ayi-20241130

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, 2024.


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 No.)

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

(Address of principal executive offices)

(404) 853-1400

(Registrant’s telephone number, including area code)

None

(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 — 30,959,298 shares as of January 3, 2025.

ACUITY BRANDS, INC.

Table of Contents


		Page No.
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets -- November 30, 2024 (Unaudited) and August 31, 2024	1
	Consolidated Statements of Comprehensive Income (Unaudited) -- Three months ended November 30, 2024 and November 30, 2023	2
	Consolidated Statements of Cash Flows (Unaudited) -- Three months ended November 30, 2024 and November 30, 2023	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 — New Accounting Pronouncements	5
	Note 4 — Fair Value Measurements	6
	Note 5 — Inventories	7
	Note 6 — Property, Plant, and Equipment	7
	Note 7 — Goodwill and Intangible Assets	7
	Note 8 — Other Current Liabilities	8
	Note 9 — Debt and Lines of Credit	9
	Note 10 — Commitments and Contingencies	10
	Note 11 — Changes in Stockholders' Equity	11
	Note 12 — Revenue	11
	Note 13 — Share-based Payments	12
	Note 14 — Pension Plans	13
	Note 15 — Other (Income) Expense	13
	Note 16 — Earnings Per Share	14
	Note 17 — Comprehensive Income	14
	Note 18 — Segment Information	15
	Note 19 — Subsequent Event	16

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	23

Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 5.	Other Information	24
Item 6.	Exhibits	24

INDEX TO EXHIBITS		25

SIGNATURES		26

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

ACUITY BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except per-share data)


	November 30, 2024		August 31, 2024
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	935.6	$	845.8
Accounts receivable, less reserve for doubtful accounts of $1.9 and $1.9, respectively	534.7		563.0
Inventories	391.1		387.6
Prepayments and other current assets	75.9		75.1
Total current assets	1,937.3		1,871.5
Property, plant, and equipment, net	299.8		303.9
Operating lease right-of-use assets	61.1		65.6
Goodwill	1,091.8		1,098.7
Intangible assets, net	440.3		440.5
Deferred income taxes	2.4		2.3
Other long-term assets	31.6		32.1
Total assets	$	3,864.3	$	3,814.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	331.5	$	352.3

Current operating lease liabilities	18.9		19.2
Accrued compensation	72.7		110.1
Other current liabilities	227.5		206.3
Total current liabilities	650.6		687.9
Long-term debt	496.3		496.2
Long-term operating lease liabilities	54.4		58.1
Accrued pension liabilities	37.5		37.5
Deferred income taxes	25.6		26.0
Other long-term liabilities	136.5		130.1
Total liabilities	1,400.9		1,435.8
Commitments and contingencies (see Commitments and Contingencies footnote)
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 50.0 shares authorized; none issued	—		—
Common stock, $0.01 par value per share; 500.0 shares authorized; 54.8 and 54.6 shares issued, respectively	0.5		0.5
Paid-in capital	1,120.5		1,115.9
Retained earnings	4,012.0		3,909.8
Accumulated other comprehensive loss	(131.7)		(114.9)
Treasury stock, at cost, of 23.8 and 23.8 shares, respectively	(2,537.9)		(2,532.5)
Total stockholders’ equity	2,463.4		2,378.8
Total liabilities and stockholders’ equity	$	3,864.3	$	3,814.6

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, 2024		November 30, 2023
Net sales	$	951.6	$	934.7
Cost of products sold	502.3		506.3
Gross profit	449.3		428.4
Selling, distribution, and administrative expenses	316.0		295.5

Operating profit	133.3		132.9
Other (income) expense:
Interest (income) expense, net	(4.0)		0.9
Miscellaneous expense, net	2.5		1.1
Total other (income) expense	(1.5)		2.0
Income before income taxes	134.8		130.9
Income tax expense	28.1		30.3
Net income	$	106.7	$	100.6

Earnings per share(1):
Basic earnings per share	$	3.45	$	3.25
Basic weighted average number of shares outstanding	30.930		31.005
Diluted earnings per share	$	3.35	$	3.21
Diluted weighted average number of shares outstanding	31.799		31.365
Dividends declared per share	$	0.15	$	0.13

