Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Ferguson plc:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)			42
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 1147)			44
Consolidated Statements of Earnings			45
Consolidated Statements of Comprehensive Income			46
Consolidated Balance Sheets			47
Consolidated Statements of Shareholders’ Equity			48
Consolidated Statements of Cash Flows			49
Notes to Consolidated Financial Statements			50
Note 1. Summary of significant accounting policies			50
Note 2. Revenue and segment information			57
Note 3. Weighted average shares			59
Note 4. Income tax			60
Note 5. Property, plant and equipment			62
Note 6. Leases			63
Note 7. Goodwill			64
Note 8. Other intangible assets			65
Note 9. Debt			66
Note 10. Fair value measurements			69
Note 11. Commitments and contingencies			69
Note 12. Accumulated other comprehensive loss			70
Note 13. Retirement benefit obligations			71
Note 14. Shareholders’ equity			75
Note 15. Share-based compensation			76
Note 16. Acquisitions			77
Note 17. Related party transactions			79
Ferguson Enterprises Inc.:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)			80
Ferguson Enterprises Inc., Consolidated Balance Sheet			81
Notes to Ferguson Enterprises Inc. Consolidated Financial Statement			82

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Ferguson Enterprises Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ferguson plc and subsidiaries (the "Company") as of July 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income, shareholders' equity, and cash flows, for each of the two years in the period ended July 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended July 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of July 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 25, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory Reserves— Refer to Note 1 to the Financial Statements

Critical Audit Matter Description

The Company had inventories of $4.2 billion as of July 31, 2024.

Inventory reserves are recorded against slow-moving, obsolete, and damaged inventories for which the net realizable value is estimated to be less than the cost. The reserve is estimated based on the Company’s current knowledge and judgment with respect to inventory levels, sales trends, and historical experience.

We identified certain components of the inventory reserve as a critical audit matter due to the inherent uncertainty and higher degree of auditor judgment and effort needed to evaluate sales trends and experience that were used in determining the inventory reserve.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to certain components of the inventory reserve included the following:

• Developed an independent expectation of the inventory reserve at year end based on historical ratios and compared the inventory reserve against our expectation;

• Recalculated the inventory reserve in accordance with the Company’s policy for a sample of certain inventory items; and

• Evaluated management’s estimated sales activity for a selection of prior year inventory items by comparing actual subsequent sales activity to management’s prior year estimate of sales used in developing certain inventory reserves.

/s/ Deloitte & Touche LLP

Richmond, VA

September 25, 2024

We have served as the Company's auditor since 2022.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Ferguson plc

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of earnings, comprehensive income, shareholder’s equity, and cash flows of Ferguson plc and its subsidiaries (the “Company”) for the period ended July 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the period ended July 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Deloitte LLP

London, United Kingdom September 27, 2022

We began serving as the Company's auditor in 2016. In 2022 we became the predecessor auditor.

Ferguson plc

Consolidated Statements of Earnings

			For the years ended July 31,
(In millions, except per share amounts)			2024						2023						2022
Net sales			$29,635						$29,734						$28,566
Cost of sales			(20,582)						(20,709)						(19,810)
Gross profit			9,053						9,025						8,756
Selling, general and administrative expenses			(6,066)						(5,920)						(5,635)
Impairments and other charges			—						(125)						—
Depreciation and amortization			(335)						(321)						(301)
Operating profit			2,652						2,659						2,820
Interest expense, net			(179)						(184)						(111)
Other expense, net			(9)						(11)						(1)
Income before income taxes			2,464						2,464						2,708
Provision for income taxes			(729)						(575)						(609)
Income from continuing operations			1,735						1,889						2,099
Income from discontinued operations (net of tax)			—						—						23
Net income			$1,735						$1,889						$2,122
Earnings per share - Basic:
Continuing operations			$8.55						$9.15						$9.64
Discontinued operations			—						—						0.11
Total			$8.55						$9.15						$9.75
Earnings per share - Diluted:
Continuing operations			$8.53						$9.12						$9.59
Discontinued operations			—						—						0.10
Total			$8.53						$9.12						$9.69
Weighted average number of shares outstanding:
Basic			202.9						206.4						217.7
Diluted			203.5						207.2						218.9

See accompanying Notes to the Consolidated Financial Statements.

Ferguson plc

Consolidated Statements of Comprehensive Income

			For the years ended July 31,
(In millions)			2024						2023						2022
Net income			$1,735						$1,889						$2,122
Other comprehensive (loss) income:
Foreign currency translation adjustments			(32)						(9)						(24)
Pension adjustments, net of tax impacts of $4, $16 and ($11), respectively.			(11)						(49)						(10)
Total other comprehensive loss, net of tax			(43)						(58)						(34)
Comprehensive income			$1,692						$1,831						$2,088

See accompanying Notes to the Consolidated Financial Statements.

Ferguson plc

Consolidated Balance Sheets

			As of July 31,
(In millions, except share amounts)			2024						2023
Assets
Cash and cash equivalents			$571						$601
Accounts receivable, less allowances of $21 and $27, respectively			3,602						3,597
Inventories			4,188						3,898
Prepaid and other current assets			1,020						953
Assets held for sale			29						28
Total current assets			9,410						9,077
Property, plant and equipment, net			1,752						1,595
Operating lease right-of-use assets			1,565						1,474
Deferred income taxes, net			181						300
Goodwill			2,357						2,241
Other intangible assets, net			753						783
Other non-current assets			554						524
Total assets			$16,572						$15,994
Liabilities and shareholders' equity
Accounts payable			$3,410						$3,408
Short-term debt			150						55
Current portion of operating lease liabilities			395						366
Share repurchase liability			—						84
Other current liabilities			1,261						1,516
Total current liabilities			5,216						5,429
Long-term debt			3,774						3,711
Long-term portion of operating lease liabilities			1,198						1,126
Other long-term liabilities			768						691
Total liabilities			10,956						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			864						809
Retained earnings			9,589						8,557
Treasury shares, 30,827,929 and 27,893,680 shares, respectively at cost			(3,936)						(3,425)
Employee Benefit Trust, 0 and 274,031 shares, respectively at cost			—						(46)
Accumulated other comprehensive loss			(931)						(888)
Total shareholders' equity			5,616						5,037
Total liabilities and shareholders' equity			$16,572						$15,994

See accompanying Notes to the Consolidated Financial Statements.

Ferguson plc

Consolidated Statements of Shareholders’ Equity

(In millions, except per share data)			Ordinary Shares			Paid-in Capital			Retained Earnings			Treasury Shares			Employee Benefit Trust			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at July 31, 2021			$30			$704			$6,054			($931)			($58)			($796)			$5,003
Share-based compensation			—			56			—			—			—			—			56
Net income			—			—			2,122			—			—			—			2,122
Other comprehensive loss			—			—			—			—			—			(34)			(34)
Cash dividends: $2.505 per share			—			—			(550)			—			—			—			(550)
Share repurchases			—			—			—			(1,872)			(92)			—			(1,964)
Shares issued under employee share plans			—			—			(51)			21			43			—			13
Other			—			—			19			—			—			—			19
Balance at July 31, 2022			$30			$760			$7,594			($2,782)			($107)			($830)			$4,665
Share-based compensation			—			49			—			—			—			—			49
Net income			—			—			1,889			—			—			—			1,889
Other comprehensive loss			—			—			—			—			—			(58)			(58)
Cash dividends: $4.160 per share			—			—			(858)			—			—			—			(858)
Share repurchases			—			—			—			(667)			—			—			(667)
Shares issued under employee share plans			—			—			(68)			24			61			—			17
Balance at July 31, 2023			$30			$809			$8,557			($3,425)			($46)			($888)			$5,037
Share-based compensation			—			53			—			—			—			—			53
Net income			—			—			1,735			—			—			—			1,735
Other comprehensive loss			—			—			—			—			—			(43)			(43)
Cash dividends: $3.120 per share			—			—			(631)			—			—			—			(631)
Share repurchases			—			—			—			(558)			—			—			(558)
Shares issued under employee share plans			—			—			(72)			47			45			—			20
Other			—			2			—			—			1			—			3
Balance at July 31, 2024			$30			$864			$9,589			($3,936)			$—			($931)			$5,616

See accompanying Notes to the Consolidated Financial Statements.

Ferguson plc

Consolidated Statements of Cash Flows

(In millions)			For the years ended July 31,
2024						2023						2022
Cash flows from operating activities:
Net income			$1,735						$1,889						$2,122
Income from discontinued operations			—						—						(23)
Income from continuing operations			1,735						1,889						2,099
Depreciation and amortization			335						321						301
Share-based compensation			49						51						57
Non-cash impact of impairments			—						125						15
Changes in deferred income taxes			125						(104)						41
Changes in inventories			(252)						607						(927)
Increase in receivables and other assets			(98)						(1)						(780)
Changes in accounts payable and other liabilities			11						(196)						436
Changes in income taxes payable			(45)						24						(103)
Other operating activities			13						11						10
Net cash provided by operating activities of continuing operations			1,873						2,727						1,149
Net cash used in operating activities of discontinued operations			—						(4)						—
Net cash provided by operating activities			1,873						2,723						1,149
Cash flows from investing activities:
Purchase of businesses acquired, net of cash acquired			(260)						(616)						(650)
Capital expenditures			(372)						(441)						(290)
Other investing activities			31						3						(6)
Net cash used in investing activities of continuing operations			(601)						(1,054)						(946)
Net cash provided by investing activities of discontinued operations			—						—						24
Net cash used in investing activities			(601)						(1,054)						(922)
Cash flows from financing activities:
Purchase of own shares by Employee Benefit Trust			—						—						(92)
Purchase of treasury shares			(634)						(908)						(1,545)
Proceeds from sale of treasury shares			17						17						13
Repayments of debt			(2,110)						(2,930)						(575)
Proceeds from debt			2,255						2,775						2,019
Change in bank overdrafts			(16)						(15)						(4)
Cash dividends			(784)						(711)						(538)
Other financing activities			(41)						(35)						(22)
Net cash used in financing activities			(1,313)						(1,807)						(744)
Change in cash, cash equivalents and restricted cash			(41)						(138)						(517)
Effects of exchange rate changes			(3)						22						(40)
Cash, cash equivalents and restricted cash, beginning of period			669						785						1,342
Cash, cash equivalents and restricted cash, end of period			$625						$669						$785
Supplemental Disclosures:
Cash paid for income taxes			$651						$656						$670
Cash paid for interest			188						182						94
Accrued capital expenditures			6						17						16
Accrued dividends			—						152						—

See accompanying Notes to the Consolidated Financial Statements.

