What changed in this filing

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Item 1. Financial Statements

2023-01-09 compared with 2022-06-30 · 176 added, 261 removed, 408 unchanged (52% of the section changed)

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(In millions, except share data)

May 31, 2022 August 31, 2021

November 30, 2022 August 31, 2022

Current assets:

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(In millions, except per-share data)

Three Months Ended Nine Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Net sales $ 997.9 $ 926.1

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Interest expense, net 6.6 5.9

Miscellaneous (income) expense, net ( 1.5 ) 2.7 ( 3.1 ) 6.5

Miscellaneous expense, net 9.1 0.3

Total other expense 15.7 6.2

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Defined benefit plans, net of tax 1.1 1.2

Other comprehensive (loss) income items, net of tax ( 0.6 ) 20.7 ( 5.3 ) 35.3

Other comprehensive loss items, net of tax ( 0.4 ) ( 10.7 )

Comprehensive income $ 74.5 $ 76.9

______________________________

(1) Earnings per share is calculated using unrounded numbers.

Amounts in the table may not recalculate exactly due to rounding.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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(In millions)

Nine Months Ended

May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Cash flows from operating activities:

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Share-based payment expense 10.7 7.6

Gain on sale of property, plant, and equipment ( 2.3 ) —

Asset impairment 4.3 —

Changes in operating assets and liabilities, net of acquisitions:

Loss on sale of a business 11.2 —

Changes in operating assets and liabilities, net of acquisitions and divestitures:

Accounts receivable 81.6 40.2

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Purchases of property, plant, and equipment ( 18.2 ) ( 9.3 )

Proceeds from sale of property, plant, and equipment 8.9 4.7

Acquisition of businesses, net of cash acquired ( 12.2 ) ( 2.0 )

Other investing activities 3.9 0.3

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Cash flows from financing activities:

Borrowings on credit facility, net of repayments 122.0 —

Issuance of long-term debt — 493.9

Repayments of long-term debt — ( 397.1 )

Repayments on credit facility, net of borrowings ( 18.0 ) —

Repurchases of common stock ( 76.5 ) ( 56.3 )

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ABL's portfolio of products includes but is not limited to the following brands:

Lithonia Lighting ® , Holophane ® , Peerless ® , Gotham ® , Mark Architectural Lighting TM , Winona ® Lighting, Juno ® , Indy TM , Aculux TM , Healthcare Lighting ® , Hydrel ® , American Electric Lighting ® , Sunoptics ® , eldoLED ® , nLight ® , Sensor Switch ® , IOTA ® , A-Light TM , Cyclone TM , Eureka ® , Lumniaire LED TM , Luminis ® , Dark to Light ® , and RELOC ® Wiring Solutions.

Principal customers of ABL include electrical distributors, retail home improvement centers, electric utilities, national accounts, digital retailers, lighting showrooms, and energy service companies located in North America and select international markets serving new construction, renovation and retrofit, and maintenance and repair applications.

ABL's lighting and lighting controls solutions are sold primarily through a network of independent sales agencies that cover specific geographic areas and market channels, by internal sales representatives, through consumer retail channels, and directly to large corporate accounts.

Lithonia Lighting ® , Holophane ® , Peerless ® , Gotham ® , Mark Architectural Lighting TM , Juno ® , Indy TM , Aculux TM , Healthcare Lighting ® , Hydrel ® , American Electric Lighting ® , eldoLED ® , nLight ® , Sensor Switch ® , IOTA ® , A-Light TM , Cyclone TM , Eureka ® , Luminaire LED TM , Luminis ® , Dark to Light ® , RELOC ® Wiring Solutions, and OPTOTRONIC ® .

Principal customers of ABL include electrical distributors, retail home improvement centers, electric utilities, national accounts, original equipment manufacturer (“OEM”) customers, digital retailers, lighting showrooms, and energy service companies.

Our customers are located in North America and select international markets that serve new construction, renovation and retrofit, and maintenance and repair applications.

Products are delivered directly from our manufacturing facilities or through a network of distribution centers, regional warehouses, and commercial warehouses using both common carriers and a company-managed truck fleet.

To serve international customers, our sales forces utilize a variety of distribution methods to meet specific individual customer or country requirements.

ABL comprised approximately 95 % of consolidated revenues during the three and nine months ended May 31, 2022 and 2021.

ABL comprised approximately 95 % of consolidated revenues during the three months ended November 30, 2022 and 2021.

ISG delivers products and services that make spaces smarter, safer, and greener.

ISG offers building management systems and location-aware applications.

Our building management system includes products for controlling heating, ventilation, and air conditioning (“HVAC”), lighting, shades, and building access that deliver end-to-end optimization of those building systems.

Atrius TM , our intelligent building platform, enhances the occupant experience, improves building system management, and automates labor intensive tasks while delivering operational energy efficiency and cost reductions.

Through a connected and converged building system architecture, our platform delivers different applications, allows clients to upgrade over time with natural refresh cycles, and deploys new capabilities through both software and hardware updates.

ISG offers a building management platform and location-aware applications.

Our building management platform includes products for controlling heating, ventilation, and air conditioning (“HVAC”), lighting, shades, and building access that deliver end-to-end optimization of those building systems.

Our Atrius ® intelligent building software enhances the occupant experience, improves building system management, and automates labor intensive tasks while delivering operational energy efficiency and cost reductions.

Through a connected and converged building system architecture, our Atrius ® software delivers different applications, allows clients to upgrade over time with natural refresh cycles, and deploys new capabilities through both software and hardware updates.

Customers of ISG primarily include system integrators as well as retail stores, airports, and enterprise campuses throughout North America and select international locations.

ISG products and solutions are marketed under numerous brand names, including but not limited to Distech Controls® and Atrius TM .

ISG comprised approximately 5 % of consolidated revenues during the three and nine months ended May 31, 2022 and 2021.

ISG products and solutions are marketed under multiple brand names, including but not limited to Distech Controls ® and Atrius ® .

ISG comprised approximately 5 % of consolidated revenues during the three months ended November 30, 2022 and 2021.

Basis of Presentation

We have prepared the Consolidated Financial Statements in accordance with U.S.

