What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-10-26 compared with 2022-10-26 · 46 added, 75 removed, 122 unchanged (50% of the section changed)

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Through our two business segments, Acuity Brands Lighting and Lighting Controls (“ABL”) and the Intelligent Spaces Group (“ISG”), we design, manufacture, and bring to market products and services that make a valuable difference in people's lives.

We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management systems, and location-aware applications.

We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management solutions, and location-aware applications.

Our ABL strategy is to increase product vitality, improve service levels, use technology to improve and differentiate both our products and our services, and drive productivity.

ABL's portfolio of lighting solutions includes commercial, architectural, and specialty lighting in addition to lighting controls and components that can be combined to create integrated lighting controls systems.

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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 ® , 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 TM .

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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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, directly to large corporate accounts, and directly to OEM customers.

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 fiscal 2022, 2021 , and 2020.

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

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.

We market our product portfolio and service capabilities to customers and/or end users in multiple channels through a broad spectrum of marketing and promotional methods, including direct customer contact, trade shows, on-site training, print and digital advertising in industry publications, product brochures, and other literature, as well as through digital marketing and social media.

We operate training and education facilities in several locations throughout North America and Europe designed to enhance the lighting knowledge of customers and industry professionals.

Our ISG strategy is to make spaces smarter, safer, and greener by connecting the edge to the cloud.

ISG offers building management solutions and building management software.

Our building management solutions include products for controlling heating, ventilation, air conditioning (“HVAC”);

refrigeration;

and building access that deliver end-to-end optimization of those building systems.

Our 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 software delivers different applications, allows clients to upgrade over time with natural refresh cycles, and deploys new capabilities.

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 fiscal 2022, 2021 , and 2020.

ISG products and solutions are marketed under multiple brand names, including but not limited to, Atrius ® , Distech Controls ® , and KE2 Therm Solutions ® .

Manufacturing and Distribution

We operate 18 manufacturing facilities, including six facilities in the United States, seven facilities in Mexico, two facilities in Europe, and three in Canada.

We utilize a blend of internal and outsourced manufacturing processes and capabilities to fulfill a variety of customer needs in the most cost-effective manner.

Our investment in our production facilities is focused primarily on improving capabilities, product quality, and manufacturing efficiency as well as environmental, health, and safety compliance.

We operate eighteen manufacturing facilities, including six facilities in the United States, seven facilities in Mexico, two facilities in Europe, and three in Canada.

We utilize a blend of internal and outsourced manufacturing processes and capabilities to fulfill a variety of customer needs.

Our investment in our production facilities is focused primarily on improving capabilities, product quality, and manufacturing efficiency as well as environmental, health, and safety

We also utilize contract manufacturing from U.S., Asian, and European sources for certain products.

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Maquiladora status, which is renewed periodically, is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program and other local regulations, which have become stricter in recent years.

Lighting and building technology solutions are delivered to our customers through a network of strategically located distribution centers, regional warehouses, and commercial warehouses in North America or directly to our customers from manufacturing facilities using both common carriers and a company-managed truck fleet.

For international customers, distribution methods are adapted to meet individual customer or country requirements.

During fiscal 2023, net sales initiated outside of the U.S.

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Research and Development

Research and development (“R&D”) is defined as the critical investigation aimed at discovery of new knowledge and the conversion of that knowledge into the design of a new product or significant improvement to an existing product or service.

We invest in product vitality, including enhancement of existing offerings, with a focus on improving the performance-to-cost ratio and energy efficiency as well as redesigning products based on component availability.

Research and development (“R&D”) is defined as the critical investigation aimed at discovery of new knowledge and the conversion of that knowledge into the design of a new product service or significant improvement to an existing product or service.

We invest in product vitality, including enhancement of existing offerings, with a focus on improving the performance-to-cost ratio and energy efficiency.

We also develop software applications and capabilities to enhance data analytics offerings for building performance, enterprise operations, and personal experiences.

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For fiscal 2023, 2022, and 2021, R&D expenses totaled $97.1 million, $95.1 million, and $88.3 million, respectively.

