Acuity Brands(AYI) - 2024 Q3 - Quarterly Report

Part I. FINANCIAL INFORMATION This section provides a comprehensive overview of the company's financial performance and condition, including detailed financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Financial Statements This section presents the unaudited Consolidated Financial Statements for Acuity Brands, Inc. as of May 31, 2024, including Balance Sheets, Statements of Comprehensive Income, and Statements of Cash Flows, along with 20 detailed notes providing context and explanation for the financial data Consolidated Financial Statements (Tables) The core financial statements show a strong liquidity position with a significant increase in cash and cash equivalents, while net sales saw a slight decline, net income and earnings per share increased, driven by improved gross margins and lower operating expenses Consolidated Balance Sheet Highlights (in millions) | Account | May 31, 2024 (Unaudited) | August 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $699.0 | $397.9 | | Total current assets | $1,674.0 | $1,395.2 | | Total assets | $3,642.9 | $3,408.5 | | Total current liabilities | $605.3 | $595.4 | | Total liabilities | $1,388.2 | $1,393.1 | | Total stockholders' equity | $2,254.7 | $2,015.4 | Consolidated Statements of Comprehensive Income Highlights (in millions, except per share data) | Metric | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $968.1 | $1,000.3 | $2,808.7 | $2,941.8 | | Gross profit | $452.2 | $447.3 | $1,293.0 | $1,270.5 | | Operating profit | $145.3 | $143.3 | $396.3 | $363.7 | | Net income | $113.9 | $105.0 | $303.7 | $263.1 | | Diluted earnings per share | $3.62 | $3.28 | $9.67 | $8.13 | Consolidated Statements of Cash Flows Highlights (in millions) | Metric | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $445.1 | $471.5 | | Net cash used for investing activities | $(44.6) | $(76.4) | | Net cash used for financing activities | $(100.5) | $(258.7) | | Net change in cash and cash equivalents | $301.1 | $136.1 | Notes to Consolidated Financial Statements The notes detail the company's business structure, recent corporate activities, and segment performance, with Acuity operating through two segments: Acuity Brands Lighting (ABL) and Intelligent Spaces Group (ISG), showing ABL sales decreased while ISG sales grew - The company operates through two business segments: Acuity Brands Lighting and Lighting Controls (ABL) and the Intelligent Spaces Group (ISG)[18] - On January 19, 2024, the company acquired certain assets related to Arize® horticulture lighting products, which were included in the ABL segment's results[28] - There were no divestitures in the first nine months of fiscal 2024, with the company selling its Sunoptics business in November 2022, recognizing a pre-tax loss of $11.2 million in fiscal 2023[32] Segment Net Sales (in millions) | Segment | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | ABL | $898.5 | $940.7 | $2,618.4 | $2,778.6 | | ISG | $75.7 | $65.8 | $208.0 | $180.8 | Segment Operating Profit (in millions) | Segment | Three Months Ended May 31, 2024 | Three Months Ended May 31, 2023 | Nine Months Ended May 31, 2024 | Nine Months Ended May 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | ABL | $151.5 | $150.0 | $421.3 | $391.7 | | ISG | $12.5 | $8.6 | $26.9 | $22.7 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial health, highlighting a strong liquidity position with $699.0 million in cash and total liquidity of $1.3 billion, with improved gross margins leading to an 8.5% increase in net income despite a 3.2% decrease in Q3 net sales Financial Condition, Capital Resources, and Liquidity The company's financial condition remains robust, with cash increasing by $301.1 million to $699.0 million since August 2023, driven by $445.1 million in operating cash flow, and total liquidity standing at $1.3 billion - Cash position increased by $301.1 million from August 31, 2023, to $699.0 million at May 31, 2024[111] - Generated $445.1 million in cash from operating activities during the first nine months of fiscal 2024[111] - Total liquidity as of May 31, 2024, was $1.3 billion, comprising cash on hand and $596.2 million of available borrowing capacity under the Revolving Credit Facility[113] - Repurchased 0.5 million shares of common stock for $88.3 million and paid dividends of $13.4 million during the first nine months of fiscal 2024[123][124] Results of Operations For Q3 2024, net sales decreased 3.2% to $968.1 million, but gross profit margin expanded by 200 basis points to 46.7%, leading to a 1.4% rise in operating profit and a 10.4% increase in diluted EPS to $3.62 Q3 FY2024 vs Q3 FY2023 Performance (in millions, except per share data) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $968.1 | $1,000.3 | (3.2)% | | Gross Profit Margin | 46.7% | 44.7% | +200 bps | | Operating Profit | $145.3 | $143.3 | 1.4% | | Net Income | $113.9 | $105.0 | 8.5% | | Diluted EPS | $3.62 | $3.28 | 10.4% | Nine Months FY2024 vs FY2023 Performance (in millions, except per share data) | Metric | YTD 2024 | YTD 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,808.7 | $2,941.8 | (4.5)% | | Gross Profit Margin | 46.0% | 43.2% | +280 bps | | Operating Profit | $396.3 | $363.7 | 9.0% | | Net Income | $303.7 | $263.1 | 15.4% | | Diluted EPS | $9.67 | $8.13 | 18.9% | - In Q3 2024, ABL segment net sales decreased 4.5% to $898.5 million, while ISG segment net sales increased 15.0% to $75.7 million[136][137] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company states that there have been no material changes to its exposure to market risks, which include fluctuations in interest rates, foreign exchange rates, and commodity prices, since the disclosures in its last Annual Report on Form 10-K - There have been no material changes to the company's exposure to market risks from those disclosed in the Form 10-K for the fiscal year ended August 31, 2023[155] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of May 31, 2024, with no material changes in internal control over financial reporting identified during the quarter - Based on an evaluation as of May 31, 2024, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective[157] - No material changes to the company's internal control over financial reporting were identified during the most recently completed fiscal quarter[159] Part II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, other general information, and a list of exhibits filed with the report Item 1. Legal Proceedings This section references the 'Commitments and Contingencies' footnote for details on legal matters, noting a class action lawsuit related to 2020 and 2021 data security incidents was settled with court approval on May 21, 2024, with no material financial impact - A class action complaint filed regarding data security incidents in October 2020 and December 2021 has been settled[65][66] - The court approved the settlement on May 21, 2024, with an effective date of June 25, 2024, and the impact of the settlement was not material to the company's financials[66] Item 1A. Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes in the company's risk factors from those disclosed in the Form 10-K[162] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Board of Directors authorized an additional three million shares for the company's stock repurchase program on January 25, 2024, with 79,523 shares repurchased during the third fiscal quarter at an average price of $260.07 - On January 25, 2024, the Board authorized the repurchase of an additional three million shares of common stock[163] Share Repurchases for the Quarter Ended May 31, 2024 | Metric | Value | | :--- | :--- | | Total Shares Purchased | 79,523 | | Average Price Paid per Share | $260.07 | | Shares Remaining for Repurchase | 3,775,637 | Item 5. Other Information The company confirms that during the third quarter of fiscal 2024, no directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - During Q3 2024, no directors or Section 16 officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[165] Item 6. Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including corporate governance documents and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - The report includes a list of exhibits, such as CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[168][169][170]