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and its wholly-owned subsidiaries.

These unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present fairly our consolidated financial position as of May 31, 2022, our consolidated comprehensive income for the three and nine months ended May 31, 2022 and 2021, and our consolidated cash flows for the nine months ended May 31, 2022 and 2021.

Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with U.S.

GAAP have been

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

condensed or omitted.

These unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present fairly our consolidated financial position as of November 30, 2022, our consolidated comprehensive income for the three months ended November 30, 2022 and 2021, and our consolidated cash flows for the three months ended November 30, 2022 and 2021.

Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted.

However, we believe that the disclosures included herein are adequate to make the information presented not misleading.

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001-16583) (“Form 10-K”).

The results of operations for the three and nine months ended May 31, 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 the remainder of fiscal 2022, seasonality, and the impact of any acquisitions, among other reasons.

The results of operations for the three months ended November 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal 2023 year due primarily to continued uncertainty of general economic conditions that may impact our key end markets for the remainder of fiscal 2023;

the impact of inflation;

component shortages;

disruptions in the global supply chain;

and the impact of any acquisitions and/or divestitures, 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.

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No material reclassifications occurred during the current period.

Note 3 — Acquisitions

The following discussion relates to fiscal 2021 acquisitions.

There were no acquisitions during fiscal 2022.

The $ 12.2 million of cash outflows reflected in the fiscal 2022 Consolidated Statements of Cash Flows relate to fiscal 2021 acquisitions primarily for working capital settlements.

Fiscal 2021 Acquisitions

ams OSRAM's North American Digital Systems Business

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

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

Rockpile Ventures

On May 18, 2021, using cash on hand, we acquired all of the equity interests of Rockpile Ventures, an accelerator of edge artificial intelligence (“AI”) 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.

Note 3 — Acquisitions and Divestitures

There were no acquisitions during fiscal 2023 or fiscal 2022.

During the first quarter of fiscal 2023, we committed to a plan to sell our Sunoptics prismatic skylights business.

We completed the sale of the business on November 10, 2022, and we transferred assets with a total carrying value of $ 15.1 million, which primarily consisted of intangibles with definite lives, inventories, and allocated goodwill from the ABL segment.

We recognized a pre-tax loss on the sale of $ 11.2 million within Miscellaneous expense, net on the Consolidated Statements of Comprehensive Income .

Additionally, we recorded impairment charges for certain retained assets as well as associate severance and other costs related to the sale.

These items are included within Special charges on the Consolidated Statements of Comprehensive Income .

See the Special Charges footnote of the Notes to Consolidated Financial Statements for further details.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Accounting for Acquisitions

We accounted for the acquisitions of Rockpile Ventures and OSRAM DS in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).

Acquired assets and liabilities were recorded at their estimated acquisition-date fair values, and acquisition-related costs were expensed as incurred.

We finalized the acquisition accounting for the Rockpile Ventures acquisition during the third quarter of fiscal 2022.

There were no material changes to our financial statements as a result of the finalization of the acquisition accounting for the Rockpile Ventures acquisition.

Amounts recognized for the OSRAM DS acquisition are deemed to be provisional until disclosed otherwise, as we continue to gather information related to the identification and valuation of acquired assets and liabilities, including but not limited to tax-related items, final net working capital purchase adjustments, if any, and the residual impacts on the valuation of intangible assets.

The aggregate purchase price of these acquisitions reflects goodwill of $ 10.6 million and definite-lived customer-based intangible assets of $ 6.7 million, which have a preliminary useful life of approximately 11 years.

Goodwill recognized from these acquisitions is comprised primarily of expected synergies from obtaining more control over our supply chain and technology, combining the operations of the acquired business with our operations, and acquiring the associated trained workforce.

As of May 31, 2022, goodwill from these acquisitions totaling $ 7.5 million is expected to be tax deductible.

Note 4 — New Accounting Pronouncements

Accounting Standards Adopted in Fiscal 2022

Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”)

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC Topic 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, or our fiscal 2022.

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

We adopted ASU 2019-11 as of September 1, 2021 as required by the standard.

This standard did not have a material effect on our financial condition, results of operations, or cash flows.

Accounting Standards Yet to Be Adopted

ASU 2021-08, Business Combinations (Topic 805):

Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”)

In October 2021, the FASB issued ASU 2021-08, which requires companies to recognize and measure contract assets and contract liabilities acquired in a business combination as if the acquiring company originated the related revenue contracts.

In October 2021, the Financial Accounting Standards Board issued ASU 2021-08, which requires companies to recognize and measure contract assets and contract liabilities acquired in a business combination as if the acquiring company originated the related revenue contracts.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, or our fiscal 2024, with early adoption permitted.

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All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 5 — Fair Value Measurements

We determine fair value measurements based on the assumptions a market participant would use in pricing an asset or liability.

ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a three-level hierarchy that distinguishes between market participant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (Level 3).

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”), establishes a three-level hierarchy that distinguishes between market participant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (Level 3).

We utilize valuation methodologies to determine the fair values of our financial assets and liabilities in conformity with the concepts of “exit price” and the fair value hierarchy as prescribed in ASC 820.

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We used quoted market prices to determine the fair value of Level 1 assets and liabilities.

Our cash and cash equivalents (Level 1), which are required to be carried at fair value and measured on a recurring basis, were $ 318.2 million and $ 491.3 million as of May 31, 2022 and August 31, 2021, respectively.

We hold a small number of investments in equity and debt financial instruments totaling $ 10.4 million and $ 5.3 million as of May 31, 2022 and August 31, 2021, respectively.

Our cash and cash equivalents (Level 1), which are required to be carried at fair value and measured on a recurring basis, were $ 284.1 million and $ 223.2 million as of November 30, 2022 and August 31, 2022, respectively.

We hold a small number of strategic investments totaling $ 12.0 million and $ 11.9 million as of November 30, 2022 and August 31, 2022, respectively.

These investments are primarily equity instruments in privately-held entities over which we do not exercise significant influence or control.

We generally account for these investments at fair value on a recurring basis;

Changes in the fair values of these financial instruments during the three and nine months ended May 31, 2022 and 2021 were not material to our financial condition, results of operations, or cash flows.

