UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



(Mark One)
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~May 31, 2020~~.

November 30, 2020.



OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

Commission file number ~~001-16583~~.001-16583.

ACUITY BRANDS, INC.

(Exact name of registrant as specified in its charter)


Delaware		58-2632672
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

~~Delaware~~	~~58-2632672~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~	~~(I.R.S. Employer~~ ~~Identification Number)~~

1170 Peachtree Street, N.E., Suite 2300,, Atlanta,, Georgia~~30309-7676~~ 30309-7676

(Address of principal executive offices)

(~~404~~) (404) 853-1400

(Registrant’s telephone number, including area code)

None

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock, $0.01 par value per share

AYI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock — $0.01 par value — ~~39,637,386~~36,026,752 shares as of ~~June 25, 2020.~~January 4, 2021.

Table of Contents

ACUITY BRANDS, INC.

Table of Contents



				Page No.
Part I. FINANCIAL INFORMATION
Item 1.			Financial Statements
			Consolidated Balance Sheets -- ~~May 31,~~November 30, 2020 (Unaudited) and August 31, ~~2019~~2020	1
			Consolidated Statements of Comprehensive Income (Unaudited) -- Three ~~and nine~~ months ended ~~May 31,~~November 30, 2020 and 2019	2
			Consolidated Statements of Cash Flows (Unaudited) -- ~~Nine~~Three months ended ~~May 31,~~November 30, 2020 and 2019	3
			Notes to Consolidated Financial Statements (Unaudited)	4
			Note 1 — Description of Business and Basis of Presentation	4
			Note 2 — Significant Accounting Policies	4
			Note 3 — Acquisitions	5
			Note 4 — New Accounting Pronouncements	5
			Note 5 — Fair Value Measurements	76
			Note 6 — Inventories	8
			Note 7 — Property, Plant, and Equipment	8
			~~Note 8 — Leases~~	9
			Note 98 — Goodwill and Intangible Assets	98
			Note 109 — Debt and Lines of Credit	109
			Note 1110 — Commitments and Contingencies	1210
			Note 1211 — Changes in Stockholders' Equity	1412
			Note 12 — Revenue Recognition	13
			Note 13 — ~~Revenue Recognition~~Share-based Payments	1513
			Note 14 — ~~Share-based Payments~~Pension Plans	1615
			Note 15 — ~~Pension Plans~~Special Charges	1816
			Note 16 ~~— Special Charges~~	18
	~~Note 17~~ — Earnings Per Share	1916
			Note 1817 — Comprehensive Income	1917
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations	2119
Item 3.			Quantitative and Qualitative Disclosures about Market Risk	3127
Item 4.			Controls and Procedures	3127

Part II. OTHER INFORMATION
Item 1.			Legal Proceedings	3228
Item 1a.			Risk Factors	3329
Item 5.2.			~~Other Information~~Unregistered Sales of Equity Securities and Use of Proceeds	3329
Item 6.5.			~~Exhibits~~Other Information	3329
Item 6.			Exhibits	31

INDEX TO EXHIBITS				3432

SIGNATURES				3534

Table of Contents

PART I. FINANCIAL INFORMATION


~~Item 1.~~	~~Financial Statements~~

Item 1.Financial Statements

ACUITY BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	May 31, 2020			August 31, 2019				November 30, 2020		August 31, 2020
	(unaudited)							(unaudited)
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	520.6		$	461.0		Cash and cash equivalents	$	507.0	$	560.7
Accounts receivable, less reserve for doubtful accounts of $1.8 and $1.0, respectively	451.3			561.0
Accounts receivable, less reserve for doubtful accounts of $2.4 and $2.6, respectively							Accounts receivable, less reserve for doubtful accounts of $2.4 and $2.6, respectively	445.3		500.3
Inventories	355.3			340.8			Inventories	316.1		320.1
Prepayments and other current assets	53.1			79.0			Prepayments and other current assets	79.3		58.6
Total current assets	1,380.3			1,441.8			Total current assets	1,347.7		1,439.7
Property, plant, and equipment, net	275.1			277.3			Property, plant, and equipment, net	268.8		270.5
Operating lease right-of-use assets	56.7			—			Operating lease right-of-use assets	65.8		63.4
Goodwill	1,086.4			967.3			Goodwill	1,080.6		1,080.0
Intangible assets, net	612.9			466.0			Intangible assets, net	596.0		605.9
Deferred income taxes	1.9			2.3			Deferred income taxes	2.7		2.7
Other long-term assets	29.0			17.7			Other long-term assets	27.0		29.5
Total assets	$	3,442.3		$	3,172.4		Total assets	$	3,388.6	$	3,491.7
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	331.3		$	338.8		Accounts payable	$	317.3	$	326.5
Current maturities of debt	17.8			9.1			Current maturities of debt	4.3		24.3
Current operating lease liabilities	16.2			—			Current operating lease liabilities	18.1		17.2
Accrued compensation	55.8			73.2			Accrued compensation	75.3		85.4
Other accrued liabilities	154.8			175.0			Other accrued liabilities	168.4		164.2
Total current liabilities	575.9			596.1			Total current liabilities	583.4		617.6
Long-term debt	385.8			347.5			Long-term debt	495.6		376.8
Long-term operating lease liabilities	46.4			—			Long-term operating lease liabilities	58.1		56.8
Accrued pension liabilities	94.7			99.7			Accrued pension liabilities	69.2		91.6
Deferred income taxes	119.2			92.7			Deferred income taxes	95.3		94.9
Self-insurance reserves	7.1			6.8			Self-insurance reserves	6.7		6.5
Other long-term liabilities	117.5			110.7			Other long-term liabilities	143.3		120.0
Total liabilities	1,346.6			1,253.5			Total liabilities	1,451.6		1,364.2
Commitments and contingencies (see Commitments and Contingencies footnote)							Commitments and contingencies (see Commitments and Contingencies footnote)	0		0
Stockholders’ equity:							Stockholders’ equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued	—			—
Common stock, $0.01 par value; 500,000,000 shares authorized; 53,873,349 and 53,778,155 issued, respectively	0.5			0.5
Preferred stock, $0.01 par value; 50,000,000 shares authorized; NaN issued							Preferred stock, $0.01 par value; 50,000,000 shares authorized; NaN issued	0		0
Common stock, $0.01 par value; 500,000,000 shares authorized; 53,960,200 and 53,885,165 issued, respectively							Common stock, $0.01 par value; 500,000,000 shares authorized; 53,960,200 and 53,885,165 issued, respectively	0.5		0.5
Paid-in capital	958.0			930.0			Paid-in capital	968.6		963.6
Retained earnings	2,454.8			2,295.8			Retained earnings	2,577.7		2,523.3
Accumulated other comprehensive loss	(161.6		)	(151.4		)	Accumulated other comprehensive loss	(126.5)		(132.7)
Treasury stock, at cost — 14,325,197 and 14,325,197 shares, respectively	(1,156.0		)	(1,156.0		)
Treasury stock, at cost — 17,571,980 and 15,012,449 shares, respectively							Treasury stock, at cost — 17,571,980 and 15,012,449 shares, respectively	(1,483.3)		(1,227.2)
Total stockholders’ equity	2,095.7			1,918.9			Total stockholders’ equity	1,937.0		2,127.5
Total liabilities and stockholders’ equity	$	3,442.3		$	3,172.4		Total liabilities and stockholders’ equity	$	3,388.6	$	3,491.7

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ACUITY BRANDS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In millions, except per-share data)


	Three Months Ended						Nine Months Ended							Three Months Ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019				November 30, 2020		November 30, 2019
Net sales	$	776.2		$	947.6		$	2,435.1		$	2,734.6		Net sales	$	792.0	$	834.7
Cost of products sold	448.6			564.0			1,407.8			1,649.6			Cost of products sold	459.6		478.9
Gross profit	327.6			383.6			1,027.3			1,085.0			Gross profit	332.4		355.8
Selling, distribution, and administrative expenses	241.3			263.4			767.5			751.1			Selling, distribution, and administrative expenses	246.0		265.3
Special charges	3.3			(0.1		)	11.8			1.3			Special charges	0.7		6.9
Operating profit	83.0			120.3			248.0			332.6			Operating profit	85.7		83.6
Other expense:													Other expense:
Interest expense, net	5.4			8.3			19.4			25.6			Interest expense, net	4.9		8.3
Miscellaneous (income) expense, net	(0.9		)	0.2			1.5			2.6
Miscellaneous expense, net													Miscellaneous expense, net	1.6		1.4
Total other expense	4.5			8.5			20.9			28.2			Total other expense	6.5		9.7
Income before income taxes	78.5			111.8			227.1			304.4			Income before income taxes	79.2		73.9
Income tax expense	18.1			23.4			52.5			70.1			Income tax expense	19.6		16.9
Net income	$	60.4		$	88.4		$	174.6		$	234.3		Net income	$	59.6	$	57.0

Earnings per share:													Earnings per share:
Basic earnings per share	$	1.53		$	2.23		$	4.42		$	5.89		Basic earnings per share	$	1.58	$	1.44
Basic weighted average number of shares outstanding	39.5			39.7			39.5			39.8			Basic weighted average number of shares outstanding	37.6		39.5
Diluted earnings per share	$	1.52		$	2.22		$	4.40		$	5.87		Diluted earnings per share	$	1.57	$	1.44
Diluted weighted average number of shares outstanding	39.7			39.8			39.7			39.9			Diluted weighted average number of shares outstanding	37.8		39.6
Dividends declared per share	$	0.13		$	0.13		$	0.39		$	0.39		Dividends declared per share	$	0.13	$	0.13

Comprehensive income:													Comprehensive income:
Net income	$	60.4		$	88.4		$	174.6		$	234.3		Net income	$	59.6	$	57.0
Other comprehensive income (loss) items:													Other comprehensive income (loss) items:
Foreign currency translation adjustments	(13.8		)	(8.7		)	(15.6		)	(12.6		)	Foreign currency translation adjustments	4.6		1.9
Defined benefit plans, net of tax	1.8			1.3			5.4			5.3			Defined benefit plans, net of tax	1.6		1.9
Other comprehensive loss items, net of tax	(12.0		)	(7.4		)	(10.2		)	(7.3		)
Other comprehensive income items, net of tax													Other comprehensive income items, net of tax	6.2		3.8
Comprehensive income	$	48.4		$	81.0		$	164.4		$	227.0		Comprehensive income	$	65.8	$	60.8

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ACUITY BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)


	Nine Months Ended							Three Months Ended
	May 31, 2020			May 31, 2019				November 30, 2020		November 30, 2019
Cash flows from operating activities:							Cash flows from operating activities:
Net income	$	174.6		$	234.3		Net income	$	59.6	$	57.0
Adjustments to reconcile net income to net cash flows from operating activities:							Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	75.3			65.7			Depreciation and amortization	25.0		24.2
Share-based payment expense	32.5			22.9			Share-based payment expense	7.7		16.7
Loss on sale or disposal of property, plant, and equipment	0.2			0.6

Asset impairment	1.4			—			Asset impairment	4.0		0
Deferred income taxes	0.3			0.2

Accounts receivable	119.9			72.1			Accounts receivable	56.3		66.3
Inventories	1.0			20.5			Inventories	4.1		4.9
Prepayments and other current assets	13.2			(23.6		)	Prepayments and other current assets	(20.3)		(3.3)
Accounts payable	(14.7		)	(71.5		)	Accounts payable	(9.2)		(22.7)
Other current liabilities	(38.5		)	(21.6		)
Other	13.1			12.4			Other	(3.3)		(13.5)
Net cash provided by operating activities	378.3			312.0			Net cash provided by operating activities	123.9		129.6
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property, plant, and equipment	(38.3		)	(39.8		)	Purchases of property, plant, and equipment	(11.4)		(11.6)
Proceeds from sale of property, plant, and equipment	0.2			—			Proceeds from sale of property, plant, and equipment	0.4		0
Acquisition of businesses, net of cash acquired	(303.0		)	—			Acquisition of businesses, net of cash acquired	0		(302.0)

Other investing activities	(1.9		)	2.9			Other investing activities	(3.1)		(1.5)
Net cash used for investing activities	(343.0		)	(36.9		)	Net cash used for investing activities	(14.1)		(315.1)
Cash flows from financing activities:							Cash flows from financing activities:
Borrowings on credit facility	400.0			86.5
Repayments of borrowings on credit facility	(2.5		)	(86.5		)

Issuance of long-term debt							Issuance of long-term debt	493.9		0
Repayments of long-term debt	(350.7		)	(0.3		)	Repayments of long-term debt	(395.1)		(0.4)
Repurchases of common stock	—			(48.7		)	Repurchases of common stock	(255.2)		0
Proceeds from stock option exercises and other	0.7			0.5			Proceeds from stock option exercises and other	0.3		0.2
Payments of taxes withheld on net settlement of equity awards	(5.1		)	(4.9		)	Payments of taxes withheld on net settlement of equity awards	(3.0)		(4.1)
Dividends paid	(15.6		)	(15.6		)	Dividends paid	(5.0)		(5.2)
Net cash provided by (used for) financing activities	26.8			(69.0		)

Net cash used for financing activities							Net cash used for financing activities	(164.1)		(9.5)
Effect of exchange rate changes on cash and cash equivalents	(2.5		)	(1.5		)	Effect of exchange rate changes on cash and cash equivalents	0.6		0.6
Net change in cash and cash equivalents	59.6			204.6			Net change in cash and cash equivalents	(53.7)		(194.4)
Cash and cash equivalents at beginning of period	461.0			129.1			Cash and cash equivalents at beginning of period	560.7		461.0
Cash and cash equivalents at end of period	$	520.6		$	333.7		Cash and cash equivalents at end of period	$	507.0	$	266.6
Supplemental cash flow information:							Supplemental cash flow information:
Income taxes paid during the period	$	32.1		$	89.0		Income taxes paid during the period	$	9.3	$	4.6
Interest paid during the period	$	26.9		$	24.8		Interest paid during the period	$	15.1	$	12.9

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 — Description of Business and Basis of Presentation

Acuity Brands, Inc. (“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 “we,” “our,” “us,” “the Company,” or similar references) and was incorporated in 2001 under the laws of the State of Delaware. We are a market-leading industrial technology company that develops, manufactures, and provides lighting and building ~~management~~technology solutions and services for commercial, institutional, industrial, infrastructure, and residential applications throughout North America and select international markets. Our lighting and building ~~management~~technology solutions include devices such as luminaires, lighting controls, controls for various building systems, power supplies, prismatic skylights, and drivers, as well as integrated systems designed to optimize energy efficiency and comfort for various indoor and outdoor applications. Additionally, we continue to ~~expand our solutions portfolio, including software and services, to provide~~evolve Atrius as the intelligent building platform upon which a host of ~~other economic benefits resulting from data analytics that enables the Internet~~problem-solving applications can be deployed. Our solution, built on our local operating system, delivers increased efficiency and productivity by solving facility, operational, and line of ~~Things (“IoT”), supports the advancement of smart buildings, and allows businesses to develop custom applications to scale their operations.~~business problems through location awareness. We have 1 reportable segment serving the North American lighting market and select international markets.

We prepared the Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) to present the financial position, results of operations, and cash flows of Acuity Brands and its wholly-owned subsidiaries.

These unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present fairly our consolidated financial position as of ~~May 31,~~November 30, 2020, our consolidated comprehensive income for the three ~~and nine~~ months ended ~~May 31,~~November 30, 2020 and 2019, and our consolidated cash flows for the ~~nine~~three months ended ~~May 31,~~November 30, 2020 and 2019. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. However, we believe that the disclosures included herein are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited consolidated financial statements as of and for the three years ended August 31, ~~2019~~2020 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October ~~29, 2019~~23, 2020 (File No. 001-16583) (“Form 10-K”).

The results of operations for the three ~~and nine~~ months ended ~~May 31,~~November 30, 2020 and 2019 are not necessarily indicative of the results to be expected for the full fiscal year due primarily to continued uncertainty of general economic conditions that may impact our key end markets for the remainder of fiscal ~~2020,~~2021, seasonality, and the impact of any acquisitions, among other reasons. Additionally, we are uncertain of the future impact of the ongoing COVID-19 pandemic and of possible sustained deterioration in economic conditions to our sales channels, supply chain, manufacturing, and distribution as well as overall construction, renovation, and consumer spending.

Note 2 — Significant Accounting Policies

Use of Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior-period amounts have been reclassified to conform to the current year presentation. No material reclassifications occurred during the current period.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 3 — Acquisitions

The following discussion relates to acquisitions completed during fiscal 2020. NaN acquisitions were completed during fiscal 2021.

Fiscal 2020 Acquisitions

The Luminaires Group

On September 17, 2019, using cash on hand and borrowings under available existing credit arrangements, we acquired all of the equity interests of The Luminaires Group (“TLG”), a leading provider of specification-grade luminaires for commercial, institutional, hospitality, and municipal markets, all of which complement our current and dynamic lighting portfolio. ~~TLG’s~~TLG's indoor and outdoor lighting fixtures are marketed to architects, landscape architects, interior designers, and engineers through 5 niche lighting brands: ~~A-light, Cyclone,~~A-light™, Cyclone™, Eureka®, Luminaire ~~LED,~~LED™, and ~~Luminis.~~Luminis®.

LocusLabs, Inc.

On November 25, 2019, using cash on hand, we acquired all of the equity interests of LocusLabs, Inc (“LocusLabs”). The LocusLabs software platform supports navigation applications used on mobile devices, web browsers, and digital displays in airports, event centers, multi-floor office buildings, and campuses.