Comprehensive income:
Net income	$	106.7	$	100.6
Other comprehensive income (loss) items:
Foreign currency translation adjustments	(17.3)		(2.1)
Defined benefit plans, net of tax	0.5		0.6
Other comprehensive loss items, net of tax	(16.8)		(1.5)
Comprehensive income	$	89.9	$	99.1

______________________________

(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, 2024		November 30, 2023
Cash flows from operating activities:
Net income	$	106.7	$	100.6
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization	21.6		22.7
Share-based payment expense	12.1		11.1






Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable	25.2		37.8
Inventories	(5.1)		3.2
Prepayments and other current assets	(1.8)		(5.3)
Accounts payable	(14.5)		28.7
Other operating activities	(12.0)		(8.8)
Net cash provided by operating activities	132.2		190.0
Cash flows from investing activities:
Purchases of property, plant, and equipment	(18.9)		(14.6)



Other investing activities	0.5		0.1
Net cash used for investing activities	(18.4)		(14.5)
Cash flows from financing activities:



Repurchases of common stock	(6.7)		(48.2)
Proceeds from stock option exercises and other	15.6		1.6
Payments of taxes withheld on net settlement of equity awards	(23.1)		(9.0)
Dividends paid	(4.5)		(4.1)

Net cash used for financing activities	(18.7)		(59.7)
Effect of exchange rate changes on cash and cash equivalents	(5.3)		(0.4)
Net change in cash and cash equivalents	89.8		115.4
Cash and cash equivalents at beginning of period	845.8		397.9
Cash and cash equivalents at end of period	$	935.6	$	513.3
Supplemental cash flow information:
Income taxes paid during the period	$	9.6	$	7.1
Interest paid during the period	$	11.6	$	12.8

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 Acuity Intelligent Spaces, we design, manufacture, and bring to market products and services that make a valuable difference in people's lives. We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management solutions, and location-aware applications.

Acuity Brands Lighting Segment

Our Acuity Brands Lighting 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. Acuity Brands Lighting'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. Acuity Brands Lighting's portfolio of products includes but is not limited to the following brands: A-LightTM, AculuxTM, American Electric Lighting®, CycloneTM, Dark to Light®, eldoLED®, Eureka®, Gotham®, Healthcare Lighting®, Holophane®, Hydrel®, IOTA®, Juno®, Lithonia Lighting®, Luminaire LEDTM, Luminis®, Mark Architectural LightingTM, nLight®, OPTOTRONIC®, Peerless®, RELOC® Wiring Solutions, and SensorSwitchTM.

Principal customers of Acuity Brands Lighting include electrical distributors, retail home improvement centers, electric utilities, corporate accounts, original equipment manufacturer (“OEM”) customers, digital retailers, lighting showrooms, and energy service companies. Customers of Acuity Brands Lighting are located in North America and select international markets that serve new construction, renovation and retrofit, and maintenance and repair applications. Acuity Brands Lighting'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 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.

Acuity Intelligent Spaces Segment

Our mission in Acuity Intelligent Spaces is to make spaces smarter, safer, and greener through our strategy of connecting the edge with the cloud using disruptive technologies that leverage data interoperability. Acuity Intelligent Spaces offers building management solutions and building management software. Our building management solutions include products for controlling heating, ventilation, and 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 Acuity Intelligent Spaces primarily include system integrators as well as retail stores, airports, and enterprise campuses throughout North America and select international locations. Acuity Intelligent Spaces products and solutions are marketed under multiple brand names, including but not limited to, Atrius® and Distech Controls®.

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.

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, 2024, our consolidated comprehensive income for the three months ended November 30, 2024 and November 30, 2023, and our consolidated cash flows for the three months ended November 30, 2024 and November 30, 2023. Certain information and footnote disclosures normally included in our annual financial statements prepared in

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

accordance with U.S. GAAP have been condensed or omitted. However, we believe that the disclosures included herein are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited consolidated financial statements as of and for the three years in the period ended August 31, 2024 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October 28, 2024 (“Form 10-K”).

Our business exhibits some seasonality, with net sales being affected by weather and seasonal demand on construction and installation programs, particularly during the winter months, as well as the annual budget cycles of major customers. Historically, with certain exceptions, we have experienced our highest sales in the last two quarters of each fiscal year due to these factors.

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.

