What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-05 compared with 2022-01-07 · 138 added, 64 removed, 132 unchanged (60% of the section changed)

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The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results of operations, financial position, cash flows, indebtedness, and other key financial information of Acuity Brands, Inc.

(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries as of November 30, 2021 and for the three months ended November 30, 2021 and 2020.

(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries as of February 28, 2022 and for the three and six months ended February 28, 2022 and 2021.

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included within this report.

Also, please refer to Acuity Brands' Annual Report on Form 10-K for the fiscal year ended August 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on October 27, 2021 (“Form 10-K”).

Also, please refer to Acuity Brands, Inc.'s Annual Report on Form 10-K for the fiscal year ended August 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on October 27, 2021 (“Form 10-K”).

We are a market-leading industrial technology company.

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We look to aggressively deploy capital to grow the business and to enter attractive new verticals.

The results of operations for the three months ended November 30, 2021 are not necessarily indicative of the results to be expected for the full fiscal 2022 year due primarily to continued uncertainty of general economic conditions that may impact our key end markets for fiscal 2022, seasonality, and the impact of any acquisitions, among other reasons.

Additionally, we are uncertain of the future impact of the ongoing COVID-19 pandemic or recovery of prior deterioration in economic conditions to our sales channels, supply chain, manufacturing, and distribution as well as overall construction, renovation, and consumer spending.

The results of operations for the three and six months ended February 28, 2022 are not necessarily indicative of the results to be expected for the full fiscal 2022 year due primarily to continued uncertainty of general economic conditions that may impact our key end markets for fiscal 2022, seasonality, and the impact of any acquisitions, among other reasons.

We are uncertain of the future impact of the ongoing COVID-19 pandemic or recovery of prior deterioration in economic conditions to our sales channels, supply chain, manufacturing, and distribution as well as overall construction, renovation, and consumer spending.

Additionally, the current conflict between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are creating substantial uncertainty in the global economy.

While we do not have operations in Russia or Ukraine and do not have significant direct exposure to customers and vendors in those countries, we are unable to predict the impact that these actions will have on the global economy or on our financial condition, results of operations, and cash flows as of the date of these financial statements.

Financial Condition, Capital Resources, and Liquidity

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In the event of a sustained market deterioration, we may need additional capital, which would require us to evaluate available alternatives and take appropriate actions.

Our cash position at November 30, 2021 was $504.0 million, an increase of $12.7 million from August 31, 2021.

Our cash position at February 28, 2022 was $475.5 million, a decrease of $15.8 million from August 31, 2021.

Cash generated from operating activities and cash on-hand were used during the current year to fund our capital allocation priorities as discussed below.

We generated $83.7 million of cash flows from operating activities during the three months ended November 30, 2021 compared with $123.9 million in the prior-year period, a decrease of $40.2 million, due primarily to increased operating working capital, particularly inventories, to support the growth in the business as well as the timing of payments for income taxes and prior year payroll tax deferrals under the Coronavirus Aid, Relief, and Economic Security Act of 2020.

We generated $127.3 million of cash flows from operating activities during the six months ended February 28, 2022 compared with $212.6 million in the prior-year period, a decrease of $85.3 million.

This decline was due primarily to increased operating working capital, as we managed our inventory levels to support growth and insulate production facilities from inconsistent supply availability.

Financing Arrangements

See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for discussion of our various financing arrangements, including the terms of our $400.0 million five-year unsecured revolving credit facility (“Revolving Credit Facility”) as well as the $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”).

At November 30, 2021, our outstanding debt balance was $494.5 million compared to our cash position of $504.0 million.

We were in compliance with all financial covenants under our financing arrangements as of November 30, 2021.

At November 30, 2021, we had additional borrowing capacity under the revolving credit facility of $395.9 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less the outstanding letters of credit of $4.1 million issued under the facility.

As of November 30, 2021, our cash on hand combined with the additional borrowing capacity under the revolving credit facility totaled $899.9 million.

At February 28, 2022, our outstanding debt balance was $494.7 million compared to our cash position of $475.5 million.

We were in compliance with all financial covenants under our financing arrangements as of February 28, 2022.

At February 28, 2022, we had additional borrowing capacity under the Revolving Credit Facility of $395.9 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less the outstanding letters of credit of $4.1 million issued under the facility.

As of February 28, 2022, our cash on hand combined with the additional borrowing capacity under the Revolving Credit Facility totaled $871.4 million.

The Unsecured Notes were issued by Acuity Brands Lighting, Inc., a wholly-owned subsidiary of Acuity Brands, Inc.

