ayi-20221130

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________

Form 10-Q

_____________________________________________


(Mark One)
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2022.


OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

Commission file number 001-16583.

_____________________________________________

ACUITY BRANDS, INC.

(Exact name of registrant as specified in its charter)

_____________________________________________


Delaware						58-2632672
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

1170 Peachtree Street, N.E., Suite 1200, Atlanta, Georgia 30309-7676

(Address of principal executive offices)

(404) 853-1400

(Registrant’s telephone number, including area code)

1170 Peachtree Street, N.E., Suite 2300, Atlanta, Georgia 30309-7676

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock, $0.01 par value per share

AYI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock — $0.01 par value — 32,051,483 shares as of January 4, 2023.

ACUITY BRANDS, INC.

Table of Contents


		Page No.
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets -- November 30, 2022 (Unaudited) and August 31, 2022	1
	Consolidated Statements of Comprehensive Income (Unaudited) -- Three months ended November 30, 2022 and 2021	2
	Consolidated Statements of Cash Flows (Unaudited) -- Three months ended November 30, 2022 and 2021	3
	Notes to Consolidated Financial Statements (Unaudited)	4
	Note 1 — Description of Business and Basis of Presentation	4
	Note 2 — Significant Accounting Policies	5
	Note 3 — Acquisitions and Divestitures	5
	Note 4 — New Accounting Pronouncements	6
	Note 5 — Fair Value Measurements	6
	Note 6 — Inventories	7
	Note 7 — Property, Plant, and Equipment	7
	Note 8 — Goodwill and Intangible Assets	8
	Note 9 — Other Current Liabilities	8
	Note 10 — Debt and Lines of Credit	9
	Note 11 — Commitments and Contingencies	10
	Note 12 — Changes in Stockholders' Equity	12
	Note 13 — Revenue Recognition	12
	Note 14 — Share-based Payments	13
	Note 15 — Pension Plans	14
	Note 16 — Special Charges	14
	Note 17 — Earnings Per Share	15
	Note 18 — Comprehensive Income	15
	Note 19 — Segment Information	16

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	24

Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1a.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

INDEX TO EXHIBITS		26

SIGNATURES		27

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

ACUITY BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	November 30, 2022		August 31, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	284.1	$	223.2
Accounts receivable, less reserve for doubtful accounts of $1.7 and $1.2, respectively	584.2		665.9
Inventories	487.0		485.7
Prepayments and other current assets	100.5		91.2
Total current assets	1,455.8		1,466.0
Property, plant, and equipment, net	279.6		276.5
Operating lease right-of-use assets	66.8		74.9
Goodwill	1,082.0		1,084.3
Intangible assets, net	505.6		529.2
Deferred income taxes	1.4		1.3
Other long-term assets	45.4		48.0
Total assets	$	3,436.6	$	3,480.2
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	415.1	$	397.8
Current maturities of debt	—		18.0
Current operating lease liabilities	15.7		15.7
Accrued compensation	68.7		88.0
Other accrued liabilities	198.1		214.1
Total current liabilities	697.6		733.6
Long-term debt	495.1		495.0
Long-term operating lease liabilities	63.6		67.4
Accrued pension liabilities	41.5		41.4
Deferred income taxes	100.8		102.1
Other long-term liabilities	134.5		128.9
Total liabilities	1,533.1		1,568.4
Commitments and contingencies (see Commitments and Contingencies footnote)
Stockholders’ equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued	—		—
Common stock, $0.01 par value; 500,000,000 shares authorized; 54,376,386 and 54,241,069 issued, respectively	0.5		0.5
Paid-in capital	1,035.4		1,036.3
Retained earnings	3,246.8		3,176.2
Accumulated other comprehensive loss	(126.2)		(125.8)
Treasury stock, at cost, of 22,225,453 and 21,753,820 shares, respectively	(2,253.0)		(2,175.4)
Total stockholders’ equity	1,903.5		1,911.8
Total liabilities and stockholders’ equity	$	3,436.6	$	3,480.2

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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ACUITY BRANDS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In millions, except per-share data)


	Three Months Ended
	November 30, 2022		November 30, 2021
Net sales	$	997.9	$	926.1
Cost of products sold	581.4		540.3
Gross profit	416.5		385.8
Selling, distribution, and administrative expenses	300.7		270.7
Special charges	6.9		—
Operating profit	108.9		115.1
Other expense:
Interest expense, net	6.6		5.9
Miscellaneous expense, net	9.1		0.3
Total other expense	15.7		6.2
Income before income taxes	93.2		108.9
Income tax expense	18.3		21.3
Net income	$	74.9	$	87.6

Earnings per share(1):
Basic earnings per share	$	2.32	$	2.50
Basic weighted average number of shares outstanding	32.308		35.063
Diluted earnings per share	$	2.29	$	2.46
Diluted weighted average number of shares outstanding	32.704		35.539
Dividends declared per share	$	0.13	$	0.13

Comprehensive income:
Net income	$	74.9	$	87.6
Other comprehensive income (loss) items:
Foreign currency translation adjustments	(1.5)		(11.9)
Defined benefit plans, net of tax	1.1		1.2
Other comprehensive loss items, net of tax	(0.4)		(10.7)
Comprehensive income	$	74.5	$	76.9

______________________________

(1) Earnings per share is calculated using unrounded numbers. Amounts in the table may not recalculate exactly due to rounding.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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ACUITY BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)


	Three Months Ended
	November 30, 2022		November 30, 2021
Cash flows from operating activities:
Net income	$	74.9	$	87.6
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	26.5		24.3
Share-based payment expense	10.7		7.6

