What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-01-09 compared with 2023-06-29 · 177 added, 228 removed, 417 unchanged (49% of the section changed)

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(In millions, except share data)

May 31, 2023 August 31, 2022

November 30, 2023 August 31, 2023

Current assets:

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Accounts payable $ 311.8 $ 285.7

Current maturities of debt — 18.0

Current operating lease liabilities 19.3 19.7

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(In millions, except per-share data)

Three Months Ended Nine Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Three Months Ended

November 30, 2023 November 30, 2022

Net sales $ 934.7 $ 997.9

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Interest expense, net 0.9 6.6

Miscellaneous expense (income), net 0.7 ( 1.5 ) 6.1 ( 3.1 )

Miscellaneous expense, net 1.1 9.1

Total other expense 2.0 15.7

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Defined benefit plans, net of tax 0.6 1.1

Other comprehensive income (loss) items, net of tax 6.3 ( 0.6 ) 5.8 ( 5.3 )

Other comprehensive loss items, net of tax ( 1.5 ) ( 0.4 )

Comprehensive income $ 99.1 $ 74.5

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(In millions)

Nine Months Ended

May 31, 2023 May 31, 2022

Three Months Ended

November 30, 2023 November 30, 2022

Cash flows from operating activities:

Net income $ 100.6 $ 74.9

Adjustments to reconcile net income to net cash flows from operating activities:

Adjustments to reconcile net income to cash flows from operating activities:

Depreciation and amortization 22.7 26.5

Share-based payment expense 11.1 10.7

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

Loss on sale of property, plant, and equipment 0.4 —

Asset impairment — 4.3

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Accounts payable 28.7 20.3

Other ( 53.4 ) ( 20.1 )

Other operating activities ( 9.2 ) ( 28.6 )

Net cash provided by operating activities 190.0 186.6

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Purchases of property, plant, and equipment ( 14.6 ) ( 18.2 )

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

Acquisition of businesses, net of cash acquired ( 35.4 ) ( 12.2 )

Other investing activities 0.1 3.9

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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 solutions, and location-aware applications.

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

ABL's customers are located in North America and select international markets that serve 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, 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.

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 solutions include products for controlling heating, ventilation, air conditioning (“HVAC”), lighting, shades, refrigeration, 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 ABL's 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.

ABL operates 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.

ISG's 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.

ISG's 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, ISG's 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.

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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, 2023, our consolidated comprehensive income for the three and nine months ended May 31, 2023 and 2022, and our consolidated cash flows for the nine months ended May 31, 2023 and 2022.

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

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

information presented not misleading.

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, 2023, our consolidated comprehensive income for the three months ended November 30, 2023 and 2022, and our consolidated cash flows for the three months ended November 30, 2023 and 2022.

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.

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, 2023 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October 26, 2023 (File No.

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

We do not expect the remainder of fiscal 2023 to follow this historical trend.

Note 2 — Significant Accounting Policies

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Note 3 — Acquisitions and Divestitures

There were no acquisitions or divestitures during the first quarter of fiscal 2024.

The following discussion relates to fiscal year 2023 activities.

On May 15, 2023, using cash on hand, we acquired all of the equity interests of KE2 Therm Solutions, Inc.

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This acquisition is intended to expand ISG's technology and controls product portfolio and reach new customers .

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.

Accounting for Acquisitions

We accounted for the acquisition of KE2 Therm 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.

The aggregate purchase price of these acquisitions reflects preliminary goodwill within the ISG segment of $ 15.2 million, which is not expected to be deductible for tax purposes.

Acquired assets and liabilities were recorded at their estimated acquisition-date fair values.

Acquisition-related costs were expensed as incurred and were not material to our financial statements.

The aggregate purchase price of this acquisition reflects preliminary goodwill within the ISG segment of $ 15.0 million at November 30, 2023, which is not expected to be deductible for tax purposes.

The goodwill is primarily comprised of expected benefits related to expanding ISG's technology and controls product portfolio as well as the trained workforce acquired with these businesses and expected synergies from combining the operations of KE2 Therm with our operations.

We additionally recorded preliminary intangible assets of $ 18.0 million, which reflect estimates for definite-lived intangibles with a preliminary estimated weighted average useful life of approximately 15 years.

Amounts recorded for acquired assets and liabilities 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, intangible assets, tax-related items, and final net working capital adjustments, if any.

