2016 ANNUAL REPORT
Letter to Our Stakeholders
2016 was another 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. At August 31, 2016, our
1, 3 and 5-year annualized total returns on the Company’s stock were 42%,
48%, and 44%, respectively, meaningfully exceeding the returns of the S&P
500 Index over the same periods as well as those of our industry-related indices,
which include the Dow Jones U.S. Electrical Components & Equipment Index
and the Dow Jones U.S. Building Materials & Fixtures Index.
During the past year, we continued to successfully execute our strategy to extend our
leadership position in the North American lighting and building management 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’ 2016 financial results include:
• Record net sales of $3.3 billion, an increase of 22% compared with fiscal 2015.
• Record operating profit of $475.2 million, an increase of 26% compared with fiscal 2015.
• Record net income of $290.8 million, an increase of 31% compared with fiscal 2015.
• Record diluted earnings per share of $6.63, an increase of 30% compared with fiscal 2015.
• Record net cash provided by operating activities of $345.7 million, an increase of 20% compared with fiscal 2015.
• We ended fiscal 2016 with a cash balance of $413.2 million, while funding $623.2 million for acquisitions, investing
$83.7 million in capital expenditures, and paying $22.9 million of dividends to stockholders.
On the strategic front, we accomplished a number of items in fiscal 2016. We continued to expand our product
portfolio of innovative and energy-efficient lighting and building management solutions. As a result, we grew net
sales that meaningfully exceeded the growth rate of our addressable market. We continued with investments to
enhance our production, distribution, and customer service and support capabilities, and further accelerated the
deployment of our lean business processes, which improved our on-time delivery and company-wide productivity.
We completed four acquisitions during fiscal 2016. The acquisition of Juno Lighting Group, a leading provider
of downlighting and track lighting luminaires, enhanced and broadened our portfolio of lighting solutions for
both residential and commercial applications. We believe the combination of our dynamic businesses and strong
leadership teams provides growth opportunities with key customer sets and benefits our primary sales channel
partners in their respective markets. Additionally, we continued to execute our tiered solutions strategy with the
acquisitions of Distech Controls, GeoMetri, and DGLogik, all in an effort to capitalize on the evolving and growing
market for intelligent networked systems that collect and exchange data to increase efficiency as well as provide a
host of other economic benefits resulting from data analytics. These acquisitions are part of the Company’s strategy
to offer a single digital ecosystem that will allow for the true end-to-end optimization of all aspects of a building,
including a quality visual environment, seamless operation, energy efficiency, operational cost reductions, and
increased digital functionality, as well as outdoor applications. The transition to solid-state lighting provides the
opportunity to expand our addressable market because lighting now provides an ideal platform for enabling the
“Internet of Things” (IoT), which supports the advancement of smart cities and the smart grid.
This is an extraordinary time to be in the lighting and building management industries, 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 and building management 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 and building management
industries. 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: EXCELLENCE, INNOVATION, GROWTH
As we enter 2017, our mission is to continue to build on our rich legacy of excellence, innovation, and growth to
provide great returns for our shareholders, superior value for our customers, and growth opportunities for our
associates. Our passion and intense focus continue to be centered on creating lighting and building management
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. Our associates are rapidly exploiting new technologies and
aggressively expanding our industry-leading portfolio by developing intelligent lighting and building management
solutions that represent significant advancements over traditional technologies and easily network with other
systems, improving energy efficiency, health & safety, and productivity.
As the market leader in North America, we believe our deep expertise in technology, optics and thermal
management, our understanding of the art and science of lighting, and our ability to provide tailored lighting and
building management 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 12,000 associates for
making possible the record success we experienced in 2016 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 18, 2016
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, 2016
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 $209.43 as quoted on the New York Stock Exchange on February 29, 2016, the
aggregate market value of the voting stock held by nonaffiliates of the registrant was $9,113,731,801.
The number of shares outstanding of the registrant’s common stock, $0.01 par value, was 44,082,639 shares as of October 26, 2016.
__________________________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K
Part II, Item 5
Incorporated Document
Proxy Statement for 2016 Annual Meeting of Stockholders
Part III, Items 10, 11, 12, 13, and 14
Proxy Statement for 2016 Annual Meeting of Stockholders
Item 1.
Business
Item 1a.
Risk Factors
Item 1b.
Unresolved Staff Comments
Item 2.
Item 3.
Properties
Legal Proceedings
ACUITY BRANDS, INC.
Table of Contents
Part I
Part II
Item 5.
Item 6.
Item 7.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7a.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9a.
Controls and Procedures
Item 9b.
Other Information
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Part III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
Part IV
Signatures
Financial Statement Schedules
Page No.
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6
13
14
15
16
18
19
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35
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92
Item 1.
($ 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 and building management solutions for commercial, institutional, industrial, infrastructure, and
residential applications throughout North America and select international markets. The Company’s lighting and building
management solutions vary from individual devices to intelligent network systems. Individual devices include luminaires,
lighting controls, lighting components, controllers for various building systems (including HVAC, lighting, shades and
access control), power supplies, and prismatic skylights. Among other benefits, intelligent network systems can optimize
energy efficiency and comfort as well as enhance the occupant experience for various indoor and outdoor applications,
all the while reducing operating costs. Additionally, the Company continues to expand its solutions portfolio, including
software and services, to provide a host of other economic benefits resulting from data analytics that enables the
“Internet of Things” ("IoT") and supports the advancement of smart buildings, smart cities, and the smart grid.
As a results-driven, customer-centric company, management continues to align the unique capabilities and
resources of the organization to drive profitable growth by providing comprehensive, differentiated, and integrated
lighting and building management solutions for customers, driving world-class cost efficiency, and leveraging a culture
of operational excellence through continuous improvement.
Lighting and building management solutions 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
application. The Company’s lighting and building management solutions are marketed under numerous brand names,
including but not limited to Lithonia Lighting®, Holophane®, Peerless®, Gotham®, Mark Architectural Lighting™,
Winona® Lighting, Juno®, Indy™, AccuLite®, Aculux™, Healthcare Lighting®, Hydrel®, American Electric Lighting®,
Carandini®, Antique Street Lamps™, Sunoptics®, RELOC® Wiring Solutions, eldoLED®, Distech Controls®, and
Acuity Controls™. As of August 31, 2016, the Company manufactures products in 17 facilities in North America and
three facilities in Europe.
Principal customers include electrical distributors, system integrators, 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 and building management solutions are sold primarily by independent sales agents, electrical
distributors, system integrators, and 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-managed 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 2016, sales originated in North America accounted for approximately 96% 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 reportable segment serving the North
American and select international lighting and building management markets.
