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

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


	August 31,
	2023								2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Cash and cash equivalents	$	397.9	$	—	$	—	$	397.9	$	223.2	$	—	$	—	$	223.2
Other financial instruments	—		0.4		—		0.4		—		—		—		—
Assets in fair value hierarchy	397.9		0.4		—		398.3		223.2		—		—		223.2
Other investments(1)							7.2								11.9
Total assets at fair value	$	397.9	$	0.4	$	—	$	405.5	$	223.2	$	—	$	—	$	235.1

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

During the second quarter of fiscal 2023, we received cash for the cancellation of a strategic investment, whose underlying company was acquired by a third party. We also received preferred equity in the third party with a cost basis of $2.5 million that is accounted for under ASC 320, Investments—Debt Securities using discounted cash flows based on rates of similar instruments (Level 2). During the year ended August 31, 2023, we recorded an allowance for credit loss for this investment for its full cost basis. This credit loss reflected a decline in the underlying company's financial condition and long-term prospects, which included a suspension of dividend payments owed to us as well as a significant market decline in its publicly traded securities, including similar preferred equities. This impairment charge is reflected in Miscellaneous expense (income), net for the year ended August 31, 2023 within our Consolidated Statements of Comprehensive Income. Accrued interest related to this investment was not material to our financial statements. We had no credit losses on our investments at August 31, 2022.

Measurement Date

Fair Value Hierarchy Level

Fair Value

Indefinite-lived trade names

June 1, 2023

Level 3

46.5

Right of use operating lease asset group

November 30, 2022

Level 3

3.4

Total assets at nonrecurring fair value

49.9

We performed an evaluation of the fair values of our indefinite-lived trade names as of June 1, 2023. Our analyses indicated that the carrying values of six of our trade names exceeded their fair values due primarily to expectations of the associated brands' future performance compared to original expectations at acquisition date as well as increases in overall discount rates. The total fair value of these trade names at June 1, 2023 totaled $46.5 million, which resulted in an impairment charge of $14.0 million. This charge is reflected within Special Charges on the Consolidated Statements of Comprehensive Income and relates to our ABL segment. We also determined the remaining value for five of these indefinite-lived trade names no longer have indefinite lives. These trade names were classified as definite-lived as of June 1, 2023 and will be amortized over 15 years. The impairment analyses of the other seven indefinite-lived intangible assets indicated that their fair values exceeded their carrying values.

We utilized significant assumptions to estimate the fair values of our indefinite-lived trade names using a fair value model based on discounted future cash flows (“fair value model”) in accordance with ASC 820. Future cash flows associated with our indefinite-lived trade names were calculated by multiplying a theoretical royalty rate a willing

third party would pay for use of the particular trade name by estimated future net sales attributable to the relevant trade name. The present value of the resulting after-tax cash flows reflected our estimate of the fair value of each trade name. This fair value model required us to make several significant assumptions, including specific estimated future net sales (including short and long-term growth rates), a royalty rate, and a discount rate for each trade name.

Future net sales and short-term growth rates are estimated for trade names based on management’s financial forecasts, which consider key business drivers, such as specific revenue growth initiatives, market share changes, expected growth in our addressable market, and general economic factors, such as macroeconomic conditions, credit availability, and interest rates. Our expected revenues as of June 1, 2023 were based on our fiscal 2023 and 2024 projections as well as recent third-party lighting, controls, and building technology solutions market growth estimates through 2028. We also included revenue growth estimates based on current initiatives expected to help improve performance, as appropriate. The long-term growth rate used in determining terminal value was estimated at 2.5% and was based primarily on our understanding of projections for expected long-term growth for our addressable market and historical long-term performance.

The theoretical royalty rate was estimated primarily using management’s assumptions regarding the amount a willing third party would pay to use the particular trade name and was compared with market information for similar intellectual property within and outside of the industry. During fiscal 2023, estimated theoretical royalty rates ranged between 1% and 3%. We based discount rates on the Capital Asset Pricing Model, which considers a current risk-free interest rate, beta, market risk premium, and size premium appropriate for each intangible. We utilized a range of estimated discount rates between 11% and 13% as of June 1, 2023.

Any reasonably likely change in the assumptions used in the analyses for our trade names, including revenue growth rates, royalty rates, and discount rates, would not be material to our financial condition or results of operations.

In connection with our sale of our Sunoptics prismatic skylights business in November 2022, we retained certain assets, primarily right of use lease assets, that we did not plan to continue using in our manufacturing operations. Accordingly, we assessed the recoverability of these assets using an undiscounted cash flow model and concluded that the carrying values of the assets were not fully recoverable, which triggered an impairment test for these assets. Our impairment test indicated that the fair value of the assets totaled $3.4 million, which resulted in an impairment charge of $4.3 million. This amount is included within Special charges on the Consolidated Statements of Comprehensive Income.

The recoverability and impairment test required significant assumptions including estimated future cash flows, the identification of assets within the asset group, and the determination of appropriate discount rates. Future cash flows were largely based both on third-party market date for sublease rental rates as well as our historic experience in subleasing properties. The discount rate was calculated using a methodology consistent with our incremental borrowing rate for leases initiated at that time and approximated the high end of our weighted average discount rate for operating leases described in the Leases footnote of the Notes to Consolidated Financial Statements.

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

Fair value for our outstanding debt obligations is estimated based on discounted future cash flows using rates currently available for debt of similar terms and maturity (Level 2). Our senior unsecured public notes are carried at the outstanding balance, net of unamortized bond discount and deferred costs, as of the end of the reporting period. The estimated fair value of our senior unsecured public notes was $401.4 million and $399.2 million as of August 31, 2023 and 2022, respectively.

We had no short-term borrowings and $18.0 million of short-term borrowings outstanding under our revolving credit facility as of August 31, 2023 and 2022, respectively. These borrowings are variable-rate instruments that reset on a

frequent short-term basis; therefore, we estimate that any outstanding carrying values of these instruments, which are equal to their face amounts, approximate their fair values. See Debt and Lines of Credit footnote for further details on our outstanding borrowings.

ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value to us. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instruments. In evaluating our management of liquidity and other risks, the fair values of all assets and liabilities should be taken into consideration, not only those presented above.