NonExecutiveDirectorsMember2022-08-012023-04-300001832433ferg:NonExecutiveDirectorsMember2022-02-012022-04-300001832433ferg:NonExecutiveDirectorsMember2021-08-012022-04-30

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, 2023

☐			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)

(Address of principal executive offices and zip code)

(Registrant’s telephone number, including area code)

Not Applicable

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

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.

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, 2023, the number of outstanding ordinary shares was 204,785,917.

Ferguson plc (the “Company”), a corporation organized under the laws of Jersey, Channel Islands, qualifies as a foreign private issuer in the United States for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company voluntarily has chosen to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K with the United States Securities and Exchange Commission (the “SEC”) instead of filing on the reporting forms available to foreign private issuers. As of January 31, 2023, the Company has determined it will no longer qualify as a foreign private issuer, effective as of August 1, 2023, and will be considered a U.S. domestic issuer.

			PAGE

CERTAIN TERMS			1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			1
PART I – FINANCIAL INFORMATION			3
Item 1. Financial Statements			3
Condensed Consolidated Statements of Earnings			3
Condensed Consolidated Statements of Comprehensive Income			4
Condensed Consolidated Balance Sheets			5
Condensed Consolidated Statements of Shareholders’ Equity			6
Condensed Consolidated Statements of Cash Flows			8
Notes to the Condensed Consolidated Financial Statements			9
Note 1: Summary of significant accounting policies			9
Note 2: Revenue and segment information			11
Note 3: Earnings per share			13
Note 4: Impairments and other charges			13
Note 5: Income tax			14
Note 6: Debt			15
Note 7: Assets and liabilities at fair value			17
Note 8: Commitments and contingencies			17
Note 9: Accumulated other comprehensive loss			17
Note 10: Retirement benefit obligations			18
Note 11: Shareholders’ equity			19
Note 12: Share-based compensation			19
Note 13: Acquisitions			21
Note 14: Related party transactions			22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			32
PART II - OTHER INFORMATION			33
Item 1. Legal Proceedings			33
Item 1A. Risk Factors			33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 5. Other Information			34
Item 6. Exhibits			35
SIGNATURES			36

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. 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 2023” or similar references refer to the fiscal year ended July 31, 2023.

Certain information included in this quarterly report on Form 10-Q (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, projected interest in and ownership of our ordinary shares by domestic U.S. investors, plans and objectives for future capabilities, 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,” “potential,” “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:

•weakness in the economy, market trends, uncertainty and other conditions in the markets in which we operate, and other factors beyond our control, including any macroeconomic or other consequences of the current conflict in Ukraine;

•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 (“IT”) systems;

•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;

•failure of a key IT 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, increased delivery costs or lack of availability;

•failure to effectively manage and protect our facilities and inventory;

•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 if 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 foreign currency and product prices (e.g., commodity-priced materials, inflation/deflation);

•funding risks related to our defined benefit pension plans;

•legal proceedings as well as failure to comply with domestic and foreign laws and regulations or the occurrence of unforeseen developments such as litigation;

•risks associated with the relocation of our primary listing to the United States and any volatility in our share price and shareholder base in connection therewith;

•the costs and risk exposure relating to environmental, social and governance (“ESG”) matters;

•adverse impacts caused by the COVID‐19 pandemic (or related variants); 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, 2022 as filed with the SEC on September 27, 2022 (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.

Item 1.Financial Statements

Ferguson plc (the “Company”) (NYSE: FERG; LSE: FERG) is a public company limited by shares incorporated in Jersey under the Companies (Jersey) Law 1991 (as amended). The Company is a value-added distributor in North America providing expertise, solutions and products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. We exist to make our customers’ complex projects simple, successful and sustainable. Ferguson is headquartered in the United Kingdom (“U.K.”), with its operations and associates solely focused on North America and managed from Newport News, Virginia. The Company’s registered office is 13 Castle Street, St Helier, Jersey, JE1 1ES, Channel Islands.

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 the disclosures normally required in annual consolidated financial statements. The unaudited condensed consolidated financial statements, in the opinion of management, contain all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. The July 31, 2022 condensed consolidated balance sheet was derived from the audited financial statements.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report. The financial results for the interim periods may not be indicative of the financial results for the entire fiscal year.