Our strategic equity investments represent less than a 20% ownership interest in each of the privately-held entities, and we do not exercise significant influence or control any of the entities.

Certain of these investments do not have readily determinable fair value.

however, these investments do not have readily determinable fair value.

We have elected the practical expedient in ASC Topic 321, Investments—Equity Securities , to measure these investments at cost less any impairment adjusted for observable price changes, if any.

During the first quarter of fiscal 2021, we recorded an impairment charge of $ 4.0 million for one of these investments as a recapitalization of the underlying company diluted our holding value.

The impairment charge is reflected in Miscellaneous (income) expense, net for the nine months ended May 31, 2021 within our Consolidated Statements of Comprehensive Income.

As such, these investments are excluded from the fair value hierarchy.

Changes in the fair values of these financial instruments during the three months ended November 30, 2022 and 2021 were not material to our financial condition, results of operations, or cash flows.

Disclosures of Fair Value of Financial Instruments

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Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Fair value for our outstanding debt obligations is estimated based on discounted future cash flows using rates currently available for debt of similar terms and maturity (Level 2).

Our senior unsecured public notes are carried at the outstanding balance, net of unamortized bond discount and deferred costs, as of the end of the reporting period.

The estimated fair value of our senior unsecured public notes was $ 411.3 million and $ 496.5 million as of May 31, 2022 and August 31, 2021, respectively.

The estimated fair value of our senior unsecured public notes was $ 388.4 million and $ 399.2 million as of November 30, 2022 and August 31, 2022, respectively.

The decrease in fair value is due to increases in market bond yields since the end of fiscal 2022.

As of May 31, 2022, we also had $ 122.0 million of short-term borrowings outstanding under our revolving credit facility.

We had no short-term borrowings and $ 18.0 million of short-term borrowings outstanding under our revolving credit facility as of November 30, 2022 and August 31, 2022, respectively.

These borrowings are variable-rate instruments that reset on a frequent short-term basis;

therefore, we estimate that the face amounts of these instruments approximate their fair values as of May 31, 2022.

therefore, we estimate that any outstanding carrying values, which are equal to the face amounts, of these instruments approximate their fair values.

See Debt and Lines of Credit footnote for further details on our outstanding borrowings.

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Accordingly, the aggregate fair value amounts presented do not represent the underlying value to us.

In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

disclosed value be realized in immediate settlement of the instruments.

In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instruments.

In evaluating our management of liquidity and other risks, the fair values of all assets and liabilities should be taken into consideration, not only those presented above.

Note 6 — Inventories

Inventories include materials, labor, inbound freight, and related manufacturing overhead;

are stated at the lower of cost (on a first-in, first-out or average cost basis) and net realizable value;

and consist of the following as of the dates presented (in millions):

May 31, 2022 August 31, 2021

Inventories include materials, direct labor, inbound freight, customs, duties, tariffs, and related manufacturing overhead.

Inventories are stated on a first-in, first-out basis at the lower of cost and net realizable value and consist of the following as of the dates presented (in millions):

November 30, 2022 August 31, 2022

Raw materials, supplies, and work in process (1)

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Property, plant, and equipment consist of the following as of the dates presented (in millions):

May 31, 2022 August 31, 2021

November 30, 2022 August 31, 2022

Land $ 22.2 $ 22.0

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Property, plant, and equipment, net $ 279.6 $ 276.5

During the second quarter of fiscal 2022, we sold one building previously classified as held for sale with a carrying value of $ 6.6 million for a gain of approximately $ 2.3 million reflected in Selling, distribution, and administrative expenses within our Consolidated Statements of Comprehensive Income.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 8 — Goodwill and Intangible Assets

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Indefinite-lived intangible assets consist of trade names that are expected to generate cash flows indefinitely.

We recorded amortization expense for definite-lived intangible assets of $ 10.2 million and $ 10.2 million during the three months ended May 31, 2022 and 2021, respectively, and $ 30.8 million and $ 30.4 million during the nine months ended May 31, 2022 and 2021, respectively.

We recorded amortization expense for definite-lived intangible assets of $ 13.6 million and $ 10.3 million during the three months ended November 30, 2022 and 2021, respectively.

Amortization expense is generally recorded on a straight-line basis and is expected to be approximately $ 41.5 million in fiscal 2023, $ 36.9 million in fiscal 2024, $ 29.4 million in fiscal 2025, $ 26.7 million in fiscal 2026, and $ 25.2 million in fiscal 2027.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table summarizes the changes in the carrying amount of goodwill by segment during the periods presented (in millions):

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Balance as of August 31, 2022 $ 1,014.2 $ 70.1 $ 1,084.3

Adjustments to provisional amounts from acquired businesses 0.6 — 0.6

Derecognitions for divestitures ( 0.7 ) — ( 0.7 )

Foreign currency translation adjustments ( 0.4 ) ( 1.2 ) ( 1.6 )

Balance as of May 31, 2022 $ 1,018.5 $ 72.4 $ 1,090.9

Balance as of November 30, 2022 $ 1,013.1 $ 68.9 $ 1,082.0

ABL ISG Total

Balance as of August 31, 2021 $ 1,022.2 $ 72.5 $ 1,094.7

Additions from acquired businesses — 3.1 3.1

Foreign currency translation adjustments ( 3.0 ) ( 0.7 ) ( 3.7 )

Balance as of May 31, 2021 $ 1,021.0 $ 75.2 $ 1,096.2

Balance as of November 30, 2021 $ 1,019.2 $ 71.8 $ 1,091.0

Further discussion of goodwill and other intangible assets is included within the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

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Other current liabilities consist of the following as of the dates presented (in millions):

May 31, 2022 August 31, 2021

November 30, 2022 August 31, 2022

Customer incentive programs (1)

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Interest on long-term debt (4)

Other 36.7 30.7

Total other current liabilities $ 198.1 $ 214.1

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(2) Refer to the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements for additional information.

(3) Includes accruals for income, property, sales and use, and value added taxes.

(3) Includes accruals for income, sales and use, and value added taxes.

(4) Refer to the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for additional information.

(5) Includes an accrual of $ 15.8 million as of May 31, 2022, related to the securities class action matter.

