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What changed in ACUITY INC. (DE)'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ACUITY INC. (DE)'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+226 added−232 removedSource: 10-K (2024-10-28) vs 10-K (2023-10-26)

Top changes in ACUITY INC. (DE)'s 2024 10-K

226 paragraphs added · 232 removed · 187 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

39 edited+2 added−3 removed27 unchanged
Biggest changeIn fiscal 2023, we continued a management effectiveness series focused on coaching to performance, which we offered through in-person events. We also provide a digital platform with learning content and resources to help associates expand their knowledge, skills, and abilities through self-directed learning initiatives.
Biggest changeWe also provide a digital platform with learning content and resources to help employees expand their knowledge, skills, and abilities through self-directed learning initiatives. We provide on demand, virtual, and in-person instructor led classes to help employees and customers expand their lighting, controls, and building management technical knowledge through Acuity Academy and other resources.
Our building management solutions include products for controlling heating, ventilation, air conditioning (“HVAC”); lighting; shades; refrigeration; and building access that deliver end-to-end optimization of those building systems. Our intelligent building software enhances the occupant experience, improves building system management, and automates labor intensive tasks while delivering operational energy efficiency and cost reductions.
Our building management solutions include products for controlling heating, ventilation, air conditioning (“HVAC”), lighting, shades, refrigeration, and building access that deliver end-to-end optimization of those building systems. Our intelligent building management software enhances the occupant experience, improves building system management, and automates labor intensive tasks while delivering operational energy efficiency and cost reductions.
We utilize a blend of internal and outsourced manufacturing processes and capabilities to fulfill a variety of customer needs. Our investment in our production facilities is focused primarily on improving capabilities, product quality, and manufacturing efficiency as well as environmental, health, and safety 1 Table of Contents compliance.
We utilize a blend of internal and outsourced manufacturing processes and capabilities to fulfill a variety of customer needs. Our investment in our production facilities is focused primarily on improving capabilities, 1 Table of Contents product quality, and manufacturing efficiency as well as environmental, health, and safety compliance.
Industry Overview Our addressable market includes non-portable luminaires as defined by the National Electrical Manufacturers Association; poles for outdoor lighting; emergency lighting fixtures and lighting equipment; lighting controls; HVAC controls; refrigeration; and building technology controls, software, and systems.
Industry Overview Our addressable market includes non-portable luminaires as defined by the National Electrical Manufacturers Association; poles for outdoor lighting; emergency lighting fixtures and lighting equipment; lighting controls; HVAC controls; refrigeration controls; and building technology controls, software, and systems.
Additionally, the charters for our Audit Committee, Compensation and Management Development Committee, and Governance Committee are available free of charge through the “Committee Charters and Governance Documents” link under the “Governance” heading within the "For Investors" section on our website.
Additionally, the charters for our Audit Committee, Compensation and Management Development Committee, and Governance Committee are available free of charge through the “Committee Charters & Governance Documents” link under the “Governance” heading within the "For Investors" section on our website.
We also seek to use raw materials more efficiently and to operate our own facilities in a more intelligent, environmentally-friendly manner. We have extended the capabilities of our energy data management software to help enable users to track and report their full carbon footprint. We regularly communicate progress on our environmental commitments as part of our EarthLIGHT sustainability program.
We have extended the capabilities of our energy data management software to help enable users to track and report their carbon footprint. We also seek to use raw materials more efficiently and to operate our own facilities in a more intelligent, environmentally-friendly manner. We regularly communicate progress on our environmental commitments as part of our EarthLIGHT sustainability program.
We market our product portfolio and service capabilities to customers and/or end users in multiple channels through a broad spectrum of marketing and promotional methods, including direct customer contact, trade shows, on-site training, print and digital advertising in industry publications, product brochures, and other literature, as well as through digital marketing and social media.
Marketing We market our product portfolio and service capabilities to customers and end users in multiple channels through a broad spectrum of marketing and promotional methods, including direct customer contact, trade shows, on-site training, print and digital advertising in industry publications, product brochures, and other literature, as well as through digital marketing and social media.
Historically, with certain exceptions, we have experienced our highest sales in the last two quarters of each fiscal year due to these factors. Our lighting and building technology solutions are sold to customers in both the new construction as well as renovation and retrofit markets for residential and non-residential applications.
Historically, with certain exceptions, we have experienced our highest sales in the last two quarters of our fiscal year due to these factors. Our lighting and building technology solutions are sold to customers in both the new construction as well as renovation and retrofit markets for residential and non-residential applications.
A variety of different metrics are averaged to determine a facility’s performance, which is used to find continuous improvement opportunities. Environmental Sustainability We save energy and help reduce carbon emissions through our lighting, lighting controls, and building management solutions by replacing older technologies, and we drive innovation and performance across our business to minimize our impact on the environment.
A variety of different metrics is averaged to determine a facility’s performance, which is used to find continuous improvement opportunities. Environmental Sustainability We save energy and help reduce carbon emissions through our lighting, lighting controls, and building management solutions by replacing older technologies, and we drive innovation and productivity across our business to minimize our impact on the environment.
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.
Principal customers of ABL include electrical distributors, retail home improvement centers, electric utilities, corporate accounts, original equipment manufacturer (“OEM”) customers, digital retailers, lighting showrooms, and energy service companies. Our customers are located in North America and select international markets that serve new construction, renovation and retrofit, and maintenance and repair applications.
We invest in product vitality, including enhancement of existing offerings, with a focus on improving the performance-to-cost ratio and energy efficiency. We also develop software applications and capabilities to enhance data analytics offerings for building performance, enterprise operations, and personal experiences.
We invest in product vitality, including enhancement of existing offerings, with a focus on improving the performance-to-cost ratio and energy efficiency. We also develop software applications with a platform to enhance data analytics offerings for building performance, enterprise operations, and personal experiences.
Our goal is to ensure that all associates feel valued, respected, and accepted for their contributions regardless of their race, sex, religion, ethnicity, age, gender identity, disabilities, national origin, sexual orientation, or other unique characteristics.
Our goal is to ensure that all employees feel valued, respected, and accepted for their contributions regardless of their race, sex, religion, ethnicity, age, gender identity, disabilities, national origin, sexual orientation, or other unique characteristics.
Compensation and Benefits We review our compensation and benefit plans annually to ensure that we are providing competitive, contemporary, and inclusive programs so we can attract and retain the best people and support the health and well-being of our associates and their families.
Compensation and Benefits We review our compensation and benefit plans annually to ensure that we are providing competitive, contemporary, and inclusive programs so we can attract and retain the best people and support the health and well-being of our employees and their families.
We operate in highly competitive industries that are affected by a number of general business and economic factors, such as, but not limited to, gross domestic product growth, employment levels, credit availability, interest rates and inflation, building costs, freight, construction-related labor availability, building occupancy rates, imports and trade, energy costs, freight costs, tariffs, commodity costs, and commodity availability.
We operate in highly competitive industries that are affected by a number of general business and economic factors, such as, but not limited to, gross domestic product growth, population growth, government stimulus, employment levels, credit availability, interest rates and inflation, building costs, freight, construction-related labor availability and costs, building occupancy rates, imports and trade, energy costs, freight costs, tariffs, commodity costs, and commodity availability.
We also utilize contract manufacturing from U.S., Asian, and European sources for certain products. The following table shows the percentage of finished goods manufactured and purchased in fiscal 2023 by significant geographic region.
We also utilize contract manufacturing from U.S., Asian, and European sources for certain products. The following table shows the percentage of finished goods manufactured and purchased in fiscal 2024 by significant geographic region.
We are a leading provider of integrated lighting and building technology solutions based on these technologies and utilize internally developed, licensed, or acquired intellectual property. 2 Table of Contents Competition We experience competition based on numerous factors, including product vitality, service capabilities, price, brand name recognition, product quality, product and system design, energy efficiency, and customer relationships.
We are a leading provider of integrated lighting and building technology solutions that utilize internally developed, licensed, or acquired intellectual property. 2 Table of Contents Competition We experience competition based on numerous factors, including product vitality, service capabilities, price, brand name recognition, product quality, product and system design, energy efficiency, and customer relationships.
The construction market is cyclical in nature and subject to changes in general economic conditions and fiscal policies. Sales volume has a major impact on our profitability. Economic downturns and the potential decline in key construction markets may have a material adverse effect on our net sales, operating income, financial position, and cash flows.
The construction market is cyclical in nature and subject to changes in general economic conditions and fiscal policies. Sales volume may have an impact on our profitability. Economic downturns and the potential decline in key construction markets may have a material adverse effect on our net sales, operating income, financial position, and cash flows.
ABL's portfolio of products includes but is not limited to the following brands: A-Light TM , Aculux TM , American Electric Lighting ® , Cyclone TM , Dark to Light ® , eldoLED ® , Eureka ® , Gotham ® , Healthcare Lighting ® , Holophane ® , Hydrel ® , Indy TM , IOTA ® , Juno ® , Lithonia Lighting ® , Luminaire LED TM , Luminis ® , Mark Architectural Lighting TM , nLight ® , OPTOTRONIC ® , Peerless ® , RELOC ® Wiring Solutions, and Sensor Switch TM .
ABL's portfolio of products includes but is not limited to the following brands: A-Light TM , Aculux TM , American Electric Lighting ® , Cyclone TM , Dark to Light ® , eldoLED ® , Eureka ® , Gotham ® , Healthcare Lighting ® , Holophane ® , Hydrel ® , IOTA ® , Juno ® , Lithonia Lighting ® , Luminaire LED TM , Luminis ® , Mark Architectural Lighting TM , nLight ® , OPTOTRONIC ® , Peerless ® , RELOC ® Wiring Solutions, and SensorSwitch TM .
R&D expenses consist of compensation, payroll taxes, employee benefits, materials, supplies, and other administrative costs, but the amounts do not include all new product development costs. For fiscal 2023, 2022, and 2021, R&D expenses totaled $97.1 million, $95.1 million, and $88.3 million, respectively.
R&D expenses consist of compensation, payroll taxes, employee benefits, materials, supplies, and other administrative costs, but the amounts do not include all new product development costs. For fiscal 2024, 2023, and 2022, R&D expenses totaled $102.3 million, $97.1 million, and $95.1 million, respectively.
To achieve this standard, we have instituted an EHS Management System based on the goals and guidelines of the International Standards of Operation for Environmental Management, International Standards for Occupational Health & Safety Management, and our own guiding principles.
Our management practices promote Environmental, Health & Safety (“EHS”) excellence. To achieve this standard, we have instituted an EHS Management System based on the goals and guidelines of the International Standards of Operation for Environmental Management, International Standards for Occupational Health & Safety Management, and our own guiding principles.
To promote diversity in the workplace, we sponsor a diversity, equity, and inclusion council that is responsible for setting our diversity strategy and initiatives, many resulting from associate feedback. Our diversity, equity, and inclusion council consists of members of management as well as key human resource process leaders and leaders from our various employee resource groups.
To promote diversity in the workplace, we sponsor an Inclusion and Belonging Council that is responsible for setting our diversity strategy and initiatives, many resulting from employee feedback. Our Inclusion and Belonging Council consists of members of management as well as key human resource process leaders and leaders from our various employee resource groups.
Information Concerning Acuity Brands Acuity Brands, Inc. was incorporated in 2001 under the laws of the State of Delaware.
Available Information Acuity Brands, Inc. was incorporated in 2001 under the laws of the State of Delaware.
ABL Segment Our ABL strategy is to increase product vitality, improve service levels, use technology to improve and differentiate both our products and our services, and drive productivity. ABL's portfolio of lighting solutions includes commercial, architectural, and specialty lighting in addition to lighting controls and components that can be combined to create integrated lighting controls systems.
ABL Segment Our ABL strategy is to increase product vitality, elevate service levels, use technology to improve and differentiate both our products and how we operate the business, and drive productivity. ABL's portfolio of lighting solutions includes commercial, architectural, and specialty lighting in addition to lighting controls and components that can be combined to create integrated lighting controls systems.
Union recognition and collective bargaining arrangements in place or in process cover approximately 1,300 and 6,500 associates in the United States and Mexico, respectively. Arrangements related to approximately 400 associates in the United States will expire within the next fiscal year.
Union recognition and collective bargaining arrangements in place or in process cover approximately 1,300 and 7,400 employees in the United States and Mexico, respectively. Arrangements related to approximately 700 employees in the United States will expire within the next fiscal year.
Human Capital We employed approximately 12,200 associates at August 31, 2023 of which approximately 3,600 were employed in the United States and approximately 7,700 were employed in Mexico. Our remaining associates were employed in other international locations including Europe, Canada, and the Asia/Pacific region.