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The following tables present summarized financial information for Acuity Brands, Inc., Acuity Brands Lighting, Inc., and ABL IP Holding LLC on a combined basis after the elimination of all intercompany balances and transactions between the combined group as well as any investments in non-guarantors as of the dates and during the period presented (in millions):

Summarized Balance Sheet Information November 30, 2021 August 31, 2021

Summarized Balance Sheet Information February 28, 2022 August 31, 2021

Current assets $ 1,271.6 $ 1,172.0

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Non-current liabilities 814.5 815.7

Summarized Income Statement Information Three Months Ended November 30, 2021

Summarized Income Statement Information Six Months Ended February 28, 2022

Net sales $ 1,552.8

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Capital Allocation Priorities

Effective capital allocation is a key driver of stockholder value.

Our capital allocation priorities are to invest in our business for growth, to invest in mergers and acquisitions, to maintain our dividend, and to make share repurchases.

Organic Growth Investments

We invested $9.3 million and $11.4 million during the three months ended November 30, 2021 and 2020, respectively, in property, plant, and equipment, primarily related to investments in new and enhanced information technology capabilities, tooling, equipment, and facility enhancements.

We invested $24.1 million and $21.2 million during the six months ended February 28, 2022 and 2021, respectively, in property, plant, and equipment, primarily related to investments in new and enhanced information technology capabilities, tooling, equipment, and facility enhancements.

We currently expect to invest approximately 1.5% of net sales on capital expenditures during fiscal 2022.

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We seek opportunities to strategically expand and enhance our portfolio of solutions.

There were no acquisitions during the first quarter of fiscal 2022.

We invested in acquisitions of businesses, net of cash acquired, of $75.3 million in the year ended August 31, 2021.

These acquisitions included the following transactions:

• On July 1, 2021, using cash on hand, we acquired certain assets and liabilities of ams OSRAM’s North American Digital Systems (“OSRAM DS”) business.

This acquisition is intended to enhance our light emitting diode (“LED”) driver and controls technology portfolio and accelerate our innovation, expand our access to market through a more fulsome OEM product offering, and give us more control over our supply chain.

• On May 18, 2021, using cash on hand, we acquired all of the equity interests of Rockpile Ventures, an accelerator of edge artificial intelligence startups.

Rockpile Ventures helps early-stage artificial intelligence companies drive co-engineering and co-selling partnerships with major cloud ecosystems, enabling faster adoption from proof-of-concept trials to market scale.

There were no acquisitions during the first half of fiscal 2022.

The $10.2 million of cash outflows reflected in the fiscal 2022 Consolidated Statements of Cash Flows relate to working capital settlements for fiscal 2021 acquisitions.

Please refer to the Acquisitions footnote of the Notes to Consolidated Financial Statements for more information.

We paid dividends on our common stock of $4.7 million ($0.13 per share) and $5.0 million ($0.13 per share) during the three months ended November 30, 2021 and 2020, respectively.

We paid dividends on our common stock of $9.3 million ($0.26 per share) and $9.7 million ($0.26 per share) during the six months ended February 28, 2022 and 2021, respectively.

All decisions regarding the declaration and payment of dividends are at the discretion of the Board of Directors (the “Board”) and are evaluated regularly in light of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Board deems relevant.

Share Repurchases

During the first quarter of fiscal 2022, we repurchased 0.3 million shares of our outstanding common stock for $52.8 million.

Total cash outflows for share repurchases during the quarter were $56.3 million.

As of November 30, 2021, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 3.5 million shares.

During the first half of fiscal 2022, we repurchased 0.6 million shares of our outstanding common stock for $109.1 million.

Total cash outflows for share repurchases during the six months ended February 28, 2022 were $108.0 million.

We expect to repurchase shares on an opportunistic basis subject to various factors including stock price, Company performance, market conditions, and other possible uses of cash.

As of February 28, 2022, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 3.2 million shares.

On March 31, 2022, the Board authorized the repurchase of additional shares of our common stock, bringing our total authorization to five million shares.

Refer to Part II, Item 5.

Other Information for further details.