Ferguson plc

Notes to the Consolidated Financial Statements

Note 1. Summary of significant accounting policies

Background

As of July 31, 2024, Ferguson plc (including its subsidiaries, the “Company”) was a public company limited by shares incorporated in Jersey under the Companies (Jersey) Law 1991 (as amended) with a registered office of 13 Castle Street, St Helier, Jersey, JE1 1ES, Channel Islands. Ferguson plc was headquartered in the U.K., with its operations and associates solely focused on North America and managed from Newport News, Virginia.

On May 30, 2024, the shareholders of Ferguson plc voted to approve a new corporate structure to domicile Ferguson plc’s ultimate parent company in the United States. Effective on August 1, 2024 (the “Effective Date”), this new corporate structure was implemented by completing a merger transaction (the “Merger”) that resulted in (i) Ferguson plc becoming a direct, wholly owned subsidiary of Ferguson Enterprises Inc., a Delaware corporation, and (ii) the shareholders of Ferguson plc at the designated record time for the Merger no longer holding ordinary shares of Ferguson plc but instead holding shares of common stock of Ferguson Enterprises Inc. As a result of the Merger, Ferguson Enterprises Inc. became the successor issuer to Ferguson plc, which was renamed “Ferguson (Jersey) Limited” and converted into a private company. The corporate headquarters of Ferguson Enterprises Inc., which became the Company’s ultimate parent company on the Effective Date, is located at 751 Lakefront Commons, Newport News, Virginia, 23606.

Ferguson is a value-added distributor serving the specialized professional in the residential and non-residential North American construction market. We help make our customers’ complex projects simple, successful and sustainable by providing expertise and a wide range of products and services from plumbing, HVAC, appliances, and lighting to PVF, water and wastewater solutions, and more. We sell through a common network of distribution centers, branches, counter service and specialist sales associates, showroom consultants and e-commerce channels.

Financial statements and basis of consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification and in conjunction with the rules and regulations of the SEC. These consolidated financial statements include the results of Ferguson plc and its wholly-owned subsidiaries as of July 31, 2024. All intercompany transactions are eliminated from the consolidated financial statements.

Fiscal year

Except as otherwise specified, 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.

Use of estimates

The preparation of the Company's consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions affecting reported amounts in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Accounts receivables

Accounts receivables are stated at their estimated net realizable value. An allowance for credit losses is estimated based on historical write-offs, the age of past due receivables, as well as consideration for forward-looking expectations where appropriate. Accounts receivables are written off when recoverability is assessed as being remote. The charges associated with the allowance for credit losses are recognized in selling, general and administrative expenses (“SG&A”). Subsequent recoveries of amounts previously written off are credited to SG&A.

Advertising and marketing costs

Advertising costs, including digital, television, radio and print, are expensed when the advertisement first appears. Certain marketing, or co-op, contributions are received to fund marketing activities of specific, incremental, and identifiable costs incurred to promote suppliers’ products or activities, which are recorded in SG&A as reductions of the related marketing costs. The following table presents net advertising expenses included in SG&A:

			For the years ended July 31,
(In millions)			2024						2023						2022
Net advertising and marketing costs			$380						$403						$389

Business combinations

The assets and liabilities of acquired businesses are recorded at their fair values at the date of acquisition. The excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits with banks with original maturities of three months or less and overdrafts to the extent there is a legal right of offset and practice of net settlement with cash balances. Cash equivalents also include amounts due from third-party credit card processors as they are both short-term and highly liquid in nature and are typically converted to cash within a few days of the sales transaction.

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

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.

			As of July 31,
(In millions)			2024						2023						2022
Cash and cash equivalents			$571						$601						$771
Restricted cash			54						68						14
Total cash, cash equivalents and restricted cash			$625						$669						$785

Concentrations of credit risk

The Company monitors credit risk associated with those financial institutions with which it conducts significant business. Credit risk, including but not limited to counterparty non-performance under derivative instruments and our credit facilities, is not considered significant, as we primarily conduct business with large, well-established financial institutions. This risk is managed by setting credit and settlement limits for approved counterparties. In addition, the Company has established guidelines that it follows regarding counterparty credit ratings which are monitored regularly, seeking to limit its exposure to any individual counterparty. The concentration of credit risk was deemed not significant as of July 31, 2024 and 2023.

Cost of sales

Cost of sales includes the cost of goods purchased for resale, net of earned rebates, and the cost of bringing inventory to a sellable location and condition. As the Company does not produce or manufacture products, its inventories are finished goods and therefore depreciation related to warehouse facilities and equipment is presented separately within operating expenses.

Derivative instruments and hedging activity

Derivative financial instruments, in particular interest rate swaps and foreign exchange swaps, are used to manage the financial risks arising from the Company’s business activities and the financing of those activities. Derivatives are not used for speculative purposes or trading activities and have generally not been significant.

Derivatives are measured at their fair values and included in other assets and other liabilities in the consolidated balance sheets.

When the hedging relationship is classified as an effective fair value hedge, the carrying amount of the hedged asset or liability is adjusted by the change in its fair value attributable to the hedged risk and the resulting gain or loss is recognized in the consolidated statements of earnings where it will be offset by the change in the fair value of the hedging instrument.

When the hedging relationship is classified as an effective cash flow hedge or as a net investment hedge, changes in the fair value of the hedging instrument arising from the hedged risk are recorded in other comprehensive income. When the hedged item is recognized in the financial statements, the unrealized gains and losses in accumulated other comprehensive loss are either recognized in the consolidated statements of earnings or, if the hedged item results in a non-financial asset, are recognized as an adjustment to its initial carrying amount.

Discontinued operations

When the Company has disposed of, or classified as held for sale, a business component that represents a strategic shift with significant effect on the Company’s operations and financial results, it classifies that business component as a discontinued operation and retrospectively presents discontinued operations for the comparable periods. The post-tax income, or loss, of discontinued operations are shown as a single line on the face of the consolidated statements of earnings. The disposal of the discontinued operation would also result in a gain or loss upon final disposal.

Fair value measurements

The applicable accounting guidance for fair value measurements established a fair value hierarchy. The fair value hierarchy established under this guidance prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted prices, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value from the perspective of a market participant.

Foreign currency

The consolidated financial statements are presented in U.S. dollars.

Results of operations of foreign subsidiaries are translated into U.S. dollars using average exchange rates during the year. The assets and liabilities of those subsidiaries are translated into U.S. dollars using exchange rates at the current rate of exchange on the last day of the reporting period. These foreign currency translation adjustments are included in accumulated other comprehensive loss. Foreign currency transaction gains and losses are not material.

In the event that the Company disposes of a subsidiary that uses a non-U.S. dollar functional currency, the gain or loss on disposal recognized in the consolidated statements of earnings includes the cumulative currency translation adjustments attributable to the subsidiary.

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill is not amortized but is carried at cost less accumulated impairment losses. The Company performs an annual impairment assessment in the fourth quarter of each fiscal year, or more frequently if changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The annual impairment assessment begins with an option to assess qualitative factors to determine whether a quantitative evaluation is appropriate for determining potential goodwill impairment. The quantitative impairment assessment compares the fair value of the reporting unit to its carrying value. The reporting units represent the lowest level within the Company at which the associated goodwill is monitored for management purposes and are based on the markets where the business operates.

The fair value of a reporting unit is determined using the income approach, which requires significant assumptions regarding future operations and the ability to generate cash flows. These assumptions include a forecast of future operating cash flows, capital requirements and a discount rate. Where the carrying value of a reporting unit exceeds the fair value, an impairment loss is recorded in the consolidated statements of earnings.

Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold.

Other intangible assets

Definite-lived intangible assets are primarily comprised of customer relationships, trade names and other intangible assets, acquired as part of business combinations and are capitalized separately from goodwill and carried at cost less accumulated amortization and accumulated impairment losses.

Computer software that is not integral to an item of property, plant and equipment is recognized separately as an intangible asset and is carried at cost less accumulated amortization and accumulated impairment losses. Costs may include software licenses and external and internal costs directly attributable to the development, design and implementation of the computer software. Training and data conversion costs are expensed as incurred.

Customer relationship amortization is calculated using a systematic, accelerated approach based on the timing of future expected cash flows. The straight-line method is used for all other intangible assets.