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. Actual results may differ from those estimates.

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.

Restricted cash primarily consists of deferred consideration for business combinations, subject to various settlement agreements, and is recorded in prepaid and other current assets in the Company’s condensed consolidated balance sheets.

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.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting. This ASU, and subsequent clarifications, provide practical expedients for contract modification accounting related to the transition away from the London Interbank Offered Rate (“LIBOR”) and other interbank offering rates to alternative reference rates. The Company has evaluated the impact of reference rate reform and concluded the impact is not material to the Company’s consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments address how to determine whether a contract liability is recognized by the acquirer in a business combination and provides specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not expect a material impact to the Company’s consolidated financial statements.

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, cash flows or related disclosures.

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. Adjusted operating profit is defined as profit before tax, excluding central and other costs, restructuring costs, impairments and other charges, amortization of acquired intangible assets, net interest expense, 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 details were as follows:

(1)For the three and nine months ended April 30, 2022, corporate restructuring costs related to the incremental costs of the Company’s listing in the United States.

(2)See Note 4 for details regarding impairments and other charges.

Our products are delivered through a common network of distribution centers, branches, specialist sales associates, counter service, showroom consultants and e-commerce. The Company recognizes revenue when a sales arrangement with a customer exists, the transaction price is fixed or determinable 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.

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:

No sales to an individual customer accounted for more than 10% of net sales during any of the periods presented.

The Company is a value-added distributor of products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. We offer a broad line of products, and items are regularly added to and removed from the Company's inventory. Accordingly, it would be impractical to provide sales information by product category due to the way our business is managed and the dynamic nature of the inventory offered.

Basic earnings per share is calculated using our weighted-average outstanding ordinary shares. Diluted earnings per share is calculated using our weighted-average outstanding ordinary shares and the dilutive effect of share awards as determined under the treasury stock method.

The following table shows the calculation of diluted shares:

Ferguson manages its affairs so that it is centrally managed and controlled in the U.K. and therefore has its tax residency in the U.K. The 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 Ferguson’s operations are based. Accordingly, the consolidated income tax rate is a composite rate reflecting earnings in various locations and the applicable 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:

During the year-to-date period of fiscal 2023, there have been no material changes to the Company’s unrecognized tax benefits when compared to those items disclosed in the Annual Report.

The Company’s debt obligations consisted of the following:

During the first quarter of fiscal 2023, the 3.43% notes due in September 2022 were repaid at maturity.

The Company previously maintained an unsecured $250 million 364-day revolving facility (the “Bilateral Loan Facility”) governed by the Revolving Facility Agreement, dated March 25, 2022, among the Company, Ferguson UK Holdings Limited, a wholly-owned subsidiary of the Company (“Ferguson UK”), Sumitomo Mitsui Banking Corporation, London Branch, as lead arranger, the lenders party thereto and SMBC Bank International PLC, as agent for the lenders (the “Bilateral Loan Agreement”).

Effective December 29, 2022, the Company voluntarily cancelled the Bilateral Loan Facility in accordance with the terms of the Bilateral Loan Agreement. At the time of cancellation, no amounts were outstanding under the Bilateral Loan Agreement.

The Credit Agreement, dated October 7, 2022, among the Company, Ferguson UK, the lenders party thereto and the agent of the lenders party thereto (the “Term Loan Agreement”) provides for term loans in an aggregate principal amount of $500 million, the proceeds of which may be used for general corporate purposes. The Term Loan Agreement will mature on October 7, 2025.

Term loans will bear interest at a rate per annum of the Term SOFR Rate, as defined in the Term Loan Agreement, plus a credit spread adjustment of 10 basis points plus a margin ranging from 100 to 150 basis points, determined on the basis of the Company’s corporate credit ratings (or if public credit ratings are not published, senior unsecured debt ratings).

Ferguson UK may voluntarily prepay the term loans, in whole or in part, without premium or penalty, but subject to reimbursement of funding losses with respect to certain prepayments. Term loans that are prepaid may not be reborrowed.