Reclassifications

We may reclassify certain prior period amounts to conform to the current year presentation. No material reclassifications occurred during the current period.

Note 3 — New Accounting Pronouncements

Accounting Standards Yet to Be Adopted

Accounting Standards Update (“ASU”) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses (“ASU 2024-03”)

In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, which requires public entities to disaggregate specific types of expenses, including disclosures for purchases of inventory, employee compensation, depreciation, and intangible asset amortization, as well as selling expenses. Annual disclosures are required for fiscal years beginning after December 15, 2026, or our fiscal 2028. Interim disclosures are required for periods within fiscal years beginning after December 15, 2027, or our fiscal 2029. Prospective application is required, and retrospective application is permitted. Early adoption is permitted. We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.

ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”)

In December 2023, the 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

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 — Fair Value Measurements

We determine fair value measurements based on the assumptions a market participant would use in pricing an asset or liability. ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a three-level hierarchy that distinguishes between market participant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (Level 3).

We utilize valuation methodologies to determine the fair values of our financial assets and liabilities in conformity with the concepts of “exit price” and the fair value hierarchy as prescribed in ASC 820. All valuation methods and assumptions are validated at least quarterly to ensure the accuracy and relevance of the fair values. There were no material changes to the valuation methods or assumptions used to determine fair values during the current period. No transfers between the levels of the fair value hierarchy occurred during the current fiscal period. In the event of a transfer in or out of a level within the fair value hierarchy, the transfers would be recognized on the date of occurrence. We may from time to time be required to remeasure the carrying value of certain assets and liabilities to fair value on a nonrecurring basis. Such adjustments typically arise if we determine that certain of our assets are impaired.

Financial Instruments Recorded at Fair Value

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


	November 30, 2024								August 31, 2024
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	935.6	$	—	$	—	$	935.6	$	845.8	$	—	$	—	$	845.8
Other financial instruments	—		—		—		—		—		—		—		—
Assets in fair value hierarchy	935.6		—		—		935.6		845.8		—		—		845.8
Other investments(1)							5.1								6.7
Total assets at fair value	$	935.6	$	—	$	—	$	940.7	$	845.8	$	—	$	—	$	852.5

____________________________________

(1) Includes strategic investments in privately-held entities over which we do not exercise significant influence or control and without readily determinable fair values. Amounts are recorded at cost less any impairment adjusted for observable price changes, if any.

Disclosures of Fair Value of Financial Instruments

Disclosures of fair value information about financial instruments, for which it is practicable to estimate that value, are required each reporting period in addition to any financial instruments carried at fair value on a recurring basis as prescribed by ASC Topic 825, Financial Instruments (“ASC 825”). In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, such as the discount rate and estimates of future cash flows.

Fair value for our outstanding debt obligations is estimated based on discounted future cash flows using rates currently available for debt of similar terms and maturity (Level 2). Our senior unsecured public notes are carried at the outstanding balance, net of unamortized bond discount and deferred costs, as of the end of the reporting period.

The estimated fair value of our senior unsecured public notes was $432.5 million and $429.7 million as of November 30, 2024 and August 31, 2024, respectively.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We had no short-term borrowings outstanding under our revolving credit facility as of November 30, 2024 and August 31, 2024. Such borrowings, if any, are variable-rate instruments that reset on a frequent short-term basis; therefore, we estimate that any outstanding carrying values of these instruments, which are equal to their face amounts, approximate their fair values. See Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for further details on our outstanding borrowings.

ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value to us. 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.

Note 5 — Inventories

Inventories include materials, direct labor, inbound freight, customs, duties, tariffs, and related manufacturing overhead. Inventories are stated on a first-in, first-out basis at the lower of cost and net realizable value and consist of the following as of the dates presented (in millions):


	November 30, 2024		August 31, 2024
Raw materials, supplies, and work in process (1)	$	227.5	$	222.1
Finished goods	190.2		191.1
Inventories excluding reserves	417.7		413.2
Less: Reserves	(26.6)		(25.6)
Total inventories	$	391.1	$	387.6

_______________________________________

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

We review inventory quantities on hand and record a provision for excess and obsolete inventory primarily based on estimated future demand and current market conditions. A significant change in customer demand and/or market conditions could render certain inventory obsolete and could have a material adverse impact on our operating results in the period the change occurs.

