What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-10-28 compared with 2023-10-26 · 289 added, 337 removed, 1244 unchanged (33% of the section changed)

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Note 16 — Supplemental Disaggregated Information

Note 17 — Subsequent Event

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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Based on this assessment, management believes that, as of August 31, 2024, the Company’s internal control over financial reporting is effective.

Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the acquired business of KE2 Therm Solutions, Inc., (“KE2 Therm”), which is included in the Company’s consolidated financial statements as of August 31, 2023 and for the period from the acquisition date of May 15, 2023 through August 31, 2023.

As of August 31, 2023, KE2 Therm constituted less than 2% of both the Company’s consolidated assets and stockholders' equity.

For the year ended August 31, 2023, KE2 Therm constituted less than 1% of both the Company's net sales and pre-tax income.

Ernst & Young LLP (PCAOB ID:

42 ), the Company’s independent registered public accounting firm, has issued an audit report on its audit of the Company’s internal control over financial reporting.

Ernst & Young LLP, the Company’s independent registered public accounting firm, has issued an audit report on its audit of the Company’s internal control over financial reporting.

This report dated October 28, 2024 is included within this Form 10-K.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Valuation of Indefinite-Lived Trade Names

Description of the Matter As explained in Notes 2 and 5 to the consolidated financial statements, the Company tests indefinite-lived trade names for impairment on an annual basis or more frequently if an event occurs or circumstances change that would more likely than not indicate that the fair value of the indefinite-lived trade name is below its carrying amount.

The Company’s indefinite-lived intangible assets consisted of thirteen trade names with an aggregate carrying value of approximately $173.4 million as of June 1, 2023, the Company’s annual indefinite-lived trade name testing date.

If the carrying amount exceeds the estimated fair value, an impairment loss would be recorded in the amount equal to the excess.

As described in Notes 2 and 5, the Company recognized an impairment charge of approximately $14.0 million for six of these trade names.

Auditing the Company’s impairment tests for indefinite-lived trade names was especially complex due to the judgmental nature of the significant assumptions used in the determination of estimated fair values for trade names.

The Company estimates the fair values of trade names using a fair value model based on discounted future cash flows.

Significant assumptions used to estimate the value of the trade names included estimated future net sales (including short- and long-term growth rates), discount rates and royalty rates, all of which are forward-looking and could be materially affected by economic, industry and company-specific qualitative factors.

Product Warranty Costs

Description of the Matter As discussed in Note 8 to the financial statements, the liabilities for product warranty costs amount to $37.5 million at August 31, 2024.

The Company accrues for the estimated amount of future warranty costs when the related revenue is recognized.

Estimated costs for product warranty costs are accrued when probable and estimable.

Auditing these liabilities is complex due to the uncertainty inherent in the estimates used by management to calculate the liability balances.

Management’s cost estimates consider historical experience, including the number and costs of identified warranty claims as well as the period of time between the shipment of products and the settlement of related claims.

In addition, the liabilities are sensitive to significant management assumptions, including the expectation that historical experience will continue to be the best indicator of future warranty costs.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s annual impairment process.

This included testing controls over management’s review of the discounted cash flow model, including the significant assumptions described above.

To test the fair values of the Company’s indefinite-lived trade names, our audit procedures included, among others, evaluating the Company’s use of the discounted cash flow model, the completeness and accuracy of the underlying data and the significant assumptions described above.

We compared the significant assumptions to current industry, market and economic trends, and the Company’s historical results.

For the six trade names that were impaired, we involved our valuation specialists to assist in evaluating the Company’s discounted cash flow model and certain assumptions including the discount rates and royalty rates.

In addition, we considered the accuracy of the Company’s historical projections of net sales compared to actual net sales.

We also performed a sensitivity analysis to evaluate the potential change in the fair values of the trade names resulting from changes in the significant assumptions.

We evaluated the design and tested the operating effectiveness of internal controls over the Company’s product warranty costs process.

We tested internal controls over management’s estimates for the product warranty costs.

Our audit also included the evaluation of controls that address the completeness and accuracy of the data utilized in calculating the estimates.

Our audit procedures related to product warranty costs also included, among others, evaluating the Company’s estimation methodology and the related significant assumptions, including testing the historical data used in the Company’s estimation methodology.

Furthermore, we performed sensitivity analyses on the cost estimates to evaluate the significant judgments made by management, and the impact on the liability from changes in assumptions.

/s/ Ernst & Young LLP

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2024, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the acquired business of KE2 Therm Solutions, Inc.

(KE2 Therm), which is included in the 2023 consolidated financial statements of the Company and constituted less than 2% of both the Company’s consolidated assets and stockholders’ equity, as of August 31, 2023 and less than 1% of both net sales and pre-tax income, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of KE2 Therm.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2024 and 2023, the related consolidated statements of comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended August 31, 2024, and the related notes and our report dated October 28, 2024 expressed an unqualified opinion thereon.

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CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(In millions, except per-share data)

Current assets:

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Accounts payable $ 352.3 $ 285.7

Current maturities of debt — 18.0

Current operating lease liabilities 19.2 19.7

Accrued compensation 110.1 103.3

Other accrued liabilities 186.7 214.1

Other current liabilities 206.3 186.7

Total current liabilities 687.9 595.4

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Stockholders’ equity:

Preferred stock, $ 0.01 par value;

Preferred stock, $ 0.01 par value per share;

50.0 shares authorized;

Common stock, $ 0.01 par value;

Common stock, $ 0.01 par value per share;

500.0 shares authorized;

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Other expense:

Interest expense, net 18.9 24.9 23.2

Interest (income) expense, net ( 4.5 ) 18.9 24.9

Miscellaneous expense (income), net 9.2 7.8 ( 9.1 )

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Net income $ 422.6 $ 346.0 $ 384.0

Other comprehensive income (loss) items, net of tax:

Other comprehensive (loss) income items, net of tax:

Foreign currency translation adjustments ( 5.9 ) 8.5 ( 33.3 )

Defined benefit plans 4.7 5.7 21.2

Other comprehensive income (loss) items, net of tax 13.2 ( 27.6 ) 34.5

Defined benefit plans, net of tax 3.6 4.7 5.7

Other comprehensive (loss) income items, net of tax ( 2.3 ) 13.2 ( 27.6 )

Comprehensive income $ 420.3 $ 359.2 $ 356.4

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Deferred income taxes ( 33.6 ) ( 47.8 ) 0.6

Changes in operating assets and liabilities, net of acquisitions

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

Accounts receivable ( 8.7 ) 114.6 ( 99.7 )

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Accounts payable 66.2 ( 110.5 ) 2.6

Other ( 28.0 ) ( 1.9 ) 23.5

Other operating activities 51.3 ( 28.0 ) ( 1.9 )

Net cash provided by operating activities 619.2 578.1 316.3

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Cash flows from financing activities:

Borrowings on credit facility, net of repayments ( 18.0 ) 18.0 —

Issuances of long-term debt — — 493.8

Repayments of long-term debt — — ( 401.1 )

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

Repurchases of common stock ( 88.7 ) ( 266.6 ) ( 514.8 )

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Net income — — — 384.0 — — 384.0

Other comprehensive income, net of tax — — — — 34.5 — 34.5

Other comprehensive loss, net of tax — — — — ( 27.6 ) — ( 27.6 )

Share-based payment amortization, issuances, and cancellations 0.1 — 28.2 — — — 28.2

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Stock options exercised 0.1 — 10.7 — — — 10.7

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

Repurchases of common stock ( 2.9 ) — — — — ( 511.7 ) ( 511.7 )

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Net income — — — 346.0 — — 346.0

Other comprehensive loss, net of tax — — — — ( 27.6 ) — ( 27.6 )

Other comprehensive income, net of tax — — — — 13.2 — 13.2

Share-based payment amortization, issuances, and cancellations 0.2 — 27.8 — — — 27.8

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Net income — — — 422.6 — — 422.6

Other comprehensive income, net of tax — — — — 13.2 — 13.2

Other comprehensive loss, net of tax — — — — ( 2.3 ) — ( 2.3 )

Share-based payment amortization, issuances, and cancellations 0.1 — 35.6 — — — 35.6

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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.