Refer to the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements for additional information.

ACUITY BRANDS, INC.

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issued $ 500.0 million aggregate principal amount of 2.150 % senior unsecured notes due December 15, 2030 (the “Unsecured Notes”).

The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Brands, Inc.

and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Brands, Inc.

The Unsecured Notes bear interest at a rate of 2.150 % per annum and were issued at a price equal to 99.737 % of their face value.

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and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Brands, Inc.

We recorded $ 4.8 million of deferred issuance costs related to the Unsecured Notes as a direct deduction from the face amount of the Unsecured Notes.

Additionally, we recorded $ 4.8 million of deferred issuance costs related to the Unsecured Notes as a direct deduction from the face amount of the Unsecured Notes.

These issuance costs are amortized over the 10-year term of the Unsecured Notes.

As of May 31, 2022, the balance of the Unsecured Notes net of unamortized discount and deferred issuance costs was $ 494.8 million.

Lines of Credit

On June 29, 2018, we entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks that provides us with a $ 400.0 million five-year unsecured revolving credit facility (the “Revolving Credit Facility”).

We had $ 122.0 million in short-term borrowings outstanding under the Revolving Credit Facility as of May 31, 2022.

There were no borrowings outstanding under the Revolving Credit Facility as of August 31, 2021.

The Credit Agreement expires in June 2023;

however, we entered into a new agreement prior to this expiration.

See Subsequent Event footnote for further details on the terms of the new agreement.

Generally, amounts outstanding under the Revolving Credit Facility allow for borrowings to bear interest at either the Eurocurrency Rate or the base rate at our option, plus an applicable margin.

Eurocurrency Rate advances can be denominated in a variety of currencies, including U.S.

Dollars, and amounts outstanding bear interest at a periodic fixed rate equal to the London Inter-Bank Offered Rate (“LIBOR”) or screen rate for the applicable currency plus an applicable margin.

The Eurocurrency Rate applicable margin is based on our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 1.000 % to 1.375 %.

Base rate advances bear interest at an alternate base rate plus an applicable margin.

The base rate applicable margin is based on our leverage ratio with such margin ranging from 0.000 % to 0.375 %.

On July 27, 2017, the U.K.

Financial Conduct Authority, which regulates LIBOR, announced that it will phase out rates for the calculation of LIBOR.

As a result of this change, certain LIBOR tenors and currencies were eliminated on December 31, 2021 with all other tenors and currencies of LIBOR anticipated to be eliminated on June 30, 2023.

We are required to pay certain fees in connection with the Credit Agreement, including administrative service fees and an annual facility fee.

The annual facility fee is payable quarterly, in arrears, and is determined by our leverage ratio.

The annual facility fee ranges from 0.125 % to 0.250 % of the aggregate $ 400.0 million commitment of the lenders under the Credit Agreement.

The Credit Agreement contains financial covenants, including a minimum interest expense coverage ratio (“Minimum Interest Expense Coverage Ratio”) and a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness to earnings before interest, tax, depreciation, and amortization (“EBITDA”), as such terms are defined in the Credit Agreement.

On June 30, 2022, we entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks that provides us with a $ 600.0 million five-year unsecured revolving credit facility (the “Revolving Credit Facility”) with the ability to request an additional $ 400.0 million of borrowing capacity.

We had no short-term borrowings at November 30, 2022 and $ 18.0 million in short-term borrowings at August 31, 2022 outstanding under the Revolving Credit Facility.

The Revolving Credit Facility uses the Secured Overnight Financing Rate (“SOFR”) as the applicable benchmark for U.S.

Dollar borrowings and an applicable benchmark rate for non-U.S.

Dollar borrowings as defined in the Credit Agreement.

The applicable margin pricing grid mechanics are based on the better of our public credit ratings or our net leverage ratio and range from 0.80 % to 1.20 % for base rate borrowings and from 0.00 % to 0.20 % for floating rate advances.

We are also required to pay certain fees in connection with the Credit Agreement, including administrative service fees and annual facility fees, which range from 0.075 % to 0.175 % of the aggregate $ 600.0 million remaining commitment of the lenders under the Credit Agreement.

The Credit Agreement contains a leverage ratio covenant (“Maximum Leverage Ratio”) of total indebtedness to earnings before interest, tax, depreciation, and amortization (“EBITDA”), as such terms are defined in the Credit Agreement.

These ratios are computed at the end of each fiscal quarter for the most recent 12-month period.

The Credit Agreement generally allows for a Minimum Interest Expense Coverage Ratio of 2.50 and a Maximum Leverage Ratio of 3.50 , subject to certain conditions.

We were in compliance with all financial covenants under the Credit Agreement as of May 31, 2022.

As of May 31, 2022, we had outstanding letters of credit totaling $ 4.1 million, primarily for securing collateral requirements under our casualty insurance programs.

At May 31, 2022, we had additional borrowing capacity under the Credit Agreement of $ 273.9 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 Revolving Credit Facility and the $ 122.0 million of short-term borrowings outstanding under the Revolving Credit Facility.

The Credit Agreement generally allows for a Maximum Leverage Ratio of 3.75 (subject to a temporary increase to 4.25 in the event of a significant acquisition) and allows netting of all unrestricted cash and cash equivalents against debt.

We were in compliance with all financial covenants under the Credit Agreement as of November 30, 2022.

At November 30, 2022, we had additional borrowing capacity under the Credit Agreement of $ 595.9 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less outstanding letters of credit of $ 4.1 million issued under the Revolving Credit Facility, primarily for securing collateral requirements under our casualty insurance programs.

Borrowings and repayments on our Revolving Credit Facility with terms of three months or less are reported on a net basis on our Consolidated Statements of Cash Flows .

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Interest Expense, net

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Interest expense is partially offset by interest income earned on cash and cash equivalents.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table summarizes the components of interest expense, net for the periods presented (in millions):

Three Months Ended Nine Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Interest expense $ 7.9 $ 6.2

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We establish estimated liabilities when the associated costs related to uncertainties or guarantees become probable and can be reasonably estimated.

