What changed in this filing

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Item 1. Financial Statements

2023-04-04 compared with 2023-01-09 · 160 added, 118 removed, 466 unchanged (37% of the section changed)

3 unchanged sentences

(In millions, except share data)

November 30, 2022 August 31, 2022

February 28, 2023 August 31, 2022

Current assets:

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Accrued compensation 78.0 88.0

Other accrued liabilities 198.1 214.1

Other current liabilities 176.3 214.1

Total current liabilities 596.3 733.6

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(In millions, except per-share data)

Three Months Ended

November 30, 2022 November 30, 2021

Three Months Ended Six Months Ended

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Net sales $ 943.6 $ 909.1 $ 1,941.5 $ 1,835.2

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Interest expense, net 5.7 6.0 12.3 11.9

Miscellaneous expense, net 9.1 0.3

Miscellaneous (income) expense, net ( 3.7 ) ( 1.9 ) 5.4 ( 1.6 )

Total other expense 2.0 4.1 17.7 10.3

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Defined benefit plans, net of tax 1.0 1.2 2.1 2.4

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

Other comprehensive (loss) income items, net of tax ( 0.1 ) 6.0 ( 0.5 ) ( 4.7 )

Comprehensive income $ 83.1 $ 81.3 $ 157.6 $ 158.2

6 unchanged sentences

(In millions)

Three Months Ended

November 30, 2022 November 30, 2021

Six Months Ended

February 28, 2023 February 28, 2022

Cash flows from operating activities:

3 unchanged sentences

Share-based payment expense 22.0 17.6

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

Asset impairment 4.3 1.7

9 unchanged sentences

Purchases of property, plant, and equipment ( 35.6 ) ( 24.1 )

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

Acquisition of businesses, net of cash acquired — ( 10.2 )

Other investing activities 6.4 ( 1.7 )

26 unchanged sentences

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

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 ® .

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

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.

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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 months ended November 30, 2022 and 2021.

ABL comprised approximately 95 % of consolidated revenues during the three and six months ended February 28, 2023 and 2022.

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

4 unchanged sentences

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 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.

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

ISG comprised approximately 5 % of consolidated revenues during the three and six months ended February 28, 2023 and 2022.

Basis of Presentation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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.

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 February 28, 2023, our consolidated comprehensive income for the three and six months ended February 28, 2023 and 2022, and our consolidated cash flows for the six months ended February 28, 2023 and 2022.

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

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

These financial statements should be read in conjunction with the audited consolidated financial statements as of and for the three years ended August 31, 2022 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October 26, 2022 (File No.

These financial statements should be read in conjunction with the audited consolidated financial statements as of and for the three years in the period ended August 31, 2022 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October 26, 2022 (File No.

001-16583) (“Form 10-K”).

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;

Several factors may impact our financial condition, results of operations, and cash flows for the remainder of fiscal 2023 and future fiscal periods, including continued uncertainty of general economic conditions that may impact our key end markets;

the impact of future inflation or disruptions in financial and banking markets;

component shortages;

disruptions in the global supply chain;

global pandemics;

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.

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.

As such, our financial performance for the three and six months ended February 28, 2023 is not necessarily indicative of the results to be expected for the remainder of fiscal 2023 and future periods.

The COVID-19 pandemic has resulted in intermittent worldwide government restrictions on the movement of people, goods, and services resulting in increased volatility in and disruptions to global markets and has had an adverse impact on our results of operations.

We remain committed to prioritizing the health and well-being of our employees (“associates”) and their families and ensuring that we operate effectively.

We have implemented various health and safety policies and processes at our facilities in the United States, Mexico, Canada, and other locations as permitted by law.

Although we have implemented significant measures to mitigate further spread of the virus, our associates, customers, suppliers, and contractors may continue to experience disruptions to business activities due to potential further government-mandated or voluntary shutdowns, general economic conditions, or other negative impacts of the COVID-19 pandemic.

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.

9 unchanged sentences

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 sold our Sunoptics prismatic skylights business in November 2022.

We transferred assets with a total carrying value of $ 15.1 million, which primarily consisted of intangibles with definite lives, inventories, and allocated goodwill

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 .

2 unchanged sentences

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

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 4 — New Accounting Pronouncements

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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.

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

We are currently assessing the impacts of ASU 2021-08 to determine whether we will adopt early or in fiscal 2024.

