2009 annual report
Acuity BrAnds, inc. : 2009 AnnuAl report 1
InnovatIve. ResponsIve. stRategIc. Focused.
Acuity BrAnds, inc. is one of the
world’s leAding providers of lighting
fixtures, lighting controls, And
relAted products And services for
new construction, renovAtion, And
fAcility mAintenAnce ApplicAtions.
products include A full rAnge of indoor And
outdoor lighting fixtures for commerciAl And
institutionAl, industriAl, infr Astructure, And
residentiAl ApplicAtions. in fiscAl 2009, Acuity
B r An ds co ntin u ed to e xecute
its lo ng -term
strAtegy of Addressing the growing mArkets
in renovAtion And lighting controls. we Also
continued to tAke AdvAntAge of Acquisition
opportunities And introduced A record numBer of
new, innovAtive products.
n 500,000 products
n 2,000 product groups
n 5,000 customers
n 6,000 employees
n 17 percent north AmericAn mArket shAre
2
to ouR staKeHoLdeRs
it is often sAid Adversity Brings out the Best in
people—And orgAnizAtions. 2009 wAs ArguABly the
most chAllenging yeAr our compAny hAs ever
co n fro nted. th e co ll Ap s e—wo r ldwi d e— o f th e
finAnciAl mArkets, And the ensuing economic
downturn precipitAted A drAmAtic drop in demAnd
for residentiAl And non-residentiAl construction.
According to the u.s. commerce department’s Bureau of the census, housing
starts dropped an additional 31% during the 12 months ended in August 2009, and
a leading-industry data provider reported non-residential building construction
starts declined approximately 33% during this same time period.
clearly, our results were affected by these uncontrollable, external forces, yet at
the same time the extraordinary efforts of the dedicated associates of Acuity
Brands allowed us to outperform our competitors in many of the markets we serve.
we acted quickly and decisively to put our company in the strongest possible
position to succeed, delivering short-term results while investing to support our
longer-term strategies. on that score, we accomplished a great deal in 2009, taking
steps to better position the company strategically to participate in rapidly growing
portions of our key markets.
2009 FInancIaL ResuLts
At Acuity Brands, we believe results for the current year should be accretive
compared with the year before; anything less is disappointing. while we are proud
of our results in 2009, we are not satisfied. key financial highlights for 2009
included:
n nets sales were almost $1.7 billion, down 18%;
n operating profit was $154 million;
n operating profit margin was 9.3%;
n net income was $85 million;
n diluted earnings per share were $2.04;
n cash flow from operating activities was $93 million;
n return on stockholders’ equity was 14%.
the above results included a special charge of approximately $27 million for
actions to accelerate the streamlining of our organization, rightsizing both our
staffing levels and manufacturing footprint. while these actions reduced our cost
structure by $28 million in 2009, we expect to realize $50 million of annualized
Acuity BrAnds, inc. : 2009 AnnuAl report 3
savings from these actions. excluding the special charge, we achieved an operating
profit margin of 10.9% in 2009, more than double the margins we generated the
last time we reported comparable sales. we believe this achievement is even more
impressive when taking into consideration the $40 million of higher raw material
and component costs that we absorbed in 2009 due to the record rise in certain
commodity prices, such as steel and oil, which occurred around the start of the
year. we were unable to pass along these cost increases as commodity prices
subsequently fell sharply coincident with the financial crisis causing a swift and
substantial decline in demand for lighting products.
nonetheless, in spite of these economic pressures, we acted decisively and
early in 2009 choosing to protect our cash flow to afford greater investments in
technology and innovation, introduce more compelling products and services, and
expand into new markets.
we generated almost $93 million in cash flow, invested $21 million for equipment
and tooling, paid almost $22 million in dividends to stockholders, retired almost
$162 million of debt, and funded $162 million in acquisitions. And yet, our financial
strength remains strong, with a net debt position of approximately $213 million.
we regard this level of leverage as modest in light of our cash-generating potential,
affording us flexibility to fund investments to expand both internally and through
strategic acquisitions. Additionally, we anticipate taking advantage of the favorable
credit market environment to refinance our $200 million of public notes that
mature in August 2010 and to potentially raise additional long-term debt at current
low borrowing rates.
overall, our associates in 2009 overcame significant obstacles to deliver strong
financial results during a very trying and tumultuous year. we are proud to report
operating margins of almost 11% (before the streamlining charge) and a return on
stockholders’ equity of 14%, again while dealing with extraordinary events, hopefully
never to occur again.
2009 acHIevements
looking beyond the financial results, our many strategic and tactical achievements
in 2009 will have long-term significance. we made considerable investments
to better understand the needs of our customers; to accelerate the introduction
of market-changing products; and to become a faster, leaner, and more team-
oriented company.
2009 was a transformational year for Acuity Brands. for the past four years we
have focused on becoming a better business in terms of execution and performance,
less concerned about being a bigger business. our consistent improvement in
performance positioned us well in 2009 to begin the next chapter in our evolution:
4
internal growth fueled by operational excellence, augmented by a focused
acquisition strategy.
At the center of our effort to refine and focus our enterprise are three mission-
critical areas we refer to as the 3 c’s:
n providing unparalleled customer service;
n pursuing world-class cost efficiency by eliminating non-value added activities
and transaction costs; and
n creating a culture that demands excellence in everything we do through
continuous improvement.
Again, we made excellent progress throughout the company in our efforts to
differentiate ourselves in these areas.
for customers, providing superior value is our top priority. we strive to deliver
products and services that are on time and complete, without error or defect, and
to do so faster and more effectively than our competitors. we measure our
performance in four critical areas: quality, delivery, cost and innovation, and
have been able to distinguish ourselves in these measures. this included our
much improved service capabilities, plus development of energy-efficient and
innovative new products demanded by our customers. we are proud of our many
accomplishments in these areas, as exemplified by the introduction of our new
outdoor lighting brand tersen™ that incorporates energy-efficient light sources to
provide night-time performance with architectural designs for day-form appearance.
our objective is to continually improve our cost, both in product design and
organizational effectiveness, by applying “lean” principles that afford us a sustainable
competitive advantage. in 2009 we once again made considerable progress in this
area. we continue to invest heavily in programs to streamline our business processes,
improve productivity, accelerate product development, and enhance our ability to
serve our customers. the impact of these programs is evident in key areas such as
customer service, quality, asset utilization, and productivity. Additionally, as i noted
earlier, we responded to the economic slowdown by reducing our cost structure by
an expected $50 million annually.
A key goal of our “lean” program is to align the interests of each stakeholder
from the board room to the shop floor, measuring success against strategy, seeking
continuous improvement, and fostering greater collaboration and teamwork. this is
the foundation of our winning culture. much of our success in delivering strong
operational improvements, particularly when facing significant obstacles as we did
in 2009, is due to the deep integration of this system into our daily work flow. we
expect this momentum to carry into 2010.
equally important, we added to our industry-leading portfolio of brands by
acquiring lighting control & design and sensor switch, forming the nucleus of
Acuity BrAnds, inc. : 2009 AnnuAl report 5
Acuity Brands controls, a complementary business to Acuity Brands lighting,
focused on the fast-growing market for lighting controls and energy management.
these acquisitions, coupled with our internal programs to profitably expand our
market presence, create a strong and dynamic foundation to execute our long-term
growth strategies.
stRategIc Focus
for the past four years, our focus on internal growth and greater profitability proved
to be the right strategy. we put considerable emphasis on our ability to execute,
creating superior value for all stakeholders.
As we have strengthened our organization, so have we expanded our ambitions.
our mission is straightforward: to be the leader in providing innovative,
technologically-advanced and sustainable lighting products and lighting-related
solutions. our strategy is equally specific: to provide superior products, services,
and solutions that best support the needs of our customers for both indoor and
outdoor lighting applications. we aim for excellence in all aspects of a lighting
project, providing holistic solutions, including fixtures and controls for virtually any
application. By strategy we offer our industry-leading portfolio of products through
multiple channels of distribution, working with select partners to bring superior
value to the end customer.
the markets we serve are diverse, with applications ranging from homes to
skyscrapers, streets to power plants, and we sell through multiple channels, allowing
our customers to purchase our products in the most efficient manner possible. we
estimate the current north American lighting equipment and lighting-controls
market to be approximately $10 billion in value while some estimates suggest the
installed-base for lighting renovation exceeds $100 billion. our recent acquisitions
will help us solidify our position in the lighting control market, currently estimated
at $800 million and growing at an accelerated pace. our efforts over the past few
years to expand our product portfolio, enhance service, broaden market coverage,
and, this year, penetrate lighting controls, have positioned us well to fully participate
in what will be a fast-growing market, particularly as technology, innovation,
environmental awareness and sustainability converge among developers and
building owners around the globe.
sustaInabILIty
our customers recognize the value we add in helping them meet their goals of
both conserving energy and lessening their impact on the environment, while at the
same time enhancing their lighting experience. we not only see benefits for others,
but also for our company. three years ago we put in place an ambitious program
6
the following charts reflect results from continuing operations.
NET SALES
($ in millions)
OPERATING PROFIT
($ in millions)
OPERATING MARGINS
DILUTED EPS
7
2
0
2
$
,
5
6
9
,
1
$
7
5
6
,
1
$
1
4
8
,
1
$
8
3
6
,
1
$
1
6
2
$
2
2
2
$
2
5
1
$
4
5
1
$
7
6
$
%
9
2
1
.
%
3
.
1
1
%
3
9
.
%
3
8
.
%
1
.
4
.
7
5
3
$
3
9
2
$
.
5
0
2
$
.
5
7
.
1
$
.
5
5
0
$
2500
2000
1500
1000
500
0
’05
’06
’07
’08
’09
’05
’06
’07
’08
’09
’05
’06
’07
’08
’09
’05
’06
’07
’08
’09
NET SALES
($ in millions)
OPERATING PROFIT
($ in millions)
OPERATING MARGINS
DILUTED EPS
300
250
200
150
100
50
0
15
12
9
6
3
0
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
(Based upon an initial investment of $100 on August 31, 2004 with dividends reinvested.)
$250
200
150
100
$ 1 8 2
$ 1 1 5
$ 1 1 2
250
200
150
100
August
2004
August
2005
August
2006
August
2007
August
2008
August
2009
Acuity Brands
S&P SmallCap 600
Dow Jones US Electrical Components & Equipment
Acuity Brands(a)
S&P SmallCap 600 Index
Dow Jones US Electrical Components & Equipment Index
Aug. ’04
Aug. ’05
Aug. ’06
Aug. ’07
Aug. ’08
Aug. ’09
$100
$100
$100
$131
$126
$ 1 1 1
$193
$136
$126
$240
$155
$150
$242
$145
$143
$182
$115
$ 1 1 2
(a) Total Return for Acuity Brands reflects the spinoff of Zep Inc.; historical stock price and dividend data have been adjusted accordingly.
Acuity Brands
S&P Smallcap 600
Dow Jones US Electrical
Components & Equipment
Acuity BrAnds, inc. : 2009 AnnuAl report 7
to take the necessary steps to reduce our environmental impact. we established
goals of reducing by at least 10% the company’s use of electricity, natural gas, and
water as well as the solid waste sent to landfills. we have achieved significant
reductions so far. since 2006, Acuity Brands lighting’s headquarters facility in
conyers, georgia has achieved an overall reduction in electricity use of 42%. in the
last fiscal year we recycled more than 774 tons, with our edison, nJ facility achieving
a waste diversion rate of 75%, and we are striving for further reductions in solid
waste sent to landfills. And company-wide, we have achieved an overall reduction
in paper use of 74%, with 24% in the past year. this past year our new york center
for light + space achieved a leed gold certification, making it our second leed
certified facility. we also implemented a four-day workweek throughout much of
our organization, providing greater flexibility to our associates and reducing the
fuel consumption for their commuting. this also reduced the company’s use of
natural resources while still meeting the demands of our customers. Additional
details on our sustainability efforts are included in the sustainability section of this
annual report.
2010 and beyond
As we anticipate 2010, we are optimistic yet realistic. in the long-term, we see great
potential for significant growth in a number of areas within the lighting equipment
and lighting controls industry. As the north American market leader, we expect
to extend our industry position as we capitalize on those opportunities. however,
we also recognize that the current economic environment will present near-
term challenges.
strategically, our focus in 2010 will remain consistent, but with an ever-increasing
sense of urgency. said differently, precise execution will be the cornerstone of our
tactical focus during these extraordinary times. our goal of continuously improving
our performance as measured by the 3 c’s of customer, cost and culture will
continue to serve as a guide, honing our focus on our customers, products, supply
chain excellence, and organizational effectiveness.
we have made great strides in becoming a more customer-centric company,
better understanding the dynamics of their businesses to provide more effective
solutions, expanding our business with both new and existing customers. new
products are the life blood of any great company, and we believe our pipeline is
strong. we understand technology and how best to apply it to advantage our
customers. in 2010, we intend to introduce, for the second year in a row, more than
100 new products, many incorporating solid state technologies (such as leds)
and superior lighting controls, while continuing our aggressive funding of innovation
and new technology. Additionally, we will continue to expand our market presence
8
and service capabilities in key geographies and channels, particularly in renovation
and relight where we see tremendous growth potential. our investments to fully
participate in the lighting control and energy management market will serve to
further strengthen our ability to provide our customers with total lighting solutions.
from a supply chain perspective, we will continue to improve our effectiveness,
lowering our transaction costs, enhancing product quality, shortening product lead-
times, increasing productivity, and providing customers with superior delivery
options. we believe our efforts in these areas, along with our streamlining actions,
will give us a competitive advantage. finally, we are focused intently on achieving
excellence in everything we do. we will continue to improve our organizational
effectiveness with further investments in the training and development of our
associates, our business systems, and infrastructure.
concLusIon
2010 will be a very challenging year; however we believe that our strategic and
tactical plans and our strong financial position will allow us to strengthen our
industry-leading position and to outperform our competitors. innovation and
technology, economic recovery, sustainability, renovation and relight—all these
factors will drive change, requiring comprehensive yet simple solutions. over the
next decade, we see an exciting new frontier in lighting as advancements in
technology and software come together to facilitate innovate and energy-efficient
solutions, providing customers with optimal lighting for their needs coupled with
superior energy performance. said differently, the interaction of light, people, and
their environment will fuel dynamic growth in our industry. we believe our strategies
position us well to capitalize on exciting opportunities, and to deliver consistent
upper-quartile performance to our stockholders.
on behalf of the Board of directors, i want to thank our more than 6,000
associates for their continued contributions and dedication to our vision, our
customers for their business, and our stockholders for the partnership we share in
our enterprise.
vernon J. nAgel
chairman, president, and chief executive officer
november 10, 2009
ACuITybRANDs,INC.:2009ANNuAlRepORT 9
2009peRFORmANCe
(in millions of dollars, except earnings per share)
2009(1)
2008(2)
% Change
For the years ended August 31
Operations:
Net sales
Gross profit %
Operating profit
Operating profit %
Income from continuing operations
Net Income
Diluted earnings per share from continuing operations
Diluted earnings per share
Diluted weighted average number of shares outstanding
(in millions)
Return on average stockholders’ equity
Cash provided by operating activities
Depreciation and amortization
Capital expenditures
Financial Position:
Total assets
Total cash
Total debt
Total stockholders’ equity
Ratio of total debt to capital
Operating working capital as a percentage of net sales(3)
$1,657.4
$2,026.6
(18%)
38.3%
40.3%
$ 153.8
$ 261.1
(41%)
9.3%
12.9%
$
$
$
$
$
$
$
85.3
85.0
2.05
2.04
41.6
13.9%
92.7
35.7
21.2
$ 148.6
$ 148.3
$
$
3.57
3.56
41.6
25.9%
$ 221.8
$
$
33.8
27.2
$ 1,291
$ 1,409
$
$
$
19
232
672
25.6%
12.4%
$
$
$
297
364
576
38.7%
10.3%
(43%)
(43%)
(43%)
(43%)
(46%)
(58%)
6%
(22%)
(8%)
(94%)
(36%)
17%
Net sales, operating profit, and cash provided by operating activities reflect the specialty chemical busi-
ness, Zep Inc., as discontinued operations.
(1) 2009 results include a $26.7 million pre-tax charge for streamlining operations (or $0.41 per diluted share).
(2) 2008 results include a $14.6 million pre-tax charge for streamlining operations (or $0.21 per diluted share).
(3) Operating working capital is defined as net receivables plus inventories minus accounts payable.
10
bRIngIng eFFIcIency, seRvIce and stRategIc vIsIon to ouR maRKets
Ac u i t y B r A n d s o c c u p i e s A u n i q u e
c o m p e t i t i v e p o s i t i o n i n t h e n o r t h
AmericAn mArketplAce. we mAnufActure And
sell products with some of the most recognizABle BrAnds
in the industry, operAte in virtuAlly every commerciAl And
residentiAl mArket, And offer some of the most AdvAnced
technology in the lighting industry. we plAn to leverAge
our exceptionAlly BroAd product portfolio, our reseArch
And development cApABilities, And our unpArAlleled
d i s tr i B u ti o n c A pA B i liti es to g row o rgA n i c A lly A n d
through strAtegic Acquisitions. our BroAd corporAte
strAtegy hinges on:
OPerating excellence:
delivering vAlue And unpArAlleled customer service
Organic grOwth:
providing superior solutions using new, innovAtive technology And design
Strategic OPPOrtunitieS:
expAnding into new, growing And relAted mArkets
Acuity BrAnds, inc. : 2009 AnnuAl report 11
continuous improvement in
operating excellence
sustains our profitability and financial strength
in fiscAl 2009, Acuity BrAnds continued
to invest significAntly in growth
opportunities, But Also responded
to the reAlities of the mArketplAce.
our Actions to AccelerAte the streAm-
lining of the orgAnizAtion lowered
our operAting costs By ApproximAtely
$28 million in fiscAl 2009 And we expect
to reAlize An estimAted $50 million in
AnnuAlized cost sAvings from these
Actions in fiscAl 2010. we Also contin-
ued to drive productivity throughout
the orgAnizAtion, where we reduced
our compAny-wide production costs
slightly more thAn the percentAge
decline in sAles—A remArkABle feAt in
such A short time for A mAnufActuring
compAny.
14
$290,000
o f sa le s p e r e m p loy e e
a 40 percent increase since 2004
Acuity BrAnds, inc. : 2009 AnnuAl report 15
meetIng tHe cHaLLenge oF a dIFFIcuLt opeRatIng envIRonment
in fiscal 2009, the core principles that drive everything
we do—customers, costs and culture—again played a
critical role in the results we delivered to our stockhold-
ers. our “three c’s” are more than just words. they’re
ideals that allow us to respond quickly to market condi-
tions, business opportunities and to the needs of our
customers. for example, in listening to our customers,
we have been able to respond with more focused and
demand-driven product development efforts. in spite of
one of the most challenging operating environments in
decades, our intense focus on costs and productivity
allowed us to maintain our profitability while creating
greater value for our customers. And our strong corpo-
rate culture, and the diligent efforts of our thousands of
dedicated associates, again resulted in a level of unparal-
leled service to our customers and performance for our
stockholders.
we are committed to distinguishing ourselves in three
mission-critical areas we refer to as the “3 c’s”:
customeRs
providing unparalleled customer service;
costs
pursuing world-class cost efficiency by eliminating non-value added activities
and transaction costs; and
cuLtuRe
creating a culture that demands excellence in everything we do
through continuous improvement.
driving
organic growth
with products, innovation and solutions
developing new, innovAtive And
energy-efficient products thAt pro-
vide A superior lighting experience
will continue to Be the key to our
future success. we introduced over
100 new products in 2009, the most
in Any single yeAr in our compAny’s
history, incorporAting the lAtest
lighting technology, including light-
emitting diodes (“leds”). our mission
is to continue to provide superior
products, services, And solutions
thAt Best support the needs of our
customers for Both indoor And
outdoor lighting ApplicAtions.
18
oVer 100 neW proDUcts
introDUceD in 2009.
Acuity BrAnds, inc. : 2009 AnnuAl report 19
new pRoducts. new tecHnoLogy. supeRIoR soLutIons.
fostering innovation and the development of exciting
new technologies are investments in a company’s long-
term future, and must never be compromised—even in
the most difficult economic times. in fact, business con-
ditions such as those we have experienced in the past
year demand that these efforts be intensified—providing
an antidote to the increased competition for market share
that often takes place in the short term and momentum
for the long term, when business conditions improve.
Acuity Brands continued its research and development
efforts in 2009, introducing a record number of new
products, many of which incorporate cutting-edge tech-
nology applied in creative and innovative designs. these
efforts included our new outdoor architectural line,
tersen™, that further strengthens our “good, better, best”
value proposition that gives our customers a greater
range of choices and price points.
growth through…
strategic opportunities
opportunities to grow through
strAtegic Acquisitions present
themselves in All economic
climAtes. we mAde two
significAnt Acquisitions in
fiscAl 2009: lighting control &
design And sensor switch. As
lighting evolves into ever more
sophisticAted configurAtions,
lighting controls represent
one of the most dynAmic
opportunities in our industry,
A mArket thAt cAptures the
increAsed technologicAl
demAnds of lighting systems As
well As the envi ronmentAl And
energy conservAtion concerns
of Building operAtors And
homeowners everywhere.
22
2009 Acquisitions:
Se nSor Switch and Lighting controL & deSign
Acuity BrAnds, inc. : 2009 AnnuAl report 23
expandIng Into new and gRowIng maRKets
fiscal 2009 marked an important milestone in the growth
and diversification of Acuity Brands. with our acquisitions
of lighting control & design and sensor switch, Acuity
Brands established a significant presence in building
energy management. this market stands at the nexus of
two important trends: the need to manage increasingly
complex commercial lighting systems, coupled with gov-
ernment and market-driven demands for greater energy
efficiency to support a more sustainable environment.
on another front, our 2007 acquisition of mark lighting
continued to bear fruit, providing a critical entry into the
new york city market, a $250 million annual market
opportunity in direct product sales, along with another
$250 million in product sales specified by new york-
based architects and lighting designers for both domes-
tic and international projects. finally, at Acuity Brands
we continued to work with our channel partners to pen-
etrate renovation opportunities utilizing our innovative
and energy-efficient lighting fixtures and controls.
24
sustaInabILIty...InnovatIon…commItment.
At Acuity BrAnds, every dAy, throughout the
enterprise we demonstrAte our commitment to
improving our environment.
in the past fiscal year, Acuity Brands has continued its work to reduce the
environmental impact of its buildings and operations. we have invested in
products, control systems and services to provide our customers with energy-
efficient lighting solutions, and we have instituted programs to help our
employees and communities save energy and conserve resources.
in April, the Acuity BrAnds
center for light + spAce in
new york city Achieved A
leed gold certificAtion,
Becoming our compAny’s
second leed certified Build-
ing. our grAnville, ohio
fAcility Achieved A leed
silver certificAtion in 2007.
Acuity BrAnds, inc. : 2009 AnnuAl report 25
tHe acuIty bRands commItment
in the past fiscal year, we recycled more than 774 tons of materials systemwide, achieving a
waste diversion rate of more than 35%. our edison, nJ, facility achieved a waste diversion rate of
75%. these efforts resulted in energy savings of 27,300 million British thermal units (“mBtus”),
reduced landfill needs of more than 2,000 cubic yards, and a reduction of greenhouse gas
emissions of nearly 3,000 metric tons.
A major focus of our sustainability efforts targets reductions in our electrical use. since
2006, our Acuity Brands lighting’s headquarters facility has achieved an overall reduction of
42%, with a 12% reduction in the past year. this program has saved $120,000 per year at this one
facility, with similar results at other Acuity Brands facilities.
ouR maRKet commItment
lighting accounts for one-quarter of u.s. commercial building energy consumption. more than
70% of u.s. commercial buildings are over 20 years old, presenting a key business opportunity
for Acuity Brands. our lighting fixtures and expanded controls capabilities provide cost-effective
energy-saving solutions to both commercial and residential building owners.
we also focus on shaping legislation to promote energy-efficient buildings. Acuity Brands
was an active participant in supporting draft regulations to provide federal tax incentives to
encourage the use of energy-efficient outdoor lighting and controls. we also are actively
engaged in federal initiatives promoting solid state technologies.
States with Green Building Policies
Through October 2005
Green Building Policy 2005 or earlier
Through October 2008
Policies enacted before 2006
Enacted 2006–2008
No state policy (as of 9/08)
ouR commItment to empLoyees and communItIes
in october 2008, Acuity Brands initiated a flexible workweek for employees. many employees
work a four-day, 10-hour per day workweek. in addition to providing an improved work-life
balance, we estimate that by driving to work only four days a week, on an annual basis our
employees will save 19,000 gallons of gas and cut their co2 emissions by 370,000 pounds.
through our aluminum can recycling, Acuity Brands has collected nearly $35,000 in funds
for local charities. And in 2008, Acuity Brands added earth share of georgia to the employee
options for our annual giving campaign.
26
boaRd oF dIRectoRs & executIve oFFIceRs
board of directors
executive officers
vernon J. nagel1
Robert F. mccullough2
vernon J. nagel
Chairman, President, and
Former Chief Financial Officer
Chairman, President, and
Chief Executive Officer
AMVESCAP PLC
Chief Executive Officer
Acuity Brands, Inc.
(now known as Invesco Ltd.)
Acuity Brands, Inc.
peter c. browning
Julia b. north
Richard K. Reece
Lead Director
Former President and
Executive Vice President
Nucor Corporation;
Chief Executive Officer
and Chief Financial Officer
Former Dean
VSI Enterprises, Inc.;
Acuity Brands, Inc.
mark a. black
Executive Vice President
Acuity Brands Lighting, Inc.
McCoIl Graduate School
Former President of
of Business at Queens
Consumer Services
University of Charlotte
BellSouth Corporation
John L. clendenin
Chairman Emeritus
Ray m. Robinson3
Non-Executive Chairman
BellSouth Corporation
Citizens Trust Bank;
george c. (Jack) guynn
Former President and
Chief Executive Officer
Federal Reserve Bank
of Atlanta
gordon d. Harnett
Former Chairman, President
and Chief Executive Officer of
Brush Engineered Materials, Inc.
President Emeritus
East Lake Golf Club
neil williams4
Former General Counsel
AMVESCAP PLC
(now known as Invesco Ltd.);
Former Managing Partner
Alston & Bird LLP
1) Chairman of Executive Committee
2) Chairman of Audit Committee
3) Chairman of Compensation Committee
4) Chairman of Governance Committee
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2009.
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 001-16583.
.
ACUITY BRANDS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
58-2632672
(I.R.S. Employer Identification Number)
1170 Peachtree Street, N.E., Suite 2400,
Atlanta, Georgia
(Address of principal executive offices)
30309-7676
(Zip Code)
(404) 853-1400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on which Registered
Common Stock ($0.01 Par Value)
Preferred Stock Purchase Rights
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
the
is not
the registrant
the registrant
the Securities
required to file reports pursuant
to Section 13 or Section 15(d) of
is a well-known seasoned issuer, as defined in Rule 405 of
Indicate by checkmark if
Act. Yes È No ‘
Indicate by checkmark if
Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such
files). Yes ‘ No ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act.
Large Accelerated Filer È
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
Based on the closing price of the Registrant’s common stock of $22.92 as quoted on the New York Stock Exchange on
February 28, 2009, the aggregate market value of the voting stock held by nonaffiliates of the registrant was $929,359,495.
The number of shares outstanding of the registrant’s common stock, $0.01 par value, was 43,286,241 shares as of October 29,
2009.
Smaller Reporting Company ‘
Non-accelerated Filer ‘
Accelerated Filer ‘
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K
Incorporated Document
Part II, Item 5
Part III, Items 10, 11, 12, 13, and 14
Proxy Statement for 2009 Annual Meeting of Stockholders
Proxy Statement for 2009 Annual Meeting of Stockholders
ACUITY BRANDS, INC.
Table of Contents
Page No.
Part I
Item 1.
Item 1a.
Item 2.
Item 3.
Item 4.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . .
3-9
10-16
16
16-17
17
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and
Item 6.
Item 7.
Item 7a.
Item 8.
Item 9.
Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9a.
Item 9b. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
19
20-37
37-38
39-76
76
76-77
77-80
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
. . . . . . . . . . . . . . . . . . . . . . . .
Directors and Executive Officers of the Registrant
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part IV
Item 15.
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
81
81
81
81
82
92
93
2
Item 1. Business
Overview
PART I
Acuity Brands, Inc. (“Acuity Brands”) is the parent company of Acuity Brands Lighting, Inc. and other
subsidiaries (collectively referred to herein as “the Company”). Acuity Brands was incorporated in 2001
under the laws of the State of Delaware. The Company designs, produces, and distributes a broad array
of indoor and outdoor lighting fixtures, lighting controls, and related products and services for commercial
and institutional, industrial, infrastructure, and residential applications for various markets throughout
North America and select international markets. The Company has one operating segment.
The Company is one of the world’s leading providers of lighting fixtures and lighting controls for new
construction, renovation, and facility maintenance applications. Products include a full range of indoor and
outdoor lighting for commercial and institutional, industrial, infrastructure, and residential applications. The
Company manufactures or procures lighting products in the United States, Mexico, Europe, and China.
These products and related services are marketed under numerous brand names, including Lithonia
Lighting®, Holophane®, Peerless®, Mark Architectural Lighting™, Hydrel®, American Electric Lighting®,
Gotham®, Carandini®, Metal Optics®, Antique Street Lamps™, Tersen™, Synergy® Lighting Controls,
Lighting Control & Design®, Sensor Switch®, Dark to Light™ and ROAM®. As of August 31, 2009, the
Company manufactures products in 14 plants in North America and two plants in Europe.
Principal customers include electrical distributors, retail home improvement centers, national accounts,
electric utilities, municipalities, and lighting showrooms located in North America and select international
markets. In North America, the Company’s products are sold by independent sales agents and factory
sales representatives who cover specific geographic areas and market segments. Products are delivered
through a network of distribution centers, regional warehouses, and commercial warehouses using both
common carriers and a company-owned truck fleet. To serve international customers, the Company
employs a sales force that utilizes distribution methods to meet specific individual customer or country
requirements. In fiscal 2009, North American sales accounted for approximately 97% of net sales. See
Note 14: Geographic Information of the Notes to Consolidated Financial Statements for more information
concerning the domestic and international net sales of the Company.
Specialty Products Business Spin-off
Acuity Brands completed the spin-off of its specialty products business (the “Spin-off”), Zep Inc. (“Zep”),
on October 31, 2007, by distributing all of the shares of Zep common stock, par value $.01 per share, to
the Company’s stockholders of record as of October 17, 2007. The Company’s stockholders received
one Zep share, together with an associated preferred stock purchase right, for every two shares of the
Company’s common stock they owned. Stockholders received cash in lieu of
fractional shares for
amounts less than one full Zep share.
As a result of the Spin-off, the Company’s financial statements have been prepared with the net assets,
results of operations, and cash flows of the specialty products business presented as discontinued
operations. All historical statements have been restated to conform to this presentation. Refer to Note 2
— Discontinued Operations of the Notes to Consolidated Financial Statements.
Industry Overview
Based on industry sources and government information, the Company estimates that in fiscal 2009 the
size of the North American market for lighting fixtures, lighting controls, and related product and services
that is served by the Company was approximately $10.0 billion. This includes non-portable light fixtures
3
(as defined by the National Electrical Manufacturers Association), poles for outdoor lighting products,
lighting control systems. This
emergency lighting fixtures, and energy management and architectural
market estimate is based on a combination of external industry data and internal estimates, and excludes
portable and vehicular lighting fixtures and related lighting components, such as lighting ballasts and
lamps. The U.S. market, which represents approximately 84% of the North American market, is relatively
fragmented. The Company estimates that the top four manufacturers (including Acuity Brands Lighting)
represent slightly above 50% of the total North American lighting equipment and controls market. The
remainder of
lighting
manufacturers.
is made up of hundreds of smaller
the North American lighting market
The Company operates in a highly competitive industry that is affected by volatility in a number of general
business and economic factors, such as gross domestic product growth, employment levels, credit
availability and commodity costs. The Company’s primary market, both non-residential and residential, is
sensitive to the volatility of these general economic factors. Based on industry sources, the Company
estimates that new construction and additions in fiscal 2009 and 2008 accounted for approximately 78%
and 83%, respectively, of the non-residential market while alterations, including renovation and relighting,
accounted for approximately 22% and 17%, respectively. This mix can vary over time depending on
economic conditions. Subsequently,
in light of the economic environment, new construction in the
non-residential market declined at a more rapid rate than alterations, which caused the change in mix.
Construction spending on infrastructure projects such as highways, streets, and urban developments also
has a material impact on the demand for the Company’s infrastructure-focused products. Demand for the
Company’s lighting products sold through its retail channels are highly dependent on economic drivers,
such as consumer spending and discretionary income, along with housing construction and home
improvement spending.
A growing source of demand for the lighting industry is being attributed to the renovation and replacement
of lighting systems in existing buildings. The potential U.S. market size is estimated to be significant
(possibly greater than $100 billion of installed base) due to square footage of existing non-residential
buildings containing older, less efficient lighting systems.
The industry is influenced by the development of new lighting technologies, including light emitting diode
(“LED”), electronic ballasts, embedded controls, and more effective optical designs; federal and state
requirements for updated energy codes; incentives by federal, state, and local municipal authorities as
well as utility companies for using more energy-efficient fixtures and controls; and design technologies
addressing sustainability. Traditional lighting manufacturers, including the Company, are offering product
solutions based on these technologies utilizing internally developed, licensed, or acquired intellectual
property. In addition, traditional
lighting manufacturers are experiencing competition from new entrants
with a focus on new technology-based lighting solutions.
Consolidation remains a key trend in the lighting equipment and controls industry as well as the broader
electrical industry leading to more extensive product offerings and increased globalization. Evidence of this
trend are the recent combinations among electrical distributors, the 2008 acquisition by Koninklijke Philips
Electronics N.V. of The Gentlyte Group Incorporated, and the Company’s fiscal 2009 acquisitions of
Sensor Switch, Inc. and Lighting Control & Design, Inc.
Products
The Company produces a wide variety of lighting fixtures and related products and services used in the
following applications:
(cid:129)
Commercial & Institutional — Applications are represented by stores, hotels, offices, schools,
and hospitals, as well as other government and public buildings. Products that serve these
applications include recessed, surface and suspended lighting products, recessed downlighting,
4
and track lighting, as well as special application lighting products. The outdoor areas associated
with these application products are addressed by a variety of outdoor lighting products, such as
area and flood lighting, decorative site lighting, and landscape lighting.
Industrial — Applications primarily include warehouses and manufacturing facilities, utilizing a
variety of glass and acrylic high intensity discharge (“HID”) and fluorescent lighting products.
Infrastructure — Applications include highways, tunnels, airports, railway yards, and ports.
Products that serve these applications include street, area, high-mast, off-set roadway, and sign
lighting.
Residential — Applications are addressed with a combination of decorative fluorescent and
downlighting products, as well as utilitarian fluorescent products.
Controls — Applications include commercial and institutional, industrial,
infrastructure, and
residential. Products include occupancy sensors, photocontrols, relay panels, architectural
dimming panels, and integrated controls systems.
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129) Other Applications & Products — Other products include emergency lighting fixtures and
flexible wiring systems, which are primarily used in non-residential buildings.
(cid:129)
Services — Applications include monitoring and controlling of lighting systems through machine
to machine wireless network technology in the utility and municipality markets, as well as energy
audit and turn-key labor renovation and relight services in the commercial, industrial, retail,
manufacturing, and warehousing markets.
Lighting fixtures sold for numerous applications in a multitude of
industry segments accounted for
approximately 84%, 85%, and 86% of total consolidated net sales for Acuity Brands in fiscal 2009, 2008,
and 2007, respectively. This does not include sales related to items such as controls, wiring products,
poles, emergency lighting, and services.
Sales and Marketing
Sales. The Company sells to customers in the North American market with separate sales forces targeted
at delivering value added products and services to specific customer, channel, and geographic segments.
As of August 31, 2009, these sales forces consist of approximately 300 company-employed salespeople
and a network of approximately 200 independent sales agencies, each of which employs numerous
salespeople. The Company also operates two separate European sales forces and an international sales
group coordinating export sales outside of North America and Europe.
Marketing. The Company markets its products to end users in multiple channels through a broad
spectrum of marketing and promotional vehicles, including direct customer contact, trade shows, on-site
training, print advertising in industry publications, product brochures, and other literature, as well as the
Internet and other electronic media. The Company owns and operates training and display facilities in
numerous locations throughout the U.S. designed to enhance the lighting knowledge of customers and
lighting professionals throughout the industry.
Customers
Customers of the Company include electrical distributors, retail home improvement centers, national
accounts, electric utilities, utility distributors, municipalities, contractors, lighting showrooms, and energy
service companies. In addition, there are a variety of other professionals, which for any given project could
represent a significant influence in the product specification process. These generally include contractors,
engineers, architects, and lighting designers.
5
A single customer of the Company, The Home Depot, accounted for approximately 11% of net sales of
the Company in both fiscal 2009 and 2008 and 13% in fiscal 2007. The loss of The Home Depot’s
business could temporarily adversely affect the Company’s results of operations.
Manufacturing
The Company operates 16 manufacturing facilities, including eight facilities in the United States, six
facilities in Mexico, and two facilities in Europe. The Company utilizes a blend of internal and outsourced
manufacturing processes and capabilities to fulfill a variety of customer needs in the most cost-effective
manner. Critical processes,
including assembly, reflector forming and anodizing and high-end glass
production, are primarily performed at company-owned facilities, offering the ability to differentiate
end-products through superior capabilities. Other critical components, such as lamps, LEDs, sockets,
ballasts, and power supplies are purchased primarily from outside vendors. Investment is focused on
improving capabilities, product quality, and manufacturing efficiency. Outsourcing production and
distribution to local suppliers’ factories and warehouses also provides an opportunity to lower Company-
owned component inventory while maintaining high service levels through frequent just-in-time deliveries.
The Company also utilizes contract manufacturing from U.S., Asian, and European sources for certain
products and purchases certain finished goods, including poles, to complement its area lighting fixtures
and a variety of residential and commercial lighting equipment. In fiscal 2009, net sales of finished product
manufactured by others accounted for approximately 22% of the Company’s net sales, U.S. operations
produced approximately 29%; Mexico produced approximately 46%; and Europe produced
approximately 3%.
Management continues to focus on certain initiatives to make the Company more globally competitive.
One of these initiatives relates to enhancing the Company’s global supply chain and includes the
consolidation of certain manufacturing facilities into more efficient locations. Since the beginning of fiscal
2002, the Company has closed 13 manufacturing facilities and in fiscal 2009 downsized one, which
reduced the total square footage used for manufacturing by approximately 32%.
Distribution
regional
Products are delivered through a network of strategically located distribution centers,
warehouses, and commercial warehouses in North America using both common carriers and a company-
owned truck fleet. For international customers, distribution methods are adapted to meet individual
customer or country requirements.
Research and Development
Research and development (“R&D”) efforts are targeted toward the development of products with an
ever-increasing performance-to-cost ratio and energy efficiency, while close relationships with lamp,
ballast, LED, and power supply manufacturers are maintained to understand technology enhancements
and incorporate them in the Company’s fixture designs. For fiscal 2009, 2008, and 2007, research and
development expense totaled $20.8 million, $30.3 million, and $31.3 million, respectively. The decrease in
the fiscal 2009 expense was due primarily to lower incentive compensation associated with R&D
associates.
Competition
The lighting equipment and controls industry served by the Company is highly competitive, with the
largest suppliers serving many of the same markets and competing for the same customers. Competition
is based on numerous factors, including brand name recognition, price, product quality, product design,
energy efficiency, customer relationships, and service capabilities. The Company’s primary competitors in
the North American lighting equipment and controls industry include Cooper Industries Ltd., Hubbell
Incorporated, and Koninklijke Philips Electronics N.V. The Company estimates that the four largest lighting
6
manufacturers (including Acuity Brands Lighting) have slightly above a 50% share of the total North
American lighting equipment and controls market. In addition to these primary competitors, the Company
also competes with hundreds of smaller lighting manufacturers, numerous lighting controls manufacturers
of varying size, and, to a lesser degree, large, diversified global electronics companies.
The market is competitive for the lighting and lighting-related fixture market and continues to evolve.
Consolidation remains a key trend. Certain broader and more global electrical manufacturers may be able
to obtain a competitive advantage over the Company by offering broader and more integrated electrical
solutions utilizing electrical, lighting, and building automation products. In addition, there has been a
growing number of new technology-based lighting manufacturers offering LED product solutions to
potentially compete with traditional lighting manufacturers.
Environmental Regulation
The operations of the Company are subject to numerous comprehensive laws and regulations relating to
the generation, storage, handling, transportation, and disposal of hazardous substances, as well as solid
and hazardous wastes, and to the remediation of contaminated sites.
In addition, permits and
environmental controls are required for certain of the Company’s operations to limit air and water
pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities. On
an ongoing basis, the Company allocates considerable resources, including investments in capital and
operating costs relating to environmental compliance. Environmental laws and regulations have generally
become stricter in recent years, and state and federal governments domestically and internationally are
considering new laws and regulations governing raw material composition, air emissions, and energy-
efficiency. The Company is not aware of any pending legislation or proposed regulation related to
environmental issues that would have a material adverse effect on the Company. The cost of responding
to future changes, however, may be substantial. See Item 3: Legal Proceedings for further discussion of
environmental matters.
Raw Materials
The products produced by the Company require certain raw materials, including certain grades of steel
and aluminum, electrical components, plastics, and other petroleum-based materials and components. In
fiscal 2009, the Company purchased approximately 114,000 tons of steel and aluminum. The Company
estimates that less than 10% of purchased raw materials are petroleum-based. Additionally, the Company
estimates that approximately 3.2 million gallons of diesel fuel was consumed in fiscal 2009 through the
Company’s distribution activities. The Company purchases most raw materials on the open market and
relies on third parties for providing certain finished goods. Accordingly, the cost of products sold may be
affected by changes in the market price of raw materials or the sourcing of finished goods.
The Company does not currently engage in or expect to engage in significant commodity hedging
transactions for raw materials, though the Company has and will continue to commit to purchase certain
materials for a period of up to 12 months. Significant increases in the prices of the Company’s products
due to increases in the cost of raw materials could have a negative effect on demand for products and on
profitability. While the Company has generally been able to pass along these increases in cost in the form
of higher selling prices for its products, there can be no assurance that future disruptions in either supply
or price of these materials will not negatively affect future results.
The Company constantly monitors and investigates alternative suppliers and materials based on
numerous attributes including quality, service, and price. The Company’s ongoing efforts to improve the
cost effectiveness of its products and services may result in a reduction in the number of its suppliers. A
7
reduction in the number of suppliers could cause increased risk associated with reliance on a limited
number of suppliers for certain raw materials, component parts (such as lamps, LEDs, ballasts, and
power supplies), and finished goods.
Backlog Orders
The Company produces and stocks quantities of inventory at key distribution centers and warehouses
throughout North America. The Company ships approximately 40% of sales orders during the month that
those orders are placed. Sales order backlogs, believed to be firm as of August 31, 2009 and 2008, were
$137.0 million and $177.1 million, respectively.
Patents, Licenses and Trademarks
The Company owns or has licenses to use various domestic and foreign patents and trademarks related
to its products, processes, and businesses. These intellectual property rights, particularly the trademarks
relating to the products of the Company, are important factors for its businesses. To protect these
proprietary rights, the Company relies on copyright, patent, trade secret, and trademark laws. Despite
these protections, unauthorized parties may attempt
the
Company. Management is not aware of any pending claims where the Company does not have the right
to use any intellectual property material to the Company. While patents and patent applications in the
aggregate are important
the Company, no single patent or patent
application is individually material to the Company.
to infringe on the intellectual property of
to the competitive position of
Seasonality and Cyclicality
The Company’s business exhibits some seasonality, with net sales being affected by the impact of
weather and seasonal demand on construction and installation programs, particularly during the winter
months, as well as the annual budget cycles of major customers. Because of these seasonal factors, the
Company has experienced, and generally expects to experience, its highest sales in the last two quarters
of each fiscal year.
A significant portion of net sales relates to customers in the new construction and renovation markets,
primarily for commercial and institutional applications. The new construction market is cyclical
in nature
and subject to changes in general economic conditions. Unit sales volume has a major impact on the
profitability of the Company. Economic downturns and the potential decline in key construction markets
may have a material adverse effect on the net sales and operating income of the Company.
International Operations
The Company manufactures and assembles products at numerous facilities, some of which are located
outside the United States. Approximately 49% of the products sold by the Company are manufactured
outside the United States.
Of the Company’s total products sold, approximately 46% is produced in six facilities in Mexico. Most of
these products are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico.
Maquiladora status allows the Company to import certain items from the United States into Mexico duty-
free, provided that such items, after processing, are re-exported from Mexico within 18 months.
Maquiladora status, which is renewed every year, is subject to various restrictions and requirements,
the Maquiladora program and other local regulations. The
including compliance with the terms of
Company may be required to make additional
investments in automated equipment to partially offset
potential increases in labor and wage costs.
The Company’s initiatives to become more globally competitive include streamlining its global supply
chain by reducing the number of manufacturing facilities and enhancing the Company’s worldwide
8
procurement and sourcing capabilities. Management believes these initiatives will result in increased
production in international locations, primarily Mexico, and will result in increased worldwide procurement
and sourcing of certain raw materials, component parts, and finished goods. As a consequence,
economic, political, military, social, or other events in a country where the Company manufactures,
procures, or sources a significant amount of raw materials, component parts, or finished goods, could
interfere with the Company’s operations and negatively impact the Company’s business.
For fiscal 2009, net sales outside the U.S. represented approximately 11% of total net sales. See Note 14
of the Notes to Consolidated Financial Statements for additional
information regarding the geographic
distribution of net sales, operating profit, and long-lived assets.
Information Concerning Acuity Brands
The Company makes its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K (and all amendments to these reports), together with all reports filed pursuant to
Section 16 of the Securities Exchange Act of 1934 by the Company’s officers, directors, and beneficial
owners of 10% or more of the Company’s common stock, available free of charge through the “SEC
located at www.acuitybrands.com, as soon as reasonably
Filings” link on the Company’s website,
practicable after they are filed with or furnished to the SEC. Information included on the Company’s
website is not incorporated by reference into this Annual Report on Form 10-K. The Company’s reports
are also available at the Securities and Exchange Commission’s Public Reference Room at 100 F. Street,
NE, Washington, DC 20549 or on their website at www.sec.gov. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Additionally, the Company has adopted a written Code of Ethics and Business Conduct that applies to all
of the Company’s directors, officers, and employees, including its principal executive officer and senior
financial officers. The Code of Ethics and Business Conduct and the Company’s Corporate Governance
Guidelines are available free of charge through the “Corporate Governance” link on the Company’s
website. Additionally, the Statement of Responsibilities of Committees of the Board and the Statement of
Rules and Procedures of Committees of the Board, which contain the charters for the Company’s Audit
Committee, Compensation Committee, and Governance Committee, and the rules and procedures
relating thereto, are available free of charge through the “Corporate Governance” link on the Company’s
website. Each of the Code of Ethics and Business Conduct, the Corporate Governance Guidelines, the
Statement of Responsibilities of Committees of the Board, and the Statement of Rules and Procedures of
Committees of the Board is available in print to any stockholder of the Company that requests such
document by contacting the Company’s Investor Relations department.
Employees
Acuity Brands employs approximately 6,000 people, of whom approximately 3,600 are employed in the
United States, 2,100 in Mexico, 50 in Canada, and 200 in other international locations, including Europe
and the Asia/Pacific region. Union recognition and collective bargaining arrangements are in place,
covering approximately 3,400 persons (including approximately 1,500 in the United States). The Company
believes that it has a good relationship with both its unionized and non-unionized employees.
9
Item 1a. Risk Factors
This filing contains forward-looking statements, within the meaning of the Private Securities Litigation
Reform Act of 1995. A variety of risks and uncertainties could cause Acuity Brands’ actual results to differ
materially from the anticipated results or other expectations expressed in the Company’s forward-looking
statements. See “Cautionary Statement Regarding Forward-Looking Statements” on page 37. These risks
include, without limitation:
Risks Related to the Business of Acuity Brands, Inc.
General business and economic conditions may affect demand for the Company’s products and
services which could impact results from operations.
The Company competes based on such factors as name recognition and reputation, service, product
features, innovation, and price. In addition, the Company operates in a highly competitive environment
that is influenced by a number of general business and economic factors, such as general economic
vitality, employment levels, credit availability, interest rates and commodity costs. Declines in general
economic activity may negatively impact new construction, renovation, and relight projects, which in turn
may impact demand for the Company’s product and service offerings. The impact of these factors could
adversely affect the Company’s financial position, results from operations, and cash flows.
Tightening credit conditions could negatively impact demand for the Company’s products and
services.
The impact of tightening credit conditions has and could continue to impair the ability of real estate
developers, property owners, and contractors to effectively access capital markets or obtain reasonable
costs of capital on borrowed funds, resulting in a decline in construction, renovation, and relight projects.
The inability of these constituents to borrow money to fund construction and renovation projects reduces
the demand for the Company’s products and services and may adversely affect the Company’s results
from operations and cash flow. The lack of credit availability and higher borrowing costs over the last two
years have negatively impacted the Company’s results from operations by reducing orders from both
residential and non-residential customers.
Acuity Brands is heavily dependent on the strength of construction activity.
lighting equipment depend significantly on the level of activity in new construction and
Sales of
renovations. Demand for non-residential construction and renovation is driven by many factors, including
but not limited to economic activity, employment levels, credit availability, interest rates, accessibility to
public financing, and trends in vacancy rates and rent values. Demand for new residential construction
and remodeling is also affected by interest rates and credit availability, as well as the supply of existing
homes, price appreciation, and household formation rates. Significant declines in either non-residential or
residential construction activity could significantly impact the Company’s results from operations and cash
flow. During fiscal 2009, both the Company and the industry experienced declines in sales volumes
resulting from weakness in both the non-residential and residential construction markets due to the weak
economic environment.
Acuity Brands’ results may be adversely affected by fluctuations in the cost or availability of raw
materials and components.
The Company utilizes a variety of raw materials and components in its production process including steel,
aluminum,
lamps, LEDs, ballasts, power supplies, petroleum-based by-products, natural gas, and
copper. Failure to effectively manage future increases in the costs of these items could adversely affect
operating margins. There can be no assurance that future raw material and component price increases
10
will be successfully passed through to customers. The Company sources these goods from a number of
suppliers and is, therefore, reasonably insulated from risks affecting any one supplier. Profitability and
volume could be negatively impacted by limitations inherent within the supply chain of certain of these
component parts, including competitive, governmental, legal, natural disasters, and other events that
could impact both supply and price.
Acuity Brand’s results may be adversely affected by the Company’s inability to maintain pricing.
Aggressive pricing actions by competitors may affect the Company’s ability to achieve desired unit volume
growth and profitability levels under its current pricing strategies. The Company may also decide to lower
pricing to match the competition. Additionally, the Company may not be able to increase prices to cover
rising costs of components and raw materials. Even if the Company were able to increase prices to cover
costs, competitive pricing pressures may not allow the Company to pass on any more than the cost
increases which could negatively impact gross margin percentages. Alternatively, if component and raw
material costs were to decline, the marketplace may not allow the Company to hold prices at their current
levels, which could negatively impact both net sales and gross margins.
Acuity Brands may experience difficulties in the consolidation of manufacturing facilities which
could impact the shipments to customers, product quality, and the ability to realize the expected
savings from accelerated streamlining actions.
During fiscal 2009, the Company announced plans to accelerate its ongoing programs to streamline
operations including the consolidation of certain manufacturing facilities and the reduction of overhead
costs. Upon completion of these actions, the Company expects to realize annualized benefits of more
than $50 million. The Company will gain from such activity only to the extent that it can effectively leverage
assets, personnel, and operating processes in the transition of production between manufacturing
facilities. Uncertainty is inherent within the facility consolidation process, and unforeseen circumstances
could offset the anticipated benefits, disrupt service to customers, and impact product quality.
Tightening credit conditions could impair the Company’s ability to effectively access capital
markets.
Tightening credit conditions as well as changes in interest and foreign currency rates could impair the
Company’s ability to effectively access capital. This could impair the Company’s ability to refinance debt
as it becomes due or to obtain additional credit, if needed. The inability to effectively access capital
markets could adversely affect the Company’s financial position, results from operations and cash flows.
Acuity Brands is subject to risks related to operations outside the United States.
The Company has substantial activities outside of the United States including sourcing of products,
materials, and components. The Company’s operations, as well as those of key vendors, are therefore
subject to regulatory, economic, political, military, and other events in countries where these operations
are located, particularly Mexico. In addition to the risks that are common to both the Company’s domestic
and international operations,
the Company faces risks specifically related to its foreign operations,
including but not limited to: foreign currency fluctuations; unstable political, social, regulatory, economic,
financial, and market conditions; potential
trade
restrictions and disruption; criminal activities; and unforeseen increases in tariffs and taxes. The Company
locations. Some of these risks may have a
continues to monitor conditions affecting its international
material adverse effect on the Company’s business, financial condition, results from operations, and cash
flows in the future.
for privatization and other confiscatory actions;
11
Acuity Brands is subject to a broad range of environmental, health, and safety laws and
regulations in the jurisdictions in which it operates, and the Company may be exposed to
substantial environmental, health, and safety costs and liabilities.
The Company is subject to a broad range of environmental, health, and safety laws and regulations in the
jurisdictions in which the Company operates. These laws and regulations impose increasingly stringent
environmental, health, and safety protection standards and permitting requirements regarding, among
other things, air emissions, wastewater storage, treatment, and discharges, the use and handling of
hazardous or
toxic materials, waste disposal practices, and the remediation of environmental
contamination and working conditions for the Company’s employees. Some environmental laws, such as
Superfund, the Clean Water Act, and comparable laws in U.S. states and other jurisdictions world-wide,
impose joint and several liability for the cost of environmental remediation, natural resource damages, third
party claims, and other expenses, without regard to the fault or the legality of the original conduct, on
those persons who contributed to the release of a hazardous substance into the environment. These laws
may impact the manufacture and distribution of the Company’s products and place restrictions on the
products the Company can sell in certain geographical locations.
In addition,
these laws and regulations may also result
The costs of complying with these laws and regulations, including participation in assessments and
remediation of contaminated sites and installation of pollution control facilities, have been, and in the
future could be, significant.
in substantial
liabilities associated with divested assets, third party locations, and past activities. The
environmental
Company has established reserves for environmental
remediation activities and liabilities where
appropriate. However, the cost of addressing environmental matters (including the timing of any charges
related thereto) cannot be predicted with certainty, and these reserves may not ultimately be adequate,
especially in light of potential changes in environmental conditions, changing interpretations of laws and
regulations by regulators and courts, the discovery of previously unknown environmental conditions, the
risk of governmental orders to carry out additional compliance on certain sites not initially included in
remediation in progress, the Company’s potential liability to remediate sites for which provisions have not
previously been established and the adoption of more stringent environmental
laws. Such future
developments could result in increased environmental costs and liabilities and could require significant
capital and other ongoing expenditures, any of which could have a material adverse effect on the
Company’s financial condition or results. In addition, the presence of environmental contamination at the
Company’s properties could adversely affect its ability to sell property, receive full value for a property, or
use a property as collateral for a loan.
Acuity Brands may develop unexpected legal contingencies or matters that exceed insurance
coverage.
The Company is subject to various claims, including legal claims arising in the normal course of business.
The Company is insured up to specified limits for certain types of claims with a self-insurance retention of
$0.5 million per occurrence, including product liability claims, and is fully self-insured for certain other
types of claims, including environmental, product recall, commercial disputes, and patent infringement.
The Company establishes reserves for legal claims when the costs associated with the claims become
probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially
higher or lower than the level of insurance coverage held by the Company and/or the amounts reserved
for such claims. In the event of unexpected future developments, it is possible that the ultimate resolutions
of such matters, if unfavorable, could have a material adverse effect on the Company’s results from
operations, financial position, or cash flows. The Company’s insurance coverage is negotiated on an
annual basis, and insurance policies in the future may have coverage exclusions that could cause claim-
related costs to rise.
12
Acuity Brands may pursue future growth through strategic acquisitions and alliances which may
not yield anticipated benefits.
including personnel,
The Company has and may continue to seek to improve its business through strategic acquisitions and
alliances. The Company will gain from such activity only to the extent that it can effectively leverage the
assets,
the acquired businesses and
technology and operating processes, of
alliances. Uncertainty is inherent within the acquisition and alliance process, and unforeseen
circumstances arising from recent and future acquisitions or alliances could offset their anticipated
benefits. In addition, unanticipated events, negative revisions to valuation assumptions and estimates,
and/or difficulties in attaining synergies, among other factors, could adversely affect the Company’s ability
investments, particularly those related to acquired goodwill and
to recover
intangible assets. Any of these factors could adversely affect the Company’s financial condition, results
from operations, and cash flows.
initial and subsequent
Technological developments and increased competition could affect the Company’s operating
profit margins and sales volume.
The Company competes in an industry where technology and innovation play major roles in the
competitive landscape. The Company is highly engaged in the investigation, development, and
implementation of new technologies. Securing key partnerships and alliances as well as employee talent,
including having access to technologies generated by others and the obtaining of appropriate patents,
play a significant role in protecting the Company’s intellectual property and development activities.
Additionally, the continual development of new technologies (e.g., LED, OLED, lamp/ballast systems, etc.)
by existing and new source suppliers looking for either direct market access or partnership with
competing large manufacturers, coupled with significant associated exclusivity and/or patent activity,
could adversely affect the Company’s ability to sustain operating profit margin and desirable levels of
sales volume. Technology developments may also increase competition from non-traditional competitors
with greater resources.
Acuity Brands may be unable to sustain significant customer relationships.
Relationships forged with customers, including The Home Depot, which historically has represented
slightly greater than 10% of the Company’s total net sales, are directly impacted by the Company’s ability
to deliver high quality products and services. The Company does not have a written contract obligating
The Home Depot to purchase its products. The loss of or substantial decrease in the volume of purchases
by The Home Depot would harm the Company’s sales, profitability and cash flow.
If Acuity Brands’ products are improperly designed, manufactured, packaged, or labeled, the
Company may need to recall those items and could be the target of product liability claims if
consumers are injured.
The Company may need to recall products if they are improperly designed, manufactured, packaged, or
labeled and does not maintain insurance for such events. The Company’s quality control procedures
relating to the raw materials, including packaging, that it receives from third-party suppliers, as well as the
Company’s quality control procedures relating to its products after those products are designed,
manufactured, and packaged, may not be sufficient. The Company has previously initiated product recalls
as a result of potentially faulty components, assembly, installation, and packaging of its products, and
widespread product recalls could result in significant losses due to the costs of a recall, the destruction of
product inventory, and lost sales due to the unavailability of product for a period of time. The Company
may also be liable if the use of any of its products causes injury, and could suffer losses from a significant
product liability judgment against the Company. A significant product recall or product liability case could
also result in adverse publicity, damage to the Company’s reputation, and a loss of consumer confidence
in its products, which could have a material adverse effect on the Company’s business, financial results,
and cash flow.
13
Acuity Brands could be adversely affected by disruptions of its operations.
The breakdown of equipment or other events, including labor disputes, pandemics or catastrophic events
such as war or natural disasters, leading to production interruptions in the Company’s or one or more of
its suppliers’ plants could have a material adverse effect on the Company’s financial results. Further,
because many of the Company’s customers are, to varying degrees, dependent on planned deliveries
from the Company’s plants, those customers that have to reschedule their own production or delay
opening a facility due to the Company’s missed deliveries could pursue financial claims against the
Company. The Company may incur costs to correct any of these problems, in addition to facing claims
from customers. Further, the Company’s reputation among actual and potential customers may be
harmed, resulting in a loss of business. While the Company has developed business continuity plans to
support responses to such events or disruptions and maintains insurance policies covering, among other
things, physical damage, business interruptions and product liability, these policies may not cover all
losses. The Company could incur uninsured losses and liabilities arising from such events, including
damage to its reputation, loss of customers, and suffer substantial losses in operational capacity, any of
which could have a material adverse effect on its financial results and cash flow.
Failure of a Company operating or information system or a compromise of security with respect
to an operating or information system or portable electronic device could adversely affect the
Company’s results from operations and financial condition or the effectiveness of internal
controls over operations and financial reporting.
The Company is highly dependent on automated systems to record and process Company and customer
transactions and certain other components of the Company’s financial statements. The Company could
experience a failure of one or more of these systems or could fail to complete all necessary data
reconciliation or other conversion controls when implementing a new software system. The Company
could also experience a compromise of its security due to technical system flaws, clerical, data input or
record-keeping errors, or tampering or manipulation of those systems by employees or unauthorized third
parties. Information security risks also exist with respect to the use of portable electronic devices, such as
laptops and smartphones, which are particularly vulnerable to loss and theft. The Company may also be
subject to disruptions of any of these systems arising from events that are wholly or partially beyond its
control (for example, natural disasters, acts of terrorism, epidemics, computer viruses, and electrical/
telecommunications outages). All of these risks are also applicable where the Company relies on outside
vendors to provide services to it. Operating system failures,
ineffective system implementation or
disruptions, or the compromise of security with respect to operating systems or portable electronic
devices could subject the Company to liability claims, harm the Company’s reputation, interrupt the
Company’s operations, and adversely affect the Company’s internal control over financial reporting,
business, results from operations, financial condition or cash flow.
The inability to attract and retain talented employees and a loss of key employees could
adversely affect the effectiveness of the Company’s operations.
The Company relies upon the knowledge and experience of employees involved in functions throughout
the organization that require technical expertise and knowledge of the industry. A loss of such employees
could adversely impact the Company’s ability to execute key operational functions and could adversely
affect the Company’s operations.
The risks associated with the inability to effectively execute its strategies could adversely affect
the Company’s results from operations and financial condition.
Various uncertainties and risks are associated with the implementation of a number of aspects of the
Company’s global business strategy, including but not limited to new product development, effective
integration of acquisitions, and efforts to streamline operations. Those uncertainties and risks include, but
14
are not limited to: diversion of management’s attention; difficulty in retaining or attracting employees;
negative impact on relationships with distributors and customers; obsolescence of current products and
slow new product development; additional streamlining efforts; and unforeseen difficulties in the
implementation of the management operating structure.
Risks Related to Ownership of Acuity Brands Common Stock
The market price and trading volume of the Company’s shares may be volatile.
The market price of the Company’s common shares could fluctuate significantly for many reasons,
including for reasons unrelated to the Company’s specific performance, such as reports by industry
analysts,
investor perceptions, or negative announcements by customers, competitors or suppliers
regarding their own performance, as well as general economic and industry conditions. For example, to
the extent that other large companies within the Company’s industry experience declines in their share
price, the Company’s share price may decline as well. In addition, when the market price of a company’s
shares drops significantly, shareholders could institute securities class action lawsuits against
the
company. A lawsuit against the Company could cause the Company to incur substantial costs and could
divert the time and attention of the Company’s management and other resources.
Risks Related to the Spin-off of Zep Inc.
Failure of the distribution to qualify as a tax-free transaction could result in substantial liability.
Acuity Brands has received a private letter ruling from the Internal Revenue Service to the effect that,
among other things, the Spin-off (including certain related transactions) qualifies as tax-free to Acuity
Brands, Zep, and Acuity Brands’ stockholders for United States federal
income tax purposes under
section 355 and related provisions of the Internal Revenue Code. Although a private letter ruling generally
is binding on the Internal Revenue Service, if the factual assumptions or representations made in the
private letter ruling request are untrue or incomplete in any material respect, then Acuity Brands will not be
able to rely on the ruling. Moreover, the Internal Revenue Service will not rule on whether a distribution of
shares satisfies certain requirements necessary to obtain tax-free treatment under section 355 of the
Internal Revenue Code. Rather, the private letter ruling is based upon representations by Acuity Brands
that those requirements have been satisfied, and any inaccuracy in those representations could invalidate
the ruling.
those requirements will be satisfied. The opinion is based on, among other
Acuity Brands has received an opinion of King & Spalding LLP, counsel to Acuity Brands, to the effect
that, with respect to the requirements referred to above on which the Internal Revenue Service will not
rule,
things, certain
assumptions and representations as to factual matters made by Acuity Brands and Zep which, if untrue or
incomplete in any material respect, could jeopardize the conclusions reached by counsel
in its opinion.
The opinion is not binding on the Internal Revenue Service or the courts, and the Internal Revenue Service
or the courts may not agree with the opinion.
If the Spin-off fails to qualify for tax-free treatment, a substantial corporate tax would be payable by Acuity
Brands, measured by the difference between (1) the aggregate fair market value of the shares of Zep
common stock on the date of the Spin-off and (2) Acuity Brands’ adjusted tax basis in the shares of Zep
common stock on the date of the Spin-off. The corporate level tax would be payable by Acuity Brands.
However, Zep has agreed under certain circumstances to indemnify Acuity Brands for this tax liability. In
addition, under the applicable Treasury regulations, each member of Acuity Brands’ consolidated group at
the time of the Spin-off (including Zep) is severally liable for such tax liability.
Furthermore, if the Spin-off does not qualify as tax-free, each Acuity Brands stockholder generally would
be taxed as if he or she had received a cash distribution equal to the fair market value of the shares of
Zep common stock on the date of the Spin-off.
15
Even if the Spin-off otherwise qualifies as tax-free, Acuity Brands nevertheless could incur a substantial
corporate tax liability under section 355(e) of the Internal Revenue Code, if 50 percent or more of the
stock of Acuity Brands or Zep were to be acquired as part of a “plan (or a series of related transactions)”
that includes the distribution. For this purpose, any acquisitions of the stock of Acuity Brands or of Zep
stock that occur within two years before or after the Spin-off are presumed to be part of such a plan,
although Acuity Brands may be able to rebut that presumption. If such an acquisition of the stock of
Acuity Brands or of Zep stock triggers the application of section 355(e), Acuity Brands would recognize
taxable gain as described above, but the Spin-off would generally remain tax-free to the Acuity Brands
stockholders. If acquisitions of Zep’s stock trigger the application of section 355(e), Zep would be
obligated to indemnify Acuity Brands for the resulting corporate-level tax liability.
Item 2. Properties
The general corporate offices of Acuity Brands are located in Atlanta, Georgia. Because of the diverse
nature of operations and the large number of individual locations, it is neither practical nor meaningful to
describe each of
leased by the Company. The following listing
summarizes the significant facility categories:
the operating facilities owned or
Nature of Facilities
Owned
Leased
Manufacturing Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warehouses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
—
2
6
5
2
4
23
The following table provides additional geographic information related to Acuity Brands’ manufacturing
facilities:
Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United
States
5
3
8
Mexico
Europe
Total
5
1
6
1
1
2
11
5
16
None of the individual properties of Acuity Brands is considered to have a value that is significant in
relation to the assets of Acuity Brands as a whole. Though a loss at certain facilities could have an impact
on the Company’s ability to serve the needs of its customers, the Company believes that the financial
impact would be partially mitigated by various insurance programs in place. Acuity Brands believes that its
properties are well maintained and are in good operating condition and that its properties are suitable and
adequate for its present needs. The Company believes that it has additional capacity available at most of
its production facilities and that it could increase production without substantial capital expenditures. As
noted above,
initiatives related to enhancing the global supply chain may continue to result in the
consolidation of certain manufacturing facilities. However, the Company believes that the remaining
facilities will have sufficient capacity to serve the current and projected needs of its customers.
Item 3. Legal Proceedings
General
Acuity Brands is subject to various legal claims arising in the normal course of business, including patent
infringement and product liability claims. Acuity Brands is self-insured up to specified limits for certain
types of claims, including product liability, and is fully self-insured for certain other types of claims,
including environmental, product recall, and patent infringement. Based on information currently available,
it is the opinion of management that the ultimate resolution of pending and threatened legal proceedings
16
will not have a material adverse effect on the financial condition, results of operations, or cash flows of
Acuity Brands. However, in the event of unexpected future developments, it is possible that the ultimate
resolution of any such matters, if unfavorable, could have a material adverse effect on the financial
condition,
results of operations, or cash flows of Acuity Brands in future periods. Acuity Brands
establishes reserves for legal claims when the costs associated with the claims become probable and can
be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the
amounts reserved for such claims. However, the Company cannot make a meaningful estimate of actual
costs to be incurred that could possibly be higher or lower than the amounts reserved.
Environmental Matters
The operations of the Company are subject to numerous comprehensive laws and regulations relating to
the generation, storage, handling, transportation, and disposal of hazardous substances, as well as solid
In addition, permits and
and hazardous wastes, and to the remediation of contaminated sites.
environmental controls are required for certain of the Company’s operations to limit air and water
pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities. On
an ongoing basis, Acuity Brands invests capital and incurs operating costs relating to environmental
compliance. Environmental laws and regulations have generally become stricter in recent years. The cost
of responding to future changes may be substantial. Acuity Brands establishes reserves for known
environmental claims when the costs associated with the claims become probable and can be reasonably
estimated. The actual cost of environmental issues may be substantially higher or lower than that reserved
due to difficulty in estimating such costs.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted for a vote of the security holders during the three months ended August 31,
2009.
17
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities
The common stock of Acuity Brands is listed on the New York Stock Exchange under the symbol “AYI”.
At October 26, 2009, there were 3,925 stockholders of record. The following table sets forth the
New York Stock Exchange high and low sale prices and the dividend payments for Acuity Brands’
common stock for the periods indicated.
Price per Share
High
Low
Dividends
Per Share
2008
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $54.42 $34.04
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48.61 $36.33
Second Quarter
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53.91 $38.40
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53.74 $36.89
2009
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $46.19 $23.72
First Quarter
Second Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36.88 $22.00
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31.34 $20.02
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33.28 $24.84
$0.15
$0.13
$0.13
$0.13
$0.13
$0.13
$0.13
$0.13
Effective October 31, 2007, Acuity Brands completed the Spin-off of Zep Inc. Prices per share after
October 31, 2007 reflect the impact of the Spin-off. Prices per share prior to October 31, 2007 do not
reflect any adjustment as a result of the Spin-off. As a result of the Spin-off, Acuity Brands announced
plans to pay quarterly dividends on its common stock at an initial annual rate of $0.52 per share. All
decisions regarding the declaration and payment of dividends are at the discretion of the Board of
Directors of Acuity Brands and will be evaluated from time to time in light of Acuity Brands’ financial
condition, earnings, growth prospects, funding requirements, applicable law, and any other factors that
the Acuity Brands board deems relevant. The information required by this item with respect to equity
compensation plans is included under the caption Equity Compensation Plans in the Company’s proxy
statement for the annual meeting of stockholders to be held January 8, 2010, to be filed with the
Securities and Exchange Commission pursuant
to Regulation 14A, and is incorporated herein by
reference.
Since October 2005, the Company’s Board of Directors has authorized the repurchase of 10 million
shares of the Company’s outstanding common stock, of which approximately 9.5 million had been
repurchased as of August 31, 2009, though none were purchased during fiscal 2009. A remaining
512,300 shares may be purchased under the authorized program.
During fiscal 2009, the Company reissued 2.1 million shares from treasury stock as partial consideration
for the acquisitions of Sensor Switch, Inc. (“Sensor Switch”), and Lighting Controls & Design, Inc.
18
Item 6. Selected Financial Data
The following table sets forth certain selected consolidated financial data of Acuity Brands which have
been derived from the Consolidated Financial Statements of Acuity Brands for each of the five years in the
period ended August 31, 2009. Amounts have been restated to reflect the specialty products business as
discontinued operations as a result of the Spin-off. Refer to Part 1, Item 1 above for additional information
regarding the Spin-off. This historical
the Company’s future
performance. The information set
forth below should be read in conjunction with Management’s
Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial
Statements and the notes thereto.
information may not be indicative of
Years Ended August 31,
2009
2008
2007*
2006*
2005*
(In thousands, except per-share data)
Net sales . . . . . . . . . . . . . . . . . . . . . . . $1,657,404 $2,026,644 $1,964,781 $1,841,039 $1,637,902
Income from Continuing
Operations . . . . . . . . . . . . . . . . . . . .
85,197
148,632
128,687
79,671
24,676
Income (loss) from Discontinued
Operations . . . . . . . . . . . . . . . . . . . .
(288)
(377)
19,367
26,891
Net Income . . . . . . . . . . . . . . . . . . . . .
Basic earnings per share from
84,909
148,255
148,054
106,562
27,553
52,229
Continuing Operations . . . . . . . . . . . $
2.09 $
3.66 $
3.02 $
1.82 $
0.57
Basic earnings (loss) per share from
Discontinued Operations . . . . . . . . .
(0.01)
(0.01)
0.45
0.61
Basic earnings per share . . . . . . . . . . . $
2.08 $
3.65 $
3.48 $
2.43 $
0.64
1.21
Diluted earnings per share from
Continuing Operations . . . . . . . . . . . $
2.05 $
3.57 $
2.93 $
1.75 $
0.55
Diluted earnings (loss) per share from
Discontinued Operations . . . . . . . . .
(0.01)
(0.01)
0.44
0.59
Diluted earnings per share . . . . . . . . . . $
2.04 $
3.56 $
3.37 $
2.34 $
0.62
1.17
Cash and cash equivalents . . . . . . . . .
Total assets*
. . . . . . . . . . . . . . . . . . . .
Long-term debt (less current
maturities) . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . .
Cash dividends declared per common
share . . . . . . . . . . . . . . . . . . . . . . . .
18,683
1,290,603
297,096
1,408,691
213,674
1,617,867
80,520
1,444,116
86,740
1,442,215
22,047
231,582
672,140
203,953
363,936
575,546
363,877
363,877
671,966
363,802
363,802
475,476
363,737
363,737
491,636
0.52
0.54
0.60
0.60
0.60
*
Total assets for years ended August 31, 2007, 2006, and 2005 include amounts related to discontinued operations.
19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements and
related notes included within this report. References made to years are for fiscal year periods. Dollar
amounts are in thousands, except share and per-share data and as indicated.
The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results
of operations, financial position, cash flows, indebtedness, and other key financial
information of Acuity
Brands and its subsidiaries for the years ended August 31, 2009 and 2008. For a more complete
understanding of this discussion, please read the Notes to Consolidated Financial Statements included in
this report.
Overview
Company
Acuity Brands Inc.
is the parent company of Acuity Brands Lighting and other
subsidiaries (collectively referred to herein as “the Company”). The Company, with its principal office in
Atlanta, Georgia, employs approximately 6,000 people worldwide.
(“Acuity Brands”)
The Company designs, produces, and distributes a broad array of indoor and outdoor lighting fixtures and
related products, including lighting controls, and services for commercial and institutional, industrial,
infrastructure, and residential applications for various markets throughout North America and select
international markets. The Company is one of the world’s leading producers and distributors of lighting
fixtures, with a broad, highly configurable product offering, consisting of roughly 500,000 active products
as part of over 2,000 product groups, as well as lighting controls and other products, that are sold to
approximately 5,000 customers. As of August 31, 2009, the Company operates 16 manufacturing
facilities and six distribution facilities along with two warehouses to serve its extensive customer base.
Acuity Brands completed the Spin-off of its specialty products business, Zep, on October 31, 2007, by
distributing all of the shares of Zep common stock, par value $.01 per share, to the Company’s
stockholders of record as of October 17, 2007. The Company’s stockholders received one Zep share,
together with an associated preferred stock purchase right, for every two shares of the Company’s
common stock they owned. Stockholders received cash in lieu of fractional shares for amounts less than
one full Zep share.
As a result of the Spin-off, the Company’s financial statements have been prepared with the net assets,
results of operations, and cash flows of the specialty products business presented as discontinued
operations. All historical statements have been restated to conform to this presentation.
Strategy
Throughout 2009, the Company made significant progress towards key initiatives designed to enhance
and streamline its operations, including its product development and service capabilities, and create a
stronger, more effective organization that is capable of more consistently achieving its long-term financial
goals, which are as follows:
(cid:129) Generating operating margins in excess of 12%;
(cid:129) Growing earnings per share in excess of 15% per annum;
(cid:129) Providing a return on stockholders’ equity of 20% or better;
(cid:129) Maintaining the Company’s debt to total capitalization ratio below 40%; and
(cid:129) Generating cash flow from operations less capital expenditures that is in excess of net income.
20
To increase the probability of the Company achieving these financial goals, management will continue to
implement programs to enhance its capabilities at providing unparalleled customer service; creating a
globally competitive cost structure; improving productivity; and introducing new and innovative products
and services more rapidly and cost effectively. In addition, the Company has invested considerable
resources to teach and train associates to utilize tools and techniques that accelerate success in these
key areas as well as to create a culture that demands excellence through continuous improvement.
Additionally, the Company promotes a “pay-for-performance” culture that rewards achievement, while
closely monitoring appropriate risk-taking. The expected outcome of these activities will be to better
position the Company to deliver on its full potential, to provide a platform for future growth opportunities,
and to allow the Company to achieve its long-term financial goals. See the Outlook section below for
additional information.
Liquidity and Capital Resources
The Company’s principle sources of
liquidity are operating cash flows generated primarily from its
business operations, cash on hand, and various sources of borrowings. The ability of Acuity Brands to
generate sufficient cash flow from operations and access certain capital markets, including borrowing
from banks, is necessary for the Company to fund its operations, to pay dividends, to meet its obligations
as they become due, and to maintain compliance with covenants contained in its financing agreements.
investments,
Based on its cash on hand, availability under existing financing arrangements and current projections of
cash flow from operations, the Company believes that it will be able to meet its liquidity needs over the
next 12 months. These needs are expected to include funding its operations as currently planned, making
anticipated capital
funding foreseen improvement
funding certain potential acquisitions,
initiatives, paying quarterly stockholder dividends as currently anticipated, paying principal and interest on
borrowings as currently scheduled, and making required contributions into the Company’s employee
benefit plans, as well as potentially repurchasing shares of Acuity Brands’ outstanding common stock as
authorized by the Company’s Board of Directors. The Company currently expects to invest approximately
$35.0 million primarily for equipment, tooling, and new and enhanced information technology capabilities
during fiscal 2010.
The Company has $200 million of public notes scheduled to mature on August 2, 2010, and intends to
refinance the notes prior to their maturity. While the Company believes it will be able to refinance the
notes, the Company believes it will also have the ability to retire the notes as they come due based on
available borrowing capacity under the Revolving Credit Facility, future cash provided by operations, and
current cash balances. See Note 5: Debt and Lines of Credit of the Notes to Consolidated Financial
Statements.
Cash Flow
The Company uses available cash and cash flow from operations, as well as proceeds from the exercise
of stock options, if any, to fund operations and capital expenditures, to pay principal and interest on debt,
to repurchase stock, to fund acquisitions, and to pay dividends. The Company’s available cash position at
August 31, 2009 was $18.7 million, a decrease of $278.4 million from August 31, 2008. The decrease in
the Company’s available cash position was due primarily to the repayment of $162.4 million of debt,
$162.1 million used for acquisitions, $21.6 million used for dividends paid, partially offset by cash provided
by operating activities and proceeds from the exercise of stock options.
During fiscal 2009, the Company generated $92.7 million of net cash from operating activities compared
with $221.8 million generated in the prior-year period, a decrease of $129.1 million. Net cash provided by
operating activities decreased due primarily to lower net income and the payment of employee incentive
compensation totaling approximately $37.8 million, which was attributable to fiscal 2008 performance.
21
Operating working capital
(calculated by adding accounts receivable, net, plus inventories, and
subtracting accounts payable) as a percentage of net sales increased to 12.4% at the end of fiscal 2009
from 10.3% at the end of fiscal 2008, due primarily to higher inventory levels as a percentage of net sales.
At August 31, 2009, the current ratio (calculated as total current assets divided by total current liabilities)
of the Company was 0.9 compared with 1.4 at August 31, 2008. This reduction in the current ratio was
due primarily due to the reduction in cash described above and the short-term classification at August
2009 of the $200 million notes that are due in August 2010.
Management believes that investing in assets and programs that will over time increase the overall return
on its invested capital is a key factor in driving stockholder value. The Company invested $21.2 million and
$27.2 million in fiscal 2009 and 2008, respectively, primarily for new tooling, machinery, equipment, and
information technology. As noted above, the Company expects to invest approximately $35.0 million for
new plant, equipment, tooling, and new and enhanced information technology capabilities during fiscal
2010.
Contractual Obligations
The following table summarizes the Company’s contractual obligations at August 31, 2009:
Payments Due by Period
Total
Less than
One Year
1 to 3
Years
4 to 5
Years
After
5 Years
Debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $231,582 $209,535 $18,047 $ — $ 4,000
57,904
Interest Obligations(2) . . . . . . . . . . . . . . . . . . . . . . .
3,124
. . . . . . . . . . . . . . . . . . . . . . . .
Operating Leases(3)
. . . . . . . . . . . . . . . . . . . . .
Purchase Obligations(4)
—
. . . . . . . . . . . . . . . . .
Other Long-term Liabilities(5)
127,366
48,427
82,356
52,278
18,878
21,940
617
12,002
20,257
8,936
—
9,762
30,327
14,427
81,739
6,356
24,158
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $542,009 $342,384 $71,484 $38,955 $89,186
(1)
(2)
(3)
(4)
(5)
These amounts (which represent the amounts outstanding at August 31, 2009) are included in the Company’s Consolidated
Balance Sheets. See Note 5: Debt and Lines of Credit for additional information regarding debt and other matters.
These amounts represent the expected future interest payments on debt held by the Company at August 31, 2009 and the
Company’s loans related to its corporate-owned life insurance policies (“COLI”). The substantial majority of interest payments on
debt included in this table are based on fixed rates. COLI-related interest payments included in this table are estimates. These
estimates are based on various assumptions, including age at death, loan interest rate, and tax bracket. The amounts in this
table do not include COLI-related payments after ten years due to the difficulty in calculating a meaningful estimate that far in the
future. Note that payments related to debt and the COLI are reflected on the Company’s Consolidated Statements of Cash
Flows.
The Company’s operating lease obligations are described in Note 8: Commitments and Contingencies.
Purchase obligations include commitments to purchase goods or services that are enforceable and legally binding and that
specify all significant terms, including open purchase orders.
These amounts are included in the Company’s Consolidated Balance Sheets and largely represent other liabilities for which the
Company is obligated to make future payments under certain long-term employee benefit programs. Estimates of the amounts
and timing of these amounts are based on various assumptions, including expected return on plan assets, interest rates, and
other variables. The amounts in this table do not include amounts related to future funding obligations under the defined benefit
pension plans. The amount and timing of these future funding obligations are subject to many variables and also depend on
whether or not the Company elects to make contributions to the pension plans in excess of those required under ERISA. Such
voluntary contributions may reduce or defer the funding obligations. See Note 4: Pension and Profit Sharing Plans for additional
information. These amounts exclude $7.2 million of unrecognized tax benefits, including interest and penalties, as a reasonably
reliable estimate of the period of cash settlement with the respective taxing authorities cannot be determined.
22
Capitalization
The current capital structure of the Company is comprised principally of senior notes and equity of its
stockholders. As of August 31, 2009, the Company had total debt outstanding of $231.6 million which
consisted primarily of fixed-rate obligations. During fiscal 2009, total debt outstanding decreased $132.3
million from $363.9 million at August 31, 2008, due primarily to the repayment of the $160 million 6%
notes, which matured on February 2, 2009, partially offset by the issuance of a $30 million unsecured
promissory note issued as partial consideration for the acquisition of Sensor Switch.
On October 19, 2007, the Company executed a $250 million revolving credit facility (the “Revolving Credit
Facility”). The Revolving Credit Facility matures in October 2012 and contains financial covenants including
a minimum interest coverage ratio and a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness
to EBITDA (earnings before interest, taxes, depreciation and amortization expense), as such terms are
defined in the Revolving Credit Facility agreement. These ratios are computed at the end of each fiscal
quarter for the most recent 12-month period. The Revolving Credit Facility allows for a Maximum Leverage
Ratio of 3.50, subject to certain conditions defined in the financing agreement. The Company was in
compliance with all financial covenants and had no outstanding borrowings at August 31, 2009 under the
Revolving Credit Facility. At August 31, 2009, the Company had borrowing capacity under the Revolving
Credit Facility of $242.7 million under the most restrictive covenant in effect at the time, which represents
the full amount of the Revolving Credit Facility less outstanding letters of credit of $7.3 million.
In December 2008, the Company commenced a cash tender offer to purchase any and all of
its
outstanding $160 million 6% notes due February 2, 2009 (the “Notes”). On December 9, 2008, a total
aggregate principal amount of $12.6 million, representing approximately 7.9% of the outstanding Notes,
was validly tendered in the offer at a discounted price of $990.00 per $1,000.00. The total consideration
plus the applicable accrued and unpaid interest was paid to the tendering holders on the settlement date,
December 10, 2008. The gain, net of expenses, was immaterial. The remaining $147.4 million of the
Notes matured on February 2, 2009, and the Company repaid the outstanding balance with cash on
hand.
The Company has $200 million of outstanding public notes scheduled to mature on August 2, 2010. The
Company intends to refinance the notes prior to their maturity. While the Company believes it will be able
to refinance the notes, the Company believes it will also have the ability to retire the notes as they come
due based on available borrowing capacity under the Revolving Credit Facility, future cash provided by
operations, and current cash balances. See Note 5: Debt and Lines of Credit of
the Notes to
Consolidated Financial Statements. In addition, the Company’s Board of Directors may authorize the
Company’s management to explore opportunistic repurchases of indebtedness.
On April 20, 2009, the Company issued a three-year $30 million 6% unsecured promissory note to the
sole shareholder of Sensor Switch, who continued as an employee of the Company upon completion of
the acquisition, as partial consideration for
the acquisition of Sensor Switch. Scheduled quarterly
payments on the note began on July 1, 2009 with the last payment due April 1, 2012. The lender has
certain rights to accelerate the note should the Company refinance the $200 million public notes.
During fiscal 2009, the Company’s consolidated stockholders’ equity increased $96.6 million to $672.1
million at August 31, 2009 from $575.5 million at August 31, 2008. The increase was due primarily to net
income earned in the period, stock issued as partial consideration for acquired businesses, and stock
issuances associated with employee incentive compensation programs, partially offset by the payment of
dividends, unfavorable currency translation adjustments, and an increase in pension obligations. The
Company’s debt to total capitalization ratio (calculated by dividing total debt by the sum of total debt and
total stockholders’ equity) was 25.6% and 38.7% at August 31, 2009 and August 31, 2008, respectively.
The ratio of debt, net of cash, to total capitalization, net of cash, was 24.1% at August 31, 2009 and
10.4% at August 31, 2008.
23
Dividends
Acuity Brands paid dividends on its common stock of $21.6 million ($0.52 per share) during 2009
compared with $22.5 million ($0.54 per share) in 2008. Acuity Brands currently plans to pay quarterly
dividends at a rate of $0.13 per share. All decisions regarding the declaration and payment of dividends
by Acuity Brands are at the discretion of the Board of Directors of Acuity Brands and will be evaluated
from time to time in light of the Company’s financial condition, earnings, growth prospects, funding
requirements, applicable law, and any other factors the Acuity Brands’ board deems relevant.
Results of Operations
Fiscal 2009 Compared with Fiscal 2008
The following table sets forth information comparing the components of net income for the year ended
August 31, 2009 with the year ended August 31, 2008:
($ in millions, except per-share data)
Years Ended
August 31,
2009
2008
Increase
(Decrease)
Percent
Change
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,657.4 $2,026.6
1,210.8
Cost of Products Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,022.3
$(369.2)
(188.5)
(18.2)%
(15.6)%
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
635.1
815.8
(180.7)
(22.2)%
Percent of net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, Distribution, and Administrative Expenses . . . . . . . . . . .
Special Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38.3%
40.3%
454.6
26.7
153.8
540.1
14.6
261.1
(200)bp
(85.5)
12.1
(15.8)%
82.9%
(107.3)
(41.1)%
Percent of net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.3%
12.9%
(360)bp
Other Expense (Income)
Interest Expense, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous Expense (Income) . . . . . . . . . . . . . . . . .
Total Other Expense (Income) . . . . . . . . . . . . . . . . . . .
28.5
(2.1)
26.4
28.4
2.1
30.5
0.1
(4.2)
(4.1)
0.4%
(200.0)%
(13.4)%
Income from Continuing Operations before Provision for
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127.4
230.6
(103.2)
(44.8)%
Percent of net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continuing Operations . . . . . . . . . . . . . . . . . . . . . .
Loss from Discontinued Operations, net of tax . . . . . . . . . . . . .
7.7%
42.1
33.1%
85.3
(0.3)
11.4%
81.9
35.5%
148.6
(0.4)
(370)bp
(39.8)
(48.6)%
(63.3)
0.1
(42.6)%
25.0%
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
85.0 $ 148.3
$ (63.3)
(42.7)%
Diluted Earnings per Share from Continuing Operations . . . . . . $
Diluted Loss per Share from Discontinued Operations . . . . . . . $
2.05 $
(0.01) $
$ (1.52)
3.57
(0.01) $ —
(42.6)%
— %
Diluted Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.04 $
3.56
$ (1.52)
(42.7)%
Results from Continuing Operations
Net sales were $1,657.4 million for fiscal 2009 compared with $2,026.6 million reported in the prior-year
period, a decrease of $369.2 million, or 18.2%. For fiscal 2009, the Company reported income from
continuing operations of $85.3 million compared with $148.6 million earned in fiscal 2008. Diluted
24
earnings per share from continuing operations were $2.05 for fiscal 2009 as compared with $3.57
reported for fiscal 2008, a decrease of 42.6%. Results for fiscal 2009 and 2008 include pre-tax special
charges of $26.7 million, or $0.41 per diluted share, and $14.6 million, or $0.21 per diluted share,
respectively.
On December 31, 2008, Acuity Brands acquired for cash and stock substantially all the assets and
assumed certain liabilities of Lighting Control & Design, Inc. (“LC&D”). Located in Glendale, California,
LC&D is a manufacturer of comprehensive digital lighting controls and software. LC&D offers a wide range
of products, including dimming and building interfaces as well as digital thermostats, all within a single,
scalable system. LC&D had calendar year 2008 sales of approximately $18 million.
On April 20, 2009, the Company acquired Sensor Switch, Inc. (“Sensor Switch”), an industry-leading
developer and manufacturer of
lighting controls and energy management systems for an aggregate
consideration of the $205 million comprised of (i) 2 million shares of common stock of the Company, (ii) a
$30 million note of Acuity Brands Lighting, and (iii) approximately $130 million of cash. A cash payment of
approximately $130 million was funded from available cash on hand and from borrowings under the
Company’s Revolving Credit Facility. The $30 million unsecured promissory note is payable over three
years. Sensor Switch, based in Wallingford, Connecticut, offers a wide-breadth of products and solutions
that substantially reduce energy consumption including occupancy sensors, photocontrols, and
distributed lighting control devices. Sensor Switch generated sales in excess of $37 million during its fiscal
year ending October 31, 2008.
The operating results of Sensor Switch and LC&D have been included in the Company’s consolidated
financial statements since their respective dates of acquisition.
Net Sales
Net sales decreased approximately 18% in 2009 compared with 2008 due primarily to lower shipments
and unfavorable impact of
foreign currency fluctuation, partially offset by revenues from recent
acquisitions. The lower volume of product shipments was due primarily to continued decline in demand
on the residential and non-residential construction markets, particularly for commercial and office
buildings. The Company estimates shipment volumes declined by approximately 19% in fiscal 2009
compared with 2008, partially offset by an estimated 1% improvement
in price and product mix.
Additionally, unfavorable foreign currency rate fluctuations negatively impacted net sales in fiscal 2009 by
slightly less than 2% compared with the prior year, which was largely offset by $26 million of net sales
from acquisitions.
Gross Profit
Gross profit margin decreased by 200 basis points to 38.3% of net sales for fiscal 2009 from 40.3%
reported for the prior-year period. Gross profit for fiscal 2009 decreased $180.7 million, or 22.2%, to
$635.1 million compared with $815.8 million for the prior-year period. The decline in gross profit and
gross profit margin was largely attributable to the decline in net sales noted above, increased cost for raw
material and components, and unfavorable foreign currency fluctuations. The Company estimates raw
material and component costs increased cost of goods sold by approximately $40 million compared with
the year-ago period, with only a small portion of the increase recovered in higher prices. Savings from
ongoing streamlining efforts, benefits from productivity improvements, and contributions from acquisitions
helped to partially offset the negative impact of the aforementioned items on gross profit and gross profit
margin.
25
Operating Profit
Selling, Distribution, and Administrative (“SD&A”) expenses for fiscal 2009 were $454.6 million compared
with $540.1 million in the prior-year period, which represented a decrease of $85.5 million, or 15.8%.
Approximately half of the decrease in SD&A expenses was due to lower commissions paid to the
Company’s sales forces and agents and lower freight costs, which both typically vary directly with sales.
Additionally, reduced incentive compensation and benefits from streamlining efforts contributed to lower
fiscal 2009 SD&A expense. Partially offsetting these reductions was the additional SD&A expense related
to the businesses acquired in fiscal 2009.
In fiscal 2009, gross profit less SD&A expenses was $180.5 million compared with $275.7 million in the
prior-year period, which represents a decrease of $95.2 million, or 17.6%. The decrease was due to lower
volume, increased raw material and component costs, and unfavorable foreign currency fluctuations,
partially offset by savings from streamlining efforts, benefits from productivity improvements, and
contributions from acquisitions. The Company believes this measure provides greater comparability and
enhanced visibility into the improvements realized.
As part of the Company’s initiative to streamline and simplify operations, the Company recorded in fiscal
2009 and 2008 pre-tax charges of $26.7 million and $14.6 million, respectively, to reflect severance and
related employee benefit costs associated with the elimination of certain positions worldwide and the
costs associated with the early termination of certain leases. The fiscal 2009 charge included a non-cash
expense of $1.6 million for the impairment of assets associated with the closing of a facility. The Company
estimates that it realized $39 million ($28 million and $11 million from actions initiated in fiscal 2009 and
2008, respectively) in savings during fiscal 2009 compared with the prior year related to these actions.
Operating profit for fiscal 2009 was $153.8 million compared with $261.1 million reported for the prior-
year period, a decrease of $107.3 million, or 41.1%. Operating profit margin decreased 360 basis points
to 9.3% compared with 12.9% in the year-ago period. The decrease in operating profit in fiscal 2009
compared with the prior-year period was due primarily to the decrease in gross profit noted above and
the $12.1 million incremental special charge related to streamlining efforts, partially offset by decreased
SD&A expense as noted above.
Income from Continuing Operations before Provision for Taxes
Other expense consists primarily of
interest expense, net, and miscellaneous income (or expense)
resulting from changes in exchange rates on foreign currency items as well as other non-operating items.
Interest expense, net, was $28.5 million and $28.4 million for fiscal 2009 and 2008, respectively. Fiscal
2009 interest expense, net reflects lower interest expense resulting from the maturity of the $160
million public notes that was more than offset by reduced interest income resulting from both lower
cash balances and lower short-term interest rates. For fiscal 2009, the Company reported $2.1 million of
other miscellaneous income compared with $2.1 million of other miscellaneous expense in the year-ago
period. The $4.2 million favorable year-over-over change was due primarily to the impact of changes in
exchange rates on foreign currency items.
Provision for Income Taxes and Income from Continuing Operations
The effective income tax rate reported by the Company was 33.1% and 35.5% for fiscal 2009 and 2008,
respectively. The decrease in the annual tax rate was due primarily to the greater impact of tax credits and
deductions on the lower earnings amount and the adverse effect on prior year’s effective tax rate related
to the repatriation of foreign cash. Income from continuing operations for fiscal 2009 decreased $63.3
million to $85.3 million (including $16.8 million after-tax for the special charge)
from $148.6 million
(including $9.1 million after-tax for the special charge) reported for the prior-year period. The decrease in
income from continuing operations was due primarily to the above noted decrease in operating profit,
partially offset by lower tax expense.
26
Results from Discontinued Operations and Net Income
The loss from discontinued operations for fiscal 2009 was $0.3 million, a decrease of $0.1 million from the
prior-year loss of $0.4 million. The loss in both periods relate to tax adjustments associated with pre-spin
activities.
Net income for fiscal 2009 decreased $63.3 million to $85.0 million from $148.3 million reported for the
prior-year period. The decrease in net income resulted primarily from the above noted decline in net sales.
Fiscal 2008 Compared with Fiscal 2007
The following table sets forth information comparing the components of net income for the year ended
August 31, 2008 with the year ended August 31, 2007:
($ in millions, except per-share data)
Years Ended
August 31,
2008
2007
Increase
(Decrease)
Percent
Change
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,026.6 $1,964.8
1,220.5
Cost of Products Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,210.8
$ 61.8
(9.7)
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
815.8
744.3
71.5
3.1%
(0.8)%
9.6%
Percent of net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, Distribution, and Administrative Expenses . . . . . . . . . .
Special Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40.3%
37.9%
540.1
14.6
261.1
521.9
—
222.4
240bp
18.2
14.6
38.7
3.5%
100.0%
17.4%
Percent of net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.9%
11.3%
160bp
Other Expense (Income)
Interest Expense, net . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous Expense (Income) . . . . . . . . . . . . . . . .
Total Other Expense (Income)
. . . . . . . . . . . . . . . . . .
28.4
2.1
30.5
29.9
(1.6)
28.3
(1.5)
3.7
2.2
(5.0)%
231.3%
7.8%
Income from Continuing Operations before Provision for
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
230.6
194.2
36.4
18.7%
Percent of net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continuing Operations . . . . . . . . . . . . . . . . . . . . .
Income (Loss) from Discontinued Operations, net of tax . . . . .
11.4%
81.9
35.5%
148.6
(0.4)
9.9%
65.5
33.7%
128.7
19.4
150bp
16.4
25.0%
19.9
(19.8)
15.5%
(102.1)%
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148.3 $ 148.1
$ 0.2
0.1%
Diluted Earnings per Share from Continuing Operations . . . . . $
Diluted Earnings (Loss) per Share from Discontinued
3.57 $
2.93
$ 0.64
21.8%
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(0.01) $
0.44
$(0.45)
(102.3)%
Diluted Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3.56 $
3.37
$ 0.19
5.6%
Results from Continuing Operations
Net sales were $2,026.6 million for fiscal 2008 compared with $1,964.8 million reported in the prior-year
period, an increase of $61.8 million, or 3.1%. For fiscal 2008, the Company reported income from
continuing operations of $148.6 million (including a $9.1 million after-tax special charge for estimated
costs the Company incurred to simplify and streamline its operations as a result of the Spin-off) compared
27
with $128.7 million earned in fiscal 2007. Diluted earnings per share from continuing operations were
$3.57 (including $0.21 loss related to the special charge) for fiscal 2008 as compared with $2.93 reported
for fiscal 2007, an increase of 21.8%.
On July 17, 2007, Acuity Brands acquired substantially all of the assets and assumed certain liabilities of
Mark Architectural Lighting. Located in Edison, New Jersey, Mark Architectural Lighting is a specification-
oriented manufacturer of high-quality lighting products which generated fiscal 2006 sales of over $22
million. The acquisition provides the Company a stronger presence in the Northeast, particularly the New
York City metropolitan area, and is a complement to the Center for Light+Space, the Company’s sales
and marketing office in New York City. The operating results of Mark Architectural Lighting have been
included in the Company’s consolidated financial statements since the date of acquisition.
Net Sales
The 3.1% increase in net sales was due primarily to an enhanced mix of products sold and improved
pricing. The Company’s sales and profitability continued to benefit from a disciplined approach to pricing
and a richer mix of new and innovative products sold at higher per unit sales prices that offer customers
greater benefits and features, such as more energy efficiency and an improved lighting experience. The
Company estimated that greater shipments of products both for new construction and relighting of
existing non-residential buildings, excluding large retailers, increased by approximately 2% in fiscal 2008
compared with 2007, partially offset by an approximately 3% decline in volume resulting from weakness in
the residential market and reduced new store openings by certain large retailers. The Mark Architectural
Lighting acquisition contributed approximately $18.0 million to fiscal 2008 net sales. Additionally, favorable
foreign currency rate fluctuations added approximately $19.1 million to the increase in net sales in fiscal
2008.
Gross Profit
Gross profit margins increased 240 basis points to 40.3% of net sales for fiscal 2008 from 37.9%
reported for the prior-year period. Gross profit increased $71.5 million, or 9.6%, to $815.8 million for fiscal
2008 compared with $744.3 million for the prior-year period. The improvement in gross profit and gross
profit margin was largely attributable to improved pricing and a greater mix of higher-margin products
sold. In addition, benefits from the contribution of Mark Architectural Lighting and programs to improve
productivity and quality contributed to the increased profitability. These gains offset increases in costs for
raw materials, components, and freight, as well as increases associated with employee wages and related
benefits and freight costs.
Operating Profit
Selling, Distribution, and Administrative (“SD&A”) expenses were $540.1 million for fiscal 2008 compared
with $521.9 million in the prior-year period, which represented an increase of $18.2 million, or 3.5%.
Approximately half of the increase in SD&A expenses was due to higher commissions paid to the
Company’s sales forces and agents, which typically vary directly with sales. Additionally, fiscal 2007 was
favorably impacted by a $6.6 million pre-tax gain (net of related legal costs) resulting from a settlement for
a commercial dispute involving reimbursement of warranty and product liability costs associated with a
product line purchased from a third party in fiscal 2002. The balance of the increase in SD&A expenses
was due primarily to an increase in the Company’s investment in product marketing and development
activities and the impact from fluctuations in foreign currency exchange rates partially offset by lower
expenses for the Company’s other general and administrative costs due to cost containment programs.
Merit based and inflationary wage increases were fully offset by benefits from the actions taken during
fiscal 2008 to streamline and simplify operations.
28
Gross profit less SD&A expenses was $275.7 million in fiscal 2008 compared with $222.4 million in the
prior-year period, which represented an increase of $53.3 million, or 24.0%. The increase was due to
gross profit improvements partially offset by increased SD&A expenses as noted above. The Company
believes this measure provides greater comparability and enhanced visibility into the improvements
realized.
As part of the Company’s initiative to streamline and simplify operations, largely in connection with actions
related to the Spin-off, the Company recorded in fiscal 2008 a pre-tax charge of $14.6 million to reflect
severance and related employee benefit costs associated with the elimination of certain positions
worldwide and the costs associated with the early termination of certain leases. The Company estimates
that it realized $11 million in savings during fiscal 2008 related to these actions.
Operating profit for fiscal 2008 was $261.1 million compared with $222.4 million reported for the prior-
year period, an increase of $38.7 million, or 17.4%. Operating profit margin increased 160 basis points to
12.9% compared with 11.3% in the year-ago period. The improvement in operating profit in fiscal 2008
compared with the prior-year period was due primarily to the increased gross profit noted above, partially
offset by the $14.6 million special charge and the $6.6 million favorable commercial dispute settlement in
the prior-year period.
Income from Continuing Operations before Provision for Taxes
Other expense consists primarily of
interest expense, net, and miscellaneous expense (or income)
resulting from changes in exchange rates on foreign currency items as well as other non-operating items.
Interest expense, net, was $28.4 million and $29.9 million for fiscal 2008 and 2007, respectively. Interest
expense, net, decreased 5.0% in fiscal 2008 compared with fiscal 2007 due primarily to greater interest
income earned on higher invested cash balances, partially offset by lower short-term interest rates. The
fluctuation in miscellaneous expense (income) was due primarily to the impact of exchange rates on
foreign currency items.
Provision for Income Taxes and Income from Continuing Operations
The effective income tax rate reported by the Company was 35.5% and 33.7% for fiscal 2008 and 2007,
respectively. The current period tax rate was adversely affected by taxes related to the repatriation of
foreign cash and increased income in jurisdictions with higher tax rates.
Income from continuing operations for fiscal 2008 increased $19.9 million to $148.6 million (including $9.1
million after-tax for the special charge) from $128.7 million reported for the prior-year period. The increase
in income from continuing operations resulted primarily from the above noted increase in operating profit,
partially offset by higher tax expense.
Results from Discontinued Operations and Net Income
The loss from discontinued operations for fiscal 2008 was $0.4 million, a decrease of $19.8 million from
the prior-year period income of $19.4 million. The decrease was due primarily to the contribution of only
two months of operating results in fiscal 2008 rather than a full year in fiscal 2007.
In addition,
discontinued operations were negatively impacted by approximately $5.5 million in costs related to the
Spin-off during the first quarter of fiscal 2008. These non-tax deductible costs consist primarily of legal,
accounting, financial, and other professional fees incurred in connection with the Spin-off.
Net income for fiscal 2008 increased $0.2 million to $148.3 million from $148.1 million reported for the
prior-year period. The increase in net income resulted primarily from the above noted increase in income
from continuing operations, partially offset by the results from discontinued operations.
29
Outlook
The performance of Acuity Brands, like most companies, is influenced by a multitude of factors such as
the health of the economy, including employment, credit availability, and consumer confidence. During the
Company’s fiscal 2009, major economies and financial markets throughout
the world experienced
unprecedented volatility, creating uncertainty both for consumers and businesses. As a result,
construction activity in the U.S., both non-residential and residential, declined significantly during fiscal
2009. The vitality of the Company’s business is determined by underlying economic factors such as
employment levels, credit availability, consumer demand, commodity costs, and government policy,
particularly as it impacts capital formation and risk taking by businesses and commercial developers. As
such, it is difficult at this time to precisely forecast the direction or intensity of future economic activity in
general and more specifically with respect to overall construction demand. Key indicators continue to
signal declines for North American non-residential construction activity. Accordingly, management’s
expectation is that in 2010 the percentage decline in the overall markets it serves will be in the mid-teens.
The Company’s backlog at the end of the fiscal 2009 was down 23 percent compared to the prior year.
While prices for components and commodities, particularly for steel and petroleum, declined from their
record highs in the summer and fall of 2008, volatility in pricing for these products could once again occur
and possibly place pressure on the Company’s margins. Management believes that competitive forces in
the current market environment will not allow the Company to pass along more than commodity cost
increases or to significantly retain current pricing on commodity-sensitive products should those specific
commodity costs sharply decline. Although management believes pricing is likely to become more
competitive in certain channels and geographies, the negative impact is expected to be offset through
productivity improvements and lower material, component, and freight costs.
During fiscal 2010, the Company expects to realize approximately $50 million of annualized benefits from
the streamlining actions taken in fiscal 2009 of which approximately $28 million of benefits were realized
during fiscal 2009. These actions related to the consolidation of certain manufacturing operations and a
reduction in workforce. The Company initiated such actions in an effort to continue to redeploy and invest
resources in other areas where the Company believes it can create greater value for all stakeholders and
accelerate profitable growth opportunities,
including a continued focus on industry-leading product
innovation incorporating sustainable design, relighting, and customer connectivity.
In addition to the recent acquisitions which significantly increased the Company’s presence in the fast-
growing lighting controls market, management believes the execution of the Company’s strategies to
accelerate investments in innovative and energy-efficient products, enhance services to its customers,
and expand market presence in key sectors such as home centers and the renovation and relight market
will provide growth opportunities, which should enable the Company to outperform the overall markets it
serves. Additionally, management believes these actions and investments will position the Company to
meet or exceed its long-term financial goals.
The Company expects cash flow from operations to remain strong in 2010 and intends to invest
approximately $35 million in capital expenditures during the year. Also, the Company estimates the annual
tax rate to approximate 35% for 2010.
Although fiscal 2010 results are expected to be negatively impacted by current economic conditions,
management remains very positive about the long-term potential of the Company and its ability to
outperform the market. Management continues to position the Company to optimize short-term
performance while investing in and deploying resources to further the Company’s long-term profitable
growth opportunities. Looking beyond the current environment, management believes the lighting and
lighting-related industry will experience solid growth over the next decade, particularly as energy and
environmental concerns come to the forefront, and that the Company is well-positioned to fully participate
in this growing industry.
30
Accounting Standards Yet to Be Adopted
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting (“SFAS”) No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R
changes accounting for business combinations through a requirement to recognize 100% of the fair
values of assets acquired, liabilities assumed, and noncontrolling interests in acquisitions of less than a
100% controlling interest when the acquisition constitutes a change in control of the acquired entity. Other
requirements include capitalization of acquired in-process research and development assets, expensing,
as incurred, acquisition-related transaction costs and capitalizing restructuring charges as part of the
acquisition only if requirements of SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities, are met. SFAS No. 141R is effective for business combination transactions for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008 and is therefore effective for
the Company beginning in fiscal 2010. The
implementation of this guidance will affect the Company’s results of operations and financial position after
its effective date only to the extent it completes applicable business combinations subsequent to the
effective date, and therefore, the impact cannot be determined at this time.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 establishes the economic
entity concept of consolidated financial statements, stating that holders of a residual economic interest in
an entity have an equity interest in the entity, even if the residual interest is related to only a portion of the
to be presented as a separate
entity. Therefore, SFAS No. 160 requires a noncontrolling interest
is obtained, a change in control that
component of equity. SFAS No. 160 also states that once control
does not result in a loss of control should be accounted for as an equity transaction. The statement
requires that a change resulting in a loss of control and deconsolidation is a significant event triggering
gain or loss recognition and the establishment of a new fair value basis in any remaining ownership
interests. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and is
therefore effective for the Company beginning in fiscal 2010. The Company does not expect the adoption
of SFAS No. 160 to have a material impact on its results of operations and financial position.
In June 2008, FASB issued FASB Staff Position (“FSP”) No. EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF
03-6-1”). FSP EITF 03-6-1 was issued to clarify that unvested share-based payment awards with a right
to receive nonforfeitable dividends are participating securities. FSP EITF 03-6-1 provides guidance on how
to allocate earnings to participating securities and compute basic earnings per share (“EPS”) using the
two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years, and is therefore effective for the Company beginning the first
quarter of
the Company’s EPS
calculation. For example, the Company’s diluted EPS for the years ended August 31, 2009, 2008, and
2007, under this guidance would be $2.00, $3.51, and $2.89, respectively, as compared to $2.04, $3.57,
and $2.93 reported for these periods.
fiscal 2010. The implementation of
this guidance will
impact
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards CodificationTM and the
Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162
(“SFAS No. 168”), which confirms that as of July 1, 2009, the FASB Accounting Standards Codification TM
(“Codification”)
is the single official source of authoritative, nongovernmental U.S. generally accepted
accounting principles (“U.S. GAAP”). All existing accounting standard documents are superseded, and all
other accounting literature not included in the Codification is considered nonauthoritative. SFAS No. 168
is effective for interim and annual periods ending after September 15, 2009 and is therefore effective for
the Company at the conclusion of the first quarter of 2010. While the Codification is not intended to
change U.S. GAAP and, thus, not expected to have an effect on the Company’s financial condition,
results of operations, or cash flows upon adoption, the Company is reviewing disclosures due to changes
in references to U.S. GAAP literature.
31
Accounting Standards Adopted in Fiscal 2009
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”), which establishes:
the period after the balance sheet date during which an entity should evaluate events or transactions for
potential recognition or disclosure in the financial statements; the circumstances under which an entity
should recognize such events or transactions in its financial statements; and disclosures regarding such
events or transactions and the date through which an entity has evaluated subsequent events.
The provisions of SFAS No. 165 were effective for financial statements issued for interim and annual
periods ending after June 15, 2009 and were adopted by the Company on August 31, 2009. The
Company determined, however, that SFAS No. 165 did not have an effect on the Company’s financial
condition, results of operations, or cash flows upon adoption, as its guidance is substantially consistent
with that previously applied by the Company.
In April 2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board Opinion (“APB”)
No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS No. 107-1 and APB
28-1”), which requires that the fair value of financial instruments be disclosed in an entity’s interim financial
statements, as well as in annual financial statements. The provisions of FSP FAS No. 107-1 and APB 28-1
also require that fair value information be presented with the related carrying value and that the method
and significant assumptions used to estimate fair value, as well as changes in method and significant
assumptions, be disclosed.
The provisions of FSP FAS No. 107-1 and APB 28-1 were effective for interim periods ending after
June 15, 2009 and were adopted by the Company on August 31, 2009. As the pronouncement only
pertains to additional disclosures, the adoption had no effect on the Company’s financial condition, results
of operations, or cash flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits companies, at their election, to measure
specified financial
value on a
instruments and warranty and insurance contracts at
contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The
election, called the “fair value option,” will enable some companies to reduce the volatility in reported
earnings caused by measuring related assets and liabilities differently, and it is easier than using the
complex hedge-accounting requirements in SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, to achieve similar results. Subsequent changes in fair value for designated items will be
required to be reported in earnings in the current period. SFAS No. 159 was effective for financial
statements issued for fiscal years beginning after November 15, 2007 and was therefore effective for the
Company beginning in fiscal 2009. The Company adopted SFAS No. 159 on September 1, 2008 and
elected not to apply the fair value option, and therefore, the adoption did not have an impact on the
Company’s results of operations or financial position.
fair
(with limited exceptions); and (c)
In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS
No. 158”). SFAS No. 158 requires an employer to: (a) recognize in its statement of financial position the
funded status of a benefit plan; (b) measure defined benefit plan assets and obligations as of the end of
the employer’s fiscal year
recognize as a component of other
comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise but are
not recognized as components of net periodic benefit costs pursuant to prior existing guidance. The
provisions governing recognition of the funded status of a defined benefit plan and related disclosures
became effective and were adopted by the Company at the end of fiscal 2007. The requirement to
measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of
financial position is effective for fiscal years ending after December 15, 2008, and was therefore effective
for the Company in fiscal 2009. The change in measurement date to August 31 resulted in a reduction to
retained earnings of approximately $0.5 million, net of tax.
32
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS
No. 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair
value, and expands disclosure requirements pertaining to fair value measurements. The provisions of
SFAS No. 157 related to financial assets and liabilities as well as other assets and liabilities carried at fair
value on a recurring basis were effective for the Company on September 1, 2008. Other than the
additional disclosures required, the adoption of these provisions of SFAS No. 157 did not have an impact
on the Company’s consolidated financial statements. The provisions of SFAS No. 157 related to other
nonfinancial assets and liabilities will be effective for the Company on September 1, 2009. The Company
does not expect the adoption of these provisions to have a material
impact on its results of operations
and financial position.
Critical Accounting Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses the
financial condition and results of operations as reflected in the Company’s Consolidated Financial
Statements, which have been prepared in accordance with U.S. GAAP. As discussed in Note 1 of the
Notes to Consolidated Financial Statements, the preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenue and expense during the reporting period. On an ongoing
basis, management evaluates its estimates and judgments, including those related to inventory valuation;
depreciation, amortization and the recoverability of long-lived assets, including goodwill and intangible
assets; share-based compensation expense; medical, product warranty, and other reserves; litigation;
and environmental matters. Management bases its estimates and judgments on its substantial historical
experience and other relevant factors, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
could differ from those estimates. Management discusses the development of accounting estimates with
the Company’s Audit Committee. See Note 3: Summary of Significant Accounting Policies of the Notes to
Consolidated Financial Statements for a summary of the accounting policies of Acuity Brands.
The management of Acuity Brands believes the following represent the Company’s critical accounting
estimates:
Inventories
Inventories include materials, direct labor, and related manufacturing overhead, and are stated at the
lower of cost (on a first-in, first-out or average-cost basis) or market. Management reviews inventory
quantities on hand and records 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 thus could have a material adverse impact on the
Company’s operating results in the period the change occurs.
Goodwill and Indefinite Lived Intangible Assets
The Company reviews goodwill and indefinite lived intangible assets for impairment on an annual basis in
the fiscal fourth quarter or on an interim basis if an event occurs or circumstances change that would
more likely than not indicate that the fair value of the long-lived asset is below its carrying value. All other
long-lived and intangible assets are reviewed for impairment whenever events or circumstances indicate
that the carrying amount of the asset may not be recoverable. An impairment loss for goodwill and
indefinite lived intangibles would be recognized based on the difference between the carrying value of the
asset and its estimated fair value, which would be determined based on either discounted future cash
33
flows or other appropriate fair value methods. The evaluation of goodwill and indefinite lived intangibles for
impairment requires management to use significant judgments and estimates in accordance with U.S.
GAAP including, but not limited to, projected future net sales, operating results, and cash flow.
Although management currently believes that the estimates used in the evaluation of goodwill and
indefinite lived intangibles are reasonable, differences between actual and expected net sales, operating
results, and cash flow and/or changes in the discount rate or theoretical royalty rate could cause these
assets to be deemed impaired. If this were to occur, the Company would be required to charge to
earnings the write-down in value of such assets, which could have a material adverse effect on the
Company’s results of operations and financial position, but not its cash flows from operations.
Goodwill
The Company is comprised of one reporting unit with a goodwill balance of $510.6 million. In determining
the fair value of the Company’s reporting unit, the Company uses a discounted cash flow analysis, which
requires significant assumptions about discount rates as well as short and long-term growth (or decline)
rates, in accordance with U.S. GAAP. The Company utilized an estimated discount rate of 10% as of
June 1, 2009, based on the Capital Asset Pricing Model, which considers the updated risk-free interest
rate, beta, market risk premium, and entity specific size premium. Short-term growth (or decline) rates are
based on management’s forecasted financial results which consider key business drivers such as specific
revenue growth initiatives, market share changes, growth (or decline) in non-residential and residential
construction markets, and general economic factors such as credit availability and interest rates. The
Company calculates the discounted cash flows using a 10-year period with a terminal value and
compares this calculation to the discounted cash flows generated over a 40-year period to ensure
reasonableness. The long-term growth rate used in determining terminal value is estimated at 3% for the
Company and is primarily based on the Company’s understanding of projections for expected long-term
growth in non-residential construction, the Company’s key market.
During fiscal 2009, the Company performed an evaluation of the fair value of goodwill. The analysis
included downward adjustments to the Company’s revenue forecasts and related short-term growth rates
compared to the prior year evaluation. The goodwill analysis did not result in an impairment charge as the
estimated fair value of the reporting unit continues to exceed the carrying value by such a significant
amount that any reasonably likely change in the assumptions used in the analysis, including revenue
growth rates and the discount rate, would not cause the carrying value to exceed the estimated fair value
for the reporting unit as determined under the step one goodwill impairment analysis.
Indefinite Lived Intangible Assets
The Company’s indefinite lived intangible assets consist of
five unamortized trade names with an
aggregate carrying value of approximately $96.0 million. Management utilizes significant assumptions to
estimate the fair value of these unamortized trade names using a fair value model based on discounted
future cash flows in accordance with U.S. GAAP. Future cash flows associated with each of the
Company’s unamortized trade names are calculated by applying a theoretical royalty rate a willing third
party would pay for use of the particular trade name to estimated future net sales. The present value of
the resulting after-tax cash flow is management’s current estimate of the fair value of the trade names.
This fair value model requires management to make several significant assumptions, including estimated
future net sales, the royalty rate, and the discount rate.
Future net sales and short-term growth (or decline) rates are estimated for each particular trade name
based on management’s forecasted financial results which consider key business drivers such as specific
revenue growth initiatives, market share changes, expected growth (or decline) in non-residential and
residential construction markets, and general economic factors such as credit availability and interest
rates. The long-term growth rate used in determining terminal value is estimated at 3% for the Company
and is primarily based on the Company’s understanding of projections for expected long-term growth in
34
in significantly different valuations.
non-residential construction, the Company’s key market. The theoretical royalty rate is estimated using a
factor of operating profit margins and management’s assumptions regarding the amount a willing third
party would pay to use the particular trade name. Differences between expected and actual results can
result
future operating results are unfavorable compared with
forecasted amounts, the Company may be required to reduce the theoretical royalty rate used in the fair
value model. A reduction in the theoretical royalty rate would result in lower expected future after-tax cash
flow in the valuation model. As with goodwill noted above, the Company utilized an estimated discount
rate of 10% as of June 1, 2009, based on the Capital Asset Pricing Model, which considers the updated
risk-free interest
these
assumptions are subject to change based on unforeseen factors by management due to the inherent
uncertainty of the global economic and political environment at large.
risk premium, and entity specific size premium. All of
rate, beta, market
If
During fiscal 2009, the Company performed an evaluation of the fair value of its five unamortized trade
names. The Company’s adjusted expected revenues are based on recent lighting market growth or
decline estimates for fiscal 2010 through 2014. The Company also included revenue growth estimates
based on current initiatives expected to help the Company improve performance. During fiscal 2009,
estimated theoretical royalty rates ranged between 1% and 4%. The indefinite lived intangible asset
analysis did not result in an impairment charge as the fair values exceeded the carrying values by a
significant amount except for the Mark Lighting trade name which has a fair value that exceeds its $8.6
million carrying value by approximately 28%. The estimated fair values of the indefinite lived intangible
assets, other than the Mark Lighting trade name, exceed the carrying values by such a significant amount
that any reasonably likely change in the assumptions used in the analyses, including revenue growth rates
and the discount rate, would not cause the carrying values to exceed the estimated fair values as
determined by the fair value analyses. The Company determined that any estimated potential impairment
related to the Mark Lighting trade name based on reasonably likely changes in the assumptions would not
be material to the Company’s financial results, trend of earnings, or financial position.
Self-Insurance
traditional
The Company self-insures, up to certain limits,
risks including workers’ compensation,
comprehensive general
liability, and auto liability. The Company’s self-insured retention for each claim
liability (including product liability claims), and
involving workers’ compensation, comprehensive general
auto liability is limited to $0.5 million per occurrence of such claims. A provision for claims under this self-
insured program, based on the Company’s estimate of the aggregate liability for claims incurred, is
revised and recorded annually. The estimate is derived from both internal and external sources including
but not limited to the Company’s independent actuary. Acuity Brands is also self-insured up to certain
limits for certain other insurable risks, primarily physical loss to property ($0.5 million per occurrence) and
business interruptions resulting from such loss lasting three days or more in duration. Insurance coverage
is maintained for catastrophic property and casualty exposures as well as those risks required to be
insured by law or contract. Acuity Brands is fully self-insured for certain other types of liabilities, including
environmental, product recall, and patent infringement. The actuarial estimates calculated are subject to
uncertainty from various sources, including, among others, changes in claim reporting patterns, claim
settlement patterns, judicial decisions, legislation, and economic conditions. Although Acuity Brands
believes that the actuarial estimates are reasonable, significant differences related to the items noted
above could materially affect the Company’s self-insurance obligations, future expense and cash flow.
The Company is also self-insured for the majority of its medical benefit plans with individual claims limited
to $300,000. The Company estimates its aggregate liability for claims incurred by applying a lag factor to
the
the Company’s historical claims and administrative cost experience. The appropriateness of
Company’s lag factor is evaluated and revised, if necessary, annually. Although management believes that
the current estimates are reasonable, significant differences related to claim reporting patterns, plan
designs, legislation, and general economic conditions could materially affect the Company’s medical
benefit plan liabilities, future expense and cash flow.
35
Share-Based Compensation Expense
relating to share-based payment
(“SFAS
On September 1, 2005, Acuity Brands adopted SFAS No. 123(R), Share Based Payment
No. 123(R)”), which requires compensation cost
transactions be
recognized in the financial statements based on the estimated fair value of the equity or liability instrument
issued. Acuity Brands adopted SFAS No. 123(R) using the modified prospective method and applied it to
the accounting for Acuity Brands’ stock options and restricted shares, and share units representing
certain deferrals into the Director Deferred Compensation Plan or the Supplemental Deferred Savings Plan
(both of which are discussed further in Note 7: Share Based Payments of Notes to Consolidated Financial
Statements). Under the modified prospective method, share-based expense recognized after adoption
includes: (a) share-based expense for all awards granted prior to, but not yet vested as of September 1,
2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, and (b) share-based expense for all awards granted
subsequent to September 1, 2005, based on the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123(R). Acuity Brands recorded $13.0 million, $12.0 million, and $11.1 million of
share-based expense in continuing operations for the years ended August 31, 2009, 2008, and 2007,
respectively. Amounts recorded for share-based expense in discontinued operations were $2.2 million for
the year ended August 31, 2007.
SFAS No. 123(R) does not specify a preference for a type of valuation model to be used when measuring
fair value of share-based payments, and Acuity Brands continues to employ the Black-Scholes model in
deriving the fair value estimates of such awards. SFAS No. 123(R) requires forfeitures of share-based
awards to be estimated at time of grant and revised in subsequent periods if actual forfeitures differ from
initial estimates. Therefore, expense related to share-based payments recognized in fiscal 2009, 2008 and
2007 has been reduced for estimated forfeitures. Acuity Brands’ assumptions used in the Black-Scholes
model remain otherwise unaffected by the implementation of this pronouncement. As of August 31, 2009,
there was $26.1 million of total unrecognized compensation cost related to unvested restricted stock.
That cost is expected to be recognized over a weighted-average period of 2.6 years. As of August 31,
2009, there was $2.9 million of total unrecognized compensation cost related to unvested options. That
cost is expected to be recognized over a weighted-average period of 1.7 years. Forfeitures are estimated
based on historical experience. If factors change causing different assumptions to be made in future
periods, compensation expense recorded pursuant to SFAS No. 123(R) may differ significantly from that
recorded in the current period. See Notes 3 and 7 of Notes to Consolidated Financial Statements for
more information regarding the assumptions used in estimating the fair value of stock options.
Product Warranty and Recall Costs
The Company records an allowance for the estimated amount of future warranty costs when the related
revenue is recognized, primarily based on historical experience of identified warranty claims. Excluding
costs related to recalls due to faulty components provided by third parties, historical warranty costs have
been within expectations. However, there can be no assurance that future warranty costs will not exceed
historical amounts. If actual future warranty costs exceed historical amounts, additional allowances may
be required, which could have a material adverse impact on the Company’s operating results and cash
flow in future periods.
Litigation
Acuity Brands recognizes expense for legal claims when payments associated with the claims become
probable and can be reasonably estimated. Due to the difficulty in estimating costs of resolving legal
claims, actual costs may be substantially higher or lower than the amounts reserved.
36
Environmental Matters
The Company recognizes expense for known environmental claims when payments associated with the
claims become probable and the costs can be reasonably estimated. The actual cost of resolving
environmental
issues may be higher or lower than that reserved primarily due to difficulty in estimating
such costs and potential changes in the status of government regulations. The Company is self-insured
for most environmental matters.
Cautionary Statement Regarding Forward-Looking Information
This filing contains forward-looking statements, within the meaning of
the federal securities laws.
Statements made herein that may be considered forward-looking include statements incorporating terms
such as “expects”, “believes”, “intends”, “anticipates” and similar terms that relate to future events,
performance, or results of the Company. In addition, the Company, or the executive officers on the
Company’s behalf, may from time to time make forward-looking statements in reports and other
documents the Company files with the SEC or in connection with oral statements made to the press,
investors or others. Forward-looking statements include, without limitation: (a) the Company’s
potential
projections regarding financial performance,
liquidity, capital structure, capital expenditures, and
dividends; (b) expectations about the impact of volatility and uncertainty in general economic conditions;
(c) external forecasts projecting unit volume decline; (d) expectations about the impact of volatility and
uncertainty in component and commodity costs and the Company’s ability to manage those costs as well
as the Company’s response with pricing of its products; (e) the Company’s ability to execute and realize
benefits from initiatives related to streamlining its operations, capitalizing on growth opportunities,
expanding in key markets, enhancing service to the customer, and investing in product innovation; and
(f) the Company’s ability to achieve its long-term financial goals and measures. You are cautioned not to
place undue reliance on any forward looking statements, which speak only as of the date of this annual
report. Except as required by law, the Company undertakes no obligation to publicly update or release
any revisions to these forward-looking statements to reflect any events or circumstances after the date of
this annual report or to reflect the occurrence of unanticipated events. The Company’s forward-looking
statements are subject to certain risks and uncertainties that could cause actual results to differ materially
from the historical experience of the Company and management’s present expectations or projections.
These risks and uncertainties include, but are not limited to, customer and supplier relationships and
prices; competition; ability to realize anticipated benefits from initiatives taken and timing of benefits;
market demand; litigation and other contingent liabilities; and economic, political, governmental, and
technological factors affecting the Company. In addition, additional risks that could cause the Company’s
actual results to differ materially from those expressed in the Company’s forward-looking statements are
discussed in Part I, “Item 1a. Risk Factors” of this Annual Report on Form 10-K, and are specifically
incorporated herein by reference.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
General. The Company is exposed to worldwide market risks that may impact the Consolidated Balance
Sheets, Consolidated Statements of Income, and Consolidated Statements of Cash Flows due primarily
to changing interest and foreign exchange rates as well as volatility in commodity prices. The following
discussion provides additional information regarding the market risks of Acuity Brands.
Interest Rates. Interest rate fluctuations expose the variable-rate debt of the Company to changes in
interest expense and cash flows. At August 31, 2009, the variable-rate debt of the Company was solely
comprised of the $4.0 million long-term industrial revenue bonds. A 10% increase in market interest rates
at August 31, 2009, would have resulted in a de minimus amount of additional annual after-tax interest
expense. A fluctuation in interest rates would not affect interest expense or cash flows related to the
Company’s fixed-rate debt which includes the $200 million publicly-traded fixed-rate notes and the
37
August 31, 2009 outstanding balance of $27.6 million on the three-year unsecured promissory note. A
10% increase in market interest rates at August 31, 2009, would have decreased the estimated fair value
of these debt obligations by approximately $0.9 million. See Note 5 of the Notes to Consolidated Financial
Statements, contained in this Form 10-K, for additional information regarding the Company’s debt.
Foreign Exchange Rates. The majority of net sales, expense, and capital purchases of the Company are
transacted in U.S. dollars. However, exposure with respect to foreign exchange rate fluctuation exists due
to the Company’s operations in Canada, where a portion of products sold are sourced from the United
States. A hypothetical decline in the Canadian dollar of 10% would negatively impact operating profit by
approximately $6.0 million. Also, a portion of the goods sold in the United States are manufactured in
Mexico. A hypothetical 10% increase in the Mexican peso would negatively impact operating profits by
approximately $5.4 million. The impact of these hypothetical currency fluctuations has been calculated in
isolation from any response the Company would undertake to address such exchange rate changes in the
Company’s foreign markets.
Commodity Prices. The Company utilizes a variety of raw materials and components in its production
process including petroleum-based products, steel, and aluminum.
the Company
purchased approximately 114,000 tons of steel and aluminum. The Company estimates that less than
10% of the raw materials purchased are petroleum-based and that approximately 3.2 million gallons of
diesel fuel was consumed in fiscal 2009. Failure to effectively manage future increases in the costs of
these items could adversely affect the ability to maintain or increase operating margins.
In fiscal 2009,
38
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
40
Management’s Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41-42
43
Consolidated Balance Sheets as of August 31, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the years ended August 31, 2009, 2008, and 2007 . . . . .
44
Consolidated Statements of Cash Flows for the years ended August 31, 2009, 2008, and
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years
ended August 31, 2009, 2008, and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46-47
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48-76
93
Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
39
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
ACUITY BRANDS, INC.
The management of Acuity Brands, Inc. is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and
15d-15(f) promulgated under the Securities Exchange Act of 1934. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
The Company’s management assessed the effectiveness of the Company’s internal control over financial
reporting as of August 31, 2009. In making this assessment, the Company’s management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in
Internal Control-Integrated Framework. Based on this assessment, management believes that, as of
August 31, 2009, the Company’s internal control over financial reporting is effective.
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 29, 2009 appears on
page 42 of this Form 10-K.
/s/ VERNON J. NAGEL
Vernon J. Nagel
Chairman, President, and
Chief Executive Officer
/s/ RICHARD K. REECE
Richard K. Reece
Executive Vice President and
Chief Financial Officer
40
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Acuity Brands, Inc.
We have audited the accompanying consolidated balance sheets of Acuity Brands, Inc. as of August 31,
2009 and 2008, and the related consolidated statements of
income, stockholders’ equity and
comprehensive income, and cash flows for each of the three years in the period ended August 31, 2009.
Our audits also included the financial statement schedule listed in the Index at Item 15(a). These
consolidated financial statements and schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements and schedule based on
our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Acuity Brands, Inc. at August 31, 2009 and 2008, and the consolidated
results of its operations and its cash flows for each of the three years in the period ended August 31,
2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Acuity Brands, Inc.’s internal control over financial reporting as of August 31, 2009,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of
report dated October 29, 2009
expressed an unqualified opinion thereon.
the Treadway Commission and our
/s/ Ernst & Young LLP
Atlanta, Georgia
October 29, 2009
41
Report of Independent Registered Public Accounting Firm on Internal Control
Over Financial Reporting
The Board of Directors and Stockholders
Acuity Brands, Inc.
We have audited Acuity Brands, Inc.’s internal control over financial reporting as of August 31, 2009,
based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of
Inc.’s
management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the company’s internal control over financial reporting based on our audit.
the Treadway Commission (the COSO criteria). Acuity Brands,
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
the company are being made only in accordance with
and that
authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
receipts and expenditures of
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or
the degree of
compliance with the policies or procedures may deteriorate.
that
In our opinion, Acuity Brands, Inc. maintained, in all material respects, effective internal control over
financial reporting as of August 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Acuity Brands, Inc. as of August 31, 2009 and
2008, and the related consolidated statements of
income, stockholders’ equity and comprehensive
income, and cash flows for each of the three years in the period ended August 31, 2009 of Acuity Brands,
Inc. and our report dated October 29, 2009 expressed an unqualified opinion thereon.
Atlanta, Georgia
October 29, 2009
/s/ Ernst & Young LLP
42
ACUITY BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less reserve for doubtful accounts of $1,888 at August 31, 2009 and $1,640
at August 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepayments and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, Plant, and Equipment, at cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
Total Property, Plant, and Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less — Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, Plant, and Equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets:
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefit plan intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 31
2009
2008
$
18,683
$ 297,096
227,371
140,797
16,710
19,339
422,900
7,273
111,810
334,725
453,808
307,979
145,829
510,563
184,826
2,626
—
23,859
721,874
268,971
145,725
18,251
26,104
756,147
9,501
126,450
334,641
470,592
309,086
161,506
342,306
129,319
2,226
1,078
16,109
491,038
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,290,603
$1,408,691
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued pension liabilities, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 209,535
162,299
35,309
1,235
67,711
$ 159,983
205,776
67,463
1,252
84,768
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued Pension Liabilities, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Self-Insurance Reserves, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
476,089
22,047
51,125
12,962
8,792
47,448
519,242
203,953
26,686
23,983
8,853
50,428
Commitments and Contingencies (see Note 8)
Stockholders’ Equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued . . . . . . . . . . . . . . . . . .
Common stock, $0.01 par value; 500,000,000 shares authorized; 49,851,316 issued and
42,433,143 outstanding at August 31, 2009; and 49,689,408 issued and 40,201,708
outstanding at August 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 7,418,173 shares at August 31, 2009 and 9,487,700 shares at August 31,
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
499
647,211
404,169
(57,423)
497
626,435
366,904
(22,819)
(322,316)
(395,471)
Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
672,140
575,546
Total Liabilities and Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,290,603
$1,408,691
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
43
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share data)
Years Ended August 31,
2008
2009
2007
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,657,404 $2,026,644 $1,964,781
1,220,466
Cost of Products Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,210,849
1,022,308
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, Distribution, and Administrative Expenses . . . . . . . . . . . .
Special Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Expense (Income):
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous expense (income), net . . . . . . . . . . . . . . . . . .
Total Other Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continuing Operations before Provision for Income
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . .
Income (Loss) from Discontinued Operations . . . . . . . . . . . . . . .
635,096
454,606
26,737
153,753
28,542
(2,112)
26,430
127,323
42,126
85,197
(288)
815,795
540,097
14,638
261,060
28,415
2,095
30,510
230,550
81,918
148,632
(377)
744,315
521,892
—
222,423
29,851
(1,614)
28,237
194,186
65,499
128,687
19,367
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
84,909 $ 148,255 $ 148,054
Earnings Per Share:
Basic Earnings per Share from Continuing Operations . . . . $
Basic Earnings (Loss) per Share from Discontinued
2.09 $
3.66 $
3.02
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.01)
(0.01)
Basic Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.08 $
3.65 $
0.45
3.48
Basic Weighted Average Number of Shares Outstanding . .
40,781
40,655
42,585
Diluted Earnings per Share from Continuing Operations . . . $
Diluted Earnings (Loss) per Share from Discontinued
2.05 $
3.57 $
2.93
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.01)
(0.01)
Diluted Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.04 $
3.56 $
0.44
3.37
Diluted Weighted Average Number of Shares
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,557
41,609
43,897
Dividends Declared per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.52 $
0.54 $
0.60
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
44
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended August 31,
2008
2009
2007
Cash Provided by (Used for) Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,909 $ 148,255 $148,054
19,367
Less: Income (Loss) from Discontinued Operations . . . . . . . . . . . . . . . . . . . .
(377)
(288)
Income from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by (used for)
85,197
148,632
128,687
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payments . . . . . . . . . . . . . . . . . .
Loss (gain) on the sale of property, plant, and equipment . . . . . . . . . . .
Impairments of property, plant, and equipment
. . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in assets and liabilities, net of effect of acquisitions and
divestitures:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepayments and other current assets . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,736
(381)
43
1,558
(388)
10,226
43,165
10,284
12,208
(44,416)
(62,528)
2,026
33,840
(5,022)
177
—
2,573
5,355
26,573
811
12,749
(4,626)
(10,903)
11,644
31,348
(15,360)
(845)
—
2,534
8,958
(2,352)
17,678
(5,120)
707
45,621
(3,151)
Net Cash Provided by Operating Activities . . . . . . . . . . . . . . .
92,730
221,803
208,705
Cash Provided by (Used for) Investing Activities:
. . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property, plant, and equipment
Proceeds from the sale of property, plant, and equipment . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(21,248)
183
(162,081)
(27,166)
198
(3,500)
(31,457)
1,618
(43,523)
Net Cash Used for Investing Activities . . . . . . . . . . . . . . . . . . .
(183,146)
(30,468)
(73,362)
Cash Provided by (Used for) Financing Activities:
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock purchase plan issuances . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from share-based payments . . . . . . . . . . . . . . . . . . . . . .
Dividend received from Zep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(162,395)
265
2,773
—
381
—
(21,634)
(8)
509
4,039
(155,650)
5,022
58,379
(22,466)
—
741
25,756
(44,963)
15,360
—
(26,359)
Net Cash Used for Financing Activities . . . . . . . . . . . . . . . . . .
(180,610)
(110,175)
(29,465)
Cash flows from Discontinued Operations:
Net Cash (Used for) Provided by Operating Activities . . . . . . .
Net Cash Used for Investing Activities . . . . . . . . . . . . . . . . . . .
Net Cash Used for Financing Activities . . . . . . . . . . . . . . . . . .
Net Cash Provided by (Used for) Discontinued Operations . . . . . . . . . . . . . . . . . .
(288)
—
—
(288)
Effect of Exchange Rate Changes on Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,099)
4,250
(410)
(2,333)
1,507
755
31,442
(5,121)
(647)
25,674
1,602
Net Change in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and Cash Equivalents at Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . . .
(278,413)
297,096
83,422
213,674
133,154
80,520
Cash and Cash Equivalents at End of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,683 $ 297,096 $213,674
Supplemental Cash Flow Information:
Income taxes paid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,529 $ 84,381 $ 51,356
34,304
Interest paid during the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,057
34,847
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
45
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(In thousands, except share and per-share data)
Accumulated Other
Comprehensive
Income (Loss) Items
Compre-
hensive
Income
Common
Stock
Paid-in
Capital
Retained
Earnings
Pension
Liability
Currency
Translation
Adjustment
Treasury
Stock
Total
Balance, August 31, 2006 . . . . . . . . . . . . . .
$481
$560,973 $192,155 $(21,848) $ 5,356 $(194,858) $ 542,259
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . $148,054
—
— 148,054
—
—
— 148,054
Other comprehensive income (loss):
Foreign currency translation
adjustment (net of tax expense of
$0) . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment
. . . . . . . . . . .
(net of tax of $6,415)
4,550
11,404
—
—
—
—
—
—
4,550
— 11,404
—
Other comprehensive income . . . . . .
15,954
Comprehensive income . . . . . . . . . . . $164,008
Impact of adopting SFAS 158 (net of
tax of $5,015) . . . . . . . . . . . . . . . . .
Amortization, issuance, and forfeitures of
restricted stock grants . . . . . . . . . . . . . .
Employee Stock Purchase Plan
issuances . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends of $0.60 per share paid
on common stock . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . .
Repurchases of common stock . . . . . . . .
Tax effect on stock options and restricted
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
8,884
741
—
—
— (26,359)
25,743
—
15,360
—
—
—
—
—
13
—
—
(8,975)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(49,707)
4,550
11,404
(8,975)
8,883
741
(26,359)
25,756
(49,707)
—
15,360
Balance, August 31, 2007 . . . . . . . . . . . . . .
$493
$611,701 $313,850 $(19,419) $ 9,906 $(244,565) $ 671,966
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . $148,255
—
— 148,255
—
—
— 148,255
Other comprehensive income (loss):
Foreign currency translation
adjustment (net of tax expense
of $0) . . . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment
. . . . . . . . . . .
(net of tax of $2,457)
5,012
—
(6,508) —
—
—
—
—
5,012
— (6,508)
—
Other comprehensive loss . . . . . . . . .
(1,496)
Comprehensive income . . . . . . . . . . . $146,759
Impact of spin-off of specialty
products . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of adopting FIN 48 . . . . . . . . . . . .
Amortization, issuance, and forfeitures of
restricted stock grants . . . . . . . . . . . . . .
Employee Stock Purchase Plan
issuances . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends of $0.54 per share paid
on common stock . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . .
Repurchases of common stock . . . . . . . .
Tax effect on stock options and restricted
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
2
—
—
2
—
—
— (71,553)
(1,182)
—
5,166
509
—
—
— (22,466)
4,037
—
5,022
—
—
—
—
—
—
—
—
—
—
—
(11,810)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(150,906)
5,012
(6,508)
(83,363)
(1,182)
5,168
509
(22,466)
4,039
(150,906)
—
5,022
Balance, August 31, 2008 . . . . . . . . . . . . . .
$497
$626,435 $366,904 $(25,927) $ 3,108 $(395,471) $ 575,546
46
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME — (Continued)
(In thousands, except share and per-share data)
Accumulated Other
Comprehensive
Income (Loss) Items
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 84,909
—
— 84,909
—
—
— 84,909
Compre-
hensive
Income
Common
Stock
Paid-in
Capital
Retained
Earnings
Pension
Liability
Currency
Translation
Adjustment
Treasury
Stock
Total
Other comprehensive income (loss):
Foreign currency translation
adjustment (net of tax expense
of $0) . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liability adjustment (net of tax
(18,474) —
of $9,169) . . . . . . . . . . . . . . . . . . . . .
(16,130) —
Other comprehensive loss . . . . . . . . . .
(34,604)
Comprehensive income . . . . . . . . . . . . $ 50,305
—
—
—
—
(18,474)
— (18,474)
— (16,130)
—
— (16,130)
SFAS 158 adjustment (net of tax of
$289)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common Stock reissued from Treasury
Shares for acquisition of businesses . . . .
Amortization, issuance, and forfeitures of
restricted stock grants . . . . . . . . . . . . . . .
Employee Stock Purchase Plan
issuances . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends of $0.52 per share paid on
common stock . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . .
Repurchases of common stock . . . . . . . . .
Tax effect on stock options and restricted
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
(454)
7,175
(25,556)
1
10,182
265
—
—
— (21,634)
2773
—
381
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(454)
73,155
54,774
— 10,183
—
265
— (21,634)
2,774
—
—
—
—
381
Balance, August 31, 2009 . . . . . . . . . . . . . . . .
$499
$647,211 $404,169 $(42,057) $(15,366) $(322,316) $672,140
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
47
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except share and per-share data and as indicated)
Note 1: Description of Business and Basis of Presentation
Acuity Brands, Inc. (“Acuity Brands”) is the parent company of Acuity Brands Lighting, Inc. formerly known
as Acuity Lighting Group, Inc. and other subsidiaries (collectively referred to herein as “the Company”).
The Company designs, produces, and distributes a broad array of indoor and outdoor lighting fixtures and
related products, including lighting controls, and services for commercial and institutional, industrial,
infrastructure, and residential applications for various markets throughout North America and select
international markets. The Company has one operating segment.
Acuity Brands completed the spin-off of its specialty products business (the “Spin-off”), Zep Inc. (“Zep”)
on October 31, 2007, by distributing all of the shares of Zep common stock, par value $.01 per share, to
the Company’s stockholders of record as of October 17, 2007. The Company’s stockholders received
one Zep share, together with an associated preferred stock purchase right, for every two shares of the
Company’s common stock they owned. Stockholders received cash in lieu of
fractional shares for
amounts less than one full Zep share.
As a result of the Spin-off, the Company’s financial statements have been prepared with the net assets,
results of operations, and cash flows of the specialty products business presented as discontinued
operations. All historical statements have been restated to conform to this presentation. Refer to
Note 2 — Discontinued Operations.
The Consolidated Financial Statements have been prepared by the Company in accordance with U.S.
generally accepted accounting principles (“U.S. GAAP”) and present the financial position, results of
operations, and cash flows of Acuity Brands and its wholly-owned subsidiaries.
Note 2: Discontinued Operations
As described in Note 1 — Description of Business and Basis of Presentation, the Company completed
the Spin-off of the specialty products business on October 31, 2007.
A summary of the operating results for the discontinued operations is as follows:
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $97,755 $565,887
Years Ended August 31,
2009
2008
2007
Income before Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 2,946 $ 33,701
14,334
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(377) $ 19,367
Net Income (Loss) from Discontinued Operations . . . . . . . . . . . . . . . . . $(288) $
3,323
288
The loss from discontinued operations for fiscal 2009 was $0.3 million, a decrease of $0.1 million from the
prior-year loss and relates to tax adjustments associated with pre-spin activities.
In conjunction with the Spin-off, Acuity Brands and Zep entered into various agreements that address the
allocation of assets and liabilities between them and that define their relationship after the separation,
including a distribution agreement, a tax disaffiliation agreement, an employee benefits agreement, and a
transition services agreement. Pursuant
to the distribution agreement, Zep drew on its financing
arrangements and paid a $62.5 million dividend to the Company, which was subject to adjustment based
on the actual cash flow performance of Zep prior to the Spin-off. A dividend adjustment of approximately
48
$4 million plus interest was disbursed to Zep by the Company during the third quarter of fiscal 2008
Information regarding guarantees and
the dividend received from Zep.
resulting in a reduction of
indemnities related to the Spin-off are included in Note 8 — Commitments and Contingencies.
Note 3: Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Acuity Brands and its wholly-owned
subsidiaries after elimination of significant intercompany transactions and accounts.
Revenue Recognition
the Company’s price to the customer
The Company records revenue when the following criteria are met: persuasive evidence of an
arrangement exists, delivery has occurred,
is fixed and
determinable, and collectability is reasonably assured. Delivery is not considered to have occurred until
the customer assumes the risks and rewards of ownership. Customers take delivery at the time of
shipment
for terms designated free on board shipping point. For sales designated free on board
destination, customers take delivery when the product is delivered to the customer’s delivery site.
Provisions for certain rebates, sales incentives, product returns, and discounts to customers are recorded
in the same period the related revenue is recorded. The Company also maintains one-time or on-going
marketing and trade-promotion programs with certain customers that require the Company to estimate
and accrue the expected costs of such programs. These arrangements include cooperative marketing
programs, merchandising of the Company’s products, and introductory marketing funds for new products
and other trade-promotion activities conducted by the customer. Costs associated with these programs
are reflected within the Company’s Consolidated Statements of Income in accordance with Emerging
Issues Task Force Issue No. 01-09: Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor’s Products), which in most instances requires such costs be recorded
as a reduction of revenue.
The Company provides for limited product return rights to certain distributors and customers primarily for
slow moving or damaged items subject to certain defined criteria. The Company monitors product returns
and records, at the time revenue is recognized, a provision for the estimated amount of future returns
based primarily on historical experience and specific notification of pending returns. Although historical
product returns generally have been within expectations, there can be no assurance that future product
returns will not exceed historical amounts. A significant increase in product returns could have a material
impact on the Company’s operating results in future periods.
For the Company’s turn key labor renovation and relight services, revenue is earned on installation
services and lighting fixtures. Revenue is recognized for the service and fixtures in the period that the
installation of the fixtures is completed.
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenue and expense during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents
Cash in excess of daily requirements is invested in time deposits and marketable securities and is included in
the accompanying balance sheets at fair value. Acuity Brands considers time deposits and marketable
securities with an original maturity of three months or less when purchased to be cash equivalents.
49
Accounts Receivable
The Company records accounts receivable at net realizable value. This value includes an allowance for
estimated uncollectible 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 economic status of customers, if known. Management believes that the
there can be no assurance that
allowance is sufficient
unanticipated future business conditions of customers will not have a negative impact on the Company’s
results of operations.
to cover uncollectible amounts; however,
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 Acuity Brands’ products, as well as their
dispersion across many different geographic areas. Receivables from The Home Depot were
approximately $30.2 million and $35.2 million at August 31, 2009 and 2008, respectively. No other single
customer accounted for more than 10% of consolidated receivables at August 31, 2009. Additionally, net
sales to The Home Depot accounted for approximately 11% of net sales of the Company in both fiscal
2009 and 2008 and 13% in fiscal 2007.
Reclassifications
Certain prior-period amounts have been reclassified to conform to current year presentation.
Inventories
Inventories include materials, direct labor, and related manufacturing overhead, are stated at the lower of
cost (on a first-in, first-out or average cost basis) or market, and consist of the following:
August 31,
2009
2008
Raw materials, components, and supplies . . . . . . . . . . . . . . . . . . . . . . .
Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 69,817
11,913
70,305
$ 66,919
12,508
76,470
Less: Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
152,035
(11,238)
155,897
(10,172)
$140,797
$145,725
Goodwill and Other Intangibles
Summarized information for the Company’s acquired intangible assets is as follows:
August 31, 2009
August 31, 2008
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Amortized intangible assets:
Patents and trademarks . . . . . . . . . . . . . . .
Distribution network and customer
relationships . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
$ 29,075
$(14,231)
$24,500
$(12,641)
89,683
4,625
(19,252)
(1,087)
56,400
4,026
(16,066)
(513)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
$123,383
$(34,570)
$84,926
$(29,220)
Unamortized trade names . . . . . . . . . . . . . . . . . .
$ 96,013
$73,613
50
Through multiple acquisitions, the Company acquired intangible assets consisting primarily of trademarks
associated with specific products with finite lives and distribution networks which are amortized over their
lives. Other acquired definite lived intangible assets consist primarily of patented
estimated useful
technology, non-compete agreements, and customer relationships.
Indefinite lived intangible assets
consist of trade names that are expected to generate cash flows indefinitely. Significant estimates and
assumptions were used to determine the fair value of these acquired intangible assets in accordance with
U.S. GAAP. The current year increases in the gross carrying amounts for the acquired intangible assets
were due to the Lighting Control and Design,
Inc. and related
Inc.
subsidiaries (“Sensor Switch”) (refer to Note 10 — Acquisitions). With regards to the LC&D acquisition, the
life of the intangible assets with finite lives acquired by the Company was 12.8
weighted average useful
years, which consisted of intangible assets related to distribution networks and customer relationships. In
the acquisition of Sensor Switch, the Company acquired intangible assets with finite lives related to
patented technology and distribution networks and customer relationships with weighted average useful
lives of 12.0 and 19.9 years, respectively. The total weighted average useful life for these intangible assets
acquired during the Sensor Switch acquisition was 18.9 years.
(“LC&D”) and Sensor Switch,
The Company recorded amortization expense of $5.4 million, $3.7 million and $3.2 million related to
intangible assets with finite lives during fiscal 2009, 2008, and 2007, respectively. Amortization expense is
expected to be approximately $6.4 million in both fiscal 2010 and 2011, $5.4 million in fiscal 2012, and
$4.6 million in both fiscal 2013 and 2014. The decrease in expected amortization expense in fiscal 2012 is
due to the completion of the amortization during fiscal 2011 of certain acquired patented technology
assets. The decrease in fiscal 2013 is due to the completion of the amortization during fiscal 2012 of
incremental
certain acquired customer relationships.
amortization expense for the December 31, 2008 acquisition of substantially all the assets and the
assumption of certain liabilities of LC&D and the April 20, 2009 acquisition of Sensor Switch.
Included in these amounts are the impact of
The changes in the carrying amount of goodwill during the year are summarized as follows:
Goodwill:
Balance as of August 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of August 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$342,306
169,662
(1,405)
$510,563
The Company tests indefinite lived intangible assets and goodwill for impairment on an annual basis or
more frequently as facts and circumstances change, as required by Statement of Financial Accounting
Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets. The goodwill impairment test has two
steps. The first step identifies potential impairments by comparing the fair value of a reporting unit with its
carrying value, including goodwill. The fair values are 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 the carrying value, goodwill
is not impaired and the second step is not necessary. If the carrying value of a reporting unit exceeds the
fair value, the second step calculates the possible impairment loss by comparing the implied fair value of
goodwill with the carrying value. If the implied fair value of the goodwill is less than the carrying value, an
impairment charge is recorded. The impairment test for unamortized trade names consists of comparing
the fair value of the asset with its carrying value. The Company estimates the fair value of these
unamortized trade names using a fair value model based on discounted future cash flows. If the carrying
amount exceeds the measured fair value, an impairment loss would be recorded in the amount of the
excess.
In accordance with U.S. GAAP, significant assumptions were used in the determination of
estimated fair value for both goodwill and indefinite lived intangible assets. Neither of the analyses resulted
in an impairment charge during fiscal 2009, 2008, or 2007.
51
Other Long-Term Assets
Other long-term assets consist of the following:
Long-term investments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in nonconsolidating affiliates(2) . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 31,
2009
2008
$ 3,134
3,989
8,911
7,825
$ 5,078
3,989
—
7,042
$23,859
$16,109
(1)
(2)
Long-term investments — The Company maintains certain investments that generate returns that offset changes in certain
liabilities related to deferred compensation arrangements. The investments primarily consist of marketable equity securities and
fixed income securities, are stated at fair value, and are classified as trading in accordance with SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Realized and unrealized gains and losses are included in the Consolidated
Statements of Income and generally offset the change in the deferred compensation liability. The decrease since August 31,
2008 was due primarily to payments made to certain participants in these deferred compensation arrangements and a decrease
in the market value of the assets.
Investments in nonconsolidating affiliates — The Company possesses an equity investment in an unconsolidated affiliate. This
strategic investment represents less than a 20% ownership interest in the privately-held affiliate, and the Company does not
maintain power over or control of the entity. The Company accounts for this investment using the cost method. Hence, the
historical cost of the acquired shares represents the carrying value of the investment, and, due to several
factors, it is
impracticable to precisely determine the fair value of the investment, although the Company estimates that the fair value
approximates the carrying value at August 31, 2009.
As of August 31, 2009, the Company reported assets held for sale of $9.6 million, which were comprised
of $5.6 million in short-term assets and $4.0 million in long-term assets. The assets represent three
properties that the Company intends to sell to third parties within one year, or, in certain circumstances,
beyond one year as allowed by SFAS 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, as the facilities have been deemed unnecessary to current operations.
Other Long-Term Liabilities
Other long-term liabilities consist of the following:
Deferred compensation and postretirement benefits other than
pensions(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Postemployment benefit obligation(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FIN 48 Liability, including interest(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 31,
2009
2008
$33,680
387
7,095
2,820
3,466
$36,209
387
7,696
3,324
2,812
$47,448
$50,428
(1) Deferred compensation and long-term postretirement benefits other than pensions — The Company maintains several
non-qualified retirement plans for the benefit of eligible employees, primarily deferred compensation plans. The deferred
compensation plans provide for elective deferrals of an eligible employee’s compensation and, in some cases, matching
contributions by the Company. In addition, one plan provides for an automatic contribution by the Company of 3% of an eligible
employee’s compensation. The Company maintains certain long-term investments that offset a portion of the deferred
compensation liability. The Company maintains life insurance policies on certain current and former officers and other key
employees as a means of satisfying a portion of these obligations.
Postemployment benefit obligation — SFAS No. 112, Employers’ Accounting for Postemployment Benefits, requires the accrual
of the estimated cost of benefits provided by an employer to former or inactive employees after employment but before
retirement. Acuity Brands’ accrual relates primarily to the liability for life insurance coverage for certain eligible employees.
The Company adopted FIN No. 48 — Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement
No. 109 effective September 1, 2007. See Note 11 to the Notes to Consolidated Financial Statements for more information.
(3)
(2)
52
Shipping and Handling Fees and Costs
The Company includes shipping and handling fees billed to customers in Net Sales. Shipping and
handling costs associated with inbound freight and freight between manufacturing facilities and
distribution centers are generally recorded in Cost of Products Sold. Other shipping and handling costs
are included in Selling, Distribution, and Administrative Expenses and totaled $86.8 million, $84.6 million,
and $83.3 million in fiscal 2009, 2008, and 2007, respectively.
Share-Based Compensation
The Company accounts for share-based compensation under Statement of Financial Accounting
Standards (“SFAS”) No. 123(R), Share-Based Payment. SFAS No. 123(R) requires compensation cost
relating to share-based payment transactions to be recognized in financial statements and that this cost
be measured based on the estimated fair value of
the equity or liability instrument issued. SFAS
No. 123(R) also requires that forfeitures be estimated over the vesting period of the instrument. Effective
September 1, 2005, the Company adopted SFAS No. 123(R) using the modified prospective method and
applied it to the accounting for the Company’s stock options and restricted shares, and share units
representing certain deferrals into the Director Deferred Compensation Plan or the Supplemental Deferred
Savings Plan (see Note 7 — Share Based Payments of Notes to Consolidated Financial Statements for
the modified prospective method, share-based expense
further discussion of
recognized after adoption includes: (a) share-based expense for all awards granted prior to, but not yet
vested as of September 1, 2005, based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, and (b) share-based
expense for all awards granted subsequent to September 1, 2005, based on the grant-date fair value
estimated in accordance with the provisions of SFAS No. 123(R).
these plans). Under
Share-based expense includes expense related to restricted stock and options issued, as well as share
units deferred into either the Director Deferred Compensation Plan or the Supplemental Deferred Savings
Plan. The Company recorded $13.0 million, $12.0 million, and $11.1 million of share-based expense in
continuing operations for the years ending August 31, 2009, 2008, and 2007, respectively. Amounts
recorded for share-based expense in discontinued operations were $2.2 million for the fiscal year ended
income tax benefit recognized in continuing operations for share-based
August 31, 2007. The total
compensation arrangements was $4.3 million, $4.7 million, and $3.9 million for
the years ended
August 31, 2009, 2008, and 2007, respectively. The total income tax benefit recognized for share-based
compensation arrangements in discontinued operations was less than $1 million in fiscal 2007. The
Company did not capitalize any expense related to share-based payments and has recorded share-based
expense in Selling, Distribution, and Administrative Expenses. The Company accounts for any awards with
graded vesting on a straight-line basis.
Excess tax benefits of $0.4 million, $5.0 million, and $15.4 million related to share-based compensation
were included in financing activities in the Company’s Statements of Cash Flows for the years ended
August 31, 2009, 2008, and 2007, respectively.
See Note 7 — Share-Based Payments of Notes to Consolidated Financial Statements for more
information.
Depreciation
For financial reporting purposes, depreciation is determined principally on a straight-line basis using
estimated useful lives of plant and equipment (10 to 40 years for buildings and related improvements and
5 to 15 years for machinery and equipment) while accelerated depreciation methods are used for income
tax purposes. Leasehold improvements are amortized over the life of the lease or the useful
life of the
improvement, whichever is shorter. Depreciation expense amounted to $29.6 million, $29.7 million, and
$28.1 million during the fiscal 2009, 2008, and 2007, respectively.
53
Research and Development
Research and development (“R&D”) costs, which are included in Selling, Distribution, and Administrative
Expenses in the Company’s Consolidated Statements of Income, are expensed as incurred. Research
and development expenses amounted to $20.8 million, $30.3 million, and $31.3 million during the fiscal
2009, 2008, and 2007, respectively. The decrease in the fiscal 2009 expense was due primarily to lower
incentive compensation associated with R&D associates.
Advertising
Advertising costs are expensed as incurred and are included within Selling, Distribution, and
Administrative Expenses in the Company’s Consolidated Statements of Income. These costs totaled $8.7
million during fiscal 2009 and $7.6 million during fiscal 2008 and 2007, respectively.
Service Arrangements with Customers
The Company maintains a service program with one of its retail customers that affords the Company
certain in-store benefits,
including lighting display maintenance. Costs associated with this program
totaled $4.8 million, $5.1 million, and $5.4 million in fiscal 2009, 2008, and 2007, respectively. These
costs have been included within the Selling, Distribution, and Administrative Expenses line item of the
Company’s Consolidated Statements of Income in accordance with EITF Issue 01-09: Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).
Foreign Currency Translation
The functional currency for the foreign operations of the Company is the local currency. The translation of
foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange rates in effect
at the balance sheet dates and for revenue and expense accounts using a weighted average exchange
rate each month during the year. The gains or losses resulting from the translation are included in
Comprehensive Income in the Consolidated Statements of Stockholders’ Equity and Comprehensive
Income and are excluded from net income.
Gains or losses relating to foreign currency items are included in Miscellaneous expense (income), net in
the Consolidated Statements of Income and consisted of expense of $2.1 million, income of $2.3 million,
and expense of $0.2 million in fiscal 2009, 2008, and 2007, respectively.
Interest Expense, Net
Interest expense, net, is comprised primarily of interest expense on long-term debt, revolving credit facility
borrowings, short-term borrowings, and loans collateralized by assets related to the Acuity Brands
company-owned life insurance program, partially offset by interest income on cash and cash equivalents.
The following table summarizes the components of interest expense, net:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$29,556
(1,014)
$34,749
(6,334)
$34,303
(4,452)
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$28,542
$28,415
$29,851
Years Ended August 31,
2009
2008
2007
Interest expense, net related to discontinued operations was zero for fiscal 2009 and $0.3 million for both
fiscal 2008 and 2007, respectively.
54
Miscellaneous Expense (Income), Net
Miscellaneous expense (income), net, is composed primarily of gains or losses on foreign currency items
and other non-operating items.
Accounting Standards Yet to Be Adopted
In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised
2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R changes accounting for business
combinations through a requirement to recognize 100% of the fair values of assets acquired, liabilities
assumed, and noncontrolling interests in acquisitions of less than a 100% controlling interest when the
acquisition constitutes a change in control of the acquired entity. Other requirements include capitalization
of acquired in-process research and development assets, expensing, as incurred, acquisition-related
transaction costs and capitalizing restructuring charges as part of the acquisition only if requirements of
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, are met. SFAS No. 141R
is effective for business combination transactions for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December 15, 2008 and is therefore
effective for the Company beginning in fiscal 2010. The implementation of this guidance will affect the
Company’s results of operations and financial position after its effective date only to the extent it
completes applicable business combinations subsequent to the effective date, and therefore, the impact
can not be determined at this time.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 establishes the economic
entity concept of consolidated financial statements, stating that holders of a residual economic interest in
an entity have an equity interest in the entity, even if the residual interest is related to only a portion of the
to be presented as a separate
entity. Therefore, SFAS No. 160 requires a noncontrolling interest
component of equity. SFAS No. 160 also states that once control
is obtained, a change in control that
does not result in a loss of control should be accounted for as an equity transaction. The statement
requires that a change resulting in a loss of control and deconsolidation is a significant event triggering
gain or loss recognition and the establishment of a new fair value basis in any remaining ownership
interests. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and is
therefore effective for the Company beginning in fiscal 2010. The Company does not expect the adoption
of SFAS No. 160 to have a material impact on its results of operations and financial position.
In June 2008, FASB issued FASB Staff Position (“FSP”) No. EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF
03-6-1”). FSP EITF 03-6-1 was issued to clarify that unvested share-based payment awards with a right
to receive nonforfeitable dividends are participating securities. FSP EITF 03-6-1 provides guidance on how
to allocate earnings to participating securities and compute basic earnings per share (“EPS”) using the
two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years, and is therefore effective for the Company beginning the first
quarter of
the Company’s EPS
calculation. For example, the Company’s diluted EPS for the years ended August 31, 2009, 2008, and
2007, under this guidance would be $2.00, $3.51, and $2.89, respectively, as compared to $2.04, $3.57,
and $2.93 reported for these periods.
fiscal 2010. The implementation of
this guidance will
impact
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards CodificationTM and the
Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162
(“SFAS No. 168”), which confirms that as of July 1, 2009, the FASB Accounting Standards Codification TM
(“Codification”)
is the single official source of authoritative, nongovernmental U.S. GAAP. All existing
accounting standard documents are superseded, and all other accounting literature not included in the
55
Codification is considered nonauthoritative. SFAS No. 168 is effective for interim and annual periods
ending after September 15, 2009 and is therefore effective for the Company at the conclusion of the first
quarter of 2010. While the Codification is not intended to change U.S. GAAP and, thus, not expected to
have an effect on the Company’s financial condition, results of operations, or cash flows upon adoption,
the Company is reviewing disclosures due to changes in references to U.S. GAAP literature.
Accounting Standards Adopted in Fiscal 2009
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”), which establishes:
the period after the balance sheet date during which an entity should evaluate events or transactions for
potential recognition or disclosure in the financial statements; the circumstances under which an entity
should recognize such events or transactions in its financial statements; and disclosures regarding such
events or transactions and the date through which an entity has evaluated subsequent events.
The provisions of SFAS No. 165 were effective for financial statements issued for interim and annual
periods ending after June 15, 2009 and were adopted by the Company on August 31, 2009. The
Company determined, however, that SFAS No. 165 did not have an effect on the Company’s financial
condition, results of operations, or cash flows upon adoption, as its guidance is substantially consistent
with that previously applied by the Company.
In April 2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board Opinion (“APB”)
No. 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS No. 107-1 and APB
28-1”), which requires that the fair value of financial instruments be disclosed in an entity’s interim financial
statements, as well as in annual financial statements. The provisions of FSP FAS No. 107-1 and APB 28-1
also require that fair value information be presented with the related carrying value and that the method
and significant assumptions used to estimate fair value, as well as changes in method and significant
assumptions, be disclosed.
The provisions of FSP FAS No. 107-1 and APB 28-1 were effective for interim periods ending after
June 15, 2009 and were adopted by the Company on August 31, 2009. As the pronouncement only
pertains to additional disclosures, the adoption had no effect on the Company’s financial condition, results
of operations, or cash flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits companies, at their election, to measure
specified financial
value on a
instruments and warranty and insurance contracts at
contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The
election, called the “fair value option,” will enable some companies to reduce the volatility in reported
earnings caused by measuring related assets and liabilities differently, and it is easier than using the
complex hedge-accounting requirements in SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, to achieve similar results. Subsequent changes in fair value for designated items will be
required to be reported in earnings in the current period. SFAS No. 159 was effective for financial
statements issued for fiscal years beginning after November 15, 2007 and was therefore effective for the
Company beginning in fiscal 2009. The Company adopted SFAS No. 159 on September 1, 2008 and
elected not to apply the fair value option, and therefore, the adoption did not have an impact on the
Company’s results of operations or financial position.
fair
In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS
No. 158”). SFAS No. 158 requires an employer to: (a) recognize in its statement of financial position the
funded status of a benefit plan; (b) measure defined benefit plan assets and obligations as of the end of
recognize as a component of other
the employer’s fiscal year
(with limited exceptions); and (c)
56
comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise but are
not recognized as components of net periodic benefit costs pursuant to prior existing guidance. The
provisions governing recognition of the funded status of a defined benefit plan and related disclosures
became effective and were adopted by the Company at the end of fiscal 2007. The requirement to
measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of
financial position is effective for fiscal years ending after December 15, 2008, and was therefore effective
for the Company in fiscal 2009. The change in measurement date to August 31 resulted in a reduction to
retained earnings of approximately $0.5 million, net of tax.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS
No. 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair
value, and expands disclosure requirements pertaining to fair value measurements. The provisions of
SFAS No. 157 related to financial assets and liabilities as well as other assets and liabilities carried at fair
value on a recurring basis were effective for the Company on September 1, 2008. The adoption of these
provisions of SFAS No. 157 did not have an impact on the Company’s consolidated financial statements.
The provisions of SFAS No. 157 related to other nonfinancial assets and liabilities will be effective for the
Company on September 1, 2009. The Company does not expect the adoption of these provisions to
have a material impact on its results of operations and financial position.
Note 4: Pension and Profit Sharing Plans
Acuity Brands has several pension plans, both qualified and non-qualified, covering certain hourly and
salaried employees. Benefits paid under these plans are based generally on employees’ years of service
and/or compensation during the final years of employment. Acuity Brands makes annual contributions to
the plans to the extent indicated by actuarial valuations and required by ERISA or foreign regulatory
requirements. Plan assets are invested primarily in equity and fixed income securities.
Effective August 31, 2007, the Company adopted the recognition and disclosure provisions of SFAS
No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”).
Effective for fiscal 2009, the Company adopted the measurement date provisions of SFAS No. 158,
Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of
FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”). Prior to 2009, the Company measured
the funded status of its plans as of May 31 of each year. The requirement to measure plan assets and
benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is
effective for fiscal years ending after December 15, 2008, and is therefore effective for the Company in
fiscal 2009. The change in measurement date to August 31 resulted in a reduction to retained earnings of
approximately $0.5 million, net of tax.
57
The following tables reflect the status of Acuity Brands’ domestic (U.S. based) and international pension
plans at August 31, 2009 and 2008. Activity related to the three-month gap period created by the change
in valuation date from May 31 to August 31 is separately identified. The values of the below listed amounts
were measured as of August 31, 2009 and August 31, 2008, respectively:
Domestic Plans
August 31,
International Plans
August 31,
2009
2008
2009
2008
Change in Benefit Obligation:
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . $110,501 $110,788 $ 35,867 $ 37,551
Adjustments due to adoption of FAS 158 measurement date
provisions:
Service cost during gap period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost during gap period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid during gap period . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain)
Curtailment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
620
1,662
(1,768)
2,480
6,649
3,062
—
—
(6,859)
409
—
N/A
N/A
N/A
2,812
6,451
(2,977)
—
—
(6,573)
—
—
13
459
(121)
52
1,850
(1,093)
(11)
(141)
(819)
—
(3,850)
N/A
N/A
N/A
70
1,980
663
—
—
(656)
—
(3,741)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $116,756 $110,501 $ 32,206 $ 35,867
Change in Plan Assets:
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . $ 92,875 $ 96,190 $ 26,017 $ 29,734
Adjustments due to adoption of FAS 158 measurement date
provisions:
Employer contributions during gap period . . . . . . . . . . . . . . . . . . .
Benefits paid during gap period . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
607
(1,768)
(11,576)
2,008
—
(6,859)
—
N/A
N/A
237
3,021
—
(6,573)
—
268
(121)
(2.369)
1,197
(141)
(819)
(2,719)
N/A
N/A
(1,618)
1,370
—
(656)
(2,813)
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . $ 75,287 $ 92,875 $ 21,313 $ 26,017
Funded status at end of year:
Funded Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (41,469) $ (17,625) $(10,893) $(10,110)
268
Employer contributions from measurement date to fiscal year end . . . .
607
N/A
N/A
Net amount recognized in Consolidated Balance Sheets . . . . . . . $ (41,469) $ (17,018) $(10,893) $ (9,842)
Amounts Recognized in the Consolidated Balance Sheets
Consist of:
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $ 1,078 $ — $ —
(1,199)
(40,270)
(1,176)
(16,920)
(37)
(10,856)
(76)
(9,766)
Net amount recognized in Consolidated Balance Sheets . . . . . . . $ (41,469) $ (17,018) $(10,893) $ (9,842)
Accumulated Benefit Obligation . . . . . . . . . . . . . . . . . . . . . . . . $115,582 $108,541 $ 29,794 $ 32,857
Amounts in accumulated other comprehensive income:
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(785) $
(50,525)
(412) $ — $ —
(13,771)
(12,340)
(28,039)
Amounts in Accumulated other comprehensive income . . . . . . . . $ (51,310) $ (28,451) $(13,771) $(12,340)
Estimated amounts that will be amortized from accumulated
comprehensive income over the next fiscal year:
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92 $
2,725
58
29 $ — $ —
1,010
609
1,154
The fair value of plan assets associated with certain of the Company’s domestic defined benefit plans did
not exceed those plans’ projected and accumulated benefit obligations in fiscal 2009 and 2008. The
projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for domestic
defined benefit pension plans with both projected and accumulated benefit obligations in excess of plan
assets were, as of August 31, 2009, $116.8 million, $115.6 million, and $75.3 million, respectively. As of
August 31, 2008, the projected benefit obligation, accumulated benefit obligation, and fair value of plan
assets for domestic defined benefit pension plans with both projected and accumulated benefit
obligations in excess of plan assets were $90.1 million, $88.2 million, and $71.4 million, respectively. The
projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for international
defined benefit pension plans with both projected and accumulated benefit obligations in excess of plan
assets were $32.2 million, $29.8 million, and $21.3 million, respectively, as of August 31, 2009, and $35.9
million, $32.9 million, and $26.0 million, respectively, as of August 31, 2008.
Components of net periodic pension cost for the fiscal years ended August 31, 2009, 2008, and 2007
included the following:
Domestic Plans
International Plans
2009
2008
2007
2009
2008
2007
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,480 $ 2,812 $ 2,420 $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . .
. . . . . . . . . .
Amortization of prior service cost
Amortization of transitional asset . . . . . . . . . . .
Recognized actuarial loss . . . . . . . . . . . . . . . .
6,275
(7,099)
26
—
1,051
6,451
(8,058)
24
—
884
6,649
(7,432)
29
—
1,154
1,850
(1,772)
—
—
552
1,980
(2,292)
—
—
373
52 $
70 $
71
1,804
(1,777)
—
—
599
Net periodic pension cost . . . . . . . . . . . . . . . . $ 2,880 $ 2,113 $ 2,673 $ 682 $ 131 $ 697
Weighted average assumptions used in computing the benefit obligation are as follows:
Domestic Plans
International Plans
2009
2008
2009
2008
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.0% 6.3% 5.6% 5.7%
5.5% 5.5% 4.5% 4.7%
Weighted average assumptions used in computing net periodic benefit cost are as follows:
Domestic Plans
International Plans
2009
2008
2007
2009
2008
2007
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . .
6.3% 6.0% 6.3% 5.7% 5.4% 5.0%
8.3% 8.5% 8.5% 7.4% 7.4% 7.3%
5.5% 5.5% 5.5% 4.7% 4.1% 3.8%
It is the Company’s 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. The Company estimates
that each 100 basis point increase in the discount rate would result in reduced net periodic pension cost
of approximately $0.8 million for domestic plans. The Company’s discount rate used in computing the net
periodic benefit cost for its domestic plans increased by 25 basis points in 2009, which contributed to the
change in net periodic pension cost associated with those plans. The decrease in service costs
associated with the higher discount rate was more than offset by a decrease in expected return on assets
due primarily to lower asset balances. The discount rate used in computing the net periodic pension cost
for the Company’s international plans increased 30 basis points in 2009 over the prior year, resulting in
59
lower service and interest costs. This decrease was more than offset by a lower expected return on plan
assets due primarily to lower asset balances, resulting in higher overall periodic benefit costs. The
expected return on plan assets is derived from a periodic study of long-term historical rates of return on
the various asset classes included in the Company’s targeted pension plan asset allocation. The
Company estimates that each 100 basis point reduction in the expected return on plan assets would
result in additional net periodic pension cost of $0.8 million and $0.2 million for domestic plans and
international plans, respectively. The rate of compensation increase is also evaluated and is adjusted by
the Company, if necessary, annually.
The Company’s investment objective for U.S. plan assets is to earn a rate of return sufficient to match or
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 Company conducts a periodic
strategic asset allocation study to form a basis for the allocation of pension assets between various asset
categories. Specific allocation percentages are assigned to each asset category with minimum and
maximum ranges established for each. The assets are then managed within these ranges. During 2009,
the U.S. targeted asset allocation was 55% equity securities, 40% fixed income securities, and 5% real
estate securities. The Company’s investment objective for the international plan assets is also to add value
by matching or exceeding the long-term growth of the Plans’ liabilities. During 2009, the international
asset target allocation was 86% equity securities, 12% fixed income securities, and 2% real estate
securities.
Acuity Brands’ pension plan asset allocation at August 31, 2009 and 2008 by asset category is as follows:
% of Plan Assets
Domestic Plans
International Plans
2009
2008
2009
2008
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52.8% 53.6% 85.8% 84.0%
43.0% 40.6% 12.6% 14.1%
1.9%
4.2%
5.8%
1.6%
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0% 100.0% 100.0% 100.0%
The Company expects to contribute approximately $3.1 million and $1.1 million to its domestic and
international defined benefit plans, respectively, during 2010. These amounts are based on the total
contributions required during 2010 to satisfy current legal minimum funding requirements for qualified
plans and estimated benefit payments for non-qualified plans.
Benefit payments are made primarily from funded benefit plan trusts. Benefit payments are expected to
be paid as follows for the years ending August 31:
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015-2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,279
6,398
6,548
6,737
6,985
40,073
$ 501
458
524
633
744
4,821
Domestic
International
Acuity Brands also has defined contribution plans to which both employees and the Company make
contributions. The cost to Acuity Brands for these plans was $4.3 million in 2009, $5.5 million in 2008,
and $5.5 million in 2007. Employer matching amounts are allocated in accordance with the participants’
the domestic defined
investment elections for elective deferrals. At August 31, 2009, assets of
60
contribution plans included shares of the Company’s common stock with a market value of approximately
$5.1 million, which represented approximately 2.8% of the total fair market value of the assets in the
Company’s domestic defined contribution plans.
Note 5: Debt and Lines of Credit
Debt
The Company’s debt at August 31, 2009 and 2008 consisted of the following:
August 31,
2009
2008
6% public notes due February 2009 with an effective interest rate of 6.04%, net of
unamortized discount of $17 in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $159,983
6% unsecured promissory note with quarterly principal payments; matures April
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,605
—
8.375% public notes due August 2010 with an effective interest rate of 8.398%,
net of unamortized discount of $23 in 2009 and $47 in 2008 . . . . . . . . . . . . . . .
Industrial revenue bond due 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less — Amounts payable within one year included in current liabilities . . . . . . . . . .
199,977
4,000
231,582
209,535
199,953
4,000
363,936
159,983
$ 22,047 $203,953
Future annual principal payments of long-term debt are as follows for fiscal years ending August 31:
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$209,535
10,144
7,903
—
—
—
4,000
$231,582
Acuity Brands and its principal operating subsidiary, Acuity Brands Lighting, Inc. (“ABL”) are the obligors
of the $200 million public notes. Because the public notes trade infrequently, it is difficult to obtain an
accurate fair market value of the notes. The fair value of the $200 million public notes is estimated to
approximate $207.8 million at August 31, 2009, based on the discounted future cash flows using rates
currently available for debt of similar terms and maturity. As of August 31, 2009, the public notes were
guaranteed by the subsidiary, Acuity Brands Lighting, Inc. The guarantee of the subsidiary was full and
unconditional and joint and several. Acuity Brands has no independent assets or operations (as defined by
Regulation S-X 3-10(h)(5)), and each subsidiary of Acuity Brands, other than Acuity Brands Lighting, Inc.,
is “minor” (as defined by Regulation S-X 3-10(h)(6)). Furthermore, there are no significant restrictions on
the ability of Acuity Brands or any guarantor to obtain funds from its subsidiaries by dividend or loan.
On April 20, 2009, ABL issued a three-year $30 million 6% unsecured promissory note to the sole
shareholder of Sensor Switch, who continued as an employee of the Company upon completion of the
acquisition, as partial consideration for the acquisition of Sensor Switch. Scheduled quarterly payments on
the note began on July 1, 2009 with the last payment due April 1, 2012. The lender has certain rights to
61
accelerate the promissory note should the Company refinance the $200 million public notes. The fair value
of the $27.6 million outstanding balance, which represents the carrying value of the promissory note, is
estimated to approximate $28.0 million at August 31, 2009, and is based on the discounted future cash
flows using rates currently available for debt of similar terms and maturity.
The $4.0 million industrial revenue bond matures in 2021. The industrial revenue bond is a tax-exempt
variable-rate instrument that resets on a weekly basis, and, therefore, the face amount of the bond
approximates the fair value amount. The interest rates on the $4.0 million bond were approximately 0.5%
and 1.9% at August 31, 2009 and 2008, respectively.
Lines of Credit
On October 19, 2007, the Company executed a $250 million revolving credit facility (the “Revolving Credit
Facility”). The Revolving Credit Facility matures in October 2012 and contains financial covenants including
a minimum interest coverage ratio and a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness
to EBITDA (earnings before interest, taxes, depreciation and amortization expense), as such terms are
defined in the Revolving Credit Facility agreement. These ratios are computed at the end of each fiscal
quarter for the most recent 12-month period. The Revolving Credit Facility allows for a Maximum Leverage
Ratio of 3.50, subject to certain conditions defined in the financing agreement. The Company was in
compliance with all financial covenants and had no outstanding borrowings at August 31, 2009 under the
Revolving Credit Facility. At August 31, 2009, the Company had additional borrowing capacity under the
Revolving Credit Facility of $242.7 million under the most restrictive covenant in effect at the time, which
represents the full amount of the Revolving Credit Facility less outstanding letters of credit of $7.3 million
discussed below.
The Revolving Credit Facility bears interest at the option of the borrower based upon either (1) the higher
of the JPMorganChase Bank prime rate and the federal funds effective rate plus 0.50%, or (2) the London
Inter Bank Offered Rate (“LIBOR”) plus the Applicable Margin (a margin as determined by Acuity Brands’
leverage ratio). Based upon Acuity Brands’ leverage ratio, as defined in the Revolving Credit Facility
agreement, the Applicable Margin was 0.41% as of both August 31, 2009 and 2008. During both fiscal
2009 and 2008, commitment fees were computed at a rate of approximately 0.1%, and commitment fees
paid during each of those years were approximately $0.2 million.
At August 31, 2009, the Company had outstanding letters of credit totaling $11.5 million, primarily for the
purpose of securing collateral requirements under the casualty insurance programs for Acuity Brands and
for providing credit support for the Company’s industrial revenue bond. At August 31, 2009, a total of
$7.3 million of the letters of credit were issued under the Revolving Credit Facility, thereby reducing the
total availability under the facility by such amount.
None of the Company’s existing debt instruments, neither short-term nor long-term, include provisions
that would require an acceleration of repayments based solely on changes in the Company’s credit
ratings.
Note 6: Common Stock and Related Matters
Stockholder Protection Rights Agreement
The Company’s Board of Directors has adopted a Stockholder Protection Rights Agreement (the “Rights
Agreement”). The Rights Agreement contains provisions that are intended to protect the Company’s
stockholders in the event of an unsolicited offer to acquire the Company, including offers that do not treat
all stockholders equally and other coercive, unfair, or inadequate takeover bids and practices that could
impair the ability of the Company’s Board of Directors to fully represent stockholders’ interests. Pursuant
to the Rights Agreement, the Company’s Board of Directors declared a dividend of one “Right” for each
outstanding share of the Company’s common stock as of November 16, 2001. The Rights will be
62
represented by, and trade together with, the Company’s common stock until and unless certain events
occur, including the acquisition of 15% or more of the Company’s common stock by a person or group of
affiliated or associated persons (with certain exceptions, “Acquiring Persons”). Unless previously
redeemed by the Company’s Board of Directors, upon the occurrence of one of the specified triggering
events, each Right that is not held by an Acquiring Person will entitle its holder to purchase one share of
common stock or, under certain circumstances, additional shares of common stock at a discounted
price. The Rights will cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Company’s Board of Directors. Thus, the Rights are intended to
encourage persons who may seek to acquire control of the Company to initiate such an acquisition
through negotiation with the Board of Directors.
Common Stock
Changes in common stock for the years ended August 31, 2009, 2008, and 2007 were as follows:
Common Stock
Shares
Amount
(in thousands)
Balance, August 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,063
(3)
1,263
Issuance of restricted stock grants, net of forfeitures . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, August 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,323
154
212
Issuance of restricted stock grants, net of forfeitures . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, August 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,689
28
134
Issuance of restricted stock grants, net of forfeitures . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$481
(1)
13
$493
2
2
$497
1
1
Balance, August 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,851
$499
the Company’s outstanding common stock. At August 31, 2009,
Since October 2005, the Company’s Board of Directors has authorized the repurchase of ten million
shares of
the Company had
repurchased 9.5 million shares at a cost of $395.5 million. During fiscal 2009, the Company re-issued
2.1 million shares as partial consideration for the acquisitions of Sensor Switch,
Inc. and Lighting
Controls & Design. The re-issued shares were removed from treasury stock using the FIFO cost method.
At fiscal year-end, the remaining 7.4 million repurchased shares were recorded as treasury stock at
original repurchase cost of $322.3 million.
Preferred Stock
The Company has 50 million shares of preferred stock authorized, 5 million of which have been reserved
for issuance under the Stockholder Protection Rights Agreement. No shares of preferred stock had been
issued at August 31, 2009 and 2008.
Earnings per Share
The Company computes earnings per share in accordance with SFAS No. 128, Earnings per Share.
Under this Statement, basic earnings per share is computed by dividing net earnings available to common
stockholders by the weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed similarly but reflects the potential dilution that would occur if dilutive
options were exercised and restricted stock awards were vested. Stock options and restricted stock
awards of 333,852 and 509,531, respectively, were excluded from the diluted earnings per share
calculation for the year ended August 31, 2009, as the effect of inclusion would have been antidilutive.
63
The following table calculates basic earnings per common share and diluted earnings per common share
for the years ended August 31, 2009, 2008, and 2007:
Years Ended August 31,
2009
2008
2007
Basic earnings per share from continuing operations:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . $85,197 $148,632 $128,687
42,585
Basic weighted average shares outstanding . . . . . . . . . . . . . . . . . .
40,781
40,655
Basic earnings per share from continuing operations . . . . . . . . . . . $ 2.09 $
3.66 $
3.02
Diluted earnings per share from continuing operations:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . $85,197 $148,632 $128,687
42,585
Basic weighted average shares outstanding . . . . . . . . . . . . . . . . . .
1,312
. .
Common stock equivalents (stock options and restricted stock)
40,655
954
40,781
776
Diluted weighted average shares outstanding . . . . . . . . . . . . . . . . .
41,557
41,609
43,897
Diluted earnings per share from continuing operations . . . . . . . . . . $ 2.05 $
3.57 $
2.93
Basic earnings (loss) per share from discontinued operations:
(Loss) Income from discontinued operations . . . . . . . . . . . . . . . . . . $
Basic weighted average shares outstanding . . . . . . . . . . . . . . . . . .
(288) $
40,781
(377) $ 19,367
42,585
40,655
Basic (loss) earnings per share from discontinued operations . . . . . $ (0.01) $
(0.01) $
0.45
Diluted earnings (loss) per share from discontinued operations:
(Loss) Income from discontinued operations . . . . . . . . . . . . . . . . . . $
Basic weighted average shares outstanding . . . . . . . . . . . . . . . . . .
. .
Common stock equivalents (stock options and restricted stock)
40,781
776
(288) $
(377) $ 19,367
42,585
1,312
40,655
954
Diluted weighted average shares outstanding . . . . . . . . . . . . . . . . .
41,557
41,609
43,897
Diluted (loss) earnings per share from discontinued operations . . . . $ (0.01) $
(0.01) $
0.44
Note 7: Share-Based Payments
Long-term Incentive and Directors’ Equity Plans
Effective November 30, 2001, Acuity Brands adopted the Acuity Brands, Inc. Long-Term Incentive Plan
(the “Plan”) for the benefit of officers and other key management personnel. An aggregate of 8.1 million
shares was originally authorized for issuance under that plan. In October 2003, the Board of Directors
approved the Acuity Brands, Inc. Amended and Restated Long-Term Incentive Plan (the “Amended
Plan”), including an increase of 5.0 million in the number of shares available for grant. However, the Board
of Directors subsequently committed that not more than 3.0 million would be available without further
shareholder approval. In December 2003, the shareholders approved the Amended Plan. The Amended
Plan provides for issuance of share-based awards, including stock options and performance-based and
time-based restricted stock awards. The Amended Plan was further amended in October 2007, including
the release of the remaining 2.0 million shares and an increase of an additional 500,000 shares. In January
2008, the shareholders approved the Amended Plan. In addition to the Amended Plan, in November
2001, the Company adopted the Acuity Brands, Inc. 2001 Nonemployee Directors’ Stock Option Plan
(the “Directors’ Plan”), under which 300,000 shares were authorized for issuance. In January 2007, the
Directors’ Plan was amended to provide that no further annual grants of stock options would be made to
nonemployee directors.
Restricted Stock Awards
As of August 31, 2009, the Company had approximately 683,000 shares outstanding of restricted stock
to officers and other key employees under the Amended Plan. The shares vest over a four-year period
64
and are valued at the closing stock price on the date of the grant. Compensation expense recognized in
continuing operations related to the awards under the Amended Plan was $9.0 million, $8.2 million, and
$7.0 million in fiscal 2009, 2008, and 2007, respectively. The Company incurred expenses related to the
restricted stock held by current and former employees of the Company and Zep at the time of the Spin-
off. Compensation expense related to these awards was recognized in discontinued operations and
amounted to $1.8 million in fiscal 2007.
factors, including individual achievements, additional
Additionally, the Company awarded restricted stock to certain employees on an individual basis based on
a number of
job responsibilities, relocation, and
employee recruitment and retention, in fiscal 2009 and prior years. As of August 31, 2009, approximately
231,000 shares related to these awards were outstanding. Compensation expense recognized in
continuing operations related to these awards was $1.6 million, $1.4 million, and $1.1 million in fiscal
2009, 2008, and 2007, respectively. Compensation expense recognized in discontinued operations
related to these awards was $0.4 million in fiscal 2007.
Activity related to restricted stock awards during the fiscal year ended August 31, 2009 was as follows:
Outstanding at August 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares
(in thousands)
747
573
(257)
(149)
Outstanding at August 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . .
914
Weighted Average
Grant Date
Fair Value
$41.88
$29.92
$38.55
$40.19
$35.65
As of August 31, 2009, there was $29.0 million of total unrecognized compensation cost related to
unvested restricted stock. That cost is expected to be recognized over a weighted-average period of 2.4
years. The total fair value of shares vested during the years ended August 31, 2009 and 2008, was
approximately $9.3 million and $17.8 million, respectively.
Stock Options
Options issued under the Plan are generally granted with an exercise price equal to the fair market value
of the Company’s stock on the date of grant and expire 10 years from the date of grant. These options
generally vest and become exercisable over a three-year period. The stock options granted under the
Directors’ Plan vest and become exercisable one year from the date of grant. These options have an
exercise price equal to the fair market value of the Company’s stock on the date of the grant and expire
10 years from that date. As of August 31, 2009, approximately 120,000 shares had been granted under
the Director’s Plan. Shares available for grant under all plans were approximately 3.2 million at August 31,
2009. Shares available for grant under all plans were approximately 3.8 million and 1.7 million at
August 31, 2008 and 2007. Forfeited shares and shares that are exchanged to offset taxes are returned
to the pool of shares available for grant. The Director Stock Option Plan was frozen with respect to future
awards effective January 1, 2007.
The fair value of each option was estimated on the date of grant using the Black-Scholes model. 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 the Company’s
stock, calculated using the most recent time period equal to the expected life of the options. The risk-free
interest rate was based on the U.S. Treasury yield for a term equal to the expected life of the options at
the time of grant. The Company used historical exercise behavior data of similar employee groups to
65
determine the expected life of options. All inputs into the Black-Scholes model are estimates made at the
time of grant. Actual realized value of each option grant could materially differ from these estimates,
without impact to future reported net income.
The following weighted average assumptions were used to estimate the fair value of stock options granted
in the fiscal years ended August 31:
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life of options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average fair value of options granted . . . . . . . . . . . . . . . . $7.53 - $11.13
1.2 - 1.4%
40.1 - 40.3%
1.9 - 2.6%
5 years
1.1%
36.4%
4.0%
1.6%
35.0%
4.6%
5 years
$13.90
5 years
$15.01
2009
2008
2007
In addition to the options granted as a part of the annual
incentive award, the Board of Directors
approved a supplemental option grant related to the assumption of additional duties by certain executives
and key employees which was granted in April 2009. As a result, the assumptions used in 2009 are
reflected as a range of values.
Stock option transactions for the stock option plans and stock option agreements during the years ended
August 31, 2009, 2008, and 2007 were as follows:
Outstanding
Exercisable
Number of
Shares
Weighted Average
Exercise Price
Number of
Shares
Weighted Average
Exercise Price
(share data in thousands)
2,656
155
(1,298)
(15)
$22.78
$45.62
$21.50
$31.30
Outstanding at August 31, 2006 . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at August 31, 2007 . . . . . . . . . . . . . . . . . .
Spin Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at August 31, 2008 . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,498
194
166
(211)
(49)
1,598
278
(134)
(44)
Outstanding at August 31, 2009 . . . . . . . . . . . . . . . . . .
1,698
Range of option exercise prices:
$10.00 – $15.00 (average life – 1.9 years)
$15.01 – $20.00 (average life – 3.5 years)
$20.01 – $25.00 (average life – 5.7 years)
$25.01 – $30.00 (average life – 4.9 years)
$30.01 – $40.00 (average life – 7.9 years)
. .
. .
. .
. .
. .
364
172
382
257
523
$26.18
$21.69
$40.29
$19.67
$25.42
$23.78
$29.21
$20.34
$33.59
$24.69
$12.14
$19.44
$22.23
$26.05
$36.29
(share data in thousands)
2,028
$21.31
1,196
$23.08
1,283
$20.26
1,289
$22.09
364
172
298
257
198
$12.14
$19.44
$22.05
$26.05
$37.62
The total intrinsic value of options exercised during the years ended August 31, 2009 and 2008 was $5.6
million and $9.7 million, respectively. As of August 31, 2009, the total intrinsic value of options outstanding
and expected to vest were each $14.8 million, and the total
intrinsic value of options exercisable was
$14.0 million. As of August 31, 2009, there was $2.9 million of total unrecognized compensation cost
related to unvested options. That cost is expected to be recognized over a weighted-average period of
approximately 1.7 years.
66
Employee Stock Purchase Plan
Employees are able to purchase, through payroll deduction, common stock at a 5% discount on a
monthly basis. There were 1.5 million shares of the Company’s common stock reserved for purchase
under the plan, of which approximately 1.1 million shares remain available as of August 31, 2009.
Employees may participate at their discretion.
Share Units
The Company requires its Directors to defer at least 50% of their annual retainer into the Directors’
Deferred Compensation Plan. Under this plan, until June 29, 2006, the deferred cash was converted into
share units using the average of the high and low prices for the five days prior to the deferral date. The
share units were adjusted to current market value each month and earned dividend equivalents. Upon
retirement, the Company distributed cash to the retiree in a lump sum or five annual
installments. The
distribution amount was calculated as share units times the average of the high and low prices for the five
days prior to distribution (defined as “fair market value” in the Directors’ Deferred Compensation Plan). On
June 29, 2006, the Board of Directors amended this plan to convert existing share units and future
deferrals to cash-based, interest bearing deferrals at fair market value or stock-based deferrals, with
distribution only in the elected form upon retirement. Existing share deferrals were valued at the fair
market value at the date of election and future share deferrals will be calculated at fair market value at the
date of the deferral and will no longer vary with fluctuations in the Company’s stock price. As of
August 31, 2009, approximately 175,000 share units were accounted for in this plan.
Additionally, the Company allowed employees to defer a portion of restricted stock awards granted in
fiscal 2003 and fiscal 2004 into the Supplemental Deferred Savings Plan as share units. Those share units
were adjusted to the current market value at the end of each month. On June 29, 2006, the Board of
Directors amended this plan to distribute those share unit deferrals in stock rather than cash. The shares
were valued at the closing stock price on the date of conversion and expense related to these shares will
no longer vary with fluctuations in the Company’s stock price. As of August 31, 2009 approximately
60,000 fully vested share units were accounted for in this plan.
Treatment of Stock Options, Restricted Stock Awards, and Restricted Stock Units pursuant to
the Spin-off of Zep
The employee benefits agreement entered into between Acuity Brands, Inc. and Zep Inc. provided that at
the time of the Spin-off, Acuity Brands stock options held by Zep’s current employees (but not former
employees) were generally converted to, and replaced by, Zep stock options in accordance with a
conversion ratio such that the intrinsic value of the underlying awards remains unaffected by the Spin-off.
The employee benefits agreement also provided that, at the time of the Spin-off, Acuity Brands stock
options held by current and former Acuity Brands employees and former Zep employees were adjusted
with regard to the exercise price of and number of Acuity Brands shares underlying the Acuity Brands
stock options to maintain the intrinsic value of the options, pursuant to the applicable Acuity Brands long-
term incentive plan.
Each of the current and former employees of Acuity Brands and Zep holding unvested shares of restricted
stock of Acuity Brands received a dividend of one share of Zep restricted stock for each two shares of
Acuity Brands unvested restricted stock held. The shares of Zep stock received as a dividend are subject
to the same restrictions and terms as the Acuity Brands restricted stock. The shares of Zep common
stock were fully paid and non-assessable and the holders thereof are not entitled to preemptive rights.
Effective immediately after the Spin-off of
the number of shares
represented by restricted stock units were converted in the same manner as the above mentioned stock
option awards.
the specialty products business,
67
Note 8: Commitments and Contingencies
Self-Insurance
It is the policy of Acuity Brands to self-insure, up to certain limits, traditional risks including workers’
compensation, comprehensive general liability, and auto liability. The Company’s self-insured retention for
liability (including product liability
each claim involving workers’ compensation, comprehensive general
claims), and auto liability is limited to $0.5 million per occurrence of such claims. A provision for claims
under this self-insured program, based on the Company’s estimate of the aggregate liability for claims
incurred, is revised and recorded annually. The estimate is derived from both internal and external sources
including but not limited to the Company’s independent actuary. Acuity Brands is also self-insured up to
certain limits for certain other insurable risks, primarily physical
loss to property ($0.5 million per
occurrence) and business interruptions resulting from such loss lasting three days or more in duration.
Insurance coverage is maintained for catastrophic property and casualty exposures as well as those risks
required to be insured by law or contract. Acuity Brands is fully self-insured for certain other types of
liabilities, including employment practices, environmental, product recall, and patent infringement. The
actuarial estimates are subject to uncertainty from various sources, including, among others, changes in
claim reporting patterns, claim settlement patterns,
legislation, and economic
the actuarial estimates are reasonable, significant
conditions. Although Acuity Brands believes that
differences related to the items noted above could materially affect
the Company’s self-insurance
obligations, future expense and cash flow. The Company is also self-insured for the majority of its medical
benefit plans. The Company estimates its aggregate liability for claims incurred by applying a lag factor to
the Company’s historical claims and administrative cost experience. The appropriateness of
the
Company’s lag factor is evaluated and revised annually, as necessary.
judicial decisions,
Leases
Acuity Brands leases certain of its buildings and equipment under noncancelable lease agreements.
Minimum lease payments under noncancelable leases for years subsequent to August 31, 2009, are
$14.4 million, $12.7 million, $9.3 million, $6.0 million, $3.0 million, and $3.1 million for fiscal 2010, 2011,
2012, 2013, 2014, and after 2015, respectively.
Total rent expense was $18.2 million, $18.8 million, and $18.7 million in fiscal 2009, 2008, and 2007,
respectively.
Purchase Obligations
The Company has incurred purchase obligations in the ordinary course of business that are enforceable
and legally binding. Obligations for years subsequent to August 31, 2009 include $81.7 million and $0.6
million in fiscal 2010 and 2011, respectively. As of August 31, 2009, the Company had no purchase
obligations extending beyond August 31, 2011.
Collective Bargaining Agreements
Approximately 57% of the Company’s total work force is covered by collective bargaining agreements.
Collective bargaining agreements representing approximately 34% of the Company’s work force will
expire within one year.
Litigation
Acuity Brands is subject to various legal claims arising in the normal course of business, including patent
infringement and product liability claims. Acuity Brands is self-insured up to specified limits for certain
types of claims, including product liability, and is fully self-insured for certain other types of claims,
68
including environmental, product recall, and patent infringement. Based on information currently available,
it is the opinion of management that the ultimate resolution of pending and threatened legal proceedings
will not have a material adverse effect on the financial condition, results of operations, or cash flows of
Acuity Brands. However, in the event of unexpected future developments, it is possible that the ultimate
resolution of any such matters, if unfavorable, could have a material adverse effect on the financial
results of operations, or cash flows of Acuity Brands in future periods. Acuity Brands
condition,
establishes reserves for legal claims when the costs associated with the claims become probable and can
be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the
amounts reserved for such claims. However, the Company cannot make a meaningful estimate of actual
costs to be incurred that could possibly be higher or lower than the amounts reserved.
Environmental Matters
The operations of the Company are subject to numerous comprehensive laws and regulations relating to
the generation, storage, handling, transportation, and disposal of hazardous substances, as well as solid
and hazardous wastes, and to the remediation of contaminated sites.
In addition, permits and
environmental controls are required for certain of the Company’s operations to limit air and water
pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities. On
an ongoing basis, Acuity Brands invests capital and incurs operating costs relating to environmental
compliance. Environmental laws and regulations have generally become stricter in recent years. The cost
of responding to future changes may be substantial. Acuity Brands establishes reserves for known
environmental claims when the costs associated with the claims become probable and can be reasonably
estimated. The actual cost of environmental issues may be substantially higher or lower than that reserved
due to difficulty in estimating such costs.
Guarantees and Indemnities
The Company is a party to contracts entered into in the normal course of business in which it is common
for the Company to agree to indemnify third parties for certain liabilities that may arise out of or relate to
the subject matter of the contract. In most cases, the Company cannot estimate the potential amount of
future payments under these indemnities until events arise that would result in a liability under the
indemnities. In connection with the sale of assets and the divestiture of businesses, the Company has
from time to time agreed to indemnify the purchaser from liabilities relating to events occurring prior to the
sale and conditions existing at
the sale. The indemnities generally include potential
liabilities, general representations and warranties concerning the asset or business, and
environmental
certain other liabilities not assumed by the purchaser. Indemnities associated with the divestiture of
businesses are generally limited in amount to the sales price of the specific business or are based on a
lower negotiated amount and expire at various times, depending on the nature of the indemnified matter,
but in some cases do not expire until the applicable statute of limitations expires. The Company does not
believe that any amounts that it may be required to pay under these indemnities will be material to the
Company’s results of operations, financial position, or cash flow.
the time of
In conjunction with the separation of their businesses (the “Distribution”), Acuity Brands and Zep entered
into various agreements that addressed the allocation of assets and liabilities and defined the Company’s
relationship with Zep after the Distribution, including a distribution agreement and a tax disaffiliation
agreement. The distribution agreement provides that Acuity Brands will indemnify Zep for liabilities related
to the businesses that comprise Acuity Brands. The tax disaffiliation agreement provides that Acuity
indemnify Zep for certain taxes and liabilities that may arise related to the Distribution and,
Brands will
generally, for deficiencies, if any, with respect to federal, state, local, or foreign taxes of Zep for periods
before the Distribution. Liabilities determined under the tax disaffiliation agreement terminate upon the
expiration of the applicable statutes of limitation for such liabilities. There is no stated maximum potential
liability included in the tax disaffiliation agreement or the distribution agreement. The Company does not
69
believe that any amounts it is likely to be required to pay under these indemnities will be material to the
financial position, or liquidity. The Company cannot estimate the
Company’s results of operations,
potential amount of future payments under these indemnities because claims that would result in a liability
under the indemnities are not fully known.
Product Warranty and Recall Costs
Acuity Brands records an allowance for the estimated amount of future warranty claims when the related
revenue is recognized, primarily based on historical experience of identified warranty claims. However,
there can be no assurance that future warranty costs will not exceed historical experience. If actual future
warranty costs exceed historical amounts, additional allowances may be required, which could have a
material adverse impact on the Company’s results of operations and cash flows in future periods.
The changes in product warranty and recall reserves (included in Other accrued liabilities on the
Consolidated Balance Sheets) during the fiscal years ended August 31, 2009 and 2008 are summarized
as follows:
Balance, beginning of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to warranty and recall reserve . . . . . . . . . . . . . . . . . . . . . . . . .
Payments made during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,888
2,736
(4,229)
$ 4,393
6,190
(5,695)
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,395
$ 4,888
2009
2008
The decrease in the product warranty and recall reserve in fiscal 2009 was due primarily to reserves for
certain specifically identified issues and warranty costs related to faulty components provided by third
parties during fiscal 2008 which was not repeated in fiscal 2009.
Note 9: Special Charge
Fiscal 2009 Special Charge
On October 6, 2008, the Company announced plans to accelerate its ongoing programs to streamline
operations including the consolidation of certain manufacturing facilities and the reduction of certain
overhead costs. These actions are expected to allow the Company to better leverage efficiencies in its
supply chain and support areas, while funding continued investments in other areas that support future
growth opportunities. During fiscal 2009, the Company recorded a pre-tax charge of $26.7 million, or
$0.41 per diluted share. The $26.7 million pre-tax charge consists of $25.6 million for estimated
severances and employee benefits as well as estimated retention payments related to the previously
announced consolidation of certain manufacturing operations and reductions in workforce and a $1.6
million impairment of assets related to the closing of a manufacturing facility, partially offset by a $0.5
million adjustment to the fiscal 2008 special charge.
The changes in the reserves related to the 2009 program during the twelve months ended August 31,
2009 are summarized as follows:
Balance as of August 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments made during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Severance
$ —
25,221
(14,253)
Balance as of August 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10,968
70
Fiscal 2008 Special Charge
During fiscal 2008, the Company recorded a pre-tax charge of $14.6 million, or $0.21 per diluted share,
for actions to streamline and simplify the Company’s organizational structure and operations as a result of
the Spin-off of Zep Inc. The charge consisted of severance and related employee benefit costs associated
with the elimination of certain positions worldwide,
the estimated costs associated with the early
termination of certain leases, and $0.8 million of share-based expense due to the modification of the
terms of agreements to accelerate vesting for certain terminated employees.
The changes in the reserves related to these programs during the twelve months ended August 31, 2009
are summarized as follows:
Balance as of August 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special charge adjustment
Payments made during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,409
(120)
(3,289)
Balance as of August 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$1,848
(380)
(600)
$ 868
Severance
Exit Costs
Note 10: Acquisitions
On April 20, 2009, the Company acquired 100% of the outstanding capital stock of Sensor Switch, an
industry-leading developer and manufacturer of
lighting controls and energy management systems.
Sensor Switch, based in Wallingford, Connecticut, offers a wide-breadth of products and solutions that
substantially reduce energy consumption including occupancy sensors, photocontrols, and distributed
lighting control devices. Total consideration for the purchase was approximately $205 million consisting of
2 million shares of Acuity Brands’ common stock, a $30 million unsecured promissory note payable over
three years, and approximately $130 million of cash. The cash payment was funded from available cash
on hand and from borrowings under the Company’s existing Revolving Credit Facility. The operating
results of Sensor Switch have been included in the Company’s consolidated financial statements since
the date of acquisition. Management finalized the purchase price allocation during fiscal 2009 and the
amounts are reflected in the Consolidated Balance Sheets as of August 31, 2009. Pro forma results and
other expanded disclosures required by SFAS No. 141, Business Combinations (“SFAS No. 141”), have
not been presented as the purchase of Sensor Switch does not represent a material acquisition.
On December 31, 2008, the Company acquired for cash and stock substantially all the assets and
assumed certain liabilities of LC&D. Located in Glendale, California, LC&D is a manufacturer of
comprehensive digital
lighting controls and software that offers a breadth of products, ranging from
dimming and building interfaces to digital thermostats, all within a single, scalable system. The operating
results of LC&D have been included in the Company’s consolidated financial statements since the date of
acquisition. Management finalized the purchase price allocation during fiscal 2009 and the amounts are
reflected in the Consolidated Balance Sheets as of August 31, 2009. Pro forma results and other
expanded disclosures required by SFAS No. 141 have not been presented as the purchase of LC&D does
not represent a material acquisition.
On May 7, 2008, Acuity Brands acquired substantially all
the assets of Guardian Networks LLC
(“Guardian”). Located in Kennesaw, Georgia, Guardian is a leading provider of remote asset management
software and service that enable utility, municipal, and other customers to efficiently monitor and manage
facility and infrastructure assets such as lighting systems. The operating results of Guardian have been
included in the Company’s consolidated financial statements since the date of acquisition. Management
finalized the purchase price allocation during the fiscal 2008 and the amounts are reflected in the
Consolidated Balance Sheets as of August 31, 2008. Pro forma results and other expanded disclosures
required by SFAS No. 141 have not been presented as the purchase of Guardian does not represent a
material acquisition.
71
On July 17, 2007, Acuity Brands acquired substantially all the assets and assumed certain liabilities of
Mark Architectural Lighting. Located in Edison, New Jersey, Mark Architectural Lighting is a specification-
oriented manufacturer of high-quality lighting products which generated fiscal 2006 sales of over $22
million. The operating results of Mark Architectural Lighting have been included in the Company’s
consolidated financial statements since the date of acquisition. Management finalized the purchase price
allocation during fiscal 2008 and the amounts are reflected in the Consolidated Balance Sheets as of
August 31, 2008. Pro forma results and other expanded disclosures required by SFAS No. 141, Business
Combinations, have not been presented as the purchase of Mark Architectural Lighting does not
represent a material acquisition.
Note 11: Income Taxes
The Company accounts for income taxes using the asset and liability approach as prescribed by SFAS
No. 109, Accounting for Income Taxes (“SFAS No. 109”). This approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Using the enacted tax rates in effect for the year in
which the differences are expected to reverse, deferred tax liabilities and assets are determined based on
the differences between the financial reporting and the tax basis of an asset or liability.
The provision for income taxes consists of the following components:
Years Ended August 31,
2009
2008
2007
Provision for current federal taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35,140 $62,045 $56,405
5,229
Provision for current state taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,620
Provision for current foreign taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,755)
(Benefit)/Provision for deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,231
3,580
(825)
7,255
5,290
7,328
Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42,126 $81,918 $65,499
A reconciliation of the federal statutory rate to the total provision for income taxes is as follows:
Years Ended August 31,
2009
2008
2007
Federal income tax computed at statutory rate . . . . . . . . . . . . . . . . . . . . . . $44,562 $80,694 $67,965
3,347
State income tax, net of federal income tax benefit . . . . . . . . . . . . . . . . . . .
(1,382)
Foreign permanent differences and rate differential . . . . . . . . . . . . . . . . . . .
(1,488)
Tax (benefit) on repatriation of foreign earnings . . . . . . . . . . . . . . . . . . . . . .
(2,943)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net
2,448
(804)
(381)
(3,699)
4,704
(1,466)
1,018
(3,032)
Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42,126 $81,918 $65,499
72
Components of the net deferred income tax asset at August 31, 2009 and net deferred tax liability at
August 31, 2008 include:
August 31,
2009
2008
Deferred Income Tax Liabilities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,595) $ (5,267)
(52,663)
Goodwill and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,707)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(54,612)
(1,217)
Total deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(59,424)
(59,637)
Deferred Income Tax Assets:
Self-insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accruals not yet deductible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,713
18,788
26,523
58
14,683
1,032
5,295
7,560
27,705
1,295
12,635
1,641
Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,797
56,131
Net deferred income tax asset (liability)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,373 $ (3,506)
Acuity Brands currently intends to indefinitely reinvest all undistributed earnings of and original investments
in foreign subsidiaries, which amounted to approximately $30.2 million at August 31, 2009; however, this
amount could fluctuate due to changes in business, economic, or other conditions. If these earnings were
distributed to the U.S. in the form of dividends or otherwise, or if the shares of the relevant foreign
subsidiaries were sold or otherwise transferred, the Company would be subject to additional U.S. income
taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. Determination of the
amount of unrecognized deferred income tax liability related to these earnings or investments is not
practicable.
At August 31, 2009 and August 31, 2008, no valuation allowances on deferred tax assets were deemed
necessary. Typically, these allowances are required to reflect the net realizable value of state tax credit
carryforwards.
At August 31, 2009 the Company has state tax credit carryforwards of approximately $0.5 million, which
will expire between 2013 and 2018.
As described in Note 3 — Summary of Significant Accounting Policies, Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FASB
Statement No. 109 (“FIN 48”), is effective for fiscal years beginning after December 15, 2006 and was
adopted by the Company on September 1, 2007. The cumulative effect of adopting FIN 48 was not
material. The amount of gross unrecognized tax benefits as of the date of the adoption was approximately
$6.9 million of which approximately $5.7 million, if recognized, would affect the effective tax rate. The
gross amount of unrecognized tax benefits as of August 31, 2009 totaled $7.2 million, which includes
$5.9 million of net unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.
The Company recognizes potential
interest and penalties related to unrecognized tax benefits as a
income tax expense; such accrued interest and penalties are not material. With few
component of
exceptions, the Company is no longer subject to United States federal, state and local
income tax
examinations for years ended before 2006 or for foreign income tax examinations before 2004. The
Company does not anticipate unrecognized tax benefits will significantly increase or decrease within the
next twelve months.
73
A reconciliation of the change in the unrecognized income tax benefit reported in Other long-term liabilities
for the year ended August 31, 2009 is as follows:
Unrecognized tax benefits balance at September 1, 2008 . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
August 31,
2009
$6,872
410
545
(21)
(339)
(236)
Unrecognized tax benefits balance at August 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . .
$7,231
During fiscal 2009, the Company decreased its interest accrual associated with uncertain tax positions by
approximately $0.1 million. Total accrued interest as of August 31, 2009 was $0.9 million. There were no
penalty accruals during fiscal 2009. Interest, net of tax benefit, and penalties are included in tax expense.
The classification of interest and penalties did not change as a result of our adoption of FIN 48.
Note 12: Subsequent Events
The Company has evaluated subsequent events for recognition and disclosure through October 29, 2009,
which is the date the financial statements as of August 31, 2009 and for the twelve months ended
August 31, 2009 were issued.
Note 13: Fair Value Measurements
In accordance with SFAS No. 157, Acuity Brands determines a fair value measurement based on the
assumptions a market participant would use in pricing an asset or liability. SFAS No. 157 established 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). The following table presents
information about assets and liabilities required to be carried at fair value on a recurring basis as of
August 31, 2009:
Fair Value Measurements
as of August 31, 2009 using:
Fair Value as
of August 31,
2009
Level 1
Level 2
Level 3
Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term investments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Deferred compensation plan(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,683
4,734
$18,683
$—
4,734 —
$—
—
$ 4,734
$ 4,734
$—
$—
(1)
(2)
The Company maintains certain investments that generate returns that offset changes in certain liabilities related to deferred
compensation arrangements.
The Company maintains a self-directed, non-qualified deferred compensation plan structured as a rabbi trust primarily for
certain retired executives and other highly compensated employees.
Note: Fair value information on assets and liabilities not carried at
nonconsolidating affiliates and Note 5 for Debt.
fair value are included in Note 2 for
Investments in
74
The Company utilizes valuation methodologies to determine the fair values of its financial assets and
liabilities in conformity with the concepts of “exit price” and the fair value hierarchy as prescribed in SFAS
No. 157. All valuation methods and assumptions are validated at least quarterly to ensure the accuracy
and relevance of the fair values. There were no material changes to the valuation methods or assumptions
used to determine fair values during the current period.
The following valuation methods and assumptions were used by the Company in estimating the fair value
of the following assets and liabilities:
Cash and cash equivalents are classified as Level 1 assets. The carrying amounts for cash reflect the
assets’ fair values, and the fair values for cash equivalents are determined based on quoted market
prices.
Long-term investments are classified as Level 1 assets. These investments consist primarily of publicly
traded marketable equity securities and fixed income securities, and the fair values are obtained through
market observable pricing.
Deferred compensation plan liabilities are classified as Level 1 within the hierarchy. The fair values of the
liabilities are directly related to the valuation of the long-term investments held in trust for the plan. Hence,
the carrying value of the deferred compensation liability represents the fair value of the investment assets.
The Company does not possess any assets or liabilities that are carried at fair value on a recurring basis
classified as Level 3 assets or liabilities.
Note 14: Geographic Information
The Company has one operating segment. The geographic distribution of the Company’s net sales,
operating profit, income from continuing operations before provision for income taxes, and long-lived
assets is summarized in the following table for the years ended August 31:
2009
2008
2007
Net sales(1)
Domestic(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,479,747 $1,804,628 $1,758,383
206,398
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
177,657
222,016
Operating profit
Domestic(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139,013 $ 242,502
18,558
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,740
201,485
20,938
$ 153,753 $ 261,060 $ 222,423
$1,657,404 $2,026,644 $1,964,781
Income from Continuing Operations before Provision for
Income Taxes
Domestic(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 111,354 $ 212,975 $ 173,219
20,967
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,575
15,969
Long-lived assets(3)
Domestic(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 140,107 $ 138,979 $ 145,333
43,270
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,940
32,207
$ 127,323 $ 230,550 $ 194,186
$ 172,314 $ 180,919 $ 188,603
75
(1) Net sales are attributed to each country based on the selling location.
(2) Domestic amounts include net sales (including export sales), operating profit, income from continuing operations before
(3)
provision for income taxes, and long-lived assets for U.S. based operations.
Long-lived assets include net property, plant, and equipment, defined benefit plan intangible assets, long-term deferred income
tax assets, and other long-term assets for continuing operations.
Note 15: Quarterly Financial Data (Unaudited)
Net Sales . . . . . . . . .
Gross Profit
. . . . . . .
Income from
Continuing
Operations . . . . . .
Income (Loss) from
Discontinued
Operations . . . . . .
Fiscal Year 2009
Fiscal Year 2008
1st Quarter(1) 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter(2) 2nd Quarter 3rd Quarter 4th Quarter
$452,025
174,723
$386,139
141,398
$396,628
153,605
$422,611
165,370
$508,865
203,189
$482,584
192,036
$512,438
208,192
$522,757
212,378
19,415
14,368
22,326
29,086
30,925
34,144
41,658
41,906
—
—
(299)
10
147
—
(525)
—
Net Income . . . . . . . .
$ 19,415
$ 14,368
$ 22,027
$ 29,096
$ 31,072
$ 34,144
$ 41,133
$ 41,906
Basic Earnings per
Share from
Continuing
Operations . . . . . .
Basic Earnings per
Share from
Discontinued
Operations . . . . . .
Basic Earnings per
$
0.49
$
0.36
$
0.55
$
0.69
$
0.74
$
0.84
$
1.04
$
1.05
—
—
(0.01)
0.00
0.00
—
(0.01)
—
Share . . . . . . . . . .
$
0.49
$
0.36
$
0.54
$
0.69
$
0.74
$
0.84
$
1.03
$
1.05
Diluted Earnings per
Share from
Continuing
Operations . . . . . .
Diluted Earnings per
Share from
Discontinued
Operations . . . . . .
Diluted Earnings per
$
0.48
$
0.35
$
0.54
$
0.68
$
0.72
$
0.82
$
1.01
$
1.02
—
—
(0.01)
0.00
0.00
—
(0.01)
—
Share . . . . . . . . . .
$
0.48
$
0.35
$
0.53
$
0.68
$
0.72
$
0.82
$
1.00
$
1.02
(1)
(2)
Income from Continuing Operations, Net Income, Basic Earnings per Share from Continuing Operations, and Diluted Earnings
per Share from Continuing Operations for fiscal 2009 include a pre-tax special charge of $26.7 million ($16.8 million after-tax), or
$0.41 per share for estimated costs the company incurred to simplify and streamline its operations.
Income from Continuing Operations, Net Income, Basic Earnings per Share from Continuing Operations, and Diluted Earnings
per Share from Continuing Operations for the first quarter of fiscal 2008 include a pre-tax special charge of $14.6 million ($9.1
million after-tax), or $0.21 per share for estimated costs the company incurred to simplify and streamline its operations as a
result of the Spin-off.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9a. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to reasonably
ensure that information required to be disclosed in the reports filed or submitted by the Company under
the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commission’s (“SEC”) rules and forms. Disclosure controls and
76
procedures include, without limitation, controls and procedures designed to reasonably ensure that
information required to be disclosed by the Company in the reports filed under the Securities Exchange
Act is accumulated and communicated to management, including the principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by SEC rules, the Company has evaluated the effectiveness of the design and operation of its
disclosure controls and procedures as of August 31, 2009. This evaluation was carried out under the
supervision and with the participation of management,
including the principal executive officer and
principal financial officer. Based on this evaluation, these officers have concluded that the design and
operation of the Company’s disclosure controls and procedures are effective at a reasonable assurance
level. However, because all disclosure procedures must rely to a significant degree on actions or
decisions made by employees throughout the organization, such as reporting of material events, the
Company and its reporting officers believe that they cannot provide absolute assurance that all control
issues and instances of fraud or errors and omissions, if any, within the Company will be detected.
Limitations within any control system, including the Company’s control system, include faulty judgments in
decision-making or simple errors or mistakes. In addition, controls can be circumvented by an individual,
by collusion between two or more people, or by management override of the control. Because of these
limitations, misstatements due to error or fraud may occur and may not be detected.
report on the Company’s internal control over
Management’s annual
reporting and the
independent registered public accounting firm’s attestation report are included in the Company’s 2009
Financial Statements in Item 8 of this Annual Report on Form 10-K, under the headings, “Management’s
Independent Registered Public
Report on Internal Control over Financial Reporting” and “Report of
Accounting Firm on Internal Control Over Financial Reporting”, respectively, and are incorporated herein
by reference.
financial
There have been no changes in the Company’s internal control over financial reporting that occurred
during the Company’s most
that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
recent completed fiscal quarter
CEO and CFO Certifications
The Company’s Chief Executive Officer as well as the Chief Financial Officer have filed with the Securities
and Exchange Commission the certifications required by Section 302 of the Sarbanes-Oxley Act of 2002
as Exhibits 31(a) and 31(b) to the Company’s Annual Report on Form 10-K for the fiscal year ended
August 31, 2009. In addition, on February 9, 2009, the Company’s CEO certified to the New York Stock
Exchange that he was not aware of any violation by the Company of the NYSE corporate governance
listing standards.
Item 9b. Other Information
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
On October 26, 2009, the Compensation Committee of the Board of Directors of the Corporation
approved certain amendments to compensatory arrangements with certain executive officers of the
Corporation.
Fiscal 2010 Long-Term Incentive Plan
The Compensation Committee adopted plan rules for potential equity awards to be earned by executive
officers for performance during fiscal year 2010 under the Corporation’s Long-Term Incentive Plan. The
plan rules for each executive officer consist of an individual target percentage, stated as a percentage of
77
gross salary, multiplied by a financial performance payout percentage. The financial performance payout
percentage for Messrs. Nagel, Reece, and Black is subject to the application of negative discretion by the
Committee.
The target award is based on the achievement of a specified target for Adjusted Diluted Earnings per
Share, which excludes the impact of: (a) special charges associated with streamlining efforts and asset
impairments; (b) capital market pre-financing and/or early pay-off of the $200 million public notes due in
2010; (c) the adoption of the Financial Accounting Standards Board Staff Position No. EITF 03-6-1,
Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities; and (d) the distortive effect of acquisitions. The actual award earned increases above target or
decreases below target based on the level of achievement of the specified target for Adjusted Diluted
Earnings per Share, with no award earned if financial performance is below a specified threshold level.
Achievement of the performance level
is determined by the Compensation Committee following the
completion of the fiscal year, subject to the application of negative discretion by the Committee for the
executives noted above. Awards are granted following completion of the fiscal year.
The individual target percentage and the financial performance payout target percentage for the named
executive officers in the proxy statement for the annual meeting to be held on January 8, 2010 are as
follows:
Vernon J. Nagel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard K. Reece . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mark A. Black . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jeremy M. Quick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Dan Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Individual
Target %
300%
150%
135%
90%
60%
Financial
Performance
Payout
Target %
200%
200%
200%
100%
100%
Fiscal 2010 Annual Incentive Plan
The Compensation Committee adopted plan rules for potential cash bonuses to be earned by executive
officers for fiscal year 2010 under the Corporation’s Management Compensation and Incentive Plan. The
plan rules for each executive officer consists of an individual target percentage, stated as a percentage of
gross salary, multiplied by a financial performance payout percentage. The target bonus is based on
achievement of specified financial performance measures and the actual bonus earned increases above
target or decreases below target based on the level of achievement of
the financial performance
measures, with no bonus payable if
financial performance is below a specified threshold level.
Achievement of performance levels is determined by the Compensation Committee following the
completion of the fiscal year.
The performance measures consist of specified targets for:
Executive Officers of Acuity Brands, Inc.
(cid:129) Adjusted Diluted Earnings per Share, computed by dividing net income by diluted weighted
average number of shares and adjusted to exclude the impact of: (a) special charges associated
with streamlining efforts and asset impairments, if any; (b) capital market pre-financing and/or
early pay-off of the $200 million public notes due in 2010; (c) the adoption of the Financial
Accounting Standards Board Staff Position No. EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities; and (d) the distortive
effect of acquisitions;
78
(cid:129) Adjusted Consolidated Operating Profit Margin, calculated as earnings before interest and taxes
divided by net sales and adjusted to exclude the impact of special charges associated with
streamlining efforts and asset impairments and the distortive effect of acquisitions; and
(cid:129) Cash Flow, calculated as cash flow from operations,
less capital expenditures, plus cash
received on sale of property of business, plus or minus cash flow from foreign currency
fluctuations, and excluding cash used for acquisitions.
Executive Officers of Acuity Brands Lighting, Inc.
(cid:129) Business Unit Operating Profit, excluding the impact of special charges associated with
streamlining efforts and asset impairments and the distortive effect of acquisitions, if any;
(cid:129) Business Unit Operating Profit Margin, calculated as operating profit (as defined above) divided
by net sales; and
(cid:129) Business Unit Cash Flow, calculated as cash flow from operations, less capital expenditures,
plus cash received on sale of property of business, plus or minus cash flow from foreign
currency fluctuations, and excluding cash used for acquisitions.
The bonus award for Messrs. Nagel, Reece, and Black is subject to the application of negative discretion
by the Committee. The individual
target
percentage for the named executive officers in the proxy statement for the annual meeting to be held on
January 8, 2010 are as follows:
target percentage and the financial performance payout
Vernon J. Nagel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard K. Reece . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mark A. Black . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jeremy M. Quick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C. Dan Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Individual
Target %
150%
65%
65%
55%
40%
Financial
Performance
Payout
Target %
200%
200%
200%
100%
100%
Supplemental Executive Retirement Plan
The Compensation Committee approved the eligibility of Mark A. Black, Executive Vice President of Acuity
Brands Lighting, Inc., as a participant in the Acuity Brands, Inc. 2002 Supplemental Executive Retirement
Plan (“Plan”) effective October 26, 2009. As a Plan participant, Mr. Black is eligible for a monthly benefit
payable for 180 months only, commencing on the his normal retirement date in an amount equal to the
product of 1.8% of his average annual compensation, as defined in the Plan, multiplied by his years of
credited service up to a maximum of 10 years, divided by 12. The maximum number of years of credited
service that Mr. Black can accrue under the Plan is 10 years, provided that compensation earned after he
has completed 10 years of credited service shall be counted for purposes of determining his Plan benefit,
if counting such compensation would increase his Plan benefit. Mr. Black’s compensation for periods
prior to his participation date in the Plan shall count for purposes of calculating his Plan benefit and that
his service with the Corporation since September 1, 2006 shall be deemed credited service for purposes
of calculating his Plan benefit.
Severance Agreements
The Compensation Committee approved amendments to the Severance Agreements for executive
officers of the Corporation. The amendments were made to comply with certain interpretations of
Section 162(m) of the Internal Revenue Code and to eliminate the application of negative discretion for
79
Messrs. Nagel, Reece, and Black. The amendments eliminate the reference to the payment of an annual
cash bonus at target and are replaced by the payment of a cash amount equal to the executive’s gross
for Messrs. Nagel, Reece, and Black, the
salary multiplied by a specified percentage.
In addition,
amendments reduce the potential payout for the annual
incentive bonus by 50% and eliminate the
application of negative discretion by the Compensation Committee in determining such amounts. The
amendments to the Severance Agreements are attached to this Form 10-K as Exhibits 10(iii)(A)(78)
through 10(iii)A(82) and are incorporated herein by reference.
80
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item, with respect to directors, is included under the captions Director
Nominees for Terms Expiring at the 2012 Annual Meeting and Directors with Terms Expiring at the 2010
or 2011 Annual Meetings of the Company’s proxy statement for the annual meeting of stockholders to be
held January 8, 2010, to be filed with the Commission pursuant to Regulation 14A, and is incorporated
herein by reference.
The information required by this item, with respect to executive officers, is included under the caption
Executive Officers of the Company’s proxy statement for the annual meeting of stockholders to be held
January 8, 2010, to be filed with the Commission pursuant to Regulation 14A, and is incorporated herein
by reference.
The information required by this item, with respect to beneficial ownership reporting, is included under the
caption Section 16(a) Beneficial Ownership Reporting Compliance of the Company’s proxy statement for
the annual meeting of stockholders to be held January 8, 2010, to be filed with the Commission pursuant
to Regulation 14A, and is incorporated herein by reference.
Item 11. Executive Compensation
the captions Compensation of Directors,
The information required by this item is included under
Information Concerning the Board and Its Committees, Compensation Committee Interlocks and Insider
Participation, Report of the Compensation Committee, Compensation Discussion and Analysis, Fiscal
2009 Summary Compensation Table, Fiscal 2009 Grants of Plan-Based Awards, Outstanding Equity
Awards at Fiscal 2009 Year-End, Option Exercises and Stock Vested in Fiscal 2009, Pension Benefits in
Fiscal 2009, Fiscal 2009 Nonqualified Deferred Compensation, Employment Arrangements, Potential
Payments upon Termination, and Equity Compensation Plans of the Company’s proxy statement for the
annual meeting of stockholders to be held January 8, 2010, to be filed with the Commission pursuant to
Regulation 14A, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
the
The information required by this item is included under the captions Beneficial Ownership of
Company’s Securities and Equity Compensation Plans of the Company’s proxy statement for the annual
meeting of stockholders to be held January 8, 2010, to be filed with the Commission pursuant to
Regulation 14A, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is included under the caption Certain Relationships and Related
Party Transactions of the Company’s proxy statement for the annual meeting of stockholders to be held
January 8, 2010, to be filed with the Commission pursuant to Regulation 14A, and is incorporated herein
by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item is included under the caption Fees Billed by Independent Registered
Public Accounting Firm of the Company’s proxy statement for the annual meeting of stockholders to be
held January 8, 2010, to be filed with the Commission pursuant to Regulation 14A, and is incorporated
herein by reference.
81
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as a part of this report:
(1) Management’s Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of August 31, 2009 and 2008
Consolidated Statements of Income for the years ended August 31, 2009, 2008, and 2007
Consolidated Statements of Cash Flows for the years ended August 31, 2009, 2008, and 2007
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years
ended August 31, 2009, 2008, and 2007
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts
Any of Schedules I through V not listed above have been omitted because they are not
applicable or the required information is included in the consolidated financial statements or
notes thereto.
(3) Exhibits filed with this report (begins on next page):
Copies of exhibits will be furnished to stockholders upon request at a nominal fee. Requests
should be sent to Acuity Brands, Inc., Investor Relations Department, 1170 Peachtree Street,
N.E., Suite 2400, Atlanta, Georgia 30309-7676.
82
INDEX TO EXHIBITS
EXHIBIT 2
(a) Agreement and Plan of Merger among Acuity
Inc. and
dated
Inc., Acuity Merger Sub,
Brands
Brands,
Acuity
September 25, 2007.
Holdings,
Inc.,
(b) Agreement and Plan of Distribution by and
Inc. and Zep Inc.,
between Acuity Brands,
dated as of October 31, 2007.
Reference is made to Exhibit 10.1 of registrant’s
Form 8-K as filed with the Commission on
September 26, 2007, which is incorporated
herein by reference.
Reference is made to Exhibit 2.1 of registrant’s
Form 8-K as filed with the Commission on
November 6, 2007, which is incorporated herein
by reference.
(c) Stock Purchase Agreement dated March 18,
2009 by and between Acuity Brands,
Inc.,
Acuity Brands Lighting, Inc., Sensor Switch,
Inc., and Brian Platner.
Reference is made to Exhibit 2.1 of registrant’s
Form 8-K as filed with the Commission on
March 18, 2009, which is incorporated herein by
reference.
EXHIBIT 3
(a) Restated Certificate of Incorporation of Acuity
Brands, Inc. (formerly Acuity Brands Holdings,
Inc.), dated as of September 26, 2007
(b) Certificate of Amendment of Acuity Brands,
Inc.),
(formerly Acuity Brands Holdings,
Inc.
dated as of September 26, 2007
(c) Amended and Restated Bylaws of Acuity
Brands
Brands,
(formerly
Holdings, Inc.) dated as of January 8, 2009.
Acuity
Inc.,
EXHIBIT 4
(a) Form of Certificate
representing Acuity
Brands, Inc. Common Stock.
Reference is made to Exhibit 3.1 of registrant’s
Form 8-K as filed with the Commission on
September 26, 2007, which is incorporated
herein by reference.
Reference is made to Exhibit 3.2 of registrant’s
Form 8-K as filed with the Commission on
September 26, 2007, which is incorporated
herein by reference.
Reference is made to Exhibit 3.1 of registrant’s
Form 8-K as filed with the Commission on
October 7, 2008, which is incorporated herein
by reference.
Reference is made to Exhibit 4.1 of registrant’s
Form 8-K as filed with the Commission on
December 14, 2001, which is incorporated
herein by reference.
(b) Stockholder Protection Rights Agreement
between Acuity Brands, Inc. (formerly Acuity
Brands Holdings, Inc.) and The Bank of New
York, dated as of September 25, 2007.
Reference is made to Exhibit 4.2 of registrant’s
Form 8-K as filed with the Commission on
September 26, 2007, which is incorporated
herein by reference.
(c) Letter Agreement
Rights Agent.
appointing Successor
(d) First Supplemental
Indenture, dated as of
to Indenture dated
October 23, 2001,
January 26, 1999, between National Service
Industries,
Inc.*, L&C
Inc., L&C Spinco,
Lighting Group, Inc., The Zep Group, Inc. and
SunTrust Bank.
(e)
Indenture dated as of January 26, 1999.
(f)
Form of 8.375% Note due August 1, 2010.
83
Reference is made to Exhibit 4(c) of registrant’s
Form 10-Q as filed with the Commission on
July 14, 2003, which is incorporated herein by
reference.
is made
Form 8-K as
to Exhibit 10.10 of
Reference
filed with the
registrant’s
Commission on December 14, 2001, which is
incorporated herein by reference.
is made
to Exhibit 10.11 to
Reference
Amendment No. 2 to the Registration Statement
on Form 10,
Inc.* on
September 6, 2001, which is incorporated
herein by reference.
filed by L&C Spinco,
is made
Reference
to Exhibit 10.13 to
Amendment No. 2 to the Registration Statement
on Form 10,
Inc.* on
September 6, 2001, which is incorporated
herein by reference.
filed by L&C Spinco,
(g) Second Supplemental
Indenture between
Inc. and The
Inc., Old ABI,
Acuity Brands,
Bank of New York Trust Company, N.A., dated
as of September 26, 2007.
Reference is made to Exhibit 4.1 of registrant’s
Form 8-K as filed with the Commission on
September 26, 2007, which is incorporated
herein by reference.
EXHIBIT 10(i)
(1) Deed to Secure Debt and Security Agreement,
dated as of October 11, 2002.
(2) Promissory Note, dated as of October 11,
2002.
(3) Amended and Restated 364-Day Revolving
Credit Agreement dated as of April 4, 2003
the Subsidiary
among Acuity Brands,
Borrowers from time to time hereto,
the
Lenders from time to time parties hereto,
Bank One, NA, as Administrative Agent, and
Wachovia Bank, N.A. as Syndication Agent.
Inc.,
(4) First Modification to Deed to Secure Debt and
Security Agreement.
(5) 5-Year Revolving Credit Agreement, dated as
of April 2, 2004 among Acuity Brands, Inc.,
the Subsidiary Borrowers from time to time
parties thereto, the Lenders from time to time
parties thereto, Bank One, NA (Main Office
Chicago), Wachovia Bank, N.A. and LaSalle
Bank National Association and Key Bank
National Association, Banc One Capital
Markets, Inc.
(6) Tax Disaffiliation Agreement, dated as of
October 7, 2005, by and between National
Service Industries, Inc. and Acuity Brands, Inc.
(7) Amendment to Receivables Facility, dated as
of September 29, 2005.
(8) Amendment No. 4 to Receivables Facility,
dated as of September 28, 2006.
(9) 5-Year Revolving Credit Agreement, dated as
of October 19, 2007 among Acuity Brands,
Inc., the Subsidiary Borrowers from time to
time parties hereto, the Lenders from time to
time parties hereto, JPMorgan Chase Bank,
National
Bank,
National Association; Bank of America, N.A.;
Keybank National Association; Wells Fargo
Bank, N.A.; and Branch Banking and Trust
Company.
Association; Wachovia
84
Reference is made to Exhibit 10(i)A(12) of the
filed with the
registrant’s Form 10-K as
Commission on November 12, 2002, which is
incorporated by reference.
Reference is made to Exhibit 10(i)A(13) of the
filed with the
registrant’s Form 10-K as
Commission on November 12, 2002, which is
incorporated by reference.
Reference is made to Exhibit 10(i)A(1) of the
registrant’s Form 10-Q as
filed with the
Commission on April 14, 2003, which is
incorporated by reference.
Reference is made to Exhibit 10(i)A(3) of the
registrant’s Form 10-Q as
filed with the
Commission on July 14, 2003, which is
incorporated by reference.
Reference is made to Exhibit 10(i)A-1(1) of the
registrant’s Form 10-Q as
filed with the
Commission on April 6, 2004, which is
incorporated by reference.
Reference is made to Exhibit 10(i)A(17) of the
registrant’s Form 10-K as
filed with the
Commission on November 1, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(i)A(18) of the
registrant’s Form 10-K as
filed with the
Commission on November 1, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(i)A(19) of the
registrant’s Form 10-K as
filed with the
Commission on November 2, 2006, which is
incorporated by reference.
Reference is made to Exhibit 10(i)A(17) of the
registrant’s Form 10-K as
filed with the
Commission on October 30, 2007, which is
incorporated herein by reference.
(10) Amended and Restated Credit and Security
Agreement dated as of October 19, 2007
among Acuity Unlimited Inc., as Borrower;
Inc., as Servicer;
Acuity Brands Lighting,
Variable
the
Liquidity Banks from time to time party hereto;
and Wachovia Bank National Association, as
Agent.
Funding Capital Company,
(11) Tax Disaffiliation Agreement between Acuity
Inc. and Zep Inc., dated as of
Brands,
October 31, 2007.
EXHIBIT 10(iii)A
Management Contracts and Compensatory
Arrangements:
(1) Acuity Brands,
Inc. 2001 Nonemployee
Directors’ Stock Option Plan.
(2) Amendment No. 1 to Acuity Brands,
Inc.
Nonemployee Directors’ Stock Option Plan,
dated December 20, 2001.
(3) Form of Indemnification Agreement.
(4) Form of Severance Agreement.
(5) Acuity Brands,
Inc. Supplemental Deferred
Savings Plan.
(6) Acuity Brands,
Inc. Executives’ Deferred
Compensation Plan.
(7) Acuity Brands,
Benefit Plan.
Inc. Senior Management
(8) Acuity Brands, Inc. Executive Benefits Trust.
(9) Acuity Brands, Inc. Supplemental Retirement
Plan for Executives.
(10) Acuity Brands, Inc. Benefits Protection Trust.
85
Reference is made to Exhibit 10(i)A(18) of the
filed with the
registrant’s Form 10-K as
Commission on October 30, 2007, which is
incorporated herein by reference.
the
Reference is made to Exhibit 10.1 of
registrant’s
filed with the
Form 8-K as
Commission on November 6, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 10.6 of registrant’s
Form 8-K as filed with the Commission on
December 14, 2001, which is incorporated
herein by reference.
Reference is made to Exhibit 10(iii)A(3) of
registrant’s Form 10-Q as
filed with the
Commission on January 14, 2002, which is
incorporated herein by reference.
Reference is made to Exhibit 10.7 to the
Registration Statement on Form 10, filed by L&C
Spinco, Inc.* with the Commission on July 3,
2001, which is incorporated herein by reference.
Reference is made to Exhibit 10 of registrant’s
Form 8-K as filed with the Commission on
January 6, 2009, which is incorporated herein
by reference.
is made
Form 8-K as
to Exhibit 10.14 of
Reference
filed with the
registrant’s
Commission on December 14, 2001, which is
incorporated herein by reference.
is made
Form 8-K as
to Exhibit 10.15 of
Reference
registrant’s
filed with the
Commission on December 14, 2001, which is
incorporated herein by reference.
is made
Form 8-K as
to Exhibit 10.16 of
Reference
registrant’s
filed with the
Commission on December 14, 2001, which is
incorporated herein by reference.
is made
Form 8-K as
to Exhibit 10.18 of
Reference
registrant’s
filed with the
Commission on December 14, 2001, which is
incorporated herein by reference.
is made
Form 8-K as
to Exhibit 10.19 of
Reference
registrant’s
filed with the
Commission on December 14, 2001, which is
incorporated herein by reference.
is made
Form 8-K as
to Exhibit 10.21 of
Reference
registrant’s
filed with the
Commission on December 14, 2001, which is
incorporated herein by reference.
(11) Employment Letter between National Service
Industries, Inc. and Vernon J. Nagel, dated as
of October 30, 2001.
(12) Form of Acuity Brands, Inc., Letter regarding
Bonuses.
(13) Amended Acuity Brands,
Inc. Management
Compensation and Incentive Plan.
(14) Amendment No. 1 to Acuity Brands,
Supplemental Deferred Savings Plan.
Inc.
(15) Amendment No. 1 to Acuity Brands,
Executives’ Deferred Compensation Plan.
Inc.
(16) Amendment No. 1 to Acuity Brands,
Inc.
Supplemental Retirement Plan for Executives.
(17) Acuity Brands,
Inc. 2002 Supplemental
Executive Retirement Plan.
(18) Letter Agreement
relating to Supplemental
Executive Retirement Plan between Acuity
Brands, Inc. and Vernon J. Nagel.
(19) Amendment No. 2 to Acuity Brands,
Supplemental Deferred Savings Plan.
Inc.
(20) Form of Severance Agreement.
(21) Amended and Restated Acuity Brands,
Inc.
Long-Term Incentive Plan.
(22) Employment Letter between Acuity Brands,
Inc. and Vernon J. Nagel, dated June 29,
2004.
(23) Amended and Restated Severance Agreement,
entered into as of January 20, 2004, by and
between
and
Vernon J. Nagel.
Brands,
Acuity
Inc.
Reference is made to Exhibit 10(iii)A(20) of the
Form 10-Q of National Service Industries, Inc.
for the quarter ended January 14, 2002, which
is incorporated herein by reference.
is made
Form 8-K as
to Exhibit 10.25 of
Reference
filed with the
registrant’s
Commission on December 14, 2001, which is
incorporated herein by reference.
Reference is made to Exhibit A of registrant’s
proxy statement
the Annual Meeting of
Stockholders as filed with the Commission on
November 12, 2002, which is incorporated
herein by reference.
for
Reference is made to Exhibit 10(iii)A(2) of
filed with the
registrant’s Form 10-Q as
Commission on January 14, 2003, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(3) of the
registrant’s Form 10-Q as
filed with the
Commission on January 14, 2003, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(2) of the
registrant’s Form 10-Q as
filed with the
Commission on April 14, 2003, which is
incorporated by reference.
the
Reference is made to Exhibit 10(iii)A(3)of
registrant’s Form 10-Q as
filed with the
Commission on April 14, 2003, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(4) of the
registrant’s Form 10-Q as
filed with the
Commission on July 14, 2003, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(8) of the
registrant’s Form 10-Q as
filed with the
Commission on July 14, 2003, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(32) of the
registrant’s Form 10-K as
filed with the
Commission on October 31, 2003, which is
incorporated by reference.
Reference is made to Exhibit A of registrant’s
proxy statement
the Annual Meeting of
Stockholders as filed with the Commission on
November 7, 2003, which is incorporated herein
by reference.
for
Reference is made to Exhibit 10(III)A(1) of the
registrant’s Form 10-Q as
filed with the
Commission on July 6, 2004, which is
incorporated by reference.
Reference is made to Exhibit 10(III)A(2) of the
registrant’s Form 10-Q as
filed with the
Commission on July 6, 2004, which is
incorporated by reference.
86
(24) Amendment No. 3 to Acuity Brands,
Supplemental Deferred Savings Plan.
Inc.
(25) Acuity Brands, Inc. Management Compensation
and Incentive Plan Fiscal Year 2005 Plan Rules
for Executive Officers.
(26) Form of Incentive Stock Option Agreement for
Executive Officers.
(27) Form of Nonqualified Stock Option Agreement
for Executive Officers.
(28) Premium-Priced Nonqualified Stock Option
for Executive Officers between
Agreement
Acuity Brands, Inc. and Vernon J. Nagel.
(29) Form of Restricted Stock Award Agreement
for Executive Officers.
(30) Acuity Brands, Inc. Long-Term Incentive Plan
Fiscal Year 2005 Plan Rules for Executive
Officers.
(31) Acuity Brands, Inc. Matching Gift Program.
(32) Acuity Brands, Inc. Long-Term Incentive Plan
Fiscal Year 2006 Plan Rules for Executive
Officers.
(33) Acuity Brands, Inc. Management Compensation
and Incentive Plan Fiscal Year 2006 Plan Rules
for Executive Officers.
(34) Employment Letter dated November 16, 2005
between Acuity Brands, Inc. and Richard K.
Reece.
(35) Form of Nonqualified Stock Option Agreement
for Executive Officers.
(36) Form of Acuity Brands,
Inc. Long-Term
Incentive Plan Restricted Stock Award.
87
Reference is made to Exhibit 10(iii)A(36) of the
filed with the
registrant’s Form 10-K as
Commission on October 29, 2004, which is
incorporated by reference.
Reference is made to Exhibit 10(III)A(2) of the
filed with the
registrant’s Form 10-Q as
Commission on January 6, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(III)A(3) of the
the
registrant’s
Commission on January 6, 2005 incorporated
by reference.
Form 10-Q filed with
Reference is made to Exhibit 10(III)A(4) of the
registrant’s Form 10-Q as
filed with the
Commission on January 6, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(III)A(5) of the
registrant’s Form 10-Q as
filed with the
Commission on January 6, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(III)A(6) of the
registrant’s Form 10-Q as
filed with the
Commission on January 6, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(III)A(7) of the
registrant’s Form 10-Q as
filed with the
Commission on January 6, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(III)A(1) of the
registrant’s Form 10-Q as
filed with the
Commission on April 4, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(47) of
registrant’s Form 10-K as
filed with the
Commission on November 1, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(48) of
registrant’s Form 10-K as
filed with the
Commission on November 1, 2005, which is
incorporated by reference.
Reference is made to Exhibit 10.1 of registrant’s
Form 8-K filed with the Commission on
November 18, 2005, which is incorporated
herein by reference.
Reference is made to Exhibit 99.1 of registrant’s
Form 8-K filed with the Commission on
December 2, 2005, which is incorporated herein
by reference.
Reference is made to Exhibit 99.2 of registrant’s
Form 8-K filed with the Commission on
December 2, 2005, which is incorporated herein
by reference.
(37) Form of Severance Agreement.
(38) Amendment dated April 21, 2006 to the
Amended
Severance
Agreement between Acuity Brands, Inc. and
Vernon J. Nagle.
Restated
and
(39) Acuity Brands,
Inc. Nonemployee Director
Deferred Compensation Plan as Amended
and Restated Effective June 29, 2006
“Nonemployee
(formerly
Director Deferred Stock Unit Plan”).
known
the
as
(40) Amendment No. 4 to Acuity Brands,
Supplemental Deferred Savings Plan.
Inc.
(41) Long-Term Incentive Plan Rules for Executive
Officers for Fiscal Year 2007.
(42) Management Compensation and Incentive
Plan for Executive Officers for Fiscal Year
2007.
(43) 2005 Supplemental Deferred Savings Plan.
(44) Amendment No. 1 to Stock Option Agreement
for Nonemployee Director dated October 25,
2006.
(45) Acuity Brands, Inc. 2002 Executives’ Deferred
Compensation
on
Plan
December 30, 2002 and as Amended and
Restated January 1, 2005.
Amended
as
(46) Amendment No. 1 to Acuity Brands,
Long-Term
September 29, 2006.
Incentive
Plan
Inc.
dated
(47) Acuity Brands,
Inc. 2002 Supplemental
Executive Retirement Plan as Amended and
Restated Effective January 1, 2005.
(48) Form of Amended and Restated Change in
Control Agreement.
(49) Amendment No. 1 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan.
(50) Amendment No. 1 to Acuity Brands, Inc. 2005
Supplemental Deferred Savings Plan.
88
Reference is made to Exhibit 99.2 of registrant’s
Form 8-K filed with the Commission on April 27,
2006, which is incorporated herein by reference.
Reference is made to Exhibit 99.3 of registrant’s
Form 8-K filed with the Commission on April 27,
2006, which is incorporated herein by reference.
Reference is made to Exhibit 99.1 of registrant’s
Form 8-K filed with the Commission on July 6,
2006, which is incorporated herein by reference.
Reference is made to Exhibit 99.2 of registrant’s
Form 8-K filed with the Commission on July 6,
2006, which is incorporated herein by reference.
Reference is made to Exhibit 99.1 of registrant’s
Form 8-K filed with the Commission on
August 29, 2006, which is incorporated herein
by reference.
Reference is made to Exhibit 99.2 of registrant’s
Form 8-K filed with the Commission on
August 29, 2006, which is incorporated herein
by reference.
Reference is made to Exhibit 10.1 of registrant’s
Form 8-K filed with the Commission on
October 5, 2006, which is incorporated herein
by reference.
Reference is made to Exhibit 99.1 of registrant’s
Form 8-K filed with the Commission on
October 27, 2006, which is incorporated herein
by reference.
Reference is made to Exhibit 10(iii)A(61) of the
registrant’s Form 10-K as
filed with the
Commission on November 2, 2006, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(62) of the
registrant’s Form 10-K as
filed with the
Commission on November 2, 2006, which is
incorporated by reference.
Reference is made to Exhibit 10(iii)A(63) of the
filed with the
registrant’s Form 10-K as
Commission on November 2, 2006, which is
incorporated by reference.
Reference is made to Exhibit 99.1 of registrant’s
Form 8-K filed with the Commission on April 27,
2006, which is incorporated herein by reference.
Reference is made to Exhibit 99.1 of registrant’s
Form 8-K as filed with the Commission on
June 29, 2007, which is incorporated herein by
reference.
Reference is made to Exhibit 99.2 of registrant’s
Form 8-K as filed with the Commission on
June 29, 2007, which is incorporated herein by
reference.
(51) Confidentiality
and Restrictive Covenants
Agreement with John K. Morgan.
(52) Amendment No. 3 to Acuity Brands, Inc. 2001
Nonemployee Directors’ Stock Option Plans.
(53) Amendment No. 2 to Acuity Brands,
Inc.
Long-Term Incentive Plan.
(54) Amendment No. 1 to Acuity Brands,
Inc.
Senior Benefit Plan.
(55) Amendment No. 5 to Acuity Brands,
Supplemental Deferred Savings Plan.
Inc.
(56) Amendment No. 2 to Acuity Brands,
Amended
Agreement.
and
Restated
Inc.
Severance
(57) Amendment No. 2 to Acuity Brands, Inc. 2001
Non-employee Directors’ Stock Option Plan.
(58) Amendment No. 1 to Nonemployee Director
Stock Option Plan.
(59) Acuity Brands, Inc. Long-Term Incentive Plan.
(60) Acuity Brands, Inc. Management Compensation
and Incentive Plan.
(61) Acuity Brands, Inc. Long-Term Incentive Plan
Fiscal Year 2008 Plan Rules for Executive
Officers.
(62) Acuity Brands, Inc. Management Compensation
and Incentive Plan Fiscal Year 2008 Plan Rules
for Executive Officers.
(63) Amendment No. 2 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan.
89
Reference is made to Exhibit 10(iii)A(72) of the
filed with the
registrant’s Form 10-K as
Commission on October 30, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(3) of
filed with the
registrant’s Form 10-Q as
Commission on July 10, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(4) of
filed with the
registrant’s Form 10-Q as
Commission on July 10, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(5) of
registrant’s Form 10-Q as
filed with the
Commission on July 10, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(6) of
registrant’s Form 10-Q as
filed with the
Commission on July 10, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(2) of
registrant’s Form 10-Q as
filed with the
Commission on January 4, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(2) of
registrant’s Form 10-Q as
filed with the
Commission on April 4, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 99.1 of registrant’s
Form 8-K as filed with the Commission on
October 27, 2006, which is incorporated herein
by reference.
Reference is made to Exhibit A of
the
registrant’s Proxy Statement as filed with the
Commission on November 16, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit B of
the
registrant’s Proxy Statement as filed with the
Commission on November 16, 2007, which is
incorporated herein by reference.
the
Reference is made to Exhibit 99.1 of
registrant’s
filed with the
Form 8-K as
Commission on January 4, 2008, which is
incorporated herein by reference.
the
Reference is made to Exhibit 99.2 of
registrant’s
filed with the
Form 8-K as
Commission on January 4, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(1) of the
registrant’s Form 10-Q as
filed with the
Commission on January 8, 2008, which is
incorporated herein by reference.
(64) Form of Indemnification Agreement.
(65) Amendment No. 2 to Acuity Brands,
Inc.
Nonemployee Director Deferred Compensation
Plan.
(66) Amendment No. 2 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan.
(67) Amendment No. 3 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan.
(68) Amendment No. 3 to Acuity Brands, Inc. 2005
Supplemental Deferred Savings Plan.
(69) Amendment No. 4 to Acuity Brands, Inc. 2005
Supplemental Deferred Savings Plan.
(70) Amendment No. 1 to Amended and Restated
Change in Control Agreement with John T.
Hartman.
(71) Amendment No. 1 to Amended and Restated
Change in Control Agreement with Jeremy M.
Quick.
(72) Form of Restricted Stock Award Agreement.
(73) Form of Nonqualified Stock Option Agreement
for Key Employees effective October 24,
2008.
(74) Form of Nonqualified Stock Option Agreement
for Executive Officers of Acuity Brands, Inc.
effective October 24, 2008.
(75) Employment Letter dated April 29, 2004
Inc. and
between Acuity Brands Lighting,
John T. Hartman.
(76) Employment Letter dated October 29, 2004
Inc. and
between Acuity Brands Lighting,
Jeremy M. Quick.
90
the
Reference is made to Exhibit 10.1 of
filed with the
Form 8-K as
registrant’s
Commission on January 16, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(86) of the
filed with the
registrant’s Form 10-K as
Commission on October 27, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(87) of the
filed with the
registrant’s Form 10-K as
Commission on October 27, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(88) of the
registrant’s Form 10-K as
filed with the
Commission on October 27, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(89) of the
registrant’s Form 10-K as
filed with the
Commission on October 27, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(90) of the
registrant’s Form 10-K as
filed with the
Commission on October 27, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(91) of the
registrant’s Form 10-K as
filed with the
Commission on October 27, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(92) of the
registrant’s Form 10-K as
filed with the
Commission on October 27, 2008, which is
incorporated herein by reference.
Reference is made to Exhibit 10(h) of registrant’s
Form 10-Q as filed with the Commission on
April 8, 2009, which is incorporated herein by
reference.
Reference is made to Exhibit 10(i) of registrant’s
Form 10-Q as filed with the Commission on
April 8, 2009, which is incorporated herein by
reference.
Reference is made to Exhibit 10(j) of registrant’s
Form 10-Q as filed with the Commission on
April 8, 2009, which is incorporated herein by
reference.
Reference is made to Exhibit 10(d) of registrant’s
Form 10-Q as filed with the Commission on
April 8, 2009, which is incorporated herein by
reference.
Reference is made to Exhibit 10(e) of registrant’s
Form 10-Q as filed with the Commission on
April 8, 2009, which is incorporated herein by
reference.
(77) Employment Letter dated July 27, 2006
Inc. and Mark A.
between Acuity Brands,
Black.
(78) Amendment No. 3 to Acuity Brands,
Inc.
Severance
Amended
Agreement, between Acuity Brands, Inc. and
Vernon J. Nagel.
Restated
and
(79) Amendment No. 1 to Acuity Brands,
Inc.
Amended
Severance
Agreement between Acuity Brands, Inc. and
Mark A. Black.
Restated
and
(80) Amendment No. 1 to Acuity Brands,
Inc.
Amended
Severance
Agreement between Acuity Brands, Inc. and
Jeremy M. Quick
Restated
and
(81) Amendment No. 1 to Acuity Brands,
Inc.
Amended
Severance
Agreement between Acuity Brands, Inc. and
Richard K. Reece.
Restated
and
(82) Amendment No. 1 to Acuity Brands,
Inc.
Amended
Severance
Agreement between Acuity Brands, Inc. and
C. Dan Smith.
Restated
and
(83) Form of Severance Agreement.
(84) Amended and Restated Change in Control
Agreement.
EXHIBIT 14
Code of Ethics and Business Conduct.
EXHIBIT 21
List of Subsidiaries.
EXHIBIT 23
Consent of
Accounting Firm.
Independent Registered Public
EXHIBIT 24
Powers of Attorney.
EXHIBIT 31
(a) Rule 13a-14(a)/15d-14(a) Certification, signed
by Vernon J. Nagel.
(b) Rule 13a-14(a)/15d-14(a) Certification, signed
by Richard K. Reece.
EXHIBIT 32
(a) Section 1350 Certification, signed by Vernon J.
Nagel.
(b) Section
1350 Certification,
signed
by
Richard K. Reece.
Reference is made to Exhibit 10(f) of registrant’s
Form 10-Q as filed with the Commission on
April 8, 2009, which is incorporated herein by
reference.
Filed with the Commission as part of this Form
10-K.
Filed with the Commission as part of this Form
10-K.
Filed with the Commission as part of this Form
10-K.
Filed with the Commission as part of this Form
10-K.
Filed with the Commission as part of this Form
10-K.
Filed with the Commission as part of this Form
10-K.
Filed with the Commission as part of this Form
10-K.
Reference is made to Exhibit 14 of registrant’s
Form 8-K as filed with the Commission on
January 12, 2005, which is incorporated herein
by reference.
Filed with the Commission as part of
Form 10-K.
Filed with the Commission as part of
Form 10-K.
Filed with the Commission as part of
Form 10-K.
Filed with the Commission as part of
Form 10-K.
Filed with the Commission as part of
Form 10-K.
Filed with the Commission as part of
Form 10-K.
Filed with the Commission as part of
Form 10-K.
this
this
this
this
this
this
this
*
Acuity Brands, Inc. operated under the name L&C Spinco, Inc. from July 27, 2001 — November 9, 2001.
91
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: October 29, 2009
ACUITY BRANDS, INC.
By:
/S/ VERNON J. NAGEL
Vernon J. Nagel
Chairman, President, and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ VERNON J. NAGEL
Vernon J. Nagel
/S/ RICHARD K. REECE
Richard K. Reece
Chairman, President, and Chief
Executive Officer
October 29, 2009
Executive Vice President and
Chief Financial Officer (Principle
Financial and Accounting Officer)
October 29, 2009
*
Peter C. Browning
*
John L. Clendenin
*
George C. (Jack) Guynn
*
Gordon D. Harnett
*
Robert F. McCullough
*
Julia B. North
*
Ray M. Robinson
*
Neil Williams
Director
Director
Director
Director
Director
Director
Director
Director
October 29, 2009
October 29, 2009
October 29, 2009
October 29, 2009
October 29, 2009
October 29, 2009
October 29, 2009
October 29, 2009
*BY:
/S/ RICHARD K. REECE
Attorney-in-Fact
October 29, 2009
Richard K. Reece
92
Schedule II
Acuity Brands, Inc.
Valuation and Qualifying Accounts
for the Years Ended August 31, 2009, 2008, and 2007
(In thousands)
Historical amounts in the following table have been restated to exclude amounts related to discontinued
operations. For additional
the Notes to
Consolidated Financial Statements included in Item 8 of this filing.
information, see Note 2 — Discontinued Operations of
Year Ended August 31, 2009:
Reserve for doubtful accounts . . . . . . . . . . . . .
Reserve for estimated warranty and recall
Balance at
Beginning
of Year
Additions and Reductions
Charged to
Costs and
Expenses
Other
Accounts(1)
Deductions
Balance at
End of
Year
$ 1,640
503
(98)
157
$ 1,888
costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,888
2,783
(47)
4,229
$ 3,395
Reserve for estimated returns and
allowances . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,283
45,704
Self-insurance reserve(2) . . . . . . . . . . . . . . . . . .
$12,587
5,637
—
499
46,633
$ 4,354
7,001
$11,722
Year Ended August 31, 2008:
Reserve for doubtful accounts . . . . . . . . . . . . .
Reserve for estimated warranty and recall
$ 1,361
388
34
143
$ 1,640
costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,393
7,230
(1,040)
5,695
$ 4,888
Reserve for estimated returns and
allowances . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,533
53,545
Self-insurance reserve(2) . . . . . . . . . . . . . . . . . .
$12,628
7,657
—
—
55,795
$ 5,283
7,698
$12,587
Year Ended August 31, 2007:
Reserve for doubtful accounts . . . . . . . . . . . . .
Reserve for estimated warranty and recall
$ 2,417
(741)
317
632
$ 1,361
costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,092
3,721
Reserve for estimated returns and
allowances . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,835
56,628
Self-insurance reserve(2) . . . . . . . . . . . . . . . . . .
$11,967
8,160
—
—
—
5,420
$ 4,393
55,930
$ 7,533
7,499
$12,628
(1)
(2)
Includes recoveries and adjustments credited to the reserve.
Includes reserves for workers’ compensation, auto, product, and general liability claims.
93
RECONCILIATION OF NON-U.S. GAAP MEASURES
ACUITY BRANDS, INC.
The table below reconciles certain U.S. Generally Accepted Accounting Principles (“GAAP”) financial
measures to the corresponding non-GAAP measures, which exclude special charges associated with
actions to accelerate the streamlining of the organization, including the consolidation of certain manu-
facturing facilities. These non-GAAP financial measures, including adjusted operating profit, adjusted
operating profit margin, adjusted income from continuing operations, and adjusted diluted earnings
per share from continuing operations, are provided to enhance the user’s overall understanding of the
Company’s current financial performance and prospects for the future. Specifically, management
believes these non-GAAP financial measures provide useful information to investors by excluding the
special charges, which management believes are unusual in nature and not indicative of the
Company’s long-term core operating results. The Company believes these non-U.S. GAAP measures
provide greater comparability and enhanced visibility into our results excluding the impact of the
charges. These non-GAAP financial measures should be considered in addition to, and not as a
substitute for or superior to, results prepared in accordance with GAAP.
($ in thousands, except per share data)
2009
2008
Change
Fiscal Years Ended
August 31,
Percent
Change
Operating Profit ........................................................ $ 153,753
Percent of net sales ..............................................
Add back: Special Charges .....................................
26,737
9.3%
$ 261,060
$ (107,307)
(41%)
12.9%
14,638
12,099
Adjusted Operating Profit ......................................... $ 180,490
Adjusted Operating Profit Margin .........................
10.9%
$ 275,698
$ (95,208)
(35%)
13.6%
Income from Continuing Operations ........................ $ 85,197
16,844
Add back: Special Charges, net of tax....................
$ 148,632
9,105
$ (63,435)
7,739
(43%)
Adjusted Income from Continuing Operations ........ $ 102,041
$ 157,737
$ (55,696)
(35%)
Diluted Earnings Per Share from Continuing
Operations ............................................................ $
Add back: Special Charges .....................................
2.05
0.41
$
3.57
0.21
$
(1.52)
0.20
(43%)
Adjusted Diluted Earnings Per Share from
Continuing Operations .......................................... $
2.46
$
3.78
$
(1.32)
(35%)
STOCKHOLDER INFORMATION
Corporate Headquarters
Stock Listing
BuyDIRECT Plan
BNY Mellon Shareowner Services
offers the BuyDIRECT investment
plan, a direct purchase and sale
plan for investors wishing to pur-
chase Acuity Brands stock.
Dividends can be automatically
reinvested. The Plan is not
sponsored or administered
by Acuity Brands.
Inquiries should be directed to
BNY Mellon Shareowner Services.
Forward-Looking Statements
This annual report includes
forward-looking statements
regarding expected future
results of the Company. A variety
of factors could cause actual
results to differ materially from
expected results. Please see the
risk factors more fully described in
the accompanying financial infor-
mation, which is separately filed
with the Securities and Exchange
Commission as part of the Annual
Report on Form 10-K for the year
ended August 31, 2009.
Acuity Brands, Inc.
1170 Peachtree Street, NE
Suite 2400
Atlanta, Georgia 30309-7676
404-853-1400
www.acuitybrands.com
Acuity Brands Lighting
One Lithonia Way
Conyers, Georgia 30012-3957
770-922-9000
www.acuitybrandslighting.com
Independent Registered
Public Accounting Firm
Ernst & Young LLP
55 Ivan Allen Jr. Boulevard
Suite 1000
Atlanta, Georgia 30308-3051
404-874-8300
Annual Meeting
1:00 p.m. Eastern Time
Friday, January 8, 2010
Four Seasons Hotel Ballroom
75 Fourteenth Street, NE
Atlanta, Georgia 30309-3604
Reports Available to Stockholders
Copies of the following company
reports may be obtained, without
charge: 2009 Annual Report to
the Securities and Exchange
Commission, filed on Form 10-K,
and Quarterly Reports to the
Securities and Exchange Com-
mission, filed on Form 10-Q.
Requests should be directed to:
Acuity Brands, Inc.
Attention: Investor Relations
1170 Peachtree Street, NE
Suite 2400
Atlanta, Georgia 30309-7676
404-853-1400
www.acuitybrands.com
New York Stock Exchange
Ticker Symbol: AYI
Certifications
Acuity Brands has filed the Chief
Executive Officer and Chief
Financial Officer certifications
required by Section 302 of the
Sarbanes-Oxley Act as exhibits
to its 2009 Annual Report on
Form 10-K, and submitted its
required annual Chief Executive
Officer certification to the New
York Stock Exchange for fiscal
year 2008.
Stockholders of Record
The number of stockholders of
record of Acuity Brands common
stock was 3,925 as of October
26, 2009.
Transfer Agent and Registrar
BNY Mellon Shareowner Services
is the transfer agent, registrar,
dividend disbursing agent and
dividend reinvestment agent for
the Company. Stockholders of
record with questions about lost
certificates, lost or missing dividend
checks, direct deposit of dividends,
or notification of change of address
should contact:
Acuity Brands, Inc.
c/o BNY Mellon Shareowner
Services
P.O. Box 358015
Pittsburgh, Pennsylvania
15252-8015
Web site:
www.bnymellon.com/shareowner/isd
Toll Free: 866-234-1921
(Inside the United States
and Canada)
201-680-6685
(Outside the United States
and Canada)
Annual Report Design by Curran & Connors, Inc.
www.curran-connors.com
Trees
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Solid Waste
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Atmospheric Emissions
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1170 Peachtree Street, NE Suite 2400 Atlanta, Georgia 30309-7676
404-853-1400 www.acuitybrands.com
Energy
energy.eps
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Automobile Miles
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Natural Gas
natural_gas.eps
The 2009 Acuity Brands, Inc. Annual Report saved the following
resources by printing on paper con taining up to 100% recycled fiber and
100% post-consumer waste.
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waterborne.eps
Trees Cut Down/Preserved for the Future
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Solid Waste
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86 trees
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Solid Waste
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Atmospheric Emissions
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Energy
energy.eps
60,764,800 BTUs
of energy not
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Automobile Miles
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Air
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4,032 pounds of
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7,912 pounds of
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Crude Oil
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Crude Oil
crude_oil.eps
36,441 gallons
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Atmospheric Emissions
atmosphere.eps
of wastewater
Atmospheric Emissions
atmosphere.eps
Solid Waste
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flow saved
Air
air.eps
Automobile Miles
auto_miles.eps
Natural Gas
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Automobile Miles
auto_miles.eps
Natural Gas
natural_gas.eps
248 pounds of
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atmosphere.eps
Trees
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generated
Trees Cut Down/Preserved for the Future
trees_cut.eps
Crude Oil
crude_oil.eps
Solid Waste
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Atmospheric Emissions
atmosphere.eps
greenhouse gases
Waterborne Waste
waterborne.eps
water-borne waste
Trees Cut Down/Preserved for the Future
trees_cut.eps
Crude Oil
crude_oil.eps
prevented
Waterborne Waste
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Trees Cut Down/Preserved for the Future
trees_cut.eps
Crude Oil
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not created
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Automobile Miles
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Natural Gas
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Energy
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Air
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Automobile Miles
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Waterborne Waste
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Trees Cut Down/Preserved for the Future
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Waterborne Waste
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Trees Cut Down/Preserved for the Future
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