What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-02 compared with 2026-01-08 · 158 added, 62 removed, 109 unchanged (67% of the section changed)

1 unchanged sentence

The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results of operations, financial position, cash flows, indebtedness, and other key financial information of Acuity Inc.

(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries as of November 30, 2025 and for the three months ended November 30, 2025 and November 30, 2024.

(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries as of February 28, 2026 and for the three and six months ended February 28, 2026 and February 28, 2025.

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included within this report.

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Our obligations related to these items are described further within Management’s Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report filed on Form 10-K.

Refer to Financing Arrangements below for a discussion of significant changes to our contractual obligations for the first three months of fiscal 2026.

Refer to Financing Arrangements below for a discussion of significant changes to our contractual obligations for the first six months of fiscal 2026.

We believe that we will be able to meet our liquidity needs over the next 12 months based on our cash on hand, current projections of cash flows from operations, borrowing availability under financing arrangements, and current access to capital markets.

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In the event of a sustained market deterioration, we may need additional capital, which would require us to evaluate available alternatives and take appropriate actions.

Our cash position at November 30, 2025 was $376.1 million, a decrease of $46.4 million from August 31, 2025.

Our cash position at February 28, 2026 was $272.5 million, a decrease of $150.0 million from August 31, 2025.

Cash generated from operating activities and cash on hand were used during the current year to voluntarily repay $200.0 million of borrowings on our Term Loan Facility (as defined below) as well as to fund our capital allocation priorities as discussed below.

We generated $140.8 million of cash flows from operating activities during the three months ended November 30, 2025, compared to $132.2 million in the prior-year period, an increase of $8.6 million.

Cash flows from operations increased due primarily to higher profit, partially offset by the timing of payments for inventory purchases.

We generated $229.9 million of cash flows from operating activities during the six months ended February 28, 2026, compared to $191.6 million in the prior-year period, an increase of $38.3 million.

Cash flows from operations increased due primarily to higher profit and lower income tax payments, partially offset by the timing of payments for

inventory purchases.

The decline in income tax payments is due primarily to the treatment for current and prior capitalized domestic research and development costs provided by recent tax law changes.

Financing Arrangements

See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for discussion of the terms of our various financing arrangements, including the 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”), the terms of our five-year unsecured revolving credit facility (“Revolving Credit Facility”), and the terms of our unsecured term loan facility (“Term Loan Facility”) due June 30, 2027.

At November 30, 2025, our outstanding debt balance was $797.0 million, which consisted of our Unsecured Notes and borrowings on our Term Loan Facility, compared to our cash position of $376.1 million.

We were in compliance with all covenants under our financing arrangements as of November 30, 2025.

At February 28, 2026, our outstanding debt balance was $697.1 million, which consisted of our Unsecured Notes and borrowings on our Term Loan Facility, compared to our cash position of $272.5 million.

We were in compliance with all covenants under our financing arrangements as of February 28, 2026.

The Unsecured Notes were issued by Acuity Brands Lighting, Inc., a wholly-owned subsidiary of Acuity Inc.

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The following tables present summarized financial information for Acuity Inc., Acuity Brands Lighting, Inc., and ABL IP Holding LLC on a combined basis after the elimination of all intercompany balances and transactions between the combined group as well as any investments in non-guarantors as of the dates and during the period presented (in millions):

Summarized Balance Sheet Information November 30, 2025 August 31, 2025

Summarized Balance Sheet Information February 28, 2026 August 31, 2025

Current assets $ 905.4 $ 1,068.2

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Current liabilities 508.8 604.0

Amounts due to non-guarantor affiliates 40.4 —

Non-current liabilities 933.5 1,138.4

Summarized Income Statement Information Three Months Ended November 30, 2025

Summarized Income Statement Information Six Months Ended February 28, 2026

Net sales $ 1,599.8

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Net income 159.7

In October 2025, we voluntarily repaid $100.0 million of our outstanding Term Loan Facility obligation.