Industry Overview
Based on industry sources and government information, the Company estimates that in fiscal 2016 the size of
the North American lighting and building management solutions market served by the Company (also referred to herein
as “addressable market”) was approximately $19 billion and includes non-portable luminaires (as defined by the National
Electrical Manufacturers Association), poles for outdoor lighting, emergency lighting fixtures, daylighting, lighting
controls, as well as building management controllers and systems. 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. A source of demand for the lighting and building
management industry is attributed to the renovation and retrofit of less efficient lighting and building management
systems. While the precise size of the North American market is not known, the Company estimates the potential size
of the installed base of lighting and building management solutions to be well in excess of $500 billion.
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
1
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 and building
management solutions. Demand for the Company’s lighting and building management 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.
The residential and non-residential market 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 and building management solutions;
and design technologies addressing sustainability and facilitating smarter buildings and cities. The Company is a
leading provider of integrated lighting and building management solutions based on these technologies and utilizes
internally developed, licensed, or acquired intellectual property. Solid-state lighting and digital building management
systems provide the opportunity for lighting and building management systems to be integrated in a manner resulting
in the optimal platform for enabling the IoT that collect and exchange data to increase efficiency as well as provide a
host of other economic benefits resulting from data analytics and other features. The industry’s addressable market
is likely to meaningfully expand due to the benefits and value creation provided by intelligent networked lighting and
building management systems. New entrants, including both well-established as well as new software and technology
companies, therefore continue to develop capabilities and solutions that are both complementary as well as competitive
to those of traditional industry participants.
Products and Solutions
The Company offers a broad portfolio of indoor and outdoor lighting and building management solutions for
commercial, institutional, industrial, infrastructure, and residential applications. The portfolio of lighting solutions
includes lighting products utilizing fluorescent, light emitting diode ("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 embedded 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. Building management solutions include products and solutions for controlling HVAC, lighting, shades, and
access control that deliver end to end optimization of those building systems. The Company's lighting and building
management solutions are designed to enhance the occupant experience, improve the quality of the visual environment,
and provide seamless operational energy efficiency and cost reductions, as well as increased digital functionality due
to a unique capability to collect vast amounts of data that can better enable the IoT for building owners.
The solutions portfolio of the Company also includes modular wiring, LED drivers, sensors, glass, and inverters
sold primarily to original equipment manufacturers ("OEMs"). In addition, the Company provides services across
applications that primarily relate to monitoring and controlling lighting and building management systems through
network technologies and the commissioning of control systems.
Sales of lighting and building management solutions, excluding services, accounted for approximately 99% of
total consolidated net sales for the Company in fiscal 2016, 2015, and 2014.
Sales and Marketing
Sales. The Company sells lighting and building management solutions to customers in the North American market
utilizing numerous sales forces, including internal direct salespeople and independent sales agencies, based on the
channel and geography served. The Company also operates separate European sales forces, including independent
international sales agencies and system integrators, 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 methods, 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
2
social media. The Company 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, system integrators, retail home improvement centers,
electric utilities, utility distributors, national accounts, value-added resellers, government entities and municipalities,
lighting showrooms, OEMs, and energy service companies. In addition, there are a variety of other professionals who
can 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.
No single customer accounted for more than 10% of net sales in fiscal 2016. A single customer of the Company,
The Home Depot, accounted for approximately 11% and 12% of net sales in fiscal 2015 and 2014, respectively. These
sales include products for resale as well as for lighting its facilities.
Manufacturing and Distribution
The Company operates 20 manufacturing facilities, including nine facilities in the United States, six facilities in
Mexico, three facilities in Europe, and two 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 forming and anodizing, high-end glass production, surface mount circuit board
production, and assembly are performed (not exclusively) at company-operated facilities, offering the ability to
differentiate products through superior capabilities. Other components, such as lamps, LEDs, certain LED light engines,
sockets, and ballasts are purchased primarily from third-party 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. Of total finished goods manufactured and purchased in fiscal 2016, the
Company’s U.S. operations produced approximately 22%, its Mexican operations produced approximately 57%, its
European operations produced approximately 3%, and finished product manufactured by others accounted for
approximately 18%.
Lighting and building management 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-managed 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 invests in the development of new products and solutions as well as the enhancement of existing
offerings with a focus on improving the performance-to-cost ratio and energy efficiency. The Company also develops
software applications and capabilities to enhance data analytics offerings. R&D expenses consist of compensation,
payroll taxes, employee benefits, materials, supplies, and other administrative costs, but do not include all new product
development costs. For fiscal 2016, 2015, and 2014, research and development expense totaled $47.1, $41.1, and
$35.3, respectively.
Competition
The Company experiences competition based on numerous factors, including features and benefits, brand name
recognition, product quality, product and system design, energy efficiency, customer relationships, service capabilities,
and price. The market for lighting and building management 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 management products as well as pricing benefits from the bundling of various offerings.
In addition, there have been a growing number of new competitors, from small startup companies to global electronics
and software companies, offering new technologies.
3
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.
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 2016, the Company purchased approximately 100,000 tons of steel and aluminum. The Company estimates that
approximately 8% of purchased raw materials are petroleum-based. Additionally, the Company estimates that
approximately five million gallons of diesel fuel were consumed in fiscal 2016 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 and components 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. 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.
4
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 and building management 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 73% 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.
Of the products produced by the Company, approximately 70% are manufactured at six facilities in Mexico. 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 a stipulated time frame. Maquiladora status, which is renewed periodically,
is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program
and other local regulations, which have become stricter in recent years.
During fiscal 2016, net sales initiated outside of the U.S. represented approximately 11% 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
As of August 31, 2016, the Company employed approximately 11,800 associates, of which approximately 4,300
were employed in the United States, approximately 7,000 in Mexico, and approximately 500 in other international
locations, including Europe, Canada, and the Asia/Pacific region. Union recognition and collective bargaining
5
arrangements are in place or in process, covering approximately 8,600 persons (including approximately 2,000 in the
United States). Union recognition and collective bargaining arrangements covering approximately 8,100 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.
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 the Company’s 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 and building
management solutions 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.
The Company’s 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.
6
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 customers, competitors, or suppliers regarding their own performance, as well as
general global economic, industry, and political conditions. SInce management does not provide guidance, the
Company's performance could be different than analyst expectations causing a decline in the Company's stock price.
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
The Company’s results may be adversely affected by its 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.
The Company’s inability to effectively introduce new products and solutions 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.
The Company may pursue future growth through strategic acquisitions, alliances, or investments, which
may not yield anticipated benefits.