The operating results of KE2 Therm have been included in our financial statements since the date of acquisition and are not material to our financial condition, results of operations, or cash flows.

We additionally recorded preliminary gross intangible assets of $ 18.0 million as of November 30, 2023, which reflect estimates for definite-lived intangibles with a preliminary estimated weighted average useful life of approximately 15 years.

The operating results of KE2 Therm have been included in our financial statements since the date of acquisition and are not material to our consolidated financial condition,

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

results of operations, or cash flows.

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 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 .

During the first quarter of fiscal 2023, 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.

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Note 4 — New Accounting Pronouncements

Accounting Standards Adopted in Fiscal 2023

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 Financial Accounting Standards Board (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.

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 early adopted ASU 2021-08 as of May 15, 2023 on a prospective basis as permitted by the standard and applied its provisions to the acquisition of KE2 Therm.

This standard did not have a material effect on the KE2 Therm acquisition or our financial condition, results of operations, or cash flows.

Accounting Standards Yet to Be Adopted

ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”)

In March 2023, the FASB issued ASU 2023-02, which expands the permitted use of the proportional amortization method of accounting for certain tax-related investments if certain conditions are met.

ASU 2023-02 is effective for fiscal years beginning after December 15, 2023, or our fiscal 2025, with early adoption permitted, including in an interim period.

As of May 15, 2023, we do not hold any qualifying investments.

Therefore, we do not expect ASU 2023-02 to have a material impact on our financial condition, results of operations, or cash flows.

Accounting Standards Update ( “ ASU ” ) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ( “ ASU 2023-09 ” )

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, which expands income tax disclosure requirements to include additional information related to the rate reconciliation of our effective tax rates to statutory rates as well as additional disaggregation of taxes paid.

The amendments in the ASU also remove disclosures related to certain unrecognized tax benefits and deferred taxes.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, or our fiscal 2026.

The amendments may be applied prospectively or retrospectively, and early adoption is permitted.

We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.

ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ( “ ASU 2023-07 ” )

In November 2023, the FASB issued ASU 2023-07, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in the ASU require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources.

Annual disclosures are required for fiscal years beginning after December 15, 2023 or our fiscal 2025.

Interim disclosures are required for periods within fiscal years beginning after December 15, 2024, or our fiscal 2026.

Retrospective application is required for all prior periods presented, and early adoption is permitted.

We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.

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

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

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).

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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No transfers between the levels of the fair value hierarchy occurred during the current fiscal period.

In the event of a transfer in or out of a level within the fair value hierarchy, the transfers would be recognized on the date of occurrence.

In the event of a

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

transfer in or out of a level within the fair value hierarchy, the transfers would be recognized on the date of occurrence.

We may from time to time be required to remeasure the carrying value of certain assets and liabilities to fair value on a nonrecurring basis.

Such adjustments typically arise if we determine that certain of our assets are impaired.

Financial Instruments Recorded at Fair Value

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 $ 359.3 million and $ 223.2 million as of May 31, 2023 and August 31, 2022, respectively.

We hold a small number of strategic investments totaling $ 9.5 million and $ 11.9 million as of May 31, 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, 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.

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 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 nine months ended May 31, 2023 and 2022 were not material to our financial condition, results of operations, or cash flows.

The following table summarizes balances and the fair value hierarchy level of our financial instruments recorded at fair value on a recurring basis as of the dates presented (in millions):

November 30, 2023 August 31, 2023

Assets recorded at fair value:

Cash and cash equivalents Level 1 $ 513.3 $ 397.9

Other financial instruments Level 2 0.5 0.4

Assets in fair value hierarchy 513.8 398.3

Other investments (1)

Total assets at fair value $ 521.0 $ 405.5

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(1) Includes strategic investments in privately-held entities over which we do not exercise significant influence or control and without readily determinable fair values.

Amounts are recorded at cost less any impairment adjusted for observable price changes, if any.

Disclosures of Fair Value of Financial Instruments

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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 $ 401.4 million and $ 399.2 million as of May 31, 2023 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 May 31, 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.

The estimated fair value of our senior unsecured public notes was $ 401.3 million and $ 401.4 million as of November 30, 2023 and August 31, 2023, respectively.

We had no short-term borrowings outstanding under our revolving credit facility as of November 30, 2023 and August 31, 2023.