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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 $ 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.

Our cash and cash equivalents (Level 1), which are required to be carried at fair value and measured on a recurring basis, were $ 339.0 million and $ 223.2 million as of February 28, 2023 and August 31, 2022, respectively.

We hold a small number of strategic investments totaling $ 9.5 million and $ 11.9 million as of February 28, 2023 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;

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.

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

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

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.

During the second quarter of fiscal 2023, we received cash for the cancellation of one of these strategic investments, whose underlying company was acquired by a third party.

We also received preferred equity in the

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

third party that is carried at fair value on a recurring basis and is accounted for under ASC 320, Investments—Debt Securities using discounted cash flows based on rates of similar instruments (Level 2) .

Changes in the fair values of these financial instruments during the three and six months ended February 28, 2023 and 2022 were not material to our financial condition, results of operations, or cash flows.

Disclosures of Fair Value of Financial Instruments

2 unchanged sentences

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 $ 388.4 million and $ 399.2 million as of November 30, 2022 and August 31, 2022, respectively.

The estimated fair value of our senior unsecured public notes was $ 390.6 million and $ 399.2 million as of February 28, 2023 and August 31, 2022, respectively.

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

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.

We had no short-term borrowings and $ 18.0 million of short-term borrowings outstanding under our revolving credit facility as of February 28, 2023 and August 31, 2022, respectively.

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

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.

See Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for further details on our outstanding borrowings.

ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.

5 unchanged sentences

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

February 28, 2023 August 31, 2022

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

8 unchanged sentences

A significant change in customer demand or market conditions could render certain inventory obsolete and could have a material adverse impact on our operating results in the period the change occurs.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 7 — Property, Plant, and Equipment

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

November 30, 2022 August 31, 2022

February 28, 2023 August 31, 2022

Land $ 22.4 $ 22.0

4 unchanged sentences

Property, plant, and equipment, net $ 286.0 $ 276.5

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 $ 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.

We recorded amortization expense for definite-lived intangible assets of $ 9.3 million and $ 10.3 million during the three months ended February 28, 2023 and 2022, respectively, and $ 22.9 million and $ 20.6 million during the six months ended February 28, 2023 and 2022, respectively.

Amortization expense is generally recorded on a straight-line basis.

The following table summarizes the expected amortization expense for the next five fiscal years as of the date presented (in millions):

Fiscal Year February 28, 2023

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

3 unchanged sentences

Foreign currency translation adjustments ( 1.2 ) ( 2.1 ) ( 3.3 )

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

Balance as of February 28, 2023 $ 1,012.3 $ 68.0 $ 1,080.3

ABL ISG Total

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

Adjustments to provisional amounts from acquired businesses 0.6 — 0.6

Foreign currency translation adjustments ( 2.6 ) ( 0.3 ) ( 2.9 )

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

Balance as of February 28, 2022 $ 1,020.2 $ 72.2 $ 1,092.4

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.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 9 — Other Current Liabilities

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

November 30, 2022 August 31, 2022

February 28, 2023 August 31, 2022

Customer incentive programs (1)

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

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 10 — Debt and Lines of Credit

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On November 10, 2020, Acuity Brands Lighting, Inc.

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.

issued $ 500.0 million aggregate principal amount of 2.150 % senior unsecured notes due December 15, 2030 (the “Unsecured Notes”) at a price equal to 99.737 % of their face value.

Interest on the Unsecured Notes is paid semi-annually in arrears on June 15 and December 15 of each year.

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.

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.

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.

Lines of Credit

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.

We had no short-term borrowings at February 28, 2023 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.

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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 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.

This ratio is computed at the end of each fiscal quarter for the most recent 12-month period.

The Credit Agreement generally allows for a Maximum Leverage Ratio of 3.75 (subject to a temporary increase to 4.25 in the

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

event of a significant acquisition) and allows netting of all unrestricted cash and cash equivalents against debt.

We were in compliance with all covenants under the Credit Agreement as of February 28, 2023.

At February 28, 2023, we had additional borrowing capacity under the Credit Agreement of $ 596.2 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 $ 3.8 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 .

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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

November 30, 2022 November 30, 2021

Three Months Ended Six Months Ended

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Interest expense $ 7.6 $ 6.4 $ 15.5 $ 12.6

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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 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.