The Company has strengthened its business through strategic acquisitions, alliances, and investments and may
continue to do so as opportunities arise in the future. Such investments have been and may be in start-up or development
stage entities. The 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, alliance, and investment process and unforeseen
circumstances arising from recent and future transactions could offset the anticipated benefits. In addition, unanticipated
events, negative revisions to valuation assumptions and estimates, diversion of resources and management's attention
from other business concerns, and difficulties in attaining synergies, among other factors, could adversely affect the
Company’s ability to recover initial and subsequent investments, particularly those related to acquired goodwill and
intangible assets or non-controlling interests. Any of these factors could adversely affect the Company’s financial
condition, results of operations, and cash flows. In addition, such investment transactions may limit the Company's
ability to invest in other activities, which could be more profitable or advantageous.
7
The inability to effectively execute its business 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 strategies, including but not limited to, the development, marketing and selling of new products and
solutions, new product development, the development, marketing, and selling of lighting and building management
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; inability to effectively participate in the emerging
opportunities of the Internet of Things utilizing the Company's digital lighting and building management systems;
additional streamlining efforts; inability to produce certain components with quality, performance, and cost attributes
equal to or better than provided by other component manufacturers; and unforeseen difficulties in the implementation
of the management operating structure. Problems with strategy execution could offset anticipated benefits, disrupt
service to customers, and impact product quality as well as adversely affect the Company’s financial condition and
results of operations. In addition, with the addition of new products and solutions, the Company may encounter new
and different competitors that may have more experience with respect to such products and solutions. Any new products
and solutions may not achieve the same profit margins as expected and as compared to the Company's historic
products and solutions.
The Company 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 expects to 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.
Risks Related to the Company's Operations
Technological developments, intellectual property issues, 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 and the right to utilize
patents of other parties all play a significant role in protecting the Company’s freedom to operate and development
activities. Additionally, the continual development of new technologies (e.g., LED, OLED, lamp/ballast systems, drivers,
lighting controls systems, sensors, communication devices, software, 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 electronics
companies. Certain global and more diversified electrical manufacturers as well as certain global software and building
solution providers may be able to obtain a competitive advantage over the Company by offering broader and more
integrated solutions utilizing electrical, lighting, and building automation systems, and small startup companies may
offer more localized product sales and support services within individual regions, which could adversely affect on the
Company’s business, financial condition, results of operations, and cash flows.
Over the last several years, the Company and others in the industry have received an increased number of
allegations of patent infringement from competitors and other non-practicing entity patent holders, often coupled with
offers to license such patents for use by the Company. Such offers typically relate to various technologies including
certain methods of designing circuits, the use of visible light to communicate data, the use of certain wireless networking
methods, and the design of specific products. The Company believes that it does not need or will be able to invalidate
or access such patents through licensing, cross-licensing, or other mutually beneficial arrangements, although to the
extent the Company is required but unable to enter into such arrangements on acceptable economic terms, it could
adversely affect the Company’s business, financial condition, results of operations, and cash flows.
8
The Company may be unable to sustain significant customer and/or channel partner relationships.
Relationships with customers 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 certain significant customers could harm
the Company’s sales, profitability, and cash flows. The Company has relationships with channel partners such as
electrical distributors, independent sales agencies, system integrators, and value-added resellers. While the Company
maintains positive, and in many 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.
The Company could be adversely affected by disruptions of its operations.
The breakdown of equipment or other events, including labor disputes, strikes, pandemics, cyber-attacks, civil
disruptions, 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 adversely affect the Company’s financial results and cash flows.
Approximately 57% 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 adversely
affect 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 or a violation of data privacy laws or regulations
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 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.
9
The Company is also subject to an increasing number of data privacy laws and regulations that prohibit certain
transfers of data, including but not limited to transfers within and outside the Company from certain jurisdictions to
others. Failure to comply with such laws and regulations could result in the imposition of fines, penalties and other
costs. The legal and regulatory data privacy framework is evolving and uncertain. For example, the European Court
of Justice’s decision in October 2015 to invalidate the Safe Harbor data privacy program between the United States
and the European Union could disrupt the Company's ability to transfer data from Europe to the United States in
compliance with applicable law.
Operating system failures, ineffective system implementation or disruptions, failure to comply with data privacy
laws or regulations, 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.
Changes in the Company's relationship with employees, changes in U.S. or international employment
regulations, an inability to attract and retain talented employees, or a loss of key employees could adversely
impact the effectiveness of the Company’s operations.
The Company employed approximately 11,800 people as of August 31, 2016, approximately 7,500 of whom are
employed in international locations. As such, the Company has significant exposure to changes in domestic and foreign
laws governing relationships with employees, including wage and hour laws and regulations, fair labor standards,
minimum wage requirements, overtime pay, unemployment tax rates, workers' compensation rates, citizenship
requirements, and payroll taxes, which likely would have a direct impact on the Company's operating costs. Union
recognition and collective bargaining agreements are in place or in process covering approximately 73% of the
Company's workforce. Collective bargaining agreements representing approximately 69% of the Company's workforce
will expire within one year. While the Company believes that it has good relationships with both its unionized and non-
unionized employees, the Company may become vulnerable to a strike, work stoppage, or other labor action by these
employees that could have an adverse effect on the Company’s business, financial condition, results of operations, or
cash flows.
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. As the Company expands its service offerings, reliance on the technical infrastructure to provide services
to customers will increase. If the Company fails to appropriately manage and secure the technical infrastructure required,
customers could experience service outages or delays in implementation of services. 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
The Company is subject to a broad range of standards, laws and regulations in the jurisdictions in which
it operates, and the Company may be exposed to substantial disruptions, costs and liabilities associated with
the failure to comply with such standards, laws, and regulations.
The Company is subject to a broad range of standards, laws and regulations in the jurisdictions in which the
Company operates which could result in increased costs or liabilities or adversely impact the Company's ability to sell
its products and solutions. These laws and regulations impose increasingly complex, stringent and costly compliance
activities, including but not limited to environmental, health, and safety protection standards and permitting, labeling
and other requirements regarding, among other things, electronic and wireless communications, air emissions,
wastewater discharges, the use, handling, and disposal of hazardous or toxic materials, 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
10
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 industry
standards, laws or regulations, including those imposed in response to energy, climate change, product functionality,
geopolitical, or similar concerns. These standards, laws, or regulations may impact the sourcing of raw materials and
the manufacture and distribution of the Company’s products and place restrictions and other requirements or
impediments on the products and solutions the Company can sell in certain geographical locations.