The COVID-19 Pandemic

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Results of Operations

First Quarter of Fiscal 2022 Compared with First Quarter of Fiscal 2021

The following table sets forth information comparing the components of net income for the three months ended November 30, 2021 and 2020 (in millions except per share data):

Second Quarter of Fiscal 2022 Compared with Second Quarter of Fiscal 2021

The following table sets forth information comparing the components of net income for the three months ended February 28, 2022 and 2021 (in millions except per share data):

Three Months Ended

November 30, 2021 November 30, 2020 Increase (Decrease) Percent Change

February 28, 2022 February 28, 2021 Increase (Decrease) Percent Change

Net sales $ 909.1 $ 776.6 $ 132.5 17.1 %

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Interest expense, net 6.0 6.6 (0.6) (9.1) %

Miscellaneous expense, net 0.3 1.6 (1.3) NM

Miscellaneous (income) expense, net (1.9) 2.2 (4.1) NM

Total other expense 4.1 8.8 (4.7) (53.4) %

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NM - not meaningful

Net sales for the three months ended November 30, 2021 increased $134.1 million, or 16.9%, to $926.1 million compared with $792.0 million in the prior-year period as our go-to-market activities, focus on servicing our customers, and continued recovery in our end markets generated higher sales in both our ABL and ISG operating segments.

Sales across both segments also benefited from recent price increases.

Revenues from acquired companies contributed a less than 4% increase in sales compared to the prior year.

Changes in foreign currency rates did not have a meaningful impact on net sales for the first quarter of fiscal 2022.

Gross profit for the first quarter of fiscal 2022 increased $53.4 million, or 16.1%, to $385.8 million compared with $332.4 million in the prior-year period, and gross profit margin decreased 30 basis points to 41.7% from 42.0%.

Throughout the current quarter, material and conversion costs as well as freight costs continued to escalate.

We were largely able to offset the increased costs through price increases and product and productivity improvements.

Gross profit margin was unfavorably impacted by the near-term dilutive effects of recent acquisitions.

Net sales for the three months ended February 28, 2022 increased $132.5 million, or 17.1%, to $909.1 million compared with $776.6 million in the prior-year period.

Both our ABL and ISG segments benefited from recent price increases as well as higher volumes.

Revenues from acquired companies contributed an almost 4% increase in sales compared to the prior year.

Changes in foreign currency rates did not have a meaningful impact on net sales for the second quarter of fiscal 2022.

Gross profit for the second quarter of fiscal 2022 increased $42.6 million, or 12.7%, to $379.3 million compared with $336.7 million in the prior-year period, while gross profit margin decreased 170 basis points to 41.7% from 43.4%.

Throughout the current quarter, material and conversion costs as well as freight costs continued to escalate, which we were able to offset through price increases and product and productivity improvements.

Gross profit margin was also unfavorably impacted by the near-term dilutive effects of recent acquisitions.

Operating Profit

SD&A expenses for the three months ended November 30, 2021 were $270.7 million compared with $246.0 million in the prior-year period, an increase of $24.7 million, or 10.0%.

Selling, distribution, and administrative expenses ("SD&A") expenses for the three months ended February 28, 2022 were $277.0 million compared with $245.4 million in the prior-year period, an increase of $31.6 million, or 12.9%.

The increase in SD&A expense was due primarily to higher outbound freight and commissions costs associated with higher sales as well as increased employee-related costs due in part to recent acquisitions.

SD&A expenses for the first quarter of fiscal 2022 were 29.2% of net sales compared with 31.1% for the prior-year period due primarily to improved leveraging of our operating costs.

Operating profit for the first quarter of fiscal 2022 was $115.1 million (12.4% of net sales) compared with $85.7 million (10.8% of net sales) for the prior-year period, an increase of $29.4 million, or 34.3%.

SD&A expenses for the second quarter of fiscal 2022 were 30.5% of net sales compared with 31.6% for the prior-year period due primarily to improved leveraging of our operating costs.

Operating profit for the second quarter of fiscal 2022 was $102.3 million (11.3% of net sales) compared with $91.0 million (11.7% of net sales) for the prior-year period, an increase of $11.3 million, or 12.4%.

The increase in

operating profit was due to higher gross profit associated with the increase in sales, partially offset by higher SD&A expenses.

operating profit was due primarily to higher gross profit associated with the increase in sales, partially offset by higher SD&A expenses.

The operating profit margin decrease of 40 bps year over year was due primarily to our decline in gross profit margin as well as the unfavorable impact of acquisitions on our operating expenses.

These declines were partially offset by improved leveraging of operating costs.

Other Expense

Other expense consists of net interest expense and net miscellaneous (income) expense, which includes non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

Interest expense, net, was $6.0 million and $6.6 million for the three months ended February 28, 2022 and 2021, respectively.