Asset impairment	4.3		—
Loss on sale of a business	11.2		—



Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable	81.6		40.2
Inventories	(5.8)		(41.3)
Prepayments and other current assets	(8.5)		(47.7)
Accounts payable	20.3		17.7
Other	(28.6)		(4.7)
Net cash provided by operating activities	186.6		83.7
Cash flows from investing activities:
Purchases of property, plant, and equipment	(18.2)		(9.3)



Other investing activities	3.9		0.3
Net cash used for investing activities	(14.3)		(9.0)
Cash flows from financing activities:
Repayments on credit facility, net of borrowings	(18.0)		—


Repurchases of common stock	(76.5)		(56.3)
Proceeds from stock option exercises and other	0.9		8.6
Payments of taxes withheld on net settlement of equity awards	(12.5)		(6.7)
Dividends paid	(4.3)		(4.7)

Net cash used for financing activities	(110.4)		(59.1)
Effect of exchange rate changes on cash and cash equivalents	(1.0)		(2.9)
Net change in cash and cash equivalents	60.9		12.7
Cash and cash equivalents at beginning of period	223.2		491.3
Cash and cash equivalents at end of period	$	284.1	$	504.0
Supplemental cash flow information:
Income taxes paid during the period	$	11.0	$	28.3
Interest paid during the period	$	15.3	$	13.3

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 — Description of Business and Basis of Presentation

Acuity Brands, Inc. (referred to herein as “we,” “our,” “us,” the “Company,” or similar references) is a market-leading industrial technology company. We use technology to solve problems in spaces and light. Through our two business segments, Acuity Brands Lighting and Lighting Controls (“ABL”) and the Intelligent Spaces Group (“ISG”), we design, manufacture, and bring to market products and services that make a valuable difference in people's lives. We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management systems, and location-aware applications.

ABL Segment

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. We offer devices such as luminaires that predominantly utilize light emitting diode (“LED”) technology designed to optimize energy efficiency and comfort for various indoor and outdoor applications. ABL's portfolio of products includes but is not limited to the following brands: Lithonia Lighting®, Holophane®, Peerless®, Gotham®, Mark Architectural LightingTM, Juno®, IndyTM, AculuxTM, Healthcare Lighting®, Hydrel®, American Electric Lighting®, eldoLED®, nLight®, Sensor Switch®, IOTA®, A-LightTM, CycloneTM, Eureka®, Luminaire LEDTM, Luminis®, Dark to Light®, RELOC® Wiring Solutions, and OPTOTRONIC®.

Principal customers of ABL include electrical distributors, retail home improvement centers, electric utilities, national accounts, original equipment manufacturer (“OEM”) customers, digital retailers, lighting showrooms, and energy service companies. Our customers are located in North America and select international markets that serve new construction, renovation and retrofit, and maintenance and repair applications. ABL's lighting and lighting controls solutions are sold primarily through a network of independent sales agencies that cover specific geographic areas and market channels, by internal sales representatives, through consumer retail channels, directly to large corporate accounts, and directly to OEM customers. Products are delivered directly from our manufacturing facilities or through a network of distribution centers, regional warehouses, and commercial warehouses using both common carriers and a company-managed truck fleet. To serve international customers, our sales forces utilize a variety of distribution methods to meet specific individual customer or country requirements.

ABL comprised approximately 95% of consolidated revenues during the three months ended November 30, 2022 and 2021.

ISG Segment

ISG delivers products and services that make spaces smarter, safer, and greener. ISG offers a building management platform and location-aware applications. Our building management platform includes products for controlling heating, ventilation, and air conditioning (“HVAC”), lighting, shades, and building access that deliver end-to-end optimization of those building systems. Our Atrius® intelligent building software enhances the occupant experience, improves building system management, and automates labor intensive tasks while delivering operational energy efficiency and cost reductions. Through a connected and converged building system architecture, our Atrius® software delivers different applications, allows clients to upgrade over time with natural refresh cycles, and deploys new capabilities through both software and hardware updates. Customers of ISG primarily include system integrators as well as retail stores, airports, and enterprise campuses throughout North America and select international locations. ISG products and solutions are marketed under multiple brand names, including but not limited to Distech Controls® and Atrius®.

ISG comprised approximately 5% of consolidated revenues during the three months ended November 30, 2022 and 2021.

Basis of Presentation

We have prepared the Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) to present the financial position, results of operations, and cash flows of Acuity Brands, Inc. and its wholly-owned subsidiaries.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

These unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present fairly our consolidated financial position as of November 30, 2022, our consolidated comprehensive income for the three months ended November 30, 2022 and 2021, and our consolidated cash flows for the three months ended November 30, 2022 and 2021. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. However, we believe that the disclosures included herein are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited consolidated financial statements as of and for the three years ended August 31, 2022 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October 26, 2022 (File No. 001-16583) (“Form 10-K”).

The results of operations for the three months ended November 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal 2023 year due primarily to continued uncertainty of general economic conditions that may impact our key end markets for the remainder of fiscal 2023; the impact of inflation; component shortages; disruptions in the global supply chain; seasonality; and the impact of any acquisitions and/or divestitures, among other reasons. We are uncertain of the future impact of the ongoing COVID-19 pandemic or recovery of prior deterioration in economic conditions to our sales channels, supply chain, manufacturing, and distribution as well as overall construction, renovation, and consumer spending. Additionally, the current conflict between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are creating substantial uncertainty in the global economy. While we do not have operations in Russia or Ukraine and do not have significant direct exposure to customers and vendors in those countries, we are unable to predict the impact that these actions will have on the global economy or on our financial condition, results of operations, and cash flows as of the date of these financial statements.

Note 2 — Significant Accounting Policies

Use of Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

SEC Form 10-Q filed by Acuity Brands Inc.