The Term Loan Agreement contains representations and warranties, affirmative and negative covenants and events of default, including, but not limited to, restrictions on the incurrence of non-guarantor subsidiary indebtedness, additional liens, mergers and sales of assets and changes in nature of business, in each case, subject to certain conditions, exceptions and thresholds. The Term Loan Agreement also requires the Company to maintain on a consolidated basis, as of the last day of each fiscal quarter, a maximum net leverage ratio of 3.50 to 1.00, with a step-up to 4.00 to 1.00 with respect to each of the four fiscal quarters ending immediately after certain material acquisitions. The Company unconditionally and irrevocably guarantees the term loans.

The Company maintains a revolving credit facility (the “Revolving Facility”) under the Amendment and Restatement Agreement, dated October 7, 2022, among the Company, Ferguson UK, the lenders and arrangers party thereto, and the agent of the lenders party thereto (as amended from time to time, the “Revolving Facility Agreement”). The Revolving Facility has aggregate total available credit commitments of $1.35 billion. Borrowings under the Revolving Facility bear interest at a per annum rate of Term SOFR (as defined in the Revolving Facility Agreement) plus a credit spread adjustment of 10 basis points plus a margin ranging from 20 to 75 basis points, determined on the basis of the Company’s corporate credit ratings (or if public credit ratings are not published, senior unsecured debt ratings).

The Company is required to pay a quarterly commitment fee and utilization fee in certain circumstances. All obligations under the Revolving Facility Agreement are unconditionally guaranteed by the Company and Ferguson UK, to the extent each entity is not the borrower with respect to such obligation.

The Revolving Facility Agreement contains affirmative and negative covenants that, among other things, restrict, subject to certain conditions, exceptions and thresholds, the ability of the Company and its subsidiaries to incur indebtedness, grant liens on present or future assets or revenues, sell assets or engage in mergers or consolidations. The Revolving Facility Agreement also contains events of default, including, among others, cross-default and cross-acceleration provisions, in each case, subject to grace periods and thresholds. The Revolving Facility terminates in March 2026.

The Company maintains a Receivables Securitization Facility (as amended from time to time, the “Receivables Facility”) governed by the Receivables Purchase Agreement dated July 31, 2013, as amended from time to time. As of October 31, 2022, the Receivables Facility consists of accounts receivable funding for up to $1.1 billion, including a swingline for up to $100 million in same day funding, terminating on October 7, 2025. The Company has available to it an accordion feature whereby the facility may be increased up to $1.5 billion subject to lender participation. Interest is payable under the Receivables Facility at a rate of Term SOFR (as defined in the Receivables Facility) plus a credit spread adjustment of 10 basis points plus a margin. The Company does not factor its accounts receivable as the Receivables Facility is the Company’s only secured borrowing.

The Receivables Facility contains affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its subsidiaries party thereto from granting additional liens on the accounts receivable, selling certain assets or engaging in acquisitions, mergers or consolidations, or, in the case of the borrower, incurring other indebtedness.

The Receivables Facility also contains events of default and cross-default provisions, including requirements that our performance in relation to accounts receivable remains at set levels (specifically, among other things, relating to timely payments being received from debtors on the accounts receivable and to the amount of accounts receivable written off as bad debt) and that a required level of accounts receivable be generated and available to support the borrowings under the arrangements. As of April 30, 2023, $175 million in borrowings were outstanding under the Receivables Facility.

The Company pays customary fees regarding unused amounts to maintain the availability under the Receivables Facility.

The Company has not changed its valuation techniques for measuring 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, approximate the fair values of those instruments.

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 as of April 30, 2023 and July 31, 2022 was $355 million.

Carrying amounts and the related estimated fair value (Level 2) of the Company’s long-term debt were as follows:

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 likely to arise. 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.

The change in accumulated other comprehensive loss was as follows:

Amounts reclassified from accumulated other comprehensive income related to pension and other post-retirement items include the related income tax impacts. Such amounts consisted of the following:

The Company maintains pension plans in the U.K. and Canada. The components of net periodic pension cost, which are included in Other expense, net in the condensed consolidated statements of earnings, were as follows:

The impact of exchange rate fluctuations is included on the amortization line above.