Sales and Marketing

We sell lighting and building technology solutions to customers utilizing numerous sales forces, including internal direct salespeople and independent sales agencies, based on the channel and geography served.

We also operate an international sales group coordinating export sales outside of North America.

See the Segment Information, Revenue Recognition, and Supplemental Disaggregated Information footnotes of the Notes to Consolidated Financial Statements for more information concerning our sales by segment, type, and geography.

We operate training and education facilities in several locations throughout North America and Europe designed to enhance the lighting knowledge of customers and industry professionals.

Industry Overview

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HVAC controls;

refrigeration;

and building technology controls, software, and systems.

We expect that the industry’s addressable market is likely to expand due to the benefits and value creation provided by our intelligent building platform services and location-aware and asset tracking applications.

We operate in a highly competitive industry that is affected by a number of general business and economic factors, such as, but not limited to, gross domestic product growth, employment levels, credit availability, interest rates and inflation, building costs, freight, construction-related labor availability, building occupancy rates, imports and trade, energy costs, freight costs, and commodity costs (including tariffs) and availability.

We operate in highly competitive industries that are affected by a number of general business and economic factors, such as, but not limited to, gross domestic product growth, employment levels, credit availability, interest rates and inflation, building costs, freight, construction-related labor availability, building occupancy rates, imports and trade, energy costs, freight costs, tariffs, commodity costs, and commodity availability.

Our market is based on non-residential and residential construction, both new as well as renovation and retrofit activity, which may be impacted by these general economic factors.

Precise segmentation of the market by new construction and renovation activity is not available, though internal estimates based on third-party data estimate the size of the markets to be about the same.

Non-residential construction spending on commercial, institutional, industrial, and infrastructure projects has a material impact on the demand for our lighting and building technology solutions.

Non-residential construction spending on commercial, institutional, industrial, and infrastructure projects has a material impact on the demand for our lighting and building solutions.

Demand for our residential lighting products is highly dependent on economic drivers, such as consumer spending and discretionary income, along with housing construction and home improvement spending.

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We are a leading provider of integrated lighting and building technology solutions based on these technologies and utilize internally developed, licensed, or acquired intellectual property.

Solid-state lighting and digital building technology systems can be converged allowing for an optimal local operating system to increase efficiency and reduce costs while also delivering productivity benefits.

We experience competition based on numerous factors, including product vitality, service capabilities, price, brand name recognition, product quality, product and system design, energy efficiency, and customer relationships.

The market for lighting and building technology services and solutions is competitive and continues to evolve through acquisition and consolidation activities.

New entrants continue to develop capabilities and solutions that are both complementary as well as competitive to those of traditional industry participants.

The markets for lighting and building management solutions are competitive and continue to evolve through acquisition and consolidation activities.

Existing and new entrants continue to develop capabilities and solutions that are both complementary as well as competitive to those of traditional industry participants.

Additionally, the market for artificial intelligence and software solutions is active with a wide range of competitors, from existing large companies to startup organizations.

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We are subject to various federal, state, and local laws and regulations that impose increasingly complex, stringent and costly compliance activities.

These regulations include but are not limited to, the Clean Water Act;

These laws and regulations include but are not limited to, the Clean Air Act and the Toxic Substances Control Act;

the Clean Water Act;

the Safe Harbor data privacy program between the U.S.

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the United States-Mexico-Canada-Free Trade Agreement (“USMCA”);

regulations from the Occupational Safety and Health Administration agency (“OSHA”);

regulations from the Occupational Safety and Health Administration agency;

the European Union’s General Data Protection Regulation;

California’s Consumer Privacy Act and Connected Device Privacy Act;

the Civil Rights Act of 1964;

the Civil Rights Act of 1964 and other federal and state labor and employment laws and regulations;

Foreign Corrupt Practices Act (the “FCPA”);

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We do not currently believe that the costs of complying with government regulations have a material impact on our financial condition, results of operations, or cash flows.