As of November 30, 2025, we had $300.0 million in borrowings outstanding under the Term Loan Facility.

At November 30, 2025, we had additional borrowing capacity under the Credit Agreement of $593.0 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility of $600.0 million less outstanding letters of credit of $7.0 million issued under the Revolving Credit Facility, primarily for securing collateral requirements under our casualty insurance policies.

As of November 30, 2025, our cash on hand combined with the additional borrowing capacity under the Revolving Credit Facility totaled $969.1 million.

During the first six months of fiscal 2026, we voluntarily repaid $200.0 million of our outstanding Term Loan Facility obligation.

As of February 28, 2026, we had $200.0 million in remaining borrowings outstanding under the Term Loan Facility.

At February 28, 2026, we had additional borrowing capacity under the Credit Agreement of $593.4 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility of $600.0 million less outstanding letters of credit of $6.6 million issued under the Revolving Credit Facility, primarily for securing collateral requirements under our casualty insurance policies.

As of February 28, 2026, our cash on hand combined with the additional borrowing capacity under the Revolving Credit Facility totaled $865.9 million.

Capital Allocation Priorities

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Investments in Current Business for Growth

We invested $26.0 million and $18.9 million in property, plant, and equipment during the three months ended November 30, 2025 and November 30, 2024, respectively.

We invested $41.8 million and $28.6 million in property, plant, and equipment during the six months ended February 28, 2026 and February 28, 2025, respectively.

We invested primarily in new and enhanced equipment, information technology, tooling, and facility improvements in fiscal 2026.

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This acquisition expanded AIS into a cloud-manageable audio, video, and control platform that includes controls, sensors, and software with broad applications across multiple end-markets including education, commercial, hospitality, government, healthcare, and transportation.

We funded the transaction using cash on hand and proceeds from our

Term Loan Facility.

We funded the transaction using cash on hand and proceeds from our Term Loan Facility.

The operating results, assets, liabilities, and cash flows of QSC have been included in our consolidated financial statements since the date of acquisition.

Please refer to the Acquisitions footnote of the Notes to Consolidated Financial Statements for more information.

We paid dividends on our common stock of $5.3 million ($0.17 per share) and $4.5 million ($0.15 per share) during the three months ended November 30, 2025 and November 30, 2024, respectively.

We paid dividends on our common stock of $11.6 million ($0.37 per share) and $10.0 million ($0.32 per share) during the six months ended February 28, 2026 and February 28, 2025, respectively.

All decisions regarding the declaration and payment of dividends are at the discretion of the Board of Directors (the “Board”) and are evaluated regularly in light of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Board deems relevant.

Share Repurchases

During the first three months of fiscal 2026 and 2025, we repurchased approximately 0.1 million shares and less than 0.1 million shares of our outstanding common stock for $27.6 million and $5.4 million, respectively.

Total cash outflows for share repurchases during the three months ended November 30, 2025 and November 30, 2024 were $27.1 million and $6.7 million, respectively.

During the first six months of fiscal 2026 and 2025, we repurchased approximately 0.3 million shares and 0.1 million shares of our outstanding common stock for $105.5 million and $21.5 million, respectively.

Total cash outflows for share repurchases during the six months ended February 28, 2026 and February 28, 2025 were $103.0 million and $22.6 million, respectively.

We expect to repurchase shares on an opportunistic basis subject to various factors including stock price, Company performance, market conditions, and other possible uses of cash.

As of November 30, 2025, 3.3 million shares remained available within the program to repurchase.

As of February 28, 2026, 3.0 million shares remained available within the program to repurchase.

Recent Developments

On February 20, 2026, the U.S.

Supreme Court issued a ruling addressing the validity of certain tariffs implemented under the International Emergency Economic Powers Act (“IEEPA”).

In March 2026, the U.S.