The following table presents a summary of the Company’s share activity:

Two Employee Benefit Trusts have been established in connection with the Company’s discretionary share option plans and long-term incentive plans. Dividends due on shares held by the Employee Benefit Trusts are waived in accordance with the provisions of the trust deeds. At April 30, 2023 and July 31, 2022, the shares held in trusts had market values of $39 million and $107 million, respectively.

In September 2021, the Company announced a program to repurchase up to $1.0 billion of shares. In March 2022 and September 2022, the Company announced an increase in its share repurchase program of $1.0 billion and $0.5 billion, respectively. As of April 30, 2023, the Company has completed $2.3 billion of the total announced $2.5 billion repurchase program. The Company is currently purchasing shares under an irrevocable and non-discretionary arrangement with $114 million in accrued repurchases remaining, which is recorded as a current liability in the condensed consolidated balance sheet.

In June 2023, the Company extended the share repurchase program by an additional $0.5 billion, bringing the total authorized repurchases to $3.0 billion.

The Ferguson Group Ordinary Share Plan 2019 (the “OSP”) and the Ferguson Group Performance Ordinary Share Plan 2019 (the “POSP”) each provides for the grant of equity awards without limitation on the number of ordinary shares that can be awarded under the plan. The Ferguson Group Long-Term Incentive Plan 2019 (“LTIP”) contains guidelines that limit the maximum number of shares that can be granted under this plan.

Awards granted under the OSP vest over a period of time (“time vested”), typically three years. Dividends do not accrue during the vesting period. The fair value of the award is based on the closing share price on the date of grant.

Awards granted under the POSP vest at the end of a three-year performance cycle (“performance vested”). The number of ordinary shares issued upon vesting varies based upon the Company’s performance against an adjusted operating profit measure. Dividends do not accrue during the vesting period. The fair value of the award is based on the closing share price on the date of grant.

Awards granted under the LTIP vest at the end of a three-year performance period. For grants awarded prior to fiscal 2023, the number of ordinary shares to be issued upon vesting will vary based on Company measures of inflation-indexed earnings per share (“EPS”), cash flow and total shareholder return (“TSR”) compared to a peer company set. Based on the performance conditions of these awards granted prior to fiscal 2023, these LTIP grants are treated as liability-settled awards. As such, the fair value of these awards is initially determined at the date of grant, and is remeasured at each balance sheet date until the liability is settled. Dividends accrue during the vesting period. As of April 30, 2023 and July 31, 2022, the total liability recorded in connection with these grants was $10 million and $11 million, respectively.

In the first quarter of fiscal 2023, the Company granted awards under the LTIP in which the ordinary shares to be issued upon vesting vary based on fixed measures of Company defined EPS and return on capital employed (“ROCE”), as well as TSR compared to a peer company set. Dividend equivalents accrue during the vesting period. Based on the performance conditions of these awards granted in the first quarter of fiscal 2023, these grants are treated as equity-settled awards (“LTIP, equity-settled”) with the fair value determined on the date of grant. Specifically, the fair value of such awards that vest based on achievement of the EPS and ROCE measures was equal to the closing share price on the date of grant. The fair value of the awards that vest based on TSR was determined using a Monte-Carlo simulation, which estimated the fair value based on the Company's share price activity relative to the peer comparative set over the expected term of the award, risk-free interest rate, expected dividends, and the expected volatility of the shares of the Company and that of the peer company set.

The following table summarizes the share-based incentive awards activity for the nine months ended April 30, 2023:

The following table relates to time vested, performance vested and long-term incentive awards activity:

The following table relates to all share-based compensation awards:

The total unrecognized share-based compensation expense at April 30, 2023 was $60 million and is expected to be recognized over a weighted-average period of 1.7 years.

The Company acquired the following businesses during the nine months ended April 30, 2023. Each of the acquired businesses is engaged in the distribution of plumbing and heating products and was acquired to support growth, primarily in the United States. All transactions have been accounted for by the acquisition method of accounting.