We reported net miscellaneous income of $1.9 million for the three months ended February 28, 2022 and net miscellaneous expense of $2.2 million for the three months ended February 28, 2021.

The year-over-year change in net miscellaneous (income) expense was largely due to gains and losses on foreign currency-related transactions.

Income Taxes and Net Income

Our effective income tax rate was 23.3% and 23.5% for the three months ended February 28, 2022 and 2021, respectively.

We currently estimate that our blended consolidated effective income tax rate, before any discrete items, will be approximately 23% for fiscal 2022, assuming the rates in our taxing jurisdictions remain generally consistent throughout the year.

Net income for the three months ended February 28, 2022 increased $12.4 million, or 19.7%, to $75.3 million from $62.9 million reported for the prior-year period.

The increase in net income resulted primarily from an increased operating profit compared to the prior-year period.

Diluted earnings per share for the three months ended February 28, 2022 increased $0.39, or 22.4%, to $2.13 compared with diluted earnings per share of $1.74 for the prior-year period.

This increase reflects higher net income as well as lower outstanding diluted shares.

Segment Results

The following table sets forth information comparing the operating results of our segments, ABL and ISG, for the three months ended February 28, 2022 and 2021 (in millions).

We have recast historical information to conform to the current segment structure.

Three Months Ended

February 28, 2022 February 28, 2021 Increase (Decrease) Percent Change

Net sales $ 863.1 $ 736.8 $ 126.3 17.1 %

Operating profit 116.5 102.0 14.5 14.2 %

Operating profit margin 13.5 % 13.8 % (30) bps

Net sales $ 50.0 $ 43.3 $ 6.7 15.5 %

Operating profit 1.2 0.8 0.4 50.0 %

Operating profit margin 2.4 % 1.8 % 60 bps

ABL net sales for the three months ended February 28, 2022 increased $126.3 million, or 17.1%, to $ 863.1 million compared with $ 736.8 million in the prior-year period.

Sales within the independent and direct network channels increased due primarily to benefits from recent price increases as well as higher volumes.

Additionally, sales within the corporate accounts channel increased year over year as some large accounts began previously deferred maintenance and renovations.

Acquisitions contributed an almost 4% increase in sales compared to the prior year and are reflected within the other sales channel in ABL's disaggregated revenue.

Operating profit for ABL was $116.5 million (13.5% of ABL net sales) for the three months ended February 28, 2022 compared to $102.0 million (13.8% of ABL net sales) in the prior-year period, an increase of $14.5 million.

The increase in operating profit was due primarily to contributions from higher sales partially offset by increased materials and freight costs as well as higher operating costs to support the increase in sales.

ISG net sales for the three months ended February 28, 2022 increased $6.7 million, or 15.5%, to $ 50.0 million compared with $ 43.3 million in the prior-year period driven primarily by strong demand for building and heating, ventilation, and air-conditioning controls as well as price increases.

ISG operating profit was $1.2 million for the three months ended February 28, 2022 compared to $0.8 million in the prior-year period, an increase of $0.4 million.

This increase was due primarily to contributions from higher sales, partially offset by increased employee costs.

First Six Months of Fiscal 2022 Compared with First Six Months of Fiscal 2021

The following table sets forth information comparing the components of net income for the six months ended February 28, 2022 and 2021 (in millions except per share data):

Six Months Ended

February 28, 2022 February 28, 2021 Increase (Decrease) Percent Change

Net sales $ 1,835.2 $ 1,568.6 $ 266.6 17.0 %

Cost of products sold 1,070.1 899.5 170.6 19.0 %

Gross profit 765.1 669.1 96.0 14.3 %

Percent of net sales 41.7 % 42.7 % (100) bps

Selling, distribution, and administrative expenses 547.7 491.4 56.3 11.5 %

Special charges — 1.0 (1.0) NM

Operating profit 217.4 176.7 40.7 23.0 %

Percent of net sales 11.8 % 11.3 % 50 bps

Other expense:

Interest expense, net 11.9 11.5 0.4 3.5 %

Miscellaneous (income) expense, net (1.6) 3.8 (5.4) NM

Total other expense 10.3 15.3 (5.0) (32.7) %

Income before income taxes 207.1 161.4 45.7 28.3 %

Percent of net sales 11.3 % 10.3 % 100 bps

Income tax expense 44.2 38.9 5.3 13.6 %

Effective tax rate 21.3 % 24.1 %

Net income $ 162.9 $ 122.5 $ 40.4 33.0 %

Diluted earnings per share $ 4.60 $ 3.30 $ 1.30 39.4 %

NM - not meaningful

Net sales for the six months ended February 28, 2022 increased $266.6 million, or 17.0%, to $1.84 billion compared with $1.57 billion in the prior-year period.