The Company 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, personal injury,
network security, data privacy, or property damage claims resulting from the use of the Company's products, services,
or solutions or exposure to hazardous materials, contract disputes, or intellectual property disputes. The Company is
insured up to specified limits for certain types of losses with a self-insurance retention per occurrence, including product
or professional liability, network security, and data privacy 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 adversely affect
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 the Company's 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 adversely affect 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
adversely affect the Company's financial condition, results of operations, and cash flows.
11
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 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 regarding the use of certain minerals, including cassiterite, wolframite,
coltan, and gold (collectively, "Conflict Minerals"), sourced from the Democratic Republic of Congo and adjoining
countries. In August 2012, the SEC adopted annual reporting requirements for public companies that use Conflict
Minerals. 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 at competitive prices and in sufficient quantities in the future.
In addition, due to the complexity and sophistication of the Company's supply chain, compliance with the reporting
requirements involves significant efforts and may increase costs. In addition, pressure from customers for more
information or due diligence could result in increased costs or potentially the loss of certain customers.
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 to contract manufacture certain products, as well as perform certain
selling, distribution, and administrative functions. 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.
The Company 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
shipments to certain countries or restricted parties and that prohibit improper payments to government officials such
as the Foreign Corrupt Practices Act and the U.K. Bribery Act; potential for privatization and other confiscatory actions;
trade restrictions and disruption; criminal activities; 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 operates six manufacturing facilities in Mexico, which 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 a stipulated time frame. Maquiladora status, which is renewed periodically, is subject to various
restrictions and requirements, including compliance with the terms of the Maquiladora program and other local
regulations, which have become stricter in recent years.
Certain regulations related to the Maquiladora program became effective in January 2015. Failure to comply
with these new regulations could adversely affect the Company’s financial position, results of operations, and cash
flows primarily because the Company would in such event be required to pay value-added tax on material imported
into Mexico and then seek a refund of those amounts months later after the material is exported from Mexico.
The Company is also subject to certain other laws and regulations affecting its international operations, including
laws and regulations such as the North American Free Trade Agreement which, among other things, provide certain
beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification
and other requirements. The evolution of the Company’s products, complexity of its supply chain, and historical reliance
12
on third-party vendors such as customs brokers and freight vendors, which may not have had effective processes and
controls to enable the Company to fully and accurately comply with such requirements, could subject the Company to
liabilities for past, present, or future periods. Such liabilities could adversely affect the Company’s business, financial
condition, results of operations, and cash flows.
In June 2016, the United Kingdom (U.K.) held a referendum in which voters approved an exit from the European
Union commonly referred to as “Brexit.” As a result of the referendum, it is expected that the British government will
begin negotiating the terms of the U.K.’s future relationship with the E.U. Although it is unknown what those terms will
be, it is possible that there will be greater restrictions on imports and exports between the U.K. and E.U. countries and
increased regulatory complexities. These changes could cause disruptions to and create uncertainty surrounding the
Company's business and the business of existing and future customers and suppliers as well as have an impact on
the Company's employees based in Europe, which could adversely affect its business, financial condition, results of
operations, and cash flows. The actual effects of Brexit will depend on any agreements the U.K. makes to retain access
to E.U. markets either during a transitional period or more permanently.
The Company 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 adversely affect the Company’s business, financial condition, results of operations, and cash flows.
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 adversely affect
the Company's financial position, results of operations, and cash flows.
Item 1b.
Unresolved Staff Comments
None.
13
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
as of August 31, 2016:
Nature of Facilities
Manufacturing Facilities
Warehouses
Distribution Centers*
Offices
______________________________________
Owned
Leased
12
—
1
4
8
2
6
17
* The majority of the distribution centers also have certain manufacturing and assembly capabilities.
The following table provides additional geographic information related to the Company’s manufacturing facilities
as of August 31, 2016:
Owned
Leased
Total
United
States
6
3
9
Mexico
Europe
Canada
Total
4
2
6
1
2
3
1
1
2
12
8
20
The Company believes that its properties are well maintained and in good operating condition and that its properties
are suitable and adequate for its present needs. During fiscal 2017, the Company expects to make investments to
expand capacity at certain manufacturing and other non-manufacturing facilities. In addition, initiatives related to
enhancing the global supply chain may result in the future consolidation of certain facilities.
Although a loss at any of the facilities could temporarily impact the Company’s ability to serve the needs of its
customers, a substantial loss at the Company’s largest manufacturing facilities in Mexico could have a material, adverse
effect on the Company’s financial position, results of operations, and cash flows. The Company believes the financial
impact of any loss would be partially mitigated by various insurance programs in place as well as capacity contingencies
developed as part of an enterprise-wide contingency plan.
14
Item 3.
General
Legal Proceedings
The Company 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. The Company 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 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 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, the Company 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. The Company 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 is listed on the New York Stock Exchange under the symbol “AYI”. At
October 26, 2016, there were 2,856 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.
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Price per Share
High
Low
Dividends
per Share
$143.67
$164.13
$183.53
$211.82
$234.43
$241.90
$264.00
$280.89
$117.19
$127.85
$157.05
$174.60
$168.33
$169.42
$209.06
$231.89
$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 6, 2017, 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, 2016, with the cumulative total returns of the Standard & Poor’s (“S&P”) 500
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 500 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 500 Index,
the Dow Jones US Electrical Components & Equipment Index,
and the Dow Jones US Building Materials & Fixtures Index
*Assumes $100 invested on August 31, 2011 in stock or index, including reinvestment of dividends.
Acuity Brands, Inc.
S&P 500
Dow Jones US Electrical Components & Equipment
Dow Jones US Building Materials & Fixtures
Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16
$
$
$
$
100 $
141 $
189 $
275 $
434 $
100 $
118 $
140 $
175 $
176 $
100 $
124 $
155 $
194 $
175 $
100 $
150 $
190 $
238 $
275 $
614
198
200
341
17
Item 6.
Selected Financial Data
The following table sets forth certain selected consolidated financial data of the Company which has been derived
from the Consolidated Financial Statements for each of the five years in the period ended August 31, 2016. 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.