Such borrowings, if any, are variable-rate instruments that reset on a frequent short-term basis;

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

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

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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):

May 31, 2023 August 31, 2022

November 30, 2023 August 31, 2023

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

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(1) Due to the immaterial amount of estimated work in process and the short lead times for the conversion of raw materials to finished goods, we do not believe the segregation of raw materials and work in process is meaningful information.

We review inventory quantities on hand and record a provision for excess or obsolete inventory primarily based on estimated future demand and current market conditions.

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.

We review inventory quantities on hand and record a provision for excess and obsolete inventory primarily based on estimated future demand and current market conditions.

A significant change in customer demand and/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.

Note 7 — Property, Plant, and Equipment

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

May 31, 2023 August 31, 2022

November 30, 2023 August 31, 2023

Land $ 22.9 $ 23.0

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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 $ 9.2 million and $ 10.2 million during the three months ended May 31, 2023 and 2022, respectively, and $ 32.1 million and $ 30.8 million during the nine months ended May 31, 2023 and 2022, respectively.

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

We recorded amortization expense for definite-lived intangible assets of $ 9.9 million and $ 13.6 million during the three months ended November 30, 2023 and 2022, respectively.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Fiscal Year May 31, 2023

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

ABL ISG Total

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

Provisional amounts from acquired businesses — 15.2 15.2

Derecognitions for divestitures ( 0.7 ) — ( 0.7 )

Balance at August 31, 2023 $ 1,014.4 $ 83.5 $ 1,097.9

Foreign currency translation adjustments ( 0.2 ) ( 0.2 ) ( 0.4 )

Balance as of May 31, 2023 $ 1,013.3 $ 83.4 $ 1,096.7

Balance at November 30, 2023 $ 1,014.2 $ 83.3 $ 1,097.5

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

Balance at August 31, 2022 $ 1,014.2 $ 70.1 $ 1,084.3

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 at November 30, 2022 $ 1,013.1 $ 68.9 $ 1,082.0

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, 2023 August 31, 2022

November 30, 2023 August 31, 2023

Customer incentive programs (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, sales and use, and value added taxes.

(3) Includes accruals for income, property, 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.

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Long-term Debt

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

On November 10, 2020, a wholly owned subsidiary of Acuity Brands Lighting, Inc.

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.

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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 May 31, 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.

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.

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 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 May 31, 2023.

At May 31, 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.

We had no short-term borrowings outstanding under the Revolving Credit Facility at November 30, 2023 and August 31, 2023.

We were in compliance with all financial covenants under the Credit Agreement as of the periods presented.

At November 30, 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 premiums.

None of our existing debt instruments include provisions that would require an acceleration of repayments based solely on changes in our credit ratings.

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 .

Interest Expense, net

Interest expense, net , is comprised primarily of interest expense on long-term debt, line of credit borrowings, and loans that are secured by and presented net of company-owned life insurance policies on our Consolidated Balance Sheets .

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

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

Three Months Ended Nine Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Interest expense $ 6.3 $ 6.6 $ 21.8 $ 19.2

Interest income ( 2.4 ) ( 0.4 ) ( 5.6 ) ( 1.1 )

Interest expense, net $ 3.9 $ 6.2 $ 16.2 $ 18.1

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 11 — Commitments and Contingencies

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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, 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 as well as the dismissal of the shareholder derivative complaint as previously disclosed.

For the period ended November 30, 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

Our products generally have a standard warranty term of five years that assures our products comply with agreed upon specifications.

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

Our products generally have a standard warranty term of five years that assure our products comply with agreed upon specifications.

We record an accrual for the estimated amount of future warranty costs in accordance with ASC Topic 450, Contingencies (“ASC 450”) when the related revenue is recognized.

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

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 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 current liabilities and Other long-term liabilities on the Consolidated Balance Sheets based upon when we expect to settle the incurred warranty.

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 based on the timing of receipt of recovery.

Recoveries are recorded net of allowances for credit losses.

There can be no assurance that future warranty or 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 or recoveries are no longer collectible, adjustments to our

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

accruals and/or receivables may be warranted, 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 current liabilities or 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, 2023 May 31, 2022

Three Months Ended

November 30, 2023 November 30, 2022

Beginning balance $ 31.6 $ 27.3

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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.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Plaintiffs recently filed a notice of voluntary dismissal without prejudice, and we continue to prepare our response strategy to any forthcoming 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.