Human Capital We employed approximately 13,200 employees at August 31, 2024, of which approximately 3,600 were employed in the United States and approximately 8,700 were employed in Mexico. Our remaining employees were employed in other international locations including Europe, Canada, and the Asia/Pacific region.
Non-residential construction spending on commercial, institutional, industrial, and infrastructure projects has a material impact on the demand for our lighting and building solutions. Demand for our residential lighting products is highly dependent on economic drivers, such as consumer spending and discretionary income, along with housing construction and home improvement spending. Our market is influenced by evolving technologies.
The volume of non-residential construction activity in commercial, institutional, industrial, and infrastructure projects has a material impact on the demand for our lighting and building management solutions. Demand for our residential lighting products is highly dependent on economic drivers, such as consumer spending and discretionary income, along with housing construction and home improvement spending.
However, we may be affected by current or future standards, laws, or regulations, including those imposed in response to energy, substances in or components in or used in the manufacturing of our products, climate change, product functionality, geopolitics, corporate social responsibility, employee health and safety, privacy, or similar concerns.
However, we may be affected by current or future standards, laws, or regulations, including those imposed in response to energy, material content, climate change, product functionality, geopolitics, corporate social responsibility, employee health and safety, privacy, or similar concerns.
Manufactured Purchased Total United States 15 % 7 % 22 % Mexico 57 % — % 57 % Asia — % 15 % 15 % Others 6 % — % 6 % Total 78 % 22 % 100 % We operate seven manufacturing facilities in Mexico, some of which are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico.
Manufactured Purchased Total United States 15 % 9 % 24 % Mexico 53 % — % 53 % Asia — % 17 % 17 % Others 6 % — % 6 % Total 74 % 26 % 100 % We operate seven manufacturing facilities in Mexico, some of which are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico.
We currently have five employee resource groups: Mind Matters; Minorities Amplifying Growth, Inclusion, and Community (“MAGIC”); People Respecting Identity, Diversity, and Equity (“PRIDE”); the Women’s Network; and the Veterans Network.
We currently have five employee resource groups: Mind Matters; Minorities Amplifying Growth, Inclusion, and Community (“MAGIC”); People Respecting Identity, Diversity, and Equity (“PRIDE”); the Women’s Network; and the Veterans Network. These groups are designed to embrace, celebrate, and recognize the power of diversity.
During fiscal 2023, net sales initiated outside of the U.S. represented approximately 14% of total net sales. See the Supplemental Disaggregated Information footnote of the Notes to Consolidated Financial Statements for additional information regarding the geographic distribution of net sales, operating profit, and long-lived assets.
See the Supplemental Disaggregated Information footnote of the Notes to Consolidated Financial Statements for additional information regarding the geographic distribution of net sales, operating profit, and long-lived assets.
Arrangements for approximately 6,500 associates in Mexico will expire within the next fiscal year, primarily due to annual negotiations of union contracts. We believe that we have strong relationships with both our unionized and non-unionized associates. Growth and Development A key pillar to attract, develop, and retain top talent is our focus on the growth and development of our associates.
Arrangements for approximately 7,400 employees in Mexico will expire within the next fiscal year, primarily due to statutory requirements of annual negotiations of union contracts. We believe that we have strong relationships with both our unionized and non-unionized employees.
In fiscal 2023, we remained focused on development through development plans for associates, training opportunities, and other activities. Our performance management and other processes are intended to align associate aspirations, interests, performance, and experiences with the talent needs that enable the business. Managers and associates conduct periodic check-in discussions to encourage continuous performance feedback and improvement.
Our performance management and other processes are intended to align employee aspirations, interests, performance, and experiences with the talent needs that enable the business. Managers and employees conduct periodic check-in discussions to encourage continuous performance feedback and improvement. These discussions also act to hold leaders accountable for creating an employee development culture.
We rely on copyright, patent, trade secret, and trademark laws as well as agreements, restrictive covenants, and internal processes and controls to protect these proprietary rights. Despite these protections, unauthorized parties may attempt to infringe on our intellectual property.
Intellectual Property We own various domestic and foreign patents, copyrights, trade secrets, trademarks, and other intellectual property, which are important factors for our businesses. We rely on patent, copyright, trade secret, and trademark laws as well as agreements, restrictive covenants, and internal processes and controls to protect these proprietary rights.
ISG products and solutions are marketed under multiple brand names, including but not limited to, Atrius ® , Distech Controls ® , and KE2 Therm Solutions ® . Manufacturing and Distribution We operate eighteen manufacturing facilities, including six facilities in the United States, seven facilities in Mexico, two facilities in Europe, and three in Canada.
ISG products and solutions are marketed under multiple brand names, including but not limited to, Atrius ® and Distech Controls ® .
Based on this review, we offer a competitive total rewards package to our associates that includes base compensation, bonuses, profit-sharing plans, stock grants, health benefits, and/or retirement benefits commensurate with an employee's position, skill set, and experience. Diversity, Equity, and Inclusion We believe that diversity, equity, and inclusion are important factors in our ongoing success.
Based on this review, we offer a competitive total rewards package to our employees that includes base compensation, annual cash incentive programs, stock grants with service and/ or performance requirements, health benefits, and/or retirement benefits commensurate with an employee's position, skill set, and experience. 4 Table of Contents Health and Safety We strive to ensure our employees have a safe and collaborative work environment.
Products are delivered directly from our manufacturing facilities or through a network of distribution centers, regional warehouses, and commercial warehouses using both common carriers and an internally-managed truck fleet.
Products are delivered primarily through a network of distribution centers as well as directly from our manufacturing facilities using both common carriers and an internally-managed truck fleet. ISG Segment Our ISG strategy is to make spaces smarter, safer, and greener by connecting the edge to the cloud. ISG offers building management solutions and building management software.
We operate training and education facilities in several locations throughout North America and Europe designed to enhance the lighting knowledge of customers and industry professionals. ISG Segment Our ISG strategy is to make spaces smarter, safer, and greener by connecting the edge to the cloud. ISG offers building management solutions and building management software.
We operate training and education facilities in various locations in North America and Europe designed to enhance the lighting, lighting controls, and building management systems knowledge of customers and industry professionals. Manufacturing and Distribution We operate eighteen manufacturing facilities, including seven in Mexico, six in the United States, three in Canada, and two in Europe.
As of August 31, 2023, we had approximately 1,600 total patent assets including issued United States and foreign patents as well as pending United States and foreign patent applications.
Despite these protections, unauthorized parties may take actions that infringe on our intellectual property. We also have licenses to certain patents and trademarks which, if not renewed, could adversely impact our business. As of August 31, 2024, we had approximately 1,600 total patent assets including issued U.S. and foreign patents as well as pending U.S. and foreign patent applications.
These discussions also act to hold leaders accountable for creating an associate development culture. Investing in the development of our associates is part of our operating system and correlates to our preparedness to meet current and future strategic priorities of the business.
Investing in the development of our employees is part of our operating system and correlates to our preparedness to meet current and future strategic priorities of the business. In fiscal 2024, we continued a management effectiveness series focused on coaching to performance, which we offered through in-person events and ongoing sustainment activities.
Removed
Intellectual Property We own or have licenses to use various domestic and foreign patents, trademarks, and other intellectual property related to our products, processes, and businesses. These intellectual property rights are important factors for our businesses.
Added
We operate seven distribution facilities, including five facilities in the United States and two in Canada. During fiscal 2024, net sales initiated outside of the U.S. represented approximately 15% of total net sales.
Removed
We provide self-learning resources to help associates expand their lighting, controls, and building management technical knowledge through Acuity Academy and other resources.
Added
Growth, Development, and Inclusion A key pillar to attract, develop, and retain top talent is our focus on the growth and development of our employees. In fiscal 2024, we remained focused on development through development plans for employees, special projects, training opportunities, and other activities.
Removed
These groups are designed to embrace, celebrate, and recognize the power of diversity. 4 Table of Contents Health and Safety We strive to ensure our associates have a safe and collaborative work environment. Our management practices promote Environmental, Health & Safety (“EHS”) excellence.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

72 edited+13 added−11 removed89 unchanged
Biggest changeWe cannot be certain that others have not and will not infringe on our intellectual property rights; however, we seek to establish and protect those rights, which could result in significant legal expenses and adversely affect our financial condition and results of operations. 13 Table of Contents Over the last several years, we and others in the industry have received an increased number of allegations of patent infringement from competitors and from non-practicing entity patent holders, often coupled with offers to license such patents for our use.
Biggest changeWith respect to intellectual property rights that we have obtained, we cannot be certain that others have not infringed and will not infringe on these rights. Enforcement actions against these third parties could result in significant legal expenses, which could also adversely affect our financial condition and results of operations.
We are highly dependent on various software and automated systems to record and process operational and financial transactions. We have experienced, and could experience in the future, a failure of one or more of these software and automated systems or could fail to complete all necessary data reconciliation or other conversion controls when implementing a new software system.
We are highly dependent on various software and automated systems to record and process operational and financial transactions. We have experienced, and could experience in the future, a failure of one or more of these software and automated systems or we could fail to complete all necessary data reconciliation or other conversion controls when implementing a new software system.
We may be subject to risk in connection with third-party relationships necessary to operate our business. We utilize strategic partners and third-party relationships in order to operate and grow our business. For instance, we utilize third parties to contract manufacturing of certain products, subcontract installation and commissioning, as well as perform certain selling, distribution, and administrative functions.
We may be subject to risk in connection with third-party relationships necessary to operate our business. We utilize strategic partners and third-party relationships in order to operate and grow our business. For instance, we utilize third parties for contract manufacturing of certain products, subcontract installation and commissioning, as well as perform certain selling, distribution, and administrative functions.
It is uncertain what laws will be enacted, and therefore we cannot predict the potential impact of such laws on our future financial condition, results of operations, and cash flows.
It is uncertain what laws will be enacted, and therefore we cannot predict the potential impact of such laws on our future financial condition, results of operations, and cash flows.
The laws and regulations regarding ESG disclosures and requirements are also rapidly evolving and could have an adverse effect on our operations and the costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may increase our operational costs. Tax liabilities due in the jurisdictions in which we operate may exceed anticipated amounts.
The laws and regulations regarding ESG disclosures and requirements are also evolving and could have an adverse effect on our operations and the costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may increase our operational costs. Tax liabilities due in the jurisdictions in which we operate may exceed anticipated amounts.
The laws and regulations regarding ESG disclosures and requirements are also rapidly evolving and could have an adverse effect on our operations and the costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may increase our operational costs. We may develop unexpected legal contingencies or matters that exceed insurance coverage.
The laws and regulations regarding ESG disclosures and requirements are also evolving and could have an adverse effect on our operations and the costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may increase our operational costs. We may develop unexpected legal contingencies or matters that exceed insurance coverage.
Further, these types of events may negatively impact residential, commercial, and industrial spending, including construction and renovation spending as well as consumer spending on our products, in impacted regions or, depending on the severity, globally. As a result, any of such events could adversely impact us.
These types of events may negatively impact residential, commercial, and industrial spending, including construction and renovation spending as well as consumer spending on our products, in impacted regions or, depending on the severity, globally. As a result, any of such events could adversely impact us.
Although no individual customer exceeded 10% of net sales during fiscal 2023, the loss of or a substantial decrease in the volume of purchases by certain larger customers could harm our business in a meaningful manner. We have relationships with channel partners such as electrical distributors, home improvement retailers, independent sales agencies, system integrators, and value-added resellers.
Although no individual customer exceeded 10% of net sales during fiscal 2024, the loss of or a substantial decrease in the volume of purchases by certain larger customers could harm our business in a meaningful manner. We have relationships with channel partners such as electrical distributors, home improvement retailers, independent sales agencies, system integrators, and value-added resellers.
We may also be subject to disruptions of any of these systems arising from events that are wholly or partially beyond our control (for example, natural disasters, acts of terrorism, cyber-attacks, including but not limited to hacking, malware, ransomware attacks, denial-of-service attacks, social engineering, exploitation of internet-connected devises, and other attacks, epidemics, computer viruses, and electrical/telecommunications outages).
We may also be subject to disruptions of systems arising from events that are wholly or partially beyond our control (for example, natural disasters, acts of terrorism, cyber-attacks, including but not limited to hacking, malware, ransomware attacks, denial-of-service attacks, social engineering, exploitation of internet-connected devises, and other attacks, epidemics, computer viruses, and electrical/telecommunications outages).