For the period ended May 31, 2022, no material changes have occurred in our estimated liabilities for self-insurance, litigation, environmental matters, guarantees and indemnities, or relevant events and circumstances, from those disclosed in the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements within our Form 10-K other than the items discussed below.

For the period ended November 30, 2022, no material changes have occurred in our estimated liabilities for self-insurance, litigation, environmental matters, guarantees and indemnities, or relevant events and circumstances, from those disclosed in the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements within our Form 10-K other than the items discussed below.

Product Warranty and Recall Costs

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We record an accrual for the estimated amount of future warranty costs when the related revenue is recognized.

Estimated costs related to product recalls based on a formal campaign soliciting repair or return of that product are accrued when they are deemed to be probable and can be reasonably estimated.

Estimated future warranty and recall costs are primarily based on historical experience of identified warranty and recall claims.

However, there can be no assurance that future warranty or recall costs will not exceed historical amounts or that new technology products may not generate unexpected costs.

If actual future warranty or recall costs exceed historical amounts, additional increases in the accrual may be required, which could have a material adverse impact on our results of operations, financial position, and cash flows.

Estimated costs related to product warranty and recall costs outside of our historical experience, which could include significant product recalls or formal campaigns soliciting repair or return of a product, are accrued when they are deemed to be probable and can be reasonably estimated.

Any estimated or actual loss recoveries that offset our costs and payments are reflected as assets and included within Other current assets or Other long-term assets on the Consolidated Balance Sheets based on the expected timing of receipt of recovery.

There can be no assurance that future warranty or recall costs will not exceed historical amounts or that new technology products may not generate unexpected costs.

Estimated liabilities for product warranty and recall costs are included in Other accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets based upon when we expect to settle the incurred warranty.

The following table summarizes changes in the estimated liabilities for product warranty and recall costs during the periods presented (in millions):

Nine Months Ended

May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Beginning balance $ 27.3 $ 20.3

2 unchanged sentences

Ending balance $ 22.4 $ 20.2

Securities Class Action

On October 5, 2021, the parties to the shareholder class action litigation previously disclosed and styled In re Acuity Brands, Inc.

Securities Litigation, Civil Action No.

1:18-cv-02140-MHC (N.D.

Ga.) executed a term sheet for settlement of the litigation, subject to documentation of the settlement and approval of the District Court after notice

Shareholder Derivative Complaint

As previously disclosed, on October 1, 2021, certain alleged shareholders of the Company filed a putative derivative complaint in the United States District Court for the Northern District of Georgia asserting claims against three former executives for breach of fiduciary duty and certain other claims (the “Derivative Complaint”).

The Company is named as a nominal defendant, and the plaintiffs seek on behalf of the Company unspecified damages from the

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

to class members.

On December 2, 2021, the lead plaintiff in the case filed an unopposed motion seeking preliminary approval of the settlement which attaches the settlement stipulation and exhibits thereto.

On June 7, 2022, following an approval hearing, the District Court entered a judgment approving the settlement and dismissing the action with prejudice.

The agreed-upon settlement payment of $ 15.8 million has been funded entirely by applicable Directors and Officers liability insurance.

As such, we did not incur a significant net loss or cash outflow as a result of the settlement of this matter.

As of May 31, 2022, we reflected a liability for the settlement amount within Other current liabilities and a corresponding receivable for the offsetting insurance proceeds within Prepayments and other current assets on the Consolidated Balance Sheets .

Shareholder Derivative Complaint

On October 1, 2021, certain alleged shareholders of the Company filed a putative derivative complaint in the United States District Court for the Northern District of Georgia asserting claims against three of the individuals named as defendants in the above securities action for breach of fiduciary duty and certain other claims arising out of the alleged facts and circumstances upon which the claims in the above securities class action are based (the “Derivative Complaint”).

The Company is named as a nominal defendant, and the plaintiffs seek on behalf of the Company unspecified damages from the individual defendants and other relief.

individual defendants and other relief.

Prior to filing the Derivative Complaint, the derivative plaintiffs sent letters to the Company’s Board of Directors (the “Board”) demanding that the Company investigate and pursue substantially the same claims against the individual defendants that are asserted in the Derivative Complaint.

The Company’s Board formed a demand evaluation committee consisting of independent directors to investigate these matters and make a recommendation to the Board regarding the best interests of the Company in connection therewith.

The committee’s work is ongoing.

On December 14, 2021, the Company filed a motion to stay the derivative action pending the conclusion of the related securities class action or, in the alternative, to dismiss the derivative action without prejudice as premature, given the demand evaluation committee’s ongoing work.

Also on December 14, 2021, the individual defendants filed a motion to dismiss the Derivative Complaint for failure to adequately plead any claim for relief against them.

Estimating an amount or range of possible losses or gains resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key evidential and legal issues have not been resolved.

For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or gains or a range of possible losses or gains resulting from the Derivative Complaint.

On August 3, 2022, the Court entered a stipulated consent order extending the deadline for the individual defendants and the Company to answer, move against, or otherwise respond to the Derivative Complaint until thirty days after the filing of an amended complaint or the designation of an operative complaint.

Subsequently, the demand evaluation committee completed its investigation and recommended that the Board reject the demands and direct the Company to seek dismissal of the Derivative Complaint.

The Board approved and adopted the recommendation from the committee and rejected the demands and directed the Company to seek dismissal of the Derivative Complaint.

The parties advised the Court of the Board’s decision during the status conference held on October 6, 2022.

The Court directed the parties to submit a written status report within forty-five days as to the litigation.

The parties subsequently negotiated a Stipulated Confidentially Agreement, which was filed with the Court on October 31, 2022.

Pursuant to the Stipulated Confidentiality Agreement and Order, the Company produced the demand evaluation committee report and recommendation regarding the claims asserted in the Derivative Complaint, along with exhibits, to the plaintiffs for review.

On December 21, 2022, the parties filed a joint status report notifying the Court that the plaintiffs had completed their review of the demand evaluation committee report and that the parties expect to update the Court by January 20, 2023 regarding the next steps in the litigation.

Data Security Incidents

On December 14, 2022, a former employee filed a putative class action complaint against the Company in the United States District Court for the Northern District of Georgia on behalf of all persons whose personal information was compromised as a result of data security incidents we experienced in October 2020 and/or December 2021.