The estimated useful life of the respective intangible assets are as follows:

Customer relationships			4 – 15 years
Trade names and brands			1 – 15 years
Software			3 – 5 years
Other			1 – 5 years

Impairment of long-lived assets

The recoverability of long-lived assets, including property, plant and equipment, right of use assets and definite-lived intangible assets, is evaluated when events or changes in circumstances indicate that the carrying amounts of an asset group may not be recoverable. Long-lived depreciable and amortizable assets are tested for impairment in asset groups, which are defined as the lowest level of assets that generate identifiable cash flows that are largely independent of the cash flows of other asset groups. A potential impairment has occurred for an asset group if projected future undiscounted cash flows expected to result from the use and eventual disposition of the assets are less than the carrying amounts of the assets.

During fiscal 2023, the Company recorded charges of $18 million related to the closure of certain smaller, underperforming branches in the United States, primarily related to impairment of lease assets and related fixed assets. This item was included in the Impairments and other charges line of the Company’s consolidated statements of earnings. No such impairments were recorded in fiscal 2024.

Inventories

Inventories, which comprise goods purchased for resale, are stated at the lower of cost or net realizable value. Cost is primarily determined using the average cost method. The cost of goods purchased for resale includes import and custom duties, transport and handling costs, freight and packing costs and other attributable costs less trade discounts and rebates. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Inventory reserves are recorded against slow‐moving, obsolete and damaged inventories for which the net realizable value is estimated to be less than the cost. The reserve is estimated based on the Company’s current knowledge and judgment with respect to inventory levels, sales trends and historical experience.

Leases

The Company enters into contractual arrangements for the utilization of certain non-owned assets. These principally relate to property for the Company’s branches, distribution centers and offices which have varying terms including extension and termination options and periodic rent reviews.

The Company determines if an arrangement is a lease at inception. Leases are evaluated at commencement to determine proper classification as an operating lease or a finance lease. The Company’s leases primarily consist of operating leases. The Company recognizes a right-of-use (“ROU”) asset and lease liability at lease commencement based on the present value of lease payments over the lease term.

The Company generally uses its incremental borrowing rate as the discount rate as most of the Company’s lease arrangements do not provide an implicit borrowing rate. The incremental borrowing rate is estimated using a combination of U.S. Treasury note rates corresponding to lease terms, as well as a blended credit risk spread.

For operating leases, fixed lease payments are recognized on a straight-line basis over the lease term. The Company has elected to not separate lease and non-lease components. Certain lease agreements include variable lease payments that depend on an index, as well as payments for non-lease components, such as common area maintenance, and certain pass-through operating expenses such as real estate taxes and insurance. In instances where these payments are fixed, they are included in the measurement of our lease liabilities, and when variable, are excluded and recognized in the period in which the obligations for those payments are incurred. The Company’s leases do not contain any material residual value guarantees or payments under purchase and termination options which are reasonably certain to be exercised.

Lease terms are initially determined as the non-cancelable period of a lease adjusted for options to extend or terminate a lease that are reasonably certain to be exercised. Generally, the Company’s real estate leases have initial terms of three to 10 years and up to four extension periods that range from two to five years each. Renewal options are typically not included in the lease term as it is not reasonably certain at commencement date that the Company would exercise the extension options. Lease liabilities are subsequently measured at amortized cost using the effective interest method.

Right of use assets are carried at cost less accumulated amortization, impairment losses, and any subsequent remeasurement of the lease liability. Initial cost comprises the lease liability adjusted for lease payments at or before the commencement date, lease incentives received, initial direct costs and an estimate of restoration costs. The Company recognizes minimum rent expense on a straight-line basis over the lease term.

Leases that have an original term of 12 months or less are not recognized on the Company’s consolidated balance sheet, and the lease expense related to those short-term leases is recognized over the lease term.

Property, plant and equipment (“PPE”)

PPE is recorded at cost less accumulated depreciation. Cost includes expenditures necessary to acquire and prepare PPE for its intended use. In addition, subsequent costs that increase the productive capacity or extend the useful life of PPE are capitalized. The cost of repairs and maintenance are expensed as incurred.

Assets are depreciated to their estimated residual value using the straight-line method over their estimated useful lives as follows:

Owned buildings			20 - 50 years
Leasehold improvements			Period of lease
Plant and machinery			10 years
Computer hardware			3 - 5 years
Furniture, fixtures, equipment			5 - 7 years
Vehicles			4 years

Rebates

The Company has agreements (“supplier rebates”) with a number of its suppliers whereby volume-based rebates and other discounts are received in connection with the purchase of goods for resale from those suppliers.

The majority of volume-based supplier rebates are determined by reference to guaranteed rates of rebate. These calculations require minimal judgment. A small proportion of volume-based supplier rebates are subject to tiered targets where the rebate percentage increases as volumes purchased reach agreed targets within a set period of time. The Company estimates supplier rebates based on forecasts which are informed by historical trading patterns, current performance and trends.

Rebates relating to the purchase of goods for resale are accrued as earned and are recorded initially as a deduction to the cost of inventory with a subsequent reduction in cost of sales when the related goods are sold. When the Company has the right to offset and net settles with the supplier, the supplier rebate receivables are offset with amounts owed to the supplier at the balance sheet date and are included within accounts payable. When the Company does not have the legal right of offset, the supplier rebate receivables are recorded in prepaid and other current assets in the consolidated balance sheets. As of July 31, 2024 and 2023, rebates owed to the Company were $491 million and $443 million, respectively.

Revenue recognition

The Company recognizes revenue when a sales arrangement with a customer exists (e.g., contract, purchase orders, others), the transaction price is fixed or determinable, collection of consideration is probable and the Company has satisfied its performance obligation per the sales arrangement. The majority of the Company’s revenue originates from sales arrangements with a single performance obligation to deliver products, whereby performance obligations are satisfied when control of the product is transferred to the customer which is the point they are delivered to, or collected by, the customer. Therefore, shipping and handling activities are not deemed a separate performance obligation. Payment terms between the Company and its customers vary by the type of customer, country of sale and the products sold. The Company does not have significant financing components in its contracts and the payment due date is typically shortly after sale.

In some limited cases, the Company’s contracts contain services and products that are deemed one performance obligation as the services are highly interdependent and interrelated with the products or are significantly integrated with the products. Contracts in which services provided are a separately identifiable performance obligation are not material.

In some instances, goods are delivered directly to the customer by the supplier. The Company has concluded that it is the principal in these transactions as it is primarily responsible to the customer for fulfilling the obligation and has the responsibility for identifying and directing the supplier to deliver the goods to the customer.

The Company offers a right of return to its customers for most goods sold. Revenue is reduced by the amount of expected returns in the period in which the related revenue is recorded with a corresponding liability recorded in other current liabilities. The Company also recognizes a returned asset in prepaid and other current assets with a corresponding adjustment to cost of sales, for the right to recover the returned goods, measured at the former carrying value, less any expected recovery costs.

Share-based compensation

Share-based incentives are provided to associates under the Company’s long-term incentive plans and all-employee share purchase plans. The Company recognizes a compensation cost in respect of these plans that is primarily based on the fair value of the awards. For equity-settled plans, the fair value is determined at the date of grant and is not subsequently remeasured unless the conditions on which the award was granted are modified. For liability-settled plans, the fair value is initially determined at the date of grant and is remeasured at each balance sheet date until the liability is settled. The related liability is recorded in other current liabilities and other long-term liabilities. Generally, the compensation cost is recognized on a straight-line basis over the vesting period, utilizing cumulative catch-up for changes in the liability-settled plans. Estimates of expected forfeitures are made at the date of grant based on historical experience to appropriately reduce expense for those grants expected not to satisfy service conditions, or based on expected performance for non-market performance conditions. The estimated forfeitures are adjusted when facts and circumstances indicate the prior estimate is no longer appropriate.

Tax

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines DTAs and DTLs based on the differences between the financial reporting and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date. For a tax-paying component of an entity and within a particular tax jurisdiction, all deferred tax liabilities and assets, as well as any related valuation allowance, shall be offset and presented as a single non-current amount.

The Company recognizes DTAs to the extent that it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. If the Company determines that it would be able to realize our DTAs in the future in excess of their net recorded amount, the DTA valuation allowance would be appropriately adjusted, which would reduce the provision for income taxes.

The Company records uncertain tax positions in accordance with Accounting Standard Codification (“ASC”) 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

Supplier finance program

In October 2023, the Company began a supplier financing program with a third party wherein certain shipping and logistics providers in the United States can opt to receive early payment at a nominal discount. The Company’s obligations to suppliers are unchanged and payment terms are consistent with the Company’s normal payment terms. All outstanding payables related to the supplier finance program are classified within accounts payable within our consolidated balance sheets and were $46 million as of July 31, 2024.

Recently issued accounting pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU expands public entities’ required segment disclosures, including disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets that are currently not required. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This ASU provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in this ASU are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company is currently evaluating the ASU to determine the impact on its disclosures.

Recent accounting pronouncements pending adoption that are not discussed above are either not applicable, or will not have, or are not expected to have, a material impact on our consolidated financial condition, results of operations or cash flows.

Note 2. Revenue and segment information

The Company reports its financial results of operations on a geographical basis in the following two reportable segments: United States and Canada. Each segment generally derives its revenues in the same manner as described in Note 1, Summary of significant accounting policies. The Company uses adjusted operating profit as its measure of segment profit. A reporting segment’s adjusted operating profit is defined as profit before tax, excluding central and other costs, restructuring costs, amortization of acquired intangible assets, net interest expenses, as well as other items typically recorded in net other (expense) income such as (loss)/gain on disposal of businesses, pension plan changes/closure costs and amounts recorded in connection with the Company’s interests in investees. Certain income and expenses are not allocated to the Company’s segments and, thus, the information that management uses to make operating decisions and assess performance does not reflect such amounts.

Segment results were as follows:

			For the years ended July 31,
(In millions)			2024						2023						2022
Net sales:
United States			$28,195						$28,291						$27,067
Canada			1,440						1,443						1,499
Total net sales			$29,635						$29,734						$28,566
Adjusted operating profit:
United States			$2,820						$2,892						$2,893
Canada			60						76						112
Central and other costs			(56)						(51)						(54)
Corporate restructurings(1)			(28)						—						(17)
Impairment and other charges(2)			—						(125)						—
Amortization of acquired intangible assets			(144)						(133)						(114)
Interest expense, net			(179)						(184)						(111)
Other expense, net			(9)						(11)						(1)
Income before income taxes			$2,464						$2,464						$2,708

(1)For fiscal 2024, corporate restructuring costs related to incremental costs in connection with the Merger. For fiscal 2022, corporate restructuring costs primarily related to the incremental costs of the Company’s listing in the United States.

(2)See Note 8, Other intangible assets for further information.

An additional disaggregation of net sales by end market for continuing operations is as follows:

			For the years ended July 31,
(In millions)			2024						2023						2022
United States:
Residential			$14,464						$14,820						$14,657
Non-residential:
Commercial			9,431						9,213						8,600
Civil/Infrastructure			2,396						2,344						2,163
Industrial			1,904						1,914						1,647
Total Non-residential			13,731						13,471						12,410
Total United States			28,195						28,291						27,067
Canada			1,440						1,443						1,499
Total net sales			$29,635						$29,734						$28,566

No sales to an individual customer accounted for more than 10% of net sales during any of the last three fiscal years.

The Company is a value-added distributor in North America, providing a wide range of products from plumbing, HVAC, appliances, and lighting to PVF, water and wastewater solutions, 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 the business is managed, and the dynamic nature of the inventory offered.

Capital expenditures and depreciation and amortization by segment were as follows:

			For the years ended July 31,
(In millions)			2024						2023						2022
Capital expenditures:
United States			$353						$423						$283
Canada			19						18						7
Total capital expenditures			$372						$441						$290
Depreciation and amortization:
United States			$323						$313						$292
Canada			12						8						9
Total depreciation and amortization**(1)**			$335						$321						$301
(1) Includes amortization of acquired intangible assets of $144 million, $133 million and $114 million in 2024, 2023 and 2022, respectively. These amounts are not included in segment adjusted operating profit.

Assets by segment included:

			As of July 31,
(In millions)			2024						2023
Assets:
United States			$14,795						$14,167
Canada			898						795
Corporate			879						1,032
Total assets			$16,572						$15,994

As of July 31, 2024 and 2023, long-lived assets located in the United States were $1,699 million and $1,545 million, respectively.

Note 3. Weighted average shares

The following table shows the calculation of diluted shares:

			For the years ended July 31,
(In millions)			2024						2023						2022
Weighted average number of shares outstanding:
Basic weighted average shares			202.9						206.4						217.7
Effect of dilutive shares (1)			0.6						0.8						1.2
Diluted weighted average shares			203.5						207.2						218.9
Excluded anti-dilutive shares			—						0.1						0.1

(1) Represents the potential dilutive impact of share-based awards.

Note 4. Income tax

Income before income tax by geographical area consisted of the following:

			For the years ended July 31,
(In millions)			2024						2023						2022
United Kingdom			$80						$80						$102
United States			2,022						2,011						2,222
International			362						373						384
Total			$2,464						$2,464						$2,708

Provision for income taxes consisted of the following:

			For the years ended July 31,
(In millions)			2024						2023						2022
Current:
United Kingdom			$3						$—						($18)
Federal and state (U.S.)			552						624						528
International			49						55						58
Total current			$604						$679						$568
Deferred:
United Kingdom			$155						$17						$20
Federal and state (U.S.)			(32)						(120)						20
International			2						(1)						1
Total deferred			$125						($104)						$41
Provision for income taxes			$729						$575						$609

The following is a reconciliation of income tax expense with income taxes at the U.K. statutory rate:

			For the years ended July 31,
(In millions)			2024									2023									2022
Provision for income taxes at U.K. statutory rate(1)			$616			25.0		%				$518			21.0		%				$515			19.0		%
Non-U.K. tax rate differentials			(30)			(1.2)						68			2.8						127			4.7
Impact of change in reserves			12			0.5						8			0.3						8			0.2
Tax credits			(8)			(0.3)						(15)			(0.6)						(9)			(0.3)
Impact of Merger transaction (2)			144			5.8						—			—						—			—
Non-taxable income			(13)			(0.5)						(6)			(0.2)						(9)			(0.3)
Other			8			0.3						2			—						(23)			(0.8)
Income tax expense			$729			29.6		%				$575			23.3		%				$609			22.5		%

(1)For each fiscal year presented, the Company was tax resident in the U.K. Therefore, the Company has utilized the U.K. statutory rate. Since the change in statutory rate transitioned between fiscal years, the Company utilized a prorated statutory rate during fiscal 2023.

(2)As a result of the steps taken in the fourth quarter of fiscal 2024 to complete the Merger, the Company recognized one-time, non-cash deferred tax charges of $137 million composed of a reduction in deferred tax assets of $90 million related to tax losses that were no longer expected to be realizable and an increase in valuation allowance of $47 million related to UK deferred tax assets no longer expected to be realizable, as well the tax impact of non-deductible expenses related to the Merger.

Deferred Taxes

Significant components of the Company’s deferred tax assets and liabilities are as follows:

			As of July 31,
(In millions)			2024						2023
Assets:
Deferred compensation			$82						$69
Tax loss carryforwards			90						186
Lease liabilities			404						378
Sales returns and other liabilities			106						123
Inventory			45						46
Capitalized research and development			82						44
Other			49						48
Total deferred tax assets			858						894
Valuation allowance			(128)						(81)
Total deferred tax assets, net of valuation allowance			$730						$813
Liabilities:
Right of use assets			($397)						($374)
Goodwill and intangible assets			(129)						(118)
Property, plant and equipment			(34)						(21)
Total deferred tax liabilities			(560)						(513)
Net deferred tax assets			$170						$300

We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Our valuation allowance at July 31, 2024 related to foreign net capital loss carryforwards in the U.K. and Canada as well as deferred tax assets in the U.K. which are not expected to be realizable. Our valuation allowance at July 31, 2023 relates to foreign net capital loss carryforwards in the U.K. and Canada which are not expected to be realizable. For the year ended July 31, 2024, there was a $47 million change in the valuation allowance (2023: $4 million and 2022: $0 million) driven by the steps taken in the fourth quarter of fiscal 2024 to complete the Merger.

As of July 31, 2024, the Company had $343 million of loss carryforwards related to the U.K. operations. At July 31, 2024, the Company had U.S. federal and state operating loss carryforwards for income tax purposes of $11 million and $12 million, respectively. Some of the loss carryforwards may expire at various dates through 2039. At July 31, 2024, the Company had $8 million of loss carryforwards related to international operations. The Company’s U.K. losses and capital losses were offset with valuation allowances.

Unrecognized Tax Benefits

The following table reconciles the beginning and ending amount of our gross unrecognized tax benefits:

			For the years ended July 31,
(In millions)			2024						2023						2022
Unrecognized tax benefits at beginning of fiscal year			$144						$140						$132
Additions based on tax positions related to current year			25						27						27
Additions for tax positions of prior years			2						2						11
Reductions for tax positions of prior years			(10)						—						—
Reductions due to lapse of statute of limitations			(10)						(25)						(30)
Unrecognized tax benefits			$151						$144						$140

As of July 31, 2024, the unrecognized tax benefits that, if recognized, would impact the effective tax rate were $151 million (2023: $144 million and 2022: $140 million). The Company recognizes interest and penalties in the income tax provision in its consolidated statements of earnings. As of July 31, 2024, the Company had accrued interest of $28 million (2023: $23 million and 2022: $17 million). For the year ended July 31, 2024, the interest expense included in income tax expense was $5 million (2023: $6 million and 2022: $1 million). Penalties related to these positions were not material for all periods presented.

The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlement of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. The Company anticipates that the balance of gross unrecognized tax benefits, excluding interest and penalties, will be reduced by $37 million during the next 12 months, primarily due to the anticipated settlement of tax examinations and statute of limitation expirations. However, the outcomes and timing of such events are highly uncertain and changes in the occurrence, expected outcomes and timing of such events could cause the Company’s current estimate to change materially in the future.

Reinvestment of Unremitted Earnings

We consider foreign earnings of specific subsidiaries to be indefinitely reinvested. These permanently reinvested earnings of foreign subsidiaries at July 31, 2024 amounted to $795 million (2023: $725 million). The Company is not recording a deferred tax liability, if any, on such amounts. If at some future date, the Company ceases to be permanently reinvested in these specific foreign subsidiaries, the Company may be subject to foreign withholding and other taxes on these undistributed earnings and may need to record a deferred tax liability for any outside basis difference on these specific foreign subsidiaries. In addition, interest payments made between the U.S. and U.K. are anticipated to be exempt from withholding taxes, however, if Ferguson should fail to meet treaty requirements, withholding taxes may apply to these payments.

Tax Return Examination Status

The Company files income tax returns in the U.K., U.S. and in various foreign, state and local jurisdictions. We are subject to tax audits in the various jurisdictions until the respective statutes of limitation expire. The Company is no longer subject to U.S. federal income tax or U.K. examinations by tax authorities for fiscal years before 2020. There are ongoing U.S. state and local audits and other foreign audits covering fiscal 2013-2022. We do not expect the results from any ongoing income tax audit to have a material impact on our consolidated financial condition, results of operations or cash flows.