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

On that basis, the complaints asserted 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 sought 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.

On December 1, 2023, the parties reached a proposed settlement and release of all claims in the class action and executed a Settlement Agreement and Release, which is pending approval from the State Court of Fulton County, Georgia.

The impact of the settlement is not material.

We have received inquiries from, and it is also possible that investigations or other actions may be 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 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.

26 unchanged sentences

Balance, November 30, 2023 30.9 $ 0.5 $ 1,070.5 $ 3,601.9 $ ( 114.1 ) $ ( 2,494.7 ) $ 2,064.1

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

Net income — — — 105.0 — — 105.0

Other comprehensive income — — — — 6.3 — 6.3

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

— — — ( 4.2 ) — — ( 4.2 )

Repurchases of common stock ( 0.6 ) — — — — ( 94.7 ) ( 94.7 )

Balance, May 31, 2023 31.4 $ 0.5 $ 1,056.9 $ 3,426.6 $ ( 120.0 ) $ ( 2,394.2 ) $ 1,969.8

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Common Stock Outstanding

15 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

Note 13 — Revenue Recognition

11 unchanged sentences

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, 2023 August 31, 2022

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

November 30, 2023 August 31, 2023

Current deferred revenues $ 13.3 $ 14.1

Non-current deferred revenues 46.4 47.6

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 .

Current deferred revenues primarily consist of professional service and service-type warranty fees collected prior to performing the related service as well as software licenses 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 nine months ended May 31, 2023 totaled $ 9.0 million.

Revenue recognized from beginning balances of contract liabilities during the three months ended November 30, 2023 totaled $ 3.9 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 May 31, 2023 and consist primarily of orders for physical goods that have not yet been shipped.

Unsatisfied performance obligations that do not represent contract liabilities are expected to be satisfied within one year from November 30, 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 Nine Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Three Months Ended

November 30, 2023 November 30, 2022

Independent sales network $ 625.2 $ 673.7

10 unchanged sentences

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

Three Months Ended Nine Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Three Months Ended

November 30, 2023 November 30, 2022

Share-based payment expense $ 11.1 $ 10.7

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We recognized excess tax benefits of $ 1.7 million and $ 4.6 million related to share-based payment awards during the nine months ended May 31, 2023 and 2022, respectively.

We recognized excess tax benefits of $ 1.5 million and $ 1.3 million related to share-based payment awards during the three months ended November 30, 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 Nine Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Three Months Ended

November 30, 2023 November 30, 2022

Service cost $ 1.1 $ 1.1

6 unchanged sentences

Note 16 — Special Charges

We recognized no special charges during the first quarter of fiscal 2024.

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 or third quarter of fiscal 2023.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 17 — Other Expense

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

Three Months Ended

November 30, 2023 November 30, 2022

Interest expense, net:

Interest expense $ 6.4 $ 7.9

Interest income ( 5.5 ) ( 1.3 )

Interest expense, net 0.9 6.6

Miscellaneous expense, net:

Non-service components of net periodic pension cost 1.1 1.3

Foreign currency transaction losses (gains) 0.6 ( 2.7 )

Loss on sale of business — 11.2

Other items ( 0.6 ) ( 0.7 )

Miscellaneous expense, net 1.1 9.1

Other expense, net $ 2.0 $ 15.7

Note 18 — 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, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Three Months Ended

November 30, 2023 November 30, 2022

Net income $ 100.6 $ 74.9

9 unchanged sentences

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

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Three Months Ended

November 30, 2023 November 30, 2022

Stock options 0.1 0.1

7 unchanged sentences

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 income (loss) net of tax during the periods presented (in millions):

1 unchanged sentence

Balance at August 31, 2023 $ ( 65.0 ) $ ( 47.6 ) $ ( 112.6 )

Other comprehensive income before reclassifications 2.6 — 2.6

Amounts reclassified from accumulated other comprehensive income (1)

Net current period other comprehensive income 2.6 3.2 5.8

Balance at May 31, 2023 $ ( 70.9 ) $ ( 49.1 ) $ ( 120.0 )

Other comprehensive loss before reclassifications ( 2.1 ) — ( 2.1 )

Amounts reclassified from accumulated other comprehensive loss (1)

Net current period other comprehensive (loss) income ( 2.1 ) 0.6 ( 1.5 )

Balance at November 30, 2023 $ ( 67.1 ) $ ( 47.0 ) $ ( 114.1 )

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

1 unchanged sentence

Other comprehensive loss before reclassifications ( 1.5 ) — ( 1.5 )

Amounts reclassified from accumulated other comprehensive income (1)

Amounts reclassified from accumulated other comprehensive loss (1)

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 )

_______________________________________

(1) The before tax amounts of the defined benefit pension plan items are included in net periodic pension cost.