The success of new product and solution introductions depends on a number of factors, including, but not limited to, timely and successful product development, product quality, market acceptance, our ability to manage the risks associated with product life cycles, such as additional inventory obsolescence risk as product life cycles begin to shorten, new products and production capabilities, effective management of purchase commitments and inventory levels to support anticipated product manufacturing and demand, availability of products in appropriate quantities and costs to meet anticipated demand, and risk that new products may have quality or other defects in the early stages of introduction.
The success of new product and solution introductions depends on a number of factors, including, but not limited to, timely and successful product development, product quality, market acceptance, including entrance into new verticals, and our ability to manage the risks associated with product life cycles, such as additional inventory obsolescence risk as product life cycles begin to shorten, new products and production capabilities, effective management of purchase commitments and inventory levels to support anticipated product manufacturing and demand, availability of products in appropriate quantities and costs to meet anticipated demand, and risk that new products may have quality or other defects in the early stages of introduction.
As such, we have significant exposure to changes in domestic and foreign laws governing relationships with employees, including wage and hour laws and regulations, fair labor standards, minimum wage requirements, overtime pay, unemployment tax rates, workers' compensation rates, citizenship requirements, and payroll taxes, which likely would have a direct impact on our operating costs.
We have significant exposure to changes in domestic and foreign laws governing relationships with employees, including wage and hour laws and regulations, fair labor standards, minimum wage requirements, overtime pay, unemployment tax rates, workers' compensation rates, citizenship requirements, and payroll taxes, which likely would have a direct impact on our operating costs.
Further, because many of our customers are to varying degrees dependent on planned deliveries from our facilities, those customers that have to reschedule their own production or delay opening a facility due to our missed deliveries as a result of these disruptions could pursue financial claims against us.
Further, because many of our customers are to varying degrees dependent on planned deliveries from our facilities, those customers that have to reschedule their own production, delay opening a facility, or incur other disruptions due to our missed deliveries as a result of these disruptions could pursue financial claims against us.
In addition to the risks that are common to both our domestic and 10 Table of Contents international operations, we face risks specifically related to our foreign operations and sourcing activities, including but not limited to: foreign currency fluctuations; unstable political, social, regulatory, economic, financial, and market conditions; laws that prohibit shipments to certain countries or restricted parties and that prohibit improper payments to government officials such as the Foreign Corrupt Practices Act and the U.K.
In addition to the risks that are common to both our domestic and 10 Table of Contents international operations, we face risks specifically related to our foreign operations and sourcing activities, including but not limited to: exposure to foreign currency fluctuations; increased inflation; unstable political, social, regulatory, economic, financial, and market conditions; laws that prohibit shipments to certain countries or restricted parties and that prohibit improper payments to government officials such as the Foreign Corrupt Practices Act and the U.K.
Approximately 57% of our finished products are manufactured in Mexico, a country that periodically experiences heightened civil unrest or may experience trade disputes with the U.S., both of which could cause a disruption of the supply of products to or from these facilities.
Approximately 53% of our finished products are manufactured in Mexico, a country that periodically experiences heightened civil unrest or may experience trade disputes with the U.S., both of which could cause a disruption of the supply of products to or from these facilities.
When the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against us or otherwise engage in activism, which could cause us to incur substantial costs and could divert the time and attention of our management and other resources.
When the market price of our shares drops significantly, shareholders could institute securities class action lawsuits against us or otherwise engage in activism, which could cause us to incur substantial costs and could divert the time and attention of our management and other resources.
We are also subject to an increasing number of data privacy and security laws and regulations that impose requirements on us and our technology prior to certain use or transfer, storing, use, processing, disclosure, and protection of data and prior to sale or use of certain technologies.
We are also subject to an increasing number of evolving and uncertain data privacy and security laws and regulations that impose requirements on us and our technology prior to certain use or transfer, storing, processing, disclosure, and protection of data and prior to sale or use of certain technologies.
Union recognition and collective bargaining agreements are in place or in process covering approximately 65% of our workforce. Collective bargaining agreements representing approximately 57% of our workforce will expire within one year, primarily due to annual negotiations with unions in Mexico.
Union recognition and collective bargaining agreements are in place or in process covering approximately 65% of our workforce. Collective bargaining agreements representing approximately 60% of our workforce will expire within one year, primarily due to annual negotiations with unions in Mexico.
Profitability and volume could be negatively impacted by limitations inherent within the supply chain of certain of these component parts, including competitive, governmental, and legal limitations, natural disasters, and other events that could impact both supply and price. Additionally, we are dependent on certain service providers for key operational functions.
Profitability and volume could be negatively impacted by limitations inherent within the supply chain of certain of these component parts, including competitive, governmental, and legal limitations, natural disasters, and other events that could impact both supply and price. Additionally, we are dependent on certain service providers for 7 Table of Contents key operational functions.
As customers become increasingly concerned about the environmental impact of their purchases, if we fail to keep up with changing regulations or innovate or operate in ways that minimize the energy use of or other impacts of our products or operations, customers may choose more energy efficient or sustainable alternatives.
As customers become increasingly concerned about the environmental impact of their purchases, 12 Table of Contents if we fail to keep up with changing regulations or innovate or operate in ways that minimize the energy use of or other impacts of our products or operations, customers may choose more energy efficient or sustainable alternatives.
In addition, if our Mexican facilities cease to qualify for Maquiladora status or if the Mexican government adopts additional adverse changes to the program, including nationalization, our manufacturing costs in Mexico would increase.
In addition, if our Mexican facilities cease to qualify for Maquiladora status or if the Mexican government adopts additional adverse changes to the program, including nationalization, our manufacturing costs in Mexico could increase.
The market price of our common shares could fluctuate significantly for many reasons, including reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, competitors, or suppliers regarding their own performance, as well as general global economic, industry, and political conditions.
The market price of our common shares could fluctuate significantly for many reasons, including reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, competitors, or suppliers regarding their own performance, as well as general global economic, industry, and political conditions, or due to our ability to accurately forecast our performance.
We generally source our goods from a number of suppliers. However, there are a limited number of suppliers for certain components and certain purchased finished goods, which on a limited basis, results in sole-source supplier situations. Our competitors supply certain of those items, and those competitors may, for various strategic reasons, choose to cease selling to us.
However, there are a limited number of suppliers for certain components and certain purchased finished goods, which on a limited basis, results in sole-source supplier situations. Our competitors supply certain items, and those competitors and other suppliers may, for various strategic reasons, choose to cease selling to us.
We have begun to incorporate artificial intelligence capabilities in our product offerings, and challenges with properly managing the use of artificial intelligence and machine learning could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations, financial condition, and/or cash flows. We have begun incorporating artificial intelligence (“AI”) capabilities into certain product offerings.
We have begun to incorporate artificial intelligence capabilities in our product offerings and operations, and challenges with properly managing the use of artificial intelligence and machine learning could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations, financial condition, and/or cash flows.
We are insured up to specified limits for certain types of losses with a self-insurance retention per occurrence, including product or professional liability, and cyber liability, including network security and data privacy claims, and are fully self-insured for certain other types of losses, including environmental, product recall, warranties, commercial disputes, and patent infringement.
We are insured up to specified limits for certain types of losses with a self-insurance retention per occurrence, including product or professional liability, and cyber liability, including network security and data privacy claims, and are fully self-insured for certain other types of losses, including environmental, product recall, warranty, commercial dispute, and patent infringement losses.
In addition, such investment transactions may limit our ability to invest in other activities, which could be more profitable or advantageous. We may experience difficulties in streamlining activities, which could impact shipments to customers, product quality, and the realization of expected savings from streamlining actions.
In addition, such investment transactions may limit our ability to invest in other activities that could be more profitable or advantageous. 6 Table of Contents We may experience difficulties in streamlining activities, which could impact shipments to customers, product quality, and the realization of expected savings from streamlining actions.
If our ESG-related data, processes, and reporting are incomplete or inaccurate, or if we fail, or are perceived to fail, to achieve 11 Table of Contents progress with respect to our ESG targets or goals on a timely basis, or at all, our reputation, business, financial performance, and growth could be adversely affected.
If our ESG-related data, processes, and reporting are incomplete or inaccurate, or if we fail, or are perceived to fail, to achieve progress with respect to our ESG targets or goals on a timely basis, or at all, our reputation, business, financial performance, and growth could be adversely affected.
Further, tax laws and regulations in domestic and international jurisdictions are often extremely complex and subject to varying interpretations and may require us to make judgments and estimates about our provisions, including with 14 Table of Contents respect to certain transactions where the ultimate tax determination is uncertain.
Further, tax laws and regulations in domestic and international jurisdictions are often extremely complex and subject to varying interpretations and may require us to make judgments and estimates about our provisions, including with respect to certain transactions where the ultimate tax determination is uncertain.
In addition, investors and stakeholders are increasingly focused on ESG matters, and as stakeholder ESG expectations and standards evolve, our failure to sufficiently respond to these evolving standards and expectations may cause us to suffer from reputational damage, and our business or financial condition could be adversely affected.
In addition, certain investors and stakeholders are increasingly interested in ESG matters, and as stakeholder ESG expectations and standards evolve, our failure to sufficiently respond to these evolving standards and expectations may cause us to suffer from reputational damage, and our business or financial condition could be adversely affected.
We are exposed to certain regulatory, financial and other risks related to climate change and other sustainability matters. The scientific consensus indicates that emissions of greenhouse gases (“GHG”) continue to alter the composition of Earth’s atmosphere in ways that are affecting, and are expected to continue to affect, the global climate.
We are exposed to certain regulatory, financial, and other risks related to climate change and other sustainability matters. The scientific consensus indicates that emissions of GHGs continue to alter the composition of Earth’s atmosphere in ways that are affecting, and are expected to continue to affect, the global climate.
Current global conflicts, such as the those between Russia and Ukraine as well as within the Middle East, have created substantial uncertainty in the global economy, including sanctions and penalties imposed on certain 8 Table of Contents countries from several governments.
Current global conflicts, such as the those between Russia and Ukraine as well as within the Middle East, have created substantial uncertainty in the global economy, including sanctions and penalties imposed on certain countries from several governments.
In addition, we could be criticized or subject to litigation for the scope or nature of such initiatives, targets, or goals, or for any revisions to such targets or goals.
In addition, we could be criticized or subject to litigation for the 11 Table of Contents scope or nature of such initiatives, targets, or goals, or for any revisions to such targets or goals.
Additionally, current uncertain economic conditions, including economic slowdowns, supply chain disruptions, and a potential global recession, could adversely affect our ability to access the capital and other financial markets, and may require us to consider alternative sources of funding for some of our operations and for working capital, which may increase our cost of, as well as adversely impact our access to, capital.
Additionally, potential economic slowdowns, supply chain disruptions, or a global recession could adversely affect our ability to access the capital and other financial markets. This may require us to consider alternative sources of funding for some of our operations and for working capital, which may increase our cost of, as well as adversely impact our access to, capital.
While we do not have operations in these locations 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.
While we do not have operations in these locations and do not have significant 8 Table of Contents 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.
Moreover, unanticipated events, negative revisions to valuation assumptions and estimates, diversion of resources and management's attention from other business concerns, and difficulties in attaining synergies, among other factors, could adversely affect our ability to recover initial and subsequent investments, particularly those related to acquired goodwill and intangible assets or non-controlling interests.
Moreover, unanticipated events, negative revisions to valuation assumptions and estimates, diversion of resources and management's attention from other business concerns, and difficulties in attaining synergies, among other factors, have in the past and could in the future adversely affect our ability to recover initial and subsequent investments, resulting in non-cash impairment charges, particularly those related to acquired goodwill and intangible assets or non-controlling interests.
Changes in our relationship with employees, changes in U.S. or international employment regulations, an inability to attract and retain talented employees, or a loss of key employees could adversely impact the effectiveness of our operations. We employed approximately 12,200 people as of August 31, 2023, approximately 8,600 of whom are employed in international locations.
Changes in our relationships with employees, changes in U.S. or international employment regulations, an inability to attract and retain talented employees, or a loss of key employees could adversely impact the effectiveness of our operations. We employed approximately 13,200 people as of August 31, 2024, approximately 9,600 of whom are employed in international locations.
Securing employee talent, key partnerships, and alliances, including having access to technologies, services, and solutions developed by others, as well as obtaining appropriate patents and the right to utilize patents of other parties all play a significant role in protecting our freedom to operate.
We are highly engaged in the investigation, development, and implementation of new technologies and services. Securing employee talent, key partnerships, and alliances, including having access to technologies, services, and solutions developed by others, as well as obtaining appropriate patents and the right to utilize patents of other parties all play a significant role in protecting our freedom to operate.
The breakdown of equipment or other events, including, but not limited to, labor disputes, strikes, workplace violence, public health crises, pandemics and epidemics (such as the recent COVID-19, or similar or related, pandemics or endemics), climate change, brown outs and other power outages, earthquakes, fires, explosions, terrorism, adverse weather conditions, water scarcity, cyber-attacks, civil disruptions, or catastrophic events such as war or natural disasters, leading to production interruptions in our or one or more of our suppliers’ facilities could adversely affect us.
Disruptions to our operations including, but not limited to, labor disputes, strikes, workplace violence, public health crises, pandemics and epidemics, climate change, brown outs and other power outages, earthquakes, fires, floods, explosions, terrorism, adverse weather conditions, water scarcity, cyber-attacks, civil or political disruptions, or other catastrophic events such as war, insurrection, or natural disasters, leading to production interruptions in our or one or more of our suppliers’ facilities could adversely affect us.
These features may become important in our operations over time. Our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
Our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
Alternatively, supply chain disruptions and shortages could require us to rely on relatively high-cost spot market purchases for certain materials or products. Future increases in our costs could negatively impact our profitability as there can be no assurance that future price increases will be successfully passed through to customers. Disruptions in the supply chain could also negatively impact us.
Alternatively, supply chain disruptions and shortages could require us to rely on relatively high-cost spot market purchases for certain materials or products. Future increases in our costs could negatively impact our profitability as there can be no assurance that future price increases will be successfully passed through to customers. We generally source our goods from a number of suppliers.
During early fiscal 2023, supply chain disruptions for certain components, including, notably, microchips and electronics, have resulted in higher prices for significant commodities, including oil and steel, as well as increased warehousing, freight, and container costs, which have negatively impacted our business.
Supply chain disruptions for certain components, including microchips and electronics, have resulted in higher prices for significant commodities and materials, as well as increased warehousing, freight, and container costs, which have negatively impacted our business.
The Company monitors its data, information technology and personnel usage of Company systems to reduce these risks and continues to do so on an ongoing basis for any current or potential threats.
The Company monitors its data, information technology and personnel usage of Company systems to reduce these risks and continues to do so on an ongoing basis for any current or potential threats. Refer to Part I, Item 1C. Cybersecurity for further details.
We may not be able to identify, finance, and complete suitable acquisitions, alliances, or investments, and we may pursue future growth through acquisitions, alliances, or investments, which may not yield anticipated benefits. We have strengthened our business through acquisitions, alliances, and investments and may continue to do so as opportunities arise in the future.
We may not be able to identify, finance, and complete suitable acquisitions, alliances, or investments, and acquisitions, alliances, or investments that we pursue may not yield anticipated benefits. We have allocated capital within our business to fund acquisitions, alliances, and investments and may continue to do so as opportunities arise in the future.
A material network breach in the security of these systems could include the theft of intellectual property, trade secrets, the unauthorized release, gathering, monitoring, misuse, loss, change, or destruction of our or our customers', suppliers', or other third-party's confidential, proprietary and other information (including personal identifying information of individuals), or otherwise disrupt our or our clients' or other third parties' business operations.
A material network breach in the security of these systems could include the theft of intellectual property, the unauthorized release, gathering, monitoring, misuse, loss, change, or destruction of our or our customers', suppliers', or other third-party's confidential, proprietary or personally identifying information, other disruptions of our customers' or other third parties' business operations.
Rising interest rates could also impair our customers’ ability to repay obligations to us. Additionally, rising interest rates may increase our cost of capital, which could have material adverse effects on our financial condition and cash flows.
Rising interest rates could also impair our customers’ ability to repay obligations to us. Additionally, rising interest rates may increase our cost of capital, which could have material adverse effects on our financial condition and cash flows. 15 Table of Contents Item 1B. Unresolved Staff Comments. None.
The legal and regulatory data privacy framework is evolving and uncertain. 9 Table of Contents System failures, ineffective system implementation or disruptions, failure to comply with data privacy and security laws or regulations, or the compromise of security with respect to internal or external systems or portable electronic devices could damage our systems or infrastructure, subject us to liability claims, or regulatory fines, penalties, or intervention, harm our reputation, interrupt our operations, disrupt customer operations, and adversely affect our internal control over financial reporting, business, financial condition, results of operations, or cash flows.
Additionally, we routinely undertake contractual obligations to comply with all applicable laws, so a violation of a data privacy or security law could result in additional contractual liability. 9 Table of Contents System failures, ineffective system implementation or disruptions, failure to comply with data privacy and security laws or regulations, or the compromise of security with respect to internal or external systems or portable electronic devices could damage our systems or infrastructure, subject us to liability claims, or regulatory fines, penalties, or intervention, harm our reputation, interrupt our operations, disrupt customer operations, and adversely affect our internal control over financial reporting, business, financial condition, results of operations, or cash flows.
We may not be able to obtain indemnity or reimbursement from our suppliers or other third parties for the warranty costs or liabilities associated with our products, even if such costs or liabilities are covered under supplier warranty obligations.
We may not be able to obtain indemnity or reimbursement from our suppliers or other third parties for the warranty costs or liabilities associated with our products, even if such costs or liabilities are covered under supplier warranty obligations. We have incurred and may incur in the future charges and loss of reimbursed cash flows from such suppliers.
A significant product recall, warranty claim, or product liability case could also result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our products. We may not be able to adequately protect our intellectual property and could be the target of intellectual property claims.
A significant product recall, warranty claim, product liability case, and/or challenges around seeking indemnity or reimbursement from our suppliers or other third parties could also result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our products. 13 Table of Contents We may not be able to adequately protect our intellectual property rights and could be the target of intellectual property claims.
Accordingly, we cannot fully predict the ultimate effect of new product introductions on our business. Additionally, new products and solutions may not achieve the same profit margins as expected or as compared to our historic products and solutions.
Additionally, new products and solutions may not achieve the same profit margins as expected or as compared to our historic products and solutions. Conversely, market adoption of new products may impact the sales of other products and may expose on-hand inventories to future write-downs. Accordingly, we cannot fully predict the ultimate effect of new product introductions on our business.
Such investments have been and may be in startup or development-stage entities. We will benefit from such activity only to the extent that we can effectively identify suitable acquisition and alliance candidates and leverage and integrate the assets or capabilities of the acquired businesses and alliances, including, but not limited to, personnel, technology, and operating processes.
We will benefit from such activity only to the extent that we can effectively identify suitable acquisition and alliance candidates, close those identified acquisitions and alliances, and leverage and integrate the assets or capabilities of the acquired businesses and alliances, including, but not limited to, personnel, technology, and operating processes.
Any such cybersecurity incidents related to our use of AI capabilities could adversely affect our business. Risks Related to Legal and Regulatory Matters Failure to comply with the broad range of standards, laws, and regulations in the jurisdictions in which we operate may result in exposure to substantial disruptions, costs, and liabilities.
Risks Related to Legal and Regulatory Matters Failure to comply with the broad range of standards, laws, and regulations in the jurisdictions in which we operate may result in exposure to substantial disruptions, costs, and liabilities.
At the same time, certain actions that we may take in our efforts to address ESG concerns may be challenged as being inconsistent or prohibited by various federal, state or local laws and regulations.
In addition, we may be subject to consumer lawsuits or enforcement actions by governmental authorities if our ESG claims relating to product marketing are inaccurate. At the same time, certain actions that we may take in our efforts to address ESG concerns may be challenged as being inconsistent or prohibited by various federal, state, or local laws and regulations.
To the extent that any disruption or security breach results in a loss or damage to our data, or an inappropriate disclosure of confidential or customer or employee information, it could cause significant damage to our reputation, affect relationships with our customers, employees, and other counterparties, lead to claims against us, which may result in the payment of fines, penalties, and costs, and ultimately harm our business.
To the extent that any disruption or security breach results in a loss or damage to our data, or an inappropriate disclosure of information, it could cause significant damage to our reputation, affect relationships with our customers, employees, and others, or lead to claims against us.
Additionally, dynamic pricing models may not cover our rising costs. Even if we were able to increase prices to cover our costs, competitive pricing pressures may not allow us to pass on any more than the cost increases.
Even if we were able to increase prices to cover our costs, competitive pricing pressures may not allow us to pass on any more than the cost increases. Alternatively, if costs were to decline, the marketplace may not allow us to hold prices at their current levels.
A trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, costs, customers, suppliers, and/or the US economy or certain sectors thereof and, thus, to adversely impact our business.
Trade wars or other governmental actions related to tariffs or international trade agreements or policies have the potential to adversely impact demand for our products, costs, customers, suppliers, and/or the U.S. economy or certain sectors therein, and, could adversely impact our business.
We could be adversely affected by external disruptions to our operations.
We could be adversely affected by external disruptions, including geopolitical and/or other conditions, to our operations.
We have also experienced compromises of our security, and could experience in the future, a compromise of our security due to many reasons, including technical system flaws, clerical, data input or record-keeping errors, or tampering or manipulation of our systems by employees or unauthorized third parties, including viruses, malware, or phishing.
We have also experienced compromises of our security, and could experience in the future, a compromise of our security for reasons including technical system flaws, the improper installation of an upgrade or update, the proper installation of an upgrade or update that has consequences unforeseen by us or the software provider, data input or record-keeping errors, or tampering or manipulation of our systems by employees or unauthorized third parties, such as through viruses, malware, or phishing.
We have previously initiated product recalls as a result of potentially faulty components, assembly, installation, design, and packaging of our products. Widespread product recalls could result in significant losses due to the costs of a recall, the destruction of product inventory, penalties, and lost sales due to the unavailability of a product for a period of time.
Widespread product recalls could result in significant losses due to the costs of a recall, the destruction of product inventory, penalties, and lost sales due to the unavailability of a product for a period of time.
Our competitors may be able to offer a work environment with higher compensation or more opportunities than we can. An inability to attract and retain a sufficient number of employees could adversely impact our ability to execute key operational functions. There are inherent risks in our solutions and services businesses.
An inability to attract and retain a sufficient number of employees could adversely impact our ability to execute key operational functions. There are inherent risks in our solutions and services businesses.
In addition, we may be required to incur significant costs, or regulatory fines, penalties, or intervention, to protect against damage caused by these disruptions or security breaches in the future.
Such claims may result in the payment of fines, penalties, and costs, and ultimately harm our business. In addition, we may incur significant costs, regulatory fines, or penalties, or be required to take actions, to protect against damage caused by these disruptions or security breaches.
Sales of lighting, lighting controls, and building technology solutions depend significantly on the level of activity in new construction and renovation/retrofits. Declines in general economic activity, appropriations, and regulations, including tax and trade policy and other political uncertainties, may negatively impact new construction and renovation projects, which in turn may impact demand for our product and service offerings.
Declines in general economic activity, appropriations, and regulations, including tax and trade policy and other political uncertainties, may negatively impact new construction and renovation projects, or our ability to expand into new geographies, which in turn may impact demand for our product and service offerings.
We source certain components and approximately 15% of our finished goods from Asia, a significant portion of which are subject to import tariffs. These tariffs could increase in future periods resulting in higher costs and/or lower demand. We could be adversely affected to the extent we are unable to mitigate the impacts of the tariffs.
Additionally, if we expand our global footprint into new geographies or territories, our exposure to these risks may increase. We source certain components and approximately 17% of our finished goods from Asia, a significant portion of which are subject to import tariffs. These tariffs could increase in future periods resulting in higher costs and/or lower demand.
While our previous audits resulted in no significant findings, and we believe we continue to be in compliance with relevant tax laws, tax authorities may challenge or disagree with certain positions or methodologies in calculating our tax positions An unfavorable interpretation or outcome could increase our worldwide effective tax rate, result in additional tax obligations owed, impact the amount of recoverable VAT, and/or increase excise taxes owed, which could have an adverse impact on our financial position, results of operations, and/or cash flows.
An unfavorable interpretation or outcome could increase our worldwide effective tax rate, result in additional tax obligations owed, impact the amount of recoverable VAT, and/or increase excise taxes owed, which could have an adverse impact on our financial position, results of operations, and/or cash flows.
Continual introductions of new products and solutions, services, and technologies, enhancement of existing products and services, and effective servicing of customers are key to our competitive strategy.
Innovations of new products and services may not yield desired returns, which may also expose our assets, particularly inventory, to potential write-downs. Continual introductions of new products and solutions, services, and technologies, enhancement of existing products and services, and effective servicing of customers are key to our competitive strategy.
We operate in several jurisdictions, including but not limited to, the United States, Mexico, Canada, and Europe. Certain jurisdictions may aggressively interpret their laws, regulations, and policies in an effort to raise additional tax revenue, and international tax authorities may seek to assert extraterritorial taxing rights on our transactions or operations.
Certain jurisdictions may aggressively interpret their laws, regulations, and policies in an effort to raise additional tax revenue, and international tax authorities may seek to assert extraterritorial taxing rights on our transactions or operations. 14 Table of Contents We have previously been subject to domestic and international tax audits by taxing authorities of the jurisdictions in which we operate, and we may be subject to additional such audits in the future.
Risks Related to Our Strategy Our business and results have been and may be adversely affected by fluctuations in the cost or availability of raw materials, components, purchased finished goods, or services.
These uncertain economic conditions may also result in the inability of our customers and other counter-parties to make payments to us, on a timely basis or at all. Risks Related to Our Operations Our business and results have been and may be adversely affected by fluctuations in the cost or availability of raw materials, components, purchased finished goods, or services.
In addition, our growth may be constrained by resource limitations as competitors and customers compete for increasingly scarce human capital resources. The demand for skilled workers is currently high. We face an increasingly competitive labor market due to sustained labor shortages in part and are subject to inflationary pressures on employee wages and salaries, which may increase labor costs.
In addition, our growth may be constrained by resource limitations as competitors and customers compete for increasingly scarce human capital resources. The demand for skilled workers is currently high.
Maquiladora status, which is renewed periodically, is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program and other local regulations, which have become stricter in recent years.
Maquiladora status allows us to import raw materials into Mexico duty-free, provided that such items, after processing, are exported from Mexico within a stipulated time frame. Maquiladora status, which is renewed periodically, is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program and other local regulations, which have become stricter in recent years.
Failure to comply with such laws and regulations could result in the imposition of fines, penalties and other costs.
Failure to comply with such laws and regulations could result in the imposition of fines, penalties and other costs. New privacy and security laws are frequently enacted. Inconsistencies between the interpretation and the practical application of both existing and new laws are common across jurisdictions.
Aggressive pricing actions by competitors may affect our ability to manage the price/cost relationship to achieve desired revenue growth and profitability levels. Potential decreased demand for our products resulting from factors including uncertainty in the global economy, the current inflationary environment, rising interest rates, and a potential global recession may influence competitor pricing.
Potential decreased demand for our products resulting from factors including uncertainty in the global economy, an inflationary environment, rising interest rates, and a potential global recession may influence competitor pricing. Additionally, dynamic pricing models may not cover our rising costs.
We believe that we do not need or will be able to invalidate or access such patents through licensing, cross-licensing, or other mutually beneficial arrangements, although to the extent we are required but unable to enter into such arrangements on acceptable economic terms, it could adversely impact us.
We typically address those allegations by developing invalidity or non-infringement positions or obtaining access to such patents through licensing, cross-licensing, or other mutually beneficial arrangements. To the extent we cannot develop such positions and are unable to enter into such arrangements on acceptable economic terms, it could adversely impact us.
While there are a number of suppliers of these services, the cost to change service providers and set up new processes could be significant. In addition, the labor market for skilled manufacturing remains tight, and our labor costs have increased as a result, particularly in the U.S. and Mexico. Our results may be adversely affected by market and competitive pricing.
While there are a number of suppliers of these services, the cost to change service providers and set up new processes could be significant. Technological developments and increased competition could affect our operating profit margins and sales volume. We compete in an industry and markets where technology and innovation play major roles in the competitive landscape.
We operate seven manufacturing facilities in Mexico, some of which are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico. Maquiladora status allows us to import raw materials into Mexico duty-free, provided that such items, after processing, are exported from Mexico within a stipulated time frame.
We could be adversely affected to the extent we are unable to mitigate the impacts of the tariffs. We operate seven manufacturing facilities in Mexico, some of which are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico.
Removed
Alternatively, if costs were to decline, the marketplace may not allow us to hold prices at their current levels. 6 Table of Contents Innovations of new products and services may not yield desired returns.
Added
Risks Related to Our Strategy Our results may be adversely affected by market and competitive pricing. Aggressive pricing actions by competitors may affect our ability to manage the price/cost relationship to achieve desired revenue growth and profitability levels.
Removed
These uncertain economic conditions may also result in the inability 7 Table of Contents of our customers and other counter-parties to make payments to us, on a timely basis or at all. Risks Related to Our Operations Technological developments and increased competition could affect our operating profit margins and sales volume.
Added
Sales of lighting, lighting controls, and building technology solutions depend significantly on the level of activity in new construction and renovation/retrofits.
Removed
We compete in an industry and markets where technology and innovation play major roles in the competitive landscape. We are highly engaged in the investigation, development, and implementation of new technologies and services.
Added
We face an increasingly competitive labor market due in part to sustained labor shortages and are subject to inflationary pressures on employee wages, salaries, and benefits which have and may continue to increase labor costs and impact labor availability. Our competitors may be able to offer a work environment with higher compensation or more opportunities than we can offer.
Removed
In addition, we may be subject to consumer lawsuits or enforcement actions by 12 Table of Contents governmental authorities if our ESG claims relating to product marketing are inaccurate.
Added
We have begun incorporating artificial intelligence (“AI”) capabilities into certain product offerings as well as utilizing AI as part of our operational processes. These features may become more important over time.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following listing summarizes the significant facility categories by which reportable segment, Acuity Brands Lighting and Lighting Controls (“ABL”) or the Intelligent Spaces Group (“ISG”), the facility primarily benefits as of August 31, 2023: ABL ISG Corporate Total Nature of Facilities Owned Leased Owned Leased Leased Owned Leased Manufacturing facilities 10 5 2 1 — 12 6 Warehouses — 1 — — — — 1 Distribution centers 2 6 — — — 2 6 Offices 5 10 — 3 1 5 14 Total 17 22 2 4 1 19 27 The following table provides additional geographic information related to our manufacturing facilities as of August 31, 2023: United States Mexico Europe Canada Total ABL: Owned 4 5 1 — 10 Leased 1 2 — 2 5 Total 5 7 1 2 15 ISG: Owned — — 1 1 2 Leased 1 — — — 1 Total 1 — 1 1 3 We believe that our properties are well maintained and in good operating condition and that our properties are suitable and adequate for our present needs.
Biggest changeThe following listing summarizes the significant facility categories by which reportable segment, Acuity Brands Lighting and Lighting Controls (“ABL”) or the Intelligent Spaces Group (“ISG”), the facility primarily benefits as of August 31, 2024: ABL ISG Corporate Total Nature of Facilities Owned Leased Owned Leased Leased Owned Leased Manufacturing facilities 10 5 2 1 — 12 6 Warehouses — 1 — — — — 1 Distribution centers 2 5 — — — 2 5 Offices 5 8 — 3 1 5 12 Total 17 19 2 4 1 19 24 The following table provides additional geographic information related to our manufacturing facilities as of August 31, 2024: United States Mexico Europe Canada Total ABL: Owned 4 5 1 — 10 Leased 1 2 — 2 5 Total 5 7 1 2 15 ISG: Owned — — 1 1 2 Leased 1 — — — 1 Total 1 — 1 1 3 17 Table of Contents We believe that our properties are well maintained and in good operating condition and that our properties are suitable and adequate for our present needs.
Initiatives related to enhancing global operations may result in the future consolidation of certain facilities.
Initiatives related to enhancing global operations may result in the future consolidation or addition of certain facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. See the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 16 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings. See the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. 18 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table summarizes share repurchase activity by month for the quarter ended August 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs 6/1/2023 through 6/30/2023 129,774 $ 163.44 129,774 1,406,752 7/1/2023 through 7/31/2023 75,027 $ 167.12 75,027 1,331,725 8/1/2023 through 8/31/2023 101,935 $ 164.33 101,935 1,229,790 Total 306,736 $ 164.64 306,736 1,229,790 17 Table of Contents Company Stock Performance The following information in this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and it will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent specifically incorporated by reference into such filing.
Biggest changeThere were no shares repurchased during the quarter ended August 31, 2024. 19 Table of Contents Company Stock Performance The following information in this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and it will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent specifically incorporated by reference into such filing.
The following graph compares the cumulative total return to shareholders on our outstanding stock during the five years ended August 31, 2023, with the cumulative total returns of the Standard & Poor’s (“S&P”) Midcap 400 Index, the Dow Jones U.S. Electrical Components & Equipment Index, and the Dow Jones U.S. Building Materials & Fixtures Index.
The following graph compares the cumulative total return to shareholders on our outstanding stock during the five years ended August 31, 2024, with the cumulative total returns of the Standard & Poor’s (“S&P”) Midcap 400 Index, the Dow Jones U.S. Electrical Components & Equipment Index, and the Dow Jones U.S. Building Materials & Fixtures Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN* Among Acuity Brands, Inc., the S&P Midcap 400 Index, the Dow Jones U.S. Electrical Components & Equipment Index, and the Dow Jones U.S. Building Materials & Fixtures Index *Assumes $100 invested on August 31, 2018 in stock or index, including reinvestment of dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN* Among Acuity Brands, Inc., the S&P Midcap 400 Index, the Dow Jones U.S. Electrical Components & Equipment Index, and the Dow Jones U.S. Building Materials & Fixtures Index *Assumes $100 invested on August 31, 2019 in stock or index, including reinvestment of dividends.
The information required by this item with respect to equity compensation plans is included under the caption Equity Compensation Plans in our proxy statement for the annual meeting of stockholders to be held January 24, 2024, which we will file with the Securities and Exchange Commission pursuant to Regulation 14A. The proxy statement is incorporated herein by reference.
The information required by this item with respect to equity compensation plans is included under the caption Equity Compensation Plans in our proxy statement for the annual meeting of stockholders to be held January 22, 2025, which we will file with the Securities and Exchange Commission pursuant to Regulation 14A. The proxy statement is incorporated herein by reference.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Our common stock is listed on the New York Stock Exchange under the symbol “AYI.” At October 20, 2023, there were 1,785 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Our common stock is listed on the New York Stock Exchange under the symbol “AYI.” At October 23, 2024, there were 1,681 stockholders of record.
As of August 31, 2023, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 1.2 million shares.
As of August 31, 2024, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 3.8 million shares.
Issuer Purchases of Equity Securities On March 31, 2022, the Board of Directors (the “Board”) authorized the repurchase of up to five million shares of our common stock.
Issuer Purchases of Equity Securities On January 25, 2024, the Board of Directors (the “Board”) authorized the repurchase of up to an additional three million shares of our common stock.
Building Materials & Fixtures Index 100 111 130 206 162 205 Item 6. [Reserved] 18 Table of Contents
Building Materials & Fixtures Index 100 118 186 146 186 251 Item 6. [Reserved] 20 Table of Contents
Aug-18 Aug-19 Aug-20 Aug-21 Aug-22 Aug-23 Acuity Brands, Inc. $ 100 $ 82 $ 72 $ 122 $ 109 $ 108 S&P Midcap 400 Index 100 94 98 141 127 140 Dow Jones U.S. Electrical Components & Equipment Index 100 90 104 150 133 161 Dow Jones U.S.
Aug-19 Aug-20 Aug-21 Aug-22 Aug-23 Aug-24 Acuity Brands, Inc. $ 100 $ 88 $ 148 $ 132 $ 131 $ 207 S&P Midcap 400 Index 100 104 151 135 150 178 Dow Jones U.S. Electrical Components & Equipment Index 100 115 167 148 180 217 Dow Jones U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

56 edited+24 added−31 removed17 unchanged
Biggest changeThe following table sets forth information comparing the components of net income for the year ended August 31, 2023 with the year ended August 31, 2022 (in millions except per share data): Year Ended August 31, Increase Percent 2023 2022 (Decrease) Change Net sales $ 3,952.2 $ 4,006.1 $ (53.9) (1.3) % Cost of products sold 2,239.0 2,333.4 (94.4) (4.0) % Gross profit 1,713.2 1,672.7 40.5 2.4 % Percent of net sales 43.3 % 41.8 % 150 bps Selling, distribution, and administrative expenses 1,212.9 1,163.0 49.9 4.3 % Special charges 26.9 — 26.9 NM Operating profit 473.4 509.7 (36.3) (7.1) % Percent of net sales 12.0 % 12.7 % (70) bps Other expense: Interest expense, net 18.9 24.9 (6.0) (24.1) % Miscellaneous expense (income), net 7.8 (9.1) 16.9 NM Total other expense 26.7 15.8 10.9 NM Income before income taxes 446.7 493.9 (47.2) (9.6) % Percent of net sales 11.3 % 12.3 % (100) bps Income tax expense 100.7 109.9 (9.2) (8.4) % Effective tax rate 22.5 % 22.3 % Net income $ 346.0 $ 384.0 $ (38.0) (9.9) % Diluted earnings per share $ 10.76 $ 11.08 $ (0.32) (2.9) % NM - not meaningful 21 Table of Contents Net Sales Net sales of $3.95 billion for the year ended August 31, 2023 decreased by $53.9 million, or 1.3%, compared with the prior-year period due to declines in sales within our ABL segment, partially offset by higher sales within our ISG segment.
Biggest changeThe following table sets forth information comparing the components of net income for the year ended August 31, 2024 with the year ended August 31, 2023 (in millions except per share data): Year Ended August 31, Increase Percent 2024 2023 (Decrease) Change Net sales $ 3,841.0 $ 3,952.2 $ (111.2) (2.8) % Cost of products sold 2,059.3 2,239.0 (179.7) (8.0) % Gross profit 1,781.7 1,713.2 68.5 4.0 % Percent of net sales 46.4 % 43.3 % 310 bps Selling, distribution, and administrative expenses 1,228.4 1,212.9 15.5 1.3 % Special charges — 26.9 (26.9) NM Operating profit 553.3 473.4 79.9 16.9 % Percent of net sales 14.4 % 12.0 % 240 bps Other expense: Interest (income) expense, net (4.5) 18.9 (23.4) (123.8) % Miscellaneous expense, net 9.2 7.8 1.4 17.9 % Total other expense 4.7 26.7 (22.0) (82.4) % Income before income taxes 548.6 446.7 101.9 22.8 % Percent of net sales 14.3 % 11.3 % 300 bps Income tax expense 126.0 100.7 25.3 25.1 % Effective tax rate 23.0 % 22.5 % Net income $ 422.6 $ 346.0 $ 76.6 22.1 % Diluted earnings per share $ 13.44 $ 10.76 $ 2.68 24.9 % NM - not meaningful Net Sales Net sales of $3.84 billion for the year ended August 31, 2024 decreased by $111.2 million, or 2.8%, compared with the prior-year period due to a decline in sales within our ABL segment, partially offset by higher sales within our ISG segment.
In the period of revenue recognition, we estimate and record provisions for certain rebates, sales incentives, product returns, and discounts to customers, in most instances, as reductions of revenue. We also maintain one-time or on-going marketing and trade-promotion programs with certain customers that require us to estimate and accrue the expected costs of such programs.
In the period of revenue recognition, we estimate and record provisions for rebates, sales incentives, product returns, and discounts to customers, in most instances, as reductions of revenue. We also maintain one-time or on-going marketing and trade-promotion programs with certain customers that require us to estimate and accrue the expected costs of such programs.
Sufficient cash flow generation is also critical to fund our operations in the short and long terms and to maintain compliance with covenants contained in our financing agreements. Our significant contractual cash requirements as of August 31, 2023 primarily include principal and interest on our unsecured notes, accounts payable, accrued employee compensation, and operating lease liabilities.
Sufficient cash flow generation is also critical to fund our operations in the short and long terms and to maintain compliance with covenants contained in our financing agreements. Our significant contractual cash requirements as of August 31, 2024 primarily include principal and interest on our unsecured notes, accounts payable, accrued employee compensation, and operating lease liabilities.
A discussion of the year ended August 31, 2022 compared to the year ended August 31, 2021 can be found within Part II, Item 7. Management's Discussion and Analysis within our fiscal 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 26, 2022. Overview Company We are a market-leading industrial technology company.
A discussion of the year ended August 31, 2023 compared to the year ended August 31, 2022 can be found within Part II, Item 7. Management's Discussion and Analysis within our fiscal 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 26, 2023. Overview Company We are a market-leading industrial technology company.
We had no borrowings outstanding under our credit agreement as of August 31, 2023. Further details on our borrowings and operating lease liabilities are outlined in the Debt and Lines of Credit and Leases footnotes of the Notes to Consolidated Financial Statements , respectively, within this Annual Report on Form 10-K.
We had no borrowings outstanding under our credit agreement as of August 31, 2024. Further details on our borrowings and operating lease liabilities are outlined in the Debt and Lines of Credit and Leases footnotes of the Notes to Consolidated Financial Statements , respectively, within this Annual Report on Form 10-K.
(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries for the fiscal years ended August 31, 2023 and 2022. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included within this report.
(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries for the fiscal years ended August 31, 2024 and 2023. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included within this report.
Significant estimates and assumptions were used to both identify and determine the initial fair value of these acquired intangible assets, often with the assistance of third-party valuation specialists. These assumptions include, but are not limited to, estimated future net sales and profitability, customer attrition rates, royalty rates, and discount rates.
Significant estimates and assumptions were used to both identify and determine the initial fair value of these acquired intangible assets, often with the assistance of third-party valuation specialists. These assumptions include, but are not limited to, estimated future net sales and profitability, royalty rates, and discount rates.
At August 31, 2023, we had additional borrowing capacity under the Revolving Credit Facility of $596.2 million under the most restrictive covenant in effect at the time, which represents the full amount of the facility less the outstanding letters of credit of $3.8 million issued under the facility.
At August 31, 2024, we had additional borrowing capacity under the Revolving Credit Facility of $596.2 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less outstanding letters of credit of $3.8 million issued under the facility.
We currently believe that the estimates used in the evaluation of goodwill and indefinite-lived intangibles are reasonable, including our calculations of fiscal 2023 trade name impairment charges described below.
We currently believe that the estimates used in the evaluation of goodwill and indefinite-lived intangibles are reasonable, including our calculations of fiscal 2024 trade name impairment charges described below.
However, future differences between actual and expected net sales, operating results, and cash flows and/or changes in the discount rates or theoretical royalty rates used could require us to record additional non-cash impairment charges to earnings for the write-down in the value of such assets.
However, future differences between actual and expected net sales, operating results, and cash flows and/or changes in the discount rates, or theoretical royalty rates for indefinite-lived intangible assets, used could require us to record additional non-cash impairment charges to earnings for the write-down in the value of such assets.
Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this quarterly report or to reflect the occurrence of unanticipated events, whether as a result of new information, future events, or otherwise.
Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this quarterly report or to reflect the occurrence of unanticipated events, whether as a result of new information, future events, or otherwise. 28 Table of Contents
Our ability to generate sufficient cash flows from operations or to access certain capital markets, including banks, is necessary to meet our capital allocation priorities, which are to invest in our current business for growth, to invest in mergers and acquisitions, to maintain our dividend, and to make share repurchases.
Our ability to generate sufficient cash flows from operations or to access certain capital markets, including banks, is necessary to meet our capital allocation priorities, which are to invest in our current business for growth, to invest in mergers and acquisitions, to pay a dividend, and to make share repurchases.
Accounting Standards Adopted in Fiscal 2023 and Accounting Standards Yet to Be Adopted See the New Accounting Pronouncements footnote of the Notes to Consolidated Financial Statements for information on recently adopted and upcoming standards.
Accounting Standards Adopted in Fiscal 2024 and Accounting Standards Yet to Be Adopted See the New Accounting Pronouncements footnote of the Notes to Consolidated Financial Statements for information on recently adopted and upcoming standards.
We discuss the development of accounting estimates with our Audit Committee of the Board of Directors on a recurring basis. See the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements for a summary of our accounting policies. 23 Table of Contents We believe the following accounting topics represent our critical accounting estimates.
We discuss the development of accounting estimates with our Audit Committee of the Board of Directors on a recurring basis. See the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements for a summary of our accounting policies. We believe the following accounting topics represent our critical accounting estimates.
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, and borrowing availability under financing arrangements.
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.
We base our estimates and judgments on our substantial historical experience and/or other relevant factors, such as projections of future performance, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
We base our estimates and judgments on our substantial historical experience and/or other relevant factors, such as projections of future performance, the results of which form the basis for making judgments about the recognition and measurement of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
A discussion of our fiscal 2022 results of operations compared to fiscal 2021 can be found within Part II, Item 7. Management's Discussion and Analysis within our fiscal 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 26, 2022.
A discussion of our fiscal 2023 results of operations compared to fiscal 2022 can be found within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within our fiscal 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 26, 2023.
Miscellaneous Expense (Income), net Miscellaneous expense (income), net consists of non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses. We reported net miscellaneous expense of $7.8 million in fiscal 2023 compared with net miscellaneous income of $9.1 million in fiscal 2022.
Miscellaneous Expense, net Miscellaneous expense, net consists of gains and losses associated with foreign currency-related transactions, non-operating gains and losses, and non-service components of net periodic pension cost. We reported net miscellaneous expense of $9.2 million in fiscal 2024 compared with $7.8 million in fiscal 2023.
Additionally, we incur purchase obligations in the ordinary course of business that are enforceable and legally binding. Contractual purchase obligations subsequent to August 31, 2023 include $302.6 million in fiscal 2024. Contractual purchase obligations beyond fiscal 2024 are not significant.
Additionally, we incur purchase obligations in the ordinary course of business that are enforceable and legally binding. Contractual purchase obligations subsequent to August 31, 2024 include $284.4 million in fiscal 2025. Contractual purchase obligations beyond fiscal 2025 are not significant.
As of August 31, 2023, our cash on hand combined with the additional borrowing capacity under the revolving credit facility totaled approximately $994.1 million. The Unsecured Notes were issued by Acuity Brands Lighting, Inc., a wholly-owned subsidiary of Acuity Brands, Inc.
As of August 31, 2024, our cash on hand combined with the additional borrowing capacity under the Revolving Credit Facility totaled $1.4 billion. The Unsecured Notes were issued by Acuity Brands Lighting, Inc., a wholly-owned subsidiary of Acuity Brands, Inc.
The following tables present summarized financial information for Acuity Brands, 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 August 31, 2023 August 31, 2022 Current assets $ 995.7 $ 1,056.6 Current assets due from non-guarantor affiliates 326.4 280.2 Non-current assets 1,377.9 1,414.3 Current liabilities 464.2 620.4 Non-current liabilities 785.4 821.0 Summarized Income Statement Information Year Ended August 31, 2023 Net sales $ 3,310.4 Gross profit 1,417.2 Net income 329.7 Capital Allocation Priorities Our capital allocation priorities are to invest in our current business for growth, to invest in mergers and acquisitions, to maintain our dividend, and to make share repurchases.
The following tables present summarized financial information for Acuity Brands, 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 August 31, 2024 August 31, 2023 Current assets $ 1,517.6 $ 995.7 Current assets due from non-guarantor affiliates 338.0 326.4 Non-current assets 1,337.7 1,377.9 Current liabilities 553.2 464.2 Non-current liabilities 746.5 785.4 Summarized Income Statement Information Year Ended August 31, 2024 Net sales $ 3,146.9 Gross profit 1,447.0 Net income 407.9 Capital Allocation Priorities Our capital allocation priorities are to invest in our current business for growth, to invest in mergers and acquisitions, to pay a dividend, and to make share repurchases.
Cash Our cash position at August 31, 2023 was $397.9 million, an increase of $174.7 million from August 31, 2022. Cash generated from operating activities and cash on hand were used during the current year to fund our capital allocation priorities as discussed below.
Cash Our cash position at August 31, 2024 was $845.8 million, an increase of $447.9 million from August 31, 2023. Cash generated from operating activities and cash on hand were used during the current year to fund our capital allocation priorities as discussed below.
Investments in Current Business for Growth We invested $66.7 million and $56.5 million in property, plant, and equipment in fiscal 2023 and 2022, respectively. We invested more in fiscal 2023 primarily on new and enhanced equipment, facility improvements, and information technology. Strategic Acquisitions, Investments, and Divestitures We seek opportunities to strategically expand and enhance our portfolio of solutions.
Investments in Current Business for Growth We invested $64.0 million and $66.7 million in property, plant, and equipment in fiscal 2024 and 2023, respectively. We invested primarily in new and enhanced information technology, tooling, machinery, and facility improvements in fiscal 2024. Strategic Acquisitions, Investments, and Divestitures We seek opportunities to strategically expand and enhance our portfolio of solutions.
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. We review inventory quantities on hand and record a provision for excess or obsolete inventory primarily based on estimated future demand and current market conditions.
Inventories are stated on a first-in, first-out basis at the lower of cost and net realizable value. We review inventory quantities on hand and record a provision for excess or obsolete inventory primarily based on estimated future demand and current market conditions.
ISG operating profit was $32.1 million (12.7% of ISG net sales) for the year ended August 31, 2023 compared with $22.7 million (10.5% of ISG net sales) in the prior-year period, an increase of $9.4 million. This increase was due primarily to contributions from higher sales, partially offset by increased employee costs.
ISG operating profit was $43.6 million (14.9% of ISG net sales) for the year ended August 31, 2024 compared with $32.1 million (12.7% of ISG net sales) in the prior-year period, an increase of $11.5 million. This increase was due primarily to contributions from higher sales, partially offset by increased employee-related costs and professional fees.
At August 31, 2023, our outstanding debt balance was $495.6 million, which consisted solely of our Unsecured Notes, compared to our cash position of $397.9 million. We were in compliance with all covenants under our financing arrangements as of August 31, 2023.
At August 31, 2024, our outstanding debt balance was $496.2 million, which consisted solely of our Unsecured Notes, compared to our cash position of $845.8 million. We were in compliance with all covenants under our financing arrangements as of August 31, 2024.
We generated $578.1 million of cash flows from operating activities during fiscal 2023 compared with $316.3 million in the prior-year period, an increase of $261.8 million.
We generated $619.2 million of cash flows from operating activities during fiscal 2024 compared with $578.1 million in the prior-year period, an increase of $41.1 million.
This increase was due primarily to increased cash collections from customers and fewer inventory purchases during the current period, partially offset by the timing of payments for purchases on account. 19 Table of Contents Financing Arrangements See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements within this Annual Report on Form 10-K for discussion of the terms of our various financing arrangements, including the $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”) as well as the terms of our $600.0 million five-year unsecured revolving credit facility (the “Revolving Credit Facility”).
This increase was due primarily to higher net income in fiscal 2024, partially offset by higher working capital investments to fund profitable growth. 21 Table of Contents Financing Arrangements See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements within this Annual Report on Form 10-K for discussion of the terms of our various financing arrangements, including the $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”) as well as the terms of our $600.0 million five-year unsecured revolving credit facility (“Revolving Credit Facility”).
The details of the equity investment impairment charge are included in the Fair Value Measurements footnote of the Notes to Consolidated Financial Statements . Income Taxes and Net Income Our effective income tax rate was 22.5% and 22.3% for the years ended August 31, 2023 and 2022, respectively.
Income Taxes and Net Income Our effective income tax rate was 23.0% and 22.5% for the years ended August 31, 2024 and 2023, respectively. Further details regarding income taxes are included in the Income Taxes footnote of the Notes to Consolidated Financial Statements .
Any reasonably likely change in the assumptions used in these analyses, including revenue growth rates, discount rates, long-term growth rates, or relevant multiples would not cause the carrying value of any reporting unit to exceed its estimated fair value as determined under the goodwill impairment analysis.
We last performed a quantitative goodwill impairment analysis in fiscal 2023 and concluded that any reasonably likely change in the assumptions used in those analyses, including revenue growth rates, discount rates, longer term growth rates, or relevant multiples would not cause the carrying value of any reporting unit to exceed its estimated fair value.
We review goodwill and indefinite-lived intangible assets for impairment on an annual basis in the fiscal fourth quarter and on an interim basis if an event occurs or circumstances change that would more likely than not indicate that the fair value of the goodwill or an indefinite-lived asset is below its carrying value.
We review goodwill and indefinite-lived intangible assets for impairment on an annual basis as of the first date of our fiscal fourth quarter (June 1) or more frequently if events occur or circumstances change, such as a significant adverse change in our business climate, that would more likely than not indicate that the fair value of a reporting unit or an indefinite-lived asset is below its carrying value.
This increase was partially offset by higher labor costs as well as the recognition of a $13.0 million charge resulting from the collectability of a supplier warranty obligation owed to us for components we used in products manufactured and sold between 2017 and 2019.
Additionally in fiscal 2023, we recognized a $13.0 million charge resulting from the collectability of a supplier warranty obligation owed to us for components we used in products manufactured and sold between 2017 and 2019.
This year-over-year change was due primarily to the recognition of an $11.2 million loss on the sale of our Sunoptics prismatic skylights business in fiscal 2023 and an impairment charge of $2.5 million for one unconsolidated equity investment, as well as higher pension cost.
This year-over-year change was due primarily to the impact of foreign currency-related items compared to the prior year. This increase in expense was partially offset by the recognition in the prior year of an $11.2 million loss on the sale of our Sunoptics prismatic skylights business and an impairment charge of $2.5 million for one unconsolidated equity investment.
Goodwill is calculated as the residual value of an acquisition's purchase price less the value of the identifiable net assets and is thus dependent on the appropriate identification and valuation of the net assets obtained in an acquisition.
Goodwill and Indefinite-Lived Intangible Assets Goodwill is calculated as the residual value of an acquisition's purchase price less the value of the identifiable net assets and is thus dependent on the appropriate identification and valuation of the net assets obtained in an acquisition. Indefinite-lived intangible assets consist of acquired trade names that are expected to generate cash flows indefinitely.
Such charges could have a material adverse effect on our results of operations and financial position but not our cash flows from operations. Goodwill We performed our annual goodwill impairment analyses on the first day of our fiscal fourth quarter (June 1) for each period presented.
Such charges could have a material adverse effect on our results of operations and financial position but not our cash flows from operations. Goodwill As of June 1, 2024, the current fiscal year testing date, we performed a qualitative analysis to assess goodwill for impairment.
Please refer to the Special Charges footnote of the Notes to Consolidated Financial Statements within this Annual Report on Form 10-K for further details. Operating profit for fiscal 2023 was $473.4 million compared with $509.7 million reported for the prior-year period, a decrease of $36.3 million, or 7.1%.
Please refer to the Special Charges footnote of the Notes to Consolidated Financial Statements within this Annual Report on Form 10-K for further details. Operating profit for the year ended August 31, 2024 was $553.3 million (14.4% of net sales) compared with $473.4 million (12.0% of net sales) for the prior fiscal year, an increase of $79.9 million, or 16.9%.
The decrease in operating profit for fiscal 2023 compared with fiscal 2022 was due to the recognition of special charges in fiscal 2023 as well as increased operating expenses, partially offset by an increase in gross profit. Interest Expense, net Interest expense, net, was $18.9 million and $24.9 million for the years ended August 31, 2023 and 2022, respectively.
The increase in operating profit was due primarily to higher gross profit and nonrecurring fiscal 2023 special charges, partially offset by higher SD&A expenses. Interest (Income) Expense, net We reported net interest income of $4.5 million and net interest expense of $18.9 million for the years ended August 31, 2024 and 2023, respectively.
Segment Results The following tables set forth information comparing the operating results of our segments, ABL and ISG, for the year ended August 31, 2023 with the year ended August 31, 2022 (in millions): Year Ended August 31, 2023 2022 Increase (Decrease) Percent Change ABL: Net sales $ 3,722.8 $ 3,810.1 $ (87.3) (2.3) % Operating profit 509.5 545.6 (36.1) (6.6) % Operating profit margin 13.7 % 14.3 % (60) bps ISG: Net sales $ 252.7 $ 216.1 $ 36.6 16.9 % Operating profit 32.1 22.7 $ 9.4 41.4 % Operating profit margin 12.7 % 10.5 % 220 bps ABL net sales for the year ended August 31, 2023 decreased 2.3% compared with the prior-year period due primarily to lower net sales within original equipment manufacturer ("OEM") and other, independent sales network, and corporate accounts channels, partially offset by higher net sales in direct sales network and retail sales channels.
Segment Results The following table sets forth information comparing the operating results of our segments, ABL and ISG, for the year ended August 31, 2024 with the year ended August 31, 2023 (in millions): Year Ended August 31, 2024 2023 Increase (Decrease) Percent Change ABL: Net sales $ 3,573.4 $ 3,722.8 $ (149.4) (4.0) % Operating profit 582.8 509.5 73.3 14.4 % Operating profit margin 16.3 % 13.7 % 260 bps ISG: Net sales $ 291.9 $ 252.7 $ 39.2 15.5 % Operating profit 43.6 32.1 $ 11.5 35.8 % Operating profit margin 14.9 % 12.7 % 220 bps ABL net sales for the year ended August 31, 2024 decreased 4.0% compared with the prior-year period due to lower net sales across all channels, excluding corporate accounts.
See the Significant Accounting Policies and Fair Value Measurement footnotes of the Notes to Consolidated Financial Statements for further details regarding the assumptions used and results of our annual impairment tests for the periods presented.
Any reasonably likely change in the assumptions used in the analysis for the trade name would not be material to our financial conditions or results of operations. See the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements for further details regarding the assumptions used and results of our annual impairment tests for the periods presented.
As of August 31, 2023, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 1.2 million shares. Results of Operations The following is a discussion of our results of operations in fiscal 2023 compared to fiscal 2022.
As of August 31, 2024, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 3.8 million shares.
The decrease in net interest expense was due to increased investing rates on our interest-bearing cash cash equivalents. compared to the prior year, partially offset by changes in average short-term borrowings outstanding.
The increase in net interest income was due to higher interest bearing cash and cash equivalent balances, higher investing rates on those balances, and lower average short-term borrowings outstanding compared to the prior year.
If actual future warranty or recall costs exceed recorded amounts, additional accruals may be required, which could have a material adverse impact on our results of operations and cash flow. We also sell certain service-type warranties that extend coverages for products beyond their base warranties.
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. If actual future warranty costs exceed recorded amounts, additional accruals may be required, which could have a material adverse impact on our results of operations and cash flow.
A significant change in customer demand, market conditions, or technology could render certain inventory obsolete and thus could have a material adverse impact on our operating results in the period the change occurs. Goodwill and Indefinite-Lived Intangible Assets Indefinite-lived intangible assets consist of trade names acquired through multiple acquisitions that are expected to generate cash flows indefinitely.
Although our historical experience related to demand and market conditions has been within expectations, a significant change in customer demand, market conditions, or technology 26 Table of Contents could render certain inventory obsolete and thus could have a material adverse impact on our operating results in the period the change occurs.
Operating profit for ABL was $509.5 million (13.7% of ABL net sales) for the year ended August 31, 2023 compared to $545.6 million (14.3% of ABL net sales) in the prior-year period, a decrease of $36.1 million.
Net sales in fiscal 2023 benefited from working through an elevated backlog. 25 Table of Contents Operating profit for ABL was $582.8 million (16.3% of ABL net sales) for the year ended August 31, 2024 compared to $509.5 million (13.7% of ABL net sales) in the prior year, an increase of $73.3 million.
The decrease in net income resulted primarily from a decrease in operating profit compared to the prior-year period. 22 Table of Contents Diluted earnings per share for fiscal 2023 was $10.76 compared with $11.08 for the prior-year period, a decrease of $0.32, or 2.9%. This decrease reflects lower net income, partially offset by lower outstanding diluted shares.
Net income for fiscal 2024 increased $76.6 million, or 22.1%, to $422.6 million from $346.0 million reported for the prior year. Diluted earnings per share for fiscal 2024 was $13.44 compared with $10.76 for the prior-year period, an increase of $2.68, or 24.9%. This increase reflects higher net income as well as lower outstanding diluted shares.
Share Repurchases During fiscal 2023, we repurchased 1.6 million shares of our outstanding common stock for $269.3 million. Total cash outflows for share repurchases during fiscal 2023 were $266.6 million. 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.
Share Repurchases During fiscal 2024, we repurchased 0.5 million shares of our outstanding common stock for $87.8 million. Total cash outflows for share repurchases during fiscal 2024 were $88.7 million. During fiscal 2023, we repurchased 1.6 million shares of our outstanding common stock for $269.3 million. Total cash outflows for share repurchases during fiscal 2023 were $266.6 million.
Dividends We paid dividends on our common stock of $16.8 million ($0.52 per share) in fiscal 2023 and $18.1 million ($0.52 per share) in fiscal 2022, indicating a quarterly dividend rate of $0.13 per share.
We sold our Sunoptics prismatic skylights business in the first fiscal quarter of 2023 and recognized a pre-tax loss of $11.2 million on the sale of this business. Dividends We paid dividends on our common stock of $18.2 million ($0.58 per share) in fiscal 2024 and $16.8 million ($0.52 per share) in fiscal 2023.
On May 15, 2023, using cash on hand, we acquired all of the equity interests of KE2 Therm Solutions, Inc. (“KE2 Therm”). KE2 Therm develops and provides intelligent refrigeration control solutions that deliver the precision of digital controls to promote safety, efficiency, and reliability, while delivering cost savings to the customer.
KE2 Therm develops and provides intelligent refrigeration control solutions that deliver the precision of digital controls to promote safety, efficiency, and reliability, while delivering cost savings to the customer. This acquisition expanded ISG's technology and controls product portfolio and reached new customers. Divestitures There were no divestitures during fiscal 2024.
ISG net sales for the year ended August 31, 2023 increased 16.9% compared with the prior-year period driven primarily by strong demand for building and heating, ventilation, and air conditioning controls as well as price increases.