Both our ABL and ISG segments benefited from recent price increases as well as higher volumes.

Revenues from acquired companies contributed an almost 4% increase in sales compared to the prior year.

Changes in foreign currency rates did not have a meaningful impact on net sales for the first six months of fiscal 2022.

Gross profit for the six months ended February 28, 2022 increased $96.0 million, or 14.3%, to $765.1 million compared with $669.1 million in the prior-year period.

Gross profit margin decreased 100 basis points to 41.7% for the six months ended February 28, 2022 compared with 42.7% in the prior-year period.

Throughout the first six months of fiscal 2022, material and conversion costs as well as freight costs continued to escalate, which we were able to offset through price increases and product and productivity improvements.

Gross profit margin was also unfavorably impacted by the near-term dilutive effects of recent acquisitions.

Operating Profit

SD&A expenses for the six months ended February 28, 2022 were $547.7 million compared with $491.4 million in the prior-year period, an increase of $56.3 million, or 11.5%.

The increase in SD&A expense was due primarily to higher outbound freight and commissions costs associated with higher sales as well as increased employee-related

costs due in part to recent acquisitions.

SD&A expenses for the first six months of fiscal 2022 were 29.8% of net sales compared with 31.3% for the prior-year period due primarily to improved leveraging of our operating costs.

Operating profit for the first six months of fiscal 2022 was $217.4 million (11.8% of net sales) compared with $176.7 million (11.3% of net sales) for the prior-year period, an increase of $40.7 million, or 23.0%.

The increase in operating profit was due primarily to higher gross profit associated with the increase in sales, partially offset by higher SD&A expenses.

The operating profit margin increase of 50 bps year over year was the result of improved leveraging of operating costs, partially offset by lower gross profit margin.

Other Expense

Other expense consists of net interest expense and net miscellaneous expense, which includes non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

Interest expense, net, was $5.9 million and $4.9 million for the three months ended November 30, 2021 and 2020, respectively.

We reported net miscellaneous expense of $0.3 million and $1.6 million for the three months ended November 30, 2021 and 2020, respectively.

During the first quarter of fiscal 2021, we recorded an impairment charge of $4.0 million for an unconsolidated equity investment.

Excluding the impairment, the year-over-year change in net miscellaneous expense was largely due to gains and losses on foreign currency-related transactions.

Interest expense, net, was $11.9 million and $11.5 million for the six months ended February 28, 2022 and 2021, respectively.

We reported net miscellaneous income of $1.6 million for the six months ended February 28, 2022 and net miscellaneous expense of $3.8 million for the six months ended February 28, 2021.

During the first six months of fiscal 2021, we recorded an impairment charge of $4.0 million for an unconsolidated equity investment.

Further details regarding the impairment charge are included in the Fair Value Measurements footnote of the Notes to Consolidated Financial Statements .

Excluding the impairment, the year-over-year change in net miscellaneous (income) expense was largely due to gains and losses on foreign currency-related transactions.

Income Taxes and Net Income

Our effective income tax rate was 19.6% and 24.7% for the three months ended November 30, 2021 and 2020, respectively.

Our effective income tax rate was 21.3% and 24.1% for the six months ended February 28, 2022 and 2021, respectively.

The decrease in the effective income tax rate was primarily due to favorable discrete items recognized in the first quarter of fiscal 2022 related to excess tax benefits on share-based payments.

Net income for the first quarter of fiscal 2022 increased $28.0 million, or 47.0%, to $87.6 million from $59.6 million reported for the prior-year period.

The increase in net income resulted primarily from an increased operating profit compared to the prior-year period as well as a lower tax rate.

Diluted earnings per share for the three months ended November 30, 2021 increased $0.89, or 56.7%, to $2.46 compared with diluted earnings per share of $1.57 for the prior-year period.

Net income for the first six months of fiscal 2022 increased $40.4 million, or 33.0%, to $162.9 million from $122.5 million reported for the prior-year period.

The increase in net income was due primarily to an increased operating profit.

Diluted earnings per share for the six months ended February 28, 2022 increased $1.30 to $4.60 compared with diluted earnings per share of $3.30 for the prior-year period.

This increase reflects higher net income as well as lower outstanding diluted shares.

Segment Results

The following table sets forth information comparing the operating results of our segments, ABL and ISG, for the three months ended November 30, 2021 and 2020 (in millions except per share data).