Accounting for Fiscal 2020 Acquisitions

~~Acquisition-related~~We accounted for the acquisitions of TLG and LocusLabs (collectively, the “2020 Acquisitions”) in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Acquired assets and liabilities were recorded at their estimated acquisition-date fair values, and acquisition-related costs were expensed as incurred. ~~Preliminary amounts related to the acquisition accounting for TLG and LocusLabs are reflected on the~~ ~~Consolidated Balance Sheets~~ as of May 31, 2020. The aggregate purchase price of these acquisitions reflects preliminary total goodwill and identified intangible assets of approximately $127.5 million and $180.7 million, respectively, as of May 31, 2020. Identified intangible assets consist of indefinite-lived marketing related intangibles as well as definite-lived customer-based and technology-based assets, which have a preliminary weighted average useful life of approximately 16 years. These amounts are deemed to be provisional until disclosed otherwise, as we continue to gather information related to the identification and valuation of intangible and other acquired assets and liabilities. These amounts are expected to change as we finalize the allocations. The operating results of the acquisitions have been included in our consolidated financial statements since the date of acquisition and are not material to our financial condition, results of operations, or cash flows.

~~Fiscal 2019 Acquisitions~~

~~WhiteOptics, LLC~~

On June 20, 2019, using cash on hand, we acquired all of the equity interests of WhiteOptics, LLC (“WhiteOptics”). WhiteOptics is headquartered in New Castle, Delaware and manufactures advanced optical components used to reflect, diffuse, and control light for light emitting diode (“LED”) lighting used in commercial and institutional applications. The operating results of WhiteOptics have been included in our consolidated financial statements since the date of acquisition and are not material to our financial condition, results of operations, or cash flows.

~~Accounting for Fiscal 2019 Acquisitions~~

As of ~~May 31,~~November 30, 2020, we have finalized the acquisition accounting for ~~WhiteOptics, LLC.~~the 2020 Acquisitions. There were no material changes to our financial statements as a result of the finalization of the acquisition ~~accounting.~~accounting for the 2020 Acquisitions.

The aggregate purchase price of these acquisitions reflects total goodwill and identified intangible assets of approximately $107.6 million and $180.6 million, respectively, as of November 30, 2020. Identified intangible assets consist of indefinite-lived marketing-related intangibles as well as definite-lived customer-based and technology-based assets, which have a weighted average useful life of approximately 16 years. Goodwill recognized from these acquisitions is comprised primarily of expected benefits related to complementing and expanding our solutions portfolio, including dynamic lighting and software, as well as the trained workforce acquired with these businesses and expected synergies from combining the operations of the acquired businesses with our operations. Goodwill from these acquisitions totaling $77.7 million is expected to be tax deductible.

Note 4 — New Accounting Pronouncements

Accounting Standards Adopted in Fiscal ~~2020~~

~~Accounting Standards Codification (~~“~~ASC~~”~~) 842 — Leases (“ASC 842”)~~2021

In ~~February~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2016-02,~~2016-13, ~~Leases~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU ~~2016-02”~~2016-13”), which requires ~~lessees~~an entity to ~~include most leases~~assess impairment of its financial instruments based on the ~~balance sheet as lease liabilities with an associated right-of-use (“ROU”) asset.~~entity's estimate of expected credit losses. Since the issuance of ASU ~~2016-02,~~2016-13, the FASB released several amendments to improve and clarify the implementation ~~guidance, as well as to change the allowable adoption methods.~~guidance. These standards have been collectively codified within ASC ~~842,~~Topic 326, ~~Leases~~ Credit Losses(“ (“ASC ~~842”~~326”). The provisions of ASC 326 are effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2019. We adopted the provisions of ASC 326 as of September 1, 2020 and applied these changes through an immaterial cumulative-effect adjustment of $0.2 million to retained earnings as of the date of adoption. Our estimation of current expected credit losses reflects our considerations of the impact of general economic conditions, including construction spending, unemployment rates, the effects of the COVID-19 pandemic, and macroeconomic growth, on our customers' ability to meet their obligations.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We adopted ASC 842 using the modified retrospective method and applied the standard to all leases existing as of September 1, 2019. Information for prior years presented has not been restated and continues to reflect the authoritative accounting standards in effect for those periods. We elected the package of transition practical expedients that allows us to carryforward our historical assessments of whether existing contracts contain leases, determinations of lease classification, and treatments of initial direct costs.

~~As of September 1, 2019, we recognized total operating lease liabilities of $64.7 million in our~~ ~~Consolidated Balance Sheets, of which $49.3 million was recorded within~~ ~~Long-term operating lease liabilities~~ ~~and $15.4 million was recorded within~~ ~~Current operating lease liabilities.~~ ~~We additionally derecognized $5.1 million of previously recorded net deferred rent balances and recorded ROU assets of $59.6 million related to our operating leases, which were reflected within~~ ~~Operating lease right-of-use assets~~ ~~in our~~ ~~Consolidated Balance Sheets.~~

In ~~March 2020,~~August 2018, the FASB issued ASU No. ~~2020-04,~~2018-15, ~~Reference Rate Reform (Topic 848)~~ Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract(“ (“ASU ~~2020-04”~~2018-15”), which ~~provides optional expedients and exceptions for applying U.S. GAAP~~requires customers to ~~contracts, hedging relationships, and other transactions affected by~~apply internal-use software guidance to determine the ~~discontinuation~~implementation costs that are able to be capitalized. Capitalized implementation costs are required to be amortized over the term of the ~~London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are~~arrangement, beginning when the cloud computing arrangement is ready for its intended use. ASU 2018-15 is effective for ~~all entities as of March 12, 2020~~fiscal years, and ~~expire on~~interim reporting periods within those years, beginning after December ~~31, 2022. The provisions of~~15, 2019. We adopted ASU ~~2020-04~~2018-15 prospectively, and this standard did not have a material effect on our financial condition, results of operations, ~~and~~or cash ~~flows as of May 31, 2020. We will continue to monitor any impacts of reference rate reform on our financial instruments.~~flows.

Accounting Standards Yet to Be Adopted

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We are currently evaluating the impacts of the provisions of ASU 2019-12 on our financial condition, results of operations, and cash flows.

~~In August 2018, the FASB issued ASU No. 2018-15,~~ ~~Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract~~ (“ASU 2018-15”), which will require customers to apply internal-use software guidance to determine the implementation costs that are able to be capitalized. Capitalized implementation costs will be required to be amortized over the term of the arrangement, beginning when the cloud computing arrangement is ready for its intended use. ASU 2018-15 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2019. The standard allows changes to be applied either retrospectively or prospectively. We will adopt the standard as required in fiscal 2021. The provisions of ASU 2018-15 are not expected to have a material effect on our financial condition, results of operations, or cash flows.

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments~~ (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. The provisions of ASU 2016-13 and the related amendments are effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2019. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

We have an implementation team tasked with reviewing our financial assets and determining the impact of the new standard to our financial statements. The team is also tasked with identifying appropriate changes to our business processes, systems, and controls to support recognition and disclosure under the new standard. The implementation team has completed its review of our current portfolio of financial assets and is currently assessing the potential impacts of the new standard. Our current financial asset portfolio consists primarily of trade receivables, and we expect the application of the expected credit loss model will have an immaterial impact on our trade receivable allowances. The implementation team reports its findings and progress of the project to management on a frequent basis and to the Audit Committee of the Board of Directors on a quarterly basis. We will adopt the amendments as required in fiscal 2021.

All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Note 5 — Fair Value Measurements

We determine fair value measurements based on the assumptions a market participant would use in pricing an asset or liability. ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a three-level hierarchy that categorizes 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.

~~We used quoted market prices to determine the fair value of Level 1 assets and liabilities.~~ 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 used quoted market prices to determine the fair value of Level 1 assets and liabilities. Our cash and cash equivalents (Level 1), which are required to be carried at fair value and measured on a recurring basis, were ~~$520.6~~$507.0 million and ~~$461.0~~$560.7 million as of ~~May 31,~~November 30, 2020 and August 31, ~~2019,~~2020, respectively.

Disclosures of fair value information about financial instruments (whether or not recognized in the balance sheet), 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 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.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The carrying values and estimated fair values of certain of our financial instruments ~~(Level 2)~~ were as follows as of the dates presented (in millions):


	November 30, 2020				August 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Investments in unconsolidated affiliates	$	5.5	$	5.5	$	6.0	$	6.0
Liabilities:
Senior unsecured public notes, net of unamortized discount and deferred costs	$	493.9	$	501.0	$	0	$	0
Borrowings under Term Loan Facility	0		0		395.0		395.0
Industrial revenue bond	4.0		4.0		4.0		4.0
Bank loans	2.0		2.2		2.1		2.3

May 31, 2020 August 31, 2019
Carrying Value Fair Value Carrying Value Fair Value
Senior unsecured public notes, net of unamortized discount and deferred costs $ —
$ —
$ 349.9
$ 352.7
Borrowings under Term Loan Facility 397.5
397.5
—
—
Industrial revenue bond 4.0
4.0
4.0
4.0
Bank loans 2.1
2.2
2.7
2.9

We hold equity investments in three unconsolidated affiliates without readily determinable fair value. These strategic investments represent less than a 20% ownership interest in each of the privately-held affiliates, and we do not maintain power over or control of the entities. We have elected the practical expedient in ASC 321, Investments—Equity Securities, to measure these investments at cost less any impairment adjusted for observable price changes, if any. Based on these considerations, we estimate that the carrying value of the acquired shares represents the fair value of the investment as of November 30, 2020. During the first quarter of fiscal 2021, we recorded an impairment charge for one of these investments of $4.0 million as a recapitalization of the underlying company diluted our holding value. This impairment is reflected in Miscellaneous expense, net within our Consolidated Statements of Comprehensive Income.

~~Borrowings under our~~Our senior unsecured ~~delayed draw term loan facility (the “Term Loan Facility”)~~public notes are carried at the outstanding balance, net of unamortized bond discount and deferred costs, as of the end of the reporting period. Fair value is estimated based on discounted future cash flows using rates currently available for debt of similar terms and maturity (Level 2). Our industrial revenue bond (“IRB”) ~~are~~is carried at the outstanding balance as of the end of the reporting period. The ~~borrowings under the Term Loan Facility and the~~ IRB ~~are~~is a variable-rate ~~instruments~~instrument that ~~reset~~resets on a frequent short-term basis; therefore, we estimate that the face ~~amounts~~amount of ~~these instruments approximate their~~this bond approximates its fair ~~values~~value as of ~~May 31,~~November 30, 2020 based on instruments of similar terms and maturity (Level 2). ~~See~~ ~~Note 10~~ — ~~Debt and Lines of Credit~~ ~~for further details on our long-term borrowings.~~

The bank loans are carried at the outstanding balance as of the end of the reporting period. Fair value is estimated based on discounted future cash flows using rates currently available for debt of similar terms and maturity (Level 2). See Note 9 — Debt and Lines of Credit for further details on our 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.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 6 — Inventories

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

May 31, 2020 August 31, 2019
Raw materials, supplies, and work in process ⁽¹⁾
$ 191.1
$ 179.4
Finished goods 204.4
183.7
Inventories excluding reserves 395.5
363.1
Less: Reserves (40.2 ) (22.3 )
Total inventories $ 355.3
$ 340.8


	November 30, 2020		August 31, 2020
Raw materials, supplies, and work in process (1)	$	161.4	$	170.3
Finished goods	196.4		199.1
Inventories excluding reserves	357.8		369.4
Less: Reserves	(41.7)		(49.3)
Total inventories	$	316.1	$	320.1

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

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

Note 7 — Property, Plant, and Equipment

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


	November 30, 2020		August 31, 2020
Land	$	22.4	$	22.2
Buildings and leasehold improvements	194.4		192.2
Machinery and equipment	601.6		588.4
Total property, plant, and equipment, at cost	818.4		802.8
Less: Accumulated depreciation and amortization	(549.6)		(532.3)
Property, plant, and equipment, net	$	268.8	$	270.5

May 31, 2020 August 31, 2019
Land $ 22.4
$ 22.6
Buildings and leasehold improvements 195.4
190.7
Machinery and equipment 574.2
544.4
Total property, plant, and equipment, at cost 792.0
757.7
Less: Accumulated depreciation and amortization (516.9 ) (480.4 )
Property, plant, and equipment, net $ 275.1
$ 277.3

Note 8 ~~— Leases~~

We lease property and equipment under operating lease arrangements, most of which relate to distribution centers and manufacturing facilities in the U.S., Mexico, and Canada. We include both the contractual term as well as any renewal option that we are reasonably certain to exercise in the determination of our lease terms. For leases with a term of greater than 12 months, we value lease liabilities and the related assets as the present value of the lease payments over the related term. We apply the short-term lease exception to leases with a term of 12 months or less and exclude such leases from our ~~Consolidated Balance Sheets. Payments related to these short-term leases are expensed on a straight-line basis over the lease term and reflected as a component of lease cost within our~~ ~~Consolidated Statements of Comprehensive Income~~. Lease payments generally consist of fixed amounts, and variable amounts based on a market rate or an index are not material to our consolidated lease cost. We have elected to use the practical expedient present in ASC 842 to not separate lease and non-lease components for all significant underlying asset classes and instead account for them together as a single lease component in the measurement of our lease liabilities. Our leases do not contain significant terms and conditions for variable lease payments.

Generally, the rate implicit in our leases is not readily determinable. Therefore, we discount future lease payments using our estimated incremental borrowing rate at lease commencement. We determine this rate based on a credit-adjusted risk-free rate, which approximates a secured rate over the lease term. The weighted average discount rate for operating leases as of May 31, 2020 was 2.2%.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

The following table presents the future undiscounted payments due on our operating lease liabilities as well as a reconciliation of those payments to our operating lease liabilities recorded as of the date presented (in millions):

Fiscal year May 31, 2020
2020 $ 4.8
2021 16.4
2022 11.9
2023 8.9
2024 6.3
Thereafter 18.4
Total undiscounted lease payments 66.7
Less: Discount due to interest (4.1 )
Present value of lease liabilities $ 62.6

~~The weighted average remaining lease term for our operating leases was six years as of May 31, 2020.~~

~~Lease cost is recorded within~~ ~~Cost of products sold~~ or ~~Selling, distribution, and administrative expenses~~ ~~in the~~ ~~Consolidated Statements of Comprehensive Income~~ ~~based on the primary use of the related ROU asset. The components of total lease cost were as follows for the period presented (in millions):~~

Three Months Ended Nine Months Ended
May 31, 2020 May 31, 2020
Operating lease cost $ 4.4
$ 13.7
Variable lease cost 0.6
1.8
Short-term lease cost 0.9
2.1
Total lease cost $ 5.9
$ 17.6

~~Prior to the adoption of ASC 842, we recognized rent expense of $5.9 million and $16.8 million during the three and nine months ended May 31, 2019, respectively.~~

Cash paid for operating lease liabilities during the nine months ended May 31, 2020 was $14.0 million. ROU assets obtained in exchange for lease liabilities, including those obtained from recent acquisitions, during the nine months ended May 31, 2020 were $11.3 million.

~~We do not have material leases that have not yet commenced as of May 31, 2020 that create significant rights and obligations.~~

~~We have subleased certain properties. Lease income from these subleases is recognized in the~~ ~~Consolidated Statements of Comprehensive Income~~ ~~as it is earned and is not material to our consolidated results of operations. We do not have any other significant transactions in which we are the lessor.~~

~~Note 9~~ — Goodwill and Intangible Assets

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

We recorded amortization expense of ~~$10.8~~$10.1 million and ~~$7.7~~$9.6 million during the three months ended ~~May 31, 2020 and 2019, respectively, and $30.8 million and $23.1 million during the nine months ended May 31,~~November 30, 2020 and 2019, respectively. Amortization expense is generally recorded on a straight-line basis and is expected to be approximately ~~$41.5~~$40.7 million in fiscal ~~2020,~~2021, $40.6 million in fiscal 2022, $40.3 million in fiscal 2023, $40.1 million in fiscal ~~2021, $40.0~~2024, and $33.3 million in fiscal ~~2022, $38.9 million in fiscal 2023, and $38.0 million in fiscal 2024.~~

2025.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Nine Months Ended
May 31, 2020 May 31, 2019
Beginning balance $ 967.3
$ 970.6
Provisional additions from acquired businesses 147.8
—
Adjustments to provisional amounts from acquired businesses (21.6 ) (0.2 )
Foreign currency translation adjustments (7.1 ) (6.3 )
Ending balance $ 1,086.4
$ 964.1


	Three Months Ended
	November 30, 2020		November 30, 2019
Beginning balance	$	1,080.0	$	967.3
Provisional additions from acquired businesses	0		147.8

Foreign currency translation adjustments	0.6		0.4
Ending balance	$	1,080.6	$	1,115.5

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

~~Impairment Analysis~~

We performed our annual impairment review for indefinite-lived intangible assets as of June 1, 2020, consisting of 13 trade names with a total carrying value of approximately $174.7 million immediately prior to the annual review. We utilized significant assumptions to estimate the fair value of these intangible assets using a fair value model based on discounted future cash flows (“fair value model”) in accordance with ASC 820. Future cash flows associated with each of our indefinite-lived trade names are 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. Based on the results of the indefinite-lived intangible asset analyses, we calculated an impairment charge of $1.4 million related to 1 trade name. We determined the facts and circumstances that gave rise to this impairment existed as of May 31, 2020 and recorded this charge within ~~Selling, distribution, and administrative expenses~~ ~~during the third fiscal quarter. The impairment analyses of the other 12 indefinite-lived intangible assets indicated that their fair values exceeded their carrying values.~~

Our revenue assumptions were based on our fiscal 2021 projections and recent third-party lighting, controls, and building management solutions market growth estimates for fiscal 2022 through 2030. The long-term growth rate used in determining terminal value was estimated at 3% and was based primarily on our understanding of projections for expected long-term growth within our addressable market and historical long-term performance. Estimated theoretical royalty rates ranged between 1% and 4%. We utilized a range of estimated discount rates for the trade names between 10% and 13%, based on the Capital Asset Pricing Model, which considers the current risk-free interest rate, beta, market risk premium, and entity specific size premium. No reasonably likely change in the assumptions used in the analyses for our trade names, including revenue growth rates, royalty rates, and discount rates, would result in an impairment that is material to our financial condition or results of operations.

We also performed our annual impairment test for goodwill as of June 1, 2020 and concluded the fair value of our one reporting unit exceeds its carrying value by a substantial margin. For more details on our testing procedures and significant assumptions related to our annual impairment tests, refer to the ~~Critical Accounting Estimates~~ ~~section of our Form 10-K.~~

Note 109 — Debt and Lines of Credit

Long-term Debt

On November 10, 2020, Acuity Brands Lighting, Inc. (“ABL”), our wholly-owned operating subsidiary, issued $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 2030 (the "Unsecured Notes"). The Unsecured Notes bear interest at a rate of 2.150% per annum and were issued at a price equal to 99.737% of their face value. Interest on the Unsecured Notes will be paid semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. The Unsecured Notes will mature on December 15, 2030. The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Brands and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Brands. Additionally, we recorded $4.8 million of deferred issuance costs related to the Unsecured Notes as a direct deduction from the face amount of the Unsecured Notes. These issuance costs are amortized over the 10-year term of the Unsecured Notes. As of November 30, 2020, the balance of the bond net of unamortized discount and deferred issuance costs was $493.9 million.

As of November 30, 2020, we also had $4.0 million of tax-exempt industrial revenue bonds that are scheduled to mature in June 2021. The carrying value of these bonds is reflected within Current maturities of debt on the Consolidated Balance Sheets as of November 30, 2020. Additionally, we had $2.0 million outstanding under fixed-rate bank loans at November 30, 2020 that mature in February 2028, subject to monthly or quarterly repayment schedules. Further discussion of our long-term debt is included within the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Lines of Credit

On June 29, 2018, we entered into a credit agreement (“Credit Agreement”) with a syndicate of banks that provides us with a $400.0 million five-year unsecured revolving credit facility (“Revolving Credit Facility”) and provided us with a $400.0 million unsecured delayed draw term loan facility ~~(“Term~~(the “Term Loan Facility”). We had 0 borrowings outstanding under the Revolving Credit Facility as of ~~May 31,~~November 30, 2020 or August 31, ~~2019.~~2020. We had ~~$397.5~~$395.0 million ~~in borrowings outstanding under the Term Loan Facility as~~ of ~~May 31, 2020 and 0~~ borrowings under the Term Loan Facility as of August 31, ~~2019. Based on~~2020, which we fully repaid during the ~~repayment schedule detailed below, $380.0 million~~first quarter of fiscal 2021 using the proceeds from the Unsecured Notes. The Credit Agreement allows for no future borrowings under the Term Loan ~~Facility are reflected within~~ ~~Long-termdebt~~ ~~on the~~ ~~Consolidated Balance Sheets~~ ~~as of May 31, 2020.~~

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Facility.

Generally, amounts outstanding under the Revolving Credit Facility allow for borrowings to bear interest at either the Eurocurrency Rate or the base rate at our option, plus an applicable margin. Eurocurrency Rate advances can be denominated in a variety of currencies, including U.S. Dollars, and amounts outstanding bear interest at a periodic fixed rate equal to the ~~LIBOR~~London Inter-Bank Offered Rate (“LIBOR”) or screen rate for the applicable currency plus an applicable margin. The Eurocurrency Rate applicable margin is based on our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 1.000% to 1.375%. Base rate advances bear interest at an alternate base rate plus an applicable margin. The base rate applicable margin is based on our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 0.000% to 0.375%. The Term Loan Facility allowed for borrowings to be drawn over a period ending December 31, 2019, utilizing up to 4 separate installments, which are U.S. Dollar denominated. Borrowings under the Term Loan Facility will amortize in equal quarterly installments

Table of 2.5% per year in year one, 2.5% per year in year two, 5.0% per year in year three, 5.0% per year in year four, and 7.5% per year in year five. Any remaining borrowings under the Term Loan Facility are due and payable in full on June 29, 2023. The Term Loan Facility allows for borrowings to bear interest at either a Eurocurrency Rate or the base rate, at our option, in each case plus an applicable margin. Eurocurrency Rate advances can be denominated in a variety of currencies, including U.S. Dollars, and amounts outstanding bear interest at a periodic fixed rate equal to the LIBOR or screen rate for the applicable currency plus an applicable margin. The Eurocurrency applicable margin is based on our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 0.875% to 1.250%. Base Rate advances bear interest at an alternate base rate plus an applicable margin. The base rate applicable margin is based on our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 0.0% to 0.25%.Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

We are required to pay certain fees in connection with the Credit Agreement, including administrative service fees and annual facility fees. The annual facility fee is payable quarterly, in arrears, and is determined by our leverage ratio as defined in the Credit Agreement. The facility fee ranges from 0.125% to ~~0.25%~~0.250% of the aggregate $800.0 million commitment of the lenders under the Credit Agreement. The Credit Agreement contains financial covenants, including a minimum interest expense coverage ratio (“Minimum Interest Expense Coverage Ratio”) and a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness to earnings before interest, tax, depreciation, and amortization (“EBITDA”), as such terms are defined in the Credit Agreement. These ratios are computed at the end of each fiscal quarter for the most recent 12-month period. The Credit Agreement generally allows for a Minimum Interest Expense Coverage Ratio of 2.50 and a Maximum Leverage Ratio of 3.50, subject to certain conditions, as such terms are defined in the Credit Agreement.

We were in compliance with all financial covenants under the Credit Agreement as of ~~May 31,~~November 30, 2020. At ~~May 31,~~November 30, 2020, we had additional borrowing capacity under the Credit Agreement of ~~$396.2~~$395.9 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less the outstanding letters of credit of ~~$3.8~~$4.1 million issued under the Revolving Credit Facility. As of ~~May 31,~~November 30, 2020, we had outstanding letters of credit totaling ~~$8.1~~$8.3 million, primarily for securing collateral requirements under our casualty insurance programs and for providing credit support for our industrial revenue bond, which includes the ~~$3.8~~$4.1 million issued under the Revolving Credit Facility.

Borrowings and repayments on our Revolving Credit Facility with terms of three months or less are reported on a net basis on our Consolidated Statements of Cash Flows.

~~Long-term Debt~~

~~On December 16, 2019, we repaid $350.0 million of senior unsecured notes in full plus accrued interest with borrowings under our Term Loan Facility.~~

In addition to the long-term portion of borrowings under the Term Loan Facility, we had $4.0 million of tax-exempt industrial revenue bonds that are scheduled to mature in June 2021 and $2.1 million outstanding under fixed-rate bank loans outstanding at May 31, 2020. Further discussion of our long-term debt is included within the ~~Debt and Lines of Credit~~ ~~footnote of the~~ ~~Notes to Consolidated Financial Statements~~ ~~within our Form 10-K.~~

Interest Expense, net

Interest expense, net, is comprised primarily of interest expense on long-term debt, obligations in connection with non-qualified retirement benefits, and Revolving Credit Facility borrowings, partially offset by interest income earned on cash and cash equivalents.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

The following table summarizes the components of interest expense, net for the periods presented (in millions):


	Three Months Ended
	November 30, 2020		November 30, 2019
Interest expense	$	5.1	$	9.0
Interest income	(0.2)		(0.7)
Interest expense, net	$	4.9	$	8.3

Three Months Ended Nine Months Ended
May 31, 2020
May 31, 2019 May 31, 2020
May 31, 2019
Interest expense $ 6.1
$ 9.1
$ 21.9
$ 27.4
Interest income (0.7 ) (0.8 ) (2.5 ) (1.8 )
Interest expense, net $ 5.4
$ 8.3
$ 19.4
$ 25.6

Note 1110 — Commitments and Contingencies

In the normal course of business, we are subject to the effects of certain contractual stipulations, events, transactions, and laws and regulations that may, at times, require the recognition of liabilities, such as those related to self-insurance estimated liabilities and claims, legal and contractual issues, environmental laws and regulations, guarantees, and indemnities. We establish estimated liabilities when the associated costs related to uncertainties or guarantees become probable and can be reasonably estimated. For the period ended ~~May 31,~~November 30, 2020, no material changes have occurred in our estimated liabilities for self-insurance, litigation, environmental matters, guarantees and indemnities, or relevant events and circumstances, from those disclosed in the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Product Warranty and Recall Costs

Our products generally have a standard warranty term of five years that assure our products comply with agreed upon specifications. We record an accrual for the estimated amount of future warranty costs when the related revenue is recognized. Estimated costs related to product recalls based on a formal campaign soliciting repair or return of that product are accrued when they are deemed to be probable and can be reasonably estimated. Estimated future warranty and recall costs are primarily based on historical experience of identified warranty and recall claims. However, there can be no assurance that future warranty or recall costs will not exceed historical amounts or that new technology products may not generate unexpected costs. If actual future warranty or recall costs exceed historical amounts, additional increases in the accrual may be required, which could have a material adverse impact on our results of operations and cash flows.

Estimated liabilities for product warranty and recall costs are included in Other accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets. The following table summarizes changes in the estimated liabilities for product warranty and recall costs for the periods presented (in millions):

Nine Months Ended
May 31, 2020 May 31, 2019
Beginning balance $ 11.5
$ 27.3
Warranty and recall costs 21.5
12.9
Payments and other deductions (19.7 ) (14.2 )
Acquired warranty and recall liabilities 0.1
—
ASC 606 adjustments ⁽¹⁾
—
(14.8 )
Ending balance $ 13.4
$ 11.2

^{______________________________}

⁽¹⁾~~Certain service-type warranties accounted for as contingent liabilities prior to the adoption of ASC 606,~~ ~~Revenue from Contracts with Customers~~ ~~(“ASC 606”), are now reflected as contract liabilities effective September 1, 2018.~~

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~


	Three Months Ended
	November 30, 2020		November 30, 2019
Beginning balance	$	16.1	$	11.5
Warranty and recall costs	6.6		7.9
Payments and other deductions	(5.9)		(7.8)
Acquired warranty and recall liabilities	0		0.1

Ending balance	$	16.8	$	11.7

Lighting Science Group Patent Litigation

On April 30, 2019 and May 1, 2019, Lighting Science Group Corp. (“LSG”) filed complaints with the International Trade Commission and United States District Court for the District of Delaware, respectively, alleging infringement of 8 patents by the Company and others. On May 17, 2019, LSG amended both of its complaints and dropped its claims regarding 1 of the patents. On October 9, 2019 and November 6, 2019, LSG dropped from the International Trade Commission action its claims regarding 4 additional patents. For the remaining 73 patents, LSG’s infringement allegations relate to certain of our LED ~~luminaires~~luminaires. On April 7, 2020 and ~~related systems. LSG seeks orders from~~October 1, 2020, the International Trade Commission made final determinations that LSG was not entitled to ~~preclude~~any relief. In the ~~importation and sale~~District of ~~the accused products.~~Delaware action, LSG ~~seeks~~separately sought unspecified monetary damages, costs, and attorneys’ ~~fees in~~fees. During fiscal 2021, LSG and the Company reached an agreement to resolve their patent disputes pending before the International Trade Commission, United States District Court for the District of Delaware, ~~action. We dispute~~ and ~~have numerous defenses~~the Patent Trial and Appeal Board. According to the allegations, and we intend to vigorously defend against LSG’s claims. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and a request for an exclusion order and are in the stagesterms of the ~~proceedings where key factual~~settlement, the various pending actions will be dismissed with prejudice, each party will bear its own fees and ~~legal issues have not been resolved. For these reasons, we currently are unable to predict~~costs, and the ~~ultimate timing or outcome of or reasonably estimate~~Company will pay no compensation for the ~~possible losses or a range of possible losses resulting from these matters.~~rights granted under the settlement agreement.

Securities Class Action

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

an order granting our motion to dismiss in part and dismissing all claims based on 42 of the 47 statements challenged in the Consolidated Complaint but also denying the motion in part and allowing claims based on 5 challenged statements to proceed to discovery. The Eleventh Circuit Court of Appeals has granted the Company permission to file an interlocutory appeal of the District Court’s class certification order. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matters described above. We are insured, in excess of a self-retention, for Directors and Officers liability.

~~Trade Compliance Matters~~

In the course of routine reviews of import and export activity, we previously determined that we misclassified and/or inaccurately valued certain international shipments of products. We are conducting a detailed review of this activity to determine the extent of any liabilities and implementing the appropriate remedial measures. At this time, we are unable to determine the likelihood or amount of loss, if any, associated with these shipments.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Litigation

We are subject to various other legal claims arising in the normal course of business, including patent infringement, employment matters, and product liability claims. Based on information currently available, it is the opinion of management that the ultimate resolution of pending and threatened legal proceedings will not have a material adverse effect on our financial condition, results of operations, or cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of any such matters, if unfavorable, could have a material adverse effect on our financial condition, results of operations, or cash flows in future periods. We establish estimated liabilities for legal claims when associated costs become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the amounts accrued for such claims. However, we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the accrued amounts.

Note 1211 — Changes in Stockholders' Equity

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


	Common Stock Outstanding
	Shares	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock, at cost		Total
Balance, August 31, 2020	38.9	$	0.5	$	963.6	$	2,523.3	$	(132.7)	$	(1,227.2)	$	2,127.5
Net income	—	—		—		59.6		—		—		59.6
Other comprehensive income	—	—		—		—		6.2		—		6.2

Cumulative effect of adoption of ASC 326 (1)	—	—		—		(0.2)		—		—		(0.2)
Share-based payment amortization, issuances, and cancellations	0.1	—		4.7		—		—		—		4.7
Employee stock purchase plan issuances	—	—		0.3		—		—		—		0.3
Cash dividends of $0.13 per share paid on common stock	—	—		—		(5.0)		—		—		(5.0)

Repurchases of common stock	(2.6)	—		—		—		—		(256.1)		(256.1)
Balance, November 30, 2020	36.4	$	0.5	$	968.6	$	2,577.7	$	(126.5)	$	(1,483.3)	$	1,937.0

____________________________________

Common Stock Outstanding
Shares Amount
Paid-in
Capital

Retained
Earnings
Accumulated Other
Comprehensive
Loss
Treasury
Stock, at cost
Total
Balance, August 31, 2019 39.5
$ 0.5
$ 930.0
$ 2,295.8
$ (151.4 ) $ (1,156.0 ) $ 1,918.9
Net income —
—
—
57.0
—
—
57.0
Other comprehensive income —
—
—
—
3.8
—
3.8
Share-based payment amortization, issuances, and cancellations —
—
12.6
—
—
—
12.6
Employee stock purchase plan issuances —
—
0.2
—
—
—
0.2
Cash dividends of $0.13 per share paid on common stock —
—
—
(5.2 ) —
—
(5.2 )
Balance, November 30, 2019 39.5
0.5
942.8
2,347.6
(147.6 ) (1,156.0 ) 1,987.3
Net income —
—
—
57.2
—
—
57.2
Other comprehensive loss —
—
—
—
(2.0 ) —
(2.0 )
Share-based payment amortization, issuances, and cancellations —
—
7.5
—
—
—
7.5
Employee stock purchase plan issuances —
—
0.2
—
—
—
0.2
Cash dividends of $0.13 per share paid on common stock —
—
—
(5.2 ) —
—
(5.2 )
Stock options exercised —
—
0.1
—
—
—
0.1
Balance, February 29, 2020 39.5
0.5
950.6
2,399.6
(149.6 ) (1,156.0 ) 2,045.1
Net income —
—
—
60.4
—
—
60.4
Other comprehensive loss —
—
—
—
(12.0 ) —
(12.0 )
Share-based payment amortization, issuances, and cancellations —
—
7.2
—
—
—
7.2
Employee stock purchase plan issuances —
—
0.2
—
—
—
0.2
Cash dividends of $0.13 per share paid on common stock —
—
—
(5.2 ) —
—
(5.2 )
Balance, May 31, 2020 39.5
$ 0.5
$ 958.0
$ 2,454.8
$ (161.6 ) $ (1,156.0 ) $ 2,095.7
(1) See Note 4 - New Accounting Pronouncements for further details on our adoption of ASC 326.


	Common Stock Outstanding
	Shares	Amount		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock, at cost		Total
Balance, August 31, 2019	39.5	$	0.5	$	930.0	$	2,295.8	$	(151.4)	$	(1,156.0)	$	1,918.9
Net income	—	—		—		57.0		—		—		57.0
Other comprehensive income	—	—		—		—		3.8		—		3.8


Share-based payment amortization, issuances, and cancellations	0	—		12.6		—		—		—		12.6
Employee stock purchase plan issuances	—	—		0.2		—		—		—		0.2
Cash dividends of $0.13 per share paid on common stock	—	—		—		(5.2)		—		—		(5.2)


Balance, November 30, 2019	39.5	$	0.5	$	942.8	$	2,347.6	$	(147.6)	$	(1,156.0)	$	1,987.3

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Common Stock Outstanding
Shares Amount
Paid-in
Capital

Retained
Earnings
Accumulated Other
Comprehensive
Loss
Treasury
Stock, at cost
Total
Balance, August 31, 2018 40.0
$ 0.5
$ 906.3
$ 1,999.2
$ (114.8 ) $ (1,074.4 ) $ 1,716.8
Net income —
—
—
79.6
—
—
79.6
Other comprehensive loss —
—
—
—
(6.2 ) —
(6.2 )
ASC 606 adjustments —
—
—
(13.0 ) —
—
(13.0 )
Share-based payment amortization, issuances, and cancellations 0.1
—
3.8
—
—
—
3.8
Employee stock purchase plan issuances —
—
0.1
—
—
—
0.1
Cash dividends of $0.13 per share paid on common stock —
—
—
(5.2 ) —
—
(5.2 )
Repurchases of common stock (0.2 ) —
—
—
—
(25.0 ) (25.0 )
Balance, November 30, 2018 39.9
0.5
910.2
2,060.6
(121.0 ) (1,099.4 ) 1,750.9
Net income —
—
—
66.3
—
—
66.3
Other comprehensive income —
—
—
—
6.3
—
6.3
Share-based payment amortization, issuances, and cancellations —
—
7.1
—
—
—
7.1
Employee stock purchase plan issuances —
—
0.2
—
—
—
0.2
Cash dividends of $0.13 per share paid on common stock —
—
—
(5.3 ) —
—
(5.3 )
Repurchases of common stock (0.2 ) —
—
—
—
(23.7 ) (23.7 )
Balance, February 28, 2019 39.7
0.5
917.5
2,121.6
(114.7 ) (1,123.1 ) 1,801.8
Net income —
—
—
88.4
—
—
88.4
Other comprehensive loss —
—
—
—
(7.4 ) —
(7.4 )
Share-based payment amortization, issuances, and cancellations —
—
7.0
—
—
—
7.0
Employee stock purchase plan issuances —
—
0.2
—
—
—
0.2
Cash dividends of $0.13 per share paid on common stock —
—
—
(5.1 ) —
—
(5.1 )
Balance, May 31, 2019 39.7
$ 0.5
$ 924.7
$ 2,204.9
$ (122.1 ) $ (1,123.1 ) $ 1,884.9

Note 1312 — Revenue Recognition

We recognize revenue when we transfer control of goods and services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for goods and services and is recognized net of allowances for rebates, sales incentives, product returns, and discounts to customers. Further details regarding revenue recognition are included within the Revenue Recognition footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Contract Balances

Our rights related to collections from customers are unconditional and are reflected within Accounts receivable on the Consolidated Balance Sheets. We do not have any other significant contract assets. Contract liabilities arise when we receive cash or an unconditional right to collect cash prior to the transfer of control of goods or services.

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

May 31, 2020 August 31, 2019
Current deferred revenues $ 6.6
$ 4.7
Non-current deferred revenues 51.6
46.4


	November 30, 2020		August 31, 2020
Current deferred revenues	$	5.2	$	5.4
Non-current deferred revenues	54.2		53.6

Current deferred revenues primarily consist of software licenses as well as professional service and sales-type warranty fees collected prior to performing the related service. Current deferred revenues are included within Other current liabilities on the Consolidated Balance Sheets. These services are expected to be performed within one year. Non-current deferred revenues primarily consist of long-term service-type warranties, which are typically recognized ratably as revenue between five and ten years from the date of sale, and are included within Other long-term liabilities on the Consolidated Balance ~~Sheets~~.Sheets. Revenue recognized from beginning balances of contract liabilities during the ~~nine~~three months ended ~~May 31,~~November 30, 2020 totaled ~~$3.9~~$2.8 million.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Unsatisfied performance obligations as of ~~May 31,~~November 30, 2020 that do not represent contract liabilities consist primarily of orders for physical goods that have not yet been shipped, which are typically shipped within a few weeks of order receipt.

Disaggregated Revenues

Our lighting and building management solutions are sold primarily through independent sales agents who cover specific geographic areas and market channels, by internal sales representatives, through consumer retail channels, and directly to large corporate accounts. The following table shows revenue from contracts with customers by sales channel for the periods presented (in millions):


	Three Months Ended
	November 30, 2020		November 30, 2019
Independent sales network	$	599.5	$	618.0
Direct sales network	76.3		84.3
Retail sales	55.0		53.4
Corporate accounts	24.0		33.5
Other	37.2		45.5
Total	$	792.0	$	834.7

Three Months Ended Nine Months Ended
May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019
Independent sales network $ 584.3
$ 650.5
$ 1,799.2
$ 1,873.9
Direct sales network 67.3
97.2
224.9
283.5
Retail sales 48.0
58.7
158.2
217.5
Corporate accounts 39.4
96.1
127.7
221.7
Other 37.2
45.1
125.1
138.0
Total $ 776.2
$ 947.6
$ 2,435.1
$ 2,734.6

Note 1413 — Share-based Payments

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

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

savings plan.

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

Three Months Ended Nine Months Ended
May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019
Share-based payment expense $ 7.8
$ 7.6
$ 32.5
$ 22.9


	Three Months Ended
	November 30, 2020		November 30, 2019
Share-based payment expense	$	7.7	$	16.7

Further details regarding our stock options, restricted shares, and director compensation award programs ~~and~~as well as our share-based payments are included within the Share-based Payments footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Equity Plan Updates

Beginning in fiscal 2020, the Board of Directors (the “Board”) approved grants of performance share units to certain executives and key employees. These shares vest over a three-year period and are valued at the closing stock price on the date of grant. During the second quarter, additional performance shares were issued to certain key employees that vest over a two-year period based on the level of achievement of established performance thresholds and were valued at the closing stock price on the date of grant. The actual number of performance shares earned for these awards will be determined at the end of the related two-year or three-year period based on the level of achievement of established performance thresholds. We recognize compensation expense for these awards proportionately over the requisite service period for each employee when it becomes probable that the performance metric will be satisfied. As of May 31, 2020, we had approximately 67,000 performance share units outstanding.

~~Additionally, effective~~Effective for restricted stock and performance share grants awarded in October ~~2019~~2020 and thereafter, the Board ~~reinstated~~of Directors (the “Board”) discontinued a policy that ~~provides~~provided for the continued vesting of stock awards following retirement for all eligible participants who have attained age 60 and have at least 10ten years of service with the Company. ~~As such, for awards granted~~This policy required acceleration of share-based payment expense in October 2019 and later, we deem the requisite service period for a participant to be the shorter of either the award's stated vesting period or the time from grant until the participant satisfies the age and service criteria.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

certain circumstances.

Stock Options

As of ~~May 31,~~November 30, 2020, we had approximately ~~917,000~~1,192,000 options outstanding to officers and other key employees. The increase from the prior fiscal year end was due to a grant on ~~January 31,~~September 1, 2020 of ~~500,000~~approximately 277,000 options that have an exercise price equal to or greater than the fair market value of our stock as of the grant date. ~~Of these~~These options ~~400,000~~ vest and become exercisable over a ~~three year period (the "Service Options"). The remaining 100,000 vest and become exercisable over a four year~~four-year period and are also subject to a market condition (the "Market Options"). All of these options expire after ten years from the date of grant.

The following weighted average assumptions were used to estimate the fair value of ~~stock options~~the Market Options granted in the ~~second~~first quarter of fiscal ~~2020:~~2021:

Service Options Market Options
Valuation Methodology Black-Scholes Monte Carlo Simulation
Dividend yield 0.4% 0.4%
Expected volatility 33.7% 33.7%
Risk-free interest rate 1.3% 1.5%
Expected life of options 5 years 7 years
Weighted-average fair value of options $34.22 $44.74



			Market Options
Valuation Methodology			Monte Carlo Simulation
Dividend yield			0.5%
Expected volatility			36.5%
Risk-free interest rate			0.7%
Expected life of options			8 years
Weighted-average fair value of options			$40.45

The dividend yield was calculated based on annual dividends paid and the trailing 12-month average closing stock price at the time of grant. Expected volatility was based on historical volatility of our stock, calculated using the most recent time period equal to the expected life of the options. The risk-free interest rate was based on the U.S. Treasury yield for a term equal to the ~~expected life of the options at the time of grant for the Service Options and equal to the~~ contractual term for the Market Options. ~~We used historical exercise behavior data of similar employee groups to determine the~~The expected life of ~~options.~~the options is based on projected exercise dates resulting from the Monte Carlo simulation for each award tranche. All inputs noted above are estimates made at the time of grant. Actual realized value of each option grant could materially differ from these estimates, without impact to future reported ~~net income. NaN options were granted during the third quarter~~share-based payment expense.

Table of ~~fiscal 2020.~~Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Stock option activity during the periods presented was as follows:

Outstanding Exercisable

Number of
Shares
(in millions)

Weighted Average
Exercise Price

Number of
Shares
(in millions)

Weighted Average
Exercise Price
Outstanding at August 31, 2019 0.4 $146.70 0.3 $147.51
Granted 0.5 $121.87
Exercised — * $116.36
Canceled — * —
Outstanding at May 31, 2020 0.9 $133.18 0.4 $151.07

Range of option exercise prices:
$40.01 - $100.00 (average life - 2.4 years) 0.1 $62.25 0.1 $62.25
$100.01 - $160.00 (average life - 8.6 years) 0.7 $123.02 0.2 $126.16
$160.01 - $210.00 (average life - 5.4 years) 0.1 $207.80 0.1 $207.80
$210.01 - $239.76 (average life - 6.4 years) — * $239.76 — * $239.76


	Outstanding			Exercisable
	Number of Shares (in millions)		Weighted Average Exercise Price	Number of Shares (in millions)		Weighted Average Exercise Price
Outstanding at August 31, 2020	0.9		$133.19	0.4		$151.07
Granted	0.3		$108.96

Canceled	0	*	0
Outstanding at November 30, 2020	1.2		$127.56	0.4		$148.90

Range of option exercise prices:

$40.01 - $100.00 (average life - 1.9 years)	0.1		$62.25	0.1		$62.25
$100.01 - $160.00 (average life - 8.6 years)	1.0		$119.11	0.2		$126.85
$160.01 - $210.00 (average life - 4.9 years)	0.1		$207.80	0.1		$207.80
$210.01 - $239.76 (average life - 5.9 years)	0	*	$239.76	0	*	$239.76

___________________________

* Represents shares of less than 0.1 million.

~~There were 522 shares issued from option exercises during fiscal 2020, and 0~~NaN options were exercised during ~~fiscal~~the three months ended November 30, 2020 or 2019. As of ~~May 31,~~November 30, 2020, the total intrinsic value of options outstanding was ~~$1.5~~$7.5 million, the total intrinsic value of options expected to vest was 0,$2.9 million, and the total intrinsic value of options exercisable was ~~$1.5~~$4.5 million. As of ~~May 31,~~November 30, 2020, there was ~~$16.8~~$23.6 million of total unrecognized compensation cost related to unvested options. That cost is expected to be recognized over a weighted-average period of approximately ~~2.0~~2.5 years.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

Note 1514 — Pension Plans

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

Service cost of net periodic pension cost is allocated between Cost of products sold and Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income based on the nature of the employee's services. All other components of net periodic pension cost are included within Miscellaneous expense, net in the Consolidated Statements of Comprehensive Income. Net periodic pension cost included the following components before tax for the periods presented (in millions):

Three Months Ended
Nine Months Ended
May 31, 2020
May 31, 2019
May 31, 2020
May 31, 2019
Service cost $ 1.2
$ 0.8
$ 3.5
$ 2.4
Interest cost 1.8
2.2
5.5
6.7
Expected return on plan assets (3.2 ) (3.1 ) (9.4 ) (9.4 )
Amortization of prior service cost 1.0
0.8
3.0
2.3
Settlement loss —
—
—
0.4
Recognized actuarial loss 1.4
1.0
4.2
3.1
Net periodic pension cost $ 2.2
$ 1.7
$ 6.8
$ 5.5


	Three Months Ended
	November 30, 2020		November 30, 2019
Service cost	$	1.2	$	1.2
Interest cost	1.6		1.8
Expected return on plan assets	(3.3)		(3.1)
Amortization of prior service cost	0.7		1.0

Recognized actuarial loss	1.4		1.4
Net periodic pension cost	$	1.6	$	2.3

Further details regarding our pension plans are included within the Pension and Defined Contribution Plans footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1615 — Special Charges

During the first ~~six~~three months of fiscal ~~2020,~~2021, we recognized pre-tax special charges of ~~$8.5~~$0.7 million, which consisted ~~primarily~~ of severance costs and ~~ROU asset lease impairments related to planned facility closures. Additionally, we recognized~~ charges for relocation costs ~~and ROU lease asset impairment charges~~ associated with the previously announced transfer of activities from planned facility closures. We expect these actions to streamline our business activities, ~~and to~~ integrate recent acquisitions, and respond to reduced demand due to the COVID-19 pandemic will allow us to reduce spending in certain areas while permitting continued investment in future growth initiatives, such as new products, expanded market presence, and technology and innovation. Further details regarding our special charges are included within the Special Charges footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Additionally, we recognized pre-tax special charges of $3.3 million during the three months ended May 31, 2020, which consisted primarily of severance and employee-related charges for actions taken in response to reduced demand due to the COVID-19 pandemic.

The following table summarizes costs reflected within Special charges on the Consolidated Statements of Comprehensive Income for the periods presented (in millions):

Three Months Ended Nine Months Ended
May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019
Severance and employee-related costs $ 2.4
$ —
$ 8.1
$ (0.8 )
Other restructuring costs 0.9
(0.1 ) 3.7
2.1
Total special charges $ 3.3
$ (0.1 ) $ 11.8
$ 1.3

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~


	Three Months Ended
	November 30, 2020		November 30, 2019
Severance and employee-related costs	$	0.3	$	5.1
Relocation and other restructuring costs	0.4		1.8
Total special charges	$	0.7	$	6.9

As of ~~May 31,~~November 30, 2020, remaining restructuring reserves were ~~$4.2~~$2.0 million and are included in Accrued compensation on the Consolidated Balance Sheets. The changes in the reserves related to these programs during the period presented are summarized as follows (in millions):


	Fiscal 2020 Actions
Balance at August 31, 2020	$	3.0
Severance and employee-related costs	0.3
Payments made during the period	(1.3)
Balance at November 30, 2020	$	2.0

Fiscal 2020 Actions Fiscal 2019 Actions Fiscal 2018 Actions Total
Balance at August 31, 2019 $ —
$ 1.3
$ 0.6
$ 1.9
Severance costs 8.2
0.1
(0.2 ) 8.1
Payments made during the period (4.2 ) (1.2 ) (0.4 ) (5.8 )
Balance at May 31, 2020 $ 4.0
$ 0.2
$ —
$ 4.2

Note 1716 — Earnings Per Share

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed similarly but reflects the potential dilution that would occur if dilutive options were exercised, all unvested share-based payment awards were vested, and other distributions related to deferred stock agreements were incurred.

The following table calculates basic earnings per common share and diluted earnings per common share for the periods presented (in millions, except per share data):


	Three Months Ended
	November 30, 2020		November 30, 2019
Net income	$	59.6	$	57.0
Basic weighted average shares outstanding	37.6		39.5
Common stock equivalents	0.2		0.1
Diluted weighted average shares outstanding	37.8		39.6
Basic earnings per share	$	1.58	$	1.44
Diluted earnings per share	$	1.57	$	1.44

Three Months Ended Nine Months Ended
May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019
Net income $ 60.4
$ 88.4
$ 174.6
$ 234.3
Basic weighted average shares outstanding 39.5
39.7
39.5
39.8
Common stock equivalents 0.2
0.1
0.2
0.1
Diluted weighted average shares outstanding 39.7

39.8
39.7
39.9
Basic earnings per share $ 1.53
$ 2.23
$ 4.42
$ 5.89
Diluted earnings per share $ 1.52

$ 2.22

$ 4.40

$ 5.87

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table presents stock options, performance stock awards, and restricted stock awards that were excluded from the diluted earnings per share calculation for the periods presented as the effect of inclusion would have been antidilutive:


	Three Months Ended
	November 30, 2020	November 30, 2019
Stock options	1,127,837	278,972

Restricted stock awards	185,419	118,036

Three Months Ended Nine Months Ended
May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019
Stock options 852,719
283,731
528,225
297,445
Performance stock awards 31,604
—
7,351
—
Restricted stock awards 239,528
107,800
229,315
169,672

NaN performance share units were antidilutive for the three months ended November 30, 2020 and 2019.

Further discussion of our stock options and restricted stock awards is included within the Common Stock and Related Matters and Share-based Payments footnotes of the Notes to Consolidated Financial Statements within our Form 10-K.

Note 1817 — Comprehensive Income

Comprehensive income represents a measure of all changes in equity that result from recognized transactions and other economic events other than transactions with owners in their capacity as owners. Other comprehensive income (loss) items includes foreign currency translation and pension adjustments.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

The following tables summarize the changes in each component of accumulated other comprehensive loss during the periods presented (in millions):

Foreign Currency Items Defined Benefit Pension Plans Accumulated Other Comprehensive Loss Items
Balance at August 31, 2019 $ (65.4 ) $ (86.0 ) $ (151.4 )
Other comprehensive loss before reclassifications (15.6 ) —
(15.6 )
Amounts reclassified from accumulated other comprehensive loss ⁽¹⁾
—
5.4
5.4
Net current period other comprehensive (loss) income (15.6 ) 5.4
(10.2 )
Balance at May 31, 2020 $ (81.0 ) $ (80.6 ) $ (161.6 )


	Foreign Currency Items		Defined Benefit Pension Plans		Accumulated Other Comprehensive Loss Items
Balance at August 31, 2020	$	(53.5)	$	(79.2)	$	(132.7)
Other comprehensive income before reclassifications	4.6		0		4.6
Amounts reclassified from accumulated other comprehensive loss (1)	0		1.6		1.6
Net current period other comprehensive income	4.6		1.6		6.2
Balance at November 30, 2020	$	(48.9)	$	(77.6)	$	(126.5)

Foreign Currency Items Defined Benefit Pension Plans Accumulated Other Comprehensive Loss Items
Balance at August 31, 2018 $ (53.9 ) $ (60.9 ) $ (114.8 )
Other comprehensive (loss) income before reclassifications (12.6 ) 0.9
(11.7 )
Amounts reclassified from accumulated other comprehensive loss ⁽¹⁾
—
4.4
4.4
Net current period other comprehensive (loss) income (12.6 ) 5.3
(7.3 )
Balance at May 31, 2019 $ (66.5 )
$ (55.6 )
$ (122.1 )


	Foreign Currency Items		Defined Benefit Pension Plans		Accumulated Other Comprehensive Loss Items
Balance at August 31, 2019	$	(65.4)	$	(86.0)	$	(151.4)
Other comprehensive income before reclassifications	1.9		0		1.9
Amounts reclassified from accumulated other comprehensive loss (1)	0		1.9		1.9
Net current period other comprehensive income	1.9		1.9		3.8

Balance at November 30, 2019	$	(63.5)	$	(84.1)	$	(147.6)

_______________________________________

⁽¹⁾The before tax amounts of the defined benefit pension plan items are included in net periodic pension cost. See the Pension and Defined Contribution Plans footnote for additional details.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table summarizes the tax expense or benefit allocated to each component of other comprehensive income (loss) for the periods presented (in millions):


	Three Months Ended
	November 30, 2020						November 30, 2019
	Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount		Before Tax Amount		Tax (Expense) Benefit		Net of Tax Amount
Foreign currency translation adjustments	$	4.6	$	0	$	4.6	$	1.9	$	0	$	1.9
Defined benefit pension plans:


Amortization of defined benefit pension items:
Prior service cost	0.7		(0.2)		0.5		1.0		(0.2)		0.8
Actuarial losses	1.4		(0.3)		1.1		1.4		(0.3)		1.1

Total defined benefit pension plans, net	2.1		(0.5)		1.6		2.4		(0.5)		1.9
Other comprehensive income	$	6.7	$	(0.5)	$	6.2	$	4.3	$	(0.5)	$	3.8

Three Months Ended
May 31, 2020 May 31, 2019
Before Tax Amount Tax (Expense) Benefit Net of Tax Amount Before Tax Amount Tax (Expense) Benefit Net of Tax Amount
Foreign currency translation adjustments $ (13.8 ) $ —
$ (13.8 ) $ (8.7 ) $ —
$ (8.7 )
Defined benefit pension plans:
Amortization of defined benefit pension items:
Prior service cost
1.0
(0.2 ) 0.8
0.8
(0.2 ) 0.6
Actuarial losses 1.4
(0.4 ) 1.0
1.0
(0.3 ) 0.7
Total defined benefit pension plans, net 2.4
(0.6 ) 1.8
1.8
(0.5 ) 1.3
Other comprehensive loss $ (11.4 ) $ (0.6 ) $ (12.0 ) $ (6.9 ) $ (0.5 ) $ (7.4 )

Nine Months Ended
May 31, 2020 May 31, 2019
Before Tax Amount Tax (Expense) Benefit Net of Tax Amount Before Tax Amount Tax (Expense) Benefit Net of Tax Amount
Foreign currency translation adjustments $ (15.6 ) $ —
$ (15.6 ) $ (12.6 ) $ —
$ (12.6 )
Defined benefit pension plans:
Actuarial gain or loss —
—
—
1.3
(0.4 ) 0.9
Amortization of defined benefit pension items:
Prior service cost 3.0
(0.7 ) 2.3
2.3
(0.5 ) 1.8
Actuarial losses 4.2
(1.1 ) 3.1
3.1
(0.8 ) 2.3
Settlement losses —
—
—
0.4
(0.1 ) 0.3
Total defined benefit pension plans, net 7.2
(1.8 ) 5.4
7.1
(1.8 ) 5.3
Other comprehensive loss $ (8.4 ) $ (1.8 ) $ (10.2 ) $ (5.5 ) $ (1.8 ) $ (7.3 )

Table of Contents


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results of operations, financial position, cash flows, indebtedness, and other key financial information of Acuity Brands, Inc. (“Acuity Brands”) and its subsidiaries as of ~~May 31,~~November 30, 2020 and for the three ~~and nine~~ months ended ~~May 31,~~November 30, 2020 and 2019. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included within this report. Also, please refer to Acuity Brands' Annual Report on Form 10-K for the fiscal year ended August 31, ~~2019,~~2020, filed with the Securities and Exchange Commission (the “SEC”) on October ~~29, 2019~~23, 2020 (“Form 10-K”).

Overview

Company

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

We are a market-leading industrial technology company that ~~develops,~~designs, manufactures, and ~~provides lighting and building management solutions~~brings to market products and services for commercial, institutional, industrial, infrastructure, and residential applications throughout North America and select international markets. Our ~~lighting and~~products include building management ~~solutions include devices such as luminaires,~~systems, lighting, lighting controls, ~~controls for various building systems, power supplies, prismatic skylights,~~ and ~~drivers, as well as integrated systems designed~~location aware applications. We achieve growth through the development of innovative new products and services. Through the Acuity Business System, we achieve customer-focused efficiencies that allow us to ~~optimize energy efficiency~~increase market share and ~~comfort for various indoor~~deliver superior returns. We look to aggressively deploy capital to grow the business and ~~outdoor applications. Additionally, we continue~~ to expand our solutions portfolio, including software and services, to provide a host of other economic benefits resulting from data analytics that enables the Internet of Things (“IoT”), supports the advancement of smart buildings, and allows businesses to develop custom applications to scale their operations.enter attractive new verticals. As of ~~May 31,~~November 30, 2020, we operate 2018 manufacturing facilities and eight distribution facilities along with ~~three~~two warehouses to serve our extensive customer base.

We do not consider acquisitions a critical element of our strategy but seek opportunities to expand and enhance our portfolio of solutions, including the following ~~transactions:~~transactions during the prior fiscal year.

On September 17, 2019, using cash on hand and borrowings under available existing credit arrangements, we acquired all of the equity interests of The Luminaires Group (“TLG”), a leading provider of specification-grade luminaires for commercial, institutional, hospitality, and municipal markets, all of which complement our current and dynamic lighting portfolio. TLG’s indoor and outdoor lighting fixtures are marketed to architects, landscape architects, interior designers, and engineers through five niche lighting brands: ~~A-light, Cyclone,~~A-light™, Cyclone™, Eureka®, Luminaire ~~LED,~~LED™, and ~~Luminis.~~Luminis®.

The results of operations for the three ~~and nine~~ months ended ~~May 31,~~November 30, 2020 and 2019 are not necessarily indicative of the results to be expected for the full fiscal year due primarily to continued uncertainty of general economic conditions that may impact our key end markets for ~~the remainder of~~ fiscal ~~2020,~~2021, seasonality, and the impact of any acquisitions, among other reasons. Additionally, we are uncertain of the future impact of the ongoing COVID-19 pandemic and of possible sustained deterioration in economic conditions to our sales channels, supply chain, manufacturing, and distribution as well as overall construction, renovation, and consumer spending.

The COVID-19 Pandemic

During March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. This pandemic has resulted in worldwide government restrictions on the movement of people, goods, and services resulting in increased volatility in and disruptions to global markets. However, our manufacturing operations are deemed essential and continue to operate. We remain committed to prioritizing the health and well-being of our associates and their families and ensuring that we operate effectively. We have implemented policies to screen associates, contractors, and vendors for COVID-19 symptoms upon entering our manufacturing and distribution and open office facilities in the United States, Mexico, and other locations as permitted by law. We have also implemented one-way traffic flows, additional cleaning requirements for common spaces, mandatory face coverings, hand sanitizer stations, ~~social-distanced~~socially distanced workspaces, and self-serve pay stations within our cafeterias to mitigate the spread of the virus. Additionally, we are requiring certain employees whose job functions can be performed remotely to work from home ~~into~~for the ~~forseeable~~foreseeable future.

Table of Contents

~~During the third quarter of fiscal 2020, government-mandated~~Government-mandated and voluntary social distancing measures had an adverse impact on our results of operations. The pandemic has caused reduced construction and renovation spending during the ~~quarter~~year as well as a disruption in our supply chain for certain components, both of which negatively impacted our ~~third quarter~~fiscal 2021 sales. In fiscal 2020 ~~sales volumes. We also~~we experienced a limited number of temporary facility shutdowns due to government-mandated ~~closures as well as~~closures. We also continue to incur additional health and safety costs including expenditures for personal protection equipment and facility enhancements to maintain proper distancing guidelines issued by the Centers for Disease Control and Prevention. In response to our sales ~~volume~~ declines, we have taken actions to reduce costs, including the realignment of headcount with current volumes, a freeze on all non-essential employee travel, ~~and~~ other efforts to decrease discretionary ~~spending.~~spending, and planned reductions in our real estate footprint.

Although we have implemented significant measures to mitigate further spread of the virus, our employees, customers, suppliers, and contractors may continue to experience disruptions to business activities due to potential further government-mandated or voluntary shutdowns, general economic conditions, or other negative impacts of the COVID-19 pandemic. We are continuously monitoring the adverse effects of the pandemic and identifying steps to mitigate those effects. As the COVID-19 pandemic is continually evolving, we are uncertain of its ultimate duration and impact. See Part ~~II,~~I, Item 1a. Risk Factors of our Form 10-K.for further details regarding the potential impacts of COVID-19 to our results of operations, financial position, and cash flows.

Liquidity and Capital Resources

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

For the first ~~nine~~three months of fiscal ~~2020,~~2021, we paid ~~$38.3~~$11.4 million for property, plant, and equipment, primarily for tooling, ~~equipment,~~ new and enhanced information technology capabilities, equipment, and facility enhancements. We currently expect to invest ~~between $10 million and $15 million~~approximately 1.5% of net sales on capital expenditures during fiscal 2021.

During the ~~fourth~~first quarter of fiscal ~~2020.~~

~~In March 2018,~~2021, we repurchased 2.6 million shares. As of November 30, 2020, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board ~~of Directors (the “Board”) authorized the repurchase of up to six~~equaled 5.1 million ~~shares of the Company's common stock. As of May 31, 2020, 1.45 million shares had been repurchased under this authorization. No shares were repurchased in fiscal 2020.~~shares. We expect to repurchase the remaining shares available for repurchase on an opportunistic basis subject to various factors including stock price, Company performance, market conditions, and other possible uses of cash.

Our short-term cash needs are expected to include funding operations as currently planned; making capital investments as currently anticipated; paying quarterly stockholder dividends as currently anticipated; paying principal and interest on debt as currently ~~scheduled, including our borrowings under our unsecured delayed draw term loan facility (the “Term Loan Facility”);~~scheduled; making required contributions and distributions related to our employee benefit plans; funding possible acquisitions; and potentially repurchasing shares of our outstanding common stock. 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 flow from operations, and borrowing availability under financing arrangements. Additionally, we believe that our cash flows from operations and sources of funding, including, but not limited to, future borrowings and borrowing capacity, will sufficiently support our long-term liquidity needs. However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

Cash Flow

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

Our cash position at ~~May 31,~~November 30, 2020 was ~~$520.6~~$507.0 million, ~~an increase~~a decrease of ~~$59.6~~$53.7 million from August 31, ~~2019.~~2020. During the ~~nine~~three months ended ~~May 31,~~November 30, 2020, we generated net cash flows from operations of ~~$378.3~~$123.9 million. Borrowings completed in the first quarter of fiscal 2021, as more fully described below under the Capitalization section, contributed $493.9 million to the cash position. Cash generated from operating activities, cash on-hand, and ~~additional long-term debt~~funds from borrowings were used during the ~~nine~~three months ended ~~May 31,~~November 30, 2020 primarily to repay ~~long term debt obligations due~~

Table of ~~$350.7~~Contents

borrowings on our Term Loan Facility (defined below) of $395.0 million, to ~~fund acquisitions~~pay for share repurchases of ~~$303.0~~$255.2 million, to fund capital expenditures of ~~$38.3~~$11.4 million, to pay dividends to stockholders of ~~$15.6~~$5.0 million, and to pay

withholding taxes on the net settlement of equity awards of ~~$5.1~~$3.0 million.

We generated ~~$378.3~~$123.9 million of cash flows from operating activities during the ~~nine~~three months ended ~~May 31,~~November 30, 2020 compared with ~~$312.0~~$129.6 million in the prior-year period, ~~an increase~~a decrease of ~~$66.3~~$5.7 million, due primarily to ~~lower working capital requirements, partially offset by lower net income.~~the timing of certain payments.

We believe that investing in assets and programs that will over time increase the overall return on our invested capital is a key factor in driving stockholder value. We paid ~~$38.3~~$11.4 million and ~~$39.8~~$11.6 million during the first ~~nine~~three months of fiscal ~~2020~~2021 and ~~2019,~~2020, respectively, for property, plant, and equipment, primarily related to investments in tooling, ~~equipment,~~ new and enhanced information technology capabilities, equipment, and facility enhancements.

Capitalization

On November 10, 2020, Acuity Brands Lighting, Inc. (“ABL”), our wholly-owned operating subsidiary, issued $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 2030 (the "Unsecured Notes"). The Unsecured Notes bear interest at a rate of 2.150% per annum and were issued at a price equal to 99.737% of their face value. Interest on the Unsecured Notes will be paid semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. The Unsecured Notes will mature on December 15, 2030. The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Brands and ABL IP Holding LLC (“ABL IP Holding”, and, together with Acuity Brands, the “Guarantors”), a wholly-owned subsidiary of Acuity Brands. Additionally, we capitalized $4.8 million of deferred issuance costs related to the Unsecured Notes that are being amortized over the 10-year term. As of ~~May~~November 30, 2020, the balance of the bond net of unamortized discount and deferred issuance costs was $493.9 million.

As of November 30, 2020, we also had $4.0 million of tax-exempt industrial revenue bonds that are scheduled to mature in June 2021. The carrying value of these bonds is reflected within Current maturities of debt on the Consolidated Balance Sheets as of November 30, 2020. Additionally, we had $2.0 million outstanding under fixed-rate bank loans outstanding at November 30, 2020 that mature in February 2028, subject to monthly or quarterly repayment schedules. There have been no other material changes outside of the ordinary course of business in our contractual obligations since August 31, 2020.

The following tables present summarized financial information for Acuity Brands, ABL, 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	November 30, 2020		August 31, 2020
Current assets	$	1,027.6	$	1,152.6
Current assets due from non-guarantor affiliates	219.4		183.3
Non-current assets	1,404.6		1,416.0
Current liabilities	498.0		530.2
Non-current liabilities	842.6		723.8


Summarized Income Statement Information	Three Months Ended November 30, 2020
Net sales	$	662.2
Gross profit	280.7

Net income	60.0

As of November 30, 2020, our capital structure was comprised principally of ~~borrowings on~~ the ~~Term Loan Facility~~Unsecured Notes and equity of our stockholders. Total debt outstanding was ~~$403.6~~$499.9 million at ~~May 31,~~November 30, 2020 and consisted primarily of ~~variable-rate~~fixed-rate obligations. At August 31, ~~2019,~~2020, total debt outstanding was ~~$356.6~~$401.1 million and consisted primarily of ~~fixed-rate~~variable-rate obligations.

On June 29, 2018, we entered into a credit agreement (“Credit Agreement”) with a syndicate of banks that provides us with a $400.0 million five-year unsecured revolving credit facility (“Revolving Credit Facility”) and a $400.0 million ~~Term~~unsecured delayed draw term loan facility (the “Term Loan ~~Facility.~~Facility)”. We had no borrowings outstanding under the Revolving Credit Facility ~~as of May 31, 2020~~ or ~~August 31, 2019. We had $397.5 million in borrowings outstanding under~~ the Term Loan Facility as of ~~May~~November 30, 2020 or August 31, ~~2020 and no~~2020. We had $395.0 million of borrowings ~~outstanding~~ under the Term Loan Facility as of August 31, ~~2019. Based on~~2020, which we fully repaid during the ~~repayment schedule, $380.0 million~~first quarter of fiscal 2021 using the proceeds from the Unsecured Notes. The Credit Agreement allows for no future borrowings under the Term Loan ~~Facility are reflected within~~Facility.

~~Long-term debt~~ ~~on the~~ ~~Consolidated Balance Sheets~~ asTable of ~~May 31, 2020.~~Contents

In December 2019, we borrowed the full $400.0 million available under our Term Loan Facility. The proceeds were primarily used to repay the $350.0 million of senior unsecured notes, which matured on December 15, 2019, and the related accrued interest in full. Borrowings under the Term Loan Facility amortize in equal quarterly installments per year as described in the ~~Debt and Lines of Credit~~ ~~footnote of the~~ ~~Notes to Consolidated Financial Statements. Any remaining borrowings under the Term Loan Facility are due and payable in full on June 29, 2023. Additionally, see the~~ ~~Debt and Lines of Credit~~ footnote for interest rates related to the Term Loan Facility. There have been no other material changes outside of the ordinary course of business in our contractual obligations since August 31, 2019.

During the first ~~nine~~three months of fiscal ~~2020,~~2021, our consolidated stockholders’ equity ~~increased $176.8~~decreased $190.5 million to ~~$2.1~~$1.9 billion at ~~May 31,~~November 30, 2020, from ~~$1.9~~$2.1 billion at August 31, ~~2019.~~2020. The ~~increase~~decrease was due primarily to ~~comprehensive income,~~repurchases of our outstanding common stock, partially offset by ~~the payment of dividends.~~net income earned. Our debt to total capitalization ratio (calculated by dividing total debt by the sum of total debt and total stockholders’ equity) was ~~16.1%~~20.5% and ~~15.7%~~15.9% at ~~May 31,~~November 30, 2020 and August 31, ~~2019,~~2020, respectively. The ratio of debt, net of cash, to total capitalization, net of cash, was ~~(5.9)~~(0.4)% and ~~(5.8)~~(8.1)% at ~~May 31,~~November 30, 2020 and August 31, ~~2019,~~2020, respectively.

Dividends

We paid dividends on our common stock of ~~$15.6~~$5.0 million ($~~0.39~~0.13 per share) and $5.2 million ($0.13 per share) during the ~~nine~~three months ended ~~May 31,~~November 30, 2020 and ~~2019.~~2019, respectively. All decisions regarding the declaration and payment of dividends are at the discretion of the Board and are evaluated regularly in light of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Board deems relevant.

Table of Contents

Results of Operations

~~Third~~First Quarter of Fiscal ~~2020~~2021 Compared with ~~Third~~First Quarter of Fiscal ~~2019~~2020

The following table sets forth information comparing the components of net income for the three months ended ~~May 31,~~November 30, 2020 and 2019 (in millions except per share data):


	Three Months Ended													Three Months Ended
	May 31, 2020			May 31, 2019			Increase (Decrease)				Percent Change			November 30, 2020			November 30, 2019			Increase (Decrease)			Percent Change
Net sales	$	776.2		$	947.6		$	(171.4	)		(18.1	)%	Net sales	$	792.0		$	834.7		$	(42.7)		(5.1)	%
Cost of products sold	448.6			564.0			(115.4		)		(20.5	)%	Cost of products sold	459.6			478.9			(19.3)			(4.0)	%
Gross profit	327.6			383.6			(56.0		)		(14.6	)%	Gross profit	332.4			355.8			(23.4)			(6.6)	%
Percent of net sales	42.2		%	40.5		%	170			bps			Percent of net sales	42.0		%	42.6		%	(60)		bps
Selling, distribution, and administrative expenses	241.3			263.4			(22.1		)		(8.4	)%	Selling, distribution, and administrative expenses	246.0			265.3			(19.3)			(7.3)	%
Special charges	3.3			(0.1		)	3.4				NM		Special charges	0.7			6.9			(6.2)			NM
Operating profit	83.0			120.3			(37.3		)		(31.0	)%	Operating profit	85.7			83.6			2.1			2.5	%
Percent of net sales	10.7		%	12.7		%	(200		)	bps			Percent of net sales	10.8		%	10.0		%	80		bps
Other expense:													Other expense:
Interest expense, net	5.4			8.3			(2.9		)		(34.9	)%	Interest expense, net	4.9			8.3			(3.4)			(41.0)	%
Miscellaneous (income) expense, net	(0.9		)	0.2			(1.1		)		NM
Miscellaneous expense, net													Miscellaneous expense, net	1.6			1.4			0.2			NM
Total other expense	4.5			8.5			(4.0		)		(47.1	)%	Total other expense	6.5			9.7			(3.2)			(33.0)	%
Income before income taxes	78.5			111.8			(33.3		)		(29.8	)%	Income before income taxes	79.2			73.9			5.3			7.2	%
Percent of net sales	10.1		%	11.8		%	(170		)	bps			Percent of net sales	10.0		%	8.9		%	110		bps
Income tax expense	18.1			23.4			(5.3		)		(22.6	)%	Income tax expense	19.6			16.9			2.7			16.0	%
Effective tax rate	23.1		%	20.9		%							Effective tax rate	24.7		%	22.9		%
Net income	$	60.4		$	88.4		$	(28.0	)		(31.7	)%	Net income	$	59.6		$	57.0		$	2.6		4.6	%
Diluted earnings per share	$	1.52		$	2.22		$	(0.70	)		(31.5	)%	Diluted earnings per share	$	1.57		$	1.44		$	0.13		9.0	%
NM - not meaningful													NM - not meaningful

Net sales were ~~$776.2~~$792.0 million for the three months ended ~~May 31,~~November 30, 2020 compared with ~~$947.6~~$834.7 million reported for the three months ended ~~May 31,~~November 30, 2019, a decrease of ~~$171.4~~$42.7 million, or ~~18.1%~~5.1%. For the three months ended ~~May 31,~~November 30, 2020, we reported net income of ~~$60.4~~$59.6 million, ~~a decrease~~an increase of ~~$28.0~~$2.6 million, or ~~31.7%~~4.6%, compared with ~~$88.4~~$57.0 million for the three months ended ~~May 31,~~November 30, 2019. For the ~~third~~first quarter of fiscal ~~2020,~~2021, diluted earnings per share ~~decreased 31.5%~~increased 9.0% to ~~$1.52~~$1.57 compared with ~~$2.22~~$1.44 reported in the year-ago 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 our results of operations, which exclude the impact of acquisition-related items, amortization of acquired intangible assets, share-based payment expense, ~~and~~ special charges associated primarily with continued efforts to streamline the organization and integrate recent ~~acquisitions.~~acquisitions, and impairments of investments. Although the impacts of some of these items have been recognized in prior periods and could recur in future periods, we typically exclude these charges during internal reviews of performance and use 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 adjusted gross profit 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 our current financial performance. Specifically, we believe these non-U.S. GAAP measures provide greater comparability and enhanced visibility into our results of operations. ~~The~~There are limitations to the use of non-U.S. GAAP financial measures and such 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.

The non-U.S. GAAP measures as defined by us may not be comparable to similar non-U.S. GAAP measures presented by other companies. Our presentation of such measures, which may include adjustments to exclude unusual or non-recurring items, should not be construed as an inference that our future results will be unaffected by other unusual or non-recurring items.

Table of Contents


(In millions, except per share data)	Three Months Ended															(In millions, except per share data)	Three Months Ended
																	November 30, 2020				November 30, 2019				Increase (Decrease)		Percent Change
Gross profit																Gross profit	$	332.4			$	355.8			$	(23.4)	(6.6)	%
Percent of net sales																Percent of net sales			42.0	%			42.6	%	(60)		bps

Add-back: Acquisition-related items (1)																Add-back: Acquisition-related items (1)	—				1.1

Adjusted gross profit																Adjusted gross profit	$	332.4			$	356.9			$	(24.5)	(6.9)	%
Percent of net sales																Percent of net sales			42.0	%			42.8	%	(80)		bps

	May 31, 2020					May 31, 2019					Increase (Decrease)			Percent Change
Selling, distribution, and administrative expenses	$	241.3				$	263.4				$	(22.1	)	(8.4	)%	Selling, distribution, and administrative expenses	$	246.0			$	265.3			$	(19.3)	(7.3)	%
Percent of net sales				31.1	%				27.8	%	330			bps		Percent of net sales			31.1	%			31.8	%	(70)		bps
Less: Amortization of acquired intangible assets	(10.8		)			(7.7		)								Less: Amortization of acquired intangible assets	(10.1)				(9.6)
Less: Share-based payment expense	(7.8		)			(7.6		)								Less: Share-based payment expense	(7.7)				(16.7)
Less: Acquisition-related items (1)																Less: Acquisition-related items (1)	—				(1.1)
Adjusted selling, distribution, and administrative expenses	$	222.7				$	248.1				$	(25.4	)	(10.2	)%	Adjusted selling, distribution, and administrative expenses	$	228.2			$	237.9			$	(9.7)	(4.1)	%
Percent of net sales				28.7	%				26.2	%	250			bps		Percent of net sales			28.8	%			28.5	%	30		bps

Operating profit	$	83.0				$	120.3				$	(37.3	)	(31.0	)%	Operating profit	$	85.7			$	83.6			$	2.1	2.5	%
Percent of net sales				10.7	%				12.7	%	(200		)	bps		Percent of net sales			10.8	%			10.0	%	80		bps
Add-back: Amortization of acquired intangible assets	10.8					7.7										Add-back: Amortization of acquired intangible assets	10.1				9.6
Add-back: Share-based payment expense	7.8					7.6										Add-back: Share-based payment expense	7.7				16.7

Add-back: Acquisition-related items (1)																Add-back: Acquisition-related items (1)	—				2.2

Add-back: Special charges	3.3					(0.1		)								Add-back: Special charges	0.7				6.9
Adjusted operating profit	$	104.9				$	135.5				$	(30.6	)	(22.6	)%	Adjusted operating profit	$	104.2			$	119.0			$	(14.8)	(12.4)	%
Percent of net sales				13.5	%				14.3	%	(80		)	bps		Percent of net sales			13.2	%			14.3	%	(110)		bps


Other expense																Other expense	$	6.5			$	9.7			$	(3.2)	(33.0)	%
Less: Impairment of investment																Less: Impairment of investment	(4.0)				—
Adjusted other expense																Adjusted other expense	$	2.5			$	9.7			$	(7.2)	(74.2)	%

Net income	$	60.4				$	88.4				$	(28.0	)	(31.7	)%	Net income	$	59.6			$	57.0			$	2.6	4.6	%
Add-back: Amortization of acquired intangible assets	10.8					7.7										Add-back: Amortization of acquired intangible assets	10.1				9.6
Add-back: Share-based payment expense	7.8					7.6										Add-back: Share-based payment expense	7.7				16.7

Add-back: Acquisition-related items (1)																Add-back: Acquisition-related items (1)	—				2.2

Add-back: Special charges	3.3					(0.1		)								Add-back: Special charges	0.7				6.9
Add-back: Impairment of investment																Add-back: Impairment of investment	4.0				—
Total pre-tax adjustments to net income	21.9					15.2										Total pre-tax adjustments to net income	22.5				35.4
Income tax effects	(5.1		)			(3.0		)								Income tax effects	(5.2)				(8.2)

Adjusted net income	$	77.2				$	100.6				$	(23.4	)	(23.3	)%	Adjusted net income	$	76.9			$	84.2			$	(7.3)	(8.7)	%

Diluted earnings per share	$	1.52				$	2.22				$	(0.70	)	(31.5	)%	Diluted earnings per share	$	1.57			$	1.44			$	0.13	9.0	%
Adjusted diluted earnings per share	$	1.94				$	2.53				$	(0.59	)	(23.3	)%	Adjusted diluted earnings per share	$	2.03			$	2.13			$	(0.10)	(4.7)	%

____________________________

(1) Acquisition-related items include profit in inventory and professional fees.

Net Sales

Net sales for the three months ended ~~May 31,~~November 30, 2020 decreased ~~18.1%~~5.1% compared with the prior-year ~~period due primarily to~~period. From a ~~20% decrease~~sales channel perspective, sales in the retail channel increased 3%, reflecting strength in home center opportunities. Sales through the independent sales ~~volumes, partially offset by a contribution from acquired businesses of approximately 2%. Fiscal 2020 third quarter sales volumes~~network decreased 3% compared with the prior year due to lower volume, decreasing prices on certain products, and a changing mix of products sold due primarily to the ~~negative impacts~~impact of the COVID-19 pandemic. ~~The change~~Sales in ~~product prices and mix~~the direct sales network decreased 10%, reflecting weakness in large industrial projects, while sales in the corporate accounts channel declined 28% due primarily to lower retrofit activity in large big-box retailers. Changes in foreign currency rates did not have a meaningful impact on first quarter net sales.

Table of products sold (“price/mix”) was flat year over year as a favorable shift in sales channel mix was offset by overall lower pricing. Due to the changing dynamics of our product portfolio, it is not possible to precisely quantify or differentiate the individual components of volume, price, and mix.Contents

Gross Profit

Gross profit for the ~~third~~first quarter of fiscal ~~2020~~2021 decreased ~~$56.0~~$23.4 million, or ~~14.6%~~6.6%, to ~~$327.6~~$332.4 million compared with ~~$383.6~~$355.8 million in the prior-year period, and gross profit margin decreased 60 basis points to 42.0% from 42.6%. The declines in gross profit and margin were due primarily to lower ~~sales volumes as a result of the COVID-19 pandemic as described above, partially offset by lower costs for certain inputs~~volume and price as well as the contribution from acquisitions. Tariffs also continue to impact cost of goods sold and are expected to continue. Gross profit margin increased 170 basis points to 42.2% for the three months ended May 31, 2020 compared with 40.5%an unfavorable change in ~~the prior-year period. The improvement in gross profit margin was due primarily to lower costs for certain inputs, contributions from acquisitions, and favorable sales channel~~product mix, partially offset by lower ~~average selling prices.~~product input costs from cost reduction efforts. Adjusted gross profit for fiscal 2021 decreased $24.5 million, or 6.9%, to $332.4 compared with $356.9 for the prior year. Adjusted gross profit margin decreased 80 basis points to 42.0% compared to 42.8% in the prior year.

Operating Profit

SD&A expenses for the three months ended ~~May 31,~~November 30, 2020 were ~~$241.3~~$246.0 million compared with ~~$263.4~~$265.3 million in the prior-year period, a decrease of ~~$22.1~~$19.3 million, or ~~8.4%~~7.3%. The decrease in SD&A expenses was due primarily to decreased employee costs, lower freight and commissions associated with ~~lower~~decreased sales volumes, and lower travel ~~expenses,~~as well as sales and marketing expenses ~~and salaried employee costs~~ due in part to the COVID-19 pandemic. ~~These declines were partially offset by additional costs from recent acquisitions, including additional amortization~~In particular, share-based payment expense decreased due to the discontinuation of ~~acquired intangibles, and employee costs.~~certain retirement provisions in the equity incentive program that resulted in the acceleration of share-based payment expense for fiscal 2020 grants. SD&A expenses for the ~~third~~first quarter of fiscal ~~2020~~2021 were 31.1% of net sales compared with ~~27.8%~~31.8% for the prior-year period.

This increase was due primarily to higher overall commission rates associated with channel mix and acquisitions, increased amortization of acquired intangibles, and higher employee costs from acquisitions. Adjusted SD&A expenses for the three months ended ~~May 31,~~November 30, 2020 were ~~$222.7~~$228.2 million ~~(28.7%~~(28.8% of net sales) compared with ~~$248.1~~$237.9 million ~~(26.2%~~(28.5% of net sales) in the prior-year period.

We recognized pre-tax special charges of ~~$3.3~~$0.7 million during the ~~third~~first quarter of fiscal ~~2020~~2021 compared with ~~pre-tax special charge credits of $0.1~~$6.9 million recorded during the ~~third~~first quarter of fiscal ~~2019.~~2020. Further details regarding our special charges are included in the Special Charges footnote of the Notes to Consolidated Financial Statements.

Operating profit for the ~~third~~first quarter of fiscal ~~2020~~2021 was ~~$83.0~~$85.7 million ~~(10.7%~~(10.8% of net sales) compared with ~~$120.3~~$83.6 million ~~(12.7%~~(10.0% of net sales) for the prior-year period, ~~a decrease~~an increase of ~~$37.3~~$2.1 million, or ~~31.0%~~2.5%. The ~~decrease~~increase in operating profit was due to lower ~~gross profit~~SD&A expenses and ~~increased~~ special charges, partially offset by lower ~~SD&A expenses.~~gross profit. Adjusted operating profit decreased ~~$30.6~~$14.8 million, or ~~22.6%~~12.4%, to ~~$104.9~~$104.2 million for the ~~third~~first quarter of fiscal ~~2020~~2021 compared with ~~$135.5~~$119.0 million for the ~~third~~first quarter of fiscal ~~2019.~~2020. Adjusted operating profit margin decreased to ~~13.5%~~13.2% for ~~the third quarter of fiscal 2020 compared with 14.3% for the year-ago period.~~

~~Other Expense~~

Other expense consists of net interest expense and net miscellaneous (income) expense, which includes non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses. Interest expense, net, was $5.4 million and $8.3 million for the three months ended May 31, 2020 and 2019, respectively. The decrease in interest expense was due primarily to the interest savings associated with refinancing the previously outstanding 6% senior unsecured notes with funds under the Term Loan Facility, which are subject to lower short-term borrowing rates. We reported net miscellaneous income of $0.9 million and net miscellaneous expense $0.2 million for the three months ended May 31, 2020 and 2019, respectively.

~~Income Taxes and Net Income~~

Our effective income tax rate was 23.1% and 20.9% for the three months ended May 31, 2020 and 2019, respectively. The increase in the current fiscal tax rate was due primarily to the recognition in fiscal 2019 of certain research and development cost tax credits, including claims for prior periods, that did not recur in the current fiscal year. We currently estimate that our blended consolidated effective income tax rate, before any discrete items, will be approximately 23% for fiscal 2020, assuming the rates in our taxing jurisdictions remain generally consistent throughout the year.

Net income for the third quarter of fiscal 2020 decreased $28.0 million, or 31.7%, to $60.4 million from $88.4 million reported for the prior-year period. The decrease in net income resulted primarily from a decreased operating profit compared to the prior-year period partially offset by lower interest expense and income tax expense. Diluted earnings per share for the three months ended May 31, 2020 decreased $0.70 to $1.52 compared with diluted earnings per share of $2.22 for the prior-year period. This decrease reflects lower net income. Adjusted net income for the third quarter of fiscal 2020 was $77.2 million, compared with $100.6 million in the prior-year period, a decrease of $23.4 million, or 23.3%. Adjusted diluted earnings per share for the three months ended May 31, 2020 decreased $0.59, or 23.3%, to $1.94 compared with $2.53 for the prior-year period.

~~First Nine Months of Fiscal 2020 Compared with First Nine Months of Fiscal 2019~~

~~The following table sets forth information comparing the components of net income for the nine months ended May 31, 2020 and 2019 (in millions except per share data):~~

Nine Months Ended
May 31, 2020
May 31, 2019 Increase (Decrease) Percent Change
Net sales $ 2,435.1
$ 2,734.6
$ (299.5 ) (11.0 )%
Cost of products sold 1,407.8
1,649.6
(241.8 ) (14.7 )%
Gross profit 1,027.3
1,085.0
(57.7 ) (5.3 )%
Percent of net sales 42.2 % 39.7 % 250
bps
Selling, distribution, and administrative expenses 767.5
751.1
16.4
2.2 %
Special charges 11.8
1.3
10.5
NM
Operating profit 248.0
332.6
(84.6 ) (25.4 )%
Percent of net sales 10.2 % 12.2 % (200 ) bps
Other expense:

Interest expense, net 19.4
25.6
(6.2 ) (24.2 )%
Miscellaneous expense, net 1.5
2.6
(1.1 ) (42.3 )%
Total other expense 20.9
28.2
(7.3 ) (25.9 )%
Income before income taxes 227.1
304.4
(77.3 ) (25.4 )%
Percent of net sales 9.3 %
11.1 % (180 ) bps

Income tax expense 52.5
70.1
(17.6 ) (25.1 )%
Effective tax rate 23.1 % 23.0 %

Net income $ 174.6
$ 234.3
$ (59.7 ) (25.5 )%
Diluted earnings per share $ 4.40
$ 5.87
$ (1.47 ) (25.0 )%
NM - not meaningful

Net sales were $2.4 billion for the nine months ended May 31, 2020 compared with $2.7 billion reported for the nine months ended May 31, 2019, a decrease of $299.5 million, or 11.0%. For the nine months ended May 31, 2020, we reported net income of $174.6 million, a decrease of $59.7 million, or 25.5%, compared with $234.3 million for the nine months ended May 31, 2019. For the first nine months of fiscal 2020, diluted earnings per share decreased 25.0% to $4.40 compared with $5.87 reported in the year-ago period.

The following table reconciles certain U.S. GAAP financial measures to the corresponding non-U.S. GAAP measures referred to in the discussion of our results of operations, which exclude the impact of manufacturing inefficiencies, acquisition-related items, amortization of acquired intangible assets, share-based payment expense, and special charges associated primarily with continued efforts to streamline the organization. These non-U.S. GAAP financial measures, including adjusted gross profit and margin, adjusted SD&A expenses and adjusted SD&A expenses as a percent of net sales, adjusted operating profit and margin, adjusted net income, and adjusted diluted earnings per share, are provided to enhance the user’s overall understanding of our current financial performance. Specifically, we believe these non-U.S. GAAP measures provide greater comparability and enhanced visibility into our 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.

(In millions, except per share data) Nine Months Ended
May 31, 2020 May 31, 2019 Increase (Decrease) Percent Change
Gross profit $ 1,027.3
$ 1,085.0
$ (57.7 ) (5.3 )%
Percent of net sales 42.2 % 39.7 % 250
bps
Add-back: Manufacturing inefficiencies ⁽¹⁾
—
0.9

Add-back: Acquisition-related items ⁽²⁾
1.2
1.2

Adjusted gross profit $ 1,028.5

$ 1,087.1
$ (58.6 ) (5.4 )%
Percent of net sales 42.2 % 39.8 % 240
bps

Selling, distribution, and administrative expenses $ 767.5
$ 751.1
$ 16.4
2.2 %
Percent of net sales 31.5 % 27.5 % 400
bps
Less: Amortization of acquired intangible assets (30.8 ) (23.1 )
Less: Share-based payment expense (32.5 ) (22.9 )
Less: Acquisition-related items ⁽²⁾
(1.3 ) —

Adjusted selling, distribution, and administrative expenses $ 702.9
$ 705.1
$ (2.2 ) (0.3 )%
Percent of net sales 28.9 % 25.8 % 310
bps

Operating profit $ 248.0
$ 332.6
$ (84.6 ) (25.4 )%
Percent of net sales 10.2 % 12.2 % (200 ) bps
Add-back: Amortization of acquired intangible assets 30.8
23.1

Add-back: Share-based payment expense 32.5
22.9

Add-back: Manufacturing inefficiencies ⁽¹⁾
—
0.9

Add-back: Acquisition-related items ⁽²⁾
2.5
1.2

Add-back: Special charges 11.8
1.3

Adjusted operating profit $ 325.6
$ 382.0
$ (56.4 ) (14.8 )%
Percent of net sales 13.4 % 14.0 % (60 ) bps

Net income $ 174.6
$ 234.3
$ (59.7 ) (25.5 )%
Add-back: Amortization of acquired intangible assets 30.8
23.1

Add-back: Share-based payment expense 32.5
22.9

Add-back: Manufacturing inefficiencies ⁽¹⁾
—
0.9

Add-back: Acquisition-related items ⁽²⁾
2.5
1.2

Add-back: Special charges 11.8
1.3

Total pre-tax adjustments to net income 77.6

49.4

Income tax effect (17.7 ) (11.3 )
Adjusted net income $ 234.5
$ 272.4
$ (37.9 ) (13.9 )%

Diluted earnings per share $ 4.40
$ 5.87
$ (1.47 ) (25.0 )%
Adjusted diluted earnings per share $ 5.91
$ 6.83
$ (0.92 ) (13.5 )%

^{______________________________}

⁽¹⁾~~Incremental costs incurred due to manufacturing inefficiencies directly related to the closure of a facility.~~

⁽²⁾~~Acquisition-related items include profit in inventory and professional fees.~~

~~Net Sales~~

Net sales for the nine months ended May 31, 2020 decreased $299.5 million, or 11.0%, compared with the prior-year period due primarily to a decrease in sales volume of approximately 14%, partially offset by a contribution from acquired businesses of approximately 2% as well as a net favorable change in price/mix of 1%. Fiscal 2020 sales volumes decreased compared with the prior year due primarily to the negative impacts of the COVID-19 pandemic, and to a lesser extent 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. Price/mix was primarily impacted by

a favorable shift in sales channel mix. Due to the changing dynamics of our product portfolio, it is not possible to precisely quantify or differentiate the individual components of volume, price, and mix.

~~Gross Profit~~

Gross profit for the first nine months of fiscal 2020 decreased $57.7 million compared to the prior-year period, while gross profit margin increased to 42.2% for the nine months ended May 31, 2020 compared with 39.7% in the prior-year period. The improvement in gross profit margin was due primarily to favorable sales channel mix, lower costs for certain inputs, and contribution from acquisitions, partially offset by lower net sales volume. Additionally, tariffs continued to have an impact on cost of goods sold. Adjusted gross profit for the nine months ended May 31, 2020 was $1.0 billion (42.2% of net sales) compared with $1.1 billion (39.8% of net sales) in the prior-year period.

~~Operating Profit~~

SD&A expenses for the nine months ended May 31, 2020 were $767.5 million compared with $751.1 million in the prior-year period, an increase of $16.4 million, or 2.2%. The increase in SD&A expenses was due primarily to higher share-based payment expense, the addition of acquisitions, including employee costs and amortization of acquired intangibles, and higher professional fees. Share-based payment expense increased due to changes made to the equity incentive program as part of the Company’s comprehensive review of its compensation programs, which resulted in the acceleration of share-based payment expense in the first quarter of fiscal ~~2020.~~

~~SD&A expenses for the first nine months of fiscal 2020 were 31.5% of net sales~~2021 compared with ~~27.5%~~14.3% for the prior-year period. Adjusted SD&A expenses for the nine months ended May 31, 2020 were $702.9 million (28.9% of net sales) compared with $705.1 million (25.8% of net sales) in the prior-year period.

We recognized pre-tax special charges of $11.8 million during the first nine months of fiscal 2020, compared with pre-tax special charges of $1.3 million during the first nine months of fiscal 2019. Further details regarding our special charges are included in the ~~Special Charge~~ ~~footnote of the~~ ~~Notes to Consolidated Financial Statements~~.

Operating profit for the first nine months of fiscal 2020 was $248.0 million (10.2% of net sales) compared with $332.6 million (12.2% of net sales) for the prior-year period, a decrease of $84.6 million, or 25.4%. The decrease in operating profit was due to lower gross profit, an increase in SD&A expenses, and higher pre-tax special charges. Adjusted operating profit decreased by $56.4 million, or 14.8%, to $325.6 million for the first nine months of fiscal 2020 compared with $382.0 million for the first nine months of fiscal 2019. Adjusted operating profit margin for the first nine months of fiscal 2020 decreased 60 basis points to 13.4% compared with 14.0% in the year-ago period.

Other Expense

Other expense consists of net interest expense and net miscellaneous expense, which includes non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

Interest expense, net, was ~~$19.4~~$4.9 million and ~~$25.6~~$8.3 million for the ~~nine~~three months ended ~~May 31,~~November 30, 2020 and 2019, respectively. The decrease in interest expense was due primarily to the interest savings associated with refinancing the previously outstanding 6% senior unsecured notes with funds under the Term Loan Facility, which ~~are~~were subject to lower short-term borrowing rates.

We reported net miscellaneous expense of ~~$1.5~~$1.6 million and ~~$2.6~~$1.4 million for the ~~nine~~three months ended ~~May 31,~~November 30, 2020 and 2019, respectively. During the first quarter of fiscal 2021, we recorded an impairment charge of $4.0 million for an unconsolidated equity investment, which was partially offset by net foreign currency transaction gains.

Income Taxes and Net Income

Our effective income tax rate was ~~23.1%~~24.7% and ~~23.0%~~22.9% for the ~~nine~~three months ended ~~May 31,~~November 30, 2020 and 2019, respectively. The increase in the current fiscal tax rate was due primarily to the recognition in fiscal 2021 of unfavorable discrete items related to the deductibility of certain compensation. We currently estimate that our blended consolidated effective income tax rate, before any discrete items, will be approximately 23% for fiscal 2021, assuming the rates in our taxing jurisdictions remain generally consistent throughout the year.

Net income for the first ~~nine months~~quarter of fiscal ~~2020 decreased $59.7~~2021 increased $2.6 million, or ~~25.5%~~4.6%, to ~~$174.6~~$59.6 million from ~~$234.3~~$57.0 million reported for the prior-year period. The ~~decrease~~increase in net income resulted primarily from ~~a decreased~~an increased operating profit and lower interest expense, partially offset by a higher income tax expense compared to the prior-year ~~period partially offset by lower interest expense and income tax expense.~~period. Diluted earnings per share for the ~~nine~~three months ended ~~May 31,~~November 30, 2020 ~~decreased $1.47~~increased $0.13, or 9.0%, to ~~$4.40~~$1.57 compared with diluted earnings per share of ~~$5.87~~$1.44 for the prior-year period. This ~~decrease~~increase reflects higher net income as well as lower ~~net income.~~outstanding diluted shares. Adjusted net income for the first ~~nine months~~quarter of fiscal ~~2020~~2021 was ~~$234.5~~$76.9 million, compared with ~~$272.4~~$84.2 million in the prior-year period, a decrease of ~~$37.9~~$7.3 million, or ~~13.9%~~8.7%. Adjusted diluted

Table of Contents

earnings per share for the ~~nine~~three months ended ~~May 31,~~November 30, 2020 decreased ~~$0.92,~~$0.10, or ~~13.5%~~4.7%, to ~~$5.91~~$2.03 compared with ~~$6.83~~$2.13 for the prior-year period.

Outlook

We believe the execution of our strategy will provide attractive opportunities for profitable growth over the long term. Although we are aggressively managing our response to the ~~recent~~current COVID-19 pandemic, its impact on our full year fiscal ~~2020~~2021 results and beyond is uncertain. We believe that the most significant elements of uncertainty are the intensity and duration of the impact on construction, renovation, and consumer spending as well as the ability of our sales channels, supply chain, manufacturing, and distribution to continue to operate with minimal disruption for the remainder of fiscal ~~2020~~2021 and beyond, all of which could negatively impact our financial position, results of operations, cash flows, and outlook.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses the financial condition and results of operations as reflected in our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. As discussed in the Description of Business and Basis of Presentation footnote of the Notes to Consolidated Financial Statements, the preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expense during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition; inventory valuation; amortization and the recoverability of long-lived assets, including goodwill and intangible assets; share-based payment expense; medical, product warranty and recall, and other estimated liabilities; retirement benefits; and litigation. We base our estimates and judgments on our substantial historical experience and other relevant factors, 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 discuss the development of accounting estimates with the Audit Committee of the Board.

There have been no material changes in our critical accounting estimates during the current period. For a detailed discussion of other significant accounting policies that may involve a higher degree of judgment, refer to our Form 10-K.

Cautionary Statement Regarding Forward-Looking Statements and Information

This filing contains forward-looking statements within the meaning of the federal securities laws. Statements made herein that may be considered forward-looking include statements incorporating terms such as “expects,” “believes,” “intends,” “anticipates,” and similar terms that relate to future events, performance, or results of the Company. In addition, the Company, or the executive officers on the Company’s behalf, may from time to time make forward-looking statements in reports and other documents we file with the U.S. Securities and Exchange Commission or in connection with oral statements made to the press, current and potential investors, or others. Forward-looking statements include, without limitation: (a) our projections regarding financial performance, liquidity, capital structure, capital expenditures, investments, share repurchases, and dividends; (b) expectations about the impact of any changes in demand as well as volatility and uncertainty in general economic conditions; (c) our ability to execute and realize benefits from initiatives related to streamlining our operations and integrating recent acquisitions, realize synergies from acquisitions, capitalize on growth opportunities, and introduce new lighting and building management solutions; (d) our planned reductions in our real estate footprint; (e) our estimate of our fiscal ~~2020~~2021 effective income tax rate, results of operations, and cash flows; ~~(e)~~(f) our estimate of future amortization expense; ~~(f)~~(g) our ability to achieve our long-term financial goals and measures and outperform the markets we serve; ~~(g) the impact of changes in the political landscape and related policy changes, including monetary, regulatory, and trade policies;~~ (h) ~~our expectations related to mitigating efforts around recently imposed tariffs; (i)~~ our expectations about the resolution of patent litigation, securities class action, ~~trade compliance,~~ and/or other legal matters; and ~~(j)~~(i) our expectations of the impact of the current COVID-19 pandemic. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this quarterly report. 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. Our forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and management’s present expectations or projections. These risks and uncertainties that could cause our actual results to differ materially from those expressed in our forward-looking statements are discussed in Part ~~II, Item 1a. Risk Factors~~ ~~below and~~ ~~Part~~ I, Item 1a. Risk Factors of our Form 10-K.

Table of Contents


~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~

Item 3.Quantitative and Qualitative Disclosures about Market Risk

General.We are exposed to market risks that may impact our Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income, and Consolidated Statements of Cash Flows due primarily to fluctuations in interest rates, foreign exchange rates, and commodity prices. Our long-term debt as of August 31, ~~2019~~2020 consisted primarily of ~~fixed rate~~variable-rate obligations, whereas weat November 30, 2020, our variable-rate debt was solely comprised of the $4.0 million industrial revenue bond. We had ~~$401.5 million of variable-rate obligations~~no borrowings outstanding under the Revolving Credit Facility or the Term Loan Facility as of ~~May 31, 2020, consisting primarily of borrowings under our unsecured delayed draw term loan facility.~~November 30, 2020. A 10% increase in market interest rates ~~at May 31,~~during November 30, 2020, would have resulted in ~~$0.2 million and $0.4~~a de minimis amount of additional annual after-tax interest expense. A fluctuation in interest rates would not affect interest expense or cash flows related to the Company’s fixed-rate debt, which includes $500.0 million of ~~additional after-tax~~senior unsecured notes. A 10% increase in market interest ~~tax interest expense for~~rates at November 30, 2020 would have decreased the ~~three and nine months ended May 31, 2020, respectively.~~estimated fair value of the senior unsecured notes by approximately $9.5 million. Except for the change in our long-term debt from primarily ~~fixed~~variable to ~~variable rate~~fixed-rate obligations and the broad effects of the COVID-19 pandemic as a result of its negative impact on the global economy and major financial markets, there have been no other material changes to our exposure from market risks from those disclosed in Part II, Item 7a. Quantitative and Qualitative Disclosures About Market Risk of our Form 10-K.


~~Item 4.~~	~~Controls and Procedures~~

Item 4.Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to reasonably ensure that information required to be disclosed in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission (the “SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to reasonably ensure that information required to be disclosed by us in the reports filed under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of ~~May 31,~~November 30, 2020. This evaluation was carried out under the supervision and with the participation of management, including the principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that the design and operation of our disclosure controls and procedures are effective at a reasonable assurance level as of ~~May 31,~~November 30, 2020. However, because all disclosure procedures must rely to a significant degree on actions or decisions made by employees throughout the organization, such as reporting of material events, the Company and its reporting officers believe that they cannot provide absolute assurance that all control issues and instances of fraud or errors and omissions, if any, within the Company will be detected. Limitations within any control system, including our control system, include faulty judgments in decision-making or simple errors or mistakes. In addition, controls can be circumvented by an individual, by collusion between two or more people, or by management override of the control. Because of these limitations, misstatements due to error or fraud may occur and may not be detected.

~~During the nine months ended May 31, 2020, we completed our acquisitions~~

Table of The Luminaires Group (“TLG”) and LocusLabs, Inc (“LocusLabs”). SEC guidance permits management to omit an assessment of an acquired business' internal control over financial reporting from management's assessment of internal control over financial reporting for a period not to exceed one year from the date of the acquisition. Accordingly, management has not assessed TLG's or LocusLab's internal control over financial reporting as of May 31, 2020. Excluding the acquisitions, there have been no changes in our internal control over financial reporting that occurred during our most recent completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We began integrating TLG and LocusLabs into our existing control procedures from their respective dates of acquisition. We do not anticipate the integration of the acquired companies to result in changes that would materially affect our internal control over financial reporting.Contents

PART II. OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings~~

Item 1.Legal Proceedings

Lighting Science Group Patent Litigation

On April 30, 2019 and May 1, 2019, Lighting Science Group Corp. (“LSG”) filed complaints with the International Trade Commission and United States District Court for the District of Delaware, respectively, alleging infringement of eight patents by the Company and others. On May 17, 2019, LSG amended both of its complaints and dropped its claims regarding one of the patents. On October 9, 2019 and November 6, 2019, LSG dropped from the International Trade Commission action its claims regarding four additional patents. For the remaining ~~seven~~three patents, LSG’s infringement allegations relate to certain of our LED ~~luminaires~~luminaires. On April 7, 2020 and ~~related systems. LSG seeks orders from~~October 1, 2020, the International Trade Commission made final determinations that LSG was not entitled to ~~preclude~~any relief. In the ~~importation and sale~~District of ~~the accused products.~~Delaware action, LSG ~~seeks~~separately sought unspecified monetary damages, costs, and attorneys’ ~~fees in~~fees. During fiscal 2021, LSG and the Company have reached an agreement to resolve their patent disputes pending before the International Trade Commission, United States District Court for the District of Delaware, ~~action. We dispute~~ and ~~have numerous defenses~~the Patent Trial and Appeal Board. According to the allegations, and we intend to vigorously defend against LSG’s claims. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and a request for an exclusion order and are in the stagesterms of the ~~proceedings where key factual~~settlement, the various pending actions will be dismissed with prejudice, each party will bear its own fees and ~~legal issues have not been resolved. For these reasons, we currently are unable to predict~~costs, and the ~~ultimate timing or outcome of or reasonably estimate~~Company will pay no compensation for the ~~possible losses or a range of possible losses resulting from these matters.~~rights granted under the settlement agreement.

Securities Class Action

On January 3, 2018, a shareholder filed a class action complaint in the United States District Court for the District of Delaware against us and certain of our officers on behalf of all persons who purchased or otherwise acquired our stock between June 29, 2016 and April 3, 2017. On February 20, 2018, a different shareholder filed a second class action complaint in the same venue against the same parties on behalf of all persons who purchased or otherwise acquired our stock between October 15, 2015 and April 3, 2017. The cases were transferred on April 30, 2018, to the United States District Court for the Northern District of Georgia and subsequently were consolidated as In re Acuity Brands, Inc. Securities Litigation, Civil Action No. 1:18-cv-02140-MHC (N.D. Ga.). On October 5, 2018, the court-appointed lead plaintiff filed a consolidated amended class action complaint (the “Consolidated Complaint”), which supersedes the initial complaints. The Consolidated Complaint is brought on behalf of all persons who purchased our common stock between October 7, 2015 and April 3, 2017 and alleges that we and certain of our current ~~officers~~ and ~~one~~ former ~~executive~~officers/executives violated the federal securities laws by making false or misleading statements and/or omitting to disclose material adverse facts that (i) concealed known trends negatively impacting sales of our products and (ii) overstated our ability to achieve profitable sales growth. The plaintiffs seek ~~class certification,~~ unspecified monetary damages, costs, and attorneys’ fees. We dispute the allegations in the complaints and intend to vigorously defend against the claims. We filed a motion to dismiss the Consolidated Complaint. On August 12, 2019, the court entered an order granting our motion to dismiss in part and dismissing all claims based on 42 of the 47 statements challenged in the Consolidated Complaint but also denying the motion in part and allowing claims based on five challenged statements to proceed to discovery. The Eleventh Circuit Court of Appeals has granted the Company permission to file an interlocutory appeal of the District Court’s class certification order. Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key factual and legal issues have not been resolved. For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matters described above. We are insured, in excess of a self-retention, for Directors and Officers liability.

~~Trade Compliance Matters~~

Litigation

liabilities for legal claims when associated costs become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the amounts accrued for such claims. However, we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the accrued amounts.

Information regarding reportable legal proceedings is contained in Part I, Item 3. Legal Proceedings in our Form 10-K. Information set forth in this report’s Commitments and Contingencies footnote of the Notes to Consolidated

Table of Contents

Financial Statements describes any legal proceedings that became reportable during the quarter ended ~~May 31,~~November 30, 2020, and updates any descriptions of previously reported legal proceedings in which there have been material developments during such quarter. The discussion of legal proceedings included within the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements is incorporated into this Item 1 by reference.


~~Item 1a.~~	~~Risk Factors~~

~~The COVID-19 pandemic could have a material adverse effect our ability to operate, results of operations, financial condition, liquidity, and capital investments.~~

The World Health Organization has declared the COVID-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 local governments have implemented, certain measures to slow and limit the transmission of the virus, including shelter in place and social distancing ordinances. The pandemic and such preventive measures, or others required or that we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of certain locations; decreased employee availability; increased claims or other expenses; potential border closures; disruptions to the businesses of our channel partners; and others. Our suppliers and customers have also faced these and other challenges, which has led to a disruption in our supply chain for certain components as well as decreased construction and renovation spending and consumer demand for our products and services. These disruptions and challenges may continue for an indefinite period of time and may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments. Although these disruptions may continue to occur, the long-term economic impact and near-term financial impacts of the COVID-19 pandemic, including but not limited to, possible impairment, restructuring, and other charges, cannot be reliably quantified or estimated at this time due to the uncertainty of future developments.Item 1a. Risk Factors

~~Other than the item listed above, there~~There have been no material changes in our risk factors from those disclosed in Part I, Item 1a. Risk Factors of our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In March 2018, the Board of Directors (the “Board”) authorized the repurchase of up to six million shares of our common stock. As of October 22, 2020, 2.2 million shares were available for repurchase under this authorization. On October 23, 2020, the Board authorized the repurchase of an additional 3.8 million shares of our common stock, bringing our total authorization back to six million shares at that time. Under the new increased share repurchase authorization, we may repurchase shares of our common stock from time to time at prevailing market prices, depending on market conditions, through open market or privately negotiated transactions. No date has been established for the completion of the share repurchase program, and we are not obligated to repurchase any shares. Subject to applicable corporate securities laws, repurchases may be made at such times and in such amounts as management deems appropriate. Repurchases under the program can be discontinued at any time management feels additional repurchases are not warranted.

During the first quarter of fiscal 2021, we repurchased 2.6 million shares under these authorizations. As of November 30, 2020, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 5.1 million shares. The following table reflects activity related to equity securities we repurchased during the quarter ended November 30, 2020:


Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet Be Purchased Under the Plans
9/1/2020 through 9/30/2020	705,141	$	102.76	705,141	3,157,607
10/1/2020 through 10/31/2020	1,092,245	$	96.81	1,092,245	5,855,000
11/1/2020 through 11/30/2020	762,145	$	102.22	762,145	5,092,855
Total	2,559,531	$	100.06	2,559,531	5,092,855


~~Item 5.~~	~~Other Information~~

Item 5. Other Information

Declaration of Dividend

On ~~June 25, 2020, the~~January 6, 2021, the Board of Directors (the “Board”) declared a quarterly dividend of $0.13 per share. The dividend is payable on ~~August 3, 2020~~February 1, 2021 to stockholders of record on ~~July 17, 2020.~~January 20, 2021.

Results of Annual Stockholders Meeting

At our annual meeting of stockholders held on January 6, 2021 in Atlanta, Georgia, the stockholders considered and voted on the following proposals:

Table of Contents

PROPOSAL 1 - Votes regarding the persons elected to serve as Directors of the Company were as follows:


	Votes For	Votes Against	Votes Abstained	Broker Non-Votes
Neil M. Ashe	30,983,864	449,447	26,168	2,058,369
W. Patrick Battle	28,244,578	3,193,220	21,681	2,058,369
Peter C. Browning	25,183,940	6,253,802	21,737	2,058,369
G. Douglas Dillard, Jr.	28,612,344	2,825,429	21,706	2,058,369
James H. Hance, Jr.	30,529,766	903,398	26,315	2,058,369
Maya Leibman	30,854,234	584,268	20,977	2,058,369
Laura G. O'Shaughnessy	31,006,072	431,962	21,445	2,058,369
Dominic J. Pileggi	30,009,311	1,428,489	21,679	2,058,369
Ray M. Robinson	26,864,795	1,989,800	2,604,884	2,058,369
Mary A. Winston	25,223,285	6,216,500	19,694	2,058,369

PROPOSAL 2 - Votes cast regarding the ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal 2021 were as follows:


Votes For	Votes Against	Votes Abstained	Broker Non-Votes
32,987,960	517,311	12,577	None

PROPOSAL 3a - The results of the vote regarding the approval of an amendment to the Restated Certificate of Incorporation to eliminate supermajority voting provisions to amend the Restated Certificate of Incorporation and the Amended and Restated Bylaws were as follows:


Votes For	Votes Against	Votes Abstained	Broker Non-Votes
31,335,580	107,384	16,515	2,058,369

PROPOSAL 3b - The results of the vote regarding the approval of an amendment to the Restated Certificate of Incorporation to eliminate supermajority voting provisions to remove directors were as follows:


Votes For	Votes Against	Votes Abstained	Broker Non-Votes
31,334,617	107,639	17,223	2,058,369

PROPOSAL 4 - The results of the vote regarding the approval of an amendment to the Restated Certificate of Incorporation to grant stockholders the ability to call special meetings of stockholders were as follows:


Votes For	Votes Against	Votes Abstained	Broker Non-Votes
31,380,941	56,270	22,268	2,058,369

PROPOSAL 5 - The results of the advisory vote on the compensation of the named executive officers of the Company were as follows:


Votes For	Votes Against	Votes Abstained	Broker Non-Votes
10,313,396	21,120,179	25,904	2,058,369

Pursuant to the foregoing votes, the Company's stockholders: (i) elected ten directors nominated by the Board of Directors and listed above for a one-year term; (ii) approved the ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal 2021; (iii) approved the amendment to the

Table of Contents

Restated Certificate of Incorporation to eliminate supermajority voting provisions to amend the Restated Certificate of Incorporation and the Amended and Restated Bylaws; (iv) approved the amendment to the Restated Certificate of Incorporation to eliminate supermajority voting provisions to remove directors; (v) approved the amendments to the Amended and Restated Certificate of Incorporation; and (vi) did not approve, on an advisory basis, the Company's named executive officer compensation.


~~Item 6.~~	~~Exhibits~~

Item 6.Exhibits

Exhibits are listed on the Index to Exhibits.

Table of Contents

INDEX TO EXHIBITS

EXHIBIT 3

(a)

Restated Certificate of Incorporation of Acuity Brands, Inc. (formerly Acuity Brands Holdings, Inc.), dated as of September 26, 2007.

Reference is made to Exhibit 3.1 of registrant's Form 8-K as filed with the Commission on September 26, 2007, which is incorporated herein by reference.

(b)

Certificate of Amendment of Restated Certification of Incorporation of Acuity Brands, Inc. (formerly Acuity Brands Holdings, Inc.), dated as of September 26, 2007.

Reference is made to Exhibit 3.2 of registrant's Form 8-K as filed with the Commission on September 26, 2007, which is incorporated herein by reference.

(c)

Certificate of Amendment to the Restated Certificate of Incorporation of Acuity Brands, Inc., dated as of January 6, 2017.

Reference is made to Exhibit 3.C of registrant's Form 10-Q as filed with the Commission on January 9, 2017, which is incorporated herein by reference.

(d)

Certificate of Amendment to the Restated Certificate of Incorporation of Acuity Brands, Inc., dated as of January 7, 2021.

Filed with the Commission as part of this Form 10-Q.

(e)

Amended and Restated Bylaws of Acuity Brands, Inc., dated as of January ~~6, 2017.~~7, 2021.

Filed with the Commission as part of this Form 10-Q.

EXHIBIT 4

(a)

Indenture, dated as of November 10, 2020, between Acuity Brands Lighting, Inc. and U.S. Bank National Association, as trustee.

Reference is made to Exhibit ~~3.D~~4.1 of registrant's Form ~~10-Q~~8-K as filed with the Commission on ~~January 9, 2017,~~November 10, 2020, which is incorporated herein by reference.

(b)

First Supplemental Indenture, dated as of November 10, 2020, among Acuity Brands Lighting, Inc., Acuity Brands, Inc. and ABL IP Holding, LLC, and U.S. Bank National Association, as trustee.

Reference is made to Exhibit 4.2 of registrant's Form 8-K as filed with the Commission on November 10, 2020, which is incorporated herein by reference.

(c)

Officer’s Certificate, dated as of November 10, 2020, pursuant to Sections 3.01 and 3.03 of the Indenture, dated November 10, 2020, setting forth the terms of the 2.150% Senior Notes due 2030. the 2.150% Senior Notes due 2030.

Reference is made to Exhibit 4.3 of registrant's Form 8-K as filed with the Commission on November 10, 2020, which is incorporated herein by reference.

(d)

Form of 2.150% Senior Notes due 2030 (included in Exhibit 4.3).

Reference is made to Exhibit 4.4 of registrant's Form 8-K as filed with the Commission on November 10, 2020, which is incorporated herein by reference.

EXHIBIT 10

(a)

Amendment No. 1 to Acuity Brands, Inc. 2002 Supplemental Executive Retirement Plan.

Filed with the Commission as part of this Form 10-Q.

(b)

Amendment No. 3 to Acuity Brands Lighting, Inc. Severance Agreement between Acuity Brands Lighting, Inc. and Karen J. Holcom.

Filed with the Commission as part of this Form 10-Q.

(c)

A cuity Brands, Inc.Amended and Restated 2012 Omnibus Stock Incentive Compensation Plan Global Performance Unit Notification and Award Agreement .

Filed with the Commission as part of this Form 10-Q.

(d)

A cuity Brands, Inc. Amended and Restated 2012 Omnibus Stock Incentive Compensation Plan Global Restricted Stock Unit Notification and Award Agreement .

Filed with the Commission as part of this Form 10-Q.

EXHIBIT 22

List of Guarantors and Subsidiary Issuers of Guaranteed Securities.

Reference is made to Exhibit 22 of registrant's Form 10-K as filed with the Commission on October 23, 2020, which is incorporated herein by reference.

EXHIBIT 31

(a)

Certification of the Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed with the Commission as part of this Form 10-Q.

(b)

Certification of the Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed with the Commission as part of this Form 10-Q.

Table of Contents

EXHIBIT 32

(a)

Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed with the Commission as part of this Form 10-Q.

(b)

Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed with the Commission as part of this Form 10-Q.

EXHIBIT 101

.INS

XBRL Instance Document

The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

.SCH

XBRL Taxonomy Extension Schema Document.

Filed with the Commission as part of this Form 10-Q.

.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Filed with the Commission as part of this Form 10-Q.

.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

Filed with the Commission as part of this Form 10-Q.

.LAB

XBRL Taxonomy Extension Label Linkbase Document.

Filed with the Commission as part of this Form 10-Q.

.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

Filed with the Commission as part of this Form 10-Q.

EXHIBIT 104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

Filed with the Commission as part of this Form 10-Q

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ACUITY BRANDS, INC.

Date:

~~June 30, 2020~~January 7, 2021

By:

/S/ NEIL M. ASHE

NEIL M. ASHE

CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER

Date:

~~June 30, 2020~~January 7, 2021

By:

/S/ KAREN J. HOLCOM

KAREN J. HOLCOM

SENIOR VICE PRESIDENT AND

CHIEF FINANCIAL OFFICER (Principal Financial and

Accounting Officer)



Fiscal year	May 31, 2020
2020	$	4.8
2021	16.4
2022	11.9
2023	8.9
2024	6.3
Thereafter	18.4
Total undiscounted lease payments	66.7
Less: Discount due to interest	(4.1		)
Present value of lease liabilities	$	62.6



	Service Options	Market Options
Valuation Methodology	Black-Scholes	Monte Carlo Simulation
Dividend yield	0.4%	0.4%
Expected volatility	33.7%	33.7%
Risk-free interest rate	1.3%	1.5%
Expected life of options	5 years	7 years
Weighted-average fair value of options	$34.22	$44.74



	Fiscal 2020 Actions			Fiscal 2019 Actions			Fiscal 2018 Actions			Total
Balance at August 31, 2019	$	—		$	1.3		$	0.6		$	1.9
Severance costs	8.2			0.1			(0.2		)	8.1
Payments made during the period	(4.2		)	(1.2		)	(0.4		)	(5.8		)
Balance at May 31, 2020	$	4.0		$	0.2		$	—		$	4.2