For the period ended February 28, 2023, 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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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.

There can be no assurance future warranty and recall costs will not exceed historical amounts, new technology products may not generate unexpected costs, and/or loss recoveries will not be fully collectible.

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 and cash flows.

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.

Estimated liabilities for product warranty and recall costs are included in Other current 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):

Three Months Ended

November 30, 2022 November 30, 2021

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Six Months Ended

February 28, 2023 February 28, 2022

Beginning balance $ 27.3 $ 20.3

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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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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.

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.

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.

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 (the “Court”) asserting claims against three former executives for breach of fiduciary duty and certain other claims (the “Derivative Complaint”).

The Company was named as a nominal defendant.

On January 20, 2023, the parties filed a joint stipulation of voluntary dismissal with prejudice wherein the named plaintiffs agreed to dismiss the Derivative Complaint.

Thereafter, the Court ordered dismissal of the Derivative Complaint with prejudice as to the named plaintiffs on January 20, 2023.

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.

On December 14, 2022, a former associate 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.

On January 25, 2023, a second putative class action complaint was filed in the same venue by two other former associates.

Both complaints contain similar allegations and claim that the Company failed to exercise reasonable caution in securing and safeguarding associate information.

On that basis, the complaints assert claims for negligence, breach of contract, breach of implied contract, unjust enrichment, breach of fiduciary duty, invasion of privacy, and breach of confidence.

The plaintiffs seek class certification, 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.

The Northern District Court recently consolidated both actions on March 3, 2023, and a consolidated complaint is forthcoming.

We dispute the allegations in both complaints, and given the recency of the lawsuits, 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.

In addition, we have received inquires 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.

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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.

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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

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

Net income — — — 83.2 — — 83.2

Other comprehensive loss — — — — ( 0.1 ) — ( 0.1 )

Share-based payment amortization, issuances, and cancellations — — 10.9 — — — 10.9

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

Cash dividends of $ 0.13 per share paid on common stock

— — — ( 4.2 ) — — ( 4.2 )

Stock options exercised — — 0.5 — — — 0.5

Repurchases of common stock ( 0.2 ) — — — — ( 46.5 ) ( 46.5 )

Balance, February 28, 2023 32.0 $ 0.5 $ 1,047.1 $ 3,325.8 $ ( 126.3 ) $ ( 2,299.5 ) $ 1,947.6

Common Stock Outstanding

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

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

Note 13 — Revenue Recognition

3 unchanged sentences

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

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

4 unchanged sentences

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):

November 30, 2022 August 31, 2022

February 28, 2023 August 31, 2022

Current deferred revenues $ 15.7 $ 11.4

2 unchanged sentences

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.

Revenue recognized from beginning balances of contract liabilities during the six months ended February 28, 2023 totaled $ 6.5 million.

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

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.

Unsatisfied performance obligations that do not represent contract liabilities are generally expected to be satisfied within one year from February 28, 2023 and consist primarily of orders for physical goods that have not yet been shipped.

Disaggregated Revenues

2 unchanged sentences

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

November 30, 2022 November 30, 2021

Three Months Ended Six Months Ended

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Independent sales network $ 635.3 $ 614.3 $ 1,309.0 $ 1,251.1

7 unchanged sentences

Total $ 943.6 $ 909.1 $ 1,941.5 $ 1,835.2

Note 14 — Share-based Payments

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)

Note 14 — Share-based Payments

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

Three Months Ended

November 30, 2022 November 30, 2021

Three Months Ended Six Months Ended

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Share-based payment expense $ 11.3 $ 10.0 $ 22.0 $ 17.6

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.

We recognized excess tax benefits of $ 1.7 million and $ 4.4 million related to share-based payment awards during the six months ended February 28, 2023 and 2022, 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.

7 unchanged sentences

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

Three Months Ended

November 30, 2022 November 30, 2021

Three Months Ended Six Months Ended

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Service cost $ 1.2 $ 1.2 $ 2.3 $ 2.4

6 unchanged sentences

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.

During the first quarter of fiscal 2023, we recognized $ 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.

We recognized no special charges during the second quarter of fiscal 2023.

ACUITY BRANDS, INC.