Note 6 — Property, Plant, and Equipment

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


	November 30, 2024		August 31, 2024
Land	$	22.0	$	22.3
Buildings and leasehold improvements	219.0		218.7
Machinery, equipment, and information technology	764.0		758.7
Total property, plant, and equipment, at cost	1,005.0		999.7
Less: Accumulated depreciation and amortization	(705.2)		(695.8)
Property, plant, and equipment, net	$	299.8	$	303.9

Note 7 — Goodwill and Intangible Assets

Through multiple acquisitions, we acquired definite-lived intangible assets consisting primarily of customer relationships, patented technology, distribution networks, and trademarks and trade names associated with specific products, which are amortized over their estimated useful lives. Indefinite-lived intangible assets consist of trade names that are expected to generate cash flows indefinitely.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We recorded amortization expense for definite-lived intangible assets of $8.7 million and $9.9 million during the three months ended November 30, 2024 and 2023, respectively.

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


	Acuity Brands Lighting		Acuity Intelligent Spaces		Total
Balance at August 31, 2024	$	1,015.1	$	83.6	$	1,098.7



Foreign currency translation adjustments	(4.9)		(2.0)		(6.9)
Balance at November 30, 2024	$	1,010.2	$	81.6	$	1,091.8


	Acuity Brands Lighting		Acuity Intelligent Spaces		Total
Balance at August 31, 2023	$	1,014.4	$	83.5	$	1,097.9



Foreign currency translation adjustments	(0.2)		(0.2)		(0.4)
Balance at November 30, 2023	$	1,014.2	$	83.3	$	1,097.5

Further discussion of goodwill and intangible assets is included within the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Note 8 — Other Current Liabilities

Other current liabilities consist of the following as of the dates presented (in millions):


	November 30, 2024		August 31, 2024
Customer incentive programs(1)	$	39.6	$	35.3
Refunds to customers(1)	27.6		28.2
Deferred revenues(1)	17.0		17.4
Sales commissions	31.9		35.3
Freight costs	17.7		18.1
Product warranty costs(2)	27.5		28.4
Tax-related items(3)	23.5		7.1
Interest on long-term debt(4)	5.0		2.3
Other	37.7		34.2
Total other current liabilities	$	227.5	$	206.3

____________________________________

(1) Refer to the Revenue Recognition footnote of the Notes to Consolidated Financial Statements within our Form 10-K for additional information.

(2) Refer to the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements for additional information.

(3) Includes accruals for income, property, sales and use, and value-added taxes.

(4) Refer to the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for additional information.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 9 — Debt and Lines of Credit

Long-term Debt

On November 10, 2020, Acuity Brands Lighting, Inc., a wholly-owned operating subsidiary of Acuity Brands, Inc., issued $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”) at a price equal to 99.737% of their face value. Interest on the Unsecured Notes is paid semi-annually in arrears on June 15 and December 15 of each year. At issuance we recorded $4.8 million of deferred issuance costs related to the Unsecured Notes as a direct deduction from the face amount of the Unsecured Notes. These issuance costs are amortized over the 10-year term of the Unsecured Notes.

The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Brands, Inc. and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Brands, Inc.

Lines of Credit

On June 30, 2022, we entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks that provides us with a $600.0 million five-year unsecured revolving credit facility (the “Revolving Credit Facility”) with the ability to request an additional $400.0 million of borrowing capacity. We had no short-term borrowings outstanding under the Revolving Credit Facility at November 30, 2024 and August 31, 2024.

On November 25, 2024, we entered into an amendment to the Credit Agreement that, among other things, provides for a delayed draw term loan facility of up to $600.0 million (the “Term Loan Facility”), which may be drawn in a single borrowing at any time through May 25, 2025, subject to certain conditions. The Credit Agreement permits the proceeds of the Term Loan Facility to be used for general corporate purposes, including working capital, permitted acquisitions, and repurchases of capital stock.

The Term Loan Facility will mature on June 30, 2027, which is the maturity date of the revolving loans and commitments under the existing Credit Agreement. Borrowings under the Term Loan Facility bear interest at an adjusted term Secured Overnight Financing Rate (“SOFR”), adjusted daily simple SOFR rate, or base rate, at the Company’s option, plus an applicable margin. The applicable margin is based on, at our option, the Company’s leverage ratio or ratings level, each as defined in the Credit Agreement, and ranges from 0.875% to 1.375% (for SOFR-based loans) and from 0.0% to 0.375% (for base rate loans). Undrawn commitments under the Term Loan Facility will accrue a commitment fee from and after February 24, 2025 at a per annum rate ranging from 0.075% to 0.175%, depending on, at our option, the Company’s leverage ratio or ratings level, each as defined in the Credit Agreement.