Our ABL strategy is to increase product vitality, elevate service levels, use technology to improve and differentiate both our products and how we operate the business, 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:

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.

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

Principal customers of ABL include electrical distributors, retail home improvement centers, electric utilities, corporate 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 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 an internally-managed truck fleet.

Products are delivered primarily through a network of distribution centers as well as directly from our manufacturing facilities using both common carriers and an internally-managed truck fleet.

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.

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 intelligent building management 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 Atrius ® , Distech Controls ® , and KE2 Therm Solutions ® .

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

Basis of Presentation

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We record accounts receivable at net realizable value.

This value includes a reserve for doubtful accounts to reflect our estimate of expected credit losses over the contractual term of our receivables.

This value includes a reserve for doubtful accounts to reflect our estimate of expected credit losses over the contractual terms of our receivables.

Our estimation of current expected credit losses reflects our considerations of historical write-offs, an analysis of past due accounts based on the contractual terms of the receivables, and the economic status of customers, if known.

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Concentrations of credit risk with respect to receivables, which are typically unsecured, are generally limited due to the wide variety of customers and markets using our lighting, lighting controls, building management systems, and location-aware applications as well as their dispersion across many different geographic areas.

One customer accounted for approximately 10 % of receivables at August 31, 2023 and at August 31, 2022.

No single customer accounted for more than 10% of receivables at August 31, 2024.

One customer accounted for 10 % of receivables at August 31, 2023.

No single customer accounted for more than 10% of net sales in fiscal 2024, 2023, or 2022.

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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.

Although our historical experience related to demand and market conditions have been within expectations, a significant change in customer demand, market conditions, or technology could render certain inventory obsolete and thus could have a material adverse impact on our operating results in the period the change occurs.

The following table summarizes the changes in our inventory reserves for the periods presented (in millions):

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

Adjustments to provisional amounts from acquired businesses 2.3 — 2.3

Foreign currency translation adjustments ( 10.3 ) ( 2.4 ) ( 12.7 )

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

Additions from acquired businesses — 15.2 15.2

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Balance as of August 31, 2023 1,014.4 83.5 1,097.9

Through multiple acquisitions, we acquired definite-lived intangible assets that are amortized over their estimated useful lives.

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

Foreign currency translation adjustments 0.7 0.1 0.8

Balance as of August 31, 2024 $ 1,015.1 $ 83.6 $ 1,098.7

Through multiple acquisitions, we acquired definite-lived intangible assets that are amortized over their estimated useful lives as well as indefinite-lived intangible assets, which consist of trade names that are expected to generate cash flows indefinitely.

Significant estimates and assumptions were used to determine the initial fair value of these acquired intangible assets, including estimated future short-term and long-term net sales and profitability, customer attrition rates, royalty rates, and discount rates.

Certain of our intangible assets are attributable to foreign operations and are impacted by currency translation due to movements in foreign currency rates year over year.

Summarized information for our intangible assets is as follows as of the dates presented (in millions except amortization periods):

Summarized information for our intangible assets is as follows as of the dates presented (in millions):

Gross Carrying

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Trademarks and trade names 45.5 ( 20.5 ) 45.5 ( 18.4 )

Distribution network 61.8 ( 49.4 ) 61.8 ( 47.3 )

Distribution networks 61.8 ( 51.6 ) 61.8 ( 49.4 )

Customer relationships 428.6 ( 180.1 ) 425.0 ( 155.4 )

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We recorded amortization expense of $ 39.7 million, $ 42.1 million, and $ 41.0 million related to acquired intangible assets during fiscal 2024, 2023 , and 2022, respectively.

Amortization expense is generally recorded on a straight-line basis and is expected to be approximately $ 39.6 million in fiscal 2024, $ 32.2 million in fiscal 2025, $ 29.5 million in fiscal 2026, $ 28.0 million in fiscal 2027, and $ 23.9 million in fiscal 2028.

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

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

Fiscal Year August 31, 2024

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment Analyses

We test goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first date of our fourth fiscal quarter (June 1) or more frequently if facts and circumstances indicate an asset is more likely than not impaired, as required by Accounting Standards Codification (“ASC”) Topic 350, Intangibles—Goodwill and Other (“ASC 350”).

ASC 350 allows for an optional qualitative analysis for goodwill to determine the likelihood of impairment.

ASC 350 allows for an optional qualitative analysis for goodwill and indefinite-lived intangible assets to determine the likelihood of impairment.

If the qualitative review results in a more likely than not probability of impairment, a quantitative analysis is required.

The qualitative step may be bypassed entirely in favor of a quantitative test.

The quantitative analysis for goodwill tests for impairments by comparing the fair value of a reporting unit to its carrying value, including goodwill.

Reporting unit fair values can be determined based on a combination of valuation techniques including the expected present value of future cash flows, a market multiple approach, and a comparable transaction approach.

If the fair value of a reporting unit exceeds its carrying value, goodwill is not

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

considered impaired.

Conversely, if the carrying value of a reporting unit exceeds its fair value, an impairment charge for the difference would be recorded.

In fiscal 2023, 2022, and 2021, we used a quantitative analysis to calculate the fair value of our reporting units using a combination of discounted future cash flows and relevant market multiples.

As of June 1, 2024, the current fiscal year testing date, we performed a qualitative analysis to assess the fair value of our reporting units as prescribed by ASC 350.

Our qualitative analysis considered and assessed external factors for each reporting unit such as macroeconomic, industry, cost, and market conditions as well as Company-specific factors, including but not limited to, our actual and planned financial performance.

Based on the results of our analysis, we determined there was not a more likely than not probability of impairment for each of our three reporting units.

Thus, no quantitative test was required for our $ 1.1 billion of goodwill.

In fiscal 2023 and 2022, we used a quantitative analysis to calculate the fair value of our three reporting units using a combination of discounted future cash flows and relevant market multiples.

The analysis for goodwill did no t result in an impairment charge during fiscal 2023, or 2022.

We performed our annual indefinite-lived intangible asset impairment analyses on the first day of our fiscal fourth quarter (June 1) for each period presented.

As of June 1, 2023, the current fiscal year testing date, we held 13 indefinite-lived intangible assets with an aggregate carrying value of $ 173.4 million.

The impairment test for indefinite-lived trade names compares the fair value of a trade name with its carrying value.

If the carrying amount exceeds the estimated fair value, an impairment loss would be recorded for the amount of the excess.

We estimate the fair value of indefinite-lived trade names using a fair value model based on discounted future cash flows.

Significant assumptions, including estimated future short-term and long-term net sales, royalty rates, and discount rates, are used in the determination of estimated fair value for indefinite-lived trade names.

Refer to the Fair Value Measurement footnote of the Notes to Consolidated Financial Statements for further information regarding significant assumptions used in our fiscal 2023 impairment test.

Based on the results of the indefinite-lived intangible asset analyses for fiscal 2023, we recorded an impairment charge of $ 14.0 million for six trade names within Special Charges in the Consolidated Statements of Comprehensive Income related to our ABL segment.

We also determined five of these trade names no longer have indefinite lives.

These trade names were classified as definite-lived as of June 1, 2023 and will be amortized over 15 years.

Indefinite-Lived Intangibles

As of June 1, 2024, the current fiscal year testing date, we held eight indefinite-lived intangible assets with an aggregate carrying value of $ 135.5 million.

For fiscal 2024, we performed a qualitative analysis to assess our indefinite-lived intangible assets for impairment.

Our qualitative analysis considered and assessed external factors such as macroeconomic, industry, cost, and market conditions as well as asset-specific factors, such as each trade name's actual and planned financial performance.

Based on the results of our analyses, we determined there was not a more likely than not probability of impairment for seven of the indefinite-lived intangible assets, and no quantitative test for these assets was required.

In the fourth quarter of fiscal 2024, management committed to a plan to rebrand certain products in ABL's portfolio.

We determined this plan adversely impacted one trade name.

Therefore, we performed a quantitative analysis to compare the fair value of this trade name with its carrying value.

We estimated the fair value of this indefinite-lived trade name using the relief-from-royalty method, a fair value model based on discounted future cash flows.

Our assumptions in valuing the trade name primarily reflected a projected decline in revenues generated by the trade name due to management’s planned reduction in future use of the asset.

We additionally considered other inputs, including theoretical royalty rates and discount rates, in valuing the asset.

Based on the results of the indefinite-lived intangible asset analyses for fiscal 2024, we recorded an impairment charge of $ 3.0 million for one indefinite-lived trade name asset within Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income related to our ABL segment.

Any reasonably likely change in the assumptions used in the analysis for the trade name would not be material to the impairment charge recorded or to our financial conditions or results of operations.

In fiscal 2023, we recorded an impairment charge of $ 14.0 million for six trade names within Special Charges in the Consolidated Statements of Comprehensive Income related to our ABL segment.

We also determined five of these trade names no longer had indefinite lives.

These trade names were classified as definite-lived as of June 1, 2023 and are amortized over 15 years.

The impairment analyses for fiscal 2023 of the other seven indefinite-lived intangible assets indicated that their fair values exceeded their carrying values.

The impairment analyses of our indefinite-lived intangible assets indicated that their fair values exceeded their carrying values for fiscal 2022 and fiscal 2021.

The impairment analyses of our indefinite-lived intangible assets indicated that their fair values exceeded their carrying values for fiscal 2022.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Long-Term Assets

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_______________________________________

(1) Estimated recoveries of warranty and recall costs, net of estimated credit losses, expected to be recovered greater than one year from the respective balance sheet dates are included in this category.

(1) Estimated recoveries of warranty costs, net of estimated credit losses, expected to be recovered greater than one year from the respective balance sheet dates are included in this category.

(2) Included within this category are company-owned life insurance investments.

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This program is frozen, and no new policies were issued in the three-year period ended August 31, 2024.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Current Liabilities

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Freight costs 18.1 15.0

Warranty and recall costs (2)

Product warranty costs (2)

Tax-related items (3)

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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

Other Long-Term Liabilities

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Unrecognized tax position liabilities, including interest (3)

Self-insurance liabilities (4)

Product warranty and recall costs (4)

Product warranty costs (4)

Other 6.6 3.8

Total other long-term liabilities $ 130.1 $ 129.2

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We include shipping and handling fees billed to customers in Net sales in the Consolidated Statements of Comprehensive Income .

Refer to the Revenue Recognition footnote of the Notes to Financial Statements for further information.

When a product is sold, the associated shipping and handling costs are recorded in the Consolidated Statements of Comprehensive Income based on their function.

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Other shipping and handling costs, which primarily include amounts incurred to transfer finished goods to a customer's desired location, are included in Selling, distribution, and administrative expenses and totaled $ 134.2 million, $ 141.7 million, and $ 151.2 million in fiscal 2024, 2023, and 2022, respectively.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Payments

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Excess tax benefits and/or expense related to share-based payment awards are reported within Income tax expense on the Consolidated Statements of Comprehensive Income .

We recognized net excess tax benefit related to share-based payment cost of $ 1.5 million and $ 4.8 million for the years ended August 31, 2023 and 2022, respectively.

We recognized net excess tax expense related to share-based payment cost of $ 0.5 million for the year ended August 31, 2021.

We recognized net excess tax benefits related

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to share-based payment cost of $ 1.5 million, $ 1.5 million, and $ 4.8 million for the years ended August 31, 2024, 2023, and 2022, respectively.

See the Share-based Payments footnote of the Notes to Consolidated Financial Statements for more information.

Property, Plant, and Equipment

Property, plant, and equipment is initially recorded at cost and depreciated principally on a straight-line basis using estimated useful lives of plant and equipment ( 3 to 40 years for buildings and related improvements and 2 to 15 years for machinery and equipment) for financial reporting purposes.

Accelerated depreciation methods are used for income tax purposes.

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Buildings and leasehold improvements 218.7 210.9

Machinery and equipment 727.9 667.6

Machinery, equipment, and information technology 758.7 727.9

Total property, plant, and equipment, at cost 999.7 961.8

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R&D expense amounted to $ 102.3 million, $ 97.1 million, and $ 95.1 million during fiscal 2024, 2023 , and 2022, respectively.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising costs are expensed as incurred and are included within Selling, distribution, and administrative expenses in our Consolidated Statements of Comprehensive Income .

These costs totaled $ 20.1 million, $ 21.9 million, and $ 19.3 million during fiscal 2024, 2023 , and 2022, respectively.

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 during the periods presented (in millions):

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Expense

The following table summarizes the components of O ther expense during the periods presented (in millions):

Year Ended August 31,

2024 2023 2022

Interest (income) expense, net:

Interest expense (1)

$ 25.3 $ 27.9 $ 27.0

Interest income (2)

Interest expense, net $ 18.9 $ 24.9 $ 23.2

( 29.8 ) ( 9.0 ) ( 2.1 )

Interest (income) expense, net ( 4.5 ) $ 18.9 $ 24.9

Miscellaneous expense (income), net

Miscellaneous expense (income), net , is comprised primarily of non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

During fiscal 2023 we reported an $ 11.2 million loss of the sale of our Sunoptics prismatic skylights business.

The details of the Sunoptics sale are described in the Acquisitions and Divestitures footnote of the Notes to Consolidated Financial Statements .

Amounts relating to foreign currency transactions consisted of net gains of $ 8.4 million in fiscal 2023, net gains of $ 5.3 million in fiscal 2022, and net losses of $ 1.3 million in fiscal 2021.

Non-service components of net periodic pension cost 4.5 5.0 ( 1.0 )

Foreign currency transaction losses (gains) 5.3 ( 8.4 ) ( 5.3 )

Loss on sale of business (3)

Other items ( 0.6 ) — ( 2.8 )

Miscellaneous expense (income), net 9.2 7.8 ( 9.1 )

Other expense $ 4.7 $ 26.7 $ 15.8

____________________________________

(1) Consists 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 .

(2) Certain cash and cash equivalents are held in interest-bearing accounts.

(3) We recorded a loss on the sale of our Sunoptics prismatic skylights business in fiscal 2023.

Refer to Acquisitions and Divestitures footnote of the Notes to Consolidated Financial Statements for further details.

We are taxed at statutory corporate rates after adjusting income reported for financial statement purposes for certain items that are treated differently for income tax purposes.

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

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

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

ACUITY BRANDS, INC.

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Balance as of August 31, 2022 $ ( 73.5 ) $ ( 52.3 ) $ ( 125.8 )

Other comprehensive (loss) income before reclassifications ( 33.3 ) 0.7 ( 32.6 )

Amounts reclassified from accumulated other comprehensive loss (1)

Net current period other comprehensive (loss) income ( 33.3 ) 5.7 ( 27.6 )

Balance as of August 31, 2022 ( 73.5 ) ( 52.3 ) ( 125.8 )

Other comprehensive income before reclassifications 8.5 0.4 8.9

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Balance as of August 31, 2023 ( 65.0 ) ( 47.6 ) ( 112.6 )

Other comprehensive (loss) income before reclassifications ( 5.9 ) 1.0 ( 4.9 )

Amounts reclassified from accumulated other comprehensive loss (1)

Net current period other comprehensive (loss) income ( 5.9 ) 3.6 ( 2.3 )

Balance as of August 31, 2024 $ ( 70.9 ) $ ( 44.0 ) $ ( 114.9 )

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Defined benefit pension plans:

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

Actuarial gains 0.4 — 0.4 0.7 — 0.7 17.5 ( 3.6 ) 13.9

Actuarial amounts 1.4 ( 0.4 ) 1.0 0.4 — 0.4 0.7 — 0.7

Amortization of defined benefit pension items:

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Total defined benefit plans, net 4.8 ( 1.2 ) 3.6 6.0 ( 1.3 ) 4.7 7.3 ( 1.6 ) 5.7

Other comprehensive income (loss) $ 14.5 $ ( 1.3 ) $ 13.2 $ ( 26.0 ) $ ( 1.6 ) $ ( 27.6 ) $ 43.1 $ ( 8.6 ) $ 34.5

Note 3 — 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 our current period acquisition.

This standard did not have a material effect on our fiscal 2023 acquisition or our financial condition, results of operations, or cash flows.

Other comprehensive (loss) income $ ( 1.1 ) $ ( 1.2 ) $ ( 2.3 ) $ 14.5 $ ( 1.3 ) $ 13.2 $ ( 26.0 ) $ ( 1.6 ) $ ( 27.6 )

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Note 3 — New Accounting Pronouncements

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 August 31, 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.

Note 4 — Acquisitions and Divestitures

The following discussion relates to fiscal 2023 and 2021 acquisitions.

There were no acquisitions during fiscal 2022.

The following discussion relates to fiscal 2023 acquisitions.

There were no acquisitions during fiscal 2024 or 2022.

The $ 12.9 million of cash outflows reflected in the fiscal 2022 Consolidated Statements of Cash Flows relate to fiscal 2021 acquisitions primarily for working capital settlements.

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KE2 Therm develops and provides intelligent refrigeration control solutions that deliver the precision of digital controls to promote safety, efficiency, and reliability, while delivering cost savings to the customer.

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

We accounted for the acquisition of KE2 Therm in accordance with Accounting Standards Codification (“ASC”) Topic 805 , Business Combinations (“ASC 805”).

This acquisition expanded ISG's technology and controls product portfolio and reached new customers.

We accounted for the acquisition of KE2 Therm in accordance with ASC Topic 805 , Business Combinations (“ASC 805”).

We finalized the acquisition accounting for the KE2 Therm acquisition during the third quarter of fiscal 2024.

There were no material measurement period adjustments during fiscal 2024.

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 these acquisitions reflects preliminary goodwill within the ISG segment of $ 15.0 million at August 31, 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 gross intangible assets of $ 18.0 million as of August 31, 2023, 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 and tax-related items.

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.

Fiscal 2021 Acquisitions

ams OSRAM's North American Digital Systems Business

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

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

The aggregate purchase price of this acquisition reflects goodwill within the ISG segment of $ 15.0 million, which is not deductible for tax purposes.

The goodwill was 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 KE2 Therm with our current businesses.

We additionally recorded gross intangible assets of $ 18.0 million, which reflects estimates for definite-lived intangibles with an 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

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Rockpile Ventures, Inc.

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

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

Accounting for Fiscal 2021 Acquisitions

We accounted for the acquisitions of Rockpile Ventures and OSRAM DS (collectively the “2021 Acquisitions”) in accordance with ASC 805.

We finalized the acquisition accounting for the 2021 Acquisitions during fiscal 2022.

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

The aggregate purchase price of the 2021 Acquisitions reflects goodwill of $ 12.3 million and definite-lived customer-based intangible assets of $ 6.7 million, which have a useful life of approximately 11 years.

Goodwill recognized from the 2021 Acquisitions is comprised primarily of expected synergies from obtaining more control over our supply chain and technology, combining the operations of the acquired business with our operations, and acquiring the associated trained workforce.

Goodwill from the 2021 Acquisitions totaling $ 9.2 million is tax deductible.

are not material to our consolidated financial condition, results of operations, or cash flows.

There were no divestitures during fiscal 2024 or 2022.

The following discussion relates to fiscal year 2023 activities.

We sold our Sunoptics prismatic skylights business in November 2022.

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We recognized a pre-tax loss on the sale of $ 11.2 million within Miscellaneous expense (income), 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.

Additionally, during fiscal 2023 we recorded impairment charges for certain retained assets as well as associate severance and other costs related to the sale.

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

See the Special Charges and Fair Value Measurements footnotes of the Notes to Consolidated Financial Statements for further details.

There were no divestitures during fiscal 2022 or 2021.

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

Note 5 — Fair Value Measurements

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

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Financial Instruments Recorded at Fair Value

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Other investments (1)

Total assets at fair value $ 397.9 $ 0.4 $ — $ 405.5 $ 223.2 $ — $ — $ 235.1

Total $ 845.8 $ — $ — $ 852.5 $ 397.9 $ 0.4 $ — $ 405.5

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

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

In the fourth quarter of fiscal 2024, management committed to a plan to rebrand certain products in ABL's portfolio, which resulted in an impairment charge of $ 3.0 million for one indefinite-lived trade name asset.

This amount is recorded within Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive

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Income and related to our ABL segment.

Refer to the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements for further details.

We had no credit losses on our investments at August 31, 2024.

During fiscal 2023, we received cash for the cancellation of a strategic investment, whose underlying company was acquired by a third party.

We also received preferred equity in the third party with a cost basis of $ 2.5 million that is accounted for under ASC 320, Investments—Debt Securities using discounted cash flows based on rates of similar instruments (Level 2).

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Accrued interest related to this investment was not material to our financial statements.

We had no credit losses on our investments at August 31, 2022.

Nonrecurring Fair Value Measurements

The following table summarizes information related to our nonrecurring fair value measurements during the current fiscal year (in millions):

Measurement Date Fair Value Hierarchy Level Fair Value

Indefinite-lived trade names June 1, 2023 Level 3 $ 46.5

Right of use operating lease asset group November 30, 2022 Level 3 3.4

Total assets at nonrecurring fair value $ 49.9

Indefinite-Lived Trade Names

We performed an evaluation of the fair values of our indefinite-lived trade names as of June 1, 2023.

Our analyses indicated that the carrying values of six of our trade names exceeded their fair values due primarily to expectations of the associated brands' future performance compared to original expectations at acquisition date as well as increases in overall discount rates.

The total fair value of these trade names at June 1, 2023 totaled $ 46.5 million, which resulted in an impairment charge of $ 14.0 million.

This charge is reflected within Special Charges on the Consolidated Statements of Comprehensive Income and relates to our ABL segment.

We also determined the remaining value for five of these indefinite-lived trade names no longer have indefinite lives.

These trade names were classified as definite-lived as of June 1, 2023 and will be amortized over 15 years.

The impairment analyses of the other seven indefinite-lived intangible assets indicated that their fair values exceeded their carrying values.

We utilized significant assumptions to estimate the fair values of our indefinite-lived trade names using a fair value model based on discounted future cash flows (“fair value model”) in accordance with ASC 820.

Future cash flows associated with our indefinite-lived trade names were calculated by multiplying a theoretical royalty rate a willing

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third party would pay for use of the particular trade name by estimated future net sales attributable to the relevant trade name.

The present value of the resulting after-tax cash flows reflected our estimate of the fair value of each trade name.

This fair value model required us to make several significant assumptions, including specific estimated future net sales (including short and long-term growth rates), a royalty rate, and a discount rate for each trade name.

Future net sales and short-term growth rates are estimated for trade names based on management’s financial forecasts, which consider key business drivers, such as specific revenue growth initiatives, market share changes, expected growth in our addressable market, and general economic factors, such as macroeconomic conditions, credit availability, and interest rates.

Our expected revenues as of June 1, 2023 were based on our fiscal 2023 and 2024 projections as well as recent third-party lighting, controls, and building technology solutions market growth estimates through 2028.

We also included revenue growth estimates based on current initiatives expected to help improve performance, as appropriate.

The long-term growth rate used in determining terminal value was estimated at 2.5 % and was based primarily on our understanding of projections for expected long-term growth for our addressable market and historical long-term performance.

The theoretical royalty rate was estimated primarily using management’s assumptions regarding the amount a willing third party would pay to use the particular trade name and was compared with market information for similar intellectual property within and outside of the industry.

During fiscal 2023, estimated theoretical royalty rates ranged between 1 % and 3 %.

We based discount rates on the Capital Asset Pricing Model, which considers a current risk-free interest rate, beta, market risk premium, and size premium appropriate for each intangible.

We utilized a range of estimated discount rates between 11 % and 13 % as of June 1, 2023.

Any reasonably likely change in the assumptions used in the analyses for our trade names, including revenue growth rates, royalty rates, and discount rates, would not be material to our financial condition or results of operations.

Right of Use Operating Lease Asset Group

In connection with our sale of our Sunoptics prismatic skylights business in November 2022, we retained certain assets, primarily right of use lease assets, that we did not plan to continue using in our manufacturing operations.

Accordingly, we assessed the recoverability of these assets using an undiscounted cash flow model and concluded that the carrying values of the assets were not fully recoverable, which triggered an impairment test for these assets.

Our impairment test indicated that the fair value of the assets totaled $ 3.4 million, which resulted in an impairment charge of $ 4.3 million.

This amount is included within Special charges on the Consolidated Statements of Comprehensive Income .

The recoverability and impairment test required significant assumptions including estimated future cash flows, the identification of assets within the asset group, and the determination of appropriate discount rates.

Future cash flows were largely based both on third-party market date for sublease rental rates as well as our historic experience in subleasing properties.

The discount rate was calculated using a methodology consistent with our incremental borrowing rate for leases initiated at that time and approximated the high end of our weighted average discount rate for operating leases described in the Leases footnote of the Notes to Consolidated Financial Statements.

Disclosures of Fair Value of Financial Instruments

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The estimated fair value of our senior unsecured public notes was $ 429.7 million and $ 401.4 million as of August 31, 2024 and 2023, respectively.

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

These borrowings are variable-rate instruments that reset on a

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frequent short-term basis;

We had no short-term borrowings outstanding under our revolving credit facility as of August 31, 2024 and 2023.

These borrowings 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.

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

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

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

Note 6 — Leases

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Therefore, we discount future lease payments using our estimated incremental borrowing rate at lease commencement.

We determine this rate based on a credit-adjusted risk-free rate, which approximates a secured rate over the lease term.

We determine this rate based

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on a credit-adjusted risk-free rate, which approximates a secured rate over the lease term.

The weighted average discount rate for operating leases was 3.7 % and 3.5 % as of August 31, 2024 and 2023, respectively.

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Present value of lease liabilities $ 77.3

The weighted average remaining lease term for our operating leases was six years as of August 31, 2023.

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The weighted average remaining lease term for our operating leases was five years as of August 31, 2024.

Lease cost is recorded within Cost of products sold, and may be capitalized into inventory as manufacturing overhead, or Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income based on the primary use of the related right of use (“ROU”) asset.

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We do not have any other significant transactions in which we are the lessor.

During fiscal 2023 and 2022, we committed to plans to vacate certain leased properties, which indicated that it was more likely than not that the fair value of the related ROU assets were below their carrying values.

We assessed the recoverability of these assets using an undiscounted cash flow model and concluded that the carrying values of the assets were not fully recoverable.

We recorded impairment charges of $ 4.3 million related to these assets using a discounted cash flow model to estimate their fair values in fiscal 2023.

The fiscal 2023 impairment was related to the ABL segment.

The impairments were recorded within Special charges in the Consolidated Statements of Comprehensive Income .

See the Special Charges footnote of the Notes to Consolidated Financial Statements for further details on the fiscal 2023 impairment.

The recoverability and impairment tests required significant assumptions including estimated future cash flows, the identification of assets within each asset group, and the determination of appropriate discount rates.

No impairments were recorded for leases in fiscal 2021.

In connection with our fiscal 2023 sale of our Sunoptics prismatic skylights, we retained certain assets, primarily ROU assets, that we did not plan to continue using in our manufacturing operations.

We recorded an impairment charge of $ 4.3 million within for these assets using a discounted cash flow model to estimate their fair values in fiscal 2023.

The impairments were recorded within Special charges in the Consolidated Statements of Comprehensive Income and pertained to our ABL segment.

See the Special Charges footnote of the Notes to Consolidated Financial Statements for further details on the fiscal 2023 impairments.

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Note 7 — Debt and Lines of Credit

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Senior unsecured public notes due December 2030, unamortized discount and deferred costs ( 3.8 ) ( 4.4 )

Short-term borrowings under credit facility — 18.0

Total debt $ 496.2 $ 495.6

Our next scheduled future principal payment of long-term debt is $ 500.0 million due upon the maturity of the senior unsecured notes in December 2030.

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Long-term Debt

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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.

The Revolving Credit Facility replaced our previous credit agreement set to expire on June 30, 2022, the details of which can be found in the fiscal 2021 Debt and Lines of Credit footnote of the Notes to Consolidated Footnotes within our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 27, 2021.

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

We had no short-term borrowings at August 31, 2023 and $ 18.0 million in short-term borrowings at August 31, 2022 outstanding under the Revolving Credit Facility.

We had no short-term borrowings outstanding under the Revolving Credit Facility at August 31, 2024 and 2023, respectively.

We were in compliance with all financial covenants under the Credit Agreement as of August 31, 2024.

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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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Note 8 — Commitments and Contingencies

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We are also self-insured up to certain limits for certain other insurable risks, primarily physical loss to property and business interruptions resulting from such loss lasting two days or more in duration.

Insurance coverage is maintained for catastrophic property and casualty exposures, as

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well as those risks required to be insured by law or contract.

Insurance coverage is maintained for catastrophic property and casualty exposures, as well as those risks required to be insured by law or contract.

We are fully self-insured for certain other types of liabilities, including environmental, product recall, warranty, and patent infringement.

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Collective bargaining agreements representing approximately 60 % of our work force will expire within one year , primarily due to annual negotiations of union contracts in Mexico.

Data Security Incidents

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 plaintiffs in both cases recently filed a notice of voluntary dismissal without prejudice of the suits in the Northern District of Georgia and refiled in state court.

We continue to prepare our response strategy.

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

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

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

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

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

We are subject to various other legal claims arising in the normal course of business, including without limitation, patent infringement, contract disputes, employment matters, and product liability claims.

Based on information currently available, it is the opinion of management that the ultimate resolution of pending and threatened legal proceedings will not have a material adverse effect on our financial condition, results of operations, or cash flows.

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

Environmental Matters

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In most cases, we cannot estimate the potential amount of future payments under these indemnities until events arise that would result in a liability under the indemnities.

Product Warranty and Recall Costs

Product Warranty Costs

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.

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 and when costs are deemed to be probable and can be reasonably estimated.

Liabilities related to product warranty costs are subject to uncertainty because they require estimates of future costs.

Estimated future warranty costs are primarily based on historical experience, including the number and costs of identified warranty claims as well as the period of time between the shipment of products and our settlement of related claims.

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 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 accrued 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):

Although we assume that historical experience will continue to be the best indicator of future warranty costs, we cannot assure that future warranty costs will not exceed historical amounts, and/or loss recoveries will not be fully collectible.

If actual future warranty costs exceed recorded amounts, or recoveries are no longer collectible, adjustments to our 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 costs are included in Other accrued 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 costs during the periods presented (in millions):

Year Ended August 31,

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Beginning balance $ 31.6 $ 27.3 $ 20.3

Warranty and recall costs (1)

Product warranty costs (1)

49.4 47.0 52.4

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( 43.5 ) ( 42.7 ) ( 45.4 )

Acquired warranty and recall liabilities — — 0.3

Ending balance $ 37.5 $ 31.6 $ 27.3

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(1) Amounts exclude any estimated or actual loss recoveries.

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Note 9 — Segment Information

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

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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 .

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

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

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

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

We recorded no special charges during the years ended August 31, 2024 and August 31, 2022.

We allocated $ 25.0 million of the $ 26.9 million in special charges incurred during the year ended August 31, 2023 to the ABL segment;

the remaining amounts of the fiscal 2023 charge were not allocated to a segment.

We recorded no special charges during the year ended August 31, 2022.

Special charges during the year ended August 31, 2021 of $ 3.3 million were not allocated to a segment.

Also beginning in fiscal 2023, we allocated certain working capital assets and capital expenditures to our segments primarily to assess each segment's contribution to our consolidated operating cash flows and capital expenditures.

We allocate certain working capital assets and capital expenditures to our segments primarily to assess each segment's contribution to our consolidated operating cash flows and capital expenditures.

Segment assets include accounts receivable and inventory.

Unallocated assets are presented in corporate as a reconciling item to our total consolidated assets.

We have restated prior periods to reflect allocated assets and capital expenditures by segment at August 31, 2022 and 2021.

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

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Operating profit (loss):

$ 509.5 $ 545.6 $ 476.2

ABL $ 582.8 $ 509.5 $ 545.6

ISG 43.6 32.1 22.7

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Operating profit 553.3 473.4 509.7

Interest expense, net 18.9 24.9 23.2

Interest (income) expense, net ( 4.5 ) 18.9 24.9

Miscellaneous expense (income), net 9.2 7.8 ( 9.1 )

Income before income taxes $ 548.6 $ 446.7 $ 493.9

During the fourth quarter of fiscal 2023, we recognized charges within our ABL segment of $ 14.0 million for trade name impairments, $ 4.1 million for employee severance costs, and $ 13.0 million for the collectability of a supplier warranty obligation owed to us for components we used in products manufactured and sold between 2017 and 2019.

During the fourth quarter of fiscal 2023, we recognized charges within our ABL segment of $ 14.0 million for trade name impairments, $ 13.0 million for the collectability of a supplier warranty obligation owed to us for components we used in products manufactured and sold between 2017 and 2019, and $ 4.1 million for employee severance costs .

Note 10 — Revenue Recognition

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Refund liabilities recorded under ASC 606 relating to rights of return, cash discounts, and other miscellaneous credits to customers were $ 28.2 million and $ 25.6 million as of August 31, 2024 and 2023, respectively, and are reflected within Other accrued liabilities on the Consolidated Balance Sheets .

Additionally, we recorded right of return assets for products expected to be returned to our distribution centers, which are included within Prepayments and other current assets on the Consolidated Balance Sheets .

Additionally, we recorded right of return assets for products expected to be returned to our facilities, which are included within Prepayments and other current assets on the Consolidated Balance Sheets .

Such assets totaled $ 4.5 million and $ 4.9 million as of August 31, 2024 and 2023, respectively.

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We allocate transaction price to our service-type warranties largely based on expectations of cost plus margin based on our estimate of future claims.

These estimates are subject to a higher level of estimation uncertainty than other estimates, as we have less experience in costs in the extended warranty period.

Claims related to service-type warranties are expensed as incurred.

Software sales include licenses for software, data usage fees, and software as a service arrangements, which generally extend for one year or less.

We recognize revenue for software based on the contractual rights provided to a customer, which typically results in the recognition of revenue ratably over the contractual service period.

Shipping and Handling Activities

We account for all shipping and handling activities for customers as activities to fulfill the promise to transfer products to our customers.

As such, we do not consider shipping and handling activities to be separate performance obligations, and we expense these costs as incurred.

Software sales include licenses for software, data usage fees, and software as a service arrangements.

We recognize revenue for software based on the contractual rights provided to a customer, which in certain instances results in the recognition of revenue ratably over the contractual service period.

Contracts with Multiple Performance Obligations

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The amount of consideration allocated to each performance obligation is recognized as revenue in accordance with the timing for products, professional services, and software as described above.

Shipping and Handling Activities

We account for all shipping and handling activities for customers as activities to fulfill the promise to transfer products to our customers.

As such, we do not consider shipping and handling activities to be separate performance obligations, and we expense these costs as incurred.

Contract Balances

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

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

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Current deferred revenues $ 17.4 $ 14.1

Non-current deferred revenues 41.5 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 upfront fees collected for service-type warranties, time-bound software licenses, software as a service arrangements, and professional fees and are included within Other current liabilities on the Consolidated Balance Sheets .

These services are expected to be performed within one year.

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The Compensation and Management Development Committee of the Board of Directors (the “Compensation Committee”) is authorized to issue awards consisting of incentive and non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock awards, performance stock units, stock bonus awards, and cash-based awards to eligible employees, non-employee directors, and outside consultants.

Shares available for grant under the Stock Incentive Plan were approximately 1.0 million, 1.1 million, and 0.3 million at August 31, 2023, 2022, and 2021, respectively.

Any shares subject to an award under the Stock Incentive Plan

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

that are forfeited, canceled, expired, or settled for cash will be available for future grant under the Stock Incentive Plan.

Shares available for grant under the Stock Incentive Plan were approximately 0.7 million, 1.0 million, and 1.1 million at August 31, 2024, 2023, and 2022, respectively.

Any shares subject to an award under the Stock Incentive Plan that are forfeited, canceled, expired, or settled for cash will be available for future grant under the Stock Incentive Plan.

Our share-based payment awards are valued based on their grant date fair values as described further below.

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For awards subject to a market condition, we consider both actual and derived service periods, as well as the expected performance period, to determine the appropriate compensation recognition method.

Compensation expense recognized related to the awards under the current and prior equity incentive plans during the periods presented is summarized as follows (in millions):

Compensation expense recognized related to our share-based payment awards during the periods presented is summarized as follows (in millions):

Year Ended August 31,

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As of August 31, 2024, we had approximately 0.3 million shares outstanding of restricted stock to officers, directors, and other key employees under the Stock Incentive Plan.

Grants awarded prior to fiscal 2022 vest primarily over a four-year period, and grants awarded beginning in fiscal 2022 vest primarily over a three-year period.

Grants awarded beginning in fiscal 2022 vest primarily over a three-year period, and grants awarded prior to fiscal 2022 vest primarily over a four-year period.

Our restricted stock grants are valued at the closing stock price on the date of the grant.

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* Represents shares of less than 0.1 million.

As of August 31, 2023, there was $ 31.8 million of total unrecognized compensation cost related to unvested restricted stock, which is expected to be recognized over a weighted-average period of 1.3 years.

The total fair

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

value of stock vested during the years ended August 31, 2023, 2022, and 2021 was approximately $ 19.9 million, $ 16.4 million, and $ 19.5 million, respectively.

As of August 31, 2024, there was $ 30.1 million of total unrecognized compensation cost related to unvested restricted stock, which is expected to be recognized over a weighted-average period of 1.3 years.

The total fair value of stock vested during the years ended August 31, 2024, 2023, and 2022 was approximately $ 22.9 million, $ 19.9 million, and $ 16.4 million, respectively.

Performance Stock Units

As of August 31, 2023, we had approximately 0.2 million performance stock units outstanding to officers, directors, and other key employees under the Stock Incentive Plan.

As of August 31, 2024, we had approximately 0.3 million performance stock units outstanding to officers and other key employees under the Stock Incentive Plan.

Our performance stock units vest primarily over a three-year period.

For most of these grants, the actual number of performance stock units earned for these awards will be determined at the end of the related performance period based on the level of achievement of established performance thresholds.

Such grants are valued at the closing stock price of the grant.

Such grants are valued at the closing stock price on the date of grant.

We recognize compensation expense for these grants proportionately over the requisite service period for each employee when it becomes probable that the performance metric will be satisfied.

A small subset of our performance stock units granted in fiscal 2023 have a payout based on a total shareholder return relative to a peer group index over a three-year period.

A small subset of our performance stock units granted in fiscal 2024 and fiscal 2023 have a payout based on a total shareholder return relative to a peer group index over a three-year period.

These awards are valued using a Monte-Carlo simulation and are expensed over the longer of the requisite service period and the derived service period.

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Granted 0.1 $ 186.78

Vested ( 0.1 ) $ 124.29

Forfeited — * $ 195.67

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Vested ( 0.1 ) $ 91.36

Forfeited — * $ 195.67

Outstanding at August 31, 2024 0.3 $ 186.66

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This cost is expected to be recognized over a weighted-average period of approximately 1.4 years.

The total fair value of performance units vested during the year ended August 31, 2023 was approximately $ 11.5 million.

No awards vested during the years ended August 31, 2022 or 2021, respectively.