The plaintiff alleges that the Company failed to exercise reasonable caution in securing and safeguarding her and the other putative class members’ personal information, and on that basis, asserts claims for negligence, breach of contract, breach of implied contract, unjust enrichment, and breach of fiduciary duty.

The plaintiff seeks class certification, unspecified monetary damages, certain injunctive relief regarding our data-security measures, additional credit-monitoring services, other equitable relief (including disgorgement), attorneys’ fees, costs, and pre- and post-judgment interest.

We dispute the allegations in the complaint and, given the recency of the lawsuit, are planning our response strategy, which we currently expect to include a vigorous defense of the claims.

Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the early stages of the proceedings where key evidential and legal issues have not been resolved.

In addition, we have received inquiries from, and it is also possible that investigations or other actions are taken by, state and/or federal agencies regarding the data security incidents and related data privacy matters.

For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matters described above.

We have insurance, subject to certain terms and conditions, for these types of matters.

We are subject to various other legal claims arising in the normal course of business, including patent infringement, employment matters, and product liability claims.

3 unchanged sentences

The actual costs of resolving legal claims may be substantially higher than the amounts accrued for such claims.

However, we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the accrued amounts.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

However, we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the accrued amounts.

Note 12 — Changes in Stockholders' Equity

17 unchanged sentences

Balance, November 30, 2022 32.2 $ 0.5 $ 1,035.4 $ 3,246.8 $ ( 126.2 ) $ ( 2,253.0 ) $ 1,903.5

Net income — — — 75.3 — — 75.3

Other comprehensive income — — — — 6.0 — 6.0

Share-based payment amortization, issuances, and cancellations — — 9.4 — — — 9.4

Employee stock purchase plan issuances — — 0.4 — — — 0.4

Cash dividends of $ 0.13 per share paid on common stock

— — — ( 4.6 ) — — ( 4.6 )

Stock options exercised — — 1.2 — — — 1.2

Repurchases of common stock ( 0.3 ) — — — — ( 56.3 ) ( 56.3 )

Balance, February 28, 2022 34.8 0.5 1,015.6 2,963.9 ( 102.9 ) ( 1,772.8 ) 2,104.3

Net income — — — 105.7 — — 105.7

Other comprehensive loss — — — — ( 0.6 ) — ( 0.6 )

Share-based payment amortization, issuances, and cancellations — — 9.2 — — — 9.2

Employee stock purchase plan issuances — — 0.4 — — — 0.4

Cash dividends of $ 0.13 per share paid on common stock

— — — ( 4.4 ) — — ( 4.4 )

Repurchases of common stock ( 1.7 ) — — — — ( 296.0 ) ( 296.0 )

Balance, May 31, 2022 33.1 $ 0.5 $ 1,025.2 $ 3,065.2 $ ( 103.5 ) $ ( 2,068.8 ) $ 1,918.6

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Common Stock Outstanding

7 unchanged sentences

Net income — — — 87.6 — — 87.6

Other comprehensive income — — — — 6.2 — 6.2

Cumulative effect of adoption of ASC 326 — — — ( 0.2 ) — — ( 0.2 )

Share-based payment amortization, issuances, and cancellations 0.1 — 4.7 — — — 4.7

Employee stock purchase plan issuances — — 0.3 — — — 0.3

Cash dividends of $ 0.13 per share paid on common stock

— — — ( 5.0 ) — — ( 5.0 )

Repurchases of common stock ( 2.6 ) — — — — ( 256.1 ) ( 256.1 )

Balance, November 30, 2020 36.4 0.5 968.6 2,577.7 ( 126.5 ) ( 1,483.3 ) 1,937.0

Net income — — — 62.9 — — 62.9

Other comprehensive income — — — — 8.4 — 8.4

Share-based payment amortization, issuances, and cancellations — — 8.6 — — — 8.6

Employee stock purchase plan issuances — — 0.2 — — — 0.2

Cash dividends of $ 0.13 per share paid on common stock

— — — ( 4.7 ) — — ( 4.7 )

Stock options exercised — — 0.4 — — — 0.4

Repurchases of common stock ( 0.7 ) — — — — ( 80.3 ) ( 80.3 )

Balance, February 28, 2021 35.7 0.5 977.8 2,635.9 ( 118.1 ) ( 1,563.6 ) 1,932.5

Net income — — — 85.7 — — 85.7

Other comprehensive income — — — — 20.7 — 20.7

Other comprehensive loss — — — — ( 10.7 ) — ( 10.7 )

Share-based payment amortization, issuances, and cancellations 0.1 — 0.4 — — — 0.4

4 unchanged sentences

Repurchases of common stock ( 0.3 ) — — — — ( 52.8 ) ( 52.8 )

Balance, May 31, 2021 35.7 $ 0.5 $ 985.1 $ 2,717.0 $ ( 97.4 ) $ ( 1,566.1 ) $ 2,039.1

Balance, November 30, 2021 35.1 $ 0.5 $ 1,004.6 $ 2,893.2 $ ( 108.9 ) $ ( 1,716.5 ) $ 2,072.9

Note 13 — Revenue Recognition

1 unchanged sentence

Revenue is measured as the amount of consideration we expect to receive in exchange for goods and services and is recognized net of allowances for rebates, sales incentives, product returns, and discounts to customers.

We allocate the expected consideration to be collected to each distinct performance obligation identified in a sale based on its standalone selling price.

Sales and use taxes collected on behalf of governmental authorities are excluded from revenues.

Further details regarding revenue recognition are included within the Revenue Recognition footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Contract Balances

Our rights related to collections from customers are unconditional and are reflected within Accounts receivable on the Consolidated Balance Sheets .

Our rights related to collections from customers are unconditional and are reflected within Accounts receivable on the Consolidated Balance Sheets at net realizable value.

Further details regarding our method for developing our estimate of expected credit losses over the contractual term of our receivables are included within the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

We do not have any other significant contract assets.