Court of International Trade Court issued an additional ruling that importers that paid tariffs under IEEPA are due refunds.

While we have paid tariffs on certain imported products and materials that were subject to these IEEPA‑based duties, the nature, timing, and extent of any such refunds remains uncertain.

Results of Operations

First Quarter of Fiscal 2026 Compared with First Quarter of Fiscal 2025

The following table sets forth information comparing the components of net income for the three months ended November 30, 2025 and November 30, 2024 (in millions except per-share data):

Second Quarter of Fiscal 2026 Compared with Second Quarter of Fiscal 2025

The following table sets forth information comparing the components of net income for the three months ended February 28, 2026 and February 28, 2025 (in millions except per-share data):

Three Months Ended

November 30, 2025 November 30, 2024 Increase (Decrease) Percent Change

February 28, 2026 February 28, 2025 Increase (Decrease) Percent Change

Net sales $ 1,055.7 $ 1,006.3 $ 49.4 4.9 %

Cost of products sold (1)

535.3 538.3 (3.0) (0.6) %

Gross profit 520.4 468.0 52.4 11.2 %

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381.5 357.8 23.7 6.6 %

Special charges 5.9 — 5.9 NM

Operating profit 133.0 110.2 22.8 20.7 %

1 unchanged sentence

Other expense (income):

Interest expense (income), net 8.4 (4.0) 12.4 NM

Miscellaneous (income) expense, net (0.6) 2.5 (3.1) NM

Total other expense (income) 7.8 (1.5) 9.3 NM

Interest expense, net 7.0 6.9 0.1 NM

Miscellaneous expense, net 3.1 1.0 2.1 NM

Total other expense 10.1 7.9 2.2 NM

Income before income taxes 122.9 102.3 20.6 20.1 %

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(1) Fiscal 2025 includes $10.4 million in acquisition date fair value adjustments to inventory for the QSC acquisition.

(2) Fiscal 2025 includes $14.1 million in acquisition-related costs.

Net sales for the first quarter of fiscal 2026 increased $192.1 million, or 20.2%, to $1.1 billion, compared with $951.6 million in the prior-year period due primarily to an increase in sales in our AIS segment, driven by the acquisition of QSC, as well as an increase in net sales in our ABL segment.

Gross profit for the first quarter of fiscal 2026 increased $104.5 million, or 23.3%, to $553.8 million, compared with $449.3 million in the prior-year period, and gross profit margin increased 120 basis points to 48.4%, compared with 47.2% in prior-year period.

Our gross profit increased compared with the prior period due primarily to contributions from the QSC acquisition.

The improvement at AIS was partially offset by lower gross profit at ABL due primarily to higher production costs, partially offset by the fall through of higher sales and lower materials costs.

Net sales for the second quarter of fiscal 2026 increased $49.4 million, or 4.9%, to $1.06 billion, compared with $1.01 billion in the prior-year period due primarily to an increase in sales in our AIS segment, driven by the acquisition of QSC, as well as higher net sales of our Distech products.

This increase was partially offset by a decrease in net sales in our ABL segment.

Gross profit for the second quarter of fiscal 2026 was $520.4 million (49.3% of net sales), compared with $468.0 million (46.5% of net sales) for the prior-year period, an increase of $52.4 million, or 11.2%.

This increase was due primarily to contributions from the QSC acquisition as well as the fall through of higher net sales of our Distech products.

The improvement at AIS was partially offset by lower gross profit at ABL.

Operating Profit

Selling, distribution, and administrative expenses (“SD&A”) expenses for the first quarter of fiscal 2026 were $393.4 million, compared with $316.0 million in the prior-year period, an increase of $77.4 million, or 24.5%.

The increase in SD&A expenses was due primarily to amounts related to the QSC acquisition, including higher employee-related costs and higher amortization from acquired intangibles.