However, we may be affected by current or future standards, laws, or regulations, including those imposed in response to energy, substances in or components in or used in the manufacturing of our products, climate change, product functionality, geopolitical, corporate social responsibility, employee health and safety, privacy, or similar concerns.

These standards, laws, or regulations may impact our costs of operation, the sourcing of raw materials, and the manufacture and distribution of our products and services.

They may also place restrictions and other requirements or impediments on the

products and solutions we can sell in certain geographical locations or may impact the willingness of certain investors to own our shares.

However, we may be affected by current or future standards, laws, or regulations, including those imposed in response to energy, substances in or components in or used in the manufacturing of our products, climate change, product functionality, geopolitics, corporate social responsibility, employee health and safety, privacy, or similar concerns.

These standards, laws, and regulations may impact our costs of operation, the sourcing of raw materials, and the manufacture and distribution of our products and services.

They may also place restrictions and other requirements or impediments on the products and solutions we can sell in certain geographical locations or may impact the willingness of certain investors to own our shares.

Risk Factors for additional information.

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We monitor and investigate alternative suppliers and materials based on numerous attributes including, but not limited to, quality, service, and price.

We currently source raw materials and components from a number of suppliers, but our ongoing efforts to improve the cost effectiveness and availability of our products and services may result in a reduction in the number of our suppliers.

We currently source raw materials and components from a number of suppliers, but our ongoing efforts to improve the cost effectiveness, quality, and availability of our products and services may result in a reduction in the number of our suppliers.

Intellectual Property

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Our business exhibits some seasonality, with net sales being affected by weather and seasonal demand on construction and installation programs, particularly during the winter months, as well as the annual budget cycles of major customers.

Because of these seasonal factors we historically have experienced our highest sales in the last two quarters of each fiscal year;

however, in the prior years presented our seasonality was meaningfully impacted by the COVID-19 pandemic.

Historically, with certain exceptions, we have experienced our highest sales in the last two quarters of each fiscal year due to these factors.

Our lighting and building technology solutions are sold to customers in both the new construction as well as renovation and retrofit markets for residential and non-residential applications.

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Economic downturns and the potential decline in key construction markets may have a material adverse effect on our net sales, operating income, financial position, and cash flows.

The COVID-19 Pandemic

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.

We remain committed to prioritizing the health and well-being of our 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.

The COVID-19 pandemic has had an adverse impact on our results of operations.

The pandemic has caused reduced construction and renovation spending as well as a disruption in our supply chain for certain components, both of which negatively impacted our operating results.

Although our facilities are open, a resurgence in COVID-19 cases, including as a result of new variants, may lead to the reimposition of previously lifted business closure requirements, the imposition of new restrictions, or the issuance of new or revised local or national health guidance.

We also continue to incur additional health and safety costs including expenditures for personal protection equipment and facility enhancements to maintain proper distancing guidelines issued by the Centers for Disease Control and Prevention and other agencies.

We have taken actions to reduce costs, including the realignment of headcount with current volumes, a limit on all non-essential employee travel, other efforts to decrease discretionary spending, and reductions in our real estate footprint.

Additionally, we elected to defer certain employer payroll taxes

as allowable under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act) signed into law on March 27, 2020.

Half of these deferrals were paid in December 2021, and the remaining deferrals are due in December 2022.

Although we have implemented significant measures to mitigate further spread of the virus, our employees, 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.

We are continuously monitoring the adverse effects of the pandemic and identifying steps to mitigate those effects.

As the COVID-19 pandemic is continually evolving, we are uncertain of its ultimate duration and impact.

See Part I, Item 1a.

Risk Factors for further details regarding the potential impacts of the COVID-19 pandemic to our results of operations, financial position, and cash flows.

Human Capital

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Union recognition and collective bargaining arrangements in place or in process cover approximately 1,300 and 6,500 associates in the United States and Mexico, respectively.

Arrangements related to approximately 100 associates in the United States will expire after the next fiscal year, and arrangements for approximately 7,000 associates in Mexico will expire within the next fiscal year, primarily due to annual negotiations of union contracts.