2016(1)
Years Ended August 31,
2014(3)
2013(4)
2015(2)
2012(5)
Net sales
Net income
Basic earnings per share
Diluted earnings per share
Cash and cash equivalents
Total assets(6)
Long-term debt
Total debt
Stockholders’ equity
Cash dividends declared per common share
_______________________________________
(In millions, except per-share data)
$ 3,291.3 $ 2,706.7 $ 2,393.5 $ 2,089.1 $ 1,933.7
290.8
6.67
6.63
413.2
2,948.0
355.0
355.2
1,659.8
0.52
222.1
5.13
5.09
756.8
175.8
4.07
4.05
552.5
127.4
2.97
2.95
359.1
116.3
2.75
2.72
284.5
2,407.0
2,145.4
1,888.5
1,722.2
352.4
352.4
351.9
351.9
1,360.0
1,163.5
0.52
0.52
351.6
351.6
993.5
0.52
351.2
351.2
834.0
0.52
(1) Net Income, Basic Earnings per Share, and Diluted Earnings per Share for fiscal 2016 include a) pre-tax special charges of $15.0 related
to streamlining initiatives, b) pre-tax amortization of acquired intangible assets of $21.4 c) pre-tax share-based compensation expense
of $27.7, d) pre-tax acquisitions-related items of $10.8, and e) pre-tax impairment of intangible asset of $5.1, totaling $1.21 per share.
(2) Net Income, Basic Earnings per Share, and Diluted Earnings per Share for fiscal 2015 include a) pre-tax special charges of $12.4 related
to streamlining initiatives, b) pre-tax amortization of acquired intangible assets of $11.0, c) pre-tax share-based compensation expense
of $18.2, d) non tax-deductible professional fees of $3.2 related to acquisitions, and e) pre-tax net loss on financial instruments of $2.6,
totaling $0.74 per share.
(3) Net Income, Basic Earnings per Share, and Diluted Earnings per Share for fiscal 2014 include a) pre-tax amortization of acquired intangible
assets of $11.2, b) pre-tax share-based compensation expense of $17.7, c) pre-tax recoveries of $5.8 associated with fraud at the
Company's former freight payment and audit service provider, and d) a pre-tax special charge reversal of $0.2 related to initiatives to
simplify and streamline the Company's operations, totaling $0.35 per share.
(4) Net Income, Basic Earnings per Share, and Diluted Earnings per Share for fiscal 2013 include a) pre-tax amortization of acquired intangible
assets of $10.9, b) pre-tax share-based compensation expense of $16.5, c) pre-tax incremental costs of $8.4 incurred due to manufacturing
inefficiencies directly related to the Cochran, GA manufacturing facility closure; d) pre-tax costs of $8.1 as a result of fraud at the Company's
former freight payment and audit service provider; and e) a pre-tax special charge of $8.5 related to initiatives to simplify and streamline
the Company's operations, totaling $0.76 per share.
(5) Net Income, Basic Earnings per Share, and Diluted Earnings per Share for fiscal 2012 include a) pre-tax amortization of acquired intangible
assets of $11.2, b) pre-tax share-based compensation expense of $15.9, c) $13.3 of pre-tax special charges, primarily related to severance
and production transfer costs; d) pre-tax non-cash impairments of $1.2 attributable to the abandonment of inventory that was not transferred
to other facilities; and e) pre-tax incremental costs incurred due to manufacturing inefficiencies directly related to the Cochran facility
closure, which amounted to approximately $3.2, totaling $0.68 per share.
(6) Fiscal 2015, 2014, 2013, and 2012 amounts include the reclassification of deferred income taxes from short-term to long-term related to
the adoption of ASU 2015-17. See the New Accounting Pronouncements footnote for more information.
18
Item 7.
($ 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, 2016 and 2015. 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, employed approximately 11,800 people worldwide as of
August 31, 2016.
The Company designs, produces, and distributes a broad array of lighting and building management 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 and building management solutions
include devices such as luminaires, lighting controls,controllers for various building systems, power supplies, prismatic
skylights, and drivers, as well as integrated systems designed to optimize energy efficiency and comfort for various
indoor and outdoor applications. The Company is one of the world's leading producers and distributors of lighting and
building management solutions, with a broad, highly configurable, diversified product offering. As of August 31, 2016,
the Company operated 20 manufacturing facilities and seven distribution facilities along with two warehouses to serve
its extensive customer base.
The Company does not consider acquisitions a critical element of its strategy, but seeks opportunities to expand
and enhance its portfolio of solutions, including the following transactions:
On June 30, 2016, using cash on hand and common stock, the Company acquired DGLogik, Inc. ("DGLogik"), a
provider of innovative software solutions that enable and visualize the Internet of Things. DGLogik's solutions provide
users with the intelligence to better manage energy usage and improve facility performance. DGLogik is headquartered
in the San Francisco Bay Area, California.
On December 10, 2015, using cash on hand, the Company acquired Juno Lighting LLC ("Juno Lighting"), a leading
provider of downlighting and track lighting fixtures for both residential and commercial applications. Juno Lighting is
headquartered in Des Plaines, Illinois.
On December 9, 2015, using cash on hand, the Company acquired certain assets and assumed certain liabilities
of Geometri, LLC ("Geometri"), a provider of a software and services platform for mapping, navigation, and analytics.
On September 1, 2015, using cash on hand, the Company acquired Distech Controls Inc. ("Distech Controls"),
a provider of building automation solutions that allow for the integration of lighting, HVAC, access control, closed circuit
television, and related systems. Distech Controls is headquartered in Quebec, Canada.
On April 15, 2015, using cash on hand, the Company acquired for cash substantially all of the assets and assumed
certain liabilities of ByteLight, Inc. ("ByteLight"), a provider of indoor location software for light-emitting diode (“LED”)
lighting. ByteLight is headquartered in Boston, Massachusetts.
In addition, during fiscal 2015, the Company made a strategic, non-controlling investment in a company specializing
in light sensory networks.
Strategy
The Company's strategy is to extend its leadership position in the North American market and certain markets
internationally by delivering superior lighting and building management solutions. The Company’s lighting and building
management solutions vary from individual devices to intelligent network systems. Individual devices include luminaires,
lighting controls, lighting components, controllers for various building systems (including HVAC, lighting, shades and
access control), power supplies, and prismatic skylights. Among other benefits, intelligent network systems can optimize
energy efficiency and comfort as well as enhance the occupant experience for various indoor and outdoor applications,
all the while reducing operating costs. Additionally, the Company continues to expand its solutions portfolio, including
19
software and services, to provide a host of other economic benefits resulting from data analytics that enables the
“Internet of Things” (IoT) and supports the advancement of smart buildings, smart cities, and the smart grid. As a
results-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 and building management solutions for its customers, driving world-class cost efficiency, and leveraging a
culture of continuous improvement.
Throughout fiscal 2016, the Company believes it made significant progress towards achieving its strategic
objectives, including expanding its access to the market, expanding its addressable market, introducing new lighting
and building management 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 profit margin in the mid-teens or higher;
•
•
•
Diluted 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.
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 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
various levels of year over year improvement, 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 2017, the
Company currently expects to invest approximately 2.5% of net sales 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, 2016 was $413.2, a decrease of $343.6 from August 31, 2015. During
the year ended August 31, 2016, the Company generated net cash from operating activities of $345.7 with additional
20
cash received of $14.2 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 acquisitions of $623.2
and capital expenditures of $83.7 as well as pay dividends to stockholders of $22.9. Foreign currency related items
had an unfavorable effect on cash flows of $4.0 during the current year.
During fiscal 2016, net cash generated from operating activities increased $56.8 to $345.7 compared with $288.9
generated in the prior-year period due primarily to higher net income partially offset by higher operating working capital
requirements. 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
$53.3 during fiscal 2016 compared to an increase of $38.1 during fiscal 2015. Operating working capital requirements
increased primarily due to greater production and purchases necessary to support the higher level of net sales.
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 $83.7 and $56.5 in
fiscal 2016 and 2015, respectively, primarily for new tooling, machinery, equipment, facility enhancements, and
information technology.
Contractual Obligations
The following table summarizes the Company’s contractual obligations at August 31, 2016:
Debt(1)
Interest Obligations(2)
Operating Leases(3)
Purchase Obligations(4)
Other Long-term Liabilities(5)
Total
___________________________
Payments Due by Period(6)
Total
Less than
One Year
1 to
3 Years
4 to 5
Years
After 5
Years
$
356.5 $
163.8
60.2
198.6
42.9
0.2 $
0.6 $
354.6 $
31.9
15.1
193.8
4.3
65.3
21.7
4.8
6.6
31.4
13.2
—
3.6
$
822.0 $
245.3 $
99.0 $
402.8 $
1.1
35.2
10.2
—
28.4
74.9
(1)
(2)
These amounts (which represent the amounts outstanding at August 31, 2016) 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, 2016
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.
(3)
(4) Purchase obligations include commitments to purchase goods or services that are enforceable and legally binding and that specify all
(5)
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 $5.2 of unrecognized
tax benefits as the period of cash settlement with the respective taxing authorities cannot be reasonably estimated.
(6) Deferred income tax liabilities as of August 31, 2016 were approximately $187.8. Refer to the Income Taxes footnote for more information.
This amount is not included in the total contractual obligations table because the Company believes this presentation would not be
meaningful. Deferred income tax liabilities are calculated based on temporary differences between the tax bases of assets and liabilities
and their respective book bases, which will result in taxable amounts in future years when the liabilities are settled at their reported financial
statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any
future periods. As a result, scheduling deferred income tax liabilities as payments due by period could be misleading, because this
scheduling would not relate to liquidity needs.
Capitalization
The current capital structure of the Company is comprised principally of senior unsecured notes and equity of its
stockholders. Total debt outstanding, consisting primarily of fixed-rate obligations net of discount and deferred costs,
was $355.2 at August 31, 2016 compared with $352.4 at August 31, 2015. During fiscal 2016, the Company borrowed
$2.5 under recently-executed fixed rate long-term bank loans.
21
On December 8, 2009, ABL issued the Notes in a private placement transaction with an aggregate principal
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 the 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, 2016. As of August 31, 2016, the Company had outstanding letters of credit totaling
$11.0, primarily for securing collateral requirements under the casualty insurance programs for the Company and
providing credit support for the Company's industrial revenue bond. At August 31, 2016, the Company had additional
borrowing capacity under the Revolving Credit Facility of $243.9 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 $6.1 issued
under the Revolving Credit Facility. See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial
Statements.
During fiscal 2016, the Company’s consolidated stockholders’ equity increased $299.8 to $1,659.8 at August 31,
2016 from $1,360.0 at August 31, 2015. The increase was due primarily to net income earned in the period, as well
as amortization of stock-based compensation, and stock issuances resulting primarily from the exercise of stock options,
partially offset by payment of dividends, pension plan adjustments, and foreign currency translation 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 17.6% and 20.6% at August 31, 2016 and 2015, respectively. The ratio of debt, net of cash,
to total capitalization, net of cash, was (3.6)% at August 31, 2016 and (42.3)% at August 31, 2015 as cash on hand
continued to exceed debt.
Dividends
Acuity Brands paid dividends on its common stock of $22.9 ($0.52 per share) in fiscal 2016 and $22.7 ($0.52 per
share) in fiscal 2015. 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.
22
Results of Operations
Fiscal 2016 Compared with Fiscal 2015
The following table sets forth information comparing the components of net income for the year ended August 31,
2016 with the year ended August 31, 2015:
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
Years Ended August 31,
Increase
2016
$ 3,291.3
2015
$ 2,706.7
(Decrease)
584.6
$
1,855.1
1,436.2
1,561.1
1,145.6
294.0
290.6
43.6%
42.3%
130 bps
946.0
15.0
475.2
756.9
12.4
376.3
189.1
2.6
98.9
14.4%
13.9%
50 bps
32.2
(1.6)
30.6
31.5
1.2
32.7
0.7
(2.8)
(2.1)
Income before Provision for Income Taxes
444.6
343.6
101.0
Percent of net sales
Provision for Income Taxes
Effective tax rate
Net Income
Diluted Earnings per Share
13.5%
12.7%
80 bps
153.8
121.5
34.6%
35.4%
$
$
290.8
6.63
$
$
222.1
5.09
$
$
32.3
68.7
1.54
Percent
Change
21.6 %
18.8 %
25.4 %
25.0 %
21.0 %
26.3 %
2.2 %
233.3 %
(6.4)%
29.4 %
26.6 %
30.9 %
30.3 %
Net sales increased $584.6, or 21.6%, to $3,291.3 for the year ended August 31, 2016 compared with $2,706.7
reported for the year ended August 31, 2015. For the year ended August 31, 2016, the Company reported net income
of $290.8 compared with $222.1 for the year ended August 31, 2015, an increase of $68.7, or 30.9%. For fiscal 2016,
diluted earnings per share increased 30.3% to $6.63 from $5.09 for the prior-year period.
The following table reconciles certain financial measures prepared in accordance with U.S. generally accepted
accounting principles ("U.S. GAAP") to the corresponding non-U.S. GAAP measures referred to in the discussion of
the Company’s results of operations, which exclude the impact of acquisition-related items, amortization of acquired
intangible assets, share-based compensation expense, impairment of intangible asset, special charges associated
primarily with continued efforts to streamline the organization, and net losses associated with financial instruments.
Although special charges, amortization of acquired intangible assets, and share-based compensation expense have
been recognized in prior periods and could recur in future periods, management typically excludes the impact of these
charges during internal reviews of performance and uses these non-U.S. GAAP measures for baseline comparative
operational analysis, decision making, and other activities. Primarily due to the impact of the four acquisitions completed
during fiscal 2016, the Company experienced noticeable increases in amortization of acquired intangibles, share-based
payments used to improve retention and align the interest of key leaders of acquired businesses, and special charges
due to activities to streamline and integrate those acquisitions. These non-U.S. GAAP financial measures, including
adjusted gross profit and margin, adjusted selling, distribution, and administrative expenses, adjusted operating profit
and margin, adjusted other income/expense, 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. 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.
23
Gross Profit
Add-back: Acquisition-related items (1)
Adjusted Gross Profit
Percent of net sales
Years Ended August 31,
2016
$1,436.2
2015
$1,145.6
2.8
—
Increase
(Decrease)
Percent
Change
$1,439.0
$1,145.6
$ 293.4
25.6%
43.7%
42.3%
140 bps
Selling, Distribution, and Administrative Expenses
$ 946.0
$ 756.9
Less: Amortization of acquired intangible assets
Less: Share-based compensation expense
Less: Acquisition-related items (1)
Less: Impairment of intangible asset
(21.4)
(27.7)
(8.0)
(5.1)
(11.0)
(18.2)
(3.2)
—
Adjusted Selling, Distribution, and Administrative Expenses
$ 883.8
$ 724.5
$ 159.3
22.0%
Percent of net sales
26.9%
26.8%
10 bps
Operating Profit
Add-back: Amortization of acquired intangible assets
Add-back: Share-based compensation expense
Add-back: Acquisition-related items (1)
Add-back: Impairment of intangible asset
Add-back: Special charge
Adjusted Operating Profit
Percent of net sales
Other Expense (Income)
Add-back: Net loss on financial instruments
Adjusted Other Expense (Income)
$ 475.2
$ 376.3
21.4
27.7
10.8
5.1
15.0
11.0
18.2
3.2
—
12.4
$ 555.2
$ 421.1
$ 134.1
31.8%
16.9%
15.6%
130 bps
$
$
30.6
—
30.6
$
$
32.7
(2.6)
30.1
$
0.5
1.7%
Net Income
$ 290.8
$ 222.1
Add-back: Amortization of acquired intangible assets
Add-back: Share-based compensation expense
Add-back: Acquisition-related items (1)
Add-back: Impairment of intangible asset
Add-back: Special charge
Add-back: Net loss on financial instruments
Total pre-tax adjustments to Net Income
Income tax effect
Adjusted Net Income
21.4
27.7
10.8
5.1
15.0
—
11.0
18.2
3.2
—
12.4
2.6
$
80.0
$
47.4
(27.1)
(15.4)
$ 343.7
$ 254.1
$
89.6
35.3%
Diluted Earnings per Share
$
6.63
$
5.09
Adjusted Diluted Earnings per Share
______________________________
(1) Acquisition-related items include acquired profit in inventory, professional fees, and certain contract termination costs.
2.01
7.84
5.83
$
$
$
34.5%
24
Net Sales
Net sales for the year ended August 31, 2016 increased by 21.6% compared with the prior-year period due primarily
to an increase in sales volumes of approximately 15% and the favorable impact of acquired revenues from acquisitions
of 9%, partially offset by the impact of an unfavorable change in product prices and the mix of products sold ("price/
mix") of approximately 2% and unfavorable foreign currency rate changes of less than 1%. Sales volume was higher
across most product categories and key sales channels. Sales of LED-based luminaires during the year ended
August 31, 2016 increased almost 50% compared to the year-ago period and represented approximately 60% of total
net sales. The change in price/mix was due primarily to unfavorable pricing on LED luminaires, reflecting the decline
in certain LED component costs, as well as a change in sales channel mix. Due to the changing dynamics of the
Company's product portfolio, including the increase of integrated lighting and building management solutions as well
as the proliferation of new products due to the adoption of solid-state lighting, it is not possible to precisely quantify or
differentiate the individual components of volume, price and mix.
Gross Profit
Gross profit for fiscal 2016 increased $290.6, or 25.4%, to $1,436.2 compared with $1,145.6 for the prior year.
The increase in gross profit was due primarily to additional contribution on higher net sales, lower material and
component costs, and improved productivity. These items were partially offset by unfavorable price/mix, acquisition-
related items, and specifically in the fourth quarter, certain disruptions in the supply chain. As a result of these factors,
gross profit margin increased 130 basis points to 43.6% for the year ended August 31, 2016 compared with 42.3% for
the year ended August 31, 2015.
Adjusted gross profit for fiscal 2016 increased $293.4, or 25.6%, to $1,439.0 compared with $1,145.6 for the prior
year. Adjusted gross profit margin increased 140 basis points to 43.7% compared to 42.3% in the prior year.
Operating Profit
Selling, Distribution, and Administrative (“SD&A”) expenses for the year ended August 31, 2016 increased $189.1,
or 25.0%, to $946.0 compared with $756.9 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,
higher amortization of acquired intangible assets related to recent acquisitions, certain other acquisition-related items,
and the impairment of an intangible asset. The increase in employee costs reflects the Company's investments in
capabilities related to areas of future growth as well as enhanced customer service. The increase in employee costs
also includes increased variable compensation expense as well as share-based compensation expense due primarily
to restricted stock issued as part of certain recent acquisitions. These items were partially offset by savings from recent
streamlining efforts. Compared with the prior-year period, SD&A expenses as a percent of sales increased 70 basis
points to 28.7% for fiscal 2016 from 28.0% in fiscal 2015. Adjusted SD&A expenses were $883.8, or 26.9% of net
sales, in fiscal 2016 compared to $724.5, or 26.8% of net sales, in the year-ago period.
The Company recognized pre-tax special charges of $15.0 during fiscal 2016 compared with pre-tax special
charges of $12.4 during fiscal 2015. These charges related primarily to the Company's continued efforts to integrate
recent acquisitions, streamline the organization by realigning certain responsibilities primarily within various selling,
distribution, and administrative departments, and the consolidation of certain production activities. 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 2016 was $475.2 compared with $376.3 reported for the prior-year period, an increase
of $98.9, or 26.3%. Operating profit margin increased 50 basis points to 14.4% for fiscal 2016 compared with 13.9%
for fiscal 2015 due primarily to higher gross profit, partially offset by higher costs to support greater sales volume,
special charges, employee-related costs, including variable incentive compensation, acquisition-related items, and the
impairment of an intangible asset.