Operating profit for the first quarter of fiscal 2026 was $160.4 million (14.0% of net sales), compared with $133.3 million (14.0% of net sales) for the prior-year period, an increase of $27.1 million, or 20.3%.

The increase in operating profit was due to higher gross profit, partially offset by higher SD&A expenses.

Interest Expense (Income), net

We reported net interest expense of $8.4 million and net interest income of $4.0 million for the first quarter of fiscal 2026 and 2025, respectively.

The increase in net interest expense was due primarily to interest incurred on our outstanding Term Loan Facility and lower interest-bearing cash and cash equivalent balances held during the period as a result of our purchase of QSC in the second quarter of fiscal 2025.

Miscellaneous (Income) Expense, net

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

We reported net miscellaneous income of $0.6 million and net miscellaneous expense of $2.5 million for the first quarter of fiscal 2026 and 2025, respectively.

Selling, distribution, and administrative expenses (“SD&A”) expenses for the second quarter of fiscal 2026 were $381.5 million, compared with $357.8 million in the prior-year period, an increase of $23.7 million, or 6.6%.

The increase in SD&A expenses was due primarily to amounts related to the QSC acquisition, including higher employee-related costs and higher amortization from acquired intangibles, partially offset by acquisition-related professional fees that did not recur in fiscal 2026.

We recorded special charges totaling $5.9 million during the second quarter of fiscal 2026, which consisted of employee severance costs related to productivity improvements in our ABL segment.

These charges primarily related to labor cost reductions.

Operating profit for the second quarter of fiscal 2026 was $133.0 million (12.6% of net sales), compared with $110.2 million (11.0% of net sales) for the prior-year period, an increase of $22.8 million, or 20.7%.

The increase in operating profit was due to higher gross profit, partially offset by higher SD&A expenses and the recognition of special charges.

Interest Expense, net

We reported net interest expense of $7.0 million and $6.9 million for the second quarter of fiscal 2026 and 2025, respectively.

Net interest expense increased year over year as lower interest income was partially offset by a decline in interest expense.

These changes reflect both lower outstanding cash balances as well as lower outstanding borrowings on our Term Loan during the second quarter of fiscal 2026.

Miscellaneous Expense, net

Miscellaneous expense, net consists of non-service components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

We reported net miscellaneous expense of $3.1 million and $1.0 million for the second quarter of fiscal 2026 and 2025, respectively.

Income Taxes and Net Income

Our effective income tax rate was 21.0% and 20.8% for the first quarter of fiscal 2026 and 2025, respectively.

Net income for the first quarter of fiscal 2026 increased $13.8 million, or 12.9%, to $120.5 million, from $106.7 million reported for the prior-year period.

This increase was due primarily to higher operating profit, partially offset by higher net interest expense and income tax expense.

Diluted earnings per share for the first quarter of fiscal 2026 increased $0.47, or 14.0%, to $3.82 compared with diluted earnings per share of $3.35 for the prior-year period.

Our effective income tax rate was 21.2% and 24.2% for the second quarter of fiscal 2026 and 2025, respectively.

This decrease primarily reflects discrete items recognized in the second quarter of fiscal 2026 that were not present in the prior year.

Net income for the second quarter of fiscal 2026 increased $19.3 million, or 24.9%, to $96.8 million, from $77.5 million reported for the prior-year period.

This increase was due primarily to higher operating profit.

Diluted earnings per share for the second quarter of fiscal 2026 increased $0.64, or 26.1%, to $3.09 compared with diluted earnings per share of $2.45 for the prior-year period.

This increase reflects higher net income as well as lower outstanding diluted shares.