Arrangements related to approximately 400 associates in the United States will expire within the next fiscal year.

Arrangements for approximately 6,500 associates in Mexico will expire within the next fiscal year, primarily due to annual negotiations of union contracts.

We believe that we have strong relationships with both our unionized and non-unionized associates.

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A key pillar to attract, develop, and retain top talent is our focus on the growth and development of our associates.

In fiscal 2022, we remained focused on development through the creation of development plans for associates, training opportunities, and other activities.

In fiscal 2023, we remained focused on development through development plans for associates, training opportunities, and other activities.

Our performance management and other processes are intended to align associate aspirations, interests, performance, and experiences with the talent needs that enable the business.

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These discussions also act to hold leaders accountable for creating an associate development culture.

In fiscal 2022, we piloted a management effectiveness series focused on coaching to performance, which we offered through in-person events and a virtual series.

Investing in the development of our associates is part of our operating system and correlates to our preparedness to meet current and future strategic priorities of the business.

In fiscal 2023, we continued a management effectiveness series focused on coaching to performance, which we offered through in-person events.

We also provide a digital platform with learning content and resources to help associates expand their knowledge, skills, and abilities through self-directed learning initiatives.

We provide self-learning resources to help associates expand their lighting, controls, and building management technical knowledge through Acuity Academy and other resources.

In fiscal 2022, we enhanced our career framework through the completion of our Global Career Architecture project.

The focus of this project was to enable a culture that more effectively attracts, retains, rewards, and mobilizes talent.

This project will continue to underpin our initiatives in fiscal 2023, including the launch of several new development programs and tools aimed at helping both managers and associates respond to the desire to learn and grow.

Compensation and Benefits

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Our diversity, equity, and inclusion council consists of members of management as well as key human resource process leaders and leaders from our various employee resource groups.

We currently have three employee resource groups:

We currently have five employee resource groups:

Mind Matters;

Minorities Amplifying Growth, Inclusion, and Community (“MAGIC”);

People Respecting Identity, Diversity, and Equity (“PRIDE”);

the Women’s Network;

and People Respecting Identity, Diversity, and Equity (“PRIDE”).

and the Veterans Network.

These groups are designed to embrace, celebrate, and recognize the power of diversity.

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A variety of different metrics are averaged to determine a facility’s performance, which is used to find continuous improvement opportunities.

COVID-19 Response

We remain committed to prioritizing the health and well-being of our associates and their families in light of the COVID-19 pandemic.

We continue to follow guidelines issued by the World Health Organization, Centers for Disease Control and Prevention, and local health providers, adapting our policies and procedures quickly in response to continually evolving information, statistics, and best practices.

We expanded paid and unpaid leave policies to cover exposures, quarantines, vaccination, and testing.

At our manufacturing and distribution facilities, we continue to have in place safety protocols, regularly clean work areas, and encourage all associates to engage in good handwashing and hygiene practices.

We also offered on-site vaccination clinics at several facilities and strongly encouraged our associates to get vaccinated.

Environmental Sustainability

We save energy and help reduce carbon emissions through our lighting, lighting controls, and building management solutions replacing older technologies, and we drive innovation and performance across our business to minimize our impact on the environment.

We save energy and help reduce carbon emissions through our lighting, lighting controls, and building management solutions by replacing older technologies, and we drive innovation and performance across our business to minimize our impact on the environment.

We also seek to use raw materials more efficiently and to operate our own facilities in a more intelligent, environmentally-friendly manner.

We have extended the capabilities of our energy data management software, Atrius Building Insights, to enable users to track and report their full carbon footprint.

We regularly communicate progress as part of our EarthLIGHT sustainability program.

We have extended the capabilities of our energy data management software to help enable users to track and report their full carbon footprint.

We regularly communicate progress on our environmental commitments as part of our EarthLIGHT sustainability program.

Information Concerning Acuity Brands

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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-K

Item 1. Business