The total fair value of performance units vested during the years ended August 31, 2024 and 2023 was $ 5.0 million and $ 11.5 million, respectively.

No awards vested during the year ended August 31, 2022.

Stock Options

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All inputs noted above are estimates made at the time of grant.

All inputs into the Monte Carlo simulation are estimates made at the time of grant.

Actual realized value of each option grant could materially differ from these estimates, without impact to future reported net income.

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Outstanding at August 31, 2021 1.2 $ 127.98 0.5 $ 142.36

Granted 0.3 $ 108.96

Exercised ( 0.1 ) * $ 88.94

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Exercised — * $ 126.92

Forfeitures ( 0.1 ) $ 227.15

Outstanding at August 31, 2023 1.0 $ 131.81 0.9 $ 135.91

Exercised ( 0.1 ) $ 143.92

Forfeitures ( 0.1 ) $ 227.15

Outstanding at August 31, 2024 0.9 $ 130.74 0.9 $ 132.48

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As of August 31, 2024, there was $ 0.7 million of total unrecognized compensation cost related to unvested options.

This cost is expected to be recognized over a weighted-average period of approximately 1.2 years.

We expect to recognize this cost over the next fiscal year.

Employee Deferred Stock Units

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Employees may participate at their discretion.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12 — Pension and Defined Contribution Plans

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We have several pension plans, both qualified and non-qualified, covering certain hourly and salaried employees.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Benefits paid under these plans are based generally on employees’ years of service and/or compensation during the final years of employment.

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

Current period net actuarial gains in our projected benefit obligation primarily reflect an increase in the discount rate from our prior year valuation.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables reflect the status of our domestic (U.S.-based) and international pension plans as of the dates presented (in millions):

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Interest cost 7.8 7.4 2.0 1.6

Actuarial gains ( 16.2 ) ( 43.1 ) ( 1.2 ) ( 17.1 )

Actuarial losses (gains) 3.7 ( 16.2 ) ( 0.1 ) ( 1.2 )

Benefits paid ( 11.1 ) ( 11.2 ) ( 1.9 ) ( 1.9 )

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Fair value of plan assets at beginning of year 132.7 141.5 32.1 28.5

Actual return on plan assets ( 1.3 ) ( 33.6 ) ( 5.2 ) ( 11.6 )

Actual return (loss) on plan assets 9.5 ( 1.3 ) 3.2 ( 5.2 )

Employer contributions 3.4 3.7 — 7.9

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Service cost of net periodic pension cost is allocated between Cost of products sold, and may be capitalized into inventory as labor costs, and Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income based on the function of the employee's services.

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

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

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Comprehensive Income .

We utilize a corridor approach to amortize cumulative unrecognized actuarial gains or losses over either the average expected future service of active participants or average life expectancy of plan participants based on each plan’s composition.

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Amounts related to prior service cost are amortized over the average remaining expected future service period for active participants in each plan.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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At August 31, 2024, the U.S.

targeted asset allocation was 20 % equity securities, 75 % fixed income securities, and 5 % real estate securities.

targeted asset allocation approximated 95 % fixed income securities and 5 % equity securities.

Our investment objective for the international plan assets is also to add value by exceeding the long-term growth of the plans’ liabilities.

At August 31, 2023, the international asset target allocation approximated 20 % equity securities, 30 % fixed income securities, and 50 % multi-strategy investments.

At August 31, 2024, the international asset target allocation approximated 93 % fixed income securities and 7 % multi-strategy investments.

ACUITY BRANDS, INC.

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Total 100.0 % 100.0 % 100.0 % 100.0 %

Domestic Plans' Assets

Our pension plan assets are stated at fair value based on quoted market prices in an active market, quoted redemption values, or estimates based on reasonable assumptions as of the most recent measurement period.

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Certain pension assets valued at net asset value (“NAV”) per share as a practical expedient are excluded from the fair value hierarchy.

Investments in pension plan assets as of August 31, 2023 are described in further detail below.

Short-term Fixed Income Investments

Short-term investments consist of money market funds, which are valued at the daily closing price as reported by the relevant fund (Level 1).

Investments in pension plan assets as of August 31, 2024 and August 31, 2023 are described in further detail below.

Short-term Fixed Income Investments (Level 1) :

Short-term investments consist of money market funds, which are valued at the daily closing price as reported by the relevant fund.

Mutual Funds (Level 1) :

Mutual funds held by the domestic plans are open-end mutual funds that are registered with the Securities and Exchange Commission (“SEC”) and seek to either replicate or outperform a related index.

These funds are required to publish their daily net asset value and to transact at that price.

The mutual funds held by the domestic plans are deemed to be actively traded (Level 1).

Collective Trust

The mutual funds held by the domestic plans are deemed to be actively traded.

Collective Trust (Level 2) :

The collective trust seeks to outperform the overall small-cap stock market and is comprised primarily of small-cap equity securities with quoted prices in active markets for identical investments.

The value of this fund is calculated on each business day based on its daily net asset value;

however, the collective trust is not deemed to be actively traded (Level 2).

Fixed Income Investments

however, the collective trust is not deemed to be actively traded.

Fixed Income Investments (Level 2) :

The fixed income investment seeks to maximize total return by investing primarily in a diversified portfolio of investment-grade fixed income securities, primarily publicly traded corporate bonds as well as U.S.

government and municipal bonds.

The investment is valued on each business day based on the values of the underlying holdings and is not actively traded (Level 2).

Treasury Investments

The investment is valued on each business day based on the values of the underlying holdings and is not actively traded.

Treasury Investments (Level 2) :

The domestic plans hold several fixed-income U.S.

Treasury securities that are valued based on discounted future cash flows using rates currently available for debt of similar terms and maturity (Level 2)

Real Estate Fund

Treasury securities that are valued based on discounted future cash flows using rates currently available for debt of similar terms and maturity.

Real Estate Fund (NAV) :

The real estate fund invests primarily in commercial real estate and includes mortgage loans that are backed by the associated property's investment objective.

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This investment is valued based on the NAV per share, without further adjustment.

The NAV, as provided by the fund's trustee, is used as a practical expedient to estimate fair value and is therefore excluded from the fair value

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The NAV, as provided by the fund's trustee, is used as a practical expedient to estimate fair value and is therefore excluded from the fair value hierarchy.

NAV is based on the fair value of the underlying investments.

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All decisions regarding whether to honor redemption requests are made by the fund’s board of directors.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the fair value of the domestic pension plan assets by major category as of the dates presented (in millions):

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Assets included in the fair value hierarchy:

Fixed-income investments $ 58.2 — $ 58.2 —

US Treasury investments 36.9 — 36.9 —

Mutual funds:

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Assets calculated at net asset value:

Fixed-income investments 84.5

Real estate fund 8.9

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

International Plan Investments

International Plans' Investments

The international plans' assets consist primarily of funds invested in equity securities, multi-strategy investments, and fixed income investments.

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Assets included in the fair value hierarchy:

Equity securities $ 5.2 $ — $ 5.2 $ —

Short-term fixed income investments $ 0.2 $ 0.2 $ — $ —

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Domestic Plan Termination Approval

On March 28, 2024, the Board of Directors approved a resolution to terminate one of the qualified domestic pension plans, which is frozen and no longer accrues benefits.

As of August 31, 2024, the fair value of this plan's assets exceeded its benefit obligation.

The termination of the plan is effective August 31, 2024, is subject to the appropriate regulatory approvals, and is expected to be completed in fiscal 2025.

The Company's ultimate settlement obligation will depend upon both the nature and timing of participant settlements and prevailing market conditions.

Multi-employer Pension Plans

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• If a participating employer chooses to stop participating in some of its multi-employer plans, the employer may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

Our contributions to these plans were $ 0.5 million for the years ended August 31, 2023 and 2022, and $ 0.6 million for the year ended August 31, 2021.

Our contributions to these plans were $ 0.5 million for the years ended August 31, 2024, 2023, and 2022.

Defined Contribution Plans

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Note 13 — Special Charges

During the year ended August 31, 2023, we recognized pre-tax special charges of $ 26.9 million, which primarily included impairment charges of indefinite-lived intangible assets;

During the year ended August 31, 2024, we recognized no pre-tax special charges.

During the year ended August 31, 2023, we recognized $ 26.9 million of pre-tax special charges, which primarily included impairment charges of indefinite-lived intangible assets;

impairments of certain retained assets associated with our previously owned Sunoptics prismatic skylights business that were not transferred in connection with the sale;

and severance and employee-related costs in connection with the Sunoptics divestiture as well as streamlining activities initiated during the fourth quarter of fiscal 2023.

We recognized no special charges during the year ended August 31, 2022.

The details of the special charges during the periods presented are summarized as follows (in millions):

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Total special charges $ 26.9

As of August 31, 2024, we had no remaining accruals related to special charges.

As of August 31, 2023, remaining accruals related to special charges totaled $ 5.2 million and are included in Accrued compensation in the Consolidated Balance Sheets .

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* Represents shares of less than 0.1 million.

(1) Shown net of cancellations for tax withholdings

As of August 31, 2024 and 2023, we had 23.8 million and 23.4 million of repurchased shares, respectively, recorded as treasury stock at an original repurchase cost of $ 2.53 billion and $ 2.44 billion, respectively.

Excise taxes on corporate stock repurchases are accounted for as an increase to the cost basis of our share repurchases.

During fiscal 2024, we repurchased approximately 0.5 million shares of our outstanding common stock.

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Using the enacted tax rates in effect for the year in which the differences are expected to reverse, deferred tax liabilities and assets are determined based on the differences between the financial reporting and the tax basis of an asset or liability.

The Organization for Economic Co-operation and Development (“OECD”) released the Global Anti-base Erosion (“GloBE”) Model Rules for Pillar Two on December 20, 2021, which defined a 15% global minimum tax.

Since the model rules have been released, many countries have enacted or continue to consider changes in their tax laws and regulations based on the Pillar Two proposals, some of which become effective for us in fiscal 2025.

We are continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available.

We do not expect Pillar Two to have a material impact on our financial statements as most jurisdictions in which we operate have an effective tax rate above the 15% threshold.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States.

Among other provisions, the IRA includes a 15% corporate alternative minimum tax rate applicable for our fiscal 2024 taxable year as well as a 1% federal excise tax on corporate stock repurchases made after December 31, 2022, which we account for as an increase to the cost basis of our share repurchases.

The IRA has not had, and we do not expect it to have, a material impact on our financial condition, results of operations, or cash flows.

The IRA did not have a material impact on our financial condition, results of operations, or cash flows.

Internal Revenue Code (“IRC”) Section 174 was enacted as part of the Tax Cuts and Jobs Act of 2017 (“TCJA”).

1 unchanged sentence

tax return over five or fifteen years, depending on where research is conducted.

The year over year change in both our provision for current federal taxes and provision for (benefit from) deferred taxes relates principally to the application of IRC Section 174.

The fiscal 2023 year over year change in both our provision for current federal taxes and (benefit from) provision for deferred taxes relates principally to the application of IRC Section 174.

The provision for income taxes consists of the following components during the periods presented (in millions):

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Total provision for income taxes $ 126.0 $ 100.7 $ 109.9

The following table presents income before income taxes for our domestic and foreign operations for the periods presented:

(in millions):

Year Ended August 31,

2024 2023 2022

Domestic $ 472.4 $ 367.5 $ 409.6

International 76.2 79.2 84.3

Income before income taxes $ 548.6 $ 446.7 $ 493.9

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the provision at the federal statutory rate to the total provision for income taxes during the periods presented (in millions):

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Total provision for income taxes $ 126.0 $ 100.7 $ 109.9

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Components of the net deferred income tax liabilities as of the dates presented include (in millions):

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At August 31, 2024, we had federal tax credit carryforwards of approximately $ 10.5 million that begin to expire in 2029, and state tax credit carryforwards of approximately $ 0.9 million that begin to expire in 2027.

Approximately $ 7.6 million of the total $ 8.3 million in federal tax credit carryforwards are subject to a full valuation allowance as we do not expect to realize any future tax benefit.

At August 31, 2023, we had federal net operating loss carryforwards of $ 14.4 million that begin to expire in 2029, state net operating loss carryforwards of $ 47.1 million that begin to expire in 2024, and foreign net operating loss carryforwards of $ 7.8 million that begin to expire in 2028.

The gross amount of unrecognized tax benefits as of August 31, 2023 and 2022 totaled $ 20.1 million and $ 19.5 million, respectively, which includes $ 20.1 million and $ 18.8 million, respectively, of net unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

Approximately $ 9.7 million of the total $ 10.5 million in federal tax credit carryforwards are subject to a full valuation allowance as we do not expect to realize any future tax benefit for these items.

At August 31, 2024, we had federal net operating

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

loss carryforwards of $ 10.5 million that begin to expire in 2029, state net operating loss carryforwards of $ 28.8 million that begin to expire in 2025, and foreign net operating loss carryforwards of $ 14.6 million that begin to expire in 2028.

The gross amount of unrecognized tax benefits as of August 31, 2024 and 2023 totaled $ 21.1 million and $ 20.1 million, respectively.

The amount of unrecognized tax benefits the would affect the company's effective income tax rate was $ 21.1 million and $ 20.1 million as of August 31, 2024 and 2023, respectively.

We recognize potential interest and penalties related to unrecognized tax benefits as a component of income tax expense;

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With few exceptions, we are no longer subject to United States federal, state, and local income tax examinations for years ended before 2018 or for foreign income tax examinations before 2017.

We do not anticipate unrecognized tax benefits will significantly increase or decrease within the next 12 months.

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We anticipate that unrecognized tax benefits may decrease within the next 12 months by $ 11.8 million of which $ 3.5 million is interest due to the expiring of the statute of limitations.

The following table reconciles the change in the unrecognized income tax benefit (reported in Other long-term liabilities on the Consolidated Balance Sheets ) during the periods presented (in millions):

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International 578.1 539.3 519.7

Total $ 3,952.2 $ 4,006.1 $ 3,461.0

Operating profit:

$ 382.6 $ 428.3 $ 369.9

International 90.8 81.4 57.7

Total $ 473.4 $ 509.7 $ 427.6

Income before income taxes:

$ 367.5 $ 409.6 $ 343.7

International 79.2 84.3 52.5

Total $ 446.7 $ 493.9 $ 396.2

Total net sales $ 3,841.0 $ 3,952.2 $ 4,006.1

Long-lived assets (3) :

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International 105.9 107.4 73.5

Total $ 431.2 $ 399.4 $ 361.0

Total long-lived assets $ 401.6 $ 431.2 $ 399.4

_______________________________________

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(3) Long-lived assets include net property, plant, and equipment, operating lease right-of-use assets, and other long-term assets as reflected in the Consolidated Balance Sheets .

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 — Subsequent Event

On October 24, 2024, Acuity Brands Technology Services, Inc., a wholly owned subsidiary of Acuity Brands, Inc.

entered into an equity purchase agreement (the “Purchase Agreement”) to acquire QSC, LLC (“QSC”)), a leader in the design, engineering, and manufacturing of audio, video, and control solutions and services.

The terms of the Purchase Agreement reflect a purchase price totaling approximately $ 1.215 billion, subject to customary purchase price adjustments.

We anticipate funding the transaction with cash on hand as well as adding a $ 600 million term loan under our Revolving Credit Facility.

We currently expect the transaction to close during the second quarter of our fiscal 2025, subject to customary closing conditions set forth in the Purchase Agreement, including, among others:

(i) the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (ii) the absence of any governmental order or law prohibiting the transaction; (iii) no “Material Adverse Effect” (as defined in the Purchase Agreement) having occurred since the signing of the Purchase Agreement; and (iv) certain other customary conditions relating to the accuracy of the parties’ representations and warranties in the Purchase Agreement (subject, with specified exceptions, to customary materiality standards) and the performance of their respective obligations under the Purchase Agreement in all material respects.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data