The following table summarizes the preliminary purchase price allocation for the assets acquired and liabilities assumed in regards to the Company's acquisitions:

(In millions)
Intangible assets:
Trade names and brands			$4
Customer relationships			62
Other			1
Right of use assets			17
Property, plant and equipment			5
Inventories			87
Trade and other receivables			32
Lease liabilities			(17)
Trade and other payables			(39)
Provisions			(4)
Total			148
Goodwill			52
Consideration			$200
Satisfied by:
Cash			$179
Deferred consideration			$21
Total consideration			$200

The fair values of the assets acquired are considered preliminary and are based on management’s best estimates. Further adjustments may be necessary when additional information becomes available about events that existed at the date of acquisition. Amendments to fair value estimates may be made to these figures during the measurement period following the date of acquisition. As of the date of this Quarterly Report, the Company has made all known material adjustments.

The fair value estimates of intangible assets are considered non-recurring Level 3 measurements within the fair value hierarchy and are estimated as of each respective acquisition date.

The goodwill on these acquisitions is attributable to the anticipated profitability of the new markets and product ranges to which the Company has gained access and additional profitability, operating efficiencies and other synergies available in connection with existing markets. All goodwill acquired during the nine months ended April 30, 2023 is in the United States segment with all goodwill expected to be deductible for tax purposes.

Deferred consideration represents the expected payout due to certain sellers of acquired businesses that is subject to either 1) a contractual settle-up period or 2) contingent on achieving contractually defined performance metrics. If the deferred consideration is contingent on achieving performance metrics, the liability is estimated using assumptions regarding the expectations of an acquiree’s ability to achieve the contractually defined performance metrics over a period of time that typically spans one to three years. When ultimately paid, deferred consideration is reported as a cash outflow from financing activities.

The businesses acquired during the year-to-date period of fiscal 2023 contributed $122 million to net sales and $3 million in losses to the Company’s income before income tax, including acquired intangible asset amortization, transaction and integration costs for the period between the applicable date of acquisition and April 30, 2023.

The net outflow of cash related to business acquisitions is as follows:  

(1) Included in other financing activities in the Condensed Consolidated Statements of Cash Flows.

If each acquisition had been completed on the first day of the prior fiscal year, the Company’s unaudited pro forma net sales would have been:

			Three months ended												Nine months ended
			April 30,												April 30,
(In millions)			2023						2022						2023						2022
Pro forma net sales			$7,140						$7,366						$22,005						$20,830

The impact on income before income tax, including additional amortization, transaction costs and integration costs would not be material in the three and nine months ended April 30, 2023 and 2022.

These unaudited pro forma results do not necessarily represent financial results that would have been achieved had the acquisition actually occurred at the beginning of the prior fiscal year.

For the three and nine month periods ended April 30, 2023, the Company purchased $9 million and $22 million, respectively, compared with $5 million and $16 million in 2022, respectively, of delivery, installation and related administrative services from companies that are, or are indirect wholly-owned subsidiaries of companies that are, controlled or significantly influenced by a Ferguson non-executive director. No material amounts are due to such companies. The services were purchased on an arm’s-length basis.

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 and nine month periods ended April 30, 2023 and 2022, 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 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 or discussed in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report.

Ferguson is a value-added distributor in North America providing expertise, solutions and products from infrastructure, plumbing and appliances to HVAC, fire, fabrication and more. Ferguson is headquartered in the U.K., with its operations and associates solely focused on North America and managed from Newport News, Virginia.

The following table presents highlights of the Company’s performance for the periods below:

(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 third quarter of fiscal 2023, net sales decreased by 2.0% compared to the third quarter of fiscal 2022, primarily due to lower sales volume and one fewer sales day, partially offset by price inflation (approximately 5%), as well as incremental revenue from acquisitions.

For the third quarter of fiscal 2023, income from continuing operations decreased by 38.5% compared to the third quarter of fiscal 2022. This decline was primarily due to impairment and other charges related to certain IT projects and branch closures, as well as lower sales and the associated gross profit. Adjusted operating profit decreased by 12.0% in the third quarter of fiscal 2023, reflecting lower sales and the associated gross profit compared to the same period in the prior fiscal year.

For the third quarter of fiscal 2023, diluted earnings per share from continuing operations was $1.63 (adjusted diluted earnings per share: $2.20), decreasing 34.8% compared to the prior fiscal year period (12.0% on an adjusted basis) due to lower income from continuing operations, though partially offset by the impact of share repurchases.

Net cash provided by operating activities from continuing operations increased to $1.8 billion in the year-to-date period of fiscal 2023 compared to $681 million in the same period of fiscal 2022, primarily reflecting improved working capital management, particularly inventory.