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

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

See the Pension and Defined Contribution Plans footnote of the Notes to Consolidated Financial Statements 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 loss for the periods presented (in millions):

Three Months Ended

May 31, 2023 May 31, 2022

November 30, 2023 November 30, 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 0.8 ( 0.2 ) 0.6 1.5 ( 0.4 ) 1.1

Other comprehensive income (loss) $ 6.7 $ ( 0.4 ) $ 6.3 $ ( 0.3 ) $ ( 0.3 ) $ ( 0.6 )

Nine Months Ended

May 31, 2023 May 31, 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 $ ( 8.9 ) $ — $ ( 8.9 )

Defined benefit pension plans:

Amortization of defined benefit pension items:

Prior service cost 2.0 ( 0.5 ) 1.5 2.1 ( 0.5 ) 1.6

Actuarial losses 2.3 ( 0.6 ) 1.7 2.6 ( 0.6 ) 2.0

Total defined benefit pension plans, net 4.3 ( 1.1 ) 3.2 4.7 ( 1.1 ) 3.6

Other comprehensive income (loss) $ 6.9 $ ( 1.1 ) $ 5.8 $ ( 4.2 ) $ ( 1.1 ) $ ( 5.3 )

Other comprehensive loss $ ( 1.3 ) $ ( 0.2 ) $ ( 1.5 ) $ — $ ( 0.4 ) $ ( 0.4 )

Note 20 — Segment Information

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.

Corporate expenses that are primarily administrative in function and benefit the Company on an entity-wide basis are not allocated to our segments.

Corporate expenses that are primarily administrative in function and benefit the Company on an entity-wide basis are not allocated to segments.

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

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 nine months ended May 31, 2023 of $ 6.9 million pertained to the ABL segment.

We recorded no special charges during the three months ended May 31, 2023 or during fiscal 2022.

Additionally, net interest expense, net miscellaneous expense, and income tax expense are not allocated to segments.

We recorded no special charges during the three months ended November 30, 2023.

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

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

ABL ISG Corporate Eliminations (1)

Three Months Ended May 31, 2023

Net sales $ 940.7 $ 65.8 $ — $ ( 6.2 ) $ 1,000.3

Operating profit (loss) 150.0 8.6 ( 15.3 ) — 143.3

Depreciation and amortization 18.1 3.5 0.3 — 21.9

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

Nine Months Ended May 31, 2023

Net sales $ 2,778.6 $ 180.8 $ — $ ( 17.6 ) $ 2,941.8

Operating profit (loss) 391.7 22.7 ( 50.7 ) — 363.7

Depreciation and amortization 58.9 10.5 1.0 — 70.4

Nine Months Ended May 31, 2022

Net sales $ 2,755.1 $ 154.7 $ — $ ( 14.0 ) $ 2,895.8

Operating profit (loss) 394.2 12.4 ( 46.5 ) — 360.1

Depreciation and amortization 59.8 10.8 0.8 — 71.4

Three Months Ended

November 30, 2023 November 30, 2022

ABL $ 876.4 $ 947.1

ISG 64.2 56.8

Eliminations (1)

( 5.9 ) ( 6.0 )

(1) This column represents intersegment sales.

Total $ 934.7 $ 997.9

Operating profit:

ABL $ 143.8 $ 118.1

Unallocated corporate amounts ( 16.2 ) ( 16.9 )

Total $ 132.9 $ 108.9

____________________________

(1) These amounts represent intersegment sales.

Profit on these sales eliminates within gross profit on a consolidated basis.

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

Three Months Ended Nine Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Three Months Ended

November 30, 2023 November 30, 2022

Operating profit - ABL $ 143.8 $ 118.1

3 unchanged sentences

Interest expense, net 0.9 6.6

Miscellaneous expense (income), net 0.7 ( 1.5 ) 6.1 ( 3.1 )

Miscellaneous expense, net 1.1 9.1

Income before income taxes $ 130.9 $ 93.2

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