ISG net sales for the year ended August 31, 2024 increased 15.5% compared with the prior-year period primarily driven by higher demand for Distech products and the acquisition of KE2 Therm.
As of June 1, 2023, the current fiscal year testing date, we held 13 indefinite-lived intangible assets with an aggregate carrying value of $173.4 million.
See the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements for additional information. Indefinite-Lived Intangible Assets As of June 1, 2024, the current fiscal year testing date, we held eight indefinite-lived intangible assets with an aggregate carrying value of $135.5 million. For fiscal 2024, we performed a qualitative analysis to assess our indefinite-lived intangible assets for impairment.
We accrue for the estimated amount of future warranty costs when the related revenue is recognized. Estimated future warranty costs are primarily based on historical experience of identified warranty claims.
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. We are fully self-insured for product warranty costs.
The evaluation of goodwill and indefinite-lived intangibles for impairment requires management to use significant judgments and estimates in accordance with U.S. GAAP including, but not limited to, economic, industry, and Company-specific qualitative factors, projected future net sales, operating results, and cash flows.
GAAP including, but not limited to, economic, industry, and Company-specific qualitative factors, projected future net sales, operating results, and cash flows. Under a quantitative assessment, fair values for goodwill and indefinite-lived intangible assets are estimated using discounted future cash flows or another appropriate fair value method.
Operating Profit Selling, distribution, and administrative expenses of $1.21 billion for the year ended August 31, 2023 increased $49.9 million, or 4.3%, compared with the prior year. This increase was due primarily to higher employee-related costs and higher commissions. We also recognized special charges of $26.9 million during fiscal year 2023.
Operating Profit Selling, distribution, and administrative (“SD&A”) expenses for the year ended August 31, 2024 were $1.23 billion compared with $1.21 billion in the prior year, an increase of $15.5 million, or 1.3%.
These amounts were partially offset by higher gains on foreign currency-related items compared to the prior year. The details of the Sunoptics sale are described in the Acquisitions and Divestitures footnote of the Notes to Consolidated Financial Statements .
The details of the Sunoptics sale are described in the Acquisitions and Divestitures footnote of the Notes to Consolidated Financial Statements . The details of the equity investment impairment charge are included in the Fair Value Measurements footnote of the Notes to Consolidated Financial Statements .
Gross Profit Gross profit for the year ended August 31, 2023 increased $40.5 million, or 2.4%, to $1.71 billion compared with $1.67 billion for the prior year, and gross profit margin increased 150 basis points to 43.3% for fiscal 2023 compared with 41.8% in the prior-year period.
Acquisitions and divestitures did not have material impacts on consolidated net sales for the year ended August 31, 2024. Gross Profit Gross profit for the year ended August 31, 2024 increased $68.5 million, or 4.0%, to $1.78 billion compared with $1.71 billion for the prior year.
See the Share-based Payments footnote of the Notes to Consolidated Financial Statements for further information on these awards, including assumptions used in estimating the fair value of our awards. 25 Table of Contents Product Warranty and Recall Costs Our products generally have a standard warranty term of five years.
See the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements for further information, including financial balances, on our estimates of liabilities for product warranty costs.
Removed
This acquisition is intended to expand ISG's technology and controls product portfolio and reach new customers. We sold our Sunoptics prismatic skylights business in November 2022. We recognized a pre-tax loss of $11.2 million on the sale of this business. 20 Table of Contents There were no acquisitions or divestitures during fiscal 2022.
Added
Refer to the Acquisitions and Divestitures footnote of the Notes to Consolidated Financial Statements for more information. Arize Assets On January 19, 2024, we acquired certain assets related to Arize® horticulture lighting products from Current Lighting Solutions, LLC.
Removed
The $12.9 million of cash outflows in fiscal 2022 reflected in the Consolidated Statements of Cash Flows primarily relate to working capital settlements for fiscal 2021 acquisitions. Please refer to the Acquisitions and Divestitures footnote of the Notes to Consolidated Financial Statements for more information.
Added
The assets have been included in ABL's financial results since the date of acquisition and did not have a material impact to our consolidated financial condition, results of operations, or cash flows. 22 Table of Contents KE2 Therm On May 15, 2023, using cash on hand, we acquired all of the equity interests of KE2 Therm Solutions, Inc. (“KE2 Therm”).
Removed
The divestiture from our Sunoptics prismatic skylight business, the acquisition of KE2 Therm, and changes in foreign currency rates did not have a meaningful impact on net sales for the year ended August 31, 2023.
Added
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. On January 25, 2024, the Board approved an increase of three million shares to the maximum number of shares that may yet be repurchased under the share repurchase program.
Removed
Our gross profit increased compared with the prior year on lower sales as we strategically managed price.
Added
Recent Developments On October 24, 2024, Acuity Brands Technology Services, Inc., a wholly owned subsidiary of Acuity Brands, Inc. entered into an equity purchase agreement (the (“Purchase Agreement”) to acquire QSC, LLC (“QSC”), a leader in the design, engineering, and manufacturing of audio, video, and control solutions and services.
Removed
Further details regarding income taxes are included in the Income Taxes footnote of the Notes to Consolidated Financial Statements . Net income for fiscal 2023 decreased $38.0 million, or 9.9%, to $346.0 million from $384.0 million reported for the prior year.
Added
Refer to the Subsequent Event footnote of the Notes to Consolidated Financial Statements for additional information. 23 Table of Contents Results of Operations The following is a discussion of our results of operations in fiscal 2024 compared to fiscal 2023.
Removed
The decrease in operating profit was due primarily to special charges of $25.0 million, the recognition of a $13.0 million charge related to the collectability of a supplier receivable, and lower net sales. These declines were partially offset by our strategic management of price.
Added
Gross profit margin increased 310 basis points to 46.4% for fiscal 2024 compared with 43.3% in the prior-year period. Our gross profit increased compared with the prior year due primarily to favorable material and import costs, which more than offset the lower net sales and higher production costs.
Removed
Generally, these items are estimated based on customer agreements, historical trends, and expected demand. For sales with multiple deliverables, significant judgment may be required to determine which performance obligations are distinct and should be accounted for separately. We allocate the expected consideration to be collected to each distinct performance obligation based on its standalone selling price.
Added
The increase in SD&A expenses was due primarily to higher employee-related costs, partially offset by lower commissions and freight costs associated with the decline in net sales. 24 Table of Contents We recognized special charges of $26.9 million during fiscal year 2023.
Removed
Standalone selling price is generally estimated using a cost plus margin valuation when no observable input is available. Actual results could differ from estimates, which would require adjustments to recorded amounts. Please refer to the Revenue Recognition footnote of the Notes to Consolidated Financial Statements for additional information regarding estimates related to revenue recognition.
Added
The increase in operating profit was due primarily to improved profitability on lower sales as well as lower sales-related costs, such as commissions and freight to customers. This improved profitability was partially offset by higher employee-related costs.
Removed
An impairment loss for goodwill or an indefinite-lived intangible asset would be recognized based on the difference between the carrying value of the asset and its estimated fair value, which would be determined based on either discounted future cash flows or another appropriate fair value method.
Added
Additionally, in fiscal 2023, we recorded special charges for ABL of $25.0 million, charges related to the collectability of a supplier receivable of $13.0 million, and accelerated amortization expense for intangibles associated with certain brands that were discontinued of $4.0 million.
Removed
Goodwill was tested for impairment at the reporting unit level using a combination of discounted future cash flows and relevant market multiples. Our discounted cash flow analyses required significant assumptions about discount rates, short and long-term growth rates, and future profitability. For the tests performed as of June 1, 2023, we utilized estimated discount rates ranging from 11% to 13%.
Added
Generally, these provisions are recorded as reductions of revenue and are estimated based on customer agreements, historical trends, expected demand, or specific notification of pending returns. Although historical experience has generally been within expectations, there can be no assurance that future rebates, sales incentives, product returns, discounts, marketing and trade-promotion programs will not exceed historical amounts.
Removed
These rates were based on the 24 Table of Contents Capital Asset Pricing Model, which considers a risk-free interest rate, beta, market risk premium, and size premium to determine an appropriate discount rate for a reporting unit.
Added
A significant increase in these activities could have a material adverse impact on our operating results in the future. Please refer to the Revenue Recognition footnote of the Notes to Consolidated Financial Statements for additional information, including financial balances, regarding estimates related to revenue recognition. Inventories Inventories include materials, direct labor, inbound freight, customs, duties, tariffs, and related manufacturing overhead.
Removed
Short-term growth rates were based on management’s forecasted financial results, which consider key business drivers such as specific revenue growth initiatives, market share changes, growth in our addressable market, and general economic factors such as macroeconomic conditions, credit availability, and interest rates.
Added
Please refer to the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements for additional information.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Exchange Rates The majority of our net sales, expense, and capital purchases are transacted in U.S. dollars. However, exposure with respect to foreign exchange rate fluctuation exists due to our operations in Mexico and Canada, where a significant portion of products sold are produced or sourced from the United States, and, to a lesser extent, in Europe.
Biggest changeForeign Exchange Rates The majority of our net sales, expense, and capital purchases are transacted in U.S. dollars. Our primary exposure with respect to foreign exchange rate fluctuation exists due to the translation of foreign operations' results into U.S. Dollars, with our largest exposures in Mexico and Canada, and, to a lesser extent, in Europe.
We do not currently engage in significant commodity hedging transactions for raw materials. The following discussion provides additional information regarding our market risks. Interest Rates Interest rate fluctuations expose variable-rate debt of the organization to changes in interest expense and cash flows. As of August 31, 2023, our long-term debt consisted primarily of fixed-rate senior unsecured notes.
We do not currently engage in significant commodity hedging transactions for raw materials. The following discussion provides additional information regarding our market risks. Interest Rates Interest rate fluctuations expose variable-rate debt of the organization to changes in interest expense and cash flows. As of August 31, 2024, our long-term debt consisted primarily of fixed-rate senior unsecured notes.
As of August 31, 2023, we had no borrowings outstanding on our credit facility. Interest incurred on these borrowings is not significant to our overall results of operations or cash flows. See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements contained in this Form 10-K for additional information.
As of August 31, 2024, we had no borrowings outstanding on our credit facility. Interest incurred on these borrowings is not significant to our overall results of operations or cash flows. See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements contained in this Form 10-K for additional information.
Our exposure to foreign currency risk related to our operations in Europe is immaterial and has been excluded from this analysis. 27 Table of Contents
Our exposure to foreign currency risk related to our operations in Europe is immaterial and has been excluded from this analysis. 29 Table of Contents
The individual impacts to the operating profit of hypothetical currency fluctuations in the Canadian dollar and Mexican peso have been calculated in isolation from any potential responses to address such exchange rate changes in our foreign markets.
The individual impacts to the operating profit of hypothetical currency fluctuations in the Canadian dollar and Mexican peso have been calculated assuming no changes to functional currency amounts and in isolation from any potential responses to address such exchange rate changes in our foreign markets.
A fluctuation in interest rates would not affect interest expense or cash flows related to the Company’s fixed-rate debt. 26 Table of Contents However, a 10% increase in market interest rates at August 31, 2023 would have decreased the estimated fair value of our senior unsecured notes by approximately $14.2 million.
A fluctuation in interest rates would not affect interest expense or cash flows related to the Company’s fixed-rate debt. However, a 10% increase in market interest rates at August 31, 2024 would have decreased the estimated fair value of our senior unsecured notes by approximately $11.7 million.
Based on fiscal 2023 performance, a hypothetical depreciation of 10% in the value of the Canadian dollar in relation to the U.S. dollar would negatively impact operating profit by approximately $11.9 million, while a hypothetical 10% appreciation in the value of the Canadian dollar in relation to the U.S. dollar would favorably impact operating profit by approximately $14.5 million.
Based on fiscal 2024 performance, a hypothetical depreciation of 10% in the value of the Canadian dollar in relation to the U.S. dollar would negatively impact operating profit by approximately $8.6 million, while a hypothetical 10% appreciation in the value of the Canadian dollar in relation to the U.S. dollar would favorably impact operating profit by approximately $10.5 million.
A hypothetical 10% decrease in the value of the Mexican peso in relation to the U.S. dollar would favorably impact operating profit by approximately $19.4 million, while a hypothetical 10% increase in the value of the Mexican peso in relation to the U.S. dollar would negatively impact operating profit by approximately $23.7 million.
A hypothetical 10% decrease in the value of the Mexican peso in relation to the U.S. dollar would favorably impact operating profit by approximately $22.0 million, while a hypothetical 10% increase in the value of the Mexican peso in relation to the U.S. dollar would negatively impact operating profit by approximately $26.9 million.

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