Segment Results

The following table sets forth information comparing the operating results of our segments, ABL and AIS, for the three months ended November 30, 2025 and November 30, 2024 (in millions):

The following table sets forth information comparing the operating results of our segments, ABL and AIS, for the three months ended February 28, 2026 and February 28, 2025 (in millions):

Three Months Ended

November 30, 2025 November 30, 2024 Increase (Decrease) Percent Change

February 28, 2026 February 28, 2025 Increase (Decrease) Percent Change

Net sales $ 817.4 $ 840.6 $ (23.2) (2.8) %

Gross profit 373.8 378.0 (4.2) (1.1) %

Percent of net sales 45.7 % 45.0 % 70 bps

Operating profit 125.1 130.3 (5.2) (4.0) %

Gross profit margin 44.8 % 45.9 % (110) bps

Operating profit margin 16.6 % 16.2 % 40 bps

Percent of net sales 15.3 % 15.5 % (20) bps

Net sales $ 248.1 $ 171.5 $ 76.6 44.7 %

Gross profit 146.6 90.0 56.6 62.9 %

Percent of net sales 59.1 % 52.5 % 660 bps

Operating profit 28.3 9.9 $ 18.4 185.9 %

Gross profit margin 59.5 % 58.4 % 110 bps

Operating profit margin 14.4 % 14.7 % (30) bps

ABL net sales for the first quarter of fiscal 2026 increased 1.0% compared with the prior-year period.

This increase was due primarily to higher net sales within the independent sales network and corporate accounts channels, partially offset by lower net sales within the direct sales network.

ABL gross profit was $400.6 million (44.8% of ABL net sales) for the first quarter of fiscal 2026, compared with $406.4 million (45.9% of ABL net sales) in the prior-year period, a decrease of $5.8 million.

The decrease in gross profit was due primarily to higher production costs, partially offset by the fall through of higher net sales and favorable materials cost.

ABL operating profit was $149.0 million (16.6% of ABL net sales) for the first quarter of fiscal 2026, compared with $143.3 million (16.2% of ABL net sales) in the prior-year period, an increase of $5.7 million.

The increase in operating profit was due primarily to lower selling and employee costs, which more than offset the decline in gross profit.

AIS net sales for the first quarter of fiscal 2026 increased 250.2% compared with the prior-year period.

The increase was due primarily to the acquisition of QSC.

Additionally, sales of Distech products increased during the first quarter of fiscal 2026.

AIS gross profit was $153.2 million (59.5% of AIS net sales) for the first quarter of fiscal 2026, compared with $42.9 million (58.4% of AIS net sales) in the prior-year period, an increase of $110.3 million.

Percent of net sales 11.4 % 5.8 % 560 bps

ABL net sales for the second quarter of fiscal 2026 decreased 2.8% compared with the prior-year period.

This decrease was due primarily to lower net sales within the direct sales network, due in part from project business that did not recur, partially offset by higher net sales within the corporate accounts channel.

ABL gross profit was $373.8 million (45.7% of ABL net sales) for the second quarter of fiscal 2026, compared with $378.0 million (45.0% of ABL net sales) in the prior-year period, a decrease of $4.2 million.

The decrease in gross profit was due primarily to the fall through of lower net sales and higher tariff costs, partially offset by product and productivity improvements.

ABL operating profit was $125.1 million (15.3% of ABL net sales) for the second quarter of fiscal 2026, compared with $130.3 million (15.5% of ABL net sales) in the prior-year period, a decrease of $5.2 million.

The decrease in operating profit was due primarily to special charges and lower gross profit, partially offset by lower sales-related and employee costs.

AIS net sales for the second quarter of fiscal 2026 increased 44.7% compared with the prior-year period.

The increase was due primarily to the acquisition of QSC and higher sales of Distech products.

AIS gross profit was $146.6 million (59.1% of AIS net sales) for the second quarter of fiscal 2026, compared with $90.0 million (52.5% of AIS net sales) in the prior-year period, an increase of $56.6 million.

The increase in gross profit was due primarily to the acquisition of QSC as well as the fall through of higher Distech net sales.

AIS operating profit was $37.0 million (14.4% of AIS net sales) for the first quarter of fiscal 2026, compared with $10.8 million (14.7% of AIS net sales) in the prior-year period, an increase of $26.2 million.