The following table sets forth information comparing the operating results of our segments, ABL and ISG, for the six months ended February 28, 2022 and 2021 (in millions).

We have recast historical information to conform to the current segment structure.

Three Months Ended

November 30, 2021 November 30, 2020 Increase (Decrease) Percent Change

Six Months Ended

February 28, 2022 February 28, 2021 Increase (Decrease) Percent Change

Net sales $ 1,746.7 $ 1,490.4 $ 256.3 17.2 %

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Net sales $ 96.4 $ 84.1 $ 12.3 14.6 %

Operating profit (loss) 2.0 ( 0.1 ) 2.1 NM

Operating profit 3.2 0.7 2.5 357.1 %

Operating profit margin 3.3 % 0.8 % 250 bps

ABL net sales for the three months ended November 30, 2021 increased $130.0 million, or 17.3%, to $ 883.6 million compared with $ 753.6 million in the prior-year period due primarily to our go-to-market activities, focus on servicing our customers, and continued recovery in end markets we serve within the independent and direct sales network channels.

Sales within these channels also benefited from recent price increases and revenues from acquired companies.

Additionally, sales within corporate accounts increased year over year as some large accounts began previously deferred maintenance and renovations.

ABL net sales for the six months ended February 28, 2022 increased 17.2% compared with the prior-year period.

Sales within the independent and direct network channels increased due primarily to benefits from recent price increases as well as higher volumes.

Additionally, sales within the corporate accounts channel increased year over year as some large accounts began previously deferred maintenance and renovations.

Acquisitions contributed an

almost 4% increase in sales compared to the prior year and are reflected within the other sales channel in ABL's disaggregated revenue.

These increases were partially offset by declines in the retail sales channel.

Operating profit for ABL was $128.1 million (14.5% of ABL net sales) for the three months ended November 30, 2021 compared to $98.4 million (13.1% of ABL net sales) in the prior-year period, an increase of $29.7 million.

Operating profit for ABL was $244.6 million (14.0% of ABL net sales) for the six months ended February 28, 2022 compared to $200.4 million (13.4% of ABL net sales) in the prior-year period, an increase of $44.2 million.

ISG net sales for the three months ended November 30, 2021 increased $5.6 million, or 13.7%, to $ 46.4 million compared with $ 40.8 million in the prior-year period driven primarily by strong demand for building and heating, ventilation, and air-conditioning controls as well as price increases.

ISG operating profit was $2.0 million for three months ended November 30, 2021 compared with a $0.1 million operating loss in the prior-year period, an increase of $2.1 million.

ISG net sales for the six months ended February 28, 2022 increased 14.6% compared with the prior-year period primarily driven by strong demand for building and heating, ventilation, and air-conditioning controls as well as price increases.

ISG operating profit was $3.2 million for the six months ended February 28, 2022 compared with $0.7 million in the prior-year period, an increase of $2.5 million.

This increase was due primarily to contributions from higher sales, partially offset by increased employee costs.

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(b) expectations about the impact of any changes in demand, including improvements in our end markets, as well as volatility, challenges, and uncertainty in general economic conditions;

(d) our ability to execute and realize benefits from initiatives related to streamlining our operations and integrating recent acquisitions, realize synergies from acquisitions, capitalize on growth opportunities with the intention of becoming a larger, more dynamic company, and introduce innovative products and services;

(c) expectations about volatility in raw material, purchased finished goods, and transportation costs as well as component and labor availability;

(d) our ability to execute and realize benefits from initiatives related to streamlining our operations and integrating recent acquisitions, realize synergies from acquisitions, capitalize on growth opportunities, introduce innovative products and services, and realize benefits from sustainability initiatives;

(e) our estimate of our fiscal 2022 effective income tax rate, results of operations, and cash flows;

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(i) our expectations about our ability to enter into a new credit agreement prior to the expiration of the current agreement as well as any impacts of the phase out of the London Inter-Bank Offered Rate (“LIBOR”);

and (j) our expectations of the impact of the ongoing COVID-19 pandemic.

and (j) our expectations of the impact of the ongoing COVID-19 pandemic and the conflict between Russia and Ukraine.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this quarterly report.

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Our forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and management’s present expectations or projections.

These risks and uncertainties that could cause our actual results to differ materially from those expressed in our forward-looking statements are discussed in Part I, Item 1a.

risks and uncertainties that could cause our actual results to differ materially from those expressed in our forward-looking statements are discussed in Part I, Item 1a.

Risk Factors of our Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis