What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-10-27 compared with 2020-10-23 · 599 added, 497 removed, 890 unchanged (55% of the section changed)

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Note 8 — Commitments and Contingencies

Note 9 — Segment Information

Note 10 — Revenue Recognition

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Note 16 — Supplemental Disaggregated Information

Note 16 — Subsequent Event

Note 17 — Quarterly Financial Data (Unaudited)

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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Based on this assessment, management believes that, as of August 31, 2021, the Company’s internal control over financial reporting is effective.

(collectively, the “2020 Acquisitions”), which are included in the Company’s consolidated financial statements as of August 31, 2020 and for the period from the respective acquisition dates through August 31, 2020.

As of August 31, 2020, the 2020 Acquisitions constituted less than 3% and 8% of the Company’s tangible assets and net tangible assets, respectively.

For the year ended August 31, 2020, the 2020 Acquisitions constituted less than 3% and 2% of the Company's net sales and pre-tax income, respectively.

Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the acquired businesses of Rockpile Ventures and ams OSRAM’s North American Digital Systems, (collectively, the “2021 Acquisitions”), which are included in the Company’s consolidated financial statements as of August 31, 2021 and for the period from the respective acquisition dates through August 31, 2021.

As of August 31, 2021, the 2021 Acquisitions constituted less than 4% of the Company’s consolidated assets and stockholders' equity.

For the year ended August 31, 2021, the 2021 Acquisitions constituted less than 1% of both the Company's net sales and pre-tax income.

The Company’s independent registered public accounting firm has issued an audit report on their audit of the Company’s internal control over financial reporting.

This report dated October 27, 2021 is included within this Form 10-K.

President and

ASHE /s/ KAREN J.

Ashe Chairman, President and

Chief Executive Officer

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We have audited the accompanying consolidated balance sheets of Acuity Brands, Inc.

(the Company) as of August 31, 2020 and 2019, the related consolidated statements of comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended August 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

(the Company) as of August 31, 2021 and 2020, the related consolidated statements of comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended August 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2021, in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Valuation of Indefinite-Lived Trade Names

Description of the Matter

At August 31, 2020, the Company’s indefinite-lived intangible assets consisted of thirteen trade names with an aggregate carrying value of approximately $174.3 million.

As explained in Note 2 to the consolidated financial statements, the Company tests indefinite-lived trade names for impairment on an annual basis or more frequently as facts and circumstances change.

Description of the Matter At August 31, 2021, the Company’s indefinite-lived intangible assets consisted of thirteen trade names with an aggregate carrying value of approximately $174.8 million.

As explained in Note 2 to the consolidated financial statements, the Company tests indefinite-lived trade names for impairment on an annual basis or more frequently if an event occurs or circumstances change that would more likely than not indicate that the fair value of the indefinite-lived trade name is below its carrying amount.

If the carrying amount exceeds the estimated fair value, an impairment loss would be recorded in the amount equal to the excess.

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Short-term growth rates reflect increased estimation uncertainty as a result of the COVID-19 pandemic.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s annual impairment process.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s annual impairment process.

This included testing controls over management’s review of the discounted cash flow model, including the significant assumptions described above.

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We also performed a sensitivity analysis to evaluate the potential change in the fair values of the trade names resulting from changes in the significant assumptions.

Valuation of Intangible Assets Resulting from the Acquisition of The Luminaires Group

Description of the Matter

As described in Note 4 to the consolidated financial statements, the Company acquired all equity interests of The Luminaires Group (“TLG”) in September 2019.

The Company preliminarily accounted for the acquisition as a business combination by recognizing the assets acquired and liabilities assumed at their estimated acquisition-date fair values.

Among the assets acquired, the Company recognized identifiable intangible assets, which primarily consisted of indefinite-lived marketing-based intangible assets and definite-lived customer-based intangible assets.

Auditing management's accounting for the acquisition of TLG involved especially subjective judgments and complex analyses related to the fair value estimates of the indefinite-lived marketing-related intangible assets and definite-lived customer-based intangibles assets due to the significant estimation uncertainty in determining the fair values of these assets.

The estimate of fair value of the acquired indefinite-lived marketing-related intangible assets is sensitive to changes in assumptions impacting the discounted future cash flows of the acquired business.

The estimate of fair value of the acquired definite-lived customer-based intangible assets is also sensitive to changes in assumptions impacting the discounted future cash flows of the acquired business.

The significant assumptions used to estimate the fair value of the indefinite-lived marketing-related intangible assets include revenue growth rates, estimated royalty rates and discount rates.

The significant assumptions used to estimate the fair value of the definite-lived customer-based intangible assets include revenue growth rates, customer attrition rates, profitability margins, and discount rates, which are affected by expectations about future market and economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s acquisition process, including controls over management’s review of the assumptions and methodologies used in the calculation of fair value of indefinite-lived marketing-related intangible assets and definite-lived customer-based intangible assets, as well as the Company’s review of the completeness and accuracy of the data used in the Company’s analysis.

To test the estimated fair value of the indefinite-lived marketing-based intangible assets and definite-lived customer-based intangible assets, we performed audit procedures that included, among others, assessing valuation methodologies and testing the significant assumptions and underlying data used by the Company.

For example, we evaluated the reasonableness of management’s forecasted revenues and profitability margins used in the fair value estimates by comparing those assumptions to the historical results of TLG and current industry, market and economic forecasts.

We also involved our valuation specialists to evaluate the valuation methodologies and the reasonableness of the discount rate and royalty rate assumptions used by management in the estimates.

As part of this evaluation, we compared the discount rate and royalty rate assumptions to market data.

In addition, we performed a sensitivity analysis on the significant assumptions to evaluate the change in the fair values of the indefinite-lived marketing-based intangible assets and definite-lived customer-based intangible assets that would result from the changes in assumptions.

/s/ Ernst & Young LLP

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2021, based on the COSO criteria.

(collectively, the 2020 Acquisitions), which are included in the 2020 consolidated financial statements of the Company and constituted less than 3% and 8% of tangible assets and net tangible assets, respectively, as of August 31, 2020 and less than 3% and 2% of net sales and pre-tax income, respectively, for the year then ended.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the acquired businesses of Rockpile Ventures and ams Osram's North American Digital Systems (collectively, the 2021 Acquisitions), which are included in the 2021 consolidated financial statements of the Company and constituted less than 4% of total assets and stockholders' equity as of August 31, 2021 and less than 1% of net sales and pre-tax income for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the 2021 Acquisitions.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2020 and 2019, the related consolidated statements of comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended August 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated October 23, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2021 and 2020, the related consolidated statements of comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended August 31, 2021, and the related notes and our report dated October 27, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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Accounts receivable, less reserve for doubtful accounts of $ 1.2 and $ 2.6 , respectively

Inventories 398.7 320.1

Prepayments and other current assets 82.5 58.6

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Operating lease right-of-use assets 58.0 63.4

Goodwill 1,094.7 1,080.0

Intangible assets, net 573.2 605.9

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Other long-term assets 33.9 29.5

Total assets $ 3,575.1 $ 3,491.7

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Deferred income taxes 101.0 94.9

Self-insurance liabilities

Other long-term liabilities 136.2 126.5

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Treasury stock, at cost — 18,826,611 and 15,012,449 shares, respectively

( 1,663.7 ) ( 1,227.2 )

Total stockholders’ equity 2,044.5 2,127.5

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Year Ended August 31,

2021 2020 2019

Net sales $ 3,461.0 $ 3,326.3 $ 3,672.7

Cost of products sold 1,986.0 1,923.9 2,193.0

Gross profit 1,475.0 1,402.4 1,479.7

Selling, distribution, and administrative expenses 1,044.1 1,028.5 1,015.0

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Income tax expense 89.9 76.4 94.5

Net income $ 306.3 $ 248.3 $ 330.4

Earnings per share:

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Comprehensive income:

Net income $ 306.3 $ 248.3 $ 330.4

Other comprehensive income (loss) items:

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Year Ended August 31,

2021 2020 2019

Cash flows from operating activities:

Net income $ 306.3 $ 248.3 $ 330.4

Adjustments to reconcile net income to net cash flows from operating activities:

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Share-based payment expense 32.5 38.2 29.2

Loss on the sale or disposal of property, plant, and equipment

(Gain) loss on the sale or disposal of property, plant, and equipment ( 0.1 ) 0.3 0.9

Asset impairments 6.0 8.8 —

Deferred income taxes ( 2.7 ) ( 6.7 ) 9.3

Gain on sale of business

Changes in operating assets and liabilities, net of acquisitions

Accounts receivable ( 68.7 ) 74.5 97.7

Inventories ( 35.5 ) 38.0 70.8

Prepayments and other current assets ( 18.2 ) 12.9 ( 34.0 )

Accounts payable 65.5 ( 19.6 ) ( 111.5 )

Other 23.5 9.0 13.6

Net cash provided by operating activities 408.7 504.8 494.7

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Proceeds from sale of property, plant, and equipment 4.7 0.2 —

Acquisition of businesses, net of cash acquired

Proceeds from sale of business

Acquisitions of businesses, net of cash acquired ( 75.3 ) ( 303.0 ) ( 2.9 )

Other investing activities ( 3.5 ) ( 2.1 ) 2.9

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Cash flows from financing activities:

Borrowings on credit facility

Repayments of borrowings on credit facility

Issuances of long-term debt 493.8 400.0 86.5

Repayments of long-term debt ( 401.1 ) ( 355.7 ) ( 86.9 )

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Common Stock Outstanding

Accumulated Other

Shares Amount Paid-in

Capital Retained

Earnings Accumulated Other

Comprehensive

Stock, at cost

Loss Items 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 — — — 330.4 — — 330.4

Other comprehensive loss — — — — ( 36.6 ) — ( 36.6 )

Reclassification of stranded tax effects of the Tax Cuts and Jobs Act

Share-based payment amortization, issuances, and cancellations 0.2 — 23.1 — — — 23.1

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Cash dividends of $ 0.52 per share paid on common stock

Stock options exercised

— — — ( 20.8 ) — — ( 20.8 )

Repurchases of common stock ( 0.7 ) — — — — ( 81.6 ) ( 81.6 )

ASC 606 adjustments — — — ( 13.0 ) — — ( 13.0 )

Balance, August 31, 2019 39.5 0.5 930.0 2,295.8 ( 151.4 ) ( 1,156.0 ) 1,918.9

Other comprehensive loss

Net income — — — 248.3 — — 248.3

Other comprehensive income — — — — 18.7 — 18.7

Share-based payment amortization, issuances, and cancellations 0.1 — 32.7 — — — 32.7

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Cash dividends of $ 0.52 per share paid on common stock

— — — ( 20.8 ) — — ( 20.8 )

Stock options exercised — — 0.1 — — — 0.1

Repurchases of common stock ( 0.7 ) — — — — ( 71.2 ) ( 71.2 )

ASC 606 adjustments

Balance, August 31, 2020 38.9 0.5 963.6 2,523.3 ( 132.7 ) ( 1,227.2 ) 2,127.5

Net income — — — 306.3 — — 306.3

Other comprehensive income — — — — 34.5 — 34.5

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Cash dividends of $ 0.52 per share paid on common stock

— — — ( 19.1 ) — — ( 19.1 )

Stock options exercised — — 2.2 — — — 2.2

Repurchases of common stock ( 3.8 ) — — — — ( 436.5 ) ( 436.5 )

Cumulative effect of adoption of ASC 326 — — — ( 0.2 ) — — ( 0.2 )

Balance, August 31, 2021 35.2 $ 0.5 $ 995.6 $ 2,810.3 $ ( 98.2 ) $ ( 1,663.7 ) $ 2,044.5

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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 technology solutions and services for commercial, institutional, industrial, infrastructure, and residential applications throughout North America and select international markets.

Our lighting and building 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 evolve Atrius as the intelligent building platform upon which a host of 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 business problems through location awareness.

We have one reportable segment serving the North American lighting market and select international markets.

(referred to herein as “we,” “our,” “us,” the “Company,” or similar references) was incorporated in 2001 under the laws of the State of Delaware.

We are a market-leading industrial technology company.

Through our two business segments, Acuity Brands Lighting and Lighting Controls (“ABL”) and the Intelligent Spaces Group (“ISG”) we design, manufacture, and bring to market products and services that make the world more brilliant, productive, and connected.

We achieve growth through the development of innovative new products and services, including building management systems, lighting, lighting controls, and location-aware applications.

ABL's portfolio of lighting solutions includes commercial, architectural, and specialty lighting in addition to lighting controls and components that can be combined to create integrated lighting controls systems.

We offer devices such as luminaires that predominantly utilize light emitting diode (“LED”) technology designed to optimize energy efficiency and comfort for various indoor and outdoor applications.

ABL's' portfolio of products includes but is not limited to the following brands:

Lithonia Lighting ® , Holophane ® , Peerless ® , Gotham ® , Mark Architectural Lighting TM , Winona ® Lighting, Juno ® , Indy TM , Aculux TM , Healthcare Lighting ® , Hydrel ® , American Electric Lighting ® , Sunoptics ® , eldoLED ® , nLight ® , Sensor Switch ® , IOTA ® , A-Light TM , Cyclone TM , Eureka ® , Lumniaire LED TM , Luminis ® , Dark to Light ® , and RELOC Wiring Solutions.

Principal customers of ABL include electrical distributors, retail home improvement centers, electric utilities, national accounts, digital retailers, lighting showrooms, and energy service companies located in North America and select international markets serving new construction, renovation and retrofit, and maintenance and repair applications.

ABL's lighting and lighting controls solutions are sold primarily through a network of independent sales agencies that cover specific geographic areas and market channels, by internal sales representatives, through consumer retail channels, and directly to large corporate accounts.

Products are delivered directly from our manufacturing facilities or through a network of distribution centers, regional warehouses, and commercial warehouses using both common carriers and a company-managed truck fleet.

To serve international customers, the sales forces utilize a variety of distribution methods to meet specific individual customer or country requirements.

ABL comprised approximately 95 % of consolidated revenues during fiscal 2021, 2020 , and 2019.

ISG offers building management systems and location-aware applications and sells predominantly to system integrators.

Our building management system includes products for controlling heating, ventilation, and air conditioning (“HVAC”), lighting, shades, and building access that deliver end-to-end optimization of those building systems.

Atrius TM , our intelligent building platform, enhances the occupant experience, improves building system management, and automates labor intensive tasks while delivering operational energy efficiency and cost reductions.

Through a connected and converged building system architecture, our platform delivers different applications, allows clients to upgrade over time with natural refresh cycles, and deploys new capability through both software and hardware updates.

Customers of ISG primarily include system integrators as well as retail stores, airports, and enterprise campuses throughout North America and select international locations.

ISG products and solutions are marketed under numerous brand names, including but not limited to Distech Controls ® , Atrius TM , and Rockpile Ventures.

ISG comprised approximately 5 % of consolidated revenues during fiscal 2021, 2020 , and 2019.

We have 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.

GAAP”) to present the financial position, results of operations, and cash flows of Acuity Brands, Inc.

and its wholly-owned subsidiaries.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 — Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Acuity Brands and its wholly-owned subsidiaries after elimination of intercompany transactions and accounts.

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, service-type warranties, and discounts to customers.

Please refer to the Revenue Recognition footnote of the Notes to Consolidated Financial Statements for additional information.

The Consolidated Financial Statements include the accounts of Acuity Brands, Inc.

and its wholly-owned subsidiaries after elimination of intercompany transactions and accounts.

Use of Estimates

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Actual results could differ from those estimates.

Revenue Recognition

Refer to the Revenue Recognition footnote of the Notes to Consolidated Financial Statements for information related to our revenue recognition accounting policies.

Cash and Cash Equivalents

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We record accounts receivable at net realizable value.

This value includes a reserve for doubtful accounts to reflect losses anticipated on accounts receivable balances.

The allowance is based on historical write-offs, an analysis of past due accounts based on the contractual terms of the receivables, and the economic status of customers, if known.

This value includes a reserve for doubtful accounts to reflect our estimate of expected credit losses over the contractual term of our receivables.

Our estimation of current expected credit losses reflects our considerations of historical write-offs, an analysis of past due accounts based on the contractual terms of the receivables, and the economic status of customers, if known.

We additionally consider the impact of general economic conditions, including construction spending, unemployment rates, and macroeconomic growth, on our customers' future ability to meet their obligations.

We believe that the allowance is sufficient to cover uncollectible amounts;

however, there can be no assurance that unanticipated future business conditions of customers will not have a negative impact on our results of operations.

Prior to the adoption of the new revenue accounting standard Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”) on September 1, 2018 , we recorded reserves for product returns, cash discounts, and other deductions due to customers as a reduction to our outstanding receivables.

As of September 1, 2019, we had a total reserve balance of $ 23.4 million .

Since the adoption of ASC 606, estimated liabilities for returns,

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

cash discounts, and other deductions are reflected within Other current liabilities within our Consolidated Balance Sheets rather than as reductions to our trade receivables.

Refer to the Revenue Recognition footnote for additional information.

Concentrations of Credit Risk

Concentrations of credit risk with respect to receivables, which are typically unsecured, are generally limited due to the wide variety of customers and markets using our lighting and building technology solutions as well as their dispersion across many different geographic areas.

One customer accounted for approximately 10 % of receivables at August 31, 2020 , 2019 , and 2018 .

Concentrations of credit risk with respect to receivables, which are typically unsecured, are generally limited due to the wide variety of customers and markets using our lighting, lighting controls, building management systems, and location-aware applications as well as their dispersion across many different geographic areas.

No customer accounted for 10 % of receivables at August 31, 2021;

however, one customer accounted for approximately 10 % of receivables at August 31, 2020 and 2019.

No single customer accounted for more than 10% of net sales in fiscal 2021, 2020, or 2019.

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No material reclassifications occurred during the current period.

Subsequent Events

We have evaluated subsequent events for recognition and disclosure for occurrences and transactions after the date of the consolidated financial statements as of August 31, 2020 .

See Subsequent Event footnote for additional details.

I nventories include materials, direct 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):

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories include materials, direct labor, inbound freight, customs, duties, tariffs, 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):

Raw materials, supplies, and work in process (1)

$ 209.5 $ 170.3

Finished goods 227.2 199.1

Inventories excluding reserves 436.7 369.4

Reserves ( 38.0 ) ( 49.3 )

Total inventories $ 398.7 $ 320.1

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(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.

W e review inventory quantities on hand and record a provision for excess or obsolete inventory primarily based on estimated future demand and current market conditions.

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.

The following table summarizes the changes in our inventory reserves for the periods presented (in millions):

Year Ended August 31,

2021 2020 2019

Beginning balance $ 49.3 $ 22.3 $ 36.8

Additions to reserve 21.4 36.3 10.7

Disposals of reserved inventory ( 32.7 ) ( 11.1 ) ( 25.1 )

Foreign currency translation adjustments — 1.8 ( 0.1 )

Ending balance $ 38.0 $ 49.3 $ 22.3

Assets Held for Sale

We classify assets as held for sale upon the development and approval of a plan for disposal, when the sale of the asset is probable, and transfer of the asset is expected to be completed within one year.

We cease the depreciation and amortization of the assets at the date of approval.

During the year ended August 31, 2020 , we classified three buildings as held for sale with a total carrying value of $ 4.1 million , within Prepayments and other current assets on the Consolidated Balance Sheets .

We did not have any assets classified as held for sale as of August 31, 2019 .

We concluded the carrying value of these assets approximated or exceeded their fair values less costs to sell.

We classify assets as held for sale when a plan for disposal is developed and approved, the asset is available for immediate sale, an active program to locate a buyer at a price reasonable in relation to current fair value is initiated, and transfer of the asset is expected to be completed within one year.

We cease the depreciation and amortization of the assets when all of these criteria have been met.

We classified as held for sale one building with a total carrying value of $ 6.6 million and three buildings with a total carrying value of $ 4.1 million within Prepayments and other current assets on the Consolidated Balance Sheets as of August 31, 2021 and 2020, respectively.

At each balance sheet date, we concluded the fair value less costs to sell exceeded the carrying value of each of these assets.

ACUITY BRANDS, INC

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Goodwill and Other Intangibles

Goodwill amounted to $ 1.1 billion and $ 967.3 million as of August 31, 2020 and 2019 , respectively.

The changes in the carrying amount of goodwill during the periods presented are summarized as follows (in millions):

Carrying Amount

Balance, August 31, 2018

Additions from an acquired business

The changes in the carrying amount of goodwill during the periods presented by segment are summarized as follows (in millions):

ABL ISG Total

Balance as of August 31, 2019 $ 907.2 $ 60.1 $ 967.3

Additions from acquired businesses 142.1 5.7 147.8

Adjustments to provisional amounts from acquired businesses ( 41.9 ) 0.4 ( 41.5 )

Foreign currency translation adjustments 5.2 1.2 6.4

Balance, August 31, 2019

Balance as of August 31, 2020 1,012.6 67.4 1,080.0

Additions from acquired businesses 6.9 3.1 10.0

Adjustments to provisional amounts from acquired businesses

Foreign currency translation adjustments 2.7 2.0 4.7

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Summarized information for our acquired intangible assets is as follows as of the dates presented (in millions except amortization periods):

Weighted Average Amortization Period in Years

Gross Carrying

Weighted Average Amortization Period in Years Gross Carrying

Amount Accumulated

Amortization Gross Carrying

Amount Accumulated

Definite-lived intangible assets:

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Indefinite-lived trade names $ 174.8 $ 174.3

Through multiple acquisitions, we 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.

Through multiple acquisitions, we acquired definite-lived intangible assets consisting primarily of customer relationships, patented technology, distribution networks, and trademarks and trade names associated with specific products, which are amortized over their estimated useful lives.

Indefinite-lived intangible assets consist of trade names that are expected to generate cash flows indefinitely.

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Amortization expense is generally recorded on a straight-line basis and is expected to be approximately $ 41.2 million in fiscal 2022, $ 40.5 million in fiscal 2023, $ 40.0 million in fiscal 2024, $ 31.9 million in fiscal 2025, and $ 29.1 million in fiscal 2026.

We test goodwill and indefinite-lived intangible assets for impairment on an annual basis or more frequently as facts and circumstances change, as required by ASC Topic 350, Intangibles — Goodwill and Other (“ASC 350”).

We test goodwill and indefinite-lived intangible assets for impairment on an annual basis or more frequently as facts and circumstances change, as required by Accounting Standards Codification (“ASC”) Topic 350, Intangibles — Goodwill and Other (“ASC 350”).

ASC 350 allows for an optional qualitative analysis for goodwill to determine the likelihood of impairment.

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The fair values can be determined based on a combination of valuation techniques including the expected present value of future cash flows, a market multiple approach, and a comparable transaction approach.

If the fair value of a reporting unit exceeds its carrying value,

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

goodwill is not considered impaired.

Conversely, if the carrying value of a reporting unit exceeds its fair value, an impairment charge for the difference is recorded.

In fiscal 2020 , we used a quantitative analysis based on discounted future cash flows to determine the likelihood of impairment for our one reporting unit.

In fiscal 2019 and 2018 , we used a qualitative fair value analysis to determine the likelihood of goodwill impairment.

The analysis for goodwill did not result in an impairment charge during fiscal 2020 , 2019 , or 2018 .

the fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired.

Conversely, if the carrying value of a reporting unit exceeds its fair value, an impairment charge for the difference would be recorded.

In fiscal 2021 and 2020, we used a quantitative analysis to calculate the fair value of our reporting units using a combination of discounted future cash flows and relevant market multiples.

In fiscal 2019, we used a qualitative fair value analysis to determine the likelihood of goodwill impairment.

The analysis for goodwill did no t result in an impairment charge during fiscal 2021, 2020, or 2019.

The impairment test for indefinite-lived trade names consists of comparing the fair value of a trade name with its carrying value.

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Significant assumptions, including estimated future net sales, royalty rates, and discount rates, are used in the determination of estimated fair value for indefinite-lived trade names.

Based on the results of the indefinite-lived intangible asset analyses for fiscal 2020 , we recorded an impairment charge of $ 1.4 million related to one trade name in Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income.

The impairment analyses of the other 12 indefinite-lived intangible assets indicated that their fair values exceeded their carrying values.

The impairment analyses of our indefinite-lived intangible assets indicated that their fair values exceeded their carrying values for fiscal 2021, and thus no impairment charges were recorded during that year.

Any reasonably likely change in the assumptions used in the analyses for our trade names would not be material to our financial condition or results of operations.

Short-term growth rates used in the fiscal 2020 our impairment analyses reflected additional estimation uncertainty as a result of the COVID-19 pandemic.

Based on the results of the indefinite-lived intangible asset analyses performed in fiscal 2019 and 2018 , we concluded that our analyses supported the indefinite-lived trade names' values;

therefore, no impairment charges were recorded during those periods.

Based on the results of the indefinite-lived intangible asset analyses for fiscal 2020, we recorded an impairment charge of $ 1.4 million for one trade name in Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income related to our ABL segment.

The impairment analyses of the other 12 indefinite-lived intangible assets indicated that their fair values exceeded their carrying values.

Based on the results of the indefinite-lived intangible asset analyses performed in fiscal 2019, we concluded that our analyses supported the indefinite-lived trade names' values;

therefore, no impairment charges were recorded.

Short-term growth rates used in the fiscal 2021 and 2020 impairment analyses reflected additional estimation uncertainty as a result of the COVID-19 pandemic.

Other Long-Term Assets

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Deferred contract costs (1)

Investments in unconsolidated affiliates (1)

$ 12.9 $ 12.3

Investments in debt and equity securities 5.3 6.0

Pensions plans in which plan assets exceed benefit obligation 13.0 —

Tax credits (2)

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_______________________________________

We hold equity investments in two unconsolidated affiliates.

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 measure these investments at cost less any impairment adjusted for observable price changes, if any.

(1) Amount includes costs incurred whose economic benefit will be realized greater than one year from August 31, 2021.

(2) Amount represents research and development tax credit receivables related to certain amended prior year tax returns.

Amounts primarily include deferred debt issuance costs related to our credit facilities and company-owned life insurance investments.

(3) Included within this category are company-owned life insurance investments.

We maintain life insurance policies on 62 former employees primarily to satisfy obligations under certain deferred compensation plans.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Current Liabilities

Other current liabilities consist of the following as of the dates presented (in millions):

Customer incentive programs (1)

$ 33.9 $ 27.7

Refunds to customers (1)

Current deferred revenues (1)

Sales commissions 28.9 26.5

Freight costs 17.6 11.7

Warranty and recall costs (2)

Tax-related items (3)

Interest on long-term debt (4)

Other 42.4 30.8

Total other current liabilities $ 189.5 $ 160.6

____________________________________

(1) Refer to the Revenue Recognition footnote of the Notes to Consolidated Financial Statements for additional information.

(2) Refer to the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements for additional information.

(3) Includes accruals for income, property, sales and use, and value added taxes.

(4) Refer to the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for additional information.

Other Long-Term Liabilities

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Deferred compensation and postretirement benefits other than pensions (1)

Service-type warranties

$ 43.1 $ 42.7

Deferred revenues (2)

Unrecognized tax position liabilities, including interest (3)

Self-insurance liabilities (4)

Product warranty and recall costs (4)

Other 9.3 2.5

Total other long-term liabilities $ 136.2 $ 126.5

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We maintain life insurance policies on certain former officers and other key employees as a means of satisfying a portion of these obligations.

See the Income Taxes footnote for more information.

Amount primarily includes fees owed for licensing certain intellectual property.

(2) Refer to the Revenue Recognition footnote of the Notes to Consolidated Financial Statements for additional information.

(3) Refer to the Income Taxes footnote of the Notes to Consolidated Financial Statements for additional information.

(4) Refer to the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements for additional information.

Shipping and Handling Fees and Costs

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Other shipping and handling costs are included in Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income and totaled $ 132.0 million, $ 121.9 million, and $ 138.4 million in fiscal 2021, 2020, and 2019, respectively.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Payments

We recognize compensation cost relating to share-based payment transactions in the financial statements based on the estimated grant date fair value of the equity instrument issued.

We account for stock options, restricted shares, performance units, and share units representing certain deferrals into the Nonemployee Director Deferred Compensation Plan (the “Director Plan”) or the Supplemental Deferred Savings Plan (“SDSP”) (both of which are discussed further in the Share-based Payments footnote) based on the grant-date fair value estimated under the current provisions of ASC Topic 718, Compensation — Stock Compensation (“ASC 718”).

Share-based payment expense includes expense related to restricted stock, performance units, options issued, and share units deferred into the Director Plan.

We account for stock options, restricted stock, performance stock units, and director stock units representing certain deferrals into the Nonemployee Director Deferred Compensation Plan (the “Director Plan”) or the Supplemental Deferred Savings Plan (“SDSP”) (both of which are discussed further in the Share-based Payments footnote) based on the grant-date fair value estimated under the current provisions of ASC Topic 718, Compensation — Stock Compensation (“ASC 718”).

Share-based payment expense includes expense related to restricted stock, performance stock units, options issued, and stock units deferred into the Director Plan.

We recorded $ 32.5 million, $ 38.2 million, and $ 29.2 million of share-based payment expense for the years ended August 31, 2021, 2020, and 2019, respectively.

The total income tax benefit recognized for share-based payment expense was $ 6.5 million, $ 6.6 million, and $ 6.5 million for the years ended August 31, 2021, 2020, and 2019, respectively.

We account for any awards with graded vesting on a straight-line basis.

Additionally, forfeitures of share-based awards are estimated based on historical experience at the time of grant and are revised in subsequent periods if actual forfeitures differ from initial estimates.

We did not capitalize any expense related to share-based payments and have recorded share-based payment expense, net of estimated forfeitures, in Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income .

We generally recognize compensation cost for share-based payment transactions on a straight-line basis over an award's requisite service period as defined by ASC 718.

In certain circumstances, such as when a performance award is subject to graded vesting, we apply the accelerated attribution method to recognize compensation cost related to our share-based payment awards.

We have recorded share-based payment expense, net of estimated forfeitures, in Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income .

Excess tax benefits and/or expense related to share-based payment awards are reported within Income tax expense on the Consolidated Statements of Comprehensive Income .

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See the Share-based Payments footnote of the Notes to Consolidated Financial Statements for more information.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant, and Equipment

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

Land $ 22.4 $ 22.2

Buildings and leasehold improvements 198.0 192.2

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Research and development (“R&D”) expense, which is expensed as incurred, consists of compensation, payroll taxes, employee benefits, materials, supplies, and other administrative costs.

R&D does not include all new product development costs and is included in Selling, distribution, and administrative expenses in our Consolidated Statements of Comprehensive Income .

R&D does not include all new product development costs and is included in Selling, distribution, and administrative expenses in our Consolidated

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Statements of Comprehensive Income .

R&D expense amounted to $ 88.3 million, $ 82.0 million, and $ 74.7 million during fiscal 2021, 2020 , and 2019, respectively.

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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 line of credit borrowings, partially offset by interest income earned on cash and cash equivalents.

Interest expense, net , is comprised primarily of interest expense on long-term debt and line of credit borrowings, partially offset by interest income earned on cash and cash equivalents.

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

Year Ended August 31,

2021 2020 2019

Interest expense $ 24.2 $ 26.4 $ 36.4

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Miscellaneous Expense, Net

Miscellaneous expense, net , is comprised primarily of non-service related components of net periodic pension cost, gains or losses on foreign currency items, and other non-operating items.

Gains or losses relating to foreign currency items consisted of net expense of $ 5.9 million in fiscal 2020 , net gains of $ 0.6 million in fiscal 2019 , and net gains of $ 0.1 million in fiscal 2018 .

During fiscal 2018 , we recognized a $ 5.4 million gain on the sale of a foreign domiciled business, which included the reclassification of $ 8.7 million in accumulated foreign currency gains from Accumulated other comprehensive loss.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Miscellaneous expense, net , is comprised primarily of non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses.

Amounts relating to foreign currency transactions consisted of net expense of $ 1.3 million in fiscal 2021, net expense of $ 5.9 million in fiscal 2020, and net gains of $ 0.6 million in fiscal 2019.

We are taxed at statutory corporate rates after adjusting income reported for financial statement purposes for certain items that are treated differently for income tax purposes.

Deferred income tax expenses or benefits result from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities.

Refer to the Income Taxes footnote of the Notes to Consolidated Financial Statements for additional information.

Foreign Currency Translation

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Other comprehensive income (loss) includes foreign currency translation and pension adjustments.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the changes in each component of accumulated other comprehensive loss net of tax during the periods presented (in millions):

Foreign Currency Items

Defined Benefit Pension Plans

Accumulated Other Comprehensive Loss Items

Foreign Currency Items Defined Benefit Pension Plans Accumulated Other Comprehensive Loss Items

Balance as of August 31, 2019 $ ( 65.4 ) $ ( 86.0 ) $ ( 151.4 )

Other comprehensive loss before reclassifications

Other comprehensive income (loss) before reclassifications 11.9 ( 0.6 ) 11.3

Amounts reclassified from accumulated other comprehensive loss (1)

Net current period other comprehensive loss

Net current period other comprehensive income 11.9 6.8 18.7

Balance as of August 31, 2020 ( 53.5 ) ( 79.2 ) ( 132.7 )

Other comprehensive income (loss) before reclassifications

Other comprehensive income before reclassifications 13.3 13.9 27.2

Amounts reclassified from accumulated other comprehensive loss (1)

Net current period other comprehensive income 13.3 21.2 34.5

Balance at August 31, 2020

Balance as of August 31, 2021 $ ( 40.2 ) $ ( 58.0 ) $ ( 98.2 )

_______________________________________

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See the Pension and Defined Contribution Plans footnote for additional details.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Year Ended August 31,

Before Tax Amount

Tax (Expense) or Benefit

Net of Tax Amount

Before Tax Amount

Tax (Expense) or Benefit

Net of Tax Amount

Before Tax Amount

Tax (Expense) or Benefit

Net of Tax Amount

2021 2020 2019

Before Tax Amount Tax (Expense) or Benefit Net of Tax Amount Before Tax Amount Tax (Expense) or Benefit Net of Tax Amount Before Tax Amount Tax (Expense) or Benefit Net of Tax Amount

Foreign currency translation adjustments $ 13.3 $ — $ 13.3 $ 11.9 $ — $ 11.9 $ ( 11.5 ) $ — $ ( 11.5 )

Defined benefit pension plans:

Actuarial (losses) gains

Tax adjustments — ( 3.2 ) ( 3.2 ) — — — — — —

Actuarial gains (losses) 17.5 ( 3.6 ) 13.9 ( 0.7 ) 0.1 ( 0.6 ) ( 40.8 ) 9.7 ( 31.1 )

Amortization of defined benefit pension items:

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Other comprehensive income (loss) $ 43.1 $ ( 8.6 ) $ 34.5 $ 20.8 $ ( 2.1 ) $ 18.7 $ ( 44.3 ) $ 7.7 $ ( 36.6 )

Note 3 — New Accounting Pronouncements

Accounting Standards Adopted in Fiscal 2020

ASC 842 — Leases (“ASC 842”)

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02, Leases (“ASU 2016-02”), which requires lessees to include most leases on the balance sheet as lease liabilities with an associated right-of-use (“ROU”) asset.

Since the issuance of ASU 2016-02, the FASB released several amendments to improve and clarify the implementation guidance, as well as to change the allowable adoption methods.

These standards have been collectively codified within ASC 842, Leases .

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 .

ASU 2020-04 — Reference Rate Reform (Topic 848)

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued.

The amendments are effective for all entities as of March 12, 2020 and expire on December 31, 2022.

The provisions of ASU 2020-04 did not have a material effect on our financial condition, results of operations, and cash flows as of August 31, 2020 .

We will continue to monitor any impacts of the standard and reference rate reform on our financial instruments.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Note 3 — New Accounting Pronouncements

Accounting Standards Adopted in Fiscal 2021

ASC Topic 326 — Credit Losses (“ASC 326”)

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on the entity's 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, which consists primarily of trade receivables, and has concluded that the application of the expected credit loss model will have an immaterial impact on our consolidated results of operations and financial position.

Throughout the fiscal year, the implementation team reported 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.

These standards have been collectively codified within ASC 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, the beginning of fiscal 2021, 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.

ASU 2018-15 — Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”)

In August 2018, the FASB issued ASU 2018-15, which requires customers to apply internal-use software guidance to determine the implementation costs that are able to be capitalized.

Capitalized implementation costs are 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.

We adopted ASU 2018-15 as of September 1, 2020 on a prospective basis.

This standard did not have a material effect on our financial condition, results of operations, or cash flows.

Accounting Standards Yet to Be Adopted

ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”)

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC Topic 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, or our fiscal 2022.

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 do not expect the provisions of ASU 2019-12 to have a material impact on our financial condition, results of operations, and cash flows.

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

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Fiscal 2021 Acquisitions

ams OSRAM's North American Digital Systems Business

On July 1, 2021, using cash on hand, we acquired certain assets and liabilities of ams OSRAM’s North American Digital Systems business (“OSRAM DS”).

This acquisition is intended to enhance our LED driver and controls technology portfolio and accelerate our innovation, expand our access to market through a more fulsome original equipment manufacturer (“OEM”) product offering, and give us more control over our supply chain.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Rockpile Ventures

On May 18, 2021, using cash on hand, we acquired all of the equity interests of Rockpile Ventures, an accelerator of edge artificial intelligence (“AI”) startups.

Rockpile Ventures helps early-stage artificial intelligence companies drive co-engineering and co-selling partnerships with major cloud ecosystems, enabling faster adoption from proof-of-concept trials to market scale.

Accounting for Fiscal 2021 Acquisitions

We accounted for the acquisitions of Rockpile Ventures and OSRAM DS in accordance with 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.

The aggregate purchase price of these acquisitions reflects preliminary goodwill of $ 10.0 million and definite-lived customer-based intangible assets of $ 6.1 million, which have a preliminary useful life of approximately 11 years.

Goodwill recognized from these acquisitions is comprised primarily of expected synergies from obtaining more control over our supply chain and technology, combining the operations of the acquired business with our operations, and acquiring the associated trained workforce.

As of August 31, 2021, goodwill from these acquisitions totaling $ 6.9 million is expected to be tax deductible.

Amounts recognized for these acquisitions are deemed to be provisional until disclosed otherwise, as we continue to gather information related to the identification and valuation of acquired assets and liabilities, including but not limited to, acquired interests in technology startups, tax-related items, final net working capital purchase adjustments, if any, and the residual impacts on the valuation of intangible assets.

Fiscal 2020 and 2019 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.

On September 17, 2019, using cash on hand and borrowings under available existing credit arrangements at that time, 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 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:

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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.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting for Fiscal 2020 Acquisitions

We accounted for the acquisitions of TLG and LocusLabs (collectively, the "2020 Acquisitions") in accordance with ASC 805 , Business Combinations ("ASC 805").

Acquired assets and liabilities were recoded at their estimated acquisition-date fair values, and acquisition-related costs were expensed as incurred.

Preliminary amounts related to the acquisition accounting for the 2020 Acquisitions are reflected on the Consolidated Balance Sheets as of August 31, 2020 .

The aggregate purchase price of these acquisitions reflects preliminary total goodwill and identified intangible assets of approximately $ 107.6 million and $ 180.6 million , respectively, as of August 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 .

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 the acquired businesses with our operations.

Goodwill from these acquisitions totaling $ 77.7 million is expected to be tax deductible.

These amounts are deemed to be provisional until disclosed otherwise, as we continue to gather information related to the identification of other acquired assets and liabilities.

These amounts may 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 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.

Fiscal 2018 Acquisitions

IOTA Engineering, LLC

On May 1, 2018, using cash on hand and borrowings available under existing credit arrangements, we acquired all of the equity interests of IOTA Engineering, LLC (“IOTA”).

IOTA manufactures highly engineered emergency lighting products and power equipment for commercial and institutional applications both in the U.S.

and international markets.

The operating results of IOTA 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.

Lucid Design Group, Inc.

On February 12, 2018, using cash on hand, we acquired all of the equity interests of Lucid Design Group, Inc (“Lucid”).

Lucid provides a data and analytics platform to make data-driven decisions to improve building efficiency and drive energy conservation and savings.

The operating results of Lucid 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 2019 and 2018 Acquisitions

As of August 31, 2020 , we have finalized the acquisition accounting for IOTA, Lucid, and WhiteOptics in accordance with ASC 805.

There were no material changes to our financial statements as a result of the finalization of the acquisition accounting.

WhiteOptics manufactures advanced optical components used to reflect, diffuse, and control light for 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.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting for Fiscal 2020 and Fiscal 2019 Acquisitions

The TLG and LocusLabs acquisitions are referred to herein collectively as the “2020 Acquisitions.” We finalized the acquisition accounting for the 2020 Acquisitions during the first quarter of fiscal 2021.

There were no material changes to our financial statements as a result of the finalization of the acquisition accounting for the 2020 Acquisitions.

The aggregate purchase price of the 2020 Acquisitions reflects total goodwill and identified intangible assets of approximately $ 107.6 million and $ 180.6 million, respectively.

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 from these acquisitions totaling $ 77.7 million is tax deductible.

We finalized the acquisition accounting for WhiteOptics in fiscal 2020 in accordance with ASC 805.

There were no material changes to our financial statements as a result of the finalization of the acquisition accounting.

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

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

We utilize valuation methodologies to determine the fair values of our financial assets and liabilities in conformity with the concepts of “exit price” and the fair value hierarchy as prescribed in ASC 820.

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There were no material changes to the valuation methods or assumptions used to determine fair values during the current period.

We use 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 use 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 $ 491.3 million and $ 560.7 million as of August 31, 2021 and 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 Topic 825, Financial Instruments (“ASC 825”).

Disclosures of fair value information about financial instruments, for which it is practicable to estimate that value, are required each reporting period in addition to any financial instruments carried at fair value on a recurring basis as prescribed by ASC Topic 825, Financial Instruments (“ASC 825”).

In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.

Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

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

August 31, 2020

August 31, 2019

Carrying Value

Investments in unconsolidated affiliates

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

August 31, 2021 August 31, 2020

Carrying Value Fair Value Carrying Value Fair Value

Investments in debt and equity securities $ 5.3 $ 5.3 $ 6.0 $ 6.0

Senior unsecured public notes, net of unamortized discount and deferred costs $ 494.3 $ 496.5 $ — $ —

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Industrial revenue bond — — 4.0 4.0

We hold equity investments in two unconsolidated affiliates without readily determinable fair value.

Bank loans — — 2.1 2.3

We hold one convertible debt security investment with a carrying value of $ 4.0 million that is scheduled to mature in September 2023.

At August 31, 2021, the fair value for this instrument approximated its cost based on the contractual terms of the arrangement as well as prevailing market interest rates for debt of similar terms and maturity (Level 2).

We hold equity investments in 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 historical cost of the acquired shares represents the fair value of the investment as of August 31, 2020.

Borrowings under our unsecured delayed draw term loan facility (the “Term Loan Facility”) and the industrial revenue bond (“IRB”) are carried at the outstanding balance as of the end of the reporting period.

The borrowings under the Term Loan Facility and the IRB are variable-rate instruments that reset on a frequent short-term basis;

therefore, we estimate that the face amounts of these instruments approximate their fair values as of August 31, 2020 based on instruments of similar terms and maturity (Level 2).

The bank loans are carried at the outstanding balance as of the end of the reporting period.

We have elected the practical expedient in ASC Topic 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 historical cost less impairments of the acquired shares represents the fair value of the investments as of August 31, 2021.

During the first quarter of fiscal 2021, we recorded an impairment charge for one of these investments for $ 4.0 million as a recapitalization of the underlying company diluted our holding value.

We additionally recorded an impairment charge of $ 2.0 million during the fourth quarter of fiscal 2021 for another investment due to a deterioration in the financial condition and long-term prospects of the underlying company.

These impairments are reflected in Miscellaneous expense, net for the year ended August 31, 2021 within our Consolidated Statements of Comprehensive Income .

Our senior unsecured public notes are carried at the outstanding balance, net of unamortized bond discount and deferred costs, as of the end of the reporting period.

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 7 — Debt and Lines of Credit for further details on our long-term borrowings.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

See Debt and Lines of Credit footnote for further details on our long-term borrowings.

ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.

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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.

For leases with a term of greater than 12 months, we value lease liabilities as the present value of the lease payments over the related term.

Related assets are equal to the calculated lease liabilities adjusted for incentives and other items as prescribed by ASC Topic 842, Leases (“ASC 842”).

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 .

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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.

We have elected to use the practical expedient present in ASC 842 to not separate lease and non-lease

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Generally, the rate implicit in our leases is not readily determinable.

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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 August 31, 2020 was 1.9 % .

The weighted average discount rate for operating leases was 2 % as of August 31, 2021 and 2020.

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):

August 31, 2020

Fiscal year 2021

Thereafter 8.1

Total undiscounted lease payments 65.2

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Present value of lease liabilities $ 62.6

The weighted average remaining lease term for our operating leases was six years as of August 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 during the period presented (in millions):

The weighted average remaining lease term for our operating leases was five years as of August 31, 2021.

The components of total lease cost were as follows during the periods presented (in millions):

Year Ended August 31,

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Total lease cost $ 22.5 $ 23.2

Prior to the adoption of ASC 842, we recognized rent expense of $ 22.6 million and $ 22.3 million during the years ended August 31, 2019 and 2018 , respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash paid for operating lease liabilities during the year ended August 31, 2020 was $ 18.7 million .

ROU assets obtained in exchange for lease liabilities, including those obtained from recent acquisitions, during the year ended August 31, 2020 were $ 27.2 million .

Prior to the adoption of ASC 842, we recognized rent expense of $ 22.6 million during the year ended August 31, 2019.

Cash paid for operating lease liabilities during the year ended August 31, 2021 and 2020 was $ 26.2 million and $ 18.7 million, respectively.

ROU assets obtained in exchange for lease liabilities, including those obtained from recent acquisitions, during the year ended August 31, 2021 and 2020 were $ 12.9 million and $ 27.2 million, respectively.

We do not have material leases that have not yet commenced as of August 31, 2021 that create significant rights and obligations.

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We assessed the recoverability of these assets using an undiscounted cash flow model and concluded that the carrying values of the assets were not fully recoverable.

We recorded impairment charges of $ 7.4 million related to these assets using a discounted cash flow model to estimate their fair values.

We recorded impairment charges of $ 7.4 million related to these assets using a

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

discounted cash flow model to estimate their fair values.

The recoverability and impairment tests required significant assumptions including estimated future cash flows, the identification of assets within each asset group, and the determination of appropriate discount rates.

Note 7 — D ebt and Lines of Credit

No impairments were recorded for leases in fiscal 2021 or fiscal 2019.

Note 7 — Debt and Lines of Credit

Our debt is carried at the outstanding balance net of any related unamortized discounts and deferred costs and consisted of the following as of the dates presented (in millions):

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Industrial revenue bond due June 2021 — 4.0

Future principal payments of long-term debt are $ 24.3 million , $ 20.2 million , $ 355.3 million , $ 0.3 million , $ 0.3 million , and $ 0.7 million in fiscal 2021 , 2022 , 2023 , 2024 , 2025 , and after 2025 , respectively.

Bank loans — 2.1

Total debt $ 494.3 $ 401.1

Our next scheduled future principal payment of long-term debt is $ 500.0 million due upon the maturity of the senior unsecured notes in December 2030.

Long-term Debt

On November 10, 2020, Acuity Brands Lighting, Inc.

issued $ 500.0 million aggregate principal amount of 2.150 % senior unsecured notes due December 15, 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 is paid semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021.

The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Brands, Inc.

and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Brands, Inc.

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 August 31, 2021, the balance of the Unsecured Notes net of unamortized discount and deferred issuance costs was $ 494.3 million.

Additionally, we had $ 4.0 million of tax-exempt industrial revenue bonds and $ 2.1 million under fixed-rate bank loans outstanding as of August 31, 2020.

We repaid the industrial revenue bonds at maturity on June 1, 2021, and we repaid the bank loans in the second quarter of fiscal 2021, prior to their maturity date.

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 a $ 400.0 million Term Loan Facility.

We had no borrowings outstanding under the Revolving Credit Facility as of August 31, 2020 or 2019 .

We had $ 395.0 million in borrowings outstanding under the Term Loan Facility as of August 31, 2020 and no borrowings outstanding under the Term Loan Facility as of August 31, 2019 .

Based on the repayment schedule, $ 375.0 million of the borrowings under the Term Loan Facility are reflected within Long-term debt on the Consolidated Balance Sheets as of August 31, 2020 .

We had $ 395.0 million in borrowings outstanding under the Term Loan Facility as of August 31, 2020, which we fully repaid during the 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.

The Credit Agreement expires in June 2023.

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.

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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 one-year period ending December 31, 2019, utilizing up to four separate installments, which are U.S.

dollar denominated.

Borrowings under the Term Loan

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Facility amortize in equal quarterly installments 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 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 % .

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 0.250 % of the aggregate $ 800.0 million commitment of the lenders under the Credit Agreement.

The facility fee ranges from 0.125 % to 0.250 % of the aggregate $ 400.0 million remaining 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.

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We were in compliance with all financial covenants under the Credit Agreement as of August 31, 2021.

As of August 31, 2021, we had outstanding letters of credit totaling $ 4.1 million, primarily for securing collateral requirements under our casualty insurance programs.

At August 31, 2021, we had additional borrowing capacity under the Credit Agreement of $ 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 $ 4.1 million issued under the Revolving Credit Facility.

As of August 31, 2020 , we had outstanding letters of credit totaling $ 8.1 million , primarily for securing collateral requirements under our casualty insurance programs and for providing credit support for our industrial revenue bond, which includes $ 3.8 million we issued under the Revolving Credit Facility.

Long-term Debt

On December 16, 2019 , we repaid $ 350 million of senior unsecured notes in full plus accrued interest in full with borrowings under our Term Loan Facility.

We also had $ 4.0 million of tax-exempt industrial revenue bonds that are scheduled to mature in June 2021 outstanding at August 31, 2020 .

The carrying value of these bonds is reflected within Current maturities of debt on the Consolidated Balance Sheets as of August 31, 2020 .

The interest rate on the $ 4.0 million bonds was approximately 1.0 % at August 31, 2020 and 2019 .

Additionally, we had $ 2.1 million outstanding under fixed-rate bank loans.

These loans have interest rates between 0.8 % and 2.0 % and mature between December 2022 and February 2028, subject to monthly or quarterly repayment schedules.

None of our existing debt instruments include provisions that would require an acceleration of repayments based solely on changes in our credit ratings.

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We are fully self-insured for certain other types of liabilities, including environmental, product recall, warranty, and patent infringement.

The actuarial estimates are subject to uncertainty from various sources including,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

among others, changes in claim reporting patterns, claim settlement patterns, actual claims, judicial decisions, legislation, and economic conditions.

The actuarial estimates are subject to uncertainty from various sources including, among others, changes in claim reporting patterns, claim settlement patterns, actual claims, judicial decisions, legislation, and economic conditions.

Although we believe that the actuarial estimates are reasonable, significant differences related to the items noted above could materially affect our self-insurance obligations, future expense, and cash flow.

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The appropriateness of our lag factor is evaluated annually and revised as necessary.

We lease certain of our buildings and equipment under noncancelable lease agreements.

We lease certain of our buildings and equipment under noncancellable lease agreements.

Please refer to the Leases footnote of the Notes to Consolidated Financial Statements for additional information.

Purchase Obligations

We incur purchase obligations in the ordinary course of business that are enforceable and legally binding.

Obligations for years subsequent to August 31, 2020 include $ 301.5 million and $ 5.1 million in fiscal 2021 , and 2022 , respectively.

As of August 31, 2020 , we had no purchase obligations extending beyond August 31, 2022 .

Collective Bargaining Agreements

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Collective bargaining agreements representing approximately 57 % of our work force will expire within one year, primarily due to annual negotiations of union contracts in Mexico.

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 three patents, LSG’s infringement allegations relate to certain of our LED luminaires.

On April 7, 2020 and October 1, 2020, the International Trade Commission made final determinations that LSG was not entitled to any relief, and LSG is appealing certain of those determinations.

In the District of Delaware action, LSG separately seeks unspecified monetary damages, costs, and attorneys’ fees.

The District of Delaware action is stayed.

We dispute and have numerous defenses 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 stages of the proceedings where key factual and legal issues have not been resolved.

For these reasons, we currently are unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from these matters.

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 October 5, 2021, the parties to the shareholder class action litigation previously disclosed (and further described below) executed a term sheet for settlement of the litigation, subject to documentation of the settlement and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

approval of the District Court after notice to class members.

If the settlement is approved, we expect that the agreed-upon settlement payment of $ 15.8 million will be funded entirely by applicable Directors and Officers liability insurance.

As such, we do not anticipate a significant net loss or cash outflow as a result of the settlement of this matter.

The case was originally filed on January 3, 2018, in the United States District Court for the District of Delaware against the Company 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.

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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 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 former 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 unspecified monetary damages, costs, and attorneys’ fees.

We dispute the allegations in the complaints.

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.

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.

The Eleventh Circuit Court of Appeals granted the Company permission to file an interlocutory appeal of the District Court’s class certification order, and the briefing of that appeal has been completed.

On October 7, 2021, the Eleventh Circuit Court of Appeals entered an order holding the appeal from the class certification order in abeyance pending a decision from the District Court concerning approval of the proposed settlement.

Shareholder Derivative Complaint

On October 1, 2021, certain alleged shareholders of the Company filed a putative derivative complaint in the United States District Court for the Northern District of Georgia asserting claims against three of the individuals named as defendants in the above securities action for breach of fiduciary duty and certain other claims arising out of the alleged facts and circumstances upon which the claims in the above securities class action are based (the “Derivative Complaint”).

The Company is named as a nominal defendant, and the plaintiffs seek on behalf of the Company unspecified damages from the individual defendants and other relief.

Prior to filing the Derivative Complaint, the derivative plaintiffs sent letters to the Company’s Board of Directors (the “Board”) demanding that the Company investigate and pursue substantially the same claims against the individual defendants that are asserted in the Derivative Complaint.

The Company’s Board formed a demand evaluation committee consisting of independent directors to investigate these matters and make a recommendation to the Board regarding the best interests of the Company in connection therewith.

The committee’s work is ongoing.

Estimating an amount or range of possible losses or gains 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 evidential 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 gains or a range of possible losses or gains resulting from the matters described above.

We are subject to various other legal claims arising in the normal course of business, including patent infringement, employment matters, and product liability claims.

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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.

However, we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

lower than the accrued amounts.

Environmental Matters

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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.

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Estimated liabilities for product warranty and recall costs are included in Other accrued liabilities or Other long-term liabilities on the Consolidated Balance Sheets based upon when we expect to settle the incurred warranty.

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Year Ended August 31,

2021 2020 2019

Beginning balance $ 16.1 $ 11.5 $ 27.3

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______________________________

(1) Certain service-type warranties accounted for as contingent liabilities prior to the adoption of ASC 606 are now reflected as contract liabilities effective September 1, 2018.

(1) Certain service-type warranties accounted for as contingent liabilities prior to the adoption of ASC 606 (defined below) are now reflected as contract liabilities effective September 1, 2018.

Note 9 — Segment Information

During the third quarter of fiscal 2021, we completed a realignment of our operations and structure to better support our business strategy.

As a result, beginning in the third quarter of fiscal 2021, we now report our financial results of operations in two reportable segments, ABL and ISG, consistent with how our chief operating decision maker

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

currently evaluates operating results, assesses performance, and allocates resources within the Company.

We have recast historical information to conform to the current segment structure.

The accounting policies of our reportable segments are the same as those described in the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Corporate expenses that are primarily administrative in function and benefit the Company on an entity-wide basis are not allocated to our segments.

These include expenses related to governance, policy setting, compliance, and certain other shared services functions.

Additionally, we do not allocate net interest expense, miscellaneous expense, special charges, or assets to our segments.

Accordingly, this information is not used by the chief operating decision maker to make operating decisions and assess performance and is therefore excluded from our disclosures.

The following table presents financial information by operating segment for the periods presented (in millions):

ABL ISG Corporate Eliminations (1)

Year Ended August 31, 2021:

Net sales $ 3,287.3 $ 190.0 $ — $ ( 16.3 ) $ 3,461.0

Operating profit (loss) 476.2 9.9 ( 58.5 ) — 427.6

Depreciation and amortization 84.3 14.7 1.1 — 100.1

Year Ended August 31, 2020:

Net sales $ 3,180.9 $ 157.0 $ — $ ( 11.6 ) $ 3,326.3

Operating profit (loss) 425.8 ( 3.9 ) ( 68.0 ) — 353.9

Depreciation and amortization 83.7 16.3 1.1 — 101.1

Year Ended August 31, 2019:

Net sales $ 3,548.4 $ 137.5 $ — $ ( 13.2 ) $ 3,672.7

Operating profit (loss) 510.2 ( 18.1 ) ( 29.2 ) — 462.9

Depreciation and amortization 72.6 14.6 1.1 — 88.3

____________________________

(1) This column represents intersegment sales.

Profit on these sales eliminates within gross profit on a consolidated basis.

The following table reconciles operating profit by segment to income before income taxes (in millions):

Year Ended August 31,

2021 2020 2019

Operating profit - ABL $ 476.2 $ 425.8 $ 510.2

Operating profit (loss) - ISG 9.9 ( 3.9 ) ( 18.1 )

Unallocated corporate amounts ( 58.5 ) ( 68.0 ) ( 29.2 )

Operating profit 427.6 353.9 462.9

Interest expense, net 23.2 23.3 33.3

Miscellaneous expense, net 8.2 5.9 4.7

Income before income taxes $ 396.2 $ 324.7 $ 424.9

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 — 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 rebates, sales incentives, product returns, and discounts to customers.

We allocate the expected consideration to be collected to each distinct performance obligation identified in a sale based on its standalone selling price.

Sales and use taxes collected on behalf of governmental authorities are excluded from revenues.

Payment is generally due and received within 60 days from the point of sale or prior to the transfer of control of certain goods and services.

No payment terms extend beyond one year, and we apply the practical expedient within ASC 606 to conclude that no significant financing terms exist within our contracts with customers.

No payment terms extend beyond one year, and we apply the practical expedient within ASC Topic 606 — Revenue from Contracts with Customers (“ASC 606”) to conclude that no significant financing terms exist within our contracts with customers.

Allowances for cash discounts to customers are estimated using the expected value method based on historical experience and are recorded as a reduction to sales.

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Additionally, we record right of return assets for products expected to be returned to our distribution centers, which are included within Prepayments and other current assets on the Consolidated Balance Sheets .

Such assets totaled $ 10.3 million and $ 13.9 million as of August 31, 2020 and August 31, 2019 , respectively.

We also maintain one-time or ongoing promotions with our customers, which may include rebate, sales incentive, marketing, and trade-promotion programs with certain customers that require us to estimate and accrue the expected costs of such programs.

Such assets totaled $ 6.4 million and $ 10.3 million as of August 31, 2021 and 2020, respectively.

We also maintain one-time and ongoing promotions with our customers, which may include rebate, sales incentive, marketing, and trade-promotion programs with certain customers that require us to estimate and accrue the expected costs of such programs.

These arrangements may include volume rebate incentives, cooperative marketing programs, merchandising of our products, introductory marketing funds for new products, and other trade-promotion activities conducted by the customer.

Costs associated with these programs are generally estimated based on the most likely amount expected to be settled based on the context of the individual contract and are reflected within the Consolidated Statements of Comprehensive Income in accordance with ASC 606, which in most instances requires such costs to be recorded as reductions of revenue.

Amounts due to our customers associated with these programs totaled $ 27.7 million and $ 34.5 million as of August 31, 2020 and August 31, 2019 , respectively, and are reflected within Other accrued liabilities on the Consolidated Balance Sheets .

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Costs to obtain and fulfill contracts, such as sales commissions and shipping and handling activities, are generally short-term in nature and are expensed as incurred.

Amounts due to our customers associated with these programs totaled $ 33.9 million and $ 27.7 million as of August 31, 2021 and 2020, respectively, and are reflected within Other accrued liabilities on the Consolidated Balance Sheets .

Costs to obtain and fulfill contracts, such as sales commissions, are generally short-term in nature and are expensed as incurred.

Nature of Goods and Services

Approximately 95 % of revenues for the periods presented were generated from short-term contracts with our customers to deliver only tangible goods such as luminaires, lighting controls, controls for various building systems, power supplies, prismatic skylights, and drivers.

Substantially all of the revenues for the periods presented were generated from short-term contracts with our customers to deliver only tangible goods such as luminaires, lighting controls, and controls for various building systems.

We record revenue from these contracts when the customer obtains control of those goods.

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For sales designated free on board destination, customers take control and revenue is recognized when a product is delivered to the customer’s delivery site.

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Professional Services

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We account for service-type warranties as distinct performance obligations and recognize revenue for these contracts ratably over the life of the additional warranty period.

We allocate transaction price to our service-type warranties largely based on expectations of cost plus margin based on our estimate of future claims.

These estimates are subject to a higher level of estimation uncertainty than other estimates, as we have less experience in costs in the extended warranty period.

Claims related to service-type warranties are expensed as incurred.

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Contracts with Multiple Performance Obligations

A small portion (approximately 5 % for the periods presented) of our revenue was derived from the combination of any or all of our products, professional services, and software licenses.

A small portion of our revenue was derived from the combination of any or all of our products, professional services, and software licenses.

Significant judgment may be required to determine which performance obligations are distinct and should be accounted for separately.

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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 consisted of the following as of the dates presented (in millions):

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

Current deferred revenues $ 7.7 $ 5.4

Non-current deferred revenues 56.7 53.6

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Current deferred revenues primarily consist of software licenses as well as professional service and service-type warranty fees collected prior to performing the related service.

Current deferred revenues are included within Other current liabilities on the Consolidated Balance Sheets .

Current deferred revenues primarily consist of software licenses as well as professional service and service-type warranty fees collected prior to performing the related service and are included within Other current liabilities on the Consolidated Balance Sheets .

These services are expected to be performed within one year.

Revenue earned from beginning contract balances during the year ended August 31, 2021 approximated the current deferred revenue balance at August 31, 2020.

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.

Revenue recognized from beginning balances of contract liabilities during the year ended August 31, 2020 totaled $ 4.7 million .

Unsatisfied performance obligations as of August 31, 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.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unsatisfied performance obligations that do not represent contract liabilities are expected to be satisfied within one year from August 31, 2021 and consist primarily of orders for physical goods that have not yet been shipped.

Disaggregated Revenues

Our lighting and building technology 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 during the periods presented (in millions):

Our ABL segment's lighting and lighting controls 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.

ISG sells predominantly to system integrators.

The following table shows revenue from contracts with customers by sales channel and reconciles to our segment information for the periods presented (in millions):

Year Ended August 31,

2021 2020 2019

Independent sales network $ 2,400.5 $ 2,284.3 $ 2,397.6

Direct sales network 358.1 329.0 383.3

Retail sales 181.5 218.3 273.0

Corporate accounts 168.7 191.8 312.8

Other 178.5 157.5 181.7

Total ABL 3,287.3 3,180.9 3,548.4

ISG 190.0 157.0 137.5

Eliminations ( 16.3 ) ( 11.6 ) ( 13.2 )

Total $ 3,461.0 $ 3,326.3 $ 3,672.7

Note 11 — Share-based Payments

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2012 Omnibus Stock Compensation Incentive Plan (the “Stock Incentive Plan”), which, among other things, resulted in an aggregate of 2.7 million of shares authorized for issuance pursuant to the Stock Incentive Plan.

The Compensation Committee of the Board of Directors is authorized to issue awards consisting of incentive and non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock awards, performance stock units, stock bonus awards, and cash-based awards to eligible employees, non-employee directors, and outside consultants.

The Compensation Committee of the Board of Directors (the “Compensation Committee") is authorized to issue awards consisting of incentive and non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock awards, performance stock units, stock bonus awards, and cash-based awards to eligible employees, non-employee directors, and outside consultants.

Shares available for grant under the Stock Incentive Plan, including those previously issued and outstanding prior to the amendment, were approximately 0.3 million, 0.7 million, and 1.4 million at August 31, 2021, 2020, and 2019, respectively.

Any shares subject to an award under the Stock Incentive Plan that are forfeited, canceled, expired, or settled for cash will be available for future grant under the Stock Incentive Plan.

Effective for certain restricted stock and performance share grants awarded in fiscal 2020, the Compensation Committee of the Board of Directors reinstated a policy that provides for the continued vesting of stock awards following retirement for all eligible participants who have attained age 60 and have at least ten years of service with the Company.

Restricted stock awards, performance stock awards, and director stock units representing certain deferrals into the Director Deferred Compensation Plan are valued based on the fair value of our common stock on the grant date.

We review the values of our performance awards on a frequent and recurring basis and adjust those values based on the probability that the related performance metric will be satisfied.

We utilize the Black-Scholes model in deriving the fair value estimates of our stock option awards that only have a service requirement, and we utilize the Monte Carlo simulation model to determine grant date fair value estimates of stock options also subject to a market condition.

Effective for certain restricted stock and performance stock grants awarded in fiscal 2020, the Compensation Committee reinstated a policy that provides for the continued vesting of stock awards following retirement for all eligible participants who have attained age 60 and have at least ten years of service with the Company.

We deem the requisite service period for these awards 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.

The Compensation Committee discontinued this policy effective for restricted stock and performance stock grants awarded in October 2020 and thereafter.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective for performance stock unit grants awarded in fiscal 2021, the Compensation Committee approved an amendment to replace the retirement provision that states if a person who receives a performance stock unit award has five years of service, a portion of the award becomes non-forfeitable on each anniversary date of the grant.

We generally recognize compensation cost for share-based payment transactions on a straight-line basis over an award's requisite service period as defined by ASC 718.

Compensation expense recognized related to the awards under the current and prior equity incentive plans during the periods presented is summarized as follows (in millions):

Year Ended August 31,

Restricted stock awards

2021 2020 2019

Restricted stock awards and units $ 15.1 $ 24.6 $ 25.1

Stock options 9.2 4.9 2.7

Performance share units

Director share units

Performance stock units 6.8 7.3 —

Director stock units 1.4 1.4 1.4

Total share-based payment expense $ 32.5 $ 38.2 $ 29.2

Restricted Stock Awards

As of August 31, 2020 , we had approximately 350,000 shares outstanding of restricted stock to officers, directors, and other key employees under the Stock Incentive Plan, including restricted stock units.

The shares vest primarily over a four -year period and are valued at the closing stock price on the date of the grant.

Restricted Stock

As of August 31, 2021, we had approximately 0.4 million shares outstanding of restricted stock to officers, directors, and other key employees under the Stock Incentive Plan, including restricted stock units.

The grants vest primarily over a four-year period and are valued at the closing stock price on the date of the grant.

Activity related to restricted stock awards during the periods presented was as follows (in millions, except per share data):

Weighted Average

Shares Weighted Average

Fair Value Per

Outstanding at August 31, 2018 0.4 $ 186.63

Granted 0.2 $ 120.73

Vested ( 0.2 ) $ 184.60

Forfeited* — $ 159.88

Outstanding at August 31, 2019 0.4 $ 156.32

Granted 0.2 $ 122.10

Vested ( 0.1 ) $ 171.92

Forfeited ( 0.1 ) $ 135.43

Outstanding at August 31, 2020 0.4 $ 134.68

Granted 0.2 $ 108.79

Vested ( 0.1 ) $ 150.44

Forfeited ( 0.1 ) $ 116.33

Outstanding at August 31, 2021 0.4 $ 116.77

___________________________

* Represents shares of less than 0.1 million.

* Represents amounts of less than 0.1 million.

As of August 31, 2021, there was $ 28.1 million of total unrecognized compensation cost related to unvested restricted stock, which is expected to be recognized over a weighted-average period of 1.8 years.

The total weighted average fair value of shares vested during the years ended August 31, 2020 , 2019 , and 2018 was approximately $ 22.8 million , $ 26.9 million , and $ 26.6 million , respectively.

Stock Options

As of August 31, 2020 , we had approximately 915,000 options outstanding to officers and other key employees under the Stock Incentive Plan.

Of these options, 815,000 vest and become exercisable over a three year period (the "Service Options").

The remaining 100,000 vest and become exercisable over a four year period and are also subject to a market condition (the "Market Options").

Options issued under the Stock Incentive Plan are generally granted with an exercise price equal to the fair market value of our stock on the date of grant, but never less than the fair market value on the grant date, and expire ten years from the date of grant.

The fair value of each Service Option was estimated on the date of grant using the Black-Scholes model, and the fair value of each Market Option was estimated on the date of grant using the Monte-Carlo simulation model.

The total fair value of stock vested during the years ended August 31, 2021, 2020, and 2019 was approximately $ 19.5 million, $ 22.8 million, and $ 26.9 million, respectively.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

yield was calculated based on annual dividends paid and the trailing 12-month average closing stock price at the time of grant.

Stock Options

As of August 31, 2021, we had approximately 1.2 million options outstanding to officers and other key employees under the Stock Incentive Plan.

Of these options, 0.8 million vest and become exercisable over a three-year period (the "Service Options").

The remaining 0.4 million vest and become exercisable over a four-year period and are also subject to a market condition (the "Market Options").

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.

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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 expected life of options.

We used historical exercise behavior data of similar employee groups to determine the expected life of the Service Options.

The expected life of the Market 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.

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The following weighted average assumptions were used to estimate the fair value of the stock options granted in the fiscal years presented:

Market Options

Service Options

Market Options Service Options

2021 2020 2020 2019

Dividend yield 0.5 % 0.4 % 0.4 % 0.4 %

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Risk-free interest rate 0.7 % 1.5 % 1.3 % 3.0 %

Expected life of options

Expected life of options 8 years 7 years 5 years 4 years

Weighted-average fair value of options $ 40.45 $ 44.74 $ 34.22 $ 34.06

There were no Market Options granted during the fiscal years ended August 31, 2019 or 2018 .

There were no Market Options granted in fiscal 2019.

There were no Service Options granted during the fiscal year ended August 31, 2021.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock option activity during the periods presented was as follows:

(in millions)

Weighted Average

Exercise Price

(in millions)

Weighted Average

Outstanding Exercisable

(in millions) Weighted Average

Exercise Price Number of

(in millions) Weighted Average

Exercise Price

Outstanding at August 31, 2018 0.3 $ 154.69 0.2 $ 134.13

Granted 0.1 * $ 116.40

Outstanding at August 31, 2019 0.4 $ 146.70 0.3 $ 147.51

Granted 0.5 $ 121.87

Exercised — * $ 116.36

Outstanding at August 31, 2020 0.9 $ 133.19 0.4 $ 151.07

Granted 0.3 $ 108.96

Exercised — * $ 108.58

Outstanding at August 31, 2021 1.2 $ 127.98 0.5 $ 142.36

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$ 40.01 - $ 100.00 (average life - 1.1 years)

0.1 $ 62.54 0.1 $ 62.54

$ 100.01 - $ 160.00 (average life - 7.9 years)

1.0 $ 119.18 0.3 $ 125.13

$ 160.01 - $ 210.00 (average life - 4.2 years)

0.1 $ 207.80 0.1 $ 207.80

$ 210.01 - $ 239.76 (average life - 5.1 years)

— * $ 239.76 0.1 * $ 239.76

* Represents shares of less than 0.1 million.

The total intrinsic value of options exercised was de minimis during the year ended August 31, 2020 and $ 0.5 million during the year ended August 31, 2018 .

___________________________

* Represents amounts of less than 0.1 million.

The total intrinsic value of options exercised was $ 1.2 million during the year ended August 31, 2021 and de minimis during the year ended August 31, 2020.

There were no options exercised during fiscal 2019.

As of August 31, 2020 , the total intrinsic value of options outstanding was $ 3.3 million , the total intrinsic value of options expected to vest was zero , and the total intrinsic value of options exercisable was $ 3.3 million .

As of August 31, 2021, the total intrinsic value of options outstanding was $ 70.9 million, the total intrinsic value of options expected to vest was $ 42.8 million, and the total intrinsic value of options exercisable was $ 27.4 million.

As of August 31, 2021, there was $ 17.0 million of total unrecognized compensation cost related to unvested options.

That cost is expected to be recognized over a weighted-average period of approximately 1.9 years.

This cost is expected to be recognized over a weighted-average period of approximately 2.2 years.

Performance Stock Units

Beginning in fiscal 2020, the Board approved grants of performance stock units to certain executives and key employees.

These grants vest primarily over a three-year period and are valued at the closing stock price at the date of grant.

The actual number of performance stock units earned for these awards will be determined at the end of the related performance period based on the level of achievement of established performance thresholds.

We recognize compensation expense for these grants proportionately over the requisite service period for each employee when it becomes probable that the performance metric will be satisfied.

For performance stock units subject to graded vesting, we apply the accelerated attribution method for expense recognition.

As of August 31, 2021, we had approximately 0.1 million performance stock units outstanding.

As of August 31, 2021 there was $ 3.8 million of total unrecognized compensation cost related to unvested performance stock units.

This cost is expected to be recognized over a weighted-average period of approximately 1.5 years.

Employee Deferred Stock Units

We previously allowed employees to defer a portion of restricted stock awards granted in fiscal 2003 and fiscal 2004 into the SDSP as stock units.

The stock units are payable in shares of stock at the time of distribution from the SDSP.

As of August 31, 2021, approximately 7,000 fully vested stock units remain deferred, but undistributed, under the Stock Incentive Plan.

There was no compensation expense related to these stock units during fiscal years 2021, 2020, and 2019.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Performance Share Units

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 August 31, 2020 , we had approximately 67,000 performance share units outstanding.

There were no outstanding performance share units at August 31, 2019 and 2018 .

As of August 31, 2020 there was $ 1.9 million of total unrecognized compensation cost related to unvested performance share units.

That cost is expected to be recognized over a weighted-average period of approximately 2.1 years.

Employee Deferred Share Units

We previously allowed employees to defer a portion of restricted stock awards granted in fiscal 2003 and fiscal 2004 into the SDSP as share units.

The share units are payable in shares of stock at the time of distribution from the SDSP.

As of August 31, 2020 , approximately 7,500 fully vested share units remain deferred, but undistributed, under the Stock Incentive Plan.

There was no compensation expense related to these share units during fiscal years 2020 , 2019 , and 2018 .

Director Deferred Share Units

Total shares available for issuance under the Director Plan were approximately 320,000 , 360,000 , and 370,000 at August 31, 2020 , 2019 , and 2018 , respectively.

As of August 31, 2020 , approximately 98,000 share units were deferred but undistributed under the Director Plan.

Director Deferred Stock Units

Total shares available for issuance under the Director Plan were approximately 0.3 million, 0.3 million, and 0.4 million at August 31, 2021, 2020, and 2019, respectively.

As of August 31, 2021, approximately 0.1 million stock units were deferred but undistributed under the Director Plan.

Employee Stock Purchase Plan

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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.

We historically have made 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.

During fiscal 2019, we recognized an actuarial gain of $ 3.4 million as well as $ 0.4 million in net periodic pension cost related to the early retirement of one participant within our non-qualified domestic plans.

Current period net actuarial gains in our projected benefit obligation primarily reflect an increase in the discount rate from our prior year valuation, partially offset by settlement losses during the year ended August 31, 2021.

ACUITY BRANDS, INC

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The following tables reflect the status of our domestic (U.S.-based) and international pension plans as of the dates presented (in millions):

Domestic Plans

International Plans

Domestic Plans International Plans

August 31, August 31,

2021 2020 2021 2020

Change in benefit obligation:

Benefit obligation at beginning of year $ 249.6 $ 239.2 $ 49.2 $ 44.6

Service cost 4.6 4.3 0.3 0.3

Interest cost 5.3 6.4 0.9 0.9

Actuarial losses

Settlement gain

Actuarial (gains) losses ( 5.2 ) 8.5 1.7 0.7

Benefits paid ( 29.6 ) ( 8.8 ) ( 1.3 ) ( 1.4 )

Other — — 1.8 4.1

Benefit obligation at end of year 224.7 249.6 52.6 49.2

4 unchanged sentences

Benefits paid ( 29.6 ) ( 8.8 ) ( 1.3 ) ( 1.4 )

Other — — 1.0 3.1

Fair value of plan assets at end of year 182.6 167.1 42.2 35.1

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Amounts recognized in the consolidated balance sheets consist of:

Non-current assets $ 13.0 $ — $ — $ —

Current liabilities ( 5.2 ) ( 5.0 ) ( 0.1 ) —

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Amounts in accumulated other comprehensive loss

$ ( 60.8 ) $ ( 87.6 ) $ ( 11.4 ) $ ( 13.5 )

Pensions plans in which benefit obligation exceeds plan assets:

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Accumulated benefit obligation 80.8 249.1 51.7 49.2

Estimated amounts that will be amortized from accumulated comprehensive income over the next fiscal year:

Prior service cost

Net actuarial loss

Plan assets 26.6 167.1 42.2 35.1

Pensions plans in which plan assets exceed benefit obligation:

Projected benefit obligation $ 143.0 $ — $ — $ —

Accumulated benefit obligation 143.0 — — —

Plan assets 156.0 — — —

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 .

We utilize a corridor approach to amortize cumulative unrecognized actuarial gains or losses over either the average expected future service of active participants or average life expectancy of plan participants based on each plan’s composition.

The corridor is determined as the greater of the excess of 10 % of plan assets or the projected benefit obligation at each valuation date.

Amounts related to prior service cost are amortized over the average remaining expected future service period for active participants in each plan.

Net periodic pension cost during the periods presented included the following components before tax (in millions):

Domestic Plans

International Plans

Domestic Plans International Plans

2021 2020 2019 2021 2020 2019

Service cost $ 4.6 $ 4.3 $ 2.9 $ 0.3 $ 0.3 $ 0.2

Interest cost 5.3 6.4 7.7 0.9 0.9 1.3

1 unchanged sentence

Amortization of prior service cost 2.9 4.0 3.5 — — —

Settlement 3.9 — 0.4 — — —

Recognized actuarial loss 4.1 4.2 2.7 1.4 1.4 1.4

1 unchanged sentence

Weighted average assumptions used in computing the benefit obligation are as follows:

Domestic Plans

International Plans

Domestic Plans International Plans

2021 2020 2021 2020

Discount rate 2.4 % 2.2 % 1.9 % 1.9 %

1 unchanged sentence

Weighted average assumptions used in computing net periodic pension cost are as follows:

Domestic Plans

International Plans

Domestic Plans International Plans

2021 2020 2019 2021 2020 2019

Discount rate 2.2 % 2.8 % 3.9 % 1.9 % 2.0 % 2.9 %

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It is our policy to adjust, on an annual basis, the discount rate used to determine the projected benefit obligation to approximate rates on high-quality, long-term obligations based on our estimated benefit payments available as of the measurement date.

We use a published yield curve to assist in the development of our discount rates.

We estimate that a 100 basis point increase in the discount rate would reduce net periodic pension cost approximately $ 1.0 million for both the domestic plans and international plans.

We use published yield curves to assist in the development of our discount rates.

We estimate that a 100 basis point increase in the discount rate would reduce net periodic pension cost approximately $ 0.9 million for the domestic plans and $ 0.6 million for the international plans.

The expected return on plan assets is derived primarily from a periodic study of long-term historical rates of return on the various asset classes included in our targeted pension plan asset allocation as well as future expectations.

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Our investment objective for domestic plan assets is to earn a rate of return sufficient to exceed the long-term growth of the plans’ liabilities without subjecting plan assets to undue risk.

The plan assets are invested primarily in high quality equity and debt securities.

The plan assets are invested primarily in high quality debt and equity securities.

We conduct a periodic strategic asset allocation study to form a basis for the allocation of pension assets between various asset categories.

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The assets are then managed within these ranges.

During fiscal 2020 , the U.S.

targeted asset allocation was 55 % equity securities, 40 % fixed income securities, and 5 % real estate securities.

Our investment objective for the international plan assets is also to add value by exceeding the long-term growth of the plans’ liabilities.

During fiscal 2020 , the international asset target allocation approximated 75 % equity securities, 15 % fixed income securities, and 10 % multi-strategy investments.

At August 31, 2021, the U.S.

targeted asset allocation was 40 % equity securities, 55 % fixed income

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

securities, and 5 % real estate securities.

Our investment objective for the international plan assets is also to add value by exceeding the long-term growth of the plans’ liabilities.

At August 31, 2021, the international asset target allocation approximated 16 % equity securities, 20 % fixed income securities, and 64 % multi-strategy investments.

Our pension plan asset allocation by asset category as of the dates presented is as follows:

% of Plan Assets

Domestic Plans

International Plans

Domestic Plans International Plans

2021 2020 2021 2020

Equity securities 41.2 % 58.2 % 16.1 % 76.9 %

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Multi-strategy investments — % — % 63.8 % 9.4 %

Real estate 4.5 % 4.5 % — % — %

Total 100.0 % 100.0 % 100.0 % 100.0 %

Our pension plan assets are stated at fair value based on quoted market prices in an active market, quoted redemption values, or estimates based on reasonable assumptions as of the most recent measurement period.

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The collective trust seeks to outperform the overall small-cap stock market and is comprised of small-cap equity securities with quoted prices in active markets for identical investments.

The value of this fund is calculated on each business day by dividing the total value of assets, less liabilities, by the number of units of each class outstanding but is not published (Level 2).

The value of this fund is calculated on each business day based on its daily net asset value;

however, the collective trust is not deemed to be actively traded (Level 2).

Fixed Income Investments

The fixed interest fund seeks to maximize total return by investing primarily in a diversified portfolio of intermediate and long-term debt securities and is valued using the NAV of units of a management investment company’s trust.

The fixed income fund seeks to maximize total return by investing primarily in a diversified portfolio of intermediate and long-term debt securities and is valued using the NAV of units of a management investment company’s trust.

The NAV, as provided by the fund's trustee, is used as a practical expedient to estimate fair value.

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This investment is valued based on the NAV per share, without further adjustment.

The NAV, as provided by the fund's trustee, is used as a practical expedient to estimate fair value and is therefore excluded from the fair value hierarchy.

The NAV, as provided by the fund's trustee, is used as a practical expedient to estimate fair value and is therefore excluded from the fair value

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NAV is based on the fair value of the underlying investments.

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Each investor must provide a written redemption request at least sixty days prior to the end of the quarter for which the request is to be effective.

If insufficient funds are available to honor all redemption requests at

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

any point in time, available funds will be allocated pro-rata based on the total number of shares held by each investor.

If insufficient funds are available to honor all redemption requests at any point in time, available funds will be allocated pro-rata based on the total number of shares held by each investor.

All decisions regarding whether to honor redemption requests are made by the fund’s board of directors.

International Plan Investments

The international plans' assets consist primarily of funds invested in equity securities, multi-strategy investments, and fixed income investments.

These securities are calculated using the values of the underlying holdings (i.e.

significant observable inputs) but do not have actively quoted market prices (Level 2).

The short-term fixed income investments represents cash and cash equivalents held by the funds at fiscal year end (Level 1).

The following tables present the fair value of the domestic pension plan assets by major category as of the dates presented (in millions):

Fair Value Measurements

Quoted Market

as of Quoted Market

Prices in Active

Identical Assets

August 31, 2020

Identical Assets Significant

Inputs Significant

August 31, 2021 (Level 1) (Level 2) (Level 3)

Assets included in the fair value hierarchy:

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Fair Value Measurements

Quoted Market

as of Quoted Market

Prices in Active

Identical Assets

August 31, 2019

Identical Assets Significant

Inputs Significant

August 31, 2020 (Level 1) (Level 2) (Level 3)

Assets included in the fair value hierarchy:

13 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

International Plan Investments

The international plans' assets consist primarily of funds invested in equity securities, multi-strategy investments, and fixed income investments.

These securities are calculated using the values of the underlying holdings (i.e.

significant observable inputs) but do not have quoted prices in active markets (Level 2).

The short-term fixed income investments represents cash and cash equivalents held by the funds at fiscal year end (Level 1).

The following tables present the fair value of the international pension plan assets by major category as of the dates presented (in millions):

Fair Value Measurements

Quoted Market

as of Quoted Market

Prices in Active

Identical Assets

August 31, 2020

Identical Assets Significant

Inputs Significant

August 31, 2021 (Level 1) (Level 2) (Level 3)

Assets included in the fair value hierarchy:

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Fair Value Measurements

Quoted Market

as of Quoted Market

Prices in Active

Identical Assets

August 31, 2019

Identical Assets Significant

Inputs Significant

August 31, 2020 (Level 1) (Level 2) (Level 3)

Assets included in the fair value hierarchy:

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Total assets at fair value $ 35.1

We expect to contribute approximately $ 1.0 million and $ 1.2 million during fiscal 2021 to our domestic qualified plans and international defined benefit plans, respectively.

We do not expect to contribute to the domestic qualified plans in fiscal 2022 based on the funded status of the plans as well as current legal minimum funding requirements.

We expect to contribute approximately $ 1.5 million during fiscal 2022 to our international defined benefit plans.

These amounts are based on the total contributions required during fiscal 2022 to satisfy current legal minimum funding requirements for qualified plans and estimated benefit payments for non-qualified plans.

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Benefit payments are expected to be paid as follows during the years ending August 31 (in millions):

Domestic Plans

International Plans

Domestic Plans International Plans

2022 $ 13.2 $ 1.2

2023 11.9 1.3

2024 12.0 1.3

2025 12.9 1.4

2026 14.8 1.4

2027-2031 65.0 8.4

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Multi-employer Pension Plans

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The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects:

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

1 unchanged sentence

• If a participating employer chooses to stop participating in some of its multi-employer plans, the employer may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

Our contributions to these plans were $ 0.6 million for the year ended August 31, 2020 , and $ 0.5 million for each of the years ended August 31, 2019 , and 2018 .

Our contributions to these plans were $ 0.6 million for the years ended August 31, 2021 and 2020, and $ 0.5 million for the year ended August 31, 2019.

Defined Contribution Plans

We also have defined contribution plans to which both employees and we make contributions.

Our cost for these plans was $ 8.2 million , $ 8.1 million , and $ 8.0 million for the years ended August 31, 2020 , 2019 , and 2018 , respectively.

Employer matching amounts are allocated in accordance with the participants’ investment elections for elective deferrals.

We have defined contribution plans to which both employees and we make contributions.

Employer matching amounts are allocated in accordance with the participants’ investment elections for elective deferrals and totaled $ 8.4 million, $ 8.2 million, and $ 8.1 million for the years ended August 31, 2021, 2020, and 2019, respectively.

At August 31, 2021, assets of the domestic defined contribution plans included shares of our common stock with a market value of approximately $ 8.9 million, which represented approximately 1.8 % of the total fair market value of the assets in our domestic defined contribution plans.

1 unchanged sentence

During the year ended August 31, 2021, we recognized pre-tax special charges of $ 3.3 million.

These charges were primarily severance costs and ROU lease asset impairments related to planned facility closures.

We additionally recognized charges for relocation costs associated with the previously announced transfer of activities from planned facility closures.

We expect these actions to streamline our business activities, 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.

These charges consisted primarily of charges for relocation costs and adjustments related to severance costs associated with the previously announced transfer of activities from planned facility closures as well as other streamlining activities.

The details of the special charges during the periods presented are summarized as follows (in millions):

Year Ended August 31,

2021 2020 2019

Severance and employee-related costs $ 1.7 $ 9.3 $ ( 0.5 )

ROU lease asset impairment charges — 7.4 —

Other restructuring costs

Relocation and other restructuring costs 1.6 3.3 2.3

Total special charges $ 3.3 $ 20.0 $ 1.8

1 unchanged sentence

The changes in the accruals related to these programs during the period presented are summarized as follows (in millions):

Fiscal 2020 Actions

Fiscal 2019 Actions

Fiscal 2018 Actions

August 31, 2021

Balance as of August 31, 2020 $ 3.0

Severance costs 1.7

Relocation and other restructuring costs 1.6

Payments made during the period ( 4.6 )

4 unchanged sentences

Changes in common stock during the periods presented were as follows (amounts and shares in millions):

Shares Amount

Balance at August 31, 2018 53.7 $ 0.5

Issuance of restricted stock grants, net of cancellations 0.1 —

Stock options exercised

Balance at August 31, 2019 53.8 0.5

Issuance of restricted stock grants, net of cancellations 0.1 —

Stock options exercised — * —

Balance at August 31, 2020 53.9 0.5

5 unchanged sentences

As of August 31, 2021 and 2020, we had 18.8 million and 15.0 million of repurchased shares recorded as treasury stock at an original repurchase cost of $ 1.66 billion and $ 1.23 billion, respectively.

In March 2018, the Board authorized the repurchase of up to six million shares of common stock.

As of August 31, 2020 , 2.1 million shares had been purchased under this authorization, of which 0.7 million were repurchased in fiscal 2020 .

The maximum number of shares that may yet be purchased under the program as of August 31, 2020 equaled 3.9 million shares.

During fiscal 2021, we repurchased 3.8 million shares of our outstanding common stock.

As of August 31, 2021, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 3.8 million shares.

We expect to repurchase shares on an opportunistic basis subject to various factors including stock price, Company performance, market conditions, and other possible capital allocation priorities.

Preferred Stock

3 unchanged sentences

Basic earnings per share for the periods presented is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for these periods.

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.

Diluted earnings per share is computed similarly but reflects the potential dilution that would occur if dilutive options were exercised, unvested share-based payment awards were vested, and other distributions related to deferred stock agreements were incurred.

The dilutive effects of share-based payment awards subject to market and/or performance conditions that were not met during the period are excluded from the computation of diluted earnings per share.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Year Ended August 31,

2021 2020 2019

Net income $ 306.3 $ 248.3 $ 330.4

Basic weighted average shares outstanding 36.3 39.5 39.7

3 unchanged sentences

Diluted earnings per share $ 8.38 $ 6.27 $ 8.29

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Year Ended August 31,

2021 2020 2019

Stock options 0.8 0.6 0.3

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_______________________

* Represents shares of less than 1,000 in fiscal 2020.

No performance stock units awards were outstanding in fiscal 2019 or fiscal 2018.

* Represents shares of less than 0.1 million.

Note 15 — Income Taxes

4 unchanged sentences

Year Ended August 31,

2021 2020 2019

Provision for current federal taxes $ 65.4 $ 54.6 $ 60.3

3 unchanged sentences

Total provision for income taxes $ 89.9 $ 76.4 $ 94.5

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the provision at the federal statutory rate to the total provision for income taxes during the periods presented (in millions):

Year Ended August 31,

2021 2020 2019

Federal income tax computed at statutory rate $ 83.2 $ 68.2 $ 89.2

1 unchanged sentence

Foreign permanent differences and rate differential 2.4 2.4 2.1

Discrete income tax benefits of the TCJA

Discrete income tax benefits of the U.S.

Tax Cuts and Jobs Act — — ( 2.2 )

Research and development tax credits ( 7.6 ) ( 7.1 ) ( 18.1 )

Unrecognized tax benefits 0.7 1.8 12.2

Other, net 0.5 1.4 ( 0.9 )

Total provision for income taxes $ 89.9 $ 76.4 $ 94.5

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Components of the net deferred income tax liabilities as of the dates presented include (in millions):

Deferred income tax liabilities:

Depreciation $ ( 19.0 ) $ ( 23.3 )

Goodwill and intangibles ( 155.2 ) ( 153.1 )

4 unchanged sentences

Self-insurance 1.8 2.1

Pension 9.9 22.2

Deferred compensation 21.3 22.2

2 unchanged sentences

Operating lease liabilities 15.4 18.2

Other assets 12.0 9.3

Total deferred income tax assets 107.1 111.6

1 unchanged sentence

Net deferred income tax liabilities $ ( 99.1 ) $ ( 92.2 )

As of August 31, 2020 and 2019 , the estimated undistributed earnings from foreign subsidiaries was $ 144.9 million .

As of August 31, 2021, the estimated undistributed earnings from foreign subsidiaries was $ 165.1 million.

We have recorded a deferred income tax liability of $ 3.3 million for certain foreign withholding taxes and U.S.

3 unchanged sentences

It is not practicable to estimate the amount of any unrecognized tax effects on these reinvested earnings and original investments in foreign subsidiaries.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“TCJA”).

The TCJA included changes that took effect during fiscal 2019 including, but not limited to, additional limitations on certain executive compensation, limitations on interest deductions, a new U.S.

tax on certain offshore earnings referred to as Global Intangible Low-Taxed Income (“GILTI”), a new alternative U.S.

tax on certain Base Erosion Anti-Avoidance (“BEAT”) payments from a U.S.

company to any foreign related party, a new deduction for Foreign Derived Intangible Income (“FDII”), and the repeal of the Section 199 domestic production activities deduction.

federal corporate tax rate was 21.0% for fiscal 2019.

During fiscal 2018 , we recorded a provisional discrete tax benefit of $ 34.6 million within Income tax expense on the Consolidated Statements of Comprehensive Income following the enactment of the TCJA.

During fiscal 2019 , we recorded an additional tax benefit of $ 2.2 million related to TCJA impacts including, but not limited to, our one-time transition tax, deferred income taxes, and executive compensation.

The total tax benefit related to the enactment of the TCJA was $ 36.8 million , which included a benefit of $ 32.5 million to decrease our deferred income taxes to the revised statutory federal rate as well as a current estimated benefit of approximately $ 4.3 million for the transition tax on unremitted foreign earnings.

We have elected to account for the tax on GILTI as a period cost and, therefore, do not record deferred taxes related to GILTI on our foreign subsidiaries.

We account for the tax on Global Intangible Low-Taxed Income (“GILTI”) as a period cost and, therefore, do not record deferred taxes related to GILTI on our foreign subsidiaries.

At August 31, 2021, we had state tax credit carryforwards of approximately $ 1.5 million, which will expire beginning in 2022.

At August 31, 2021, we had federal net operating loss carryforwards of $ 28.7 million that expire beginning in 2029, state net operating loss carryforwards of $ 30.1 million that began expiring in 2022, and foreign net operating loss carryforwards of $ 3.4 million that expire beginning in 2026.

The gross amount of unrecognized tax benefits as of August 31, 2020 and 2019 totaled $ 17.2 million and $ 16.6 million , respectively, which includes $ 16.7 million and $ 15.9 million , respectively, of net unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

We recognize potential interest and penalties related to

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

unrecognized tax benefits as a component of income tax expense;

The gross amount of unrecognized tax benefits as of August 31, 2021 and 2020 totaled $ 17.7 million and $ 17.2 million, respectively, which includes $ 17.1 million and $ 16.7 million, respectively, of net unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

We recognize potential interest and penalties related to unrecognized tax benefits as a component of income tax expense;

such accrued interest and penalties are not material.

3 unchanged sentences

Year Ended August 31,

2021 2020 2019

Unrecognized tax benefits balance at beginning of year $ 17.2 $ 16.6 $ 4.4

5 unchanged sentences

Unrecognized tax benefits balance at end of year $ 17.7 $ 17.2 $ 16.6

Total accrued interest was $ 1.7 million and $ 1.0 million as of August 31, 2020 and 2019 , respectively.

Total accrued interest was $ 2.0 million, $ 1.7 million, and $ 1.0 million as of August 31, 2021, 2020, and 2019, respectively.

There were no accruals related to income tax penalties during fiscal 2021.

1 unchanged sentence

The classification of interest and penalties did not change during the current fiscal year.

We are currently under an IRS audit for fiscal years 2017 , 2016 , and 2015 .

We do not believe this audit will result in adjustments that would materially change our uncertain tax positions.

We are routinely under audit from various tax jurisdictions.

We do not currently anticipate material audit assessments.

ACUITY BRANDS, INC

1 unchanged sentence

Note 16 — Supplemental Disaggregated Information

We have one reportable segment.

Sales of lighting and building technology solutions, excluding services, accounted for approximately 99 % of total consolidated net sales in fiscal 2020 , 2019 , and 2018 .

Sales of lighting, lighting controls, and building technology solutions, excluding services, accounted for approximately 99 % of total consolidated net sales in fiscal 2021, 2020, and 2019.

Our geographic distribution of net sales, operating profit, income before provision for income taxes, and long-lived assets is summarized in the following table during and as of the periods presented (in millions):

Year Ended August 31,

2021 2020 2019

Net sales (1) :

$ 2,982.4 $ 2,925.0 $ 3,277.4

International 478.6 401.3 395.3

Total $ 3,461.0 $ 3,326.3 $ 3,672.7

Operating profit:

$ 369.9 $ 300.6 $ 419.3

International 57.7 53.3 43.6

Income before provision for income taxes:

Total $ 427.6 $ 353.9 $ 462.9

Income before income taxes:

$ 343.7 $ 274.2 $ 386.4

International 52.5 50.5 38.5

Total $ 396.2 $ 324.7 $ 424.9

Long-lived assets (3) :

$ 284.4 $ 298.6 $ 246.9

International 76.6 64.8 48.1

Total $ 361.0 $ 363.4 $ 295.0

_______________________________________

2 unchanged sentences

based operations.

Long-lived assets include net property, plant, and equipment, operating lease right-of-use assets, long-term deferred income tax assets, and other long-term assets as reflected in the Consolidated Balance Sheets .

Note 16 — Subsequent Event

From September 1, 2020 through October 22, 2020, we repurchased an additional 1.7 million shares of our common stock under the March 2018 share repurchase 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.

Refer to Part II, Item 9b.

Other information for further details.

ACUITY BRANDS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17 — Quarterly Financial Data (Unaudited)

Fiscal Year 2020

(In millions)

Basic earnings per share

Diluted earnings per share

Fiscal Year 2019

(In millions)

Basic earnings per share

Diluted earnings per share

Certain amounts in the tables above have been rounded.

Accordingly, the sum of the quarters may not be an exact match to the full year amounts.

(3) Long-lived assets include net property, plant, and equipment, operating lease right-of-use assets, and other long-term assets as reflected in the Consolidated Balance Sheets .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data