The covenants and events of default that apply to the revolving loans and commitments under the Credit Agreement also apply to the Term Loan Facility, and borrowings under the Term Loan Facility are guaranteed by the Company and the subsidiaries of the Company that guarantee the revolving loans and commitments. We had no borrowings outstanding under the Term Loan Facility at November 30, 2024.

We were in compliance with all financial covenants under the Credit Agreement as of the periods presented. At November 30, 2024, we had additional borrowing capacity under the Credit Agreement of $1.2 billion under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility and the Term Loan Facility less outstanding letters of credit of $3.5 million issued under the Revolving Credit Facility, primarily for securing collateral requirements under our casualty insurance premiums.

None of our existing debt instruments include provisions that would require an acceleration of repayments based solely on changes in our credit ratings. Borrowings and repayments on our Revolving Credit Facility with terms of three months or less are reported on a net basis on our Consolidated Statements of Cash Flows.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 10 — Commitments and Contingencies

In the normal course of business, we are subject to the effects of certain contractual stipulations, events, transactions, and laws and regulations that may, at times, require the recognition of liabilities, such as those related to self-insurance estimated liabilities and claims, legal and contractual issues, environmental laws and regulations, guarantees, and indemnities. We establish estimated liabilities when the associated costs related to uncertainties or guarantees become probable and can be reasonably estimated. For the period ended November 30, 2024, no material changes have occurred in our estimated liabilities for self-insurance, litigation, environmental matters, guarantees, and indemnities, or relevant events and circumstances, from those disclosed in the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

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 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.

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):


	Three Months Ended
	November 30, 2024		November 30, 2023
Beginning balance	$	37.5	$	31.6
Product warranty costs(1)	6.3		12.4
Payments and other deductions(1)	(9.3)		(11.3)


Ending balance	$	34.5	$	32.7

_________________________

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

Litigation

We are subject to various other legal claims arising in the normal course of business, including patent infringement, 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. However, in the event of unexpected future developments, it is possible that the ultimate resolution of any such matters, if unfavorable, could have a material adverse effect on our financial condition, results of operations, or cash flows in future periods. We establish estimated liabilities for legal claims when associated costs become probable and can be reasonably estimated. 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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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 11 — Changes in Stockholders' Equity

The following tables summarize changes in the components of stockholders' equity for the periods presented (in millions):


	Common Stock Outstanding
	Shares(1)		Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock, at cost		Total
Balance, August 31, 2024	30.8		$	0.5	$	1,115.9	$	3,909.8	$	(114.9)	$	(2,532.5)	$	2,378.8
Net income	—		—		—		106.7		—		—		106.7
Other comprehensive loss	—		—		—		—		(16.8)		—		(16.8)


Share-based payment amortization, issuances, and cancellations	0.1		—		(11.0)		—		—		—		(11.0)
Employee stock purchase plan issuances	—		—		0.6		—		—		—		0.6
Cash dividends of $0.15 per share paid on common stock	—		—		—		(4.5)		—		—		(4.5)
Stock options exercised	0.1		—		15.0		—		—		—		15.0
Repurchases of common stock	—	*	—		—		—		—		(5.4)		(5.4)
Balance, November 30, 2024	31.0		$	0.5	$	1,120.5	$	4,012.0	$	(131.7)	$	(2,537.9)	$	2,463.4

_______________________________________

(1) Share activity and balances above are calculated using rounded numbers.

* Represents shares of less than 0.1 million.