Contract liabilities arise when we receive cash or an unconditional right to collect cash prior to the transfer of control of goods or services.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The amount of transaction price from contracts with customers allocated to our contract liabilities consists of the following as of the periods presented (in millions):

May 31, 2022 August 31, 2021

November 30, 2022 August 31, 2022

Current deferred revenues $ 11.6 $ 11.4

Non-current deferred revenues 52.1 53.1

Current deferred revenues primarily consist of sales-type warranties, software licenses, and professional service fees collected prior to performing the related service.

Current deferred revenues are included within Other current liabilities on the Consolidated Balance Sheets .

These services are expected to be performed within one year from the dates presented.

Non-current deferred revenues primarily consist of long-term service-type warranties, which are typically recognized ratably as revenue between five and ten years from the date of sale, and are included

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

within Other long-term liabilities on the Consolidated Balance Sheets.

Revenue recognized from beginning balances of contract liabilities during the nine months ended May 31, 2022 totaled $ 6.5 million.

Unsatisfied performance obligations that do not represent contract liabilities are expected to be satisfied within one year from May 31, 2022 and consist primarily of orders for physical goods that have not yet been shipped.

Current deferred revenues primarily consist of software licenses as well as professional service and service-type warranty fees collected prior to performing the related service and are included within Other current liabilities on the Consolidated Balance Sheets .

These services are expected to be performed within one year.

Revenue recognized from beginning balances of contract liabilities during the three months ended November 30, 2022 totaled $ 3.9 million.

Unsatisfied performance obligations that do not represent contract liabilities are generally expected to be satisfied within one year from November 30, 2022 and consist primarily of orders for physical goods that have not yet been shipped.

Disaggregated Revenues

Our ABL segment's lighting and lighting controls are sold primarily through independent sales agents who cover specific geographic areas and market channels, by internal sales representatives, through consumer retail channels, and directly to large corporate accounts.

ISG sells predominantly to system integrators.

The following table shows revenue from contracts with customers by sales channel and reconciles to our segment information for the periods presented (in millions):

Three Months Ended Nine Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Independent sales network $ 673.7 $ 636.8

2 unchanged sentences

Corporate accounts 49.1 37.0

Other 82.6 45.2 224.8 118.1

OEM and other 68.0 72.9

Total ABL 947.1 883.6

4 unchanged sentences

We account for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors over the related requisite service period, including stock options, performance stock units, and restricted stock (all part of our equity incentive plan), as well as stock units representing certain deferrals into our director deferred compensation plan or our supplemental deferred savings plan.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table presents share-based payment expense for the periods presented (in millions):

Three Months Ended Nine Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Share-based payment expense $ 10.7 $ 7.6

We recognized excess tax benefits of $ 4.6 million related to share-based payment awards during the nine months ended May 31, 2022.

We recognized excess tax benefits of $ 1.3 million and $ 4.2 million related to share-based payment awards during the three months ended November 30, 2022 and 2021, respectively.

Further details regarding our share-based payments are included within the Share-based Payments footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

4 unchanged sentences

Plan assets are invested primarily in fixed income and equity securities.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Service cost of net periodic pension cost is allocated between Cost of products sold and Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income based on the nature of the employee's services.

All other components of net periodic pension cost are included within Miscellaneous (income) expense, net in the Consolidated Statements of Comprehensive Income .

All other components of net periodic pension cost are included within Miscellaneous expense, net in the Consolidated Statements of Comprehensive Income .

Net periodic pension cost included the following components before tax for the periods presented (in millions):

Three Months Ended Nine Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Service cost $ 1.1 $ 1.2

5 unchanged sentences

Further details regarding our pension plans are included within the Pension and Defined Contribution Plans footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Note 16 — Special Charges

During the first three months of fiscal 2023, we recognized pre-tax special charges of $ 6.9 million within Special charges on the Consolidated Statements of Comprehensive Income primarily for impairments of operating lease right-of-use assets for $ 4.3 million associated with our previously owned Sunoptics prismatic skylights business that were not transferred in connection with the sale.

We additionally recognized associate severance and other costs totaling $ 2.6 million primarily in connection with the Sunoptics divestiture.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 17 — Earnings Per Share

4 unchanged sentences

The following table calculates basic earnings per common share and diluted earnings per common share for the periods presented (in millions, except per share data):

Three Months Ended Nine Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Net income $ 74.9 $ 87.6

3 unchanged sentences

Basic earnings per share (1)

$ 2.32 $ 2.50

Diluted earnings per share (1)

$ 2.29 $ 2.46

_______________________________________

(1) Earnings per share is calculated using unrounded numbers.

Amounts in the table may not recalculate exactly due to rounding.

The following table presents stock options, performance stock awards, and restricted stock awards that were excluded from the diluted earnings per share calculation for the periods presented as the effect of inclusion would have been antidilutive (in millions):

Three Months Ended Nine Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Stock options 0.1 0.1

Performance stock awards — * — *

Restricted stock awards 0.1 — *

_______________________________________

* Represents shares of less than 0.1 million.

Further discussion of our share-based payment awards is included within the Common Stock and Related Matters and Share-based Payments footnotes of the Notes to Consolidated Financial Statements within our Form 10-K.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 18 — Comprehensive Income

Comprehensive income represents a measure of all changes in equity that result from recognized transactions and other economic events other than transactions with owners in their capacity as owners.

Comprehensive income includes our net income as well as other comprehensive income (loss) items.

Other comprehensive (loss) income items include foreign currency translation and pension adjustments.