The second quarter of fiscal 2025 also included $10.4 million in preliminary pre-tax nonrecurring acquisition date fair value adjustments to inventory related to the acquisition of QSC, which did not recur in fiscal 2026.

AIS operating profit was $28.3 million (11.4% of AIS net sales) for the second quarter of fiscal 2026, compared with $9.9 million (5.8% of AIS net sales) in the prior-year period, an increase of $18.4 million.

This increase primarily reflects higher operating profit from the QSC acquisition.

AIS's operating results also include higher amortization from acquired intangibles from the QSC acquisition.

AIS's operating results also include higher amortization from acquired intangibles as well as the impact of fair value adjustments to inventory that occurred in the prior year, both of which related to the QSC acquisition.

First Six Months of Fiscal 2026 Compared with First Six Months of Fiscal 2025

The following table sets forth information comparing the components of net income for the six months ended February 28, 2026 and February 28, 2025 (in millions except per share data):

Six Months Ended

February 28, 2026 February 28, 2025 Increase (Decrease) Percent Change

Net sales $ 2,199.4 $ 1,957.9 $ 241.5 12.3 %

Cost of products sold (1)

1,125.2 1,040.6 84.6 8.1 %

Gross profit 1,074.2 917.3 156.9 17.1 %

Percent of net sales 48.8 % 46.9 % 190 bps

Selling, distribution, and administrative expenses (2)

774.9 673.8 101.1 15.0 %

Special charges 5.9 — 5.9 NM

Operating profit 293.4 243.5 49.9 20.5 %

Percent of net sales 13.3 % 12.4 % 90 bps

Other expense:

Interest expense, net 15.4 2.9 12.5 NM

Miscellaneous expense, net 2.5 3.5 (1.0) NM

Total other expense 17.9 6.4 11.5 NM

Income before income taxes 275.5 237.1 38.4 16.2 %

Percent of net sales 12.5 % 12.1 % 40 bps

Income tax expense 58.2 52.9 5.3 10.0 %

Effective tax rate 21.1 % 22.3 %

Net income $ 217.3 $ 184.2 $ 33.1 18.0 %

Diluted earnings per share $ 6.91 $ 5.80 $ 1.11 19.1 %

NM - not meaningful

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(1) Fiscal 2025 includes $10.4 million in pre-tax nonrecurring acquisition date fair value adjustments to inventory related to the acquisition of QSC.

(2) Fiscal 2025 includes $18.7 million in acquisition-related costs.

Net sales for the six months ended February 28, 2026 increased $241.5 million, or 12.3%, to $2.20 billion compared with $1.96 billion in the prior-year due to higher sales in our AIS segment, partially offset by lower sales in our ABL segment.

The increase in our AIS segment was driven by the acquisition of QSC, as well higher net sales of our Distech products.

Gross profit for the six months ended February 28, 2026 increased $156.9 million, or 17.1%, to $1.07 billion compared with $917.3 million in the prior-year period.

This increase was due primarily to contributions from the QSC acquisition as well as the fall through of higher net sales of our Distech products.

The improvement at AIS was partially offset by lower gross profit at ABL.

Operating Profit

SD&A expenses for the six months ended February 28, 2026 were $774.9 million compared with $673.8 million in the prior-year period, an increase of $101.1 million, or 15.0%.

We recorded special charges totaling $5.9 million during six months ended February 28, 2026, which consisted of employee severance costs related to productivity improvements in our ABL segment.

These charges primarily related to labor cost reductions.

Operating profit for the six months ended February 28, 2026 was $293.4 million (13.3% of net sales) compared with $243.5 million (12.4% of net sales) for the prior-year period, an increase of $49.9 million, or 20.5%.

The increase in operating profit was due to higher gross profit, partially offset by higher SD&A expenses and the recognition of special charges in the current period.