Net sales were $7.1 billion in the third quarter of fiscal 2023, a decrease of $0.1 billion, or 2.0%, compared to the same period in fiscal 2022. The decrease in net sales was primarily driven by lower sales volume, as well as a 1.6% decrease due to one fewer sales day compared to the same period in the prior fiscal year. These decreases were partially offset by price inflation of approximately 5% and a 2.4% increase in incremental sales from acquisitions. The Company’s decrease in net sales was primarily driven by its United States segment due to declines in the residential end markets, partially offset by growth in non-residential sales compared to the prior fiscal year period.

Net sales were $21.9 billion in the year-to-date period of fiscal 2023, an increase of $1.3 billion, or 6.3%, compared to the same period in fiscal 2022. The increase in net sales was primarily driven by price inflation of approximately 10%, as well as a 2.6% increase in sales from acquisitions, partially offset by lower sales volume. On a year-to-date basis, the Company’s sales growth was driven by its United States segment, growing 6.8%, mainly due to growth in the non-residential end markets, along with solid growth in the first half of fiscal 2023 in residential markets.

For further discussion on the Company’s net sales, see the “Segment results” section below.

Gross profit was $2.1 billion in the third quarter of fiscal 2023, a decrease of $0.1 billion, or 2.9%, compared to the same period in fiscal 2022, primarily reflecting decreased net sales. Gross profit as a percentage of sales was 30.0% and 30.3% in the third quarters of fiscal 2023 and fiscal 2022, respectively. The decrease of 0.3% primarily reflected the price realization benefit in the prior fiscal year period due to price inflation which exceeded the weighted average cost of inventory sold in certain commodity categories.

Gross profit was $6.6 billion in the year-to-date period of fiscal 2023, an increase of $0.3 billion, or 4.8%, compared to the same period in fiscal 2022, reflecting higher sales. Gross profit as a percentage of sales was 30.2% and 30.7% in the year-to-date period of fiscal 2023 and fiscal 2022, respectively. The factors impacting the year-to-date comparison were largely the same as those noted above for the quarter.

SG&A expenses were $1.4 billion in the third quarter of fiscal 2023, an increase of $20 million, or 1.4%, compared to the same period in fiscal 2022. SG&A as a percentage of sales was 20.1% and 19.4% in the third quarter of fiscal 2023 and fiscal 2022, respectively. The increase in SG&A as a percent of sales primarily reflects increased infrastructure and fleet costs, partially offset by the Company’s management of its labor base relative to sales growth.

SG&A expenses were $4.4 billion in the year-to-date period of fiscal 2023, an increase of $0.3 billion, or 7.0%, compared to the same period in fiscal 2022. SG&A as a percentage of sales was 20.0% and 19.9% in the year-to-date period of fiscal 2023 and fiscal 2022, respectively. The increase in SG&A as a percent of sales primarily reflects increased infrastructure costs, partially offset by the operating cost leverage resulting from the Company’s management of its labor base relative to sales growth.

Net interest expense was $48 million in the third quarter of fiscal 2023 compared to $22 million in the third quarter of fiscal 2022. The change in net interest expense in the year-over-year comparison was primarily due to an increase in average debt related to the Company’s $1.0 billion unsecured senior notes offering at the end of the third quarter of fiscal 2022, the $500 million of term loans entered into during the first quarter of fiscal 2023, both of which were executed to provide additional flexibility to invest in the Company’s capital priorities. In addition to the above, and to a lesser extent, the higher interest expense compared to the third quarter of fiscal 2022 was due to increased interest rates on the Company’s variable rate debt.

In the year-to-date periods, net interest expense was $136 million in fiscal 2023 compared with $71 million in fiscal 2022. The factors impacting the year-to-date comparison were largely the same as those noted for the quarter.