Note 5. Property, plant and equipment

Property, plant and equipment consisted of the following:

			As of July 31,
(In millions)			2024						2023
Land			$388						$348
Buildings			1,185						1,134
Leasehold improvements			618						529
Plant and machinery			927						834
Other equipment			166						156
Property, plant and equipment			3,284						3,001
Less: Accumulated depreciation			(1,532)						(1,406)
Property, plant and equipment, net			$1,752						$1,595

Depreciation related to property, plant and equipment included in operating costs for fiscal 2024 was $162 million (2023: $148 million and 2022: $140 million).

Note 6. Leases

Lease-related assets and liabilities consisted of the following:

			As of July 31,
(In millions)			2024						2023
Assets:
Operating lease right-of-use assets			$1,565						$1,474
Liabilities:
Current portion of operating lease liabilities			$395						$366
Long-term portion of operating lease liabilities			1,198						1,126
Total lease liabilities			$1,593						$1,492

The components of leasing costs, included in SG&A, consisted of the following:

			For the years ended July 31,
(In millions)			2024						2023						2022
Operating lease costs			$440						$390						$349
Variable lease costs			92						85						72
Short-term lease costs			28						23						14
Total lease costs			$560						$498						$435

Variable lease costs represent costs incurred in connection with non-lease components, such as common area maintenance, and certain pass-through operating expenses such as real estate taxes and insurance.

The weighted average remaining lease terms and discount rates for the Company’s operating leases were as follows:

			As of July 31,
			2024						2023
Weighted average remaining lease term (years)			5.4						5.5
Weighted average discount rate			4.5		%				4.0		%

The future minimum rental payments for the next five fiscal years under operating lease obligations, having initial or remaining non-cancelable lease terms in excess of one year are summarized as follows:

			As of July 31,
(In millions)			2024
2025			$409
2026			386
2027			314
2028			243
2029			173
Thereafter			299
Total undiscounted lease payments			1,824
Less: imputed interest			(231)
Present value of liabilities			$1,593

The future minimum lease payments in the table above exclude payments for leases that have not yet commenced.

Supplemental cash flow information related to leases from continuing operations consisted of the following:

			For the years ended July 31,
(In millions)			2024						2023						2022
Cash paid for operating leases (operating cash flows)			$424						$379						$337
Lease assets obtained in exchange for new operating lease liabilities (non-cash)			253						309						362

As of July 31, 2024, the Company had $131 million of non-cancelable operating leases with terms similar to the Company’s current operating leases that have not yet commenced. Of this amount, $113 million is expected to commence in fiscal year 2025 with the remaining $18 million expected to commence in fiscal year 2026.

Note 7. Goodwill

The Company completed its annual impairment analysis for goodwill during the fourth quarter of fiscal 2024. Based on the results of the Company’s analysis, the Company concluded that the fair value of each reporting unit was substantially in excess of its respective carrying value. There were no impairment charges related to goodwill in fiscal 2024, 2023 or 2022.

The following table presents the changes in the net carrying amount of goodwill allocated by reportable segment for the years ended July 31, 2024 and 2023:

(In millions)			United States						Canada						Total
Balance as of July 31, 2022			$1,894						$154						$2,048
Acquisitions			198						—						198
Effect of currency translation adjustment			—						(5)						(5)
Balance as of July 31, 2023			2,092						149						2,241
Acquisitions			91						33						124
Effect of currency translation adjustment			(1)						(7)						(8)
Balance as of July 31, 2024			$2,182						$175						$2,357
Cumulative goodwill impairment as of July 31, 2024			$108						$11						$119

Cumulative balance of historical goodwill impairments as of July 31, 2024, as shown above, was the same for all periods presented herein. See Note 16, Acquisitions, to the Consolidated Financial Statements for further information on the additions to goodwill in fiscal 2024 and 2023.

Note 8. Other intangible assets

The Company's major categories of definite-lived intangible assets and the respective weighted average remaining useful lives consisted of the following:

						As of July 31, 2024												As of July 31, 2023
(In millions, except remaining useful life)			Weighted average remaining useful life (years)			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Software			3			$300						($223)						$283						($197)
Customer relationships*			7			1,452						(855)						1,345						(750)
Tradenames and brands*			3			273						(224)						268						(200)
Other*			3			219						(189)						209						(175)
Total intangible assets						$2,244						($1,491)						$2,105						($1,322)
* Acquired intangible assets

Amortization expense of intangible assets for the year ended July 31, 2024 was $173 million (2023: $173 million and 2022: $161 million).

As of July 31, 2024, expected amortization expense for the unamortized definite-lived intangible assets for the next five fiscal years and thereafter is as follows:

			As of July 31,
(In millions)			2024
2025			$180
2026			145
2027			127
2028			106
2029			73
Thereafter			122
Total			$753

Impairments

In fiscal 2023, the Company recorded a non-cash charge of $107 million in connection with previously capitalized software costs in the United States. This item was included in the Impairments and other charges line of the Company’s consolidated statements of earnings. No such impairments were recorded in fiscal 2024.

Note 9. Debt

The Company’s debt obligations consisted of the following:

			As of July 31,
(In millions)			2024						2023
Variable-rate debt:
Receivables Facility			$250						$50
Term Loan			500						500
Private Placement Notes:
3.30% due November 2023			—						55
3.44% due November 2024			150						150
3.73% due September 2025			400						400
3.51% due November 2026			150						150
3.83% due September 2027			150						150
Unsecured Senior Notes:
4.25% due April 2027			300						300
4.50% due October 2028			750						750
3.25% due June 2030			600						600
4.65% due April 2032			700						700
Subtotal			$3,950						$3,805
Less: current maturities of debt			(150)						(55)
Unamortized discounts and debt issuance costs			(18)						(22)
Interest rate swap - fair value adjustment			(8)						(17)
Total long-term debt			$3,774						$3,711

Except as otherwise noted, the following discussion of the Company’s debt arrangements is as of July 31, 2024.

Private Placement Notes

In June 2015 and November 2017, Wolseley Capital, Inc. (“Wolseley Capital”), a wholly owned subsidiary of the Company, privately placed fixed rate notes in an aggregate principal amount of $800 million and $355 million, respectively (collectively, the “Private Placement Notes”). Interest on the Private Placement Notes is payable semi-annually. During the first quarter of fiscal 2024, the 3.30% notes due in November 2023 were repaid at maturity.

As of July 31, 2024 and 2023, the Company had interest rate swaps with a notional value of $300 million and $355 million, respectively, in connection with the Private Placement Notes entered into in November 2017. See Note 10, Fair value measurements for further information.

Wolseley Capital’s obligations under the note and guarantee agreements are unconditionally guaranteed by the Company and Ferguson UK Holdings Limited (“Ferguson UK”). Wolseley Capital may repay the outstanding Private Placement Notes, in whole or in part, at any time at a price equal to 100% of the principal amount being prepaid plus a “make-whole” prepayment premium.

The note and guarantee agreements relating to the Private Placement Notes contain certain customary affirmative covenants, as well as certain customary negative covenants that, among other things, restrict, subject to certain exceptions, the Company’s non-guarantor subsidiaries’ ability to incur indebtedness and the Company’s ability to enter into affiliate transactions, grant liens on its assets, sell assets, or engage in acquisitions, mergers or consolidations. In addition, subject to certain exceptions, the note and guarantee agreements require us to maintain a leverage ratio.

The outstanding Private Placement Notes also contain customary events of default. Upon an event of default and an acceleration of the Private Placement Notes, the Company must repay the outstanding Private Placement Notes plus a make-whole premium and accrued and unpaid interest.

Unsecured Senior Notes

Ferguson Finance, plc (“Ferguson Finance”) has issued $2.35 billion in unsecured senior notes (collectively, the “Unsecured Senior Notes”) which are guaranteed by the Company and Ferguson UK.

The Unsecured Senior Notes are fully and unconditionally guaranteed on a direct, unsubordinated and unsecured senior basis by the Company and generally carry the same terms and conditions with interest paid semi-annually. The Unsecured Senior Notes may be redeemed, in whole or in part (i) at 100% of the principal amount on the notes being redeemed plus a “make-whole” prepayment premium at any time prior to three months before the maturity date (the “Notes Par Call Date”) or (ii) after the Notes Par Call Date at 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest on the principal being redeemed. The Unsecured Senior Notes include covenants, subject to certain exceptions, which include limitations on the granting of liens and on mergers and acquisitions.

Term 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). Interest rates for the term loans ranged from 6.5% to 6.6% during fiscal 2024.

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 and 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.

Revolving Credit Facility

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 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.

As of July 31, 2024 and 2023, no borrowings were outstanding under the Revolving Facility, respectively.

Receivables Securitization Facility

The Company maintains a Receivables Securitization Facility (the “Receivables Facility”) which is primarily governed by the Receivables Purchase Agreement, dated July 31, 2013, as amended from time to time, among the Company, Ferguson Enterprises, LLC and certain of its subsidiaries; the conduit purchasers, committed purchasers, and letter of credit banks from time to time party thereto; and Royal Bank of Canada, as administrative agent.

The Receivables Facility consists of 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 or, in the case of the lending banks that fund, through a conduit, by the issuance of commercial paper, at a rate equal to the per annum rate payable of the related commercial paper issued by such conduit plus a margin. Interest rates under the Receivables Facility ranged from 6.3% to 6.4% during fiscal 2024. The Company does not factor its accounts receivable.