Comprehensive income includes our net income as well as other comprehensive income (loss) items, which are comprised of foreign currency translation and pension adjustments.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table presents the changes in each component of accumulated other comprehensive loss net of tax during the periods presented (in millions):

4 unchanged sentences

Net current period other comprehensive (loss) income ( 1.5 ) 1.1 ( 0.4 )

Balance at May 31, 2022 $ ( 49.1 ) $ ( 54.4 ) $ ( 103.5 )

Balance at November 30, 2022 $ ( 75.0 ) $ ( 51.2 ) $ ( 126.2 )

Foreign Currency Items Defined Benefit Pension Plans Accumulated Other Comprehensive Loss Items

Balance at August 31, 2021 $ ( 40.2 ) $ ( 58.0 ) $ ( 98.2 )

Other comprehensive income before reclassifications 33.6 ( 3.2 ) 30.4

Other comprehensive loss before reclassifications ( 11.9 ) — ( 11.9 )

Amounts reclassified from accumulated other comprehensive loss (1)

Net current period other comprehensive income 33.6 1.7 35.3

Balance at May 31, 2021 $ ( 19.9 ) $ ( 77.5 ) $ ( 97.4 )

Net current period other comprehensive (loss) income ( 11.9 ) 1.2 ( 10.7 )

Balance at November 30, 2021 $ ( 52.1 ) $ ( 56.8 ) $ ( 108.9 )

_______________________________________

1 unchanged sentence

See the Pension and Defined Contribution Plans footnote for additional details.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table summarizes the tax expense or benefit allocated to each component of other comprehensive income (loss) for the periods presented (in millions):

Three Months Ended

May 31, 2022 May 31, 2021

November 30, 2022 November 30, 2021

Before Tax Amount Tax (Expense) Benefit Net of Tax Amount Before Tax Amount Tax (Expense) Benefit Net of Tax Amount

1 unchanged sentence

Defined benefit pension plans:

Tax adjustments — — — — ( 3.2 ) ( 3.2 )

Amortization of defined benefit pension items:

3 unchanged sentences

Total defined benefit pension plans, net 1.5 ( 0.4 ) 1.1 1.6 ( 0.4 ) 1.2

Other comprehensive (loss) income $ ( 0.3 ) $ ( 0.3 ) $ ( 0.6 ) $ 24.5 $ ( 3.8 ) $ 20.7

Nine Months Ended

May 31, 2022 May 31, 2021

Before Tax Amount Tax (Expense) Benefit Net of Tax Amount Before Tax Amount Tax (Expense) Benefit Net of Tax Amount

Foreign currency translation adjustments $ ( 8.9 ) $ — $ ( 8.9 ) $ 33.6 $ — $ 33.6

Defined benefit pension plans:

Tax adjustments — — — — ( 3.2 ) ( 3.2 )

Amortization of defined benefit pension items:

Prior service cost 2.1 ( 0.5 ) 1.6 2.2 ( 0.5 ) 1.7

Actuarial losses 2.6 ( 0.6 ) 2.0 4.1 ( 0.9 ) 3.2

Total defined benefit pension plans, net 4.7 ( 1.1 ) 3.6 6.3 ( 4.6 ) 1.7

Other comprehensive (loss) income $ ( 4.2 ) $ ( 1.1 ) $ ( 5.3 ) $ 39.9 $ ( 4.6 ) $ 35.3

Other comprehensive loss $ — $ ( 0.4 ) $ ( 0.4 ) $ ( 10.3 ) $ ( 0.4 ) $ ( 10.7 )

Note 19 — Segment Information

3 unchanged sentences

These include expenses related to governance, policy setting, compliance, and certain other shared services functions.

Additionally, we do not allocate net interest expense, net miscellaneous expense, special charges, or assets to our segments.

Accordingly, this information is not used by the chief operating decision maker to make operating decisions and assess performance and is therefore excluded from our disclosures.

Beginning in fiscal 2023, we now allocate special charges to operating segment information presented to the chief operating decision maker on a prospective basis.

Special charges during the three months ended November 30, 2022 of $ 6.9 million pertained to the ABL segment.

We recorded no special charges during fiscal 2022.

ACUITY BRANDS, INC.

2 unchanged sentences

ABL ISG Corporate Eliminations (1)

Three Months Ended May 31, 2022

Net sales $ 1,008.4 $ 58.3 $ — $ ( 6.1 ) $ 1,060.6

Operating profit (loss) 149.6 9.2 ( 16.1 ) — 142.7

Depreciation and amortization 19.6 3.6 0.3 — 23.5

Three Months Ended May 31, 2021

Net sales $ 850.0 $ 55.4 $ — $ ( 5.7 ) $ 899.7

Operating profit (loss) 126.5 7.2 ( 15.6 ) — 118.1

Depreciation and amortization 21.0 3.7 0.3 — 25.0

Nine Months Ended May 31, 2022

Three Months Ended November 30, 2022

Net sales $ 947.1 $ 56.8 $ — $ ( 6.0 ) $ 997.9

1 unchanged sentence

Depreciation and amortization 22.7 3.5 0.3 — 26.5

Nine Months Ended May 31, 2021

Three Months Ended November 30, 2021

Net sales $ 883.6 $ 46.4 $ — $ ( 3.9 ) $ 926.1

5 unchanged sentences

The following table reconciles operating profit by segment to income before income taxes (in millions):

Three Months Ended Nine Months Ended

May 31, 2022 May 31, 2021 May 31, 2022 May 31, 2021

Three Months Ended

November 30, 2022 November 30, 2021

Operating profit - ABL $ 118.1 $ 128.1

3 unchanged sentences

Interest expense, net 6.6 5.9

Miscellaneous (income) expense, net ( 1.5 ) 2.7 ( 3.1 ) 6.5

Miscellaneous expense, net 9.1 0.3

Income before income taxes $ 93.2 $ 108.9

Note 19 — Subsequent Event

On June 30, 2022, we entered into a new revolving credit facility (the “New Revolving Credit Facility”) with a syndicate of banks that replaced the existing Revolving Credit Facility set to expire in June 2023.

The New Revolving Credit Facility, among other things, (i) increases borrowing capacity by $ 200 million to $ 600 million with the ability to request additional capacity of $ 400 million;

(ii) extends the maturity date from June 2023 to June 2027;

(iii) replaces the benchmark reference rate for U.S.

Dollar borrowings from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and for non-U.S.

Dollar borrowings to the applicable benchmark rate for those currencies;

(iv) reduces pricing for borrowings as well as annual facility and administration fees;

(v) adjusts the applicable margin pricing grid mechanics to be based on the better of our public credit ratings or our net leverage ratio;

(vi) increases the Maximum Leverage Ratio financial covenant 25 basis points to 3.75 (subject to temporary increase to 4.25 in the event of a significant acquisition) and allows netting of all unrestricted cash and cash equivalents against debt;

and (vii) removes the Minimum Interest Expense Coverage Ratio financial covenant.

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 1. Financial Statements