Income tax expense was $111 million for the third quarter of fiscal 2023, a decrease of $33 million, or 22.9%, compared to the same period in fiscal 2022 due to the decrease in income before taxes. In the year-to-date period of fiscal 2023, income tax expense was $429 million, an increase of $13 million, or 3.1%, compared to the same period in fiscal 2022. The Company’s effective tax rates attributable to continuing operations were 24.8% and 20.9% for the third quarters of fiscal 2023 and 2022, respectively. The effective tax rates were 24.7% and 21.5% for the year-to-date periods of fiscal 2023 and 2022, respectively. For each of the year-over-year comparisons, the increase in the effective tax rate was mainly due to discrete tax benefits recorded in fiscal 2022 related to prior year adjustments and releases of uncertain tax positions following the closure of tax audits.

Income from continuing operations for the third quarter of fiscal 2023 was $336 million, a decrease of $210 million, or 38.5%, compared to the same period in fiscal 2022 due to the elements described in the sections above.

Income from continuing operations for the year-to-date period of fiscal 2023 was $1,305 million, a decrease of $212 million, or 14.0%, compared to the same period in fiscal 2022 due to the elements described in the sections above.

Net sales for the United States segment were $6.8 billion in the third quarter of fiscal 2023, a decrease of $0.1 billion, or 1.6%, compared to the prior year period. The decrease in net sales was primarily driven by lower volume, as well as a 1.6% impact from one fewer sales day. These decreases were partially offset by price inflation of approximately 5%, as well as a 2.5% increase in sales from acquisitions. Sales in residential markets, which comprise over half of segment net sales, decreased 5.8%, driven by a reduction in new construction due to slowing housing starts and permit activity, partially offset by more resilient RMI sales. Sales growth in non-residential markets was 3.4%, with growth in each of the civil/infrastructure, commercial and industrial end markets.

On a year-to-date basis, net sales for the United States segment were $20.9 billion in fiscal 2023, an increase of $1.3 billion, or 6.8%, compared to the same prior year period. The increase in net sales was primarily driven by price inflation of approximately 10%, as well as a 2.7% increase in sales from acquisitions. These increases were partially offset by lower volume. Sales growth in non-residential markets was 11.2%, with growth in each of the civil/infrastructure, commercial and industrial end markets. Sales growth in residential markets was 3.2%, driven by higher RMI sales, partially offset by lower sales in new construction in light of slowing housing starts and permit activity.

The following table illustrates net sales growth by end market: 

Adjusted operating profit for the United States segment was $664 million for the third quarter of fiscal 2023, a decrease of $72 million, or 9.8%, compared to the same prior year period, primarily reflecting lower gross profit in light of lower sales, as well as increased infrastructure and fleet costs, partially offset by the operating cost leverage resulting from the Company’s management of its labor base and lower variable incentive costs.

On a year-to-date basis, adjusted operating profit for the United States segment was $2,088 million in fiscal 2023, an increase of $24 million, or 1.2%, compared to the same prior year period, primarily due to net sales growth and labor cost leverage.

Net sales for the Canada segment were $313 million in the third quarter of fiscal 2023, a decrease of $33 million, or 9.5%, compared to the same period in fiscal 2022. This decrease in net sales was primarily due to a 6.2% impact of foreign currency exchange rates and lower volumes, as well as a 1.8% impact due to fewer sales days. These impacts were partially offset by sales price inflation of approximately 6%.

On a year-to-date basis, net sales for the Canada segment were $1,033 million in fiscal 2023, a decrease of $34 million, or 3.2%, compared to the same prior year period. The factors impacting the year-over year comparison were largely the same as for the quarter. The impact of price inflation was approximately 9%.

Adjusted operating profit for the Canada segment in the third quarter and year-to-date period of fiscal 2023 decreased compared to the same periods in the prior year, respectively, due to lower sales.

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 measures include adjusted operating profit, adjusted net income, 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 business restructuring charges, corporate restructuring charges, which includes costs associated with the Company’s listing in the United States, 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.

The following table reconciles net income (U.S. GAAP) to adjusted operating profit (non-GAAP):

(1)For the three and nine months ended April 30, 2022, corporate restructuring costs related to the incremental costs of the Company’s listing in the United States.

(2)For the three and nine months ended April 30, 2023, impairments and other charges related to the $107 million in software impairment charges in the United States, as well as $20 million in charges associated with the closure of certain smaller, underperforming branches in the United States.

The following table reconciles net income (U.S. GAAP) to adjusted net income and adjusted EPS - diluted (non-GAAP):