Acquisitions

6 Months Ended

Jan. 31, 2025

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisitions

Acquisitions

The Company acquired two businesses during the six months ended January 31, 2025. Each of the acquired businesses is generally engaged in the distribution of plumbing, HVAC or infrastructure related products and was acquired to support growth. In each of the Company’s acquisitions, the Company has purchased substantially all of 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 regard to the Company's acquisitions:

(In millions)
Trade and other receivables	$7
Inventories	6
Property, plant and equipment	1
Right of use assets	4
Trade names and brands	1
Customer relationships	32
Other intangible assets	1
Trade and other payables	(2)
Lease liabilities	(4)
Total	46
Goodwill	15
Consideration	$61
Satisfied by:
Cash	$46
Deferred & other consideration	15
Total consideration	$61

The fair values of the net assets acquired are considered preliminary and are based on management’s best estimates. Further adjustments may be necessary in connection with acquisitions completed in a prior period when additional information becomes available about events that existed at the date of acquisition. Amendments to fair value estimates may be made to these figures during the measurement period following the date of acquisition. 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 Quarterly Report, the Company has made all known material adjustments related to acquisitions in fiscal 2025.

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

The goodwill on these acquisitions is attributable to the anticipated profitability of the new markets and product ranges to which the Company has gained access and additional profitability, operating efficiencies and other synergies available in connection with existing markets. All of the goodwill acquired during the six months ended January 31, 2025 was attributed to the United States segment and is expected to be deductible for tax purposes.

Deferred consideration represents the expected payout due to certain sellers of acquired businesses that is subject to either 1) a contractual settle-up period or 2) 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 during the year-to-date period of fiscal 2025 contributed $10 million to net sales and $2 million in losses to the Company’s income before income tax, including acquired intangible asset amortization, as well as transaction and integration costs for the period between the applicable date of acquisition and January 31, 2025. Acquisition costs during the six months ended January 31, 2025 were not material. Acquisition costs are expensed as incurred and included in selling, general and administrative expenses in the Company’s consolidated statements of earnings.

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

	Six months ended
(In millions)	January 31, 2025
Purchase consideration	$46
Cash, cash equivalents and bank overdrafts acquired	—
Cash consideration paid, net of cash acquired	46
Deferred and contingent consideration(1)	11
Net cash outflow in respect of the purchase of businesses	$57

(1) Included in other financing activities in the Condensed 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:

	Three months ended		Six months ended
	January 31,		January 31,
(In millions)	2025	2024	2025	2024
Pro forma net sales	$6,873	$6,685	$14,654	$14,405

The impact on income before income tax, including additional amortization, transaction costs and integration costs would not be material in the three and six months ended January 31, 2025 and 2024.

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