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.

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

Concurrently with the consummation of the Merger on August 1, 2024, Ferguson Enterprises Inc. assumed Ferguson (Jersey) Limited’s (f/k/a Ferguson plc) rights, duties, liabilities and obligations, and Ferguson (Jersey) Limited was released from its liabilities and obligations, under the outstanding Private Placement Notes, outstanding Unsecured Senior Notes, the Term Loan Agreement, the Revolving Facility and the Receivables Facility.

The Company was in compliance with all debt covenants for all of these debt obligations and facilities that were in effect as of July 31, 2024.

Debt maturities, exclusive of unamortized original issue discounts, unamortized debt issuance costs, fair-value hedge adjustments, and finance lease obligations, for the next five fiscal years and thereafter are as follows:

			As of July 31,
(In millions)			2024
2025			$150
2026			1,150
2027			450
2028			150
2029			750
Thereafter			1,300
Total			$3,950

Note 10. Fair value measurements

Derivative Instruments

The Company’s derivatives relate principally to interest rate swaps, designated as fair value hedges, to manage its exposure to interest rate movements on its debt. They are measured at fair value on a recurring basis through profit and loss using forward interest curves which are Level 2 inputs. The Company’s derivatives are not material. The notional amount of the Company’s outstanding fair value hedges as of July 31, 2024 was $300 million (2023: $355 million).

Equity investments

The fair value of the Company’s equity investments is measured on a recurring basis using market derived valuation methods upon occurrence of orderly transactions for identical or similar assets which is deemed a Level 3 input. The fair value of equity investments was $28 million as of July 31, 2024 (2023: $34 million) and the activity during fiscal 2024 was not material.

Other Fair Value Disclosures

Due to their short maturities, or their insignificance, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term debt approximated their fair values at July 31, 2024 and 2023.

Non-recurring fair value measurements

Fair value estimates are made in connection with the Company’s acquisitions. See Note 16, Acquisitions of the Consolidated Financial Statements for further details.

Liabilities for which fair value is only disclosed

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

			As of July 31,
			2024												2023
(In millions)			Carrying Amount						Fair Value						Carrying Amount						Fair Value
Unsecured Senior Notes			$2,333						$2,263						$2,330						$2,195
Private Placement Notes			849						837						904						871

The difference in fair values results from changes, since issuance, in the corporate debt markets and investor preferences. The fair value of the Unsecured Senior Notes and Private Placement Notes are classified as Level 2 fair value measurements, and were estimated using observable market prices as provided in secondary markets that consider the Company’s credit risk and market-related conditions.

Due to its variable rate nature, the carrying value of the Company’s variable rate debt approximates its fair value.

Note 11. Commitments and contingencies

The Company is, from time to time, involved in various legal proceedings considered to be normal course of business in relation to, among other things, the products that we supply, contractual and commercial disputes and disputes with employees. Provision is made if, on the basis of current information and professional advice, liabilities are considered probable. In the case of unfavorable outcomes, the Company may benefit from applicable insurance protection. The Company does not expect any of its pending legal proceedings to have a material adverse effect on its results of operations, financial position or cash flows.

Note 12. Accumulated other comprehensive loss

The change in accumulated other comprehensive loss was as follows:

(In millions, net of tax)			Foreign currency translation						Pensions						Total
Balance at July 31, 2021			($396)						($400)						($796)
Other comprehensive loss before reclassifications			(24)						(18)						(42)
Amounts reclassified from accumulated other comprehensive loss			—						8						8
Other comprehensive loss			(24)						(10)						(34)
Balance as of July 31, 2022			($420)						($410)						($830)
Other comprehensive loss before reclassifications			(9)						(57)						(66)
Amounts reclassified from accumulated other comprehensive loss			—						8						8
Other comprehensive loss			(9)						(49)						(58)
Balance as of July 31, 2023			($429)						($459)						($888)
Other comprehensive loss before reclassifications			(32)						(22)						(54)
Amounts reclassified from accumulated other comprehensive loss			—						11						11
Other comprehensive loss			(32)						(11)						(43)
Balance as of July 31, 2024			($461)						($470)						($931)

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

			For the years ended July 31,
(In millions)			2024						2023						2022
Amortization of actuarial losses			$15						$11						$10
Tax benefit			(4)						(3)						(2)
Amounts reclassified from accumulated other comprehensive loss			$11						$8						$8

Note 13. Retirement benefit obligations

The Company provides various retirement benefits to eligible employees, including pension benefits associated with defined benefit plans, contributions to defined contribution plans, post-retirement benefits and other benefits. Eligibility requirements and benefit levels vary depending on associate location.

The Company provides defined benefit plans to its employees in Canada. The majority of the Canadian defined benefit plans are funded. Post-retirement benefit obligations are not material and have been included in all amounts presented herein.

The legacy U.K. defined benefit plan is the Wolseley Group Retirement Benefits Plan which provides benefits based on final pensionable salaries. The assets are held in separate trustee administered funds. The plan was closed to new entrants in 2009, closed to future service accrual in December 2013 and closed to future non-inflationary salary accrual on the disposal of the U.K. business in 2021.

In 2017, the Company secured a buy-in insurance policy with Pension Insurance Corporation for the U.K. defined benefit plan. This policy covers all benefit payments to a certain portion of participants in the plan. The insured liabilities are exactly equal to the fair value of the related insurance assets.

In 2021, prior to the disposal of the U.K. business, Wolseley UK Limited, the liabilities of the disposed entities to the U.K. defined benefit plan were transferred to Ferguson UK Holdings Limited.

The funded status of the Company’s plans was as follows, valued with a measurement date of July 31 for each year:

			For the years ended July 31,
(In millions)			2024						2023
Change in net benefit obligations:
Beginning balance			$1,218						$1,402
Interest cost			62						51
Actuarial loss (gain)			36						(245)
Benefits paid			(63)						(57)
Exchange rate adjustment			(2)						67
Ending balance			$1,251						$1,218
Change in assets at fair value:
Beginning balance			$1,270						$1,508
Actual return on plan assets			68						(279)
Company contributions			34						24
Benefits paid			(63)						(57)
Exchange rate adjustment			(1)						74
Ending balance at fair value			$1,308						$1,270
Funded status of plans			$57						$52

As required by United Kingdom pensions regulation, the United Kingdom Plan completed its triennial actuarial valuation exercise, which is measured on a technical provisions basis, based on the United Kingdom Plan’s financial position as of April 30, 2022. The triennial valuation resulted in required contributions by the Company of £133 million to be spread over the period to January 31, 2026, of which the Company has paid £50 million as of July 31, 2024.

Total expected employer contributions to the defined benefit plans for the year ending July 31, 2025 are estimated to be $61 million, which includes amounts due from the triennial funding valuation.

Amounts recognized in the consolidated balance sheets consisted of:

			As of July 31,
(In millions)			2024						2023
Non-current asset			$57						$55
Non-current liability			—						(3)

Amounts recognized in accumulated other comprehensive loss:

			As of July 31,
(In millions)			2024						2023
Net actuarial loss			$617						$602
Income tax impact			(147)						(143)
Accumulated other comprehensive loss			$470						$459

Components of other comprehensive loss (income) consisted of the following:

			For the years ended July 31,
(In millions)			2024						2023						2022
Net actuarial loss (gain)			$31						$83						($3)
Amortization of net actuarial loss			(15)						(11)						(10)
Impact of exchange rates			(1)						(7)						12
Income tax impact			(4)						(16)						11
Other comprehensive loss, net of tax			$11						$49						$10

The components of net periodic pension costs associated with all of the Company’s plans were as follows:

			For the years ended July 31,
(In millions)			2024						2023						2022
Other expense (income), net
Amortization of net actuarial losses			15						11						10
Interest cost			62						51						41
Expected return on plan assets			(63)						(49)						(45)
Net periodic cost			$14						$13						$6
Weighted average assumptions:
Discount rate, net periodic benefit cost			5.05		%				3.53		%				1.78		%
Discount rate, benefit obligations			4.98		%				5.05		%				3.53		%
Expected return on plan assets			5.11		%				3.41		%				2.12		%
Wage inflation growth rate			2.45		%				2.50		%				2.35		%

The Company determines the discount rate primarily by reference to rates on high-quality, long-term corporate and government bonds that mature in a pattern similar to the expected payments to be made under the various plans.

The Company has established strategic asset allocation percentage targets for significant asset classes with the aim of achieving an appropriate balance between risk and return. The Company periodically revises asset allocations, where appropriate, in an effort to improve return and/or manage risk. The expected return on plan assets is determined based on the expected long-term rate of return on plan assets and the market-related value of plan assets. The market-related value of plan assets is based on long-term expectations given current investment objectives and historical results.

Investment Strategy

The Company’s investment strategy for its funded post-employment plans is decided locally and, if relevant, by the trustees of the plan and takes account of the relevant statutory requirements. The Company’s objective for the investment strategy is to achieve a target rate of return in excess of the increase in the liabilities, while taking an acceptable amount of investment risk relative to the liabilities. This objective is implemented by using specific allocations to a variety of asset classes that are expected over the long term to deliver the target rate of return.

For the U.K. Plan, the guaranteed insurance policy represents approximately 34% of the plan assets. For the remaining assets, the strategy is to invest in a mix of equities, bonds and other income-generating asset classes so that expected cash flows broadly match a high proportion of the cash flows of the plan’s expected liabilities. The investment strategy is subject to regular review by the trustees of the plan in consultation with the Company.

For the plans in Canada, the investment strategy is to invest predominantly in equities and bonds.

The Company’s weighted average asset allocations by asset category were as follows:

			As of July 31,
			2024						2023
Asset category:
Equity securities			2		%				3		%
Fixed income securities			63						61
Cash, cash equivalents and other short-term investments			2						2
Guaranteed insurance policies			33						34
Total			100		%				100		%

The following tables present the fair value of the Company’s plan assets using the fair value hierarchy:

			As of July 31, 2024
(In millions)			Total						Level 1						Level 2						Level 3
U.K. Plan assets:
Fixed income securities:
Corporate			$340						$1						$227						$112
Asset backed			1						—						1						—
Government			439						439						—						—
Cash, cash equivalents and other short-term investments			23						22						1						—
Insurance policies			409						—						—						409
Canada Plan assets:
Equity securities			34						34						—						—
Fixed income securities:
Corporate			7						—						7						—
Government			33						—						33						—
Cash and cash equivalents			2						2						—						—
Other			20						12						8						—
			$1,308						$510						$277						$521

			As of July 31, 2023
(In millions)			Total						Level 1						Level 2						Level 3
U.K. Plan assets:
Fixed income securities:
Corporate			$319						$2						$224						$93
Asset backed			1						—						1						—
Government			410						406						4						—
Cash and cash equivalents			29						28						1						—
Insurance policies			417						—						—						417
Canada Plan assets:
Equity securities			33						33						—						—
Fixed income securities:
Corporate			9						—						9						—
Government			32						—						32						—
Cash and cash equivalents			1						1						—						—
Other			19						11						8						—
			$1,270						$481						$279						$510

The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3):

			For the years ended July 31,
(In millions)			2024						2023
Beginning balance			$510						$570
Transfers into Level 3			11						67
Transfers out of Level 3			—						(131)
Actual returns			31						1
Purchases, sales and settlements, net			(32)						(24)
Impact of exchange rates			1						27
Ending balance			$521						$510

The Company expects the following benefit payments related to its defined benefit pension plans over the next 10 years:

			As of July 31,
(In millions)			2024
2025			$63
2026			65
2027			66
2028			68
2029			69
2030-2034			369
Total			$700

Defined Contribution Plans

The principal plans operated for employees in the United States are defined contribution plans, which are established in accordance with 401(k) rules in the United States. The Company’s Canadian employees are covered by defined contribution plans including a Post Retirement Benefit Plan and Supplemental Executive Retirement Plan. Under the Canadian plans, the Company’s employees are able to make personal contributions.

Total expense related to defined contribution plans in fiscal 2024 was $95 million (2023: $93 million and 2022: $87 million).

In addition, Ferguson Enterprises, LLC, a subsidiary of the Company, sponsors a non-qualified deferred compensation plan for the benefit of U.S.-based executives and certain other senior associates. For the year ended July 31, 2024, the Company’s obligations related to the plan total $378 million (2023: $323 million), including a current portion of the liability of $28 million (2023: $16 million). The Company has investments in Company-owned life insurance policies that are intended to fund these obligations, however, these assets are subject to the general claims of the Company’s creditors. The assets are recorded at cash surrender value with changes recognized in earnings. The non-current assets total $373 million (2023: $322 million).

Note 14. Shareholders’ equity

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

			For the years ended July 31,
			2024						2023						2022
Ordinary shares:
Balance at beginning of period			232,171,182						232,171,182						232,171,182
Change in shares issued			—						—						—
Balance at end of period			232,171,182						232,171,182						232,171,182
Treasury shares:
Balance at beginning of period			(27,893,680)						(21,078,577)						(9,862,816)
Repurchases of ordinary shares			(3,317,654)						(7,022,242)						(11,413,180)
Treasury shares used to settle share-based compensation awards			383,405						207,139						197,419
Balance at end of period			(30,827,929)						(27,893,680)						(21,078,577)
Employee Benefit Trust:
Balance at beginning of period			(274,031)						(846,491)						(833,189)
New shares purchased			—						—						(600,000)
Employee Benefit Trust shares used to settle share-based compensation awards			253,212						572,460						586,698
Shares sold upon termination of Employee Benefit Trust			20,819						—						—
Balance at end of period			—						(274,031)						(846,491)
Total shares outstanding at end of period			201,343,253						204,003,471						210,246,114

Employee Benefit Trusts

Two Employee Benefit Trusts had been previously established in connection with the Company’s discretionary share award plans and long-term incentive plans. During fiscal 2024, each of these trusts were terminated with all shares disbursed or sold. The proceeds from shares sold upon termination of the Employee Benefit Trusts were $4 million and included in other financing activities in the statement of cash flow.

Share Repurchases

Share repurchases are being made under an authorization that allows up to $4.0 billion in share repurchases. As of July 31, 2024, the Company has completed $3.1 billion of the total announced $4.0 billion share repurchase program.

Treasury shares

As of August 1, 2024, the Company canceled all ordinary shares held in treasury in connection with its completion of the Merger. As a result, the fiscal 2025 beginning balance for the number of shares issued and outstanding of Ferguson Enterprises Inc. will consist of 201,343,253 shares of common stock.

Note 15. Share-based compensation

Following adoption by the board of directors of the Company (the “Board”), the Ferguson plc 2023 Omnibus Equity Incentive Plan (the “Ferguson plc Omnibus Plan”) was approved by the shareholders of the Company at the annual general meeting on November 28, 2023, and became effective as of September 21, 2023, the date of the Board’s adoption of the Ferguson plc Omnibus Plan. The Ferguson plc Omnibus Plan provided for the issuance of up to 6,750,000 of the Company’s ordinary shares, subject to share recycling and adjustment provisions. All new share-based compensation awards granted subsequent to November 28, 2023 have been granted under the Ferguson plc Omnibus Plan through July 31, 2024.

In connection with the Merger, on the Effective Date, Ferguson Enterprises Inc. assumed the Ferguson plc Omnibus Plan, the Ferguson Enterprises Inc. Ordinary Share Plan 2019, the Ferguson Enterprises Inc. Performance Ordinary Share Plan 2019 and the Ferguson Enterprises Inc. Long Term Incentive Plan 2019 (the “Prior Plans”) and adopted the Ferguson Enterprises Inc. 2023 Omnibus Equity Incentive Plan (the “FEI Omnibus Plan” and, together with the Ferguson plc Omnibus Plan, the “Omnibus Plan”). In addition, in connection with the assumption of the Prior Plans, Ferguson Enterprises Inc. adopted the Omnibus Amendment to The Ferguson Group International Sharesave Plan 2019, The Ferguson Group Long Term Incentive Plan 2019, The Ferguson Group Ordinary Share Plan 2019 and The Ferguson Group Performance Ordinary Share Plan 2019. No new awards have been, or will be, granted under the Prior Plans after November 28, 2023. Additionally, on the Effective Date, each outstanding ordinary share of the Company’s stock was canceled without any repayment of capital and Ferguson Enterprises Inc. issued as consideration new shares of common stock of Ferguson Enterprises Inc*.* In addition, on the Effective Date, each equity award previously granted under the Omnibus Plan and the Prior Plans were converted to an incentive award of Ferguson Enterprises Inc. that is subject to substantially the same terms and conditions as the former Ferguson plc incentive award. The security issuable upon vesting will be a share of common stock of Ferguson Enterprises Inc. rather than an ordinary share of Ferguson plc.

The Company grants share-based compensation awards that can be broadly characterized by the underlying vesting conditions as follows:

• Time vested, restricted stock units (“RSU”) typically vest at the end of three years. The fair value of these awards is based on the closing share price on the date of grant.

• Single metric performance stock units (“PSU”) typically vest following three-year performance cycles. The number of common stock shares issued will vary based upon the Company’s performance against an adjusted operating profit measure. The fair value of the award is based on the closing share price on the date of grant.

• Multiple metric performance stock units granted to Executive Directors (“PSU-ED”) typically vest following three-year performance cycles. The number of common stock shares issued will vary based upon multiple performance metrics as described below.

For PSU-ED awards granted prior to fiscal 2023, the number of shares eligible to vest will vary based on Company measures of inflation-indexed earnings per share (“EPS”), cash flow and relative total shareholder return (“rTSR”) compared to a peer company set. Based on these performance conditions, these awards granted prior to fiscal 2023 are treated as liability-settled awards. As such, the fair value of these awards are initially determined at the date of grant and are remeasured at each balance sheet date until the liability is settled. Dividend equivalents accrue during the vesting period with respect to these awards, but are not paid until the underlying awards vest. As of July 31, 2024 and July 31, 2023, the total liability recorded in connection with these grants was $8 million and $13 million, respectively.

In fiscal 2024 and 2023, the Company granted PSU-ED awards in which the number of shares eligible to vest will vary based on fixed measures of Company defined adjusted EPS growth (diluted) and return on capital employed (“ROCE”), as well as rTSR compared to a peer company set. Dividend equivalents accrue during the vesting period with respect to these awards, but are not paid until the underlying awards vest. Based on the performance conditions of these awards, such grants are treated as equity-settled awards (“PSU-ED, 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 are equal to the closing share price on the date of grant. The fair value of the awards that vest based on rTSR were determined using a Monte-Carlo simulation, which estimate 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 fiscal 2024:

			Number of shares						Weighted average grant date fair value
Outstanding as of July 31, 2023			1,158,673						$111.57
RSU awards granted			113,281						161.15
PSU awards granted			209,945						158.16
PSU-ED, equity-settled awards granted			32,050						149.37
Share adjustments based on performance			(27,836)						53.59
Vested			(477,323)						99.01
Forfeited			(45,660)						130.41
Outstanding as of July 31, 2024			963,130						$135.82

The following table relates to RSU, PSU and PSU-ED awards activity:

			For the years ended July 31,
(In millions, except per share amounts)			2024						2023						2022
Fair value of awards vested			$79						$67						$94
Weighted average grant date fair value per share granted			$158.32						$99.95						$134.88

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

			For the years ended July 31,
(In millions)			2024						2023						2022
Share-based compensation expense (within SG&A)			$49						$51						$57
Income tax benefit			14						11						20

Total unrecognized share-based payment expense for all share-based payment plans was $56 million at July 31, 2024, which is expected to be recognized over a weighted average period of 1.9 years.

Employee share purchase plan

Similar to the Omnibus Plan and Prior Plans, in connection with the Merger, as of the Effective Date, Ferguson Enterprises Inc. assumed The Ferguson Group Employee Share Purchase Plan 2021, and in connection with such assumption, adopted the Ferguson Enterprises Inc. Employee Share Purchase Plan 2021 (the “ESPP”). In addition, as of the Effective Date, all outstanding options under the ESPP were converted into options of Ferguson Enterprises Inc. that were subject to substantially the same terms and conditions as the former Ferguson plc option, except, that the security issuable upon exercise of the option will be a share of common stock (or its cash equivalent) of Ferguson Enterprises Inc. rather than an ordinary share of Ferguson plc (or its cash equivalent). The ESPP provides for a limit of 20 million shares of common stock that can be awarded under the plan subject to certain guidelines set forth in the plan.

As of July 31, 2024, 19.5 million shares of common stock remain available for allotment under the ESPP. The exercise price per share of common stock will be prescribed by the Board for each offering period and may not be less than 85% of the lesser of the fair market value of common stock on the date of grant and the fair market value of common stock on the date of exercise. During fiscal 2024, there were approximately 160,800 shares purchased under the ESPP at an average price of $106.02. The expense associated with the ESPP is not material.

Note 16. Acquisitions

The Company acquired ten and eight businesses during fiscal 2024 and 2023, respectively. Each of the acquired businesses are primarily engaged in the distribution of plumbing, HVAC and infrastructure related products and was acquired to support growth. In each of the Company’s acquisitions, the Company has substantially purchased the acquiree's business and therefore all transactions have been accounted for as a business combination pursuant to FASB Accounting Standards Codification (ASC) 805.

The following table summarizes the preliminary purchase price allocation for the assets acquired and liabilities assumed in regards to the Company's respective acquisitions occurring in fiscal 2024 and 2023:

			Acquisitions occurring in fiscal
(In millions)			2024						2023
Cash and cash equivalents			$1						$3
Receivables and other assets			53						134
Inventories			50						180
Property, plant and equipment			6						11
Operating lease right-of-use assets			11						66
Trade name intangible assets			5						9
Customer relationships intangible assets			108						207
Other intangible assets			10						4
Trade and other payables			(41)						(80)
Lease liabilities			(11)						(66)
Deferred tax			(7)						—
Provisions			—						(4)
Other			(2)						—
Total			183						464
Goodwill			124						198
Consideration			$307						$662
Satisfied by:
Cash			$261						$619
Deferred consideration			46						43
Total consideration			$307						$662

The fair values of the assets acquired in fiscal 2024 are considered preliminary and are based on management’s best estimates. Further adjustments may be necessary in connection with acquisitions completed in fiscal 2024 when additional information becomes available during the measurement period about events that existed at the date of acquisition. There were no material adjustments in the current fiscal year that related to the closing of the measurement period of acquisitions made in the prior fiscal year. As of the date of this Annual Report, the Company has made all known material adjustments related to acquisitions in fiscal 2024.

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. Goodwill acquired during fiscal 2024 that was attributed to the United States and Canada segments were $91 million (2023: $198 million) and $33 million (2023: $0 million), respectively. Goodwill acquired in fiscal 2024 that is expected to be deductible for tax purposes is $90 million (2023: $198 million).

Deferred consideration represents the expected payout due to the sellers of certain acquired businesses that is subject to either 1) a contractual settle-up period or 2) a contingency related to 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 in fiscal 2024 contributed $126 million to net sales and $4 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 July 31, 2024. Acquisition costs in fiscal 2024 was $5 million (2023: $5 million). Acquisition costs are expensed as incurred and included in SG&A in the Company’s consolidated statements of earnings.

The net outflow of cash in respect of the purchase of businesses is as follows:

			For the years ended July 31,
(In millions)			2024						2023
Purchase consideration			$261						$619
Cash, cash equivalents and bank overdrafts acquired			(1)						(3)
Cash consideration paid, net of cash acquired			260						616
Deferred and contingent consideration paid for prior years’ acquisitions(1)			44						34
Net cash outflow in respect of the purchase of businesses			$304						$650

(1) Included in other financing activities in the consolidated statements of cash flows

Pro forma disclosures

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:

			Year ended July 31,
(In millions)			2024						2023
Pro forma net sales for current year acquisitions			$29,902						$30,140

			Year ended July 31,
(In millions)			2023						2022
Pro forma net sales for prior year acquisitions			$30,299						$29,354

The impact on income before income tax in fiscal 2024, 2023 and 2022, including additional intangible asset amortization, transaction and integration costs, would not be material.

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

Note 17. Related party transactions

For fiscal 2024, the Company purchased $8 million (2023: $27 million and 2022: $22 million) 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-Employee Director. The services were purchased on an arm’s-length basis. In December 2023, this related party relationship ended. As such, services provided by these companies during the second half of fiscal 2024 did not constitute a related party transaction. No material amounts are due to such companies.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Ferguson Enterprises Inc.

Opinion on the Financial Statement

We have audited the accompanying consolidated balance sheet of Ferguson Enterprises Inc. and subsidiaries (the "Company") as of July 31, 2024, and the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of July 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current-period audit of the financial statement that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statement and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Deloitte & Touche LLP

Richmond, VA

September 25, 2024

We have served as the Company's auditor since 2024.

Ferguson Enterprises Inc.

Consolidated Balance Sheet

(In millions, except share amounts)			As of July 31, 2024
Assets
Cash and cash equivalents			$—
Total assets			$—
Liabilities and shareholders' equity
Total liabilities			$—
Shareholders’ equity:
Common stock, $0.0001 par value, 500,000,000 shares authorized, 3 shares issued			—
Additional paid-in capital			—
Total liabilities and shareholders' equity			$—

See accompanying Notes to the Consolidated Financial Statement.

Ferguson Enterprises Inc.

Notes to the Consolidated Financial Statement

Note A. Basis of presentation and summary of significant accounting policies

Background

Ferguson Enterprises Inc. was formed as a Delaware corporation in February 2024. Effective on August 1, 2024 (the “Effective Date”), the Company implemented a new corporate structure by completing a merger transaction (the “Merger”) that resulted in (i) Ferguson plc becoming a direct, wholly owned subsidiary of Ferguson Enterprises Inc., a Delaware corporation, and (ii) the shareholders of Ferguson plc at the designated record time for the Merger no longer holding ordinary shares of Ferguson plc but instead holding shares of common stock of Ferguson Enterprises Inc. As a result of the Merger, Ferguson Enterprises Inc. became the successor issuer to Ferguson plc, which was renamed “Ferguson (Jersey) Limited” and converted into a private company.

Financial statements and basis of consolidation

The accompanying consolidated financial statement of Ferguson Enterprises Inc. and all of its wholly owned subsidiaries have been prepared in accordance with U.S. GAAP as set forth in the FASB Accounting Standards Codification and in conjunction with the rules and regulations of the SEC. Separate statements of earnings and comprehensive income, changes in stockholder’s equity, and cash flows have not been presented because there have been no activities in this entity since its formation in February 2024 through July 31, 2024. Beginning on August 1, 2024, Ferguson Enterprises Inc. became the successor issuer to Ferguson plc; therefore, beginning August 1, 2024, the operations, assets, rights, duties, liabilities, obligations and cash flows of Ferguson plc will be reported within Ferguson Enterprises Inc. pursuant to a merger under common control.

Use of estimates

The preparation of the accompanying consolidated financial statement of Ferguson Enterprises Inc. and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions affecting reported amounts in the consolidated financial statement and accompanying notes. Actual results may differ from those estimates.

Contingencies

As of July 31, 2024, Ferguson Enterprises Inc. was not a party to any pending claims or legal proceeding and is not aware of any other claims that it believes could, individually or in the aggregate, have a material adverse effect on its financial position, results of operations or cash flows.

Note B. Shareholders’ Equity

Ferguson Enterprises Inc. is authorized to issue 500,000,000 shares of common stock, par value $0.0001 per share. In February 2024, as part of its initial capitalization, Ferguson Enterprises Inc. issued 3 shares of common stock for total value of $0.03. In connection with the Merger, on the Effective Date, these shares in Ferguson Enterprises Inc. were surrendered to Ferguson Enterprises Inc. and cancelled, terminated and disposed of by Ferguson Enterprises Inc. for no additional consideration, and following such cancellation and termination, the initial stockholders no longer hold any rights whatsoever with respect to such shares.

On August 1, 2024, in connection with the completion of the Merger, Ferguson Enterprises Inc. issued common stock on a one-for-one basis for each Ferguson plc share held immediately preceding the Merger by the shareholders of Ferguson plc at the designated record time for the Merger. As a result, on August 1, 2024, the number of Ferguson Enterprises Inc. shares issued and outstanding consisted of 201,343,253 shares of common stock.