6 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

November 30, 2022 November 30, 2021

Three Months Ended Six Months Ended

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Net income $ 83.2 $ 75.3 $ 158.1 $ 162.9

10 unchanged sentences

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

November 30, 2022 November 30, 2021

Three Months Ended Six Months Ended

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Stock options 0.1 0.1 0.1 0.1

15 unchanged sentences

Net current period other comprehensive (loss) income ( 2.6 ) 2.1 ( 0.5 )

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

Balance at February 28, 2023 $ ( 76.1 ) $ ( 50.2 ) $ ( 126.3 )

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

3 unchanged sentences

Net current period other comprehensive (loss) income ( 7.1 ) 2.4 ( 4.7 )

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

Balance at February 28, 2022 $ ( 47.3 ) $ ( 55.6 ) $ ( 102.9 )

_______________________________________

3 unchanged sentences

Three Months Ended

November 30, 2022 November 30, 2021

February 28, 2023 February 28, 2022

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

6 unchanged sentences

Total defined benefit pension plans, net 1.3 ( 0.3 ) 1.0 1.6 ( 0.4 ) 1.2

Other comprehensive (loss) income $ 0.2 $ ( 0.3 ) $ ( 0.1 ) $ 6.4 $ ( 0.4 ) $ 6.0

Six Months Ended

February 28, 2023 February 28, 2022

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

Foreign currency translation adjustments $ ( 2.6 ) $ — $ ( 2.6 ) $ ( 7.1 ) $ — $ ( 7.1 )

Defined benefit pension plans:

Amortization of defined benefit pension items:

Prior service cost 1.3 ( 0.3 ) 1.0 1.4 ( 0.4 ) 1.0

Actuarial losses 1.5 ( 0.4 ) 1.1 1.8 ( 0.4 ) 1.4

Total defined benefit pension plans, net 2.8 ( 0.7 ) 2.1 3.2 ( 0.8 ) 2.4

Other comprehensive loss $ 0.2 $ ( 0.7 ) $ ( 0.5 ) $ ( 3.9 ) $ ( 0.8 ) $ ( 4.7 )

1 unchanged sentence

We report our financial results of operations in two reportable segments, ABL and ISG, consistent with how our chief operating decision maker currently evaluates operating results, assesses performance, and allocates resources within the Company.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The accounting policies of our reportable segments are the same as those described in the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

2 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Special charges during the six months ended February 28, 2023 of $ 6.9 million pertained to the ABL segment.

We recorded no special charges during the three months ended February 28, 2023 or during fiscal 2022.

The following table presents financial information by operating segment for the periods presented (in millions):

ABL ISG Corporate Eliminations (1)

Three Months Ended November 30, 2022

Three Months Ended February 28, 2023

Net sales $ 890.8 $ 58.2 $ — $ ( 5.4 ) $ 943.6

1 unchanged sentence

Depreciation and amortization 18.2 3.5 0.3 — 22.0

Three Months Ended November 30, 2021

Three Months Ended February 28, 2022

Net sales $ 863.1 $ 50.0 $ — $ ( 4.0 ) $ 909.1

1 unchanged sentence

Depreciation and amortization 19.8 3.6 0.2 — 23.6

Six Months Ended February 28, 2023

Net sales $ 1,837.9 $ 115.0 $ — $ ( 11.4 ) $ 1,941.5

Operating profit (loss) 241.7 14.0 ( 35.3 ) — 220.4

Depreciation and amortization 40.9 7.0 0.6 — 48.5

Six Months Ended February 28, 2022

Net sales $ 1,746.7 $ 96.4 $ — $ ( 7.9 ) $ 1,835.2

Operating profit (loss) 244.6 3.2 ( 30.4 ) — 217.4

Depreciation and amortization 40.2 7.2 0.5 — 47.9

____________________________

2 unchanged sentences

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

Three Months Ended

November 30, 2022 November 30, 2021

Three Months Ended Six Months Ended

February 28, 2023 February 28, 2022 February 28, 2023 February 28, 2022

Operating profit - ABL $ 123.6 $ 116.5 $ 241.7 $ 244.6

3 unchanged sentences

Interest expense, net 5.7 6.0 12.3 11.9

Miscellaneous expense, net 9.1 0.3

Miscellaneous (income) expense, net ( 3.7 ) ( 1.9 ) 5.4 ( 1.6 )

Income before income taxes $ 109.5 $ 98.2 $ 202.7 $ 207.1

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