	Common Stock Outstanding
	Shares(1)	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock, at cost		Total
Balance, August 31, 2023	31.1	$	0.5	$	1,066.8	$	3,505.4	$	(112.6)	$	(2,444.7)	$	2,015.4
Net income	—	—		—		100.6		—		—		100.6
Other comprehensive loss	—	—		—		—		(1.5)		—		(1.5)


Share-based payment amortization, issuances, and cancellations	0.1	—		2.1		—		—		—		2.1
Employee stock purchase plan issuances	—	—		0.5		—		—		—		0.5
Cash dividends of $0.13 per share paid on common stock	—	—		—		(4.1)		—		—		(4.1)
Stock options exercised	—	—		1.1		—		—		—		1.1
Repurchases of common stock	(0.3)	—		—		—		—		(50.0)		(50.0)
Balance, November 30, 2023	30.9	$	0.5	$	1,070.5	$	3,601.9	$	(114.1)	$	(2,494.7)	$	2,064.1

_______________________________________

(1) Share activity and balances above are calculated using rounded numbers.

Note 12 — Revenue

We recognize revenue when we transfer control of goods and services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for goods and services and is recognized net of allowances for rebates, sales incentives, product returns, and discounts to customers. We allocate the expected consideration to be collected to each distinct performance obligation identified in a sale based on its standalone selling price. Sales and use taxes collected on behalf of governmental authorities are excluded from revenues.

Further details regarding revenue recognition are included within the Revenue Recognition footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Contract Balances

Our rights related to collections from customers are unconditional and are reflected within Accounts receivable on the Consolidated Balance Sheets at net realizable value. Further details regarding our method for developing our estimate of expected credit losses over the contractual term of our receivables are included within the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

We do not have any other significant contract assets. Contract liabilities arise when we receive cash or an unconditional right to collect cash prior to the transfer of control of goods or services.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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


	November 30, 2024		August 31, 2024
Current deferred revenues	$	17.0	$	17.4
Non-current deferred revenues	39.6		41.5

Current deferred revenues primarily consist of service-type warranty and professional service fees collected prior to performing the related service as well as software licenses. Current deferred revenues are included within Other current liabilities on the Consolidated Balance Sheets. These services are expected to be performed within one year. Revenue recognized from beginning balances of contract liabilities during the three months ended November 30, 2024 totaled $5.4 million.

Non-current deferred revenues primarily consist of long-term service-type warranties, which are typically recognized ratably as revenue between five and ten years from the date of sale, and are included within Other long-term liabilities on the Consolidated Balance Sheets.

Unsatisfied performance obligations that do not represent contract liabilities are expected to be satisfied within one year from November 30, 2024 and consist primarily of orders for physical goods that have not yet been shipped.

Disaggregated Revenues

Our Acuity Brands Lighting segment's products are sold primarily through independent sales agents who cover specific geographic areas and market channels, by internal sales representatives, through consumer retail channels, directly to large corporate accounts, and through other distribution methods, including directly to OEM customers. Acuity Intelligent Spaces sells predominantly to system integrators. The following table shows revenue from contracts with customers by sales channel and reconciles to our segment information for the periods presented (in millions):


	Three Months Ended
	November 30, 2024		November 30, 2023
Acuity Brands Lighting:
Independent sales network	$	643.9	$	625.2
Direct sales network	107.2		97.4
Retail sales	44.9		55.6
Corporate accounts	32.7		41.5
OEM and other	57.3		56.7
Total Acuity Brands Lighting	886.0		876.4
Acuity Intelligent Spaces	73.5		64.2
Eliminations	(7.9)		(5.9)
Total	$	951.6	$	934.7

Note 13 — Share-based Payments

We account for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors over the related requisite service period, including restricted stock, performance stock units, and stock options (all part of our equity incentive plan), as well as stock units representing certain deferrals into our director deferred compensation plan or our supplemental deferred savings plan.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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


	Three Months Ended
	November 30, 2024		November 30, 2023
Share-based payment expense	$	12.1	$	11.1

Further details regarding our share-based payments are included within the Share-based Payments footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Note 14 — Pension Plans

We have several pension plans, both qualified and non-qualified, covering certain hourly and salaried employees. Benefits paid under these plans are based generally on employees’ years of service and/or compensation during the final years of employment. We make at least the minimum annual contributions to the plans to the extent indicated by actuarial valuations and statutory requirements. Plan assets are invested primarily in fixed income and equity securities.

Service cost of net periodic pension cost is allocated between Cost of products sold 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 expense, net in the Consolidated Statements of Comprehensive Income. Net periodic pension cost included the following components before tax for the periods presented (in millions):

Three Months Ended

SEC Form 10-Q filed by Acuity Brands Inc.