Interest Expense, net

We reported net interest expense of $15.4 million and $2.9 million for the six months ended February 28, 2026 and February 28, 2025, respectively.

The increase in net interest expense was due primarily to lower interest-bearing cash and cash equivalent balances as a result of our purchase of QSC and higher interest incurred on our outstanding Term Loan Facility.

Miscellaneous Expense, net

Miscellaneous expense, net consists of non-service components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

We reported net miscellaneous expense of $2.5 million for the six months ended February 28, 2026 and $3.5 million for the six months ended February 28, 2025.

Income Taxes and Net Income

Our effective income tax rate was 21.1% and 22.3% for the six months ended February 28, 2026 and February 28, 2025, respectively.

This decrease primarily reflects discrete items recognized in the second quarter of fiscal 2026 that were not present in the prior year.

Net income for the first six months of fiscal 2026 increased $33.1 million, or 18.0%, to $217.3 million from $184.2 million reported for the prior-year period.

This increase was due primarily to higher operating profit, partially offset by higher net interest expense.

Diluted earnings per share for the six months ended February 28, 2026 increased $1.11 to $6.91 compared with diluted earnings per share of $5.80 for the prior-year period.

This increase reflects higher net income as well as lower outstanding diluted shares.

Segment Results

The following table sets forth information comparing the operating results of our segments, ABL and AIS, for the six months ended February 28, 2026 and February 28, 2025 (in millions):

Six Months Ended

February 28, 2026 February 28, 2025 Increase (Decrease) Percent Change

Net sales $ 1,712.5 $ 1,726.6 $ (14.1) (0.8) %

Gross profit 774.4 784.4 (10.0) (1.3) %

Percent of net sales 45.2 % 45.4 % (20) bps

Operating profit 274.1 273.6 0.5 0.2 %

Percent of net sales 16.0 % 15.8 % 20 bps

Net sales $ 505.5 $ 245.0 $ 260.5 106.3 %

Gross profit 299.8 132.9 166.9 125.6 %

Percent of net sales 59.3 % 54.2 % 510 bps

Operating profit 65.3 20.7 44.6 215.5 %

Percent of net sales 12.9 % 8.4 % 450 bps

ABL net sales for the six months ended February 28, 2026 decreased 0.8% compared with the prior-year period due primarily to lower net sales within the direct sales network, partially offset by higher sales within the independent sales network and the corporate accounts channel.

ABL gross profit for the six months ended February 28, 2026 was $774.4 million (45.2% of ABL net sales), compared with $784.4 million (45.4% of ABL net sales) in the prior-year period, a decrease of $10.0 million.

The decrease in gross profit was due primarily to the fall through of lower net sales and higher tariff costs, partially offset by product and productivity improvements.

ABL operating profit for the six months ended February 28, 2026 was $274.1 million (16.0% of ABL net sales), compared with $273.6 million (15.8% of ABL net sales) in the prior-year period, an increase of $0.5 million.

The increase in operating profit was due primarily to lower selling and employee costs, which more than offset the decline in gross profit and the recognition of nonrecurring special charges.

AIS net sales for the six months ended February 28, 2026 increased 106.3% compared with the prior-year period.

The increase in sales is attributed primarily to the acquisition of QSC as well as higher net sales of Distech products.

AIS gross profit for the six months ended February 28, 2026 was $299.8 million (59.3% of AIS net sales), compared with $132.9 million (54.2% of AIS net sales) in the prior-year period, an increase of $166.9 million.

The increase in gross profit was due primarily to the acquisition of QSC as well as the fall through of higher Distech net sales.

AIS operating profit for the six months ended February 28, 2026 was $65.3 million (12.9% of AIS net sales), compared with $20.7 million (8.4% of AIS net sales) in the prior-year period, an increase of $44.6 million.

This increase primarily reflects higher operating profit from the QSC acquisition.

Critical Accounting Estimates

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis