The Company operatesWe operate six facilities in Mexico, which are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico. Maquiladora status allows the Companyus to import certain items from the United States 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.

Research and development (“R&D”) is defined as the critical investigation aimed at discovery of new knowledge and the conversion of that knowledge into the design of a new product or significant improvement to an existing product. The Company investsWe invest in the development of new products and solutions as well as the enhancement of existing offerings with a focus on improving the performance-to-cost ratio and energy efficiency. The CompanyWe also developsdevelop software applications and capabilities to enhance data analytics offerings. R&D expenses consist of compensation, payroll taxes, employee benefits, materials, supplies, and other administrative costs, but do not include all new product development costs. For fiscal 2018, 2017,2020, 2019, and 2016,2018, research and development expense totaled $63.9$82.0 million, $52.0$74.7 million, and $47.1$63.9 million, respectively.

The Company experiencesWe experience competition based on numerous factors, including features and benefits, price, brand name recognition, product quality, product and system design, energy efficiency, customer relationships, and service capabilities, and price.capabilities. The market for lighting and building managementtechnology solutions and services is competitive and continues to evolve.evolve through acquisition and consolidation activities. Certain global and more diversified electrical manufacturers may provide a broader

product offering utilizing electrical, lighting, and building managementtechnology products as well as pricing benefits from the bundling of various offerings. In addition, there have been a growing number ofare new competitors, fromincluding Asian importers, small startup companies, toand global electronics, technology, and software companies, offering competing solutions, sometimes deploying different technologies. Asian imports have also increased competition within the lighting market.

TheOur operations of the Company are subject to numerous comprehensive laws and regulations relating to the generation, storage, handling, transportation, and disposal of hazardous substances, as well as solid and hazardous wastes, and to the remediation of contaminated sites. In addition, permits and environmental controls are required for certain of the Company’sour operations to limit air and water pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities. On an ongoing basis, the Company allocateswe allocate resources, including investments in capital and operating costs relating to environmental compliance. Environmental laws and regulations have generally become stricter in recent years, and federal, state, and local governments domestically and internationally are considering new laws and regulations, including those governing raw material composition, carbon dioxide and other air emissions, end-of-life product dispositions, and energy efficiency. The Company isWe are not aware of any pending legislation or proposed regulation related to environmental issues that would have a material adverse effect on the Company.us. The cost of responding to future changes, however, may be substantial.

Products produced by the Company requireOur production requires certain raw materials, including certain grades of steel and aluminum, electrical and electronic components, plastics, and other petroleum-based materials and components. In fiscal 2018, the Company2020, we purchased approximately 104,00070,000 tons of steel and aluminum. The Company estimatesWe estimate that approximately 7% of purchased raw materials are petroleum-based. Additionally, the Company estimateswe estimate that approximately sixfive million gallons of diesel fuel were consumed in fiscal 20182020 through the Company’sour distribution activities. The Company purchasesWe purchase most raw materials and other components on the open market and reliesrely on third parties for providingto provide certain finished goods. While these items are generally available from multiple sources, the cost of products sold may be affected by changes in the market price of raw materials and tariffs on certain raw materials, particularly imports from China,Asia, as well as disruptions in availability of raw materials, components, and sourced finished goods.

The Company doesWe do not currently engage in or expect to engage in significant commodity hedging transactions for raw materials, though the Company haswe have and will continue to commit to purchase certain materials for a period of up to 12 months. The Company monitorsWe monitor and investigatesinvestigate alternative suppliers and materials based on numerous attributes including quality, service, and price. The CompanyWe currently sourcessource raw materials and components from a number of suppliers, but the Company’sour ongoing efforts to improve the cost effectiveness of itsour products and services may result in a reduction in the number of itsour suppliers.

The Company producesWe produce and stocksstock quantities of inventory at key distribution centers and warehouses throughout North America and to a much lesser degree, certain European markets. The backlog of orders at any given time is affected by various factors, including seasonality, cancellations, sales promotions, production cycle times, and the timing of receipt and shipment of orders, which are usually shipped within a few weeks of order receipt. Accordingly, a comparison of backlog orders from period to period is not necessarily meaningful and may not be indicative of future shipments.

The Company ownsWe own or hashave licenses to use various domestic and foreign patents, trademarks, and other intellectual property related to itsour products, processes, and businesses. These intellectual property rights are important factors for itsour businesses. The Company reliesWe 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 theour intellectual property of the Company.property. As of August 31, 2018, the Company2020, we had approximately 1,4501,700 active United States and foreign patents. While patents and patent applications in the aggregate are important to theour competitive position, of the Company, no single patent or patent application is individually material to the Company.us.

The Company’sOur business exhibits some seasonality, with net sales being affected by weather and seasonal demand on construction and installation programs, particularly during the winter months, as well as the annual budget cycles of major customers. Because of these seasonal factors the Company haswe historically have experienced and generally expects to experience, itsour highest sales in the last two quarters of each fiscal year.year; however, our seasonality has been meaningfully impacted by the enactment of tariffs and the COVID-19 pandemic.

Our lighting and building managementtechnology solutions are sold to customers in both the new construction as well as renovation and retrofit markets for residential and non-residential applications. The construction market is cyclical in nature and subject to changes in general economic conditions.conditions and fiscal policies. Sales volume has a major impact on the profitability of the Company.our profitability. Economic downturns and the potential decline in key construction markets may have a material adverse effect on theour net sales and operating incomeincome. Additionally, tariffs have caused pull forwards of the Company.customer orders to avoid price increases.

As of August 31, 2018, the Company2020, we employed approximately 13,00011,500 associates, of which approximately 4,2003,800 were employed in the United States, approximately 8,3006,900 in Mexico, and approximately 500800 in other international locations, including Europe, Canada, and the Asia/Pacific region. Union recognition and collective bargaining arrangements are in place or in process, covering approximately 9,3007,700 persons (including approximately 1,9001,600 in the United States). Union recognition and collective bargaining arrangements covering approximately 8,2006,800 persons will expire within the next fiscal year, primarily due to annual negotiations with unionsof union contracts in Mexico. The remaining arrangements will expire after the next fiscal year and relate to approximately 1,100900 persons employed within the United States. The Company believesWe believe that it haswe have a good relationship with both itsour unionized and non-unionized employees.

Additionally, the Company haswe have adopted a written Code of Ethics and Business Conduct that applies to all of the Company’sour directors, officers, and employees, including itsour principal executive officer and senior financial officers. The Code of Ethics and Business Conduct and the Company’sour Corporate Governance Guidelines are available free of charge through the “Corporate Governance” link on the Company’sour website. Any amendments to, or waivers of, the Code of Ethics and Business Conduct for the Company'sour principal executive officer and senior financial officers will be disclosed on the Company'sour website promptly following the date of such

amendment or waiver. Additionally, the Statement of Responsibilities of Committees of the Board of Directors (the “Board”) and the Statement of Rules and Procedures of Committees

The Company competesWe compete based on numerous factors, including features and benefits, brand name recognition, product quality, product and system design, energy efficiency, customer relationships, service capabilities, and price. Asian imports have also increased competition within the lighting market. In addition, the Company operateswe operate in a highly competitive environment that is influenced by a number of general business and economic factors, such as economic vitality, employment levels, credit availability, interest rates, trends in vacancy rates and rent values, energy costs, and commodity costs. Sales of lighting and building managementtechnology 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 the Company’sour product and service offerings.

The Company utilizesWe utilize a variety of raw materials and components in itsour production process including steel, aluminum, lamps, certain rare earth materials, LEDs, LED drivers, ballasts, wire, electronic components, power supplies, petroleum-based by-products, natural gas, and copper. The CompanyWe also sourcessource certain finished goods externally. Future increases in the costs of these items, including import tariffs, could adversely affect profitability, as there can be no assurance that future price increases will be successfully passed through to customers. The CompanyWe generally sourcessource these 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. Disruptions in the supply of those items could negatively impact the Company’sour performance. Suppliers for certain of those items are our competitors of the Company that may, for various strategic reasons, choose to cease selling to the Company.us. In addition, the Company'sour ongoing efforts to improve the cost effectiveness of itsour products and services may result in a reduction in the number of itsour suppliers, and in turn, increased risk associated with reliance on a single or limited number of suppliers. Furthermore, volatility in certain commodities, such as oil, impacts all suppliers and, therefore, may cause the Companyus to experience significant price increases from time to time regardless of the number and availability of suppliers. 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, the Company iswe are dependent on certain service providers for key operational functions. While there are a number of suppliers of these services, the cost to change service providers and set up new processes could be significant.

Aggressive pricing actions by competitors, including Asian importers and those within the technology and services sectors, may affect the Company’sour ability to achieve desired revenue growth and profitability levels under itsour current pricing strategies. The CompanyWe may also decide to lower prices to match the competition.competition or for other reasons or to exit unprofitable business. Additionally, the Companywe may not be able to increase prices to cover rising costs of components and raw materials.costs. Even if the Companywe were able to increase prices to cover costs, competitive pricing pressures may not allow the Companyus to pass on any more than the cost increases. Alternatively, if component and raw material costs were to decline, the marketplace may not allow the Companyus to hold prices at their current levels.

Continual introductions of new products and solutions, services, and technologies, enhancement of existing products and services, and effective servicing of customers are key to the Company’sour competitive strategy. 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, the Company’sour 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. Accordingly, the Companywe cannot fully predict the ultimate effect of new product introductions on the Company’sour business. Additionally, new products and solutions may not achieve the same profit margins as expected and as compared to the Company'sour historic products and solutions.

The Company hasWe have strengthened itsour business through strategic acquisitions, alliances, and investments and may continue to do so as opportunities arise in the future. Such investments have been and may be in start-up or development stage entities. The CompanyWe will benefit from such activity only to the extent that itwe can effectively leverage and integrate the assets or capabilities of the acquired businesses and alliances, including, but not limited to, personnel, technology, and operating processes. 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 the Company’sour ability to recover initial and subsequent investments, particularly those related to acquired goodwill and intangible assets or non-controlling interests. In addition, such investment transactions may limit the Company'sour ability to invest in other activities, which could be more profitable or advantageous.

Various uncertainties and risks are associated with the implementation of a number of aspects of the Company’sour global business strategies, including but not limited to, the development, marketing and selling of new products and solutions, new product development, the development, marketing, and selling of lighting, building management,technology, and software-based solutions, and effective integration of acquisitions, and development of production capacity related to components such as LED drivers.acquisitions. Those uncertainties and risks include, but are not limited to: diversion of management’s attention; difficulty in retaining or attracting employees; negative impact on relationships with distributors and customers; obsolescence of current products and slow new product development; inability to effectively participate in the emerging opportunities of the IoT utilizing the Company'sour digital lighting and building managementtechnology systems; additional streamlining efforts; inability to produce certain components with quality, performance, and cost attributes equal to or better than provided by other component manufacturers; and unforeseen difficulties in the implementation of the management operating structure. Problems with strategy execution could offset anticipated benefits, disrupt service to customers, and impact product quality as well as adversely affect the Company.our business. With the addition of new products and solutions, the Companywe may encounter new and different competitors that may have more experience with respect to such products and solutions.

The Company expectsWe expect to benefit from itsour programs to streamline operations, including the consolidation of certain facilities and the reduction of overhead costs. Such benefits will only be realized to the extent that the Companywe can effectively leverage assets, personnel, and operating processes in the transition of production between manufacturing facilities. Uncertainty is inherent within the facility consolidation process and unforeseen circumstances could offset the anticipated benefits, disrupt service to customers, and impact product quality.

The World Health Organization has declared the Company's OperationsCOVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products and services. The COVID-19 pandemic and similar issues in the future could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, and capital investments. Several public health organizations have recommended, and some governments have implemented, certain measures to slow and limit the transmission of the virus, including shelter in place, social distancing ordinances, and business shutdowns. There is considerable uncertainty regarding the extent to which the COVID-19 outbreak will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus

The Company competesWe compete in an industry and markets where technology and innovation play major roles in the competitive landscape. The Company isWe 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, andas well as obtaining appropriate patents and the right to utilize patents of other parties all play a significant role in protecting the Company’sour freedom to operate and development activities.operate. Additionally, the continual development of new technologies by existing and new source suppliers — including non-traditional competitors with significant resources — looking for either direct market access or partnerships with competing large manufacturers, coupled with significant associated exclusivity and/or patent activity, could adversely affect the Company’sour ability to sustain operating profit margins and desirable levels of sales volume.

In addition, there have been a growing number ofare new competitors, fromincluding Asian importers, small startup companies, toand global electronics, Asian, technology, and software companies, whichoffering competing solutions, sometimes deploying different technologies. These competitors may vertically integrate and begin offering total solution packages that directly compete with the Company'sour offerings. Certain global and more diversified electrical manufacturers as well as certain global technology and building solution providers may be able to obtain a competitive advantage over the Companyus by offering broader and more integrated solutions utilizing electrical, lighting, controls, building automation systems, and data analytics, and small startup companies may offer more localized product sales and support services within individual regions.

Relationships with customers are directly impacted by the Company’sour ability to deliver quality products and services. Although no individual customer exceeded 10% of sales during the current fiscal year, the loss of or a substantial decrease in the volume of purchases by certain larger customers could harm the Companyour business in a meaningful manner. The Company hasWe have relationships with channel partners such as electrical distributors, home improvement retailers, independent sales agencies, system integrators, and value-added resellers. While the Company maintainswe maintain positive, and in many cases long-term, relationships with these channel partners, the sudden or unplanned loss of a number of these channel partners or a

substantial decrease in the volume of purchases from a major channel partner or a group of channel partners could adversely affect the Company.our business.

The breakdown of equipment or other events, including, but not limited to, labor disputes, strikes, workplace violence, pandemics, cyber-attacks, civil disruptions, or catastrophic events such as war or natural disasters, leading to production interruptions in the Company’sour or one or more of itsour suppliers’ facilities could adversely affect the Company.us. Approximately 57%56% of the Company’sour 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. Further, because many of the Company’sour customers are to varying degrees dependent on planned deliveries from the Company’sour facilities, those customers that have to reschedule their own production or delay opening a facility due to the Company’sour missed deliveries as a result of these disruptions could pursue financial claims against the Company. The Companyus. We may incur costs to correct any of these problems in addition to facing claims from customers. Further, the Company’sour reputation among actual and potential customers may be harmed and result in a loss of business. While the Company haswe have developed business continuity plans, including alternative capacity, to support responses to such events or disruptions and maintains insurance policies covering, among other things, physical damage and business interruptions, these policies may not cover all losses. The CompanyWe could incur uninsured losses and liabilities arising from such events, including damage to itsour reputation, loss of customers, and substantial losses in operational capacity.

The Company isWe are highly dependent on various software and automated systems to record and process operational and financial transactions. The CompanyWe could experience 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. The CompanyWe could also experience a compromise of itsour security due to many reasons, including technical system flaws, clerical, data input or record-keeping errors, or tampering or manipulation of itsour systems by

The CompanyWe also providesprovide and maintainsmaintain technology built on our local operating system to enable lighting controls systems,and building management systems, and business intelligence systems, in many cases though the internet of things (IoT) in certain of its customer offerings.technology systems. In addition to the risks noted above, there are other risks associated with these customer offerings. For example, a customer may depend on integral information from, or functionality of, Company’sour technology to support that customer’s other systems, such that a failure of Company’sour technology could impact those systems, including by loss or destruction of data. Likewise, a customer’s failure to properly configure, update, or upgrade its own network and integrations with Company’sour technology are outside of the Company’sour control and could result in a failure in functionality or security of Company’sour technology.

The CompanyCertain of our third-party vendors and certain of its third-party vendorswe may receive and store personal information in connection with human resources operations, customer offerings, and other aspects of the business. 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 the Company'sour or itsour clients' confidential, proprietary and other information (including personal identifying information of individuals), or otherwise disrupt the Company'sour or itsour clients' or other third parties' business operations. To the extent that any disruption or security breach results in a loss or damage to the Company'sour data, or an inappropriate disclosure of confidential or customer or employee information, it could cause significant damage to the Company'sour reputation, affect relationships with the Company'sour customers, employees, and other counterparties, lead to claims against the Company,us, which may result in the payment of fines, penalties, and costs, and ultimately harm the Company'sour business. In addition, the Companywe 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.

The Company isWe are also subject to an increasing number of data privacy and security laws and regulations that impose requirements on the Companyus and itsour technology prior to certain use or transfer, storing, use, processing, disclosure, and protection of data and prior to sale or use of certain technologies. Failure to comply with such laws and regulations could result in the imposition of fines, penalties and other costs. The legal and regulatory data privacy framework is evolving and uncertain. For example, the European Court of Justice’s decision in October 2015 to invalidate the Safe Harbor data privacy

program between the United States and the European Union, the European Union’s implementation of the General Data Protection Regulation in 2018, the European Union’s pending ePrivacy Regulation, and California’s implementation of its Consumer Privacy Act of 2018 and Connected Device Privacy Act of 2018 (f.k.a. SB-327) all could disrupt the Company'sour ability to use or transfer data or sell products and solutions because such activities may not be in compliance with applicable law in certain jurisdictions.

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 the Company'sour systems or infrastructure, subject the Companyus to liability claims, or regulatory fines, penalties, or intervention, harm the Company’sour reputation, interrupt the Company’sour operations, disrupt customer operations, and adversely affect the Company’sour internal control over financial reporting, business, financial condition, results of operations, or cash flows.

The CompanyWe employed approximately 13,00011,500 people as of August 31, 2018,2020, approximately 8,8007,700 of whom are employed in international locations. As such, the Company haswe 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 the Company'sour operating costs. Union recognition and collective bargaining agreements are in place or in process covering approximately 72%67% of the Company'sour workforce. Collective bargaining agreements representing approximately 59% of our workforce will expire within one year, primarily due to annual negotiations with unions in Mexico. Collective bargaining agreements representing approximately 63% of the Company's workforce will expire within one year. While the Company believeswe believe that it haswe have good relationships with both itsour unionized and non-unionized employees, the Companywe may become vulnerable to a strike, work stoppage, or other labor action by these employees.

Risks inherent in the sale of solutions and services include assuming greater responsibility for successfully delivering projects that meet a particular customer specification, includingincluding: defining and controlling contract scope and timing, efficiently executing projects, and managing the performance and quality of subcontractors and suppliers. As the Company expands itswe expand our service offerings, reliance on the technical infrastructure to provide services to customers will increase. If the Company failswe fail to appropriately manage and secure the technical infrastructure required, customers could experience service outages or delays in implementation of services. If the Company iswe are unable to manage and mitigate these risks, the Companywe could incur liabilities and other losses.

The Company utilizesWe utilize strategic partners and third-party relationships in order to operate and grow itsour business. For instance, the Company utilizeswe utilize third parties to contract manufacture certain products, subcontract installation and commissioning, as well as perform certain selling, distribution, and administrative functions. The CompanyWe cannot control the actions or performance, including product quality, of these third parties and therefore, cannot be certain that the Companywe or itsour end-users will be satisfied. Any future actions of or any failure to act by any third party on which the Company’sour business relies could cause the Companyus to incur losses or interruptions in itsour operations.

The Company hasWe have substantial activities outside of the United States, including sourcing of products, materials, components, and contract manufactured finished goods, as well as manufacturing and distribution activities. The Company’sOur operations, as well as those of key vendors, are therefore subject to regulatory, economic, political, military, and other events in countries where these operations are located. In addition to the risks that are common to both the Company’sour domestic and international operations, the Company faceswe face risks specifically related to itsour 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. Bribery Act; potential for privatization and other confiscatory actions; trade restrictions and disruption; criminal activities; increases in tariffs and taxes; corruption; and other changes in regulation in international jurisdictions that could result in substantial additional legal or compliance obligations for the Company.us.

We source certain components and approximately 15%14% of itsour finished goods from China,Asia, a significant portion of which are subject to the recently enacted import tariffs. These tariffs could increase in future periods resulting in higher costs and/or lower demand. The Company isWe are seeking to mitigate the impact of theChinese tariffs on itsour profitability, including a variety of activities such as engaging alternative non-Chinese suppliers that produce products and components whose origin is in countries other than China, insourcing the production of certain products, and raising selling prices. The CompanyWe could be adversely affected to the extent it iswe are unable to mitigate the impacts of the tariffs. In addition, if the Company's Mexican facilities cease to qualify for Maquiladora status or if the Mexican government adopts additional adverse changes to the program, the Company's manufacturing costs in Mexico would increase.

The Company operatesWe operate six manufacturing facilities in Mexico, which are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico. Maquiladora status allows the Companyus to import certain items from the United States 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.

The Company isWe are also subject to certain other laws and regulations affecting itsour international operations, including laws and regulations such as the North AmericanUnited States, Mexico, Canada Free Trade Agreement (“NAFTA”USMCA”) which, among other things, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable

The evolution of the Company’sour products, complexity of itsour supply chain, and reliance on third-party vendors such as customs brokers and freight vendors, which may not have effective processes and controls to enable the Companyus to fully and accurately comply with such requirements, could subject the Companyus to liabilities for past, present, or future periods. Such liabilities could adversely impact the Company’sour business.

In June 2016, the United Kingdom (“U.K.”) held a referendum in which voters approved an exit from the European Union (“U.K.E.U.”) commonly referred to as “Brexit.” AsThe U.K. subsequently withdrew from the European Union on January 31, 2020, subject to a result of the referendum, the British government has begun negotiatingtransition period that is set to end on December 31, 2020. Although it is unknown what the terms of the U.K.’s future's relationship with the E.U. Although it is unknown what those terms will be, it is possible that there will be greater restrictions on imports and exports between the U.K. and E.U. countries and increased regulatory complexities. These changes could cause disruptions to and create uncertainty surrounding the Company'sour business and the business of existing and future customers and suppliers as well as have an impact on the Company'sour employees based in Europe, which could adversely impact itsour business. The actual effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. markets either during a transitional period or more permanently.

The Company continuesWe continue to monitor conditions affecting itsour international locations, including potential changes in income from a strengthening or weakening in foreign exchange rates in relation to the U.S. dollar. Some of these risks, including but not limited to foreign exchange rates, violations of laws, and higher costs associated with changes in regulation, could adversely impact the Company’sour business.

The laws and regulations impacting the Companyus impose increasingly complex, stringent and costly compliance activities, including but not limited to environmental, health, and safety protection standards and permitting, labeling and other requirements regarding, among other things, electronic and wireless communications, air emissions, wastewater discharges, the use, handling, and disposal of hazardous or toxic materials, remediation of environmental contamination, and working conditions for the Company’sand compensation of our employees. Some environmental laws, such as Superfund, the Clean Water Act, and comparable laws in U.S. states and other jurisdictions world-wide, impose joint and several liability for the cost of environmental remediation, natural resource damages, third-party claims, and other expenses, without regard to the fault or the legality of the original conduct, on those persons who contributed to the release of a hazardous substance into the environment. The CompanyWe may also be affected by future industry standards, laws or regulations, including those

imposed in response to energy, climate change, product functionality, geopolitical, corporate social responsibility, or similar concerns. These standards, laws, or regulations may impact our costs of operation, the sourcing of raw materials, and the manufacture and distribution of the Company’sour products and place restrictions and other requirements or impediments on the products and solutions the Companywe can sell in certain geographical locations.locations or on the willingness of certain investors to own our shares.

The Company isWe are subject to and in the future may be subject to various claims, including legal claims arising in the normal course of business. Such claims may include without limitation employment claims, product recall, personal injury, network security, data privacy, or property damage claims resulting from the use of the Company'sour products, services, or solutions, as well as exposure to hazardous materials, contract disputes, or intellectual property disputes. The Company isWe 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 isare fully self-insured for certain other types of losses, including environmental, product recall, warranties, commercial disputes, and patent infringement. The Company establishes reservesWe establish accruals for legal claims when the costs associated with

The CompanyWe may need to recall products if they are improperly designed, manufactured, packaged, or labeled, and the Company doeswe do not maintain insurance for such recall events. Many of the Company'sour products and solutions have become more complex in recent years and include more sophisticated and sensitive electronic components. A problem or issue relating to any individual component could have the effect of creating a compounded problem for an integrated solution, which could result in significant costs and losses. The Company hasWe have increasingly manufactured certain of those components and products in itsour own facilities. The Company hasWe have previously initiated product recalls as a result of potentially faulty components, assembly, installation, design, and packaging of itsour 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. In addition, products we developed by the Company that incorporate new technologies, such as LED technology, generally provide for more extensive warranty protection which may result in higher costs if warranty claims on these products are higher than historical amounts. The CompanyWe may also be liable if the use of any of itsour products causescause harm, whether from fire, shock, harmful materials or components, alleged adverse health impacts from exposure to light emitted by our products, or any other personal injury or property damage, and the Companywe could suffer losses from a significant product liability judgment against the Companyus in excess of itsour insurance limits. The CompanyWe may not be able to obtain indemnity or reimbursement from itsour suppliers or other third parties for the warranty costs or liabilities associated with itsour products. A significant product recall, warranty claim, or product liability case could also result in adverse publicity, damage to the Company’sour reputation, and a loss of consumer confidence in itsour products.

The Company ownsWe own certain patents, trademarks, copyrights, trade secrets, and other intellectual property. In addition, the Company continueswe continue to file patent applications, when appropriate. The CompanyWe cannot be certain that others have not and will not infringe on itsour intellectual property rights; however, the Company seekswe seek to establish and protect those rights, which could result in significant legal expenses and adversely affect the Company'sour financial condition and results of operations.

Over the last several years, the Companywe 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 use by the Company.our use. Such offers typically relate to various technologies including electronics, power systems, controls, and software, as well as the use of visible light to communicate data, the use of certain wireless networking methods, and the design of specific products. The Company believesWe believe that it doeswe 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 the Company iswe are required but unable to enter into such arrangements on acceptable economic terms, it could adversely impact the Company.us.

The market price of the Company’sour common shares could fluctuate significantly for many reasons, including reasons unrelated to the Company’sour 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. Since management does not provide guidance, the Company'sour performance could be different than analyst expectations causing a decline in the Company'sour stock price. To the extent that other large companies within the Company’sour industry experience declines in share price, the Company’sour share price may decline as well. In addition, when the market price of a company’s shares drops significantly, shareholders could institute securities class action lawsuits against the Companyus or otherwise engage in activism, which could cause the Companyus to incur substantial costs and could divert the time and attention of the Company’sour management and other resources.

Significant changes in actual investment returns on defined benefit plan assets, discount rates, and other factors could adversely affect the Company'sour results of operations and the amount of contributions the Company iswe are required to make to the defined benefit plans in future periods. As the Company'sour defined benefit plan assets and liabilities are marked-to-market on an annual basis, large non-cash gains or losses could be recorded in the fourth quarter of each fiscal year. In accordance with United States generally accepted accounting principles, the income or expense for the plans is calculated using actuarial valuations. These valuations reflect assumptions about financial markets and interest rates, which may change based on economic conditions. Funding requirements for the defined benefit plans are dependent upon, among other things, interest rates, underlying asset returns, and the impact of legislative or regulatory changes related to defined benefit funding obligations. Unfavorable changes in these factors could adversely affect the Company.our results.

None.

TheOur general corporate offices of the Company are located in Atlanta, Georgia. Because of the diverse nature of operations and the large number of individual locations, it is neither practical nor meaningful to describe each of theour operating facilities owned or leased by the Company.leased. The following listing summarizes the significant facility categories as of August 31, 2018:2020:

The following table provides additional geographic information related to the Company’sour manufacturing facilities as of August 31, 2018:2020:

The Company believesWe believe that itsour properties are well maintained and in good operating condition and that itsour properties are suitable and adequate for itsour present needs. Initiatives related to enhancing global operations may result in the future consolidation of certain facilities.

The Company isWe are subject to various legal claims arising in the normal course of business, including, but not limited to, patent infringement, product liability claims, and employment matters. The Company isWe are self-insured up to specified limits for certain types of claims, including product liability, and iswe are fully self-insured for certain other types of claims, including environmental, product recall, and patent infringement. Based on information currently available, it is the opinion of management that the ultimate resolution of any such pending and threatened legal proceedings will not have a material adverse effect on theour financial condition, results of operations, or cash flows of the Company.flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of any such matters, if unfavorable, could have a material adverse effect on theour financial condition, results of operations, or cash flows of the Company in future periods. The Company establishes reservesWe establish accruals for legal claims when the costs associated with the claims become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the amounts reservedaccrued for such claims. However, the Companywe cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the amounts reserved.accrued.

TheOur operations of the Company are subject to numerous comprehensive laws and regulations relating to the generation, storage, handling, transportation, and disposal of hazardous substances, as well as solid and hazardous wastes, and to the remediation of contaminated sites. In addition, permits and environmental controls are required for certain of the Company’s operations to limit air and water pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities. On an ongoing basis, the Company investswe invest capital and incursincur operating costs relatingrelated to environmental compliance. Environmental laws and regulations have generally become stricter in recent years. The cost of responding to future changes may be substantial. The Company establishes reservesWe establish accruals for known environmental claims when the costs associated with the claims become probable and can be reasonably estimated. The actual cost of environmental issues may be substantially higher than that reservedaccrued due to difficulty in estimating such costs.

Not applicable.

In March 2018, the Board of Directors (the “Board”) authorized the repurchase of up to six million shares of the Company'sour common stock. As of August 31, 2018, 0.82020, 2.1 million shares had been purchased under this authorization. Theauthorization, and the maximum number of shares that may yet be purchased under the program equals 5.2 million. Additionally, the Companyequaled 3.9 million shares.

We repurchased 1.2 millionno shares of our common stock during the current year under previous authorizations fromfirst nine months fiscal 2020. The following table summarizes share repurchase activity by month for the Board, resulting in total repurchases during fiscal 2018quarter ended August 31, 2020:

We may repurchase shares of two million shares.

The following graph compares the cumulative total return to shareholders on the Company’sour outstanding stock during the five years ended August 31, 2018,2020, with the cumulative total returns of the Standard & Poor’s (“S&P”) 500 Index, 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. The Company isWe are a component of both the S&P Midcap 400 Index and the Dow Jones U.S. Building Materials & Fixtures Index. The Dow Jones U.S. Electrical Components & Equipment Index is included in the following graph as the parent companies of several major lighting companies are included in the index. During fiscal 2018, the Company was removed from the S&P 500 Index and added to the S&P Midcap 400 Index. Therefore, the S&P 500 Index will be removed from the following cumulative total return chart in future periods.

Acuity Brands is the parent company of Acuity Brands Lighting, Inc. (“ABL”) and other wholly-owned subsidiaries (Acuity Brands, ABL, and such other subsidiaries are collectively referred to herein as the “Company”)“we,” “our,” “us,” “the Company,” or similar references). The Company has itsOur principal office is located in Atlanta, Georgia.

The Company is one of the world’s leading providers of lightingWe are a market-leading industrial technology company that designs, manufactures, and building management solutionsbrings to market products and services for commercial, institutional, industrial, infrastructure, and residential applications throughout North America and select international markets. The Company’s lighting andOur products include building management solutions include individual devices and integrated systems, designed to optimize energy efficiency and comfort, enhance the occupant experience, and reduce operating costs for various indoor and outdoor applications. Individual devices include luminaires,lighting, lighting controls, controllers for various building systems, power supplies, prismatic skylights, inverters, and drivers. Additionally, the Company continues to expand its solutions portfolio to provide a host of other economic benefits, including software and services that enable the Internet of Things (“IoT”). The Company's IoT solutions provide customers with access to robust data analytics; support the advancement of smart buildings, smart cities, and the smart grid; and allow businesses to develop custom applications to scale their operations.location aware applications. As of August 31, 2018, the Company operates 192020, we operated 18 manufacturing facilities, and eight distribution facilities, along with threeand two warehouses to serve itsour extensive customer base and employs approximately 13,000 associates.base.

The Company doesWe do not consider acquisitions a critical element of itsour strategy but seeksseek opportunities to expand and enhance itsour portfolio of solutions, including the following transactions:

On May 1, 2018, using cash on hand and borrowings available under existing credit arrangements, the Companywe acquired IOTA Engineering, LLC (“IOTA”), a provider of. IOTA manufactures highly engineered emergency lighting products and power equipment for commercial and institutional applications both in the U.S. and internationally.

On February 12, 2018, using cash on hand, the Companywe acquired Lucid Design Group, Inc (“Lucid”) a provider of. Lucid provides a data and analytics platform to make data-driven decisions to improve building efficiency and drive energy conservation and savings.

The Company'sOur strategy is to extend itsour leadership position in the North American market and certain international markets by delivering superior lighting and building managementtechnology solutions. Additionally, the Company plans towe continue to expand its software solution offerings. Asevolve Atrius as the intelligent building platform upon which a results-oriented, customer-centric company, management planshost of problem-solving applications can be deployed. Through the Acuity Business System, we strive to align

Throughout fiscal 2018, the Company believes it2020, we believe we made progress towards achieving itsour strategic objectives, including expanding itsour access to the market, expanding itsour addressable market, introducing new lighting and building managementtechnology solutions, and enhancing itsour operations to create a stronger, more effective organization. The strategic objectives were developed to enable the Company to meet or exceed the following financial goals during an entire business cycle:

The Company'sOur principal sources of liquidity are operating cash flows generated primarily from itsour business operations, cash on hand, and various sources of borrowings. TheOur ability of the Company to generate sufficient cash flow from operations or to access certain capital markets, including banks, is necessary to fund itsour operations and capital expenditures, pay dividends, repurchase shares, of common stock, meet its obligations as they become due, and maintain compliance with covenants contained in itsour financing agreements.

The Company invested $43.6In fiscal 2020, we paid $54.9 million in fiscal 2018 for capital expenditures,property, plant, and equipment, primarily for tooling, new and enhanced information technology capabilities, equipment, tooling,and facility enhancements, and information technology. The Company expectsenhancements. We currently expect to invest approximately 1.5% of net sales inon capital expenditures during fiscal 2019.2021.

Our short-term cash needs are expected to include funding operations as currently planned,planned; making anticipated capital investments as currently anticipated; paying quarterly stockholder dividends as currently anticipated,anticipated; paying principal and interest on borrowingsdebt as currently scheduled, including our borrowings under our unsecured delayed draw term loan facility (the “Term Loan Facility”); making required contributions to itsour employee benefit plans,plans; funding possible acquisitions,acquisitions; and potentially repurchasing up to 5.2 million shares of itsour outstanding common stock as authorized by the the Board of Directors (the “Board”). Management believesstock. We believe that the Companywe will be able to meet itsour liquidity needs over the next 12 months based on itsour cash on hand, current projections of cash flow from operations, and

borrowing availability under recently executed financing arrangements. Additionally, management believeswe believe that the Company’sour cash flows from operations and sources of funding, including, but not limited to, future borrowings and borrowing capacity, will sufficiently support theour long-term liquidity needsneeds. However, as the impact of the Company.

The Company usesWe use available cash and cash flowflows from operations, borrowings on credit arrangements, and proceeds from the exercise of stock options to fund operations, capital expenditures, and acquisitions;acquisitions if any; to repurchase Company stock; and to pay dividends.

During fiscal 2018, netWe generated $504.8 million of cash generatedflows from operating activities increased $16.6 million to $353.2 millionduring fiscal 2020 compared with $336.6$494.7 million in the prior-year period, an increase of $10.1 million, due primarily to lower net working capital requirements, which reflect reduced variable incentive payments for prior year performance and payments for income taxes, partially offset by lower operating profit.net income. Operating working capital (calculated by adding accounts receivable plus inventories and subtracting accounts payable-net of acquisitions and the impact of foreign exchange rate changes) increaseddecreased by approximately $84.7$92.9 million during fiscal 20182020 compared to an increasea decrease of $34.3$57.0 million during fiscal 2017. Operating working capital requirements increased primarily due to greater production and purchases necessary to support the higher level of net sales. The increase in inventory during the year was due primarily to customer expansion in the home center channel, new product launches, and a buildup of finished goods to support committed projects in the corporate accounts channel. This increase in inventory was mostly offset by a corresponding increase in accounts payable during the same period. Additionally, the increase in accounts receivable during the year was due primarily to the timing of cash collections from customers.2019.

Management believesWe believe that investing in assets and programs that will over time increase the overall return on itsour invested capital is a key factor in driving stockholder value. The CompanyWe invested $43.6$54.9 million and $67.3$53.0 million in fiscal 20182020 and 2017,2019, respectively, in property, plant, and equipment, primarily forrelated to investments in tooling, new and enhanced information technology capabilities, equipment, tooling,and facility enhancements, and information technology. The Company expects to invest approximately 1.5% of net sales in capital expenditures during fiscal 2019.enhancements.

The following table summarizes the Company’sour contractual obligations at August 31, 20182020 (in millions):

TheOur current capital structure of the Company is comprised principally of senior unsecured notesborrowings under the Term Loan Facility and equity of itsour stockholders. Total debt outstanding was $356.8 million and $356.9$401.1 million at August 31, 20182020 and 2017, respectfully,consisted primarily of variable-rate obligations. At August 31, 2019, total debt outstanding was $356.6 million and consisted primarily of fixed-rate obligations. The Company fully repaid all borrowings under its revolving credit facility during fiscal 2018. Additionally, the Company repaid $0.4 million under the fixed rate long-term bank loans during fiscal 2018.

During fiscal 2018, the Company’s2020, our consolidated stockholders’ equity increased $51.2$208.6 million to $1.72$2.13 billion at August 31, 20182020 from $1.67$1.92 billion at August 31, 2017.2019. The increase was due primarily to net income earned in the period stock issuances resulting primarily from the exercise of stock options,as well as favorable foreign currency translation and actuarial gains on pension plans,plan adjustments, partially offset by share repurchases the payment of dividends, shares withheld for employee taxes on vested restricted stock grants, and foreign currency translation adjustments. The Company’sdividend payments. Our debt to total capitalization ratio (calculated by dividing total debt by the sum of total debt and total stockholders’ equity) was 17.2%15.9% and 17.6%15.7% at August 31, 20182020 and 2017,2019, respectively. The ratio of debt, net of cash, to total capitalization, net of cash, was 11.7%(8.1)% and 2.7%(5.8)% at August 31, 20182020 and 2017,2019, respectively.

Acuity BrandsWe paid dividends on itsour common stock of $21.4$20.8 million ($0.52 per share) in fiscal 20182020 and $22.7 million ($0.52 per share) in fiscal 2017,2019, indicating a quarterly dividend rate of $0.13 per share. All decisions regarding the declaration and payment of dividends by Acuity Brands are at the discretion of the Company’s Board and are evaluated regularly in light of the Company’sour financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Board deems relevant.

The following table table sets forth information comparing the components of net income for the year ended August 31, 20182020 with the year ended August 31, 20172019 (in millions except per share data):

Net sales increased $175.0decreased $346.4 million, or 5.0%9.4%, to $3.68$3.33 billion for the year ended August 31, 20182020 compared with $3.51$3.67 billion reported for the year ended August 31, 2017.2019. For the year ended August 31, 2018, the Company2020, we reported net income of $349.6$248.3 million compared with $321.7$330.4 million for the year ended August 31, 2017, an increase2019, a decrease of $27.9$82.1 million, or 8.7%24.8%. For fiscal 2018,2020, diluted earnings per share increased 14.7%decreased 24.4% to $8.52$6.27 from $7.43$8.29 for the prior-year period.

The following table reconciles certain U.S. generally accepted accounting principles (“U.S. GAAP”) financial measures to the corresponding non-U.S. GAAP measures referred to in the discussion of the Company’sour results of operations, which exclude the impact of acquisition-related items, excess inventory adjustments, certain manufacturing inefficiencies, amortization of acquired intangible assets, share-based payment expense, and special charges associated primarily with continued efforts to streamline the organization, a gain associated with the sale of the Company's Spanish lighting business, a gain on the sale of an investment in an unconsolidated affiliate, and certain discrete income tax benefits of the Tax Cuts and Jobs Act (“TCJA”).organization. Although the impacts of these items have been recognized in prior periods and could recur in future periods, management typically excludes these items during internal reviews of performance and uses these non-U.S. GAAP measures for baseline comparative operational analysis, decision making, and other activities. These non-U.S. GAAP financial measures, including adjusted gross profit and margin, adjusted selling, distribution, and administrative (“SD&A”) expenses and adjusted SD&A expenses as a percent of net sales, adjusted operating profit and margin, adjusted other expense, adjusted net income, and adjusted diluted earnings per share, are provided to enhance the user’s overall understanding of the Company’sour current financial performance. Specifically, the Company believeswe believe these non-U.S. GAAP measures provide greater comparability and enhanced visibility into the Company'sour results of operations. The non-U.S. GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with U.S. GAAP.

Net sales for the year ended August 31, 2018 increased2020 decreased by 5.0%9.4% compared with the prior-year period due primarily to an increaseestimated 12% decline in sales volumes of approximately 7% and an approximately 1% favorable impact of acquired revenues from acquisitions, partially offset by a contribution from acquired businesses of 3%. Fiscal 2020 sales volumes decreased compared with the impactprior year due primarily to the negative impacts of an unfavorablethe COVID-19 pandemic, lower activity of relight projects for certain large corporate accounts customers, and the elimination of certain products in our portfolio negatively impacted by the increases in tariffs sold primarily through the retail sales channel that did not meet our return objectives. The change in product prices and the mix of products sold (“price/mix”) ofwas approximately 3%. Sales of LED-based luminaires during theflat year ended August 31, 2018 accounted for approximately two-thirds of total net sales. The increase in volumes was due primarily to greater shipments of Atrius-based luminaires to customers in certain key vertical applications and higher shipments within the home center channel. The net unfavorable price/mix was primarily due to lower pricing on certain luminaires as a result of increased competition in portions of the market for more basic, lesser-featured products; changes in product mix reflecting the substitution of certain products with less costly form factors resulting in lower price points; and changes in sales channel mix, which reflected fewer large commercial projects that generally include higher priced solutions.over year. Due to the changing dynamics of the Company'sour product portfolio, including the increase of integrated lighting and building management solutions, it is not possible to precisely quantify or differentiate the individual components of volume, price, and mix.

Gross profit for fiscal 2018 increased $5.62020 decreased $77.3 million, or 0.4%5.2%, to $1.49$1.40 billion compared with $1.48 billion for the prior year. Grossyear due primarily to lower net sales volumes. Despite our lower sales, gross profit margin decreasedincreased to 40.4%42.2% for the year ended August 31, 20182020 compared with 42.3%40.3% for the year ended August 31, 2017. Gross2019. The improvement in gross profit margin was due primarily to lower thancosts for certain inputs and the prior-year period primarily due to unfavorable price/mix; higher material, component, and freight costs; increased wages; and additional reserves for excess inventory related to the closure of a facility. These declines werecontribution from acquisitions, partially offset by higherlower net sales volumes, productivity improvements, and gross profit attributable to acquisitions.volumes. Adjusted gross profit for fiscal 2018 increased $8.82020 decreased $78.2 million, or 0.6%5.3%, to $1.49$1.40 billion compared with $1.48 billion for the prior year. Adjusted gross profit margin decreased 180increased 190 basis points to 40.5%42.2% compared to 42.3%40.3% in the prior year.

SD&A expenses for the year ended August 31, 2018 increased $75.5 million, or 7.9%, toof $1.03 billion compared with $951.1 million in the prior year. The increase in SD&A expenses was primarily due to higher employee related costs, including additional headcount from acquisitions, increased freight charges and commissions to support greater sales volume, higher professional fees related to recent acquisitions, and to a lesser degree, certain other operating expenses. Compared with the prior-year period, SD&A expenses as a percent of sales increased 80 basis points to 27.9% for fiscal 2018 from 27.1% in fiscal 2017. Adjusted SD&A expenses were $963.7 million, or 26.2% of net sales, in fiscal 2018 compared to $891.1 million, or 25.4% of net sales, in the year-ago period.