2014 ANNUAL REPORT
Letter to Our Stakeholders
2014 was a year of record financial performance for Acuity Brands
as we reported all-time highs for net sales, operating profit, net
income, diluted earnings per share, and cash flow from operations.
During the past year, we continued to successfully execute our strategy to extend our leader-
ship position in the North American lighting solutions market by providing our customers with
differentiated value from our industry-leading portfolio of innovative products and solutions
along with superior service.
Acuity Brands’ 2014 financial results include:
• Record net sales of $2.4 billion, an increase of 15% compared with fiscal 2013;
• Record operating profit of $299.1 million, an increase of 35% compared with fiscal 2013;
• Record net income of $175.8 million, an increase of 38% compared with fiscal 2013;
• Record diluted earnings per share of $4.05, an increase of 37% compared with fiscal 2013;
• Record net cash provided by operating activities of $233.1 million, an increase of over $100 million
compared with fiscal 2013; and
• We ended fiscal 2014 with a record cash balance of $552.5 million, while investing $35.3 million in
capital expenditures, and paying $22.5 million of dividends to stockholders.
On the strategic front, we accomplished a number of items in 2014. We outperformed the growth rate
of the overall lighting markets we serve due to our multiple sales channels and product diversification,
as well as our strategies to better serve customers with new, more innovative lighting solutions and the
strength of our many sales forces. This past year we won multiple major awards for product innovation
and customer service, further demonstrating our leadership in solid-state lighting solutions.
In 2014, we continued our investments to enhance our production, distribution, and customer service
and support capabilities and further accelerated the deployment of our lean business processes. A few
specific examples that demonstrate these accomplishments include reducing late backlog to a historical
low while improving on-time delivery to an all-time high, and increasing our productivity which is reflected
in our nearly 11% increase in net sales per associate.
This is an extraordinary time to be in the lighting industry, particularly for a company of the caliber of
Acuity Brands. Rapid advancements in technology, along with the need for greater energy efficiency,
changes in public policy, and demand for environmental sustainability continue to drive profound changes
in our industry, creating an exciting opportunity. Acuity Brands is capitalizing on these profound changes
to provide lighting solutions that are efficient, elegant, and sophisticated while at the same time simple
,
to install, maintain, and use. We are at the forefront of transforming the lighting industry. Our experience,
knowledge, and skill as lighting experts allow us to deliver superior lighting solutions for virtually any
application, a promise best captured in our tag line: “Expanding the Boundaries of Lighting™.”
OUR FUTURE: GROWTH, INNOVATION, EXCELLENCE
As we enter 2015, our mission is to continue to build on our rich legacy of excellence, growth, and inno-
vation. Our passion and intense focus continue to be centered on creating lighting solutions that deliver
superior quality, energy efficiency and performance. We know that superior quality of light enhances
how we live and interact, whether it is increasing students’ learning ability in schools, improving worker
productivity and comfort in offices and industrial facilities, enhancing the shopping experience in retail
establishments, or accelerating patient healing in hospitals. The possibilities of what can be achieved
by the use of intelligent lighting solutions are still being explored. Technology, coupled with our deep
knowledge of lighting, is allowing us to create ever more effective and energy-efficient solutions that are
smart and simple, a slogan campaign we use to convey our value proposition in the many vertical markets
we serve. Our associates are rapidly exploiting these new technologies and aggressively expanding our
industry-leading portfolio by developing intelligent lighting solutions that represent significant advance-
ments over traditional technologies and easily network with other building systems, improving energy
efficiency, performance and safety.
We believe the emphasis on energy efficiency and environmental concerns will continue to drive significant
growth in our industry. As the market leader in North America, we believe our deep expertise in tech-
nology, optics and thermal management, our understanding of the art and science of lighting, and our
ability to provide tailored lighting solutions for numerous applications have positioned the company to
excel. Our key strategies and tactical focus have remained consistent over the last few years. We expect
to continue to execute our profitable growth strategy by focusing on the three mission-critical areas of
operational excellence that we refer to as the 3 Cs:
• Providing unparalleled customer service;
• Pursuing world-class cost efficiency by eliminating non-value added activities and transaction costs; and
• Creating a culture that demands excellence in everything we do through continuous improvement.
On behalf of Acuity’s management team and its Board of Directors, I would like to thank our 7,000
associates for making possible the success we experienced in 2014 and for their continued contributions
and dedication to our vision. I also would like to thank our customers for their business, our suppliers for
their support, and our stockholders for the partnership we share in our enterprise.
Sincerely,
VERNON J. NAGEL
Chairman, President, and Chief Executive Officer
November 17, 2014
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________
Form 10-K
__________________________________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2014
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
58-2632672
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
1170 Peachtree Street, N.E., Suite 2300, Atlanta, Georgia
(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
Common Stock ($0.01 Par Value)
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
__________________________________________________________
Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically 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 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 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
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
Based on the closing price of the Registrant’s common stock of $141.05 as quoted on the New York Stock Exchange on February 28, 2014, the aggregate market
value of the voting stock held by nonaffiliates of the registrant was $6,041,028,757.
The number of shares outstanding of the registrant’s common stock, $0.01 par value, was 43,253,118 shares as of October 27, 2014.
__________________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K
Part II, Item 5
Incorporated Document
Proxy Statement for 2014 Annual Meeting of Stockholders
Part III, Items 10, 11, 12, 13, and 14
Proxy Statement for 2014 Annual Meeting of Stockholders
ACUITY BRANDS, INC.
Table of Contents
Part I
Part II
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Item 1.
Item 1a.
Item 1b.
Item 2.
Item 3.
Item 5.
Item 6.
Item 7.
Item 7a.
Item 8.
Item 9.
Item 9a.
Item 9b.
Other Information
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Part III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
Part IV
Signatures
Financial Statement Schedules
Page No.
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8
14
14
15
16
18
19
33
34
79
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88
89
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Item 1.
($ in millions, except per-share data and as indicated)
Business
PART I
Overview
Acuity Brands, Inc. (“Acuity Brands”) is the parent company of Acuity Brands Lighting, Inc. (“ABL”) and other subsidiaries
(Acuity Brands, ABL, and such other subsidiaries are collectively referred to herein as the "Company”), and was incorporated in
2001 under the laws of the State of Delaware. The Company is one of the world’s leading providers of lighting solutions for
commercial, institutional, industrial, infrastructure, and residential applications throughout North America and select international
markets. The Company’s lighting solutions include devices such as luminaires, lighting controls, lighting components, power
supplies, prismatic skylights, light-emitting diode (“LED”) lamps, and integrated lighting systems for indoor and outdoor
applications utilizing a combination of light sources, including daylight, and other devices controlled by software that monitors
and manages light levels while optimizing energy consumption (collectively referred to herein as “lighting solutions”). As a goal-
oriented, customer-centric company, we expect to continue to align the unique capabilities and resources of our organization to
drive profitable growth through a keen focus on providing comprehensive and differentiated lighting solutions for our customers,
driving world-class cost efficiency, and leveraging a culture of operational excellence through continuous improvement.
The Company manufactures or procures lighting devices primarily in North America, Europe, and Asia. These devices can
be sold separately or as part of an integrated lighting system. Devices used in lighting systems vary significantly in terms of
functionality and performance and are selected based on a customer's specification, including the aesthetic desires and performance
requirements for a given lighting application. The Company’s lighting solutions are marketed under numerous brand names,
including Lithonia Lighting®, Holophane®, Peerless®, Mark Architectural Lighting™, Hydrel®, American Electric Lighting®,
Gotham®, Carandini®, RELOC®, Antique Street Lamps™, Winona® Lighting, Synergy® Lighting Controls, Sensor Switch®,
Lighting Control & Design™, Dark to Light®, ROAM®, Sunoptics®, Axion™ Controls, acculamp®, Pathway Connectivity™,
Healthcare Lighting®, and eldoLED®. As of August 31, 2014, the Company manufactures products in 14 facilities in North America
and two facilities in Europe.
Principal customers include electrical distributors, retail home improvement centers, electric utilities, lighting showrooms,
national accounts, and energy service companies located in North America and select international markets serving new
construction, renovation, and maintenance and repair applications. In North America, the Company’s lighting solutions are sold
primarily by independent sales agents, electrical wholesalers, and factory sales representatives who cover specific geographic
areas and market channels. Products are delivered directly or 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 sales
forces utilize a variety of distribution methods to meet specific individual customer or country requirements. In fiscal 2014, sales
originated in North America accounted for approximately 98% of net sales. See the Supplemental Disaggregated Information
footnote of the Notes to Consolidated Financial Statements for more information concerning the domestic and international net
sales of the Company. The Company has one operating segment serving the North American lighting market and select international
markets.
Industry Overview
Based on industry sources and government information, the Company estimates that in fiscal 2014 the size of the North
American lighting market served by the Company (also referred to herein as “N.A. addressable lighting market”) was approximately
$14 billion and includes non-portable luminaires (as defined by the National Electrical Manufacturers Association), poles for
outdoor lighting, emergency lighting fixtures, daylighting, lighting controls, LED drivers, and certain types of LED lamps. This
market estimate is based on a combination of external industry data and internal estimates, and excludes portable and vehicular
lighting fixtures and certain related lighting components, such as lighting ballasts and most lamps. The U.S. market, which
represents approximately 80% of the North American market, is relatively fragmented.
The Company operates in a highly competitive industry that is affected by volatility from a number of general business and
economic factors, such as gross domestic product growth, employment levels, credit availability, energy costs, and commodity
costs. The Company’s market is based on residential and non-residential construction, both new and renovation and retrofit activity,
which is sensitive to the volatility of these general economic factors. The Company is not aware of any data that accurately
quantifies the split of the non-residential lighting market between new construction and renovation and retrofit activity; however,
recent trends developed from industry sources and Company estimates suggest that renovation and retrofit activity represents a
growing proportion of the total non-residential lighting market. Construction spending on infrastructure projects such as highways,
streets, and urban developments has a material impact on the demand for the Company’s infrastructure-focused lighting solutions.
Demand for the Company’s lighting solutions sold through certain retail channels is highly dependent on economic drivers, such
as consumer spending and discretionary income, along with housing construction and home improvement spending.
3
A source of demand for the lighting industry is attributed to the renovation and retrofit of lighting systems in existing
buildings. The Company estimates the potential market size of the installed base of U.S. lighting and lighting controls is significant
(approximately $300 billion) based on square footage of existing buildings, of which a majority represents potential space for
relighting activities as they contain older, less efficient lighting systems.
The industry is influenced by the development of new lighting technologies, including solid-state lighting, electronic drivers,
embedded lighting controls, and more effective optical designs and lamps; federal, state, and local requirements for updated energy
codes; incentives by federal, state, and local municipal authorities, as well as utility companies, for using more energy-efficient
lighting solutions; and design technologies addressing sustainability. The Company is a leading provider of lighting solutions
based on these technologies and utilizes internally developed, licensed, or acquired intellectual property. The industry continues
to experience competition from new entrants with a focus on new technology-based lighting devices and controls components.
Products
The Company offers a broad portfolio of indoor and outdoor lighting products and solutions for commercial, institutional,
industrial, infrastructure, and residential applications. The portfolio of products and solutions of the Company includes lighting
products utilizing fluorescent, LED, organic LED ("OLED"), high intensity discharge, metal halide, and incandescent light sources
to illuminate an extensive number of applications as well as standalone and imbedded lighting control solutions from simple to
sophisticated, wired and wireless. Lighting and controls products and solutions include the following: recessed, surface, and
suspended lighting; downlighting; decorative lighting; emergency and exit lighting; track lighting; daylighting; special-use lighting;
street and roadway lighting; parking garage lighting; underwater lighting; area pedestrian, flood, and decorative site lighting;
landscape lighting; occupancy sensors; photocontrols; relay panels; architectural dimming panels; and integrated lighting controls
systems.
The product and solutions portfolio of the Company also includes modular wiring, LED drivers, glass, and inverters sold
primarily to original equipment manufacturers. In addition, the Company provides services across applications that primarily
relate to monitoring and controlling lighting systems through network technologies and the commissioning of control systems.
Sales of lighting solutions, excluding services, accounted for approximately 99% of total consolidated net sales for Acuity
Brands in fiscal 2014, 2013, and 2012.
Sales and Marketing
Sales. The Company sells lighting products and solutions to customers in the North American market utilizing numerous
sales forces based on the channel served and geography. As of August 31, 2014, these sales forces consisted of approximately
280 company-employed salespeople and a network of approximately 170 independent sales agencies, each of which employs
numerous salespeople. The Company also operates separate European sales forces, including independent international sales
agencies, and an international sales group coordinating export sales outside of North America and Europe.
Marketing. The Company markets its portfolio and service capabilities 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 social media. The Company owns and
operates training and display facilities in several locations throughout North America and Europe designed to enhance the lighting
knowledge of customers and industry professionals.
Customers
Customers of the Company include electrical distributors, retail home improvement centers, electric utilities, utility
distributors, national accounts, U.S. government and municipalities, lighting showrooms, original equipment manufacturers
("OEMs"), and energy service companies. In addition, there are a variety of other professionals who could represent a significant
influence in the product specification process for any given project. These generally include building owners, federal, state, and
local governments, contractors, engineers, architects, and lighting designers.
A single customer of the Company, The Home Depot, accounted for approximately 12% of net sales of the Company in
fiscal 2014, 13% in fiscal 2013, and 10% in fiscal 2012. These sales include products for resale as well as for lighting its facilities.
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, five facilities in Mexico,
two facilities in Europe, and one in Canada. 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. Certain critical processes, such as reflector
4
forming and anodizing, high-end glass production, surface mount circuit board production, LED driver production, software
development, and assembly are performed (not exclusively) at company-operated facilities, offering the ability to differentiate
end-products through superior capabilities. Other critical components, such as lamps, LEDs, certain LED light engines, sockets,
and ballasts are purchased primarily from outside vendors. The Company’s investment in its production facilities is focused
primarily on improving capabilities, product quality, and manufacturing efficiency as well as environmental, health, and safety
compliance. The Company also utilizes contract manufacturing from U.S., Asian, and European sources for certain products.
Additionally, the Company purchases certain finished goods, including poles, to complement its area lighting fixtures, as well as
a variety of residential and commercial lighting equipment. Of total finished goods manufactured and purchased in fiscal 2014,
the Company’s U.S. operations produced approximately 25%; its Mexican operations produced approximately 53%; its European
operations produced approximately 2%; and finished product manufactured by others accounted for approximately 20%.
Distribution
Lighting solutions are delivered directly from manufacturing facilities or through a network of strategically located
distribution centers, regional 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”) is defined as the critical investigation aimed at discovery of new knowledge and the
conversion of that knowledge into the design of a new product or significant improvement to an existing product. The Company's
R&D efforts are targeted toward the development of lighting solutions with an ever-increasing performance-to-cost ratio and
energy efficiency, while mutually beneficial relationships with LED, lamp, ballast, and power supply manufacturers are maintained
to understand technology enhancements and incorporate them in the design of the Company’s lighting solutions. R&D expenses
consist of compensation, payroll taxes, employee benefits, materials, supplies, and other administrative costs, but do not include
all new product development costs. For fiscal 2014, 2013, and 2012, research and development expense totaled $35.3, $32.7, and
$34.7, respectively.
Competition
The lighting market served by the Company is highly competitive, with some of the largest suppliers of lighting components
also serving many of the same markets and competing for the same customers. Competition is based on numerous factors, including
brand name recognition, product quality, features and benefits, product and lighting system design, energy efficiency, customer
relationships, service capabilities, and price. The Company’s largest competitors in the North American lighting market include
the lighting divisions of Koninklijke Philips N.V., Eaton Corporation, Hubbell Incorporated, Schneider Electric, and Cree, Inc.
The Company estimates that the largest publicly traded manufacturers (including Acuity Brands), which participate in varying
degrees in the North American lighting market, have approximately half of the total market share. In addition to these large
competitors, the Company also competes with hundreds of manufacturers of varying size.
The market for lighting solutions and services is competitive and continues to evolve. Certain global and more diversified
electrical manufacturers may provide a broader product offering utilizing electrical, lighting, and building automation products.
In addition, there have been a growing number of new competitors, from small startup companies to global consumer electronics
companies, offering solid-state (primarily LED) lighting solutions.
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 resources, including investments in capital and operating costs relating to environmental
compliance. Environmental laws and regulations have generally become stricter in recent years, and federal, state, and local
governments domestically and internationally are considering new laws and regulations, including those governing raw material
composition, air emissions, end-of-life product dispositions, 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.
5
Raw Materials
The products produced by the Company require certain raw materials, including certain grades of steel and aluminum,
electrical and electronic components, plastics, and other petroleum-based materials and components. In fiscal 2014, the Company
purchased approximately 95,000 tons of steel and aluminum. The Company estimates that approximately 8% of purchased raw
materials are petroleum-based. Additionally, the Company estimates that approximately four million gallons of diesel fuel were
consumed in fiscal 2014 through the Company’s distribution activities. The Company purchases most raw materials and other
components on the open market and relies on third parties for providing certain finished goods. While these items are generally
available from multiple sources, the cost of products sold may be affected by changes in the market price of raw materials, as well
as disruptions in availability of raw materials, components, and sourced 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 and components 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 monitors and investigates alternative suppliers and materials based on numerous attributes including quality,
service, and price. The Company currently sources raw materials from a number of suppliers, but 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 reduction
in the number of suppliers could cause increased risk associated with reliance on a single or limited number of suppliers for certain
raw materials, component parts (such as LEDs, lamps, 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 and to a much lesser degree, certain European markets. The backlog of orders at any given time is affected by various
factors, including seasonality, cancellations, sales promotions, production cycle times, and the timing of receipt and shipment of
orders, which are usually shipped within a few weeks of order receipt. Accordingly, a comparison of backlog orders from period
to period is not necessarily meaningful and may not be indicative of future shipments.
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 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 to infringe on the intellectual property of the Company. Management is not aware of any pending claims asserting
that the Company does not have the right to use intellectual property that is material to the Company. While patents and patent
applications in the aggregate are important to the competitive position of the Company, no single patent or patent application is
individually material to the Company.
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.
The Company's lighting solutions are sold to customers in both the new construction and renovation and retrofit markets
for residential and non-residential applications. The construction market is cyclical in nature and subject to changes in general
economic conditions. 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 68% of the products produced by the Company are manufactured outside the United States, primarily in
Mexico and Europe. In addition, the Company sources certain finished goods from third parties with operations outside the United
States, primarily in Asia.
6
Of the products produced by the Company, approximately 66% are manufactured at five facilities in Mexico. Most of these
facilities 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 exported from
Mexico within 18 months. Maquiladora status, which is renewed every year, is subject to various restrictions and requirements,
including compliance with the terms of the Maquiladora program and other local regulations, which have become stricter in recent
years.
During fiscal 2014, net sales initiated outside of the U.S. represented approximately 10% of total net sales. See the
Supplemental Disaggregated Information footnote 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) and proxy statements, 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 Filings” link on the Company’s website, located at www.acuitybrands.com, as
soon as reasonably 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. Any amendments to, or waivers of, the Code of Ethics and Business Conduct for
our principal executive officer and senior financial officers will be disclosed on our website promptly following the date of such
amendment or waiver. 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 7,000 people, of which approximately 3,300 are employed in the United States,
approximately 3,400 in Mexico, and approximately 300 in other international locations, including Europe, Canada, and the Asia/
Pacific region. Union recognition and collective bargaining arrangements are in place or in process, covering approximately
4,500 persons (including approximately 1,400 in the United States). Union recognition and collective bargaining arrangements
covering approximately 3,300 persons will expire within the next fiscal year. The Company believes that it has a good relationship
with both its unionized and non-unionized employees.
7
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 Information” included in Management's Discussion and Analysis of Financial Condition and Results of Operations. These
risks include, without limitation:
Risks Related to Economic Factors
General business, political, and economic conditions, including the strength of the construction market, political events, or
other factors may affect demand for the Company’s products and services, which could impact results of 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 economic vitality, employment levels, credit availability, interest rates, trends in vacancy rates and
rent values, energy costs, and commodity costs. Sales of lighting equipment depend significantly on the level of activity in new
construction and renovation/retrofits. Declines in general economic activity, appropriations, and regulations, including tax policy,
may negatively impact new construction and renovation 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 of operations,
and cash flows.
Acuity Brands’ results may be adversely affected by fluctuations in the cost or availability of raw materials, components,
purchased finished goods, or services.
The Company utilizes a variety of raw materials and components in its production process including steel, aluminum, lamps,
certain rare earth materials, LEDs, LED drivers, ballasts, wire, electronic components, power supplies, petroleum-based by-
products, natural gas, and copper. The Company also sources certain finished goods externally. Future increases in the costs of
these items could adversely affect profitability, as there can be no assurance that future price increases will be successfully passed
through to customers. The Company generally sources these goods from a number of suppliers. However, there are a limited
number of suppliers for certain components and certain purchased finished goods, which on a limited basis results in sole-source
supplier situations. Disruptions in the supply of those items could negatively impact the Company’s performance. In addition, 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, and in turn, increased risk associated with reliance on a single or limited number of suppliers. Furthermore,
volatility in certain commodities, such as oil, impacts all suppliers and, therefore, may cause the Company to experience significant
price increases from time to time regardless of the number and availability of suppliers. Profitability and volume could be negatively
impacted by limitations inherent within the supply chain of certain of these component parts, including competitive, governmental,
and legal limitations, natural disasters, and other events that could impact both supply and price. Additionally, the Company is
dependent on certain service providers for key operational functions. While there are a number of suppliers of these services, the
cost to change service providers and set up new processes could be significant. Variability in cost and availability of raw materials,
components, purchased finished goods, or services could adversely affect the Company’s financial position, results of operations,
and cash flows.
Tight credit conditions could impair the ability of the Company and other industry parties to effectively access capital markets,
which could negatively impact the Company’s capital position and demand for the Company’s products and services.
The impact of tight credit conditions could 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 depressed levels of
construction and renovation projects. The inability of these constituents to borrow money to fund construction and renovation
projects may reduce the demand for the Company’s products and services and could adversely affect the Company’s financial
position, results of operations, and cash flows.
In addition to the impact on customers, tight credit conditions 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 of operations, and
cash flows.
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 reasons unrelated
to the Company’s specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by
8
customers, competitors, or suppliers regarding their own performance, as well as general global economic, industry, and political
conditions. To the extent that other large companies within the Company’s industry experience declines in 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. Such a lawsuit 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 Company's Strategy
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 revenue 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. 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 net sales, profitability, and cash flows.
Acuity Brands may experience difficulties in streamlining activities which could impact shipments to customers, product
quality, and the ability to realize the expected savings from streamlining actions.
The Company will benefit from its ongoing programs to streamline operations, including the consolidation of certain
manufacturing facilities and the reduction of overhead costs, 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.
The Company’s inability to effectively introduce new products could adversely affect its ability to compete and its operating
performance.
Continual introductions of new products and solutions, services, and technologies, enhancement of existing products and
services, and effective servicing of customers are key to the Company’s competitive strategy. The success of new product and
solution introductions depends on a number of factors, including, but not limited to, timely and successful product development,
market acceptance, the Company’s ability to manage the risks associated with product life cycles, such as new products and
production capabilities, the effective management of purchase commitments and inventory levels to support anticipated product
manufacturing and demand, the availability of products in appropriate quantities and costs to meet anticipated demand, and the
risk that new products may have quality or other defects in the early stages of introduction. Accordingly, the Company cannot
fully predict the ultimate effect of new product introductions and transitions on the Company’s business, financial condition, results
of operations, and cash flows.
Acuity Brands may pursue future growth through strategic acquisitions and alliances, which may not yield anticipated
benefits.
The Company has strengthened its business through strategic acquisitions and alliances and may continue to do so as
opportunities arise in the future. The Company will benefit from such activity only to the extent that it can effectively leverage
and integrate the assets of the acquired businesses and alliances, including, but not limited to, personnel, technology, and operating
processes. Uncertainty is inherent within the acquisition and alliance process and unforeseen circumstances arising from recent
and future acquisitions or alliances could offset the 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 to recover initial and subsequent investments, particularly those related to acquired goodwill and intangible
assets. Any of these factors could have a material adverse effect on the Company’s financial condition, results of operations, and
cash flows. In addition, an investment in acquisitions or alliances may limit the Company's ability to invest in other activities,
which could be more profitable or advantageous.
The risks associated with the inability to effectively execute its strategies could adversely affect the Company’s financial
condition and results of operations.
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, the development, marketing, and selling of lighting
solutions, effective integration of acquisitions, and the development of production capacity related to components such as LED
drivers. Those uncertainties and risks include, but are not limited to: diversion of management’s attention; difficulty in retaining
or attracting employees; negative impact on relationships with distributors and customers; obsolescence of current products and
slow new product development; additional streamlining efforts; inability to produce certain components with quality, performance,
9
and cost attributes equal to or better than provided by other component manufacturers; and unforeseen difficulties in the
implementation of the management operating structure. Problems with strategy execution could offset anticipated benefits, disrupt
service to customers, and impact product quality as well as adversely affect the Company’s financial condition and results of
operations.
Risks Related to the Company's Operations
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 and services. Securing
key partnerships and alliances as well as employee talent, including having access to technologies, services, and solutions developed
by others, and obtaining 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,
drivers, lighting controls systems, etc.) by existing and new source suppliers — including non-traditional competitors with
significant resources — looking for either direct market access or partnerships with competing large manufacturers, coupled with
significant associated exclusivity and/or patent activity, could adversely affect the Company’s ability to sustain operating profit
margins and desirable levels of sales volume. Also, certain key suppliers of components compete with the Company and could
choose to cease supplying the Company, which could temporarily disrupt production by the Company until alternative supplier
relationships are established. In addition, there have been a growing number of new competitors, from small startup companies
to global consumer electronics companies, offering solid-state (primarily LED) lighting solutions to compete with traditional
lighting providers. Certain global and more diversified 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, and small startup companies may offer more localized product sales and support services within individual regions,
which could have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.
Acuity Brands may be unable to sustain significant customer and/or channel partner relationships.
Relationships with customers, including The Home Depot which historically has represented approximately 10% or more
of the Company’s total net sales, are directly impacted by the Company’s ability to deliver quality products and services. The loss
of or a substantial decrease in the volume of purchases by The Home Depot could harm the Company’s sales, profitability, and
cash flows. The Company also has relationships with channel partners such as electrical distributors and independent sales agencies.
While the Company has experienced positive, and in most cases long-term, relationships with these channel partners, the loss of
a number of these channel partners or a substantial decrease in the volume of purchases from a major channel partner or a group
of channel partners could adversely affect the Company’s sales, profitability, and cash flows.
Acuity Brands could be adversely affected by disruptions of its operations.
The breakdown of equipment or other events, including labor disputes, strikes, pandemics, cyber attacks, or catastrophic
events such as war or natural disasters, leading to production interruptions in the Company’s or one or more of its suppliers’
facilities could have a material adverse effect on the Company’s financial results and cash flows. Approximately 53% of the
Company’s finished products are manufactured in Mexico, a country that periodically experiences heightened civil unrest which
could also disrupt supply of products to or from these facilities. Further, because many of the Company’s customers are to varying
degrees dependent on planned deliveries from the Company’s facilities, 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 and result in a loss of business. While the Company has developed
business continuity plans, including alternative capacity, to support responses to such events or disruptions and maintains insurance
policies covering, among other things, physical damage and business interruptions, these policies may not cover all losses. The
Company could incur uninsured losses and liabilities arising from such events, including damage to its reputation, loss of customers,
and substantial losses in operational capacity, any of which could have a material adverse effect on its financial condition, results
of operations, and cash flows.
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 of operations and financial condition or the
effectiveness of internal controls over operations and financial reporting.
The Company is highly dependent on various software and automated systems to record and process operational and financial
transactions. The Company could experience a failure of one or more of these software and automated systems or could fail to
complete all necessary data reconciliation or other conversion controls when implementing a new software system. The Company
10
could also experience a compromise of its security due to many reasons, including technical system flaws, clerical, data input or
record-keeping errors, or tampering or manipulation of its 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, cyber attacks, epidemics, computer viruses,
and electrical/telecommunications outages). All of these risks are also applicable where the Company relies on outside vendors to
provide services, which may operate in a cloud environment. The Company is dependent on the third-party vendors to operate
secure and reliable systems which may include data transfers over the internet.
The Company also maintains information technology to support lighting controls systems in certain of its customer offerings,
which are integral to the functionality of those integrated systems. In addition to the risks noted above, there are other risks
associated with these customer offerings. Customers may be installing software on their networks and utilizing portable electronic
devices, which may have security protocol variations that are outside of the Company’s control and could result in a data security
compromise.
The Company and certain of its third-party vendors may receive and store personal information in connection with human
resources operations, customer offerings, and other aspects of the business. A material network breach in the security of these
systems could include the theft of intellectual property, trade secrets, or employee and customer information. To the extent that
any disruption or security breach results in a loss or damage to the Company's data, or an inappropriate disclosure of confidential
or customer or employee information, it could cause significant damage to the Company's reputation, affect relationships with the
Company's customers and employees, lead to claims against the Company, and ultimately harm the Company's business. In addition,
the Company may be required to incur significant costs to protect against damage caused by these disruptions or security breaches
in the future.
Operating system failures, ineffective system implementation or disruptions, or the compromise of security with respect to
internal or external operating systems or portable electronic devices could subject the Company to liability claims, harm the
Company’s reputation, interrupt the Company’s operations, disrupt customer operations, and adversely affect the Company’s
internal control over financial reporting, business, financial condition, results of operations, or cash flows.
The inability to attract and retain talented employees and/or a loss of key employees could adversely impact 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. An inability to attract and retain such employees could adversely
impact the Company’s ability to execute key operational functions and could adversely affect the Company’s operations.
There are inherent risks in our solutions and services businesses.
Risks inherent in the sale of solutions and services include assuming greater responsibility for successfully delivering
projects that meet a particular customer specification, including defining and controlling contract scope and timing, efficiently
executing projects, and managing the performance and quality of the Company’s subcontractors and suppliers. If the Company
is unable to manage and mitigate these risks, the Company could incur liabilities and other losses that would adversely affect the
Company’s results of operations.
Risks Related to Legal and Regulatory Matters
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, 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. The Company
may also be affected by future laws or regulations, including those imposed in response to energy, climate change, geopolitical,
or similar concerns. These laws may impact the sourcing of raw materials and the manufacture and distribution of the Company’s
products and place restrictions and other requirements on the products the Company can sell in certain geographical locations.
The costs of complying with these laws and regulations, including participation in assessments and remediation of
contaminated sites and installation of pollution control capabilities, have been, and in the future could be, significant. In addition,
11
these laws and regulations may result in substantial environmental liabilities associated with divested assets, third party locations,
and past activities. The Company establishes 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 of operations. In addition, the presence of environmental
contamination at the Company’s properties could adversely affect its ability to sell a 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 and in the future may be subject to various claims, including legal claims arising in the normal
course of business, which may include without limitation employment claims, product recall or personal injury claims resulting
from the use of our products or exposure to hazardous materials, contract disputes, intellectual property disputes, and product
liability claims. The Company is insured up to specified limits for certain types of losses with a self-insurance retention per
occurrence, including product liability claims, and is fully self-insured for certain other types of losses, including environmental,
product recall, warranties, 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 of 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.
If Acuity Brands’ products are improperly designed, manufactured, packaged, or labeled, the Company may need to recall
those items, may have increased warranty costs, and could be the target of product liability claims.
The Company may need to recall products if they are improperly designed, manufactured, packaged, or labeled, and the
Company does not maintain insurance for such recall events. Many of the Company's products and solutions have become more
complex in recent years and include more sophisticated and sensitive electronic components. The Company has increasingly
manufactured certain of those components and products in its own facilities. 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, penalties, and lost sales due to
the unavailability of a product for a period of time. In addition, products developed by the Company that incorporate new
technologies, such as LED technology, generally provide for more extensive warranty protection which may result in higher costs
if warranty claims on these products are higher than historical amounts. The Company may also be liable if the use of any of its
products causes harm, and could suffer losses from a significant product liability judgment against the Company in excess of its
insurance limits. The Company may not be able to obtain indemnity or reimbursement from its suppliers or other third parties for
the warranty costs or liabilities associated with its products. A significant product recall, warranty claim, 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 condition, results of operations, and cash flows.
Failure to effectively estimate employer-sponsored health insurance premiums and incremental costs due to the Affordable
Care Act could materially and adversely affect the Company's financial condition, results of operations, and cash flows.
In March 2010, the United States federal government enacted comprehensive health care reform legislation, which, among
other things, includes guaranteed coverage requirements, eliminates pre-existing condition exclusions and annual and lifetime
maximum limits, restricts the extent to which policies can be rescinded, and imposes new taxes on health insurers, self-insured
companies, and health care benefits. The legislation imposes implementation effective dates that began in 2010 and extend through
2020 with many of the changes requiring additional guidance and regulations from federal agencies. Possible adverse effects could
include increased costs, exposure to expanded liability, and requirements for the Company to revise the ways in which healthcare
and other benefits are provided to employees. To date, the Company has experienced increased costs related to such legislation;
however, due to the phased-in nature of the implementation and the lack of interpretive guidance, the Company continues to
monitor the potential impacts the health care reform legislation will have on the Company’s financial results. Future costs could
have a material adverse effect on the Company's financial condition, results of operations, and cash flows.
12
The Company may not be able to adequately protect its intellectual property.
The Company owns certain patents, trademarks, copyrights, trade secrets, and other intellectual property. In addition, the
Company continues to file patent applications, when appropriate. The Company cannot be certain that others have not and will
not infringe on its intellectual property rights; however, the Company seeks to establish and protect those rights, which could result
in significant legal expenses and adversely affect the Company's financial condition and results of operations.
Compliance with new reporting requirements related to the use of conflict minerals, within the meaning of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, may result in additional expense, supply chain limitations, or loss of customers.
In July 2010, the United States federal government enacted the Dodd–Frank Wall Street Reform and Consumer Protection
Act, which contained provisions that mandated the creation of rules by the SEC for public companies to ascertain the region of
origin of conflict minerals (i.e., cassiterite, wolframite, coltan, and gold) used in the production of goods. In August 2012, the SEC
adopted new rules requiring disclosures of conflict minerals that are necessary to the functionality or production of products
manufactured or contracted to be manufactured by public companies. The new rule requires companies to perform due diligence
and disclose through the issuance of a report whether or not such minerals originate from the Democratic Republic of Congo or
an adjoining country. The new rule could affect sourcing at competitive prices and availability in sufficient quantities of certain
minerals used in the manufacture of the Company’s products, including tantalum, tin, tungsten, and gold. The number of suppliers
who provide conflict-free minerals may be limited, which could have an adverse effect on the Company’s ability to source these
products in the future. In addition, due to the complexity and sophistication of the Company's supply chain, compliance with the
rules requires significant efforts from a cross-functional project team, including identifying and contacting the Company's suppliers
(who in turn may be required to contact their suppliers), compiling and documenting the findings, and possibly providing for an
independent third party audit. Therefore, costs attributable to compliance with the disclosure requirements of the SEC’s new rules
will be incurred and could be material. In addition, pressure from customers for more information or due diligence could result in
increased costs or potentially the loss of certain customers. Jurisdictions other than the U.S. federal government, such as U.S.
states and the European Union, may adopt similar rules and regulations, which could have different reporting requirements or
timelines. The costs of compliance, including those related to supply chain research, unexpected consequences to the Company’s
reputation or customer relationships, the limited number of suppliers, and possible changes in the sourcing of these materials could
adversely affect the Company’s results of operations and cash flows.
Risks Related to Other Factors
The Company may be subject to risk in connection with third party relationships necessary to operate the Company's
business.
The Company utilizes strategic partners and third party relationships in order to operate and grow its business. For instance,
the Company utilizes third parties for contract manufacturing for certain products, a portion of its sales function and some of its
distribution requirements. The Company cannot control the actions or performance of these third parties and therefore, cannot be
certain that the Company or its end-users will be satisfied. Any future actions of or any failure to act by any third party on which
the Company’s business relies could cause the Company to incur losses or interruptions in its operations and adversely affect the
Company’s financial condition and results of operations.
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, components
and purchased finished goods. 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; laws that prohibit improper payments to government officials such as the Foreign
Corrupt Practices Act and the U.K. Bribery Act; potential for privatization and other confiscatory actions; trade restrictions and
disruption; criminal activities; unforeseen increases in tariffs and taxes; corruption; and other changes in regulation in international
jurisdictions that could result in substantial additional legal or compliance obligations for the Company. The Company continues
to monitor conditions affecting its international locations, including potential changes in income from a strengthening or weakening
in foreign exchange rates in relation to the U.S. dollar. Some of these risks, including but not limited to foreign exchange risk,
violations of laws, and higher costs associated with changes in regulation, could have a material adverse effect on the Company’s
business, financial condition, results of operations, and cash flows.
13
Risks related to the Company's defined benefit retirement plans may adversely impact results of operations and cash flows.
Significant changes in actual investment returns on defined benefit plan assets, discount rates, and other factors could adversely
affect the Company's results of operations and the amount of contributions the Company is required to make to the defined benefit
plans in future periods. As the Company's defined benefit plan assets and liabilities are marked-to-market on an annual basis, large
non-cash gains or losses could be recorded in the fourth quarter of each fiscal year. In accordance with United States generally
accepted accounting principles the income or expense for the plans is calculated using actuarial valuations. These valuations reflect
assumptions about financial markets and interest rates, which may change based on economic conditions. Funding requirements
for the defined benefit plans are dependent upon, among other things, interest rates, underlying asset returns, and the impact of
legislative or regulatory changes related to defined benefit funding obligations. Unfavorable changes in these factors could have
an adverse effect on the Company's financial position, results of operations, and cash flows.
Item 1b.
Unresolved Staff Comments
None.
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 the operating facilities owned
or leased by the Company. The following listing summarizes the significant facility categories:
Nature of Facilities
Manufacturing Facilities
Warehouses
Distribution Centers*
Offices
Owned
Leased
9
—
2
4
7
3
5
15
9
7
16
______________________________________
* The majority of the Distribution Centers also have certain manufacturing and assembly capabilities.
The following table provides additional geographic information related to Acuity Brands’ manufacturing facilities:
Owned
Leased
Total
United States
Mexico
Europe
Canada
Total
4
4
8
4
1
5
1
1
2
—
1
1
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 as well as capacity contingencies developed as part of an enterprise-wide contingency plan. Acuity Brands believes that its
properties are well maintained and 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.
14
Item 3.
General
Legal Proceedings
Acuity Brands is subject to various legal claims arising in the normal course of business, including, but not limited to, patent
infringement, product liability claims, and employment matters. 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 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 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 than that reserved due to difficulty
in estimating such costs.
15
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, Inc. (“Acuity Brands” or the “Company”) is listed on the New York Stock Exchange
under the symbol “AYI”. At October 27, 2014, there were 2,997 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.
2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Price per Share
High
Low
Dividends
per Share
$69.46
$73.48
$79.16
$89.57
$106.33
$143.54
$146.28
$138.46
$57.42
$62.39
$65.99
$72.34
$83.61
$99.16
$116.77
$104.69
$0.13
$0.13
$0.13
$0.13
$0.13
$0.13
$0.13
$0.13
The indicated annual dividend rate on the Company's common stock is $0.52 per share. However, all decisions regarding
the declaration and payment of dividends are at the discretion of the Board of Directors of the Company (the "Board") and will
be evaluated regularly in light of the Company’s financial condition, earnings, growth prospects, funding requirements, applicable
law, and any other factors that the 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 7, 2015, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A,
and is incorporated herein by reference.
Issuer Purchases of Equity Securities
In September 2011, the Board authorized the repurchase of two million shares of the Company's outstanding common stock.
None of the Company’s outstanding common stock has been repurchased under the current plan; therefore, the maximum number
of shares that may yet be purchased under the program equals two million.
Depending on market conditions, shares may be repurchased from time to time at prevailing market prices through open
market or privately negotiated transactions. No date has been established for the completion of the share repurchase program and
the Company is not obligated to repurchase any shares. Subject to applicable corporate securities laws, repurchases may be made
at such times and in such amounts as management deems appropriate. Repurchases under the program can be discontinued at any
time management feels additional repurchases are not warranted.
Company Stock Performance
The following information in this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed”
with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act,
and will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the
extent specifically incorporated by reference into such filing.
16
The following graph compares the cumulative total return to shareholders on the Company’s outstanding stock during the
five years ended August 31, 2014, with the cumulative total returns of the Standard & Poor’s (“S&P”) MidCap 400 Index, the
Dow Jones U.S. Electrical Components & Equipment Index, and the Dow Jones U.S. Building Materials & Fixtures Index. The
Company is a component of both the S&P Midcap 400 Index and Dow Jones U.S. Building Materials & Fixtures Index. The Dow
Jones U.S. Electrical Components & Equipment Index is also included in the following graph as the parent companies of several
major lighting companies are included in the index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
Among Acuity Brands, Inc., the S&P Midcap 400 Index,
the Dow Jones US Electrical Components & Equipment Index,
and the Dow Jones US Building Materials & Fixtures Index
*Assumes $100 invested on August 31, 2009 in stock or index, including reinvestment of dividends.
Acuity Brands, Inc.
S&P Midcap 400 Index
Dow Jones US Electrical Components & Equipment Index
Dow Jones US Building Materials & Fixtures Index
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Aug-14
$
$
$
$
100 $
100 $
100 $
100 $
122 $
112 $
104 $
100 $
147 $
137 $
130 $
112 $
206 $
155 $
161 $
168 $
277 $
192 $
201 $
213 $
403
236
251
267
17
Item 6.
Selected Financial Data
The following table sets forth certain selected consolidated financial data of Acuity Brands which has been derived from the
Consolidated Financial Statements for each of the five years in the period ended August 31, 2014. The Company completed the
spin-off of its specialty products business (the "Spin-off"), Zep Inc., on October 31, 2007. The Company incurred a $0.6 million
gain from discontinued operations during fiscal 2010 due to revisions of estimates of certain legal reserves established at the time
of the Spin-off. This historical information may not be indicative of 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.
Net sales
Income from Continuing Operations
Income from Discontinued Operations
Net Income
Basic earnings per share from Continuing Operations
Basic earnings per share from Discontinued Operations
Basic earnings per share
Diluted earnings per share from Continuing Operations
Diluted earnings per share from Discontinued Operations
Diluted earnings per share
Cash and cash equivalents
Total assets
Long-term debt
Total debt
Stockholders’ equity
2014(1)
2013(2)
Years Ended August 31,
2012(3)
2011
2010(4)
(In millions, except per-share data)
$ 2,393.5
$ 2,089.1
$ 1,933.7
$ 1,795.7
$ 1,626.9
$
$
$
$
$
175.8
—
175.8
4.07
—
4.07
4.05
—
4.05
552.5
2,168.1
353.6
353.6
1,163.5
$
$
$
$
$
127.4
—
127.4
2.97
—
2.97
2.95
—
2.95
359.1
1,903.8
353.6
353.6
993.5
$
$
$
$
$
116.3
—
116.3
2.75
—
2.75
2.72
—
2.72
284.5
1,736.9
353.5
353.5
834.0
$
$
$
$
$
105.5
—
105.5
2.46
—
2.46
2.42
—
2.42
170.2
1,597.4
353.4
353.4
757.0
$
$
$
$
$
79.0
0.6
79.6
1.83
0.01
1.84
1.79
0.01
1.80
191.0
1,503.6
353.3
353.3
694.4
0.52
Cash dividends declared per common share
$
0.52
$
0.52
$
0.52
$
0.52
$
_______________________________________
(1)
(2)
(3)
(4)
Income from Continuing Operations, Net Income, Basic Earnings per Share from Continuing Operations, and Diluted Earnings per Share from Continuing
Operations for fiscal 2014 include a) pre-tax recoveries of $5.8 ($3.6 after-tax), or $0.08 per share, associated with fraud at the Company's former
freight payment and audit service provider; and b) a pre-tax special charge reversal of $0.2 ($0.1 after-tax), or $0.00 per share, related to initiatives to
simplify and streamline the Company's operations, including the planned closure of certain small production facilities.
Income from Continuing Operations, Net Income, Basic Earnings per Share from Continuing Operations, and Diluted Earnings per Share from Continuing
Operations for fiscal 2013 include a) pre-tax incremental costs of $8.4 ($5.2 after-tax), or $0.12 per share, incurred due to manufacturing inefficiencies
directly related to the Cochran, GA manufacturing facility closure; b) pre-tax costs of $8.1 ($5.0 after-tax), or $0.12 per share, as a result of fraud at
the Company's former freight payment and audit service provider; and c) a pre-tax special charge of $8.5 ($5.5 after-tax), or $0.12 per share, related
to initiatives to simplify and streamline the Company's operations, including the planned closure of certain small production facilities.
Income from Continuing Operations, Net Income, Basic Earnings per Share from Continuing Operations, and Diluted Earnings per Share from Continuing
Operations for fiscal 2012 include expenses incurred in the closing of the Cochran, GA manufacturing facility and other streamlining activities. Amounts
related to these restructuring charges were comprised of the following: a) $13.3 of pre-tax special charges ($8.8 after-tax), or $0.21 per share, primarily
related to severance and production transfer costs; b) pre-tax non-cash impairments of $1.2 ($0.8 after-tax), or $0.02 per share, attributable to the
abandonment of inventory that was not transferred to other facilities; and c) pre-tax incremental costs incurred due to manufacturing inefficiencies
directly related to the Cochran facility closure, which amounted to approximately $3.2 ($2.0 after-tax), or $0.05 per share.
Income from Continuing Operations, Net Income, Basic Earnings per Share from Continuing Operations, and Diluted Earnings per Share from Continuing
Operations for fiscal 2010 include a pre-tax special charge of $8.4 ($5.5 after-tax), or $0.13 per share, for estimated costs the Company incurred to
simplify and streamline its operations. Net income, Basic Earnings per Share from Continuing Operations, and Diluted Earnings per Share from
Continuing Operations for fiscal 2010 also include a pre-tax loss of $10.5 ($6.8 after-tax), or $0.16 per share, related to the loss on early debt
extinguishment.
18
Item 7.
($ in millions, except per-share data and as indicated)
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.
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, 2014 and 2013. 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. (“Acuity Brands”) is the parent company of Acuity Brands Lighting, Inc. (“ABL”) and other subsidiaries
(Acuity Brands, ABL, and such other subsidiaries are collectively referred to herein as the "Company”). The Company, with its
principal office in Atlanta, Georgia, employs approximately 7,000 people worldwide.
The Company designs, produces, and distributes a broad array of lighting solutions, components, and services for commercial,
institutional, industrial, infrastructure, and residential applications for various markets throughout North America and select
international markets. The Company's lighting solutions include devices such as luminaires, lighting controls, prismatic skylights,
light-emitting diode (“LED”) lamps and drivers, and integrated lighting systems for indoor and outdoor applications utilizing a
combination of light sources, including daylight, and other devices controlled by software that monitors and manages light levels
while optimizing energy consumption (collectively referred to herein as “lighting solutions”). The Company is one of the world's
leading producers and distributors of lighting solutions, with a broad, highly configurable product offering, consisting of a diversified
portfolio of lighting, controls, and daylighting brands. The Company integrates conventional and advanced solid-state lighting
fixtures with digital controls and daylighting products to create greater energy efficiencies and higher quality of light for a broad
and diverse customer base. As of August 31, 2014, the Company operated 16 manufacturing facilities and seven distribution
facilities along with three warehouses to serve its extensive customer base.
The Company has made several acquisitions to expand and enhance its portfolio of lighting solutions over the last five years,
including the following recent acquisitions:
On March 13, 2013, the Company acquired for cash, including potential additional cash payments that may be paid in future
periods under earn-out provisions, all of the ownership interests in eldoLAB Holding B.V. (“eldoLED”), a leading provider of
high-performance drivers for LED lighting systems based in Eindhoven, The Netherlands. The operating results of eldoLED have
been included in the Company's consolidated financial statements since the date of acquisition.
On December 20, 2012, the Company acquired for cash all of the ownership interests in Adura Technologies ("Adura"), a
leading developer of radio frequency (RF) mesh networking technology that allows individual light fixtures to communicate in a
wireless mesh network with switches, sensors and system management software. The operating results of Adura have been included
in the Company’s consolidated financial statements since the date of acquisition.
Strategy
The Company's strategy is to extend its leadership position in the North American lighting market and certain markets
internationally by delivering superior lighting solutions. As a goal-oriented, customer-centric company, management will continue
to align the unique capabilities and resources of the organization to drive profitable growth through a keen focus on providing
comprehensive and differentiated lighting solutions for its customers, driving world-class cost efficiency, and leveraging a culture
of continuous improvement.
Throughout fiscal 2014, the Company believes it made significant progress towards achieving its strategic objectives,
including expanding its access to the market, introducing new lighting solutions, and enhancing its operations to create a stronger,
more effective organization. The strategic objectives were developed to enable the Company to meet or exceed the following
financial goals during an entire business cycle:
•
•
•
•
Operating margins in the mid-teens or higher;
Earnings per share growth in excess of 15% per annum;
Return on stockholders’ equity of 20% or better per annum; and
Cash flow from operations, less capital expenditures, that is in excess of net income.
19
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 lighting solutions 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 the Company to generate sufficient cash flow from operations or to
access certain capital markets, including banks, is necessary to fund its operations and capital expenditures, pay dividends, meet
its obligations as they become due, and maintain compliance with covenants contained in its financing agreements.
In recent years, the Company strengthened its liquidity position and extended its debt maturity profile following the issuance
of $350.0 of senior unsecured notes due in fiscal 2020 (the “Notes”) and the execution of a $250.0 revolving credit facility scheduled
to mature in fiscal 2019 (the “Revolving Credit Facility”). See the Capitalization section below and the Debt and Lines of Credit
footnote of the Notes to Consolidated Financial Statements for more information.
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. Short-term needs are
expected to include funding its operations as currently planned, making anticipated capital investments, funding potential
acquisitions, paying quarterly stockholder dividends as currently anticipated, paying interest on borrowings as currently scheduled,
and making required contributions into its employee benefit plans, as well as potentially repurchasing shares of its outstanding
common stock as authorized by the Board of Directors. Two million shares of the Company’s common stock are currently authorized
and available for repurchase under the existing repurchase program. The Company expects to repurchase shares on an opportunistic
basis. During fiscal 2015, the Company currently expects to invest approximately two percent of revenue in capital expenditures
primarily for equipment, tooling, facility enhancements, and new and enhanced information technology capabilities. Additionally,
management believes that the Company's cash flow from operations and sources of funding, including, but not limited to, borrowing
capacity, will sufficiently support the long-term liquidity needs of the Company.
Cash Flow
The Company uses available cash and cash flow from operations, as well as proceeds from the exercise of stock options, to
fund operations and capital expenditures, repurchase Company stock, fund acquisitions, and pay dividends.
The Company’s cash position at August 31, 2014 was $552.5, an increase of $193.4 from August 31, 2013. During the year
ended August 31, 2014, the Company generated net cash from operating activities of $233.1 with additional cash received of $8.4
from stock issuances primarily in connection with stock option exercises. Cash generated from operating activities, as well as cash
on-hand, was used during the current year primarily to fund capital expenditures of $35.3 and pay dividends to stockholders of
$22.5. Foreign currency related items had a favorable effect on cash flows of $0.9 during the current year.
During fiscal 2014, net cash generated from operating activities increased $100.8 to $233.1 compared with $132.3 generated
in the prior-year period due primarily to higher net income and lower operating working capital requirements in fiscal 2014
compared with the prior-year period. Operating working capital (calculated by adding accounts receivable plus inventories, and
subtracting accounts payable-net of acquisitions and the impact of foreign exchange rate changes) increased by approximately
$26.8 during fiscal 2014 compared to an increase of $46.1 during fiscal 2013. In both periods, inventory and accounts payable
increased due primarily to greater production and purchases to support the higher level of net sales, which in turn resulted in
increased accounts receivable.
Management believes that investing in assets and programs that will over time increase the overall return on the Company’s
invested capital is a key factor in driving stockholder value. The Company invested $35.3 and $40.6 in fiscal 2014 and 2013,
respectively, primarily for new tooling, machinery, equipment, and information technology.
20
Contractual Obligations
The following table summarizes the Company’s contractual obligations at August 31, 2014:
Debt(1)
Interest Obligations(2)
Operating Leases(3)
Purchase Obligations(4)
Other Long-term Liabilities(5)
Total
___________________________
Payments Due by Period
Total
Less than
One Year
1 to 3 Years
4 to 5
Years
After 5
Years
$
354.0
$
— $
— $
— $
354.0
220.6
64.4
117.3
53.1
31.4
14.2
115.8
14.4
63.0
25.8
1.5
8.4
64.4
15.1
—
3.8
61.8
9.3
—
26.5
$
809.4
$
175.8
$
98.7
$
83.3
$
451.6
(1)
(2)
(3)
(4)
(5)
These amounts (which represent the amounts outstanding at August 31, 2014) are included in the Company’s Consolidated Balance Sheets. See the
Debt and Lines of Credit footnote for additional information regarding debt and other matters.
These amounts represent primarily the expected future interest payments on outstanding debt held by the Company at August 31, 2014 and the Company’s
outstanding loans related to its corporate-owned life insurance policies (“COLI”), which constitute a small portion of the total amounts shown. 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 in the Company’s Consolidated Statements of Cash Flows.
The Company’s operating lease obligations are described in the Commitments and Contingencies footnote.
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 are also dependent 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 the Pension and Profit Sharing Plans footnote for additional
information. These amounts exclude $3.0 of unrecognized tax benefits as a reasonable estimate of the period of cash settlement with the respective
taxing authorities that cannot be determined.
Capitalization
The current capital structure of the Company is comprised principally of senior unsecured notes and equity of its stockholders.
As of August 31, 2014, total debt outstanding of $353.6, net of discount, remained substantially unchanged from August 31, 2013
and consisted primarily of fixed-rate obligations.
On December 8, 2009, ABL issued the Notes in a private placement transaction with an aggregate principle amount of $350.0.
The Notes were subsequently exchanged for SEC-registered notes with substantially identical terms. The Notes bear interest at a
rate of 6% per annum and were issued at a price equal to 99.797% of their face value and for a term of 10 years. See Debt and
Lines of Credit footnote of the Notes to Consolidated Financial Statements for more information.
On August 27, 2014, the Company executed the Revolving Credit Facility with a borrowing capacity of $250.0. The Revolving
Credit Facility replaced the Company's prior $250.0 revolving credit facility, which was scheduled to mature on January 31, 2017.
The Revolving Credit Facility will mature and all amounts outstanding thereunder will be due and payable on August 27, 2019.
The Company was compliant with all financial covenants under the Revolving Credit Facility as of August 31, 2014. As of
August 31, 2014, the Company had outstanding letters of credit totaling $10.4, primarily for securing collateral requirements under
the casualty insurance programs for Acuity Brands and providing credit support for the Company's industrial revenue bond. At
August 31, 2014, the Company had additional borrowing capacity under the Revolving Credit Facility of $243.8 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 $6.2 issued under the Revolving Credit Facility. See the Debt and Lines of Credit footnote of the Notes to Consolidated
Financial Statements.
During fiscal 2014, the Company’s consolidated stockholders’ equity increased $170.0 to $1,163.5 at August 31, 2014 from
$993.5 at August 31, 2013. The increase was due primarily to net income earned in the period, as well as amortization of stock-
based compensation, stock issuances resulting primarily from the exercise of stock options, and foreign currency translation
adjustments partially offset by payment of dividends and pension plan adjustments. The Company’s debt to total capitalization
ratio (calculated by dividing total debt by the sum of total debt and total stockholders’ equity) was 23.3% and 26.2% at August 31,
2014 and August 31, 2013, respectively. The ratio of debt, net of cash, to total capitalization, net of cash, decreased to (20.6)% at
August 31, 2014 from (0.6)% at August 31, 2013 due primarily to the substantial increase in the Company’s cash balance and
stockholders' equity in the current year.
21
Dividends
Acuity Brands paid dividends on its common stock of $22.5 ($0.52 per share) in fiscal 2014 and $22.4 ($0.52 per share) in
fiscal 2013. The indicated quarterly dividend rate is $0.13 per share. However, all decisions regarding the declaration and payment
of dividends by Acuity Brands are at the discretion of the Company’s Board of Directors and are evaluated regularly in light of
the Company’s financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the
Company’s Board of Directors deems relevant.
Results of Operations
Fiscal 2014 Compared with Fiscal 2013
The following table sets forth information comparing the components of net income for the year ended August 31, 2014
with the year ended August 31, 2013:
Net Sales
Cost of Products Sold
Gross Profit
Percent of net sales
Selling, Distribution, and Administrative Expenses
Special Charge
Operating Profit
Percent of net sales
Other Expense (Income):
Interest Expense, net
Miscellaneous Expense (Income), net
Total Other Expense
Income before Provision for Income Taxes
Percent of net sales
Provision for Income Taxes
Effective tax rate
Net Income
Diluted Earnings per Share
Years Ended August 31,
2014
2013
Increase
(Decrease)
Percent
Change
$ 2,393.5
$ 2,089.1
$
1,414.3
1,251.5
979.2
40.9%
680.3
(0.2)
299.1
12.5%
32.1
1.3
33.4
265.7
11.1%
89.9
33.8%
175.8
4.05
$
$
837.6
40.1%
607.6
8.5
221.5
10.6%
31.2
(2.8)
28.4
193.1
9.2%
65.7
34.0%
$
$
127.4
2.95
$
$
304.4
162.8
141.6
80 bps
72.7
(8.7)
77.6
190 bps
0.9
4.1
5.0
72.6
190 bps
24.2
48.4
1.10
14.6 %
13.0 %
16.9 %
12.0 %
(102.4)%
35.0 %
2.9 %
146.4 %
17.6 %
37.6 %
36.8 %
38.0 %
37.3 %
Net sales increased $304.4, or 14.6%, to $2,393.5 for the year ended August 31, 2014 compared with $2,089.1 reported for
the year ended August 31, 2013. For the year ended August 31, 2014, the Company reported net income of $175.8 compared with
$127.4 for the year ended August 31, 2013, an increase of $48.4, or 38.0%. For fiscal 2014, diluted earnings per share increased
37.3% to $4.05 from $2.95 for the prior-year period.
The table below reconciles certain U.S. GAAP financial measures to the corresponding non-U.S. GAAP measures referred
to in the discussion of the Company’s results of operations, which exclude restructuring charges associated primarily with continued
efforts to streamline the organization through the planned closing of certain manufacturing facilities and by realigning
responsibilities primarily within various SD&A departments, other costs associated with manufacturing inefficiencies directly
related to the Cochran manufacturing facility closure, as well as recoveries and losses due to fraud at a freight service company.
Although special charges related to efforts to improve overall Company efficiency have been recognized in prior periods and could
recur in future periods, management typically excludes the impact of special charges during internal reviews of performance and
uses these non-U.S. GAAP measures for baseline comparative operational analysis, decision making, and other activities. These
non-U.S. GAAP financial measures, including adjusted gross profit and margin, adjusted selling, distribution, and administrative
expenses and percent of net sales, adjusted operating profit and margin, adjusted net income, and adjusted diluted earnings per
share, are provided to enhance the user’s overall understanding of the Company’s current financial performance. Specifically, the
Company believes these non-U.S. GAAP measures provide greater comparability and enhanced visibility into the results of
operations, excluding the impact of special charges and certain other expenses. The non-U.S. GAAP financial measures should
be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with U.S. GAAP.
22
Years Ended August 31,
Increase
(Decrease)
Percent
Change
2013
837.6
8.4
Gross Profit
Add-back: Manufacturing inefficiencies
Adjusted Gross Profit
Percent of net sales
Selling, Distribution, and Administrative Expenses
Add-back/(Less): Freight service provider fraud-related recovery/(expense)
Adjusted Selling, Distribution, and Administrative Expenses
Percent of net sales
Operating Profit
Add-back: Manufacturing inefficiencies
(Less)/Add-back: Freight service provider fraud-related (recovery)/expense
(Less)/Add-back: Special Charge
Adjusted Operating Profit
Percent of net sales
Net Income
Add-back: Manufacturing inefficiencies, net of tax
(Less)/Add-back: Freight service provider fraud-related (recovery)/
expense, net of tax
(Less)/Add-back: Special Charge, net of tax
Adjusted Net Income
Diluted Earnings per Share
Add-back: Manufacturing inefficiencies, net of tax
(Less)/Add-back: Freight service provider fraud-related (recovery)/
expense, net of tax
Add-back: Special Charge, net of tax
Adjusted Diluted Earnings per Share
Net Sales
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2014
979.2
—
979.2
40.9%
680.3
5.8
686.1
28.7%
299.1
—
(5.8)
(0.2)
293.1
12.2%
175.8
—
(3.6)
(0.1)
172.1
4.05
—
(0.08)
—
$
3.97
$
846.0
$
133.2
15.7%
40 bps
$
86.6
14.4%
— bps
40.5%
607.6
(8.1)
599.5
28.7%
221.5
8.4
8.1
8.5
246.5
$
46.6
18.9%
40 bps
11.8%
127.4
5.2
5.0
5.5
143.1
$
29.0
20.3%
2.95
0.12
0.12
0.12
3.31
$
0.66
19.9%
Net sales for the year ended August 31, 2014 increased by 14.6% compared with the prior-year period due primarily to an
increase in sales volumes of approximately 16%, partially offset by the impact of an unfavorable change in product prices and the
mix of products sold ("price/mix") of approximately 1%. The impact on net sales from foreign currency and acquisitions was not
material. Sales volume was higher across most product categories and key sales channels which reflects growth in the North
American lighting market, including renovation and retrofit applications. Additionally, greater demand for LED luminaires
continued in fiscal 2014 as sales of these products more than doubled compared with the year-ago period and represented
approximately 33% of total net sales. The Company estimates that the unfavorable price/mix in the current year compared with
the year-ago period was influenced by a reduction in the sales price of certain LED luminaries reflecting the continued decline in
the cost of certain purchased LED components. Because of the changing dynamics of the Company's extensive product portfolio,
including the increase of integrated lighting solutions as well as the proliferation of new products due to the adoption of solid-
state lighting, it is not possible to precisely quantify volume as well as accurately differentiate the individual components of price/
mix.
Gross Profit
Gross profit for fiscal 2014 increased $141.6, or 16.9%, to $979.2 compared with $837.6 for the prior year. The increase was
due primarily to higher sales volumes, lower material and component costs, and improved manufacturing productivity due, in part,
to the elimination of $8.4 of temporary manufacturing inefficiencies incurred in fiscal 2013 directly attributable to the closure of
the Company's Cochran facility. These improvements were partially offset by unfavorable price/mix and increased product warranty
and related costs compared with the year-ago period. As a result of these factors, gross profit margin increased 80 basis points to
40.9% for the year ended August 31, 2014 compared with 40.1% for the year ended August 31, 2013.
Gross profit was $979.2 in fiscal 2014 compared with adjusted gross profit (excluding the impact of temporary manufacturing
inefficiencies directly attributable to the Cochran facility closure) of $846.0 in fiscal 2013, which amounted to an increase of
23
$133.2, or 15.7%. Fiscal 2014 gross profit margin of 40.9% was 40 basis points higher than adjusted gross profit margin (excluding
the impact of temporary manufacturing inefficiencies directly attributable to the Cochran facility closure) of 40.5% reported in
the prior-year period.
Operating Profit
Selling, Distribution, and Administrative (“SD&A”) expenses for the year ended August 31, 2014 increased $72.7, or 12.0%,
to $680.3 compared with $607.6 in the prior year. The increase in SD&A expenses was due primarily to higher costs to support
the greater sales volume, including freight and commissions, higher employee-related costs, including variable compensation, and
greater spending on activities to enhance sales, service, product development, and customer support capabilities. These expenses
were partially offset by recoveries of $5.8 associated with the fraud at a freight service provider and savings from streamlining
activities initiated in fiscal 2013 . Further details regarding the fraud at a freight service provider and the related costs and recoveries
are included in the Commitment and Contingencies footnote of the Notes to Consolidated Financial Statements. Compared with
the prior-year period, SD&A expenses as a percent of sales declined 70 basis points to 28.4% for fiscal 2014 from 29.1% in fiscal
2013. Adjusted SD&A expenses (excluding the freight service provider fraud-related recoveries and expenses) were $686.1, or
28.7% of net sales, in fiscal 2014 compared to $599.5, or 28.7% of net sales, in the year-ago period.
During the year ended August 31, 2014, the Company recognized a reversal of pre-tax special charges of $0.2 due to lower-
than-anticipated costs related to previously-initiated streamlining efforts of $0.6 partially offset by production transfer costs of
$0.4. During fiscal 2013, the Company recorded a pre-tax special charge of $8.5 related to initiatives to streamline and simplify
operations. The special charge was related primarily to streamlining efforts initiated during the third quarter of fiscal 2013 associated
with a reduction in various selling, distribution, and administrative positions and the planned closure of two small production
facilities. Further details regarding the Company's special charges are included in the Special Charge footnote of the Notes to
Consolidated Financial Statements.
Operating profit for fiscal 2014 was $299.1 compared with $221.5 reported for the prior-year period, an increase of $77.6,
or 35.0%. Operating profit margin increased 190 basis points to 12.5% for fiscal 2014 compared with 10.6% for fiscal 2013 due
primarily to the favorable impact of higher net sales, lower material and component costs, improved manufacturing productivity,
lower special charges, savings from the prior year streamlining activities, and the recoveries associated with the fraud at a freight
service provider. These improvements were partially offset by higher costs to support greater sales volume, higher employee-
related costs, increased product warranty and related costs, and unfavorable price/mix.
Adjusted operating profit (excluding special charges and recoveries associated with the fraud at a freight service provider
noted above) increased $46.6, or 18.9%, to $293.1 compared with $246.5 (excluding the impact of special charges, costs associated
with the fraud at a freight service provider, and the impact of temporary manufacturing inefficiencies directly attributable to the
Cochran facility closure) for fiscal 2013. Adjusted operating profit margin (excluding special charges and recoveries associated
with the fraud at a freight service provider) increased 40 basis points to 12.2% compared with adjusted operating profit margin
(excluding the impact of special charges, costs associated with the fraud at a freight service provider, and the impact of temporary
manufacturing inefficiencies directly attributable to the Cochran facility closure) of 11.8% in the year-ago period.
Other Expense (Income)
Other expense (income) for the Company consists principally of net interest expense and net miscellaneous expense (income)
due primarily to gains and losses related to foreign exchange rate changes. Interest expense, net, was $32.1 and $31.2 for the years
ended August 31, 2014 and 2013, respectively. The increase in interest expense, net, was due primarily to higher interest related
to obligations associated with non-qualified retirement plans. The Company reported net miscellaneous expense of $1.3 in fiscal
2014 compared with net miscellaneous income of $2.8 in fiscal 2013.
Provision for Income Taxes and Net Income
The effective income tax rate was 33.8% and 34.0% for the years ended August 31, 2014 and 2013, respectively. The decrease
in the effective tax rate was due primarily to the favorable impact of certain discrete items. The Company estimates that its effective
tax rate for fiscal 2015 will be approximately 35.5% before any discrete items and assuming the rates in its taxing jurisdictions
remain generally consistent throughout the year.
Net income for fiscal 2014 increased $48.4, or 38.0%, to $175.8 from $127.4 reported for the prior year. The increase in net
income resulted primarily from higher operating profit partially offset by higher net miscellaneous expense and higher tax expense.
Adjusted net income (excluding special charges and recoveries associated with the fraud at a freight service provider) for
fiscal 2014 increased approximately 20.3% to $172.1 compared with $143.1 of adjusted net income (excluding the impact of
special charges, costs associated with the fraud at a freight service provider, and the impact of temporary manufacturing
inefficiencies directly attributable to the Cochran facility closure) in the year-ago period. Adjusted diluted earnings per share for
fiscal 2014 were $3.97 (excluding the impact of special charges and recoveries associated with the fraud at a freight service
24
provider) compared with adjusted diluted earnings per share (excluding the impact of special charges, costs associated with the
fraud at a freight service provider, and the impact of temporary manufacturing inefficiencies directly attributable to the Cochran
facility closure) of $3.31 for the prior-year period, which represented an increase of $0.66, or approximately 19.9%.
Fiscal 2013 Compared with Fiscal 2012
The following table sets forth information comparing the components of net income for the year ended August 31, 2013
with the year ended August 31, 2012:
Net Sales
Cost of Products Sold
Gross Profit
Percent of net sales
Selling, Distribution, and Administrative Expenses
Special Charge
Operating Profit
Percent of net sales
Other Expense (Income):
Interest Expense, net
Miscellaneous (Income) Expense, net
Total Other Expense
Income before Provision for Income Taxes
Percent of net sales
Provision for Income Taxes
Effective tax rate
Net Income
Diluted Earnings per Share
Years Ended August 31,
2013
2012
Increase
(Decrease)
Percent
Change
$ 2,089.1
$ 1,933.7
$
1,251.5
1,145.7
155.4
105.8
837.6
40.1%
607.6
8.5
221.5
10.6%
31.2
(2.8)
28.4
193.1
9.2%
65.7
34.0%
788.0
40.8%
566.7
13.3
208.0
10.8%
30.7
(1.7)
29.0
179.0
9.3%
62.7
35.0%
$
$
127.4
2.95
$
$
116.3
2.72
$
$
49.6
(70) bps
40.9
(4.8)
13.5
(20) bps
0.5
(1.1)
(0.6)
14.1
(10) bps
3.0
11.1
0.23
8.0 %
9.2 %
6.3 %
7.2 %
(36.1)%
6.5 %
1.6 %
64.7 %
(2.1)%
7.9 %
4.8 %
9.5 %
8.5 %
Net sales increased $155.4, or 8.0%, to $2,089.1 for the year ended August 31, 2013 compared with $1,933.7 reported for
the year ended August 31, 2012. For the year ended August 31, 2013, the Company reported net income of $127.4 compared with
$116.3 for the year ended August 31, 2012, an increase of $11.1, or 9.5%. For fiscal 2013, diluted earnings per share increased
8.5% to $2.95 from $2.72 for the prior-year period.
The table below reconciles certain U.S. GAAP financial measures to the corresponding non-U.S. GAAP measures referred
to in the discussion of the Company’s results of operations, which exclude restructuring charges associated primarily with continued
efforts to streamline the organization through the planned closing of certain manufacturing facilities and by realigning
responsibilities primarily within various SD&A departments, other costs associated with manufacturing inefficiencies and
abandoned inventory directly related to the Cochran manufacturing facility closure, and a loss due to fraud at a freight service
company. Although special charges related to efforts to improve overall Company efficiency have been recognized in prior periods
and could recur in future periods, management typically excludes the impact of special charges during internal reviews of
performance and uses these non-U.S. GAAP measures for baseline comparative operational analysis, decision making, and other
activities. These non-U.S. GAAP financial measures, including adjusted gross profit and margin, adjusted selling, distribution,
and administrative expenses and percent of net sales, adjusted operating profit and margin, adjusted net income, and adjusted
diluted earnings per share, are provided to enhance the user’s overall understanding of the Company’s current financial performance.
Specifically, the Company believes these non-U.S. GAAP measures provide greater comparability and enhanced visibility into
the results of operations, excluding the impact of special charges and certain other expenses. The non-U.S. GAAP financial measures
should be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with U.S. GAAP.
25
Gross Profit
Add-back: Manufacturing inefficiencies
Add-back: Abandonment of inventory
Adjusted Gross Profit
Percent of net sales
Selling, Distribution, and Administrative Expenses
Less: Freight service provider fraud-related expense
Adjusted Selling, Distribution, and Administrative Expenses
Percent of net sales
Operating Profit
Add-back: Manufacturing inefficiencies
Add-back: Abandonment of inventory
Add-back: Freight service provider fraud-related expense
Add-back: Special Charge
Adjusted Operating Profit
Percent of net sales
Net Income
Add-back: Manufacturing inefficiencies, net of tax
Add-back: Abandonment of inventory, net of tax
Add-back: Freight service provider fraud-related expense, net of tax
Add-back: Special Charge, net of tax
Adjusted Net Income
Diluted Earnings per Share
Add-back: Manufacturing inefficiencies, net of tax
Add-back: Abandonment of inventory, net of tax
Add-back: Freight service provider fraud-related expense, net of tax
Add-back: Special Charge, net of tax
Adjusted Diluted Earnings per Share
Net Sales
$
$
$
$
$
$
$
$
$
$
Years Ended August 31,
2013
2012
837.6
$
788.0
Increase
(Decrease)
Percent
Change
8.4
—
846.0
40.5%
607.6
8.1
599.5
28.7%
221.5
$
$
$
$
8.4
—
8.1
8.5
246.5
11.8%
127.4
$
$
5.2
—
5.0
5.5
143.1
2.95
0.12
—
0.12
0.12
3.31
$
$
$
53.6
(50) bps
6.8%
$
32.8
(60) bps
5.8%
3.2
1.2
792.4
$
41.0%
566.7
—
566.7
29.3%
208.0
3.2
1.2
—
13.3
225.7
$
20.8
9.2%
10 bps
11.7%
116.3
2.0
0.8
—
8.8
127.9
$
15.2
11.9%
2.72
0.05
0.02
—
0.21
3.00
$
0.31
10.3%
Net sales for the year ended August 31, 2013 increased by 8.0% compared with the prior-year period due primarily to an
increase in sales volumes of approximately 10%, partially offset by the impact of an unfavorable change in price/mix. The impact
on net sales from foreign currency and acquisitions was not material. Sales volume was higher across most product categories
and key sales channels which reflects growth in the North American lighting market, particularly for renovation and retrofit
applications. Additionally, greater demand for LED luminaires continued in fiscal 2013 as sales of these products more than doubled
compared with the year-ago period. The Company estimates that the unfavorable price/mix in fiscal 2013 compared with the year-
ago period was due primarily to greater sales of less featured, value-oriented products sold through certain sales channels, including
an increase in the number of large renovation projects, particularly for national retailers. In addition, price/mix was influenced
by a reduction in the sales price of certain LED luminaries reflecting the continued decline in the cost of certain purchased LED
components.
Gross Profit
Gross profit for fiscal 2013 increased $49.6, or 6.3%, to $837.6 compared with $788.0 for the prior year. The increase was
due primarily to higher sales volumes, net benefits recognized from productivity improvements attributable to streamlining
activities, and lower materials and component costs. These improvements were partially offset by unfavorable price/mix and $8.4
of temporary manufacturing inefficiencies associated with the closure of the Company's Cochran facility as well as increased costs
associated with new product introductions particularly in the first three months of fiscal 2013 compared with the year-ago period.
As a result of these factors, gross profit margin decreased 70 basis points to 40.1% for the year ended August 31, 2013 compared
with 40.8% for the year ended August 31, 2012.
26
Excluding the impact of expenses associated with the closure of the Cochran facility, adjusted gross profit was $846.0 in
fiscal 2013 compared to adjusted gross profit of $792.4 in fiscal 2012, which amounted to an increase of $53.6, or 6.8%. Adjusted
gross profit margin (excluding the expenses associated with the Cochran facility closure in Cost of Products Sold) decreased 50
basis points to 40.5% in fiscal 2013 compared to 41.0% reported in the prior-year period.
Operating Profit
SD&A expenses for the year ended August 31, 2013 increased $40.9, or 7.2%, to $607.6 compared with $566.7 in the prior
year. The increase in SD&A expenses was due primarily to higher costs to support the greater sales volume, including freight and
commissions, greater spending on activities to enhance sales, service, and customer support capabilities, and acquisitions. In
addition, during the third quarter of fiscal 2013, management was notified by a freight payment and audit service provider (“freight
service provider”) that all freight payment services would immediately cease as a result of internal fraud issues at the freight service
provider. Management was informed that the Company may have incurred a loss to the extent that funds remitted to the freight
service provider were not subsequently remitted to the Company's freight carriers. The estimated loss recorded during fiscal 2013
of $8.1, including recovery costs, is included in Selling, Distribution, and Administrative Expenses in the Consolidated Statements
of Comprehensive Income. Further details regarding the fraud at a freight service provider are included in the Commitment and
Contingencies footnote of the Notes to Consolidated Financial Statements. Compared with the prior-year period, SD&A expenses
as a percent of sales declined 20 basis points to 29.1% for fiscal 2013 from 29.3% in fiscal 2012, as a result of relatively slower
growth in SD&A expenses to support the increased level of sales. Adjusted SD&A expenses (excluding freight service provider
fraud-related expenses) were $599.5 or 28.7% of net sales.
During the year ended August 31, 2013, the Company recorded a pre-tax special charge of $8.5 related to initiatives to
streamline and simplify operations. The special charge was related primarily to streamlining efforts initiated during the third quarter
of fiscal 2013 associated with a reduction in various selling, distribution, and administrative positions and the planned closure of
two small production facilities. In addition, the Company incurred approximately $8.4 of costs due to production inefficiencies
directly attributable to the closure of the Cochran facility reported in Cost of Products Sold. Further details regarding the Company's
special charges are included in the Special Charge footnote of the Notes to Consolidated Financial Statements.
Operating profit for fiscal 2013 was $221.5 compared with $208.0 reported for the prior-year period, an increase of $13.5,
or 6.5%. Operating profit margin decreased 20 basis points to 10.6% for fiscal 2013 compared with 10.8% for fiscal 2012 due
primarily to unfavorable price/mix, temporary manufacturing inefficiencies directly attributable to the Cochran facility closure,
incremental costs associated with the fraud at a freight service provider noted above, unfavorable operating performance of the
Company's European operations, and higher costs to support greater sales volume. These items were partially offset primarily by
the favorable impact of higher net sales, lower material and component costs, and the benefits of prior streamlining actions and
manufacturing facility consolidations.
Adjusted operating profit (excluding special charges, incremental costs associated with the fraud at a freight service provider
noted above, and the impact of temporary manufacturing inefficiencies directly attributable to the Cochran facility closure) increased
$20.8, or 9.2%, to $246.5 compared with $225.7 (excluding the impact of special charges and other charges directly attributable
to the Cochran facility closure) for fiscal 2012. The period-over-period increase was due primarily to the favorable impact of higher
net sales, benefits associated with prior streamlining actions and manufacturing facility consolidations (excluding the temporary
manufacturing inefficiencies related to the Cochran facility), and lower material and component costs, partially offset by unfavorable
price/mix, higher costs to support greater sales volumes, and unfavorable operating performance of the Company's European
operations. Adjusted operating profit margin (excluding special charges, incremental costs associated with the fraud at a freight
service provider, and the impact of temporary manufacturing inefficiencies directly attributable to the Cochran facility closure)
increased 10 basis points to 11.8% compared with adjusted operating profit margin (excluding the impact of special charges and
other charges directly attributable to the Cochran facility closure) of 11.7% in the year-ago period.
Other Expense (Income)
Other expense (income) for the Company consists principally of net interest expense and net miscellaneous expense (income)
due primarily to gains and losses related to foreign exchange rate changes. Interest expense, net, was $31.2 and $30.7 for the years
ended August 31, 2013 and 2012, respectively. The increase in interest expense, net, was due primarily to higher interest related
to obligations associated with non-qualified retirement plans. The Company reported net miscellaneous income of $2.8 in fiscal
2013 compared with $1.7 in fiscal 2012.
Provision for Income Taxes and Net Income
The effective income tax rate was 34.0% and 35.0% for the years ended August 31, 2013 and 2012, respectively. The decrease
in the effective tax rate was due primarily to the favorable impact of a reduction in certain income tax reserves and the retroactive
application of the research and development tax credit included in the “American Taxpayer Relief Act of 2012" which became
law in the second quarter of fiscal 2013. These benefits were partially offset by the impact of the United Kingdom reducing its
27
corporate tax rate which required a fourth quarter reduction in the related deferred tax assets. The Company estimates that its
effective tax rate for fiscal 2014 will be approximately 35.5% before any discrete items and if the rates in its taxing jurisdictions
remain generally consistent throughout the year.
Net income for fiscal 2013 increased $11.1, or 9.5%, to $127.4 from $116.3 reported for the prior year. The increase in net
income resulted primarily from higher operating profit and higher net miscellaneous income, partially offset by higher tax expense.
Adjusted net income (excluding special charges, incremental costs associated with the fraud at a freight service provider,
and the impact of temporary manufacturing inefficiencies directly attributable to the Cochran facility closure) for fiscal 2013
increased approximately 11.9% to $143.1 compared with $127.9 of adjusted net income (excluding the impact of special charges
and other charges directly attributable to the Cochran facility closure) in the year-ago period. Adjusted diluted earnings per share
for fiscal 2013 were $3.31 (excluding the impact of temporary manufacturing inefficiencies directly attributable to the Cochran
facility closure, incremental costs associated with the fraud at a freight service provider, and the special charge) compared with
adjusted diluted earnings per share (excluding the impact of special charges and other charges directly attributable to the Cochran
facility closure) of $3.00 for the prior-year period, which represented an increase of $0.31, or approximately 10.3%.
Outlook
Management believes that the execution of the Company's strategy will provide opportunities for continued profitable growth.
The Company's strategy is to capitalize on market growth opportunities by continuing to expand and leverage its industry-leading
lighting product and solutions portfolio combined with its extensive market presence and financial strength. Management continues
to position the Company to optimize short-term performance while investing in and deploying resources for long-term profitable
growth opportunities.
The growth rate for the North American lighting market, which typically benefits from new construction as well as renovation
and retrofit activity, is projected to be in the mid-to-upper single digit range for fiscal 2015 with continued gradual improvement
over the next several years. Management currently believes that the Company will benefit from continued renovation and tenant
improvement projects, further expansion in underpenetrated geographies and channels, and growth from the introduction of new
lighting products and solutions.
Additionally, the lighting industry continues to experience some volatility with respect to input costs. While some commodity
costs have waned recently, others continue to rise. As the economy improves, management believes there is the potential for rising
input costs. While management expects employee-related costs will continue to rise due to wage inflation and rising health care
costs, management will continue to be vigilant in its pricing posture and productivity efforts to help offset rising costs. Management
remains optimistic about the opportunities for solid profitable growth for fiscal 2015 and the foreseeable future and expects that
the Company will be able to outperform the markets it serves while delivering performance more consistent with management's
long-term financial objectives.
From a longer term perspective, management expects that its addressable markets will experience solid growth over the next
decade, particularly as energy and environmental concerns come to the forefront. Management remains positive about the future
prospects of the Company and its ability to continue to outperform the markets it serves.
Accounting Standards Adopted in Fiscal 2014 and Accounting Standards Yet to Be Adopted
See the New Accounting Pronouncements footnote of the Notes to Consolidated Financial Statements for information on
recently adopted and upcoming standards.
28
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 the Description of Business and Basis of Presentation footnote of the Notes to Consolidated
Financial Statements, the preparation of financial statements in conformity with U.S. GAAP requires 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 revenue recognition; accounts receivable;
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; income taxes; retirement benefits; 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 the Significant Accounting Policies footnote 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 policies and estimates:
Revenue Recognition
The Company records revenue when the following criteria are met: persuasive evidence of a sales arrangement exists, delivery
has occurred, the Company’s price to the customer is fixed and determinable, and collectability is reasonably assured. In the period
of revenue recognition, provisions for certain rebates, sales incentives, product returns, and discounts to customers are estimated
and recorded, in most instances, as a reduction of revenue. 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 items are estimated based on customer agreements, historical trends, and expected demand. Actual results could
differ from estimates, which would require adjustments to accrued amounts. See the Significant Accounting Policies footnote of
the Notes to Consolidated Financial Statements for additional information about these assumptions and estimates.
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 allowance is sufficient to cover uncollectible amounts; however, there can be no assurance that unanticipated
future business conditions of customers will not have a negative impact on the Company’s results of operations.
Inventories
Inventories include materials, direct labor, in-bound freight, 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, market conditions, or technology 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 goodwill and indefinite-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 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, economic, industry, and
company-specific qualitative factors, projected future net sales, operating results, and cash flows.
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 flows 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
29
to record a non-cash charge to earnings for 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 $569.4 as of August 31, 2014. 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 approximately 10% as of June 1, 2014, based on the Capital Asset Pricing Model,
which considers the risk-free interest rate, beta, market risk premium, and entity specific size premium to determine an appropriate
discount rate. 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 discrete 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, and historical long-term performance.
During fiscal 2014, the Company performed an evaluation of the fair value of goodwill. 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 six trade names with an aggregate carrying value of approximately
$100.0. Management utilized significant assumptions to estimate the fair value of these indefinite-lived trade names using a fair
value model based on discounted future cash flows (“fair value model”) in accordance with U.S. GAAP. Future cash flows associated
with each of the Company’s indefinite-lived 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 (including short and long-term growth rates), the royalty rate, and
the discount rate.
Future net sales and short-term growth rates are estimated for each particular trade name based on management’s financial
forecasts, which consider key business drivers, such as specific revenue growth initiatives, market share changes, expected growth
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 3.0% for the Company and is based primarily on the
Company’s understanding of projections for expected long-term growth in non-residential construction, the Company’s key market,
and historical long-term performance. The theoretical royalty rate is estimated primarily using management’s assumptions regarding
the amount a willing third party would pay to use the particular trade name and is compared with market information for similar
intellectual property within and outside of the industry. Differences between expected and actual results can result in significantly
different valuations. If 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 flows in the valuation model. The Company utilized a range of estimated discount rates between
10% and 16% as of June 1, 2014, based on the Capital Asset Pricing Model, which considers the updated risk-free interest rate,
beta, market risk premium, and entity specific size premium.
During fiscal 2014, the Company performed an evaluation of the fair value of its indefinite-lived trade names. The Company’s
expected revenues are based on the Company’s fiscal 2015 expectations and recent lighting market growth estimates for fiscal
2015 through 2019. The Company also included revenue growth estimates based on current initiatives expected to help the Company
improve performance. During fiscal 2014, 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 for each trade name.
The estimated fair values of the indefinite-lived intangible assets 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, royalty rates, and discount rates,
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 trade names based on changes in the assumptions, which would
be less likely to occur, would not be material to the Company’s financial condition or results of operations.
30
Self-Insurance
The Company self-insures, up to certain limits, traditional risks including workers’ compensation, comprehensive general
liability, and auto liability. 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. The actuarial estimates 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 the Company 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 up to certain limits for certain other insurable risks, primarily physical loss to property and business
interruptions resulting from such loss lasting two 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. The Company is fully self-insured
for certain other types of liabilities, including environmental, product recall, warranty, and patent infringement.
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, if necessary, annually. Although management believes that
the current estimates are reasonable, significant differences related to claim reporting patterns, plan design, legislation, and general
economic conditions could materially affect the Company’s medical benefit plan liabilities, future expense, and cash flow.
Income Taxes
The Company uses certain assumptions and estimates in determining the income taxes payable or refundable for the current
year, income tax expense, and deferred income tax liabilities and assets, which represent temporary and permanent differences
between amounts within the financial statements and the income tax basis. Accounting Standards Codification (“ASC”) Topic
740, Income Taxes (“ASC 740”), requires the evaluation and testing of the recoverability of deferred tax assets. Deferred tax assets
are reduced by a valuation allowance if, based on the relevant factors, it is more likely than not that all or some portion of the
deferred tax assets will not be realized. Reasonable judgment and estimates are required in determining whether a valuation
allowance is necessary and, if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, the
Company considers a number of factors, including, but not limited to: the nature and character of the deferred tax assets and
liabilities; taxable income in prior carryback years; future reversals of existing temporary differences; and the length of time
carryovers can be utilized.
In light of the multiple tax jurisdictions in which the Company operates, the Company’s tax returns are subject to routine
audit by the Internal Revenue Service (“IRS”) and other taxation authorities. The results of these audits at times produce uncertainty
regarding particular tax positions taken in the year(s) of review. The Company records uncertain tax positions as prescribed by
ASC 740, which requires recognition at the time when it is more likely than not that the position in question will be upheld.
Although management believes that the judgment and estimates involved are reasonable and that the necessary provisions have
been recorded, changes in circumstances or unexpected events could adversely or positively affect the Company’s financial position,
results of operations, and cash flows.
Retirement Benefits
The Company sponsors domestic and international defined benefit pension plans and defined contribution plans and other
postretirement plans. Assumptions are used to determine the estimated fair value of plan assets, the actuarial value of plan liabilities,
and the current and projected costs for these employee benefit plans and include, among other factors, estimated discount rates,
expected returns on the pension fund assets, estimated mortality rates, the rates of increase in employee compensation levels, and,
for one international plan, retroactive inflationary adjustments. These assumptions are determined based on Company and market
data and are evaluated annually as of the plans’ measurement date. See the Pensions and Defined Contribution Plans footnote of
the Notes to Consolidated Financial Statements for further information on the Company’s plans, including the potential impact
of changes to certain of these assumptions.
Share-Based Compensation Expense
The Company recognizes compensation cost relating to share-based payment transactions in the financial statements based
on the estimated fair value of the equity instrument issued. The Company accounts for stock options, 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 the Share-Based Payments footnote of the Notes to Consolidated Financial Statements) based
on the grant-date fair value estimated under the current provisions of ASC Topic 718, Compensation — Stock Compensation (“ASC
718”).
31
The Company employs the Black-Scholes model in deriving the fair value estimates of certain share-based awards and
estimates forfeitures of all share-based awards at the time of grant, which are revised in subsequent periods if actual forfeitures
differ from initial estimates. Forfeitures are estimated based on historical experience. If factors change causing different assumptions
to be made in future periods, estimated compensation expense may differ significantly from that recorded in the current period.
See the Significant Accounting Policies and Share-Based Payments footnotes of the 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.
Estimated future warranty costs are primarily based on historical experience of identified warranty claims. The Company is fully
self-insured for product warranty costs. Historical warranty costs have been within expectations; and the Company expects that
historical activity will continue to be the best indicator of future warranty costs. There can be no assurance that future warranty
costs will not exceed historical amounts or that incorporating new technologies, such as LED components into products, may not
generate unexpected costs. Estimated costs related to product recalls based on a formal campaign soliciting repair or return of that
product are accrued when they are deemed to be probable and can be reasonably estimated. If actual future warranty or recall costs
exceed recorded amounts, additional allowances may be required, which could have a material adverse impact on the Company’s
results of operations and cash flow.
Litigation
The Company 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 could have a material adverse
impact on the Company’s results of operations and cash flow.
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 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 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, current and potential investors,
or others. Forward-looking statements include, without limitation: (a) the Company’s 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 industry unit volumes; (d) expectations about the impact of volatility
and uncertainty in component and commodity costs and availability, and the Company's ability to manage those challenges, 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; (f) the Company’s estimate of its fiscal 2015 annual tax rate; (g) the Company’s
future amortization expense; and (h) 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. Also, 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.
32
Item 7a.
($ in millions)
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 Comprehensive 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, 2014, the variable-rate debt of the Company was solely comprised of the $4.0 long-term industrial
revenue bond. A 10% increase in market interest rates at August 31, 2014, 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 $350.0 publicly-traded fixed-rate notes. A 10% increase in market interest rates at
August 31, 2014 would have decreased the estimated fair value of these debt obligations by approximately $6.2. See the Debt and
Lines of Credit footnote 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 Mexico
and Canada, where a significant portion of products sold are sourced from the United States, and, to a lesser extent, in Europe.
Based on fiscal 2014 performance, a hypothetical decline in the value of the Canadian dollar in relation to the U.S. dollar of 10%
would negatively impact operating profit by approximately $11, while a hypothetical appreciation of 10% in the value of the
Canadian dollar in relation to the U.S. dollar would favorably impact operating profit by approximately $13. In addition to products
and services sold in Mexico, a significant portion of the goods sold in the United States are manufactured in Mexico. A hypothetical
10% increase in the value of the Mexican peso in relation to the U.S. dollar would negatively impact operating profits by
approximately $9, while a hypothetical decrease of 10% in the value of the Mexican peso in relation to the U.S. dollar would
favorably impact operating profit by approximately $7. The individual impacts to the operating profit of the Company of hypothetical
currency fluctuations in the Canadian dollar and Mexican peso have been calculated in isolation from any potential responses to
address such exchange rate changes in the Company’s foreign markets.
The Company’s exposure to foreign currency risk related to its operations in Europe is immaterial and has been excluded
from this analysis.
Commodity Prices. The Company utilizes a variety of raw materials and components in its production process including
petroleum-based products, steel, and aluminum. In fiscal 2014, the Company purchased approximately 95,000 tons of steel and
aluminum. The Company estimates that approximately 8% of raw materials purchased are petroleum-based and that approximately
four million gallons of diesel fuel were consumed in fiscal 2014. Failure to effectively manage future increases in the costs of
these items could have an adverse impact on the Company's results of operations and cash flow.
33
Item 8.
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Management’s Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of August 31, 2014 and 2013
Consolidated Statements of Comprehensive Income for the years ended August 31, 2014, 2013, and 2012
Consolidated Statements of Cash Flows for the years ended August 31, 2014, 2013, and 2012
Consolidated Statements of Stockholders’ Equity for the years ended August 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
Schedule II — Valuation and Qualifying Accounts
Page
35
36
38
39
40
41
42
89
34
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, 2014. 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 (1992 Framework). Based on
this assessment, management believes that, as of August 31, 2014, 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, 2014 is included within 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
35
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, 2014 and 2013, and
the related consolidated statements of comprehensive income, cash flows, and stockholders’ equity for each of the three years in
the period ended August 31, 2014. 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, 2014 and 2013, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended August 31, 2014, 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, 2014, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992
Framework) and our report dated October 29, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
October 29, 2014
36
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, 2014, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (1992 Framework) (the COSO criteria). Acuity Brands, 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.
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, and that receipts and expenditures of the
company are being made only in accordance with 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.
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 that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Acuity Brands, Inc. maintained, in all material respects, effective internal control over financial reporting as
of August 31, 2014, 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, 2014 and 2013, and the related consolidated statements
of comprehensive income, cash flows, and stockholders’ equity for each of the three years in the period ended August 31, 2014
of Acuity Brands, Inc. and our report dated October 29, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
October 29, 2014
37
ACUITY BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
Current Assets:
Cash and cash equivalents
ASSETS
Accounts receivable, less reserve for doubtful accounts of $1.9 and $1.5 as of August 31, 2014 and August
31, 2013, respectively
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
Other long-term assets
Total Other Assets
Total Assets
Current Liabilities:
Accounts payable
Accrued compensation
Accrued pension liabilities, current
Other accrued liabilities
Total Current Liabilities
LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-Term Debt
Accrued Pension Liabilities, less current portion
Deferred Income Taxes
Self-Insurance Reserves, less current portion
Other Long-Term Liabilities
Commitments and Contingencies (see Commitments and Contingencies footnote)
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; 52,581,917 issued and 42,862,662
outstanding at August 31, 2014; 52,205,933 issued and 42,486,678 outstanding at August 31, 2013
Paid-in capital
Retained earnings
Accumulated other comprehensive loss items
Treasury stock, at cost, 9,719,255 shares at August 31, 2014 and 2013
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
August 31,
2014
2013
(In millions, except share data)
$
552.5
$
359.1
373.4
212.0
21.5
27.3
1,186.7
7.8
116.0
375.8
499.6
347.1
152.5
569.4
231.6
3.0
24.9
828.9
2,168.1
287.4
54.8
1.2
127.1
470.5
353.6
65.1
58.4
6.8
50.2
$
$
318.3
203.0
13.6
19.5
913.5
7.2
109.6
354.5
471.3
323.4
147.9
568.2
245.1
1.7
27.4
842.4
1,903.8
249.5
28.0
1.2
107.5
386.2
353.6
54.7
53.9
7.0
54.9
—
—
0.5
761.5
893.6
(71.9)
(420.2)
1,163.5
2,168.1
$
0.5
735.5
740.3
(62.6)
(420.2)
993.5
1,903.8
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
38
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended August 31,
2014
2013
2012
(In millions, except per-share data)
$
2,393.5
$
2,089.1
$
1,414.3
1,251.5
Net Sales
Cost of Products Sold
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 before Provision for Income Taxes
Provision for Income Taxes
Net Income
Earnings Per Share:
Basic Earnings per Share
Basic Weighted Average Number of Shares Outstanding
Diluted Earnings per Share
Diluted Weighted Average Number of Shares Outstanding
Dividends Declared per Share
Comprehensive Income:
Net income
Other Comprehensive Income/(Expense) Items:
Foreign currency translation adjustments
Defined benefit plans, net
Other Comprehensive (Expense)/Income Items, net of tax
Comprehensive Income
979.2
680.3
(0.2)
299.1
32.1
1.3
33.4
265.7
89.9
837.6
607.6
8.5
221.5
31.2
(2.8)
28.4
193.1
65.7
175.8
$
127.4
$
$
$
4.07
42.8
4.05
43.0
$
$
2.97
42.2
2.95
42.5
1,933.7
1,145.7
788.0
566.7
13.3
208.0
30.7
(1.7)
29.0
179.0
62.7
116.3
2.75
41.4
2.72
41.9
0.52
$
0.52
$
0.52
175.8
$
127.4
$
116.3
0.7
(10.0)
(9.3)
166.5
(1.9)
24.0
22.1
$
149.5
$
(8.2)
(22.7)
(30.9)
85.4
$
$
$
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
39
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Provided by (Used for) Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
$
175.8
$
127.4
$
116.3
Years Ended August 31,
2014
2013
2012
(In millions)
Depreciation and amortization
Share-based compensation expense
Excess tax benefits from share-based payments
Loss (gain) on the sale or disposal of property, plant, and equipment
Asset impairments
Deferred income taxes
Other non-cash items
Change in assets and liabilities, net of effect of acquisitions, divestitures and effect of
exchange rate changes:
Accounts receivable
Inventories
Prepayments and other current assets
Accounts payable
Other current liabilities
Other
Net Cash Provided by Operating Activities
Cash Provided by (Used for) Investing Activities:
Purchases of property, plant, and equipment
Proceeds from sale of property, plant, and equipment
Acquisitions of businesses and intangible assets, net of cash acquired
Net Cash Used for Investing Activities
Cash Provided by (Used for) Financing Activities:
Repurchases of common stock
Proceeds from stock option exercises and other
Excess tax benefits from share-based payments
Dividends paid
Other financing activities
Net Cash (Used for) Provided by Financing Activities
Effect of Exchange Rate Changes on Cash
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
Supplemental Cash Flow Information:
Income taxes paid during the period
Interest paid during the period
43.4
17.7
(10.4)
0.3
0.1
(0.2)
—
(55.4)
(9.0)
(6.6)
37.6
59.8
(20.0)
233.1
(35.3)
1.0
—
(34.3)
—
8.4
10.4
(22.5)
(2.6)
(6.3)
0.9
193.4
359.1
552.5
77.4
32.5
$
$
$
40.8
16.5
(8.6)
(2.5)
0.3
6.5
—
(54.8)
(6.5)
1.9
15.2
7.7
(11.6)
132.3
(40.6)
7.6
(25.5)
(58.5)
—
14.9
8.6
(22.4)
—
1.1
(0.3)
74.6
284.5
359.1
46.8
31.3
$
$
$
39.8
15.9
(4.9)
0.5
0.3
6.2
0.1
(2.3)
(28.6)
(2.2)
29.6
9.7
(8.2)
172.2
(31.4)
0.1
(3.8)
(35.1)
(9.2)
7.6
4.9
(22.0)
—
(18.7)
(4.1)
114.3
170.2
284.5
50.7
31.6
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
40
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Balance, August 31, 2011
Net income
Other comprehensive loss
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
Balance, August 31, 2012
Net income
Other comprehensive income
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
Tax effect on stock options and restricted stock
Balance, August 31, 2013
Net income
Other comprehensive loss
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
Tax effect on stock options and restricted stock
Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
$
0.5
$
680.3
$
541.0
$
(53.8) $ (411.0) $ 757.0
(In millions)
—
—
—
—
—
—
—
—
—
—
10.3
0.3
—
7.3
—
4.9
0.5
703.1
—
—
—
—
—
—
—
0.5
—
—
—
—
—
—
—
—
—
8.9
0.4
—
14.5
8.6
735.5
—
—
7.2
0.4
—
8.0
10.4
116.3
—
—
—
(22.0)
—
—
—
635.3
127.4
—
—
—
(22.4)
—
—
740.3
175.8
—
—
—
(22.5)
—
—
—
(30.9)
—
—
—
—
—
—
—
—
—
—
—
—
(9.2)
—
(84.7)
(420.2)
—
22.1
—
—
—
—
—
—
—
—
—
—
—
—
(62.6)
(420.2)
—
(9.3)
—
—
—
—
—
—
—
—
—
—
—
—
116.3
(30.9)
10.3
0.3
(22.0)
7.3
(9.2)
4.9
834.0
127.4
22.1
8.9
0.4
(22.4)
14.5
8.6
993.5
175.8
(9.3)
7.2
0.4
(22.5)
8.0
10.4
Balance, August 31, 2014
$
0.5
$
761.5
$
893.6
$
(71.9) $ (420.2) $1,163.5
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
41
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in millions, except per-share data and as indicated)
1.
Description of Business and Basis of Presentation
Acuity Brands, Inc. (“Acuity Brands”) is the parent company of Acuity Brands Lighting, Inc. (“ABL”) and other subsidiaries
(Acuity Brands, ABL, and such other subsidiaries are collectively referred to herein as the "Company”). The Company designs,
produces, and distributes a broad array of lighting solutions and services for commercial, institutional, industrial, infrastructure,
and residential applications for various markets throughout North America and select international markets. The Company's lighting
solutions include devices such as luminaires, lighting controls, power supplies, prismatic skylights, light-emitting diode (“LED”)
lamps, and integrated lighting systems for indoor and outdoor applications utilizing a combination of light sources, including
daylight, and other devices controlled by software that monitors and manages light levels while optimizing energy consumption
(collectively referred to herein as “lighting solutions”). The Company has one operating segment serving the North American
lighting market and select international markets.
The Company has made several acquisitions over the last five years to expand and enhance its portfolio of lighting solutions,
including the following recent acquisitions:
On March 13, 2013, the Company acquired for cash , including potential additional cash payments that may be paid in future
periods under earn-out provisions, all of the ownership interests in eldoLAB Holding B.V. (“eldoLED”), a leading provider of
high-performance drivers for LED lighting systems based in Eindhoven, The Netherlands. The operating results of eldoLED
have been included in the Company's consolidated financial statements since the date of acquisition.
On December 20, 2012, the Company acquired for cash all of the ownership interests in Adura Technologies ("Adura"), a
leading developer of radio frequency (RF) mesh networking technology that allows individual light fixtures to communicate in a
wireless mesh network with switches, sensors and system management software. The operating results of Adura have been included
in the Company’s consolidated financial statements since the date of acquisition.
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. References made to years are for fiscal year periods, unless noted otherwise.
2.
Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Acuity Brands and its wholly-owned subsidiaries after
elimination of significant intercompany transactions and accounts.
Revenue Recognition
The Company records revenue when the following criteria are met: persuasive evidence of an arrangement exists, delivery
has occurred, the Company’s price to the customer 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, 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 Comprehensive
Income in accordance with the Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition (“ASC 605”), which
in most instances requires such costs be recorded as a reduction of revenue.
The Company's standard terms and conditions of sale allow returns of certain products within four months of the date of
shipment. The Company also provides for limited product return rights to certain distributors and other customers, primarily for
slow moving or damaged items subject to certain defined criteria. The limited product return rights generally allow customers to
return resalable products purchased within a specified time period and subject to certain limitations, including, at times, when
accompanied by a replacement order of equal or greater value. At the time revenue is recognized, the Company records a provision
42
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
for the estimated amount of future returns primarily based on historical experience, specific notification of pending returns, or
based on contractual terms with the respective customers. 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 adverse impact on the Company's operating results in future periods.
Revenue is earned on services and the sale of products. Revenue is recognized for the sale of products when the above criteria
are met and for services rendered in the period of performance.
Revenue Recognition for Arrangements with Multiple Deliverables
A small portion of the Company's revenues are derived from the combination of any or all of: (i) the sale and license of its
products, (ii) fees associated with training, installation, and technical support services, and (iii) monitoring and lighting control
services. Certain agreements, particularly related to lighting controls systems, represent multiple-element arrangements that include
tangible products that contain software that is essential to the functionality of the systems and undelivered elements that primarily
relate to installation, monitoring, and lighting control services. The undelivered elements associated with installation, monitoring,
and lighting control services are reviewed and analyzed to determine separability in relation to the delivered elements and
appropriate pricing treatment based on (a) vendor-specific objective evidence, (b) third-party evidence, or (c) management
estimates. If deemed separate units of accounting, the revenue and associated cost of sales related to the delivered elements are
recognized at the time of delivery, while those related to the undelivered elements are recognized appropriately based on the period
of performance. If the separation criterion for the undelivered elements is not met because the undelivered elements are essential
to the functionality of the lighting controls systems, all revenue and cost of sales attributable to the contract are deferred at the
time of sale and are both generally recognized on a straight-line basis over the respective contract periods.
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.
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 allowance is sufficient to cover uncollectible amounts; however, there can be no assurance that unanticipated
future business conditions of customers will not have a negative impact on the Company’s results of operations.
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 the Company’s lighting solutions as well as their dispersion across many different geographic
areas. Receivables from The Home Depot were approximately $53.3 and $53.7 at August 31, 2014 and 2013, respectively. No
other single customer accounted for more than 10% of consolidated receivables at August 31, 2014 or 2013. Additionally, net sales
to The Home Depot accounted for approximately 12% of net sales of the Company in fiscal 2014, 13% in fiscal 2013, and 10%
in fiscal 2012.
Reclassifications
Certain prior-period amounts have been reclassified to conform to the current year presentation.
43
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Subsequent Events
The Company has evaluated subsequent events for recognition and disclosure for occurrences and transactions after the date
of the consolidated financial statements as of August 31, 2014.
Inventories
Inventories include materials, direct labor, in-bound freight, 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:
Raw materials, supplies, and work in process(1)
Finished goods
Less: Reserves
Total Inventory
August 31,
2014
2013
$
$
125.7
$
97.6
223.3
(11.3)
212.0
$
122.6
90.9
213.5
(10.5)
203.0
_______________________________________
(1) Due to the immaterial amount of estimated work in process and the short lead times for the conversion of raw materials to finished goods, the
Company does not believe the segregation of raw materials and work in process to be meaningful information.
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.
Assets Held for Sale
The Company classifies assets as held for sale upon the development of a plan for disposal and in accordance with applicable
U.S. GAAP and ceases the depreciation and amortization of the assets at that date. The Company is actively marketing the properties
classified as held for sale. As of August 31, 2014, the carrying value of the properties held for sale was $3.7, which is included in
Prepayments and other current assets on the Consolidated Balance Sheets.
Goodwill and Other Intangibles
Changes in the carrying amount of goodwill during the year are summarized as follows:
Goodwill:
Balance as of August 31, 2013
Adjustments for acquired businesses
Currency translation adjustments
Balance as of August 31, 2014
$
$
568.2
1.4
(0.2)
569.4
The current year increase in the gross carrying amount for goodwill was due primarily to the finalization of the acquisition
accounting adjustments for Adura and eldoLED partially offset by the impact of foreign currency changes during the period.
44
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Summarized information for the Company’s acquired intangible assets is as follows:
Definite-lived intangible assets:
Patents and patented technology
Trademarks and trade names
Distribution network
Customer relationships
Other
Total
Indefinite-lived trade names
August 31,
2014
2013
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
$
$
$
$
69.2
25.4
61.8
55.2
5.3
216.9
$
100.0
(26.4) $
(8.6)
(29.7)
(16.3)
(4.3)
(85.3) $
$
$
71.3
25.4
61.8
55.2
5.5
219.2
$
100.0
(22.2)
(6.9)
(27.4)
(13.9)
(3.7)
(74.1)
Through multiple acquisitions, the Company acquired intangible assets consisting primarily of trademarks and trade names
associated with specific products with finite lives, definite-lived distribution networks, patented technology, non-compete
agreements, and customer relationships, which are amortized over their estimated useful lives. Indefinite-lived intangible assets
consist of trade names that are expected to generate cash flows indefinitely. Significant estimates and assumptions were used to
determine the initial fair value of these acquired intangible assets, including estimated future net sales, customer attrition rates,
royalty rates, and discount rates. The current year decreases in the gross carrying amounts for the acquired intangible assets were
due primarily to recording the final values of intangible assets associated with the acquisition of Adura (refer to the Acquisitions
footnote).
The Company recorded amortization expense of $11.2, $10.9, and $11.2 related to intangible assets with finite lives during
fiscal 2014, 2013, and 2012, respectively. Amortization expense is generally recorded on a straight-line basis and is expected to
be approximately $11.1 in fiscal 2015, $10.5 in fiscal 2016, $10.2 in fiscal 2017, $10.2 in fiscal 2018, and $10.2 in fiscal 2019.
The Company tests goodwill and indefinite-lived intangible assets for impairment on an annual basis or more frequently as
facts and circumstances change, as required by ASC Topic 350, Intangibles — Goodwill and Other (“ASC 350”). The goodwill
impairment test has three steps: a qualitative review and a two-step quantitative method. The preliminary step (“Step 0”) allows
for a qualitative analysis to determine the likelihood of impairment. If the qualitative review results in a more likely than not
probability of impairment, the first quantitative step is required. The first step identifies potential impairments by comparing the
fair value of a reporting unit with its carrying value, including goodwill. The fair values can be determined based on a combination
of valuation techniques including the expected present value of future cash flows, a market multiple approach, and a comparable
transaction approach. If the fair value of a reporting unit exceeds the carrying value, goodwill is not considered 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. In fiscal 2014, a quantitative fair value analysis, based on
discounted future cash flows, was used to determine the likelihood of goodwill impairment for the Company’s one reporting unit.
The analysis for goodwill did not result in an impairment charge during fiscal 2014, 2013, or 2012.
The impairment test for indefinite-lived trade names consists of comparing the fair value of the asset with its carrying value.
The Company estimates the fair value of indefinite-lived trade names using a fair value model based on discounted future cash
flows. If the carrying amount exceeds the estimated fair value, an impairment loss would be recorded in the amount of the excess.
Significant assumptions, including estimated future net sales, royalty rates, and discount rates, are used in the determination of
estimated fair value for indefinite-lived trade names. None of the analyses for the indefinite-lived trade names resulted in an
impairment charge during fiscal 2014, 2013, or 2012.
45
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Long-Term Assets
Other long-term assets consist of the following:
Deferred contract costs
Capitalized software costs (1)
Other(2)
Total
_______________________________________
August 31,
2014
2013
$
$
15.0
$
2.3
7.6
24.9
$
13.5
2.7
11.2
27.4
(1)
The Company recorded amortization expense related to capitalized software costs of $0.4, $0.9, and $1.1 in fiscal 2014, 2013, and 2012,
respectively.
(2) Other - Amount primarily includes deferred debt issuance costs and company-owned life insurance investments. The Company maintains life
insurance policies on 78 current and former employees primarily to satisfy obligations under certain deferred compensation plans. These company-
owned life insurance policies are presented net of loans that are secured by these policies. This program is frozen and no new policies were issued in
the three-year period ended August 31, 2014.
Other Long-Term Liabilities
Other long-term liabilities consist of the following:
Deferred compensation and postretirement benefits other than pensions(1)
Acquisition-related liabilities(2)
Uncertain tax position liabilities, including interest(3)
Other(4)
Total
_______________________________________
August 31,
2014
2013
32.6
$
5.3
3.5
8.8
50.2
$
31.9
9.0
5.7
8.3
54.9
$
$
(1) Deferred compensation and 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.
Acquisition-related liabilities - Amounts represent contingent payments and other obligations, including holdback liabilities, related to recent
acquisitions.
See the Income Taxes footnote for more information.
(2)
(3)
(4) Other - Amount primarily includes deferred revenue and deferred rent.
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 $100.9,
$86.4, and $81.5 in fiscal 2014, 2013, and 2012, respectively.
Share-Based Compensation
The Company recognizes compensation cost relating to share-based payment transactions in the financial statements based
on the estimated fair value of the equity or liability instrument issued. The Company accounts for stock options, 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 the Share-Based Payments footnote) based on the grant-date fair value estimated
under the current provisions of ASC Topic 718, Compensation — Stock Compensation (“ASC 718”).
Share-based expense includes expense related to restricted stock and options issued, as well as share units deferred into
either the Director Deferred Compensation Plan. The Company recorded $17.7, $16.5, and $15.9 of share-based expense for the
years ending August 31, 2014, 2013, and 2012, respectively. The total income tax benefit recognized for share-based compensation
46
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
arrangements was $6.0, $5.6, and $5.6 for the years ended August 31, 2014, 2013, and 2012, respectively. The Company accounts
for any awards with graded vesting on a straight-line basis. Additionally, forfeitures of share-based awards are estimated based
on historical experience at the time of grant and are revised in subsequent periods if actual forfeitures differ from initial estimates.
The Company did not capitalize any expense related to share-based payments and has recorded share-based expense, net of
estimated forfeitures, in Selling, Distribution, and Administrative Expenses.
Benefits of tax deductions in excess of recognized share-based compensation cost are reported as a financing cash
flow, rather than as an operating cash flow, in the Company’s Statements of Cash Flows and amounted to $10.4, $8.6, and $4.9
for fiscal 2014, 2013, and 2012, respectively.
See the Share-Based Payments footnote 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 3 to 15 years for machinery and equipment),
while accelerated depreciation methods are used for income tax purposes. Leasehold improvements are amortized over the shorter
of the life of the lease or the estimated useful life of the improvement. Depreciation expense amounted to $31.8, $29.0, and $27.5
during fiscal 2014, 2013, and 2012, respectively.
Research and Development
Research and development (“R&D”) expense, which is expensed as incurred, consists of compensation, payroll taxes,
employee benefits, materials, supplies, and other administrative costs, but does not include all new product development costs,
and is included in Selling, Distribution, and Administrative Expenses in the Company’s Consolidated Statements of Comprehensive
Income. R&D expense amounted to $35.3, $32.7, and $34.7 during fiscal 2014, 2013, and 2012, respectively.
Advertising
Advertising costs are expensed as incurred and are included within Selling, Distribution, and Administrative Expenses in
the Company’s Consolidated Statements of Comprehensive Income. These costs totaled $13.3, $12.1, and $12.6 during fiscal 2014,
2013, and 2012, 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 $6.1, $5.7, and $5.7 in fiscal 2014, 2013, and
2012, respectively. These costs have been included within Selling, Distribution, and Administrative Expenses in the Company’s
Consolidated Statements of Comprehensive Income.
Interest Expense, Net
Interest expense, net, is comprised primarily of interest expense on long-term debt, revolving credit facility borrowings, and
loans collateralized by assets related to a 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
Interest expense, net
Years Ended August 31,
2014
2013
2012
$
$
32.6
(0.5)
32.1
$
$
31.9
(0.7)
31.2
$
$
31.3
(0.6)
30.7
47
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
balance sheet translation are included in Foreign currency translation adjustments in the Consolidated Statements of Comprehensive
Income and are excluded from net income.
Miscellaneous Expense (Income), Net
Miscellaneous expense (income), net, is composed primarily of gains or losses on foreign currency items and other non-
operating items. Gains or losses relating to foreign currency items consisted of expense of $1.5 in fiscal 2014, expense of $0.2
in fiscal 2013, and income of $1.2 in fiscal 2012.
Income Taxes
The Company is taxed at regular corporate rates after adjusting income reported for financial statement purposes for certain
items that are treated differently for income tax purposes. Deferred income tax expenses or benefits result from changes during
the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities.
Comprehensive Income
Comprehensive income represents a measure of all changes in equity that result from recognized transactions and other
economic events other than transactions with owners in their capacity as owners. Other comprehensive income for the Company
includes foreign currency translation and pension adjustments.
The following table presents the changes in each component of Accumulated Other Comprehensive Income/Loss Items, net
of tax.
Balance at August 31, 2013
Other Comprehensive Income/(Expense) before reclassifications
Amounts reclassified from accumulated other comprehensive income
Net current-period Other Comprehensive Income/(Expense)
Balance at August 31, 2014
Foreign
Currency Items
Defined
Benefit Pension
Plans
Accumulated
Other
Comprehensive
Loss Items
$
$
(18.8) $
(43.8) $
0.7
—
0.7
(12.6)
2.6
(10.0)
(18.1) $
(53.8) $
(62.6)
(11.9)
2.6
(9.3)
(71.9)
48
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the tax (expense)/benefit allocated to each component of Other Comprehensive Income
(Expense).
2014
Years Ended August 31,
2013
2012
Before
Tax
Amount
Tax
(Expense)
or Benefit
Net of
Tax
Amount
Before
Tax
Amount
Tax
(Expense)
or Benefit
Net of
Tax
Amount
Before
Tax
Amount
Tax
(Expense)
or Benefit
Net of
Tax
Amount
$
0.7
$
— $
0.7
$
(1.9) $
— $
(1.9) $
(8.2) $
— $
(8.2)
—
(18.2)
0.8
3.1
—
5.6
(0.3)
(1.0)
—
(12.6)
(5.5)
34.5
2.2
(11.7)
(3.3)
22.8
—
(38.3)
0.5
2.1
0.7
6.2
(0.3)
(2.1)
0.4
4.1
0.1
4.1
—
12.9
—
(1.5)
—
(25.4)
0.1
2.6
(14.3)
4.3
(10.0)
35.9
(11.9)
24.0
(34.1)
11.4
(22.7)
$
(13.6) $
4.3
$
(9.3) $
34.0
$
(11.9) $
22.1
$
(42.3) $
11.4
$
(30.9)
Foreign Currency Translation
Adjustments
Defined Benefit Pension Plans:
Prior service cost from plan
amendment during period
Actuarial gains (losses)
Amortization of defined
benefit pension items:
Prior service cost (1)
Actuarial losses (1)
Total Defined Benefit Plans,
net
Other Comprehensive Income/
(Expense)
_______________________________________
(1)
The before tax amount of these accumulated other comprehensive income components is included in net periodic pension cost. See the Pension and
Defined Contribution Plans footnote for additional details.
3.
New Accounting Pronouncements
Accounting Standards Adopted in Fiscal 2014
In July 2012, the Financial Accounting Standard s Board ("FASB") issued Accounting Standards Update ("ASU") No.
2012-02, Intangibles - Goodwill and Other (Topic 350) - Testing Indefinite-Lived Intangible Assets for Impairment (“ASU
2012-02”), which allows companies to assess qualitative factors to determine if indefinite-lived intangible assets other than goodwill
have been impaired. If the qualitative factors reviewed do not indicate that it is more likely than not that the fair value of an
indefinite-lived intangible asset does not exceed the carrying value, ASU 2012-02 deems any further impairment testing to be
unnecessary. In the event that the qualitative review indicates otherwise, a company is required to perform further quantitative
impairment testing as prescribed by Topic 350. ASU 2012-02 is effective for fiscal years beginning after September 15, 2012,
with early adoption permitted. The Company adopted ASU 2012-02 in the first quarter of fiscal 2014. The provisions of ASU
2012-02 did not have a material effect on the Company’s results of operations, financial condition, and cash flows.
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210) - Disclosures about Offsetting Assets
and Liabilities (“ASU 2013-01”), which amended ASC Subtopic 210-20, Balance Sheet - Offsetting. ASU 2013-01 clarified the
scope of ASU 2011-11, Balance Sheet (Topic 210) - Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11"). ASU
2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of that entity's financial
statements to understand the effect of those arrangements on its financial position. ASU 2013-01 clarifies the scope of ASU
2011-11 as applying to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated
embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending
transactions that are offset either in accordance with other requirements of the Accounting Standards Codification or subject to
an enforceable master netting arrangement or similar arrangement. The provisions of ASU 2011-11 and ASU 2013-01 are effective
retrospectively to all comparative periods for public entities during annual reporting periods beginning after January 1, 2013
(effective date) and interim reporting periods therein. The Company adopted ASU 2011-11 and ASU 2013-01 in the first quarter
of fiscal 2014. The provisions of ASU 2011-11 and ASU 2013-01 did not have a material effect on the Company’s results of
operations, financial condition, and cash flows.
49
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Accounting Standards Yet to Be Adopted
In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the
Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or
of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force) (“ASU 2013-05”), which applies to
the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a
foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business (other than a
sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. ASU 2013-05 is effective
prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The Company
is currently reviewing the provisions of ASU 2013-05 but does not expect it to have a material effect on the Company's financial
condition, results of operations, and cash flows.
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit
When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB
Emerging Issues Task Force) (“ASU 2013-11”), which applies to the presentation of unrecognized tax benefits as a liability on
the balance sheet when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the
reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the
disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does
not intend to use, the deferred tax asset for such purpose. ASU 2013-11 is effective prospectively for fiscal years (and interim
reporting periods within those years) beginning after December 15, 2013. The Company is currently reviewing the provisions of
ASU 2013-11 but does not expect it to have a material effect on the Company's financial condition, results of operations, and cash
flows.
In May 2014, the FASB issued ASU No. 2014-09, Revenue From Contracts With Customers ("ASU 2014-09"), which
outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU
2014-09 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2016. The
Company is currently evaluating the impact of the provisions of ASU 2014-09.
4.
Acquisitions
The Company has actively pursued opportunities for investment and growth through acquisitions. In recent years, the
Company has acquired a number of businesses that participate in the North American lighting market, including the businesses
discussed below. The companies were purchased to further expand and complement the Company’s lighting solutions portfolio
and were fully incorporated into the Company’s operations. None of the business combinations-individually or in the aggregate-
represented a material transaction.
eldoLED Acquisition
On March 13, 2013, the Company acquired for cash, including potential additional cash payments that may be paid in future
periods under earn-out provisions, all of the ownership interests in eldoLED, a leading provider of high-performance drivers for
LED lighting systems based in Eindhoven, The Netherlands. Potential cash payments related to the earn-out provisions are payable
beginning in fiscal 2014 and ending in fiscal 2017 subject to achievement of those provisions. The operating results of eldoLED
have been included in the Company's consolidated financial statements since the date of acquisition and are not material to the
Company's financial condition, results of operations, or cash flows. Management finalized the acquisition accounting for eldoLED
during the second quarter of fiscal 2014 and the amounts are reflected in the Consolidated Balance Sheets.
Adura Technologies Acquisition
On December 20, 2012, the Company acquired for cash all of the ownership interests in Adura, a leading developer of radio
frequency (RF) mesh networking technology that allows individual light fixtures to communicate in a wireless mesh network with
switches, sensors and system management software. The operating results of Adura have been included in the Company's
consolidated financial statements since the date of acquisition and are not material to the Company's financial condition, results
of operations, or cash flows. Management finalized the acquisition accounting for Adura during the first quarter of fiscal 2014
and the amounts are reflected in the Consolidated Balance Sheets.
50
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5.
Fair Value Measurements
The Company determines a fair value measurement based on the assumptions a market participant would use in pricing an
asset or liability. ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), establishes a three level hierarchy
making a distinction between market participant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities
in an active market (Level 1), (ii) quoted prices in markets that are not active or inputs that are observable either directly or
indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation techniques that require inputs
that are both unobservable and significant to the overall fair value measurement (Level 3).
The following table presents information about assets and liabilities required to be carried at fair value and measured on a
recurring basis as of August 31, 2014 and 2013:
Fair Value Measurements as of:
August 31, 2014
August 31, 2013
Level 1
Level 2
Level 3
Total
Fair
Value
Level 1
Level 2
Level 3
Total Fair
Value
Assets:
Cash and cash equivalents
$ 552.5
$ — $ — $ 552.5
$ 359.1
$ — $ — $ 359.1
Other
Liabilities:
Other
0.6
—
—
0.6
0.7
—
—
0.7
$
0.6
$ — $ 11.6
$ 12.2
$
0.7
$ — $ 12.1
$
12.8
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 ASC 820. All valuation methods and assumptions
are validated at least quarterly to ensure the accuracy and relevance of the fair values. There were no material changes to the
valuation methods or assumptions used to determine fair values during the current period.
The Company used the following valuation methods and assumptions in estimating the fair value of the following assets
and liabilities:
The fair value of Level 1 assets and liabilities is determined based on quoted market prices.
The fair value of Level 3 liabilities is estimated using a discounted cash flow technique with significant inputs that are
not observable in the market, appropriately discounted considering the uncertainties associated with the obligation.
Changes in these inputs, including probability assessments or the discount rate, could result in a higher or lower fair
value measurement. Any reasonably likely change in the assumptions used in the analysis would not result in a material
change to the fair value of these liabilities.
No transfers between the levels of the fair value hierarchy occurred during the current fiscal period. In the event of a transfer
in or out of a level within the fair value hierarchy, the transfers would be recognized on the date of occurrence.
The Company's Level 3 liabilities consist of certain acquisition-related liabilities. The change in these liabilities during
fiscal 2014 was due to a $2.2 increase in the estimated fair value, a $2.6 decrease due to payments, and a $0.1 decrease due to
currency rate fluctuations in the period. The expense associated with the change in the estimated fair value was included in Selling,
Distribution, and Administrative Expenses within the Consolidated Statements of Comprehensive Income.
Disclosures of fair value information about financial instruments (whether or not recognized in the balance sheet), for which
it is practicable to estimate that value, are required each reporting period in addition to any financial instruments carried at fair
value on a recurring basis as prescribed by ASC Topic 825, Financial Instruments (“ASC 825”). In cases where quoted market
prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.
51
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The carrying values and estimated fair values of certain of the Company’s financial instruments were as follows at August 31,
2014 and 2013:
Liabilities:
August 31, 2014
August 31, 2013
Carrying
Value
Fair Value
Carrying
Value
Fair Value
Senior unsecured public notes, net of unamortized discount
$
349.6
$
391.2
$
349.6
$
381.5
Industrial revenue bond
4.0
4.0
4.0
4.0
The senior unsecured public notes are carried at the outstanding balance, including bond discounts, as of the end of the
reporting period. Fair value is estimated based on discounted future cash flows using rates currently available for debt of similar
terms and maturity (Level 2).
The industrial revenue bond is carried at the outstanding balance as of the end of the reporting period. The industrial revenue
bond is a tax-exempt, variable-rate instrument that resets on a weekly basis; therefore, the Company estimates that the face amount
of the bond approximates fair value as of August 31, 2014 based on bonds of similar terms and maturity (Level 2).
ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the underlying value to the Company. In many cases,
the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in
immediate settlement of the instruments. In evaluating the Company’s management of liquidity and other risks, the fair values of
all assets and liabilities should be taken into consideration, not only those presented above.
52
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
6.
Pension and Defined Contribution Plans
Company-sponsored Pension Plans
The Company 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. The Company makes annual contributions to the plans to the extent indicated by actuarial valuations and statutory
requirements. Plan assets are invested primarily in equity and fixed income securities.
The following tables reflect the status of the Company’s domestic (U.S.-based) and international pension plans at August 31,
2014 and 2013:
Fair value of plan assets at beginning of year
$
105.7
$
95.6
$
30.1
$
Change in Benefit Obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Amendments
Actuarial (gain) loss
Plan settlements
Benefits paid
Other
Benefit obligation at end of year
Change in Plan Assets:
Actual return on plan assets
Employer contributions
Benefits paid
Other
Fair value of plan assets at end of year
Funded status at end of year:
Funded status
Net amount recognized in Consolidated Balance Sheets
Amounts Recognized in the Consolidated Balance Sheets Consist of:
Current liabilities
Non-current liabilities
Net amount recognized in Consolidated Balance Sheets
Accumulated Benefit Obligation
Pre-tax amounts in accumulated other comprehensive income:
Prior service cost
Net actuarial loss
Amounts in accumulated other comprehensive income
Estimated amounts that will be amortized from accumulated
comprehensive income over the next fiscal year:
Prior service cost
Net actuarial loss
53
Domestic Plans
August 31,
International Plans
August 31,
2014
2013
2014
2013
$
151.5
$
168.1
$
40.2
$
46.9
2.4
7.0
—
17.6
—
(7.0)
—
171.5
3.4
6.3
5.5
(24.9)
—
(6.9)
—
151.5
0.1
1.9
—
8.6
(0.1)
(1.0)
2.8
52.5
15.1
8.7
(7.0)
—
9.3
7.7
(6.9)
—
122.5
105.7
2.9
1.1
(1.0)
2.1
35.2
0.1
1.7
—
(6.5)
—
(1.0)
(1.0)
40.2
28.1
2.5
1.1
(1.0)
(0.6)
30.1
$
$
$
$
$
$
$
$
(49.0) $
(49.0) $
(45.8) $
(45.8) $
(17.3) $
(17.3) $
(10.1)
(10.1)
(1.2) $
(47.8)
(49.0) $
$
170.7
(1.2) $
(44.6)
(45.8) $
$
151.5
— $
(17.3)
(17.3) $
$
52.3
(4.5) $
(57.5)
(62.0) $
(5.3) $
(48.9)
(54.2) $
— $
(20.5)
(20.5) $
—
(10.1)
(10.1)
40.2
—
(13.0)
(13.0)
$
0.8
2.4
0.8
2.0
$
— $
1.9
—
1.0
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Components of net periodic pension cost for the fiscal years ended August 31, 2014, 2013, and 2012 included the following:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Curtailment
Settlement
Recognized actuarial loss
Net periodic pension cost
Domestic Plans
International Plans
2014
2013
2012
2014
2013
2012
$
$
2.4
7.0
(8.0)
0.8
—
—
2.0
4.2
$
3.4
$
2.7
$
0.1
$
0.1
$
6.3
(7.1)
0.7
—
—
4.4
7.7
$
6.6
(6.5)
0.1
0.1
—
3.2
6.2
$
1.9
(2.0)
—
—
(0.1)
1.1
$
1.0
$
1.7
(1.5)
—
—
—
1.8
2.1
$
0.1
1.9
(1.7)
—
—
—
0.9
1.2
Weighted average assumptions used in computing the benefit obligation are as follows:
Discount rate
Rate of compensation increase
Domestic Plans
International Plans
2014
2013
2014
2013
4.0%
5.5%
4.8%
5.5%
3.6%
3.1%
4.5%
3.3%
Weighted average assumptions used in computing net periodic benefit cost are as follows:
Discount rate
Expected return on plan assets
Rate of compensation increase
Domestic Plans
International Plans
2014
2013
2012
2014
2013
2012
4.8%
7.5%
5.5%
3.8%
7.5%
5.5%
5.0%
7.5%
5.5%
4.5%
6.2%
3.3%
3.7%
5.5%
2.5%
5.6%
6.6%
3.4%
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 based on the Company’s estimated benefit payments available as of
the measurement date. The Company uses a publicly published yield curve to assist in the development of its discount rates. The
Company estimates that each 100 basis point increase in the discount rate would result in reduced net periodic pension cost of
approximately $0.6 and $1.0 for domestic plans and international plans, respectively. 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 $1.2 and $0.4 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 domestic 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 fiscal 2014,
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 fiscal 2014, the international asset target allocation approximated 60% equity securities,
25% fixed income securities, 10% multi-strategy funds, and 5% real estate securities.
54
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s pension plan asset allocation at August 31, 2014 and 2013 by asset category is as follows:
Equity securities
Fixed income securities
Multi-strategy investments
Real estate
Total
% of Plan Assets
Domestic Plans
International Plans
2014
2013
2014
2013
59.2%
36.2%
—%
4.6%
100.0%
58.8%
36.4%
—%
4.8%
100.0%
64.0%
21.9%
9.4%
4.7%
100.0%
63.4%
22.5%
9.6%
4.5%
100.0%
The Company’s pension plan assets are stated at fair value from quoted market prices in an active market, quoted redemption
values, or estimates based on reasonable assumptions as of the most recent measurement period. See the Fair Value Measurements
footnote for a description of the fair value guidance.
No transfers between the levels of the fair value hierarchy occurred during the current fiscal period. In the event of a transfer
in or out of a level within the fair value hierarchy, the transfers would be recognized on the date of occurrence.
The following tables present the fair value of the domestic pension plan assets by major category as of August 31, 2014 and
2013:
Assets
Mutual Funds:
Domestic large cap equity fund
$
Foreign equity fund
Real Estate Fund
Short-Term Investments
Fixed-Income Investments
Collective Trust: Domestic small cap equities
Fair Value Measurements
Quoted Market
Prices in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
(Level 1)
(Level 2)
(Level 3)
Fair Value
as of
August 31,
2014
46.7
12.4
5.6
6.0
38.3
13.5
$
$
46.7
12.4
—
6.0
—
—
— $
—
—
—
38.3
13.5
—
—
5.6
—
—
—
Assets
Mutual Funds:
Domestic large cap equity fund
Foreign equity fund
Domestic small cap equity fund
Real Estate Fund
Short-Term Investments
Fixed-Income Investments
$
122.5
Fair Value Measurements
Quoted Market
Prices in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
(Level 1)
(Level 2)
(Level 3)
Fair Value
as of
August 31,
2013
$
39.1
10.6
12.4
5.1
5.1
33.4
105.7
39.1
10.6
12.4
—
5.1
—
$
— $
—
—
—
—
33.4
—
—
—
5.1
—
—
$
$
55
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following tables present the fair value of the international pension plan assets by major category as of August 31,
2014 and 2013:
Assets
Equity Securities
Real Estate Fund
Multi-Strategy Investments
Fixed-Income Investments
Assets
Equity Securities
Real Estate Fund
Multi-Strategy Investments
Fixed-Income Investments
Fair Value Measurements
Quoted Market
Prices in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
(Level 1)
(Level 2)
(Level 3)
Fair Value
as of
August 31,
2014
22.5
$
— $
22.5
$
1.7
3.3
7.7
35.2
—
—
—
—
3.3
7.7
—
1.7
—
—
Fair Value Measurements
Quoted Market
Prices in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
(Level 1)
(Level 2)
(Level 3)
Fair Value
as of
August 31,
2013
19.0
$
— $
19.0
$
1.4
3.0
6.7
30.1
—
—
—
—
3.0
6.7
—
1.4
—
—
$
$
$
$
Publicly-traded securities are valued at the last reported sales price on the last business day of the period. Investments traded
in the over-the-counter market and listed securities for which no sale was reported on the last day of the period are valued at the
last reported bid price.
Investments in real estate are stated at estimated fair values based on the fund management’s valuations and upon appraisal
reports prepared periodically by independent real estate appraisers. These investments are classified as Level 3 assets within the
fair value hierarchy. The purpose of the appraisal is to estimate the fair value of the real estate as of a specific date based on the
most probable price for which the appraised real estate will sell in a competitive market under all conditions requisite to a fair
sale. Estimated fair value is based on (i) discounted cash flows using certain market assumptions, including holding period, discount
rates, capitalization rates, rent and expense growth rates, future capital expenditures and the ultimate sale of the property at the
end of the holding period; (ii) direct capitalization method; or (iii) comparable sales method.
The tables below present a rollforward of the domestic and international pension plans’ Level 3 assets for the years ended
August 31, 2014 and 2013:
Balance, beginning of year
Net unrealized gain relating to instruments still held at the reporting date
Shares purchased, including from dividend reinvestment
Balance, end of year
Domestic Real Estate Fund
Years Ended August 31,
2014
2013
$
$
5.1
0.3
0.2
5.6
$
$
4.7
0.3
0.1
5.1
56
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Balance, beginning of year
Shares purchased, including from dividend reinvestment(1)
Balance, end of year
_______________________________________
(1) Activity in 2013 was less than $0.1.
International Real Estate Fund
Years Ended August 31,
2014
2013
$
$
1.4
0.3
1.7
$
$
1.4
—
1.4
The Company expects to contribute approximately $8.1 and $1.2 during fiscal 2015 to its domestic and international defined
benefit plans, respectively. These amounts are based on the total contributions required during fiscal 2015 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:
2015
2016
2017
2018
2019
2020 - 2024
Domestic
Plans
International
Plans
$
$
7.2
7.6
7.8
8.4
8.9
49.2
1.1
1.1
1.1
1.1
1.2
6.3
Multi-employer Pension Plans
The Company contributes to three multi-employer defined benefit pension plans under the terms of collective-bargaining
agreements that cover certain of its union-represented employees. The risks of participating in these multi-employer plans are
different from single-employer plans in the following aspects:
• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees
•
•
of other participating employers.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be shared
by the remaining participating employers.
If a participating employer chooses to stop participating in some of its multi-employer plans, the employer may
be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal
liability.
The Company’s contributions to these plans were $0.4, $0.3, and $0.2 for the years ended August 31, 2014, 2013, and 2012,
respectively. The most recent Pension Protection Act zone status for one of the plans is red, generally defined as less than 65%
funded. This plan currently has a rehabilitation plan in place and the Company's contributions include a surcharge.
Defined Contribution Plans
The Company also has defined contribution plans to which both employees and the Company make contributions. The cost
to the Company for these plans was $5.3, $4.7, and $4.1 for the years ended August 31, 2014, 2013, and 2012, respectively.
Employer matching amounts are allocated in accordance with the participants’ investment elections for elective deferrals. At
August 31, 2014, assets of the domestic defined contribution plans included shares of the Company’s common stock with a market
value of approximately $12.0, which represented approximately 4.4% of the total fair market value of the assets in the Company’s
domestic defined contribution plans.
57
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7.
Debt and Lines of Credit
Debt
The Company’s debt at August 31, 2014 and 2013 consisted of the following:
Senior unsecured public notes due December 2019, principal
Senior unsecured public notes due December 2019, unamortized discount
Industrial revenue bond due 2021
Total debt outstanding
August 31,
2014
2013
$
$
$
350.0
(0.4)
4.0
353.6
$
350.0
(0.4)
4.0
353.6
All future annual principal payments of long-term debt in the amount of $354.0 will become due after fiscal 2019.
On December 1, 2009, the Company announced a private offering by ABL, Acuity Brands’ wholly-owned principal operating
subsidiary, of $350.0 aggregate principal amount of senior unsecured notes due in fiscal 2020 (the “Notes”). The Notes are fully
and unconditionally guaranteed on a senior unsecured basis by Acuity Brands and ABL IP Holding LLC (“ABL IP Holding”, and,
together with Acuity Brands, the “Guarantors”), a wholly-owned subsidiary of Acuity Brands. The Notes are senior unsecured
obligations of ABL and rank equally in right of payment with all of ABL’s existing and future senior unsecured indebtedness. The
guarantees of Acuity Brands and ABL IP Holding are senior unsecured obligations of Acuity Brands and ABL IP Holding and
rank equally in right of payment with their other senior unsecured indebtedness. The Notes bear interest at a rate of 6% per annum
and were issued at a price equal to 99.797% of their face value and for a term of 10 years. Interest on the Notes is payable semi-
annually on June 15 and December 15. Additionally, the Company capitalized $3.1 of deferred issuance costs related to the Notes
that are being amortized over the 10-year term of the Notes.
In accordance with the registration rights agreement by and between ABL and the Guarantors and the initial purchasers of
the Notes, ABL and the Guarantors filed a registration statement with the SEC for an offer to exchange the Notes for SEC-registered
notes with substantially identical terms. The registration became effective on August 17, 2010, and all of the Notes were exchanged.
The $4.0 industrial revenue bond matures in 2021. The interest rate on the $4.0 bond was approximately 0.2% at August 31,
2014 and 2013.
Lines of Credit
On August 27, 2014, the Company executed a new $250.0 revolving credit facility (the “Revolving Credit Facility”). The
Revolving Credit Facility replaced the Company’s prior $250.0 revolving credit facility (the “prior facility”), which was scheduled
to mature on January 31, 2017. The Revolving Credit Facility will mature and all amounts outstanding will be due and payable
on August 27, 2019.
The Revolving Credit Facility contains financial covenants, including a minimum interest coverage ratio (“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 and a Minimum Interest Coverage Ratio of 2.50, subject to certain conditions defined in the
financing agreement. Generally, amounts outstanding under the Revolving Credit Facility bear interest at a “Eurocurrency Rate”.
Eurocurrency rate advances can be denominated in a variety of currencies, including U.S. dollars, and amounts outstanding bear
interest at a periodic fixed rate equal to the London Inter Bank Offered Rate (“LIBOR”) for the applicable currency plus a margin
as determined by Acuity Brands' leverage ratio (“Applicable Margin”). The Applicable Margin is based on the Company’s leverage
ratio, as defined in the Revolving Credit Facility, with such margin ranging from 1.000% to 1.575%. Additionally, the Company
is required to pay certain fees in connection with the Revolving Credit Facility, including administrative service fees and an annual
facility fee. The annual facility fee is payable quarterly in arrears and is determined by the Company’s leverage ratio as defined
in the Revolving Credit Facility. This facility fee ranges from 0.125% to 0.300% of the aggregate $250.0 commitment of the
lenders under the Revolving Credit Facility.
The Company was compliant with all financial covenants under the Revolving Credit Facility as of August 31, 2014. As
of August 31, 2014, the Company had outstanding letters of credit totaling $10.4, primarily for securing collateral requirements
under the casualty insurance programs for Acuity Brands and providing credit support for the Company’s industrial revenue bond
(not an outstanding amount under the Revolving Credit Facility). At August 31, 2014, the Company had additional borrowing
58
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
capacity under the Revolving Credit Facility of $243.8 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 $6.2 issued under the Revolving Credit Facility.
None of the Company’s existing debt instruments include provisions that would require an acceleration of repayments based
solely on changes in the Company’s credit ratings.
8.
(share data presented in whole units except where otherwise indicated)
Common Stock and Related Matters
Common Stock
Changes in common stock for the years ended August 31, 2014, 2013, and 2012 were as follows:
(Amounts and shares in millions)
Balance at August 31, 2011
Issuance of restricted stock grants, net of forfeitures
Stock options exercised
Balance at August 31, 2012
Issuance of restricted stock grants, net of forfeitures
Stock options exercised
Balance at August 31, 2013
Issuance of restricted stock grants, net of forfeitures
Stock options exercised
Balance at August 31, 2014
Common Stock
Shares
Amount
(At par)
51.0
$
0.2
0.3
51.5
$
0.2
0.5
52.2
$
0.2
0.2
52.6
$
0.5
—
—
0.5
—
—
0.5
—
—
0.5
During fiscal 2012, the Company reacquired 252,000 shares of the Company’s outstanding common stock at a total cost of
$9.2, which completed the plan to repurchase two million shares previously authorized by the Board of Directors in July 2010.
As of August 31, 2014 and 2013, the Company had 9.7 million repurchased shares recorded as treasury stock at an original
repurchase cost of $420.2.
In September 2011, the Company's Board of Directors authorized the repurchase of an additional two million shares of the
Company's outstanding common stock. No shares have been repurchased under the repurchase plan approved in September 2011.
Preferred Stock
The Company has 50 million shares of preferred stock authorized. No shares of preferred stock were issued in fiscal 2014
or 2013 and no shares of preferred stock are outstanding.
Earnings per Share
Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average
number of common shares outstanding, which has been modified to include the effects of all participating securities (unvested
share-based payment awards with a right to receive nonforfeitable dividends) as prescribed by the two-class method under ASC
Topic 260, Earnings Per Share (“ASC 260”), 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 of
approximately 41,000 and 62,000 were excluded from the diluted earnings per share calculation for the years ended August 31,
2014 and 2013, respectively, as the effect of inclusion would have been antidilutive. Approximately 9,000 shares of restricted
stock were excluded from the diluted earnings per share calculation for the year ended August 31, 2014. There were no shares of
restricted stock excluded from the diluted earnings per share calculation for the year ended August 31, 2013.
59
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table calculates basic earnings per common share and diluted earnings per common share for the years ended
August 31, 2014, 2013, and 2012:
(Amounts and shares in millions, except earnings per share)
Basic Earnings per Share:
Net income
Less: Income attributable to participating securities
Net income available to common shareholders
Basic weighted average shares outstanding
Basic earnings per share
Diluted Earnings per Share:
Net income
Less: Income attributable to participating securities
Net income available to common shareholders
Basic weighted average shares outstanding
Common stock equivalents
Diluted weighted average shares outstanding
Diluted earnings per share
Years Ended August 31,
2014
2013
2012
$
$
$
$
$
$
175.8
(1.6)
174.2
42.8
4.07
175.8
(1.6)
174.2
42.8
0.2
43.0
4.05
$
$
$
$
$
$
127.4
(2.0)
125.4
42.2
2.97
127.4
(2.0)
125.4
42.2
0.3
42.5
2.95
$
$
$
$
$
$
116.3
(2.2)
114.1
41.4
2.75
116.3
(2.2)
114.1
41.4
0.5
41.9
2.72
9.
(share data presented in whole units except where otherwise indicated)
Share-Based Payments
Omnibus Stock Compensation Incentive and Directors’ Equity Plans
In January 2013, the Company’s stockholders approved the Acuity Brands, Inc. 2012 Omnibus Stock Compensation Incentive
Plan (“2012 Plan”) to replace the Amended and Restated 2007 Acuity Brands, Inc. Long Term Incentive Plan (“2007 Plan”). An
aggregate of 2.3 million shares are available for issuance under the new plan including 1.9 million previously issuable shares
under the 2007 Plan and 400,000 newly authorized shares. In addition, 1.7 million shares that were previously approved by the
Company’s stockholders and that are subject to outstanding awards granted under the 2007 plan are issuable under the 2012 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. The Directors’ Plan expired
on November 1, 2011. Approximately 5,000 options, which were previously approved by the Company’s stockholders and are
subject to awards granted prior to expiration, remain issuable under the Directors’ Plan.
Shares available for grant under all plans were approximately 2.1 million, 2.3 million, and 2.3 million at August 31, 2014,
2013, and 2012, respectively. Forfeited shares are returned to the pool of shares available for grant.
Restricted Stock Awards
As of August 31, 2014, the Company had approximately 530,000 shares outstanding of restricted stock to officers, directors,
and other key employees under the 2012 Plan, including restricted stock units granted to foreign employees. The shares vest
primarily over a four-year period and are valued at the closing stock price on the date of the grant. Compensation expense recognized
related to the awards under the equity incentive plans was $14.2, $13.2, and $13.1 in fiscal 2014, 2013, and 2012, respectively.
60
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Activity related to restricted stock awards during the fiscal year ended August 31, 2014 was as follows:
Outstanding at August 31, 2013
Granted
Vested
Forfeited
Outstanding at August 31, 2014
Number of
Shares
(in millions)
0.7
0.1
(0.2)
(0.1)
0.5
Weighted
Average
Grant Date
Fair Value Per
Share
$
$
$
$
$
52.90
107.92
49.32
61.90
70.73
As of August 31, 2014, there was $24.9 of total unrecognized compensation cost related to unvested restricted stock, which
is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of shares vested during the years
ended August 31, 2014, 2013, and 2012, was approximately $13.0, $13.4, and $12.6, respectively.
Stock Options
As of August 31, 2014, the Company had approximately 658,000 options outstanding to officers and other key employees
under the 2012 Plan. Options issued under the 2012 Plan are generally granted with an exercise price equal to the fair market
value of the Company’s stock on the date of grant (but never less than the fair market value on the grant date) 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 vested and became exercisable one year from the date of grant. Options under the Directors' Plan 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, 2014, approximately 5,000 options remain outstanding under the Director’s Plan and are included in the table
below. Compensation expense recognized related to the awards under the current and prior equity incentive plans was $2.4, $2.5,
and $2.3 in fiscal 2014, 2013, and 2012, respectively. There was no expense related to the director plan in fiscal 2014, 2013, and
2012.
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 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
2014
0.7%
38.4%
1.3%
5 years
$34.37
2013
0.9%
43.8%
0.8%
5 years
$22.32
2012
1.0%
43.2%
1.1%
5 years
$16.43
61
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Stock option activity during the years ended August 31, 2014, 2013, and 2012 was as follows:
Outstanding at August 31, 2011
Granted
Exercised
Cancelled
Outstanding at August 31, 2012
Granted
Exercised
Outstanding at August 31, 2013
Granted
Exercised
Outstanding at August 31, 2014
Range of option exercise prices:
$20.01 - $40.00 (average life - 4.6 years)
$40.01 - $60.00 (average life - 5.5 years)
$60.01 - $80.00 (average life - 8.1 years)
$80.01 - $110.00 (average life - 9.1 years)
_______________________________________
*
Represents shares of less than 0.1.
Outstanding
Exercisable
Number of
Shares
(in millions)
Weighted
Average
Exercise Price
1.3
0.1
(0.3)
—
1.1
0.1
(0.4)
0.8
0.1
(0.2)
0.7
0.2
0.3
0.1
0.1
*
$31.67
$46.29
$22.02
$35.64
$36.25
$62.54
$30.72
$43.16
$103.74
$40.31
$50.58
$32.71
$45.47
$62.54
$103.74
Number of
Shares
(in millions)
1.0
Weighted
Average
Exercise Price
$28.81
1.0
0.5
0.5
0.2
0.3
—
—
$33.06
$38.00
$41.05
$32.71
$45.31
$62.54
$—
*
The total intrinsic value of options exercised during the years ended August 31, 2014, 2013, and 2012 was $16.3, $19.2, and
$11.7, respectively. As of August 31, 2014, the total intrinsic value of options outstanding was $48.6, the total intrinsic value of
options expected to vest was $48.5, and the total intrinsic value of options exercisable was $38.9. As of August 31, 2014, there
was $2.8 of total unrecognized compensation cost related to unvested options. That cost is expected to be recognized over a
weighted-average period of approximately 1.3 years.
Employee Deferred Share Units
The Company previously allowed employees to defer a portion of restricted stock awards granted in fiscal 2003 and fiscal
2004 into the Supplemental Deferred Savings Plan (“SDSP”) as share units. The share units are payable in shares of stock at the
time of distribution from the SDSP. As of August 31, 2014, approximately 14,000 fully vested share units remain deferred, but
undistributed, under the 2012 Plan. There was no compensation expense related to these share units during fiscal years 2014,
2013, and 2012.
Director Deferred Share Units
The Company previously required its Directors to defer at least 50% of their annual retainer into the 2006 Nonemployee
Director Deferred Compensation Plan ("2006 Plan"). Shares deferred under the 2006 Plan are to be paid in shares at retirement
from the Board. In January 2012, the Company's stockholders approved the 2011 Nonemployee Director Deferred Compensation
Plan ("2011 Plan"), following the expiration of the 2006 Plan on November 30, 2011. Pursuant to the 2011 Plan, fees deferred
by nonemployee directors can be invested in deferred stock units to be paid in shares or credited to an interest-bearing account to
be paid in cash at retirement from the Board. 300,000 shares of common stock were reserved for issuance under the 2011 Plan,
which incorporated approximately 86,000 shares previously available for grant under the 2006 Plan. Beginning in fiscal year 2013,
the deferral requirement was adjusted to 55% of the annual director fees. On September 28, 2012, the 2011 Plan was amended
to allow for stock grants in lieu of mandatory deferrals for the non-cash component of a nonemployee director's annual fee if a
director exceeds the stock ownership requirement of five-times the annual cash retainer fee. Shares available for issuance under
both plans were approximately 400,000 at August 31, 2014, 2013, and 2012. As of August 31, 2014, approximately 134,000 share
units were deferred, but undistributed, under the 2006 Plan and the 2011 Plan.
62
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Compensation expense recognized related to the share units under these plans was $0.8 million, $0.8 million, and $0.5
million in fiscal 2014, 2013, and 2012, respectively.
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 1.0 million
shares remain available as of August 31, 2014. Employees may participate at their discretion.
10.
Commitments and Contingencies
Self-Insurance
It is the policy of the Company 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 each claim involving workers’
compensation, comprehensive general liability (including product liability claims), and auto liability is limited 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. The Company is also self-insured up to certain limits for certain other
insurable risks, primarily physical loss to property and business interruptions resulting from such loss lasting two 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. The Company is fully self-insured for certain other types of liabilities, including environmental,
product recall, warranty, and patent infringement. The actuarial estimates are subject to uncertainty from various sources including,
among others, changes in claim reporting patterns, claim settlement patterns, judicial decisions, legislation, and economic
conditions. Although the Company 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. 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.
Leases
The Company leases certain of its buildings and equipment under noncancelable lease agreements. Future minimum annual
lease payments under noncancelable leases are $14.2, $13.5, $12.3, $9.3, $5.8, and $9.3 for fiscal 2015, 2016, 2017, 2018, 2019,
and after 2019, respectively.
Total rent expense was $16.5, $16.2, and $15.7 in fiscal 2014, 2013, and 2012, 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, 2014 include $115.8 and $1.5 in fiscal 2015 and 2016, respectively. As of August 31,
2014, the Company had no purchase obligations extending beyond August 31, 2016.
Collective Bargaining Agreements
Approximately 65% of the Company’s total work force is covered by collective bargaining agreements. Collective bargaining
agreements representing approximately 47% of the Company’s work force will expire within one year.
Litigation
The Company is subject to various legal claims arising in the normal course of business, including patent infringement and
product recall claims. Based on information currently available, it is the opinion of management that the ultimate resolution of
pending and threatened legal proceedings will not have a material adverse effect on the financial condition, results of operations,
or cash flows of the Company. 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 the Company in future periods. The Company establishes reserves for legal claims when associated costs become probable
and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the amounts reserved
63
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
As reported in prior periods, on March 25, 2013, a freight payment and audit service provider, Trendset, Inc. (“Trendset”),
provided notice to its customers that all freight payment services would immediately cease as a result of fraud at Trendset.
Management believes that the Company incurred a loss primarily related to funds disbursed by the Company to Trendset that were
not subsequently remitted to freight carriers that provided services on behalf of the Company and additional costs related to
recovery efforts. Based on then available information, management estimated that the Company's loss was approximately $8.1
which was previously included in Selling, Distribution, and Administrative Expenses in the Consolidated Statements of
Comprehensive Income during fiscal 2013. During fiscal 2014, the Company received $5.8 in recovery payments related to this
loss, consisting primarily of payments under an insurance policy maintained by the Company. These recoveries are included as
an offset to expense in Selling, Distribution and Administrative Expenses in the Consolidated Statements of Comprehensive Income
and cover a portion of, but not the entirety of, the Company’s loss related to this matter.
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, the Company invests capital and incurs operating costs relating to environmental compliance. Environmental laws
and regulations have generally become stricter in recent years. 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 may be substantial. The Company establishes reserves for known environmental claims when the associated costs
become probable and can be reasonably estimated. The actual cost of environmental issues may be substantially higher 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.
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 $0.01 per share, to the Company's stockholders of record
as of October 17, 2007. 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 tax disaffiliation agreement. The tax disaffiliation agreement provides that Acuity Brands will
indemnify Zep for certain taxes and liabilities that may arise related to the Distribution and 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. The Company does not believe that any amounts it is
likely to be required to pay under these indemnities will be material to the Company’s financial position, results of operations, or
cash flow. The Company cannot estimate the potential amount of future payments under these indemnities because claims that
would result in a liability under the indemnities are not fully known.
64
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Acquisition-Related Liabilities
During the negotiations related to business combinations, the previous owners of the acquired entity (“acquiree”) typically
indemnify the Company for specific unrecognized liabilities of the acquiree in existence as of the date of acquisition. For some
acquisitions of businesses, the Company acts in the place of escrow agents in the holding of funds, including accrued interest
(collectively, the “holdback funds”), used to fulfill pre-acquisition obligations agreed to be paid by the acquiree. These funds
represent consideration given to the previous owners of the businesses acquired and are payable to them, net of any pre-acquisition
obligations satisfied within a stated amount of time, at a future date. Any potential pre-acquisition obligations for which the
Company may be reimbursed through the holdback funds are usually uncertain as of the date of the change of control. In certain
circumstances, the Company is capable of the identification and quantification of particular liabilities including, but not limited
to, uncertain tax positions, legal issues, and other outstanding obligations not recognized in the financial statements of the acquired
entity. Under ASC Topic 805, Business Combinations, these unrecognized liabilities are recorded as obligations of the Company
with a corresponding receivable due from the previous owners as of the date of acquisition and are included as part of the acquisition
accounting. The actual costs of resolving pre-acquisition obligations may be substantially higher than the holdback funds or
amounts reserved. The Company does not believe that any amounts it is likely to be required to pay under these acquisition-related
liabilities, including net holdback funds, will be material to the Company’s financial position, results of operations, or cash flow.
Product Warranty and Recall Costs
Acuity Brands records an allowance for the estimated amount of future warranty costs when the related revenue is recognized.
Estimated costs related to product recalls based on a formal campaign soliciting repair or return of that product are accrued when
they are deemed to be probable and can be reasonably estimated. Estimated future warranty and recall costs are primarily based
on historical experience of identified warranty and recall claims. However, there can be no assurance that future warranty or recall
costs will not exceed historical amounts or new technology products, which may include extended warranties, may not generate
unexpected costs. If actual future warranty or recall 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 flow.
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, 2014, 2013, and 2012 are summarized as follows:
Balance at September 1
Warranty and recall costs
Payments and other deductions
Balance at August 31
2014
2013
2012
$
$
5.9
$
4.0
$
19.5
(16.9)
8.5
$
14.3
(12.4)
5.9
$
4.2
8.0
(8.2)
4.0
Amounts included in the table above for fiscal 2013 and 2012 were adjusted to include certain warranty and recall costs
and payments and other deductions primarily for products or components shipped to customers at no charge and labor costs to
satisfy the product warranty and recall obligations of the Company.
11.
Special Charge
Fiscal 2012 Actions
During fiscal 2012, the Company continued efforts to streamline the organization through the planned closure of its Cochran,
Georgia production facility (“Cochran facility”) and reductions in workforce resulting from the downsizing of the Company’s
operations in Spain as well as the realignment of responsibilities primarily within various Selling, Distribution, and Administrative
(“SD&A”) departments. The Company expects that these actions to streamline its business activities, in addition to those taken
in previous fiscal years, will allow it to reduce costs and enhance customer service capabilities, while permitting for the continued
investment in future growth initiatives, such as new products, expanded market presence, and technology and innovation.
The Company recorded a $2.7 pre-tax special charge in the first quarter of fiscal 2012 related to the realignment of
responsibilities primarily within various SD&A departments. The Company recorded a pre-tax special charge of approximately
$1.2 during the second quarter of fiscal 2012 associated with a reduction in workforce, primarily at its operations in Spain. The
reduction in workforce was due to the decline in market conditions in Spain, which were not expected to rebound materially in
the near future. The pre-tax charge consisted primarily of severance and other employee related costs.
65
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the second quarter of fiscal 2012, the Company decided to close its Cochran facility. The closure was principally
completed by the end of the second quarter of fiscal 2013. The Company transitioned production from the Cochran facility, which
produced less than 10% of the Company’s total sales, to various existing facilities in North America.
During fiscal 2012, approximately $9.4 of pre-tax special charges related to the Cochran facility closure consisting primarily
of severance and employee-related costs of $7.6, production transfer expenses of $1.4, and non-cash impairments and other
miscellaneous costs of $0.4 were recognized and were included in Special Charge in the Consolidated Statements of Comprehensive
Income. In addition, related pre-tax expenses of $4.4 were recognized in fiscal 2012 and were included in Cost of Products Sold
in the Company’s Consolidated Statements of Comprehensive Income. These related expenses consisted of manufacturing
inefficiencies of $3.2 and non-cash asset impairments of $1.2 related to the abandonment of certain otherwise usable inventory at
the Cochran facility.
During fiscal 2013, approximately $0.8 of net pre-tax special charges related to fiscal 2012 actions, consisting primarily of
production transfer expenses, were recognized and were included in Special Charge in the Consolidated Statements of
Comprehensive Income. In addition, related pre-tax expenses of $8.4 directly attributable to temporary manufacturing inefficiencies
were recorded in the first nine months of fiscal 2013 and were included in Cost of Products Sold in the Consolidated Statements
of Comprehensive Income. No further costs related to this streamlining effort were incurred after fiscal 2013.
Fiscal 2013 Actions
During fiscal 2013, the Company continued efforts to streamline the organization through the planned closure of certain
production facilities as well as the realignment of responsibilities primarily within various SD&A departments. The Company
expects that these actions to streamline its business activities, in addition to those taken in previous fiscal years, will allow it to
reduce costs and enhance customer service capabilities, while permitting continued investment in future growth initiatives, such
as new products, expanded market presence, and technology and innovation.
During fiscal 2013, the Company recorded a pre-tax special charge of $7.8 consisting of severance and employee-related
costs of $7.6 and lease termination costs of $0.2, which are included in Special Charge in the Consolidated Statements of
Comprehensive Income.
The remaining severance reserve related to these programs is included in Accrued Compensation on the Consolidated Balance
Sheets. The remaining balance in the reserve as of August 31, 2014 and 2013 was $0.8 and $5.1, respectively. The change in the
reserve during the year ended August 31, 2014 was due primarily to $3.7 in payments.
12.
Income Taxes
The Company accounts for income taxes using the asset and liability approach as prescribed by ASC Topic 740, Income
Taxes (“ASC 740”). 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:
Provision for current federal taxes
Provision for current state taxes
Provision for current foreign taxes
Provision for deferred taxes
Total provision for income taxes
Years Ended August 31,
2014
2013
2012
77.1
$
48.4
$
9.0
4.3
(0.5)
89.9
6.9
4.2
6.2
$
65.7
$
47.9
5.4
3.7
5.7
62.7
$
$
66
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation of the federal statutory rate to the total provision for income taxes is as follows:
Federal income tax computed at statutory rate
State income tax, net of federal income tax benefit
Foreign permanent differences and rate differential
Other, net
Total provision for income taxes
Years Ended August 31,
2014
2013
2012
93.0
$
67.6
$
6.7
(1.0)
(8.8)
89.9
$
4.8
(1.1)
(5.6)
65.7
$
62.6
4.5
(1.2)
(3.2)
62.7
$
$
Components of the net deferred income taxes at August 31, 2014 and 2013 include:
Deferred Income Tax Liabilities:
Depreciation
Goodwill and intangibles
Other liabilities
Total deferred income tax liabilities
Deferred Income Tax Assets:
Self-insurance
Pension
Deferred compensation
Bonuses
Net operating losses
Other accruals not yet deductible
Other assets
Total deferred income tax assets
Valuation Allowance
Net deferred income tax liabilities
August 31,
2014
2013
$
(6.1) $
(101.8)
(5.3)
(113.2)
3.8
21.1
27.0
1.3
18.1
15.9
5.7
92.9
(13.6)
(33.9) $
$
(8.1)
(98.6)
(5.8)
(112.5)
3.6
17.6
26.0
0.7
17.6
14.4
6.4
86.3
(12.4)
(38.6)
The Company currently intends to indefinitely reinvest all undistributed earnings of and original investments in foreign
subsidiaries, which amounted to approximately $62.7 at August 31, 2014; 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, 2014, the Company had state tax credit carryforwards of approximately $1.7, which will expire between 2018
and 2023. At August 31, 2014, the Company had federal net operating loss carryforwards of $28.6 that expire beginning in 2027,
state net operating loss carryforwards of $14.2 that begin expiring in 2028, and foreign net operating loss carryforwards of $27.5
that begin expiring in 2015.
The gross amount of unrecognized tax benefits as of August 31, 2014 totaled $3.0, which includes $2.2 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 component of income tax expense; such accrued interest and penalties are not material.
With few exceptions, the Company is no longer subject to United States federal, state, and local income tax examinations for years
ended before 2010 or for foreign income tax examinations before 2008. The Company does not anticipate unrecognized tax benefits
will significantly increase or decrease within the next twelve months.
67
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation of the change in the unrecognized income tax benefit (reported in Other long-term liabilities on the
Consolidated Balance Sheets) for the years ended August 31, 2014 and 2013 is as follows:
Unrecognized tax benefits balance at September 1
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
Unrecognized tax benefits balance at August 31
2014
2013
5.0
0.4
—
(0.6)
—
(1.8)
3.0
$
$
7.0
0.3
0.6
—
(0.3)
(2.6)
5.0
$
$
During fiscal 2014, the Company did not increase its interest accrual associated with uncertain tax positions. Total accrued
interest was $0.5 and $0.6 as of August 31, 2014 and 2013, respectively. There were no accruals related to income tax penalties
during fiscal 2014. Interest, net of tax benefits, and penalties are included in income tax expense. The classification of interest
and penalties did not change during the current fiscal year.
13.
Supplemental Disaggregated Information
The Company has one operating segment. Sales of lighting solutions, excluding services, accounted for approximately 99%
of total consolidated net sales for Acuity Brands in fiscal 2014, 2013, and 2012. The geographic distribution of the Company’s
net sales, operating profit, income before provision for income taxes, and long-lived assets is summarized in the following table
for the years ended August 31:
Net sales(1)
Domestic(2)
International
Total
Operating profit
Domestic(2)
International
Total
Income before Provision for Income Taxes
Domestic(2)
International
Total
Long-lived assets(3)
Domestic(2)
International
Total
2014
2013
2012
$
$
$
$
$
$
$
$
2,155.0
238.5
2,393.5
287.8
11.3
299.1
257.1
8.6
265.7
149.2
31.2
180.4
$
$
$
$
$
$
$
$
1,854.9
234.2
2,089.1
207.2
14.3
221.5
181.2
11.9
193.1
146.1
30.9
177.0
$
$
$
$
$
$
$
$
1,728.1
205.6
1,933.7
197.7
10.3
208.0
171.6
7.4
179.0
141.9
30.3
172.2
_______________________________________
(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 before provision for income taxes, and long-lived assets for U.S.
(3)
based operations.
Long-lived assets include net property, plant, and equipment, long-term deferred income tax assets, and other long-term assets.
68
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14.
Supplemental Guarantor Condensed Consolidating Financial Statements
In December 2009, ABL, the wholly-owned and principal operating subsidiary of the Company, refinanced the then current
outstanding debt through the issuance of the Notes. See Debt and Lines of Credit footnote for further information.
In accordance with the registration rights agreement by and between ABL and the guarantors to the Notes and the initial
purchasers of the Notes, ABL and the guarantors to the Notes filed a registration statement with the SEC for an offer to exchange
the Notes for an issue of SEC-registered notes with identical terms. Due to the filing of the registration statement and offer to
exchange, the Company determined the need for compliance with Rule 3-10 of SEC Regulation S-X (“Rule 3-10”). In lieu of
providing separate audited financial statements for ABL and ABL IP Holding, the Company has included the accompanying
Condensed Consolidating Financial Statements in accordance with Rule 3-10(d) of SEC Regulation S-X since the Notes are fully
and unconditionally guaranteed by Acuity Brands and ABL IP Holding. The column marked “Parent” represents the financial
condition, results of operations, and cash flows of Acuity Brands. The column marked “Subsidiary Issuer” represents the financial
condition, results of operations, and cash flows of ABL. The column entitled “Subsidiary Guarantor” represents the financial
condition, results of operations, and cash flows of ABL IP Holding. Lastly, the column listed as “Non-Guarantors” includes the
financial condition, results of operations, and cash flows of the non-guarantor direct and indirect subsidiaries of Acuity Brands,
which consist primarily of foreign subsidiaries. Eliminations were necessary in order to arrive at consolidated amounts. In addition,
the equity method of accounting was used to calculate investments in subsidiaries. Accordingly, this basis of presentation is not
intended to present our financial condition, results of operations, or cash flows for any purpose other than to comply with the
specific requirements for parent-subsidiary guarantor reporting.
69
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
At August 31, 2014
ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Other current assets
Total Current Assets
Property, Plant, and Equipment, net
Goodwill
Intangible assets
Deferred income taxes
Other long-term assets
Investments in and amounts due from affiliates
$
516.0
$
3.1
$
— $
—
—
9.4
525.4
0.4
—
—
33.4
1.2
692.6
331.0
196.8
31.6
562.5
121.4
524.2
86.6
—
18.0
—
—
—
—
—
2.7
121.5
—
—
130.2
142.3
33.4
42.4
15.2
7.8
98.8
30.7
42.5
23.5
0.1
5.7
—
Total Assets
$ 1,253.0
$ 1,442.9
$ 266.5
$
201.3
$
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued liabilities
Total Current Liabilities
Long-Term Debt
Deferred Income Taxes
Long-Term Liabilities
Amounts due to affiliates
Total Stockholders’ Equity
$
1.1
$
268.2
$
— $
25.0
26.1
—
—
63.4
—
129.5
397.7
353.6
88.9
34.4
—
—
—
—
—
—
—
1,163.5
568.3
266.5
18.1
28.6
46.7
—
—
24.3
52.3
78.0
$
— $
—
—
—
—
—
—
552.5
373.4
212.0
48.8
1,186.7
152.5
569.4
3.0
231.6
—
(30.5)
—
(965.1)
—
(995.6) $ 2,168.1
24.9
$
— $
—
—
287.4
183.1
470.5
58.4
353.6
—
(30.5)
—
(52.3)
(912.8)
1,163.5
(995.6) $ 2,168.1
122.1
—
Total Liabilities and Stockholders’ Equity
$ 1,253.0
$ 1,442.9
$ 266.5
$
201.3
$
70
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
At August 31, 2013
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Parent
ASSETS
359.1
318.3
203.0
33.1
913.5
147.9
568.2
245.1
1.7
27.4
249.5
136.7
386.2
353.6
53.9
116.6
—
$
— $
—
—
—
—
—
—
—
(32.5)
—
(990.4)
—
$ (1,022.9) $ 1,903.8
$
— $
—
—
—
(32.5)
—
(61.5)
(928.9)
993.5
$ (1,022.9) $ 1,903.8
Current Assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Other current assets
Total Current Assets
Property, Plant, and Equipment, net
Goodwill
Intangible assets
Deferred income taxes
Other long-term assets
$ 331.0
$
0.8
$
— $
—
—
4.4
335.4
0.4
—
—
34.2
2.1
270.8
191.2
23.0
485.8
118.1
517.0
99.9
—
19.4
—
—
—
—
—
2.7
119.2
—
—
Investments in and amounts due from subsidiaries
701.5
170.7
118.2
27.3
47.5
11.8
5.7
92.3
29.4
48.5
26.0
—
5.9
—
Total Assets
$1,073.6
$1,410.9
$ 240.1
$ 202.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Other accrued liabilities
Total Current Liabilities
Long-Term Debt
Deferred Income Taxes
Other Long-Term Liabilities
Amounts due to affiliates
Total Stockholders’ Equity
$
1.6
$ 233.2
$
— $
17.0
18.6
—
—
61.5
—
95.0
328.2
353.6
85.8
33.6
—
—
—
—
—
—
—
993.5
609.7
240.1
14.7
24.7
39.4
—
0.6
21.5
61.5
79.1
Total Liabilities and Stockholders’ Equity
$1,073.6
$1,410.9
$ 240.1
$ 202.1
71
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
Net Sales:
External sales
Intercompany sales
Total Sales
Cost of Products Sold
Gross Profit
Selling, Distribution, and Administrative
Expenses
Intercompany charges
Special Charge
Operating Profit
Interest expense (income), net
Equity earnings in subsidiaries
Miscellaneous (income) expense, net
Income (Loss) before Provision for Income
Taxes
Provision for Income Taxes
Net Income (Loss)
Other Comprehensive Income/(Expense)
Items:
Foreign Currency Translation Adjustments
Defined Benefit Pension Plans, net
Other Comprehensive Income/(Expense)
Items after Provision for Income Taxes
Other Comprehensive Income/(Expense)
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Year Ended August 31, 2014
$
— $ 2,150.6
$
— $
242.9
$
— $ 2,393.5
—
—
—
—
—
2,150.6
1,255.5
895.1
27.8
(39.6)
—
11.8
10.0
(174.2)
—
176.0
0.2
175.8
0.7
(10.0)
(9.3)
$
166.5
$
612.5
34.7
(0.2)
248.1
22.2
(4.0)
(1.6)
231.5
75.5
156.0
0.7
(3.7)
(3.0)
153.0
37.2
37.2
—
37.2
4.1
—
—
33.1
—
—
—
33.1
13.1
20.0
—
—
—
$
20.0
$
94.8
337.7
250.5
87.2
76.2
4.9
—
6.1
(0.1)
—
1.8
4.4
1.1
3.3
(132.0)
(132.0)
(91.7)
(40.3)
(40.3)
—
—
—
—
178.2
1.1
(179.3)
—
(179.3)
—
(5.2)
(0.7)
8.9
(5.2)
(1.9) $
8.2
(171.1) $
—
2,393.5
1,414.3
979.2
680.3
—
(0.2)
299.1
32.1
—
1.3
265.7
89.9
175.8
0.7
(10.0)
(9.3)
166.5
72
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
Net Sales:
External sales
Intercompany sales
Total Sales
Cost of Products Sold
Gross Profit
Selling, Distribution, and Administrative
Expenses
Intercompany charges
Special Charges
Operating Profit
Interest expense (income), net
Equity earnings in subsidiaries
Miscellaneous (income) expense, net
Income (Loss) before Provision for Income
Taxes
Provision for Income Taxes
Net Income (Loss)
Other Comprehensive Income/(Expense)
Items:
Foreign Currency Translation Adjustments
Defined Benefit Pension Plans, net
Other Comprehensive Income/(Expense)
Items after Provision for Income Taxes
Other Comprehensive Income/(Expense)
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Year Ended August 31, 2013
$
— $ 1,851.4
$
— $
237.7
$
— $ 2,089.1
—
—
—
—
—
1,851.4
1,088.6
762.8
28.0
(37.5)
—
9.5
9.4
(127.4)
—
127.5
0.1
127.4
(1.9)
24.0
22.1
542.6
32.8
6.5
180.9
22.1
(2.1)
(1.0)
161.9
51.5
110.4
(1.9)
17.3
15.4
31.8
31.8
—
31.8
2.9
—
—
28.9
—
—
—
28.9
11.6
17.3
—
—
—
$
149.5
$
125.8
$
17.3
$
85.0
322.7
247.9
74.8
65.9
4.7
2.0
2.2
(0.3)
—
(1.8)
4.3
2.5
1.8
—
7.2
7.2
9.0
(116.8)
(116.8)
(85.0)
(31.8)
(31.8)
—
—
—
—
129.5
—
(129.5)
—
(129.5)
—
2,089.1
1,251.5
837.6
607.6
—
8.5
221.5
31.2
—
(2.8)
193.1
65.7
127.4
1.9
(24.5)
(1.9)
24.0
(22.6)
(152.1) $
$
22.1
149.5
73
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
Net Sales:
External sales
Intercompany sales
Total Sales
Cost of Products Sold
Gross Profit
Selling, Distribution, and Administrative
Expenses
Intercompany charges
Special Charge
Operating Profit (Loss)
Interest expense (income), net
Equity earnings in subsidiaries
Miscellaneous (income) expense, net
Income (Loss) before Provision for Income
Taxes
Provision for Income Taxes
Net Income (Loss)
Other Comprehensive Income/(Expense)
Items:
Foreign Currency Translation Adjustments
Defined Benefit Pension Plans, net
Other Comprehensive Income/(Expense)
Items after Provision for Income Taxes
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Year Ended August 31, 2012
$
— $ 1,726.4
$
— $
207.3
$
— $ 1,933.7
—
—
—
—
—
1,726.4
1,002.9
723.5
30.2
30.2
—
30.2
3.5
—
—
26.7
—
—
—
26.7
10.8
15.9
—
—
—
$
15.9
$
67.5
274.8
210.3
64.5
59.6
4.7
0.9
(0.7)
(0.4)
0.1
0.7
(1.1)
2.2
(3.3)
(97.7)
(97.7)
(67.5)
(30.2)
(30.2)
—
—
—
—
114.0
—
(114.0)
—
(114.0)
—
(7.4)
8.2
21.3
(7.4)
(10.7) $
29.5
(84.5) $
—
1,933.7
1,145.7
788.0
566.7
—
13.3
208.0
30.7
—
(1.7)
179.0
62.7
116.3
(8.2)
(22.7)
(30.9)
85.4
508.4
30.7
12.4
172.0
22.2
1.3
(2.1)
150.6
49.2
101.4
(8.2)
(13.9)
(22.1)
79.3
25.4
(35.4)
—
10.0
8.9
(115.4)
(0.3)
116.8
0.5
116.3
(8.2)
(22.7)
(30.9)
Other Comprehensive Income/(Expense)
$
85.4
$
74
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Net Cash Provided by Operating Activities
$ 188.7
$
35.1
$
— $
9.3
$
— $
233.1
Year Ended August 31, 2014
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Cash Provided by (Used for) Investing Activities:
Purchases of property, plant, and equipment
Proceeds from sale of property, plant, and equipment
Investments in subsidiaries
Net Cash Used for Investing Activities
Cash Provided by (Used for) Financing Activities:
Proceeds from stock option exercises and other
Excess tax benefits from share-based payments
Dividends paid
Other financing activities
Net Cash Used for Financing Activities
Effect of Exchange Rate Changes on Cash
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
—
—
—
—
8.4
10.4
(22.5)
—
(3.7)
—
185.0
331.0
Cash and Cash Equivalents at End of Year
$ 516.0
$
(29.2)
1.0
(4.5)
(32.7)
—
—
—
—
—
(0.1)
2.3
0.8
3.1
—
—
—
—
—
—
—
—
—
—
—
—
$
— $
(6.1)
—
4.5
(1.6)
—
—
—
(2.6)
(2.6)
1.0
6.1
27.3
33.4
—
—
—
—
—
—
—
—
—
—
—
—
$
— $
(35.3)
1.0
—
(34.3)
8.4
10.4
(22.5)
(2.6)
(6.3)
0.9
193.4
359.1
552.5
75
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Net Cash Provided by (Used for) Operating Activities
$ 83.7
$
46.4
$
— $
14.3
$
(12.1) $
132.3
Year Ended August 31, 2013
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Cash Provided by (Used for) Investing Activities:
Purchases of property, plant, and equipment
Proceeds from sale of property, plant, and equipment
Investments in subsidiaries
Acquisitions of businesses
Net Cash (Used for) Provided by Investing
Activities
Cash Provided by (Used for) Financing Activities:
Proceeds from stock option exercises and other
Excess tax benefits from share-based payments
Intercompany dividends
Intercompany capital
Dividends paid
Net Cash Provided by (Used for) Financing
Activities
Effect of Exchange Rate Changes on Cash
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
(0.4)
—
—
—
(36.9)
7.6
(13.1)
(3.7)
(0.4)
(46.1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3.3)
—
—
(21.8)
(25.1)
—
—
(12.1)
13.1
—
1.0
(0.8)
(10.6)
37.9
—
—
13.1
—
13.1
—
—
12.1
(13.1)
—
(1.0)
—
—
—
$
— $
27.3
$
— $
(40.6)
7.6
—
(25.5)
(58.5)
14.9
8.6
—
—
(22.4)
1.1
(0.3)
74.6
284.5
359.1
—
—
—
—
—
—
0.5
0.8
—
0.8
14.9
8.6
—
—
(22.4)
1.1
—
84.4
246.6
Cash and Cash Equivalents at End of Period
$ 331.0
$
76
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Net Cash Provided by (Used for) Operating Activities
$ 141.9
$
29.8
$
— $
2.5
$
(2.0) $
172.2
Year Ended August 31, 2012
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Cash Provided by (Used for) Investing Activities:
Purchases of property, plant, and equipment
Proceeds from sale of property, plant, and equipment
Investments in subsidiaries
Acquisitions of business and intangible assets
Net Cash (Used for) Provided by Investing
Activities
Cash Provided by (Used for) Financing Activities:
Proceeds from stock option exercises and other
Repurchases of common stock
Excess tax benefits from share-based payments
Intercompany dividends
Intercompany capital
Dividends paid
Net Cash (Used for) Provided by Financing
Activities
Effect of Exchange Rate Changes on Cash
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
—
—
(3.8)
—
(27.7)
0.1
—
(3.8)
(3.8)
(31.4)
7.6
(9.2)
4.9
—
—
(22.0)
(18.7)
—
119.4
127.2
—
—
—
—
3.8
—
3.8
(2.3)
(0.1)
0.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3.7)
—
—
—
(3.7)
—
—
—
(2.0)
—
—
(2.0)
(1.8)
(5.0)
42.9
—
—
3.8
—
3.8
—
—
—
2.0
(3.8)
—
(1.8)
—
—
—
Cash and Cash Equivalents at End of Year
$ 246.6
$ — $
— $
37.9
$
— $
(31.4)
0.1
—
(3.8)
(35.1)
7.6
(9.2)
4.9
—
—
(22.0)
(18.7)
(4.1)
114.3
170.2
284.5
77
ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
15.
Quarterly Financial Data (Unaudited)
Net Sales
Gross Profit
Net Income
Basic Earnings per Share
Diluted Earnings per Share
Net Sales
Gross Profit
Net Income
Basic Earnings per Share
Diluted Earnings per Share
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year 2014
574.7
237.1
44.5
1.03
1.03
$
$
$
$
$
546.2
215.2
32.7
0.76
0.75
$
$
$
$
$
603.9
243.4
43.8
1.01
1.01
$
$
$
$
$
668.7
283.5
54.8
1.27
1.26
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year 2013
481.1
189.5
26.1
0.61
0.61
$
$
$
$
$
486.7
189.7
24.7
0.58
0.57
$
$
$
$
$
541.5
221.1
31.7
0.74
0.73
$
$
$
$
$
579.8
237.3
44.9
1.04
1.03
$
$
$
$
$
$
$
$
$
$
78
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 of 1934 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 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 of 1934
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, 2014. 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 were effective as of August 31, 2014
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.
Management’s annual report on the Company’s internal control over financial reporting and the independent registered
public accounting firm’s attestation report are included in the Company’s 2014 Financial Statements in Item 8 of this Annual
Report on Form 10-K, under the headings, Management’s Report on Internal Control over Financial Reporting and Report of
Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting, respectively, and are incorporated
herein by reference.
There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s
most recent completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Item 9b.
Other Information
None.
79
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item, with respect to directors and corporate governance, is included under the captions
Item 1 — Election of Directors and Information Concerning the Board and Its Committees of the Company’s proxy statement for
the annual meeting of stockholders to be held January 7, 2015, 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, will be included under the caption Executive Officers
of the Company’s proxy statement for the annual meeting of stockholders to be held January 7, 2015, 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, will be 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 7, 2015, 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 the code of ethics, will be included under the caption Questions and
Answers about Communications, Governance, and Company Documents of the Company’s proxy statement for the annual meeting
of stockholders to be held January 7, 2015, to be filed with the Commission pursuant to Regulation 14A, and is incorporated herein
by reference.
Item 11.
Executive Compensation
The information required by this item will be included under the captions Compensation of Directors, Information Concerning
the Board and Its Committees, Compensation Committee Interlocks and Insider Participation, Report of the Compensation
Committee, Compensation Discussion and Analysis, Fiscal 2014 Summary Compensation Table, Fiscal 2014 Grants of Plan-
Based Awards, Outstanding Equity Awards at Fiscal 2014 Year-End, Option Exercises and Stock Vested in Fiscal 2014, Pension
Benefits in Fiscal 2014, Fiscal 2014 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 7, 2015, 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 information required by this item will be included under the captions Beneficial Ownership of the Company’s Securities
and Equity Compensation Plans of the Company’s proxy statement for the annual meeting of stockholders to be held January 7,
2015, 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 will be 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 7, 2015, 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 will be 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 7, 2015, to be filed
with the Commission pursuant to Regulation 14A, and is incorporated herein by reference.
80
Item 15.
Exhibits and Financial Statement Schedules
(a) The following documents are filed as a part of this report:
PART IV
(1) Management’s Report on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of August 31, 2014 and 2013
Consolidated Statements of Comprehensive Income for the years ended August 31, 2014, 2013, and 2012
Consolidated Statements of Cash Flows for the years ended August 31, 2014, 2013, and 2012
Consolidated Statements of Stockholders’ Equity for the years ended August 31, 2014, 2013, and 2012
(2)
(3)
Notes to Consolidated Financial Statements
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
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 2300, Atlanta,
Georgia 30309-7676
35
36
38
39
40
41
42
89
81
EXHIBIT 2
INDEX TO EXHIBITS
(a) Agreement and Plan of Merger among Acuity
Brands, Inc., Acuity Merger Sub, Inc. and
Acuity Brands Holdings, Inc., dated
September 25, 2007.
(b) Agreement and Plan of Distribution by and
between Acuity Brands, Inc. and Zep Inc.,
dated as of October 31, 2007.
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, Inc., dated as of September 30, 2011.
EXHIBIT 4
(a) Form of Certificate representing Acuity
Brands, Inc. Common Stock.
EXHIBIT 10(i)
(b)
Indenture, dated December 8, 2009, among
Acuity Brands Lighting, Inc, as issuer, and
Acuity Brands, Inc. and ABL IP Holding LLC,
as guarantors, and Wells Fargo Bank, National
Association, as trustee.
(c) Form of 6.00% Senior Note due 2019.
(1) Tax Disaffiliation Agreement, dated as of
October 7, 2005, by and between National
Service Industries, Inc. and Acuity Brands,
Inc.
(2) Tax Disaffiliation Agreement between Acuity
Brands, Inc. and Zep Inc., dated as of October
31, 2007.
(3) 5-Year Revolving Credit Agreement, dated as
of August 27, 2014 among Acuity Brands,
Inc., the Subsidiary Borrowers from time to
time parties hereto, the Lenders from time to
time parties hereto, JPMorgan Chase Bank,
N.A., as Swing Line Lender, LC Issuer and
Administrative Agent, Wells Fargo Bank,
National Association, as Syndication Agent
and Bank of America, N.A., Branch Banking
& Trust Company and Keybank National
Association, as Co-Documentation Agents.
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.
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 5, 2011, 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.
Reference is made to Exhibit 4.1 of
registrant’s Form 8-K as filed with the
Commission on December 9, 2009, which is
incorporated herein by reference.
Reference is made to Exhibit 4.2 of
registrant’s Form 8-K as filed with the
Commission on December 9, 2009, which is
incorporated herein 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 10.1 of
registrant's Form 8-K as filed with the
Commission on November 6, 2007, which is
incorporated herein by reference.
Reference is made to Exhibit 10.1 of
registrant’s Form 8-K as filed with the
Commission on August 28, 2014, which is
incorporated herein by reference.
82
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. 2001
Nonemployee Directors’ Stock Option Plan,
dated December 20, 2001.
(3) Amendment No. 1 to Stock Option Agreement
for Nonemployee Director dated October 25,
2006.
(4) Amendment No. 2 to Acuity Brands, Inc. 2001
Non-employee Directors’ Stock Option Plan.
(5) Amendment No. 3 to Acuity Brands, Inc. 2001
Nonemployee Directors’ Stock Option Plans.
(6) Acuity Brands, Inc. Supplemental Deferred
Savings Plan.
(7) Amendment No. 1 to Acuity Brands, Inc.
Supplemental Deferred Savings Plan.
(8) Amendment No. 2 to Acuity Brands, Inc.
Supplemental Deferred Savings Plan.
(9) Amendment No. 3 to Acuity Brands, Inc.
Supplemental Deferred Savings Plan.
(10) Amendment No. 4 to Acuity Brands, Inc.
Supplemental Deferred Savings Plan.
(11) Amendment No. 5 to Acuity Brands, Inc.
Supplemental Deferred Savings Plan.
(12) Amended and Restated Acuity Brands, Inc.,
2005 Supplemental Deferred Savings Plan,
effective as of January 1, 2010.
(13) Acuity Brands, Inc. Executives' Deferred
Compensation Plan.
(14) Amendment No. 1 to Acuity Brands, Inc.
Executives’ Deferred Compensation Plan.
(15) Acuity Brands, Inc. 2002 Executives’ Deferred
Compensation Plan as Amended on
December 30, 2002 and as Amended and
Restated January 1, 2005.
83
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 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(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(3) 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 10.14 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(2) of
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(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(36) of
the registrant’s Form 10-K as filed with the
Commission on October 29, 2004, which is
incorporated 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 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 (c) of
registrant’s Form 10-Q as filed with the
Commission on March 31, 2010, which is
incorporated herein by reference.
Reference is made to Exhibit 10.15 of
registrant's Form 8-K as filed with the
Commission on December 14, 2001, which is
incorporated here in 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(61) of
the registrant’s Form 10-K as filed with the
Commission on November 2, 2006, which is
incorporated by reference.
(16) Amendment No. 2 to Acuity Brands, Inc.
Nonemployee Director Deferred
Compensation Plan.
(17) Amended and Restated Acuity Brands Inc.
2011 Nonemployee Director Deferred
Compensation Plan, effective as of
December 1, 2012.
(18) Acuity Brands, Inc. Senior Management
Benefit Plan.
(19) Amendment No. 1 to Acuity Brands, Inc.
Senior Management Benefit Plan.
(20) Acuity Brands, Inc. Executive Benefits Trust.
(21) Acuity Brands, Inc. Supplemental Retirement
Plan for Executives.
(22) Amendment No. 1 to Acuity Brands, Inc.
Supplemental Retirement Plan for Executives.
(23) Acuity Brands, Inc. Benefits Protection Trust.
(24) Form of Acuity Brands, Inc., Letter regarding
Bonuses.
(25) Acuity Brands, Inc. 2002 Supplemental
Executive Retirement Plan as Amended and
Restated Effective January 1, 2005.
(26) Amendment No. 1 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan.
(27) Amendment No. 2 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan,
dated September 27, 2007.
(28) Amendment No. 2 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan,
dated October 24, 2008.
(29) Amendment No. 3 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan.
(30) Amendment No. 4 to Acuity Brands, Inc. 2002
Supplemental Executive Retirement Plan.
84
Reference is made to Exhibit 10(iii)A(86) 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(68) of
the registrant's Form 10-K as filed with the
Commission on October 26, 2012, which is
incorporated herein by reference.
Reference is made to Exhibit 10.16 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(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 10.18 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 10.19 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(2) 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 10.21 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 10.25 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(63) 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 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 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.
Reference is made to Exhibit 10(iii)A(87) 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(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(69) of
the registrant's Form 10-K as filed with the
Commission on October 26, 2012, which is
incorporated herein by reference.
(31) Letter Agreement relating to Supplemental
Executive Retirement Plan between Acuity
Brands, Inc. and Vernon J. Nagel.
(32) Employment Letter between Acuity Brands,
Inc. and Vernon J. Nagel, dated June 29, 2004.
(33) Amended and Restated Severance Agreement,
entered into as of January 20, 2004, by and
between Acuity Brands, Inc. and Vernon J.
Nagel.
(34) Amendment dated April 21, 2006 to the
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Vernon J.
Nagel.
(35) Amendment No. 2 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Vernon J.
Nagel.
(36) Amendment No. 3 to Acuity Brands, Inc.
Amended and Restated Severance Agreement,
between Acuity Brands, Inc. and Vernon J.
Nagel.
(37) Amendment No. 4 to Acuity Brands, Inc.
Amended and Restated Severance Agreement,
between Acuity Brands, Inc. and Vernon J.
Nagel.
(38) Form of Incentive Stock Option Agreement
for Executive Officers.
(39) Form of Nonqualified Stock Option
Agreement for Executive Officers.
(40) Premium-Priced Nonqualified Stock Option
Agreement for Executive Officers between
Acuity Brands, Inc. and Vernon J. Nagel.
(41) Acuity Brands, Inc. Matching Gift Program.
(42) Employment Letter dated November 16, 2005
between Acuity Brands, Inc. and Richard K.
Reece.
(43) Amendment No. 1 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Richard K.
Reece.
(44) Amendment No. 2 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Richard K.
Reece.
(45) Amendment No. 3 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Richard K.
Reece.
85
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(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.
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 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 10(iii)A(78) of
the registrant’s Form 10-K as filed with the
Commission on October 30, 2009, which is
incorporated herein 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 2, 2014, which is
incorporated herein by reference.
Reference is made to Exhibit 10(III)A(3) of
the registrant’s Form 10-Q filed with the
Commission on January 6, 2005 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 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(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 10.1 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 10(iii)A(81) of
the registrant’s Form 10-K as filed with the
Commission on October 30, 2009, which is
incorporated herein by reference.
Reference is made to Exhibit 10 (f) of
registrant’s Form 10-Q as filed with the
Commission on March 31, 2010, which is
incorporated herein 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 2, 2014, which is
incorporated herein by reference.
(46) Amendment No. 4 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Richard K.
Reece.
(47) Form of Nonqualified Stock Option
Agreement for Executive Officers.
(48) Amended and Restated Acuity Brands, Inc.
Long-Term Incentive Plan.
(49) Acuity Brands, Inc. Long-Term Incentive Plan
Fiscal Year 2008 Plan Rules for Executive
Officers.
(50) Acuity Brands, Inc. 2007 Management
Compensation and Incentive Plan.
(51) Acuity Brands, Inc. Management
Compensation and Incentive Plan Fiscal Year
2008 Plan Rules for Executive Officers.
(52) Form of Nonqualified Stock Option
Agreement for Key Employees effective
October 24, 2008.
(53) Form of Nonqualified Stock Option
Agreement for Executive Officers of Acuity
Brands, Inc. effective October 24, 2008.
(54) Employment Letter dated July 27, 2006
between Acuity Brands, Inc. and Mark A.
Black.
(55) Amendment No. 1 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Mark A.
Black.
(56) Amendment No. 2 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Mark A.
Black.
(57) Amendment No. 3 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Mark A.
Black.
(58) Amendment No. 4 to Acuity Brands, Inc.
Amended and Restated Severance Agreement
between Acuity Brands, Inc. and Mark A.
Black.
(59) Amended and Restated Change in Control
Agreement.
(60) Form of Indemnification Agreement.
86
Filed with the Commission as part of this
Form 10-K.
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 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 99.1 of the
registrant’s Form 8-K as filed with the
Commission on January 4, 2008, 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.
Reference is made to Exhibit 99.2 of the
registrant’s Form 8-K as filed with the
Commission on January 4, 2008, 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 (f) 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(iii)A(79) of
the registrant’s Form 10-K as filed with the
Commission on October 30, 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 March 31, 2010, which is
incorporated herein 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 2, 2014, which is
incorporated herein by reference.
Filed with the Commission as part of this
Form 10-K.
Reference is made to Exhibit 10(iii)A(84) of
the registrant’s Form 10-K as filed with the
Commission on October 30, 2009, which is
incorporated herein by reference.
Reference is made to Exhibit 10.1 of
registrant’s Form 8-K as filed with the
Commission on February 9, 2010, 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 19, 2012, 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 19, 2012, which is
incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(72) of
the registrant's Form 10-K as filed with the
Commission on October 29, 2013, 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 April 2, 2014, 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.
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.
(61) Acuity Brands, Inc. 2012 Omnibus Stock
Incentive Compensation Plan.
(62) Acuity Brands, Inc. 2012 Management Cash
Incentive Plan.
(63) Form of Stock Notification and Award
Agreement for restricted stock, effective
October 24, 2013.
(64) Form of Stock Notification and Award
Agreement for stock options, effective
October 24, 2013.
(65) Form of Stock Notification and Award
Agreement for restricted stock, effective
October 27, 2014.
(66) Form of Stock Notification and Award
Agreement for stock options, effective
October 27, 2014.
EXHIBIT 21
List of Subsidiaries.
EXHIBIT 23
Consent of Independent Registered Public
Accounting Firm.
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.
EXHIBIT 101
The following financial information from the
Company's Annual Report on Form 10-K for
the year ended August 31, 2014, filed on
October 29, 2014, formatted in XBRL
(Extensible Business Reporting Language): (i)
the Consolidated Balance Sheets as of August
31, 2014 and 2013, (ii) the Consolidated
Statements of Comprehensive Income for the
years ended August 31, 2014, 2013, and 2012,
(iii) the Consolidated Statements of Cash
Flows for the years ended August 31, 2014,
2013, and 2012, (iv) the Consolidated
Statements of Stockholders' Equity for the
years ended August 31, 2014, 2013, and 2012
and (v) the Notes to Consolidated Financial
Statements.
87
SIGNATURES
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.
Date: October 29, 2014
By:
/S/ VERNON J. NAGEL
Vernon J. Nagel
Chairman, President, and Chief Executive Officer
ACUITY BRANDS, INC.
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
*
W. Patrick Battle
*
Peter C. Browning
*
George C. (Jack) Guynn
*
James H. Hance, Jr.
*
Gordon D. Harnett
*
Robert F. McCullough
*
Julia B. North
*
Dominic J. Pileggi
*
Ray M. Robinson
*
Norman H. Wesley
Chairman, President, and Chief Executive
Officer
October 29, 2014
Executive Vice President and Chief Financial
Officer (Principle Financial and Accounting
Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
October 29, 2014
October 29, 2014
October 29, 2014
October 29, 2014
October 29, 2014
October 29, 2014
October 29, 2014
October 29, 2014
October 29, 2014
October 29, 2014
October 29, 2014
*BY:
/s/ RICHARD K. REECE
Richard K. Reece
Attorney-in-Fact
October 29, 2014
88
Schedule II
Acuity Brands, Inc.
Valuation and Qualifying Accounts
For the Years Ended August 31, 2014, 2013, and 2012
(In millions)
Year Ended August 31, 2014
Reserve for doubtful accounts
Reserve for estimated product returns, net
Reserve for estimated cash discounts
Reserve for estimated other deductions
Deferred tax asset valuation allowance
Year Ended August 31, 2013
Reserve for doubtful accounts
Reserve for estimated product returns, net(1)
Reserve for estimated cash discounts(1)
Reserve for estimated other deductions(1)
Deferred tax asset valuation allowance
Year Ended August 31, 2012
Reserve for doubtful accounts
Reserve for estimated product returns, net(1)
Reserve for estimated cash discounts(1)
Reserve for estimated other deductions(1)
Deferred tax asset valuation allowance
_______________________________________
Balance at
Beginning of
Year
Additions and Reductions
Charged to
Costs and
Expenses
Other
Accounts
Deductions
Balance at
End of Year
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1.5
1.5
2.2
1.0
12.4
1.4
1.3
1.8
0.8
10.2
1.8
1.4
1.8
1.7
7.7
0.8
35.9
19.5
7.4
0.4
0.2
24.1
17.4
7.4
1.1
0.4
18.5
15.4
5.7
1.7
—
—
—
—
0.8
—
—
—
—
1.1
—
—
—
—
0.8
0.4
33.1
19.0
7.1
$
$
$
$
1.9
4.3
2.7
1.3
— $
13.6
0.1
23.9
17.0
7.2
$
$
$
$
1.5
1.5
2.2
1.0
— $
12.4
0.8
18.6
15.4
6.6
$
$
$
$
1.4
1.3
1.8
0.8
— $
10.2
(1)
Previously these items were combined and reported as "Reserve for estimated returns and allowances."
89
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1170 Peachtree Street, NE
Suite 2300
Atlanta, Georgia 30309-7676
404-853-1400
www.acuitybrands.com