Adjusted operating profit increased $134.1, or 31.8%, to $555.2 compared with $421.1 for fiscal 2015. Adjusted
operating profit margin increased 130 basis points to 16.9% compared with adjusted operating profit margin of 15.6%
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) which includes gains and losses related to foreign exchange rate changes. Interest expense, net,
was $32.2 and $31.5 for the years ended August 31, 2016 and 2015, respectively. The Company reported net
miscellaneous income of $1.6 in fiscal 2016 compared with net miscellaneous expense of $1.2 in fiscal 2015.
25
Provision for Income Taxes and Net Income
The effective income tax rate was 34.6% and 35.4% for the years ended August 31, 2016 and 2015, respectively.
The Company estimates that its effective tax rate for fiscal 2017 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 2016 increased $68.7, or 30.9%, to $290.8 from $222.1 reported for the prior year. The
increase in net income resulted primarily from higher operating profit partially offset by higher tax expense.
Adjusted net income for fiscal 2016 increased 35.3% to $343.7 compared with $254.1 in the year-ago period.
Adjusted diluted earnings per share for fiscal 2016 was $7.84 compared with $5.83 for the prior-year period, which
represented an increase of $2.01, or 34.5%.
Fiscal 2015 Compared with Fiscal 2014
The following table sets forth information comparing the components of net income for the year ended August 31,
2015 with the year ended August 31, 2014:
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
NM - not meaningful
Years Ended August 31,
Increase
2015
$ 2,706.7
2014
$ 2,393.5
(Decrease)
313.2
$
1,561.1
1,145.6
1,414.3
979.2
42.3%
40.9%
756.9
12.4
376.3
680.3
(0.2)
299.1
146.8
166.4
140 bps
76.6
12.6
77.2
13.9%
12.5%
140 bps
31.5
1.2
32.7
343.6
12.7%
121.5
35.4%
32.1
1.3
33.4
265.7
11.1%
89.9
33.8%
(0.6)
(0.1)
(0.7)
77.9
160 bps
31.6
$
$
222.1
5.09
$
$
175.8
4.05
$
$
46.3
1.04
Percent
Change
13.1 %
10.4 %
17.0 %
11.3 %
NM
25.8 %
(1.9)%
(7.7)%
(2.1)%
29.3 %
35.2 %
26.3 %
25.7 %
Net sales increased $313.2, or 13.1%, to $2,706.7 for the year ended August 31, 2015 compared with $2,393.5
reported for the year ended August 31, 2014. For the year ended August 31, 2015, the Company reported net income
of $222.1 compared with $175.8 for the year ended August 31, 2014, an increase of $46.3, or 26.3%. For fiscal 2015,
diluted earnings per share increased 25.7% to $5.09 from $4.05 for the prior-year period.
The following table reconciles certain U.S. GAAP financial measures to the corresponding non-U.S. GAAP
measures referred to in the discussion of the Company’s results of operations, which exclude amortization of acquired
intangibles, share-based compensation expense, acquisition-related items, incremental recoveries related to a fraud
at a freight service provider, special charges associated primarily with continued efforts to streamline the organization,
and net losses associated with financial instruments.
26
Selling, Distribution, and Administrative Expenses
Less: Amortization of acquired intangible assets
Less: Share-based compensation expense
Add-back: Freight service provider fraud-related recoveries
Less: Acquisition-related items (1)
Increase
(Decrease)
Percent
Change
Years Ended August 31,
2015
$ 756.9
2014
$ 680.3
(11.0)
(18.2)
—
(3.2)
(11.2)
(17.7)
5.8
—
Adjusted Selling, Distribution, and Administrative Expenses
$ 724.5
$ 657.2
$
67.3
10.2 %
Percent of net sales
26.8%
27.5%
(70) bps
Operating Profit
Add-back: Amortization of acquired intangible assets
Add-back: Share-based compensation expense
Less: Freight service provider fraud-related recoveries
Add-back: Acquisition-related items (1)
Add-back/(Less): Special charge
Adjusted Operating Profit
Percent of net sales
Other Expense (Income)
Add-back: Net loss on financial instruments
Adjusted Other Expense (Income)
$ 376.3
$ 299.1
11.0
18.2
—
3.2
12.4
11.2
17.7
(5.8)
—
(0.2)
$ 421.1
$ 322.0
$
99.1
30.8 %
15.6%
13.5%
210 bps
$
$
32.7
(2.6)
30.1
$
$
33.4
—
33.4
$
(3.3)
(9.9)%
Net Income
$ 222.1
$ 175.8
Add-back: Amortization of acquired intangible assets
Add-back: Share-based compensation expense
Add-back: Acquisition-related items (1)
Less: Freight service provider fraud-related recoveries
Add-back/(Less): Special charge
Add-back: Net loss on financial instruments
Total pre-tax adjustments to Net Income
Income tax effect
Adjusted Net Income
11.0
18.2
3.2
—
12.4
2.6
11.2
17.7
—
(5.8)
(0.2)
—
$
47.4
$
22.9
(15.4)
(7.9)
$ 254.1
$ 190.8
$
63.3
33.2 %
Diluted Earnings per Share
Adjusted Diluted Earnings per Share
$
$
5.09
5.83
$
$
4.05
4.40
$
1.43
32.5 %
Net Sales
Net sales for the year ended August 31, 2015 increased by 13.1% compared with the prior-year period due
primarily to an increase in sales volumes of approximately 15%, partially offset by the impact of an unfavorable change
in product prices and the mix of products sold ("price/mix") of approximately 1% and unfavorable foreign currency rate
changes of 1%. Sales volume was higher across most product categories and key sales channels as the Company
realized greater demand for LED-based luminaires. Sales of LED-based luminaires during the year ended August 31,
2015 increased 57% compared to the year-ago period and represented 46% of total net sales. The change in price/
mix was due primarily to unfavorable pricing on LED luminaires, reflecting the decline in certain LED component costs,
as well as a change in sales channel mix. Due to the changing dynamics of the Company's product portfolio, including
the increase of integrated lighting and building management 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 or differentiate the individual
components of price/mix.
27
Gross Profit
Gross profit for fiscal 2015 increased $166.4, or 17.0%, to $1,145.6 compared with $979.2 for the prior year. The
increase in gross profit margin was due primarily to additional contribution on higher net sales, lower material and
component costs, and improved manufacturing productivity. These items were partially offset by unfavorable price/
mix and the unfavorable impact of foreign currency rate changes. As a result of these factors, gross profit margin
increased 140 basis points to 42.3% for the year ended August 31, 2015 compared with 40.9% for the year ended
August 31, 2014.
Operating Profit
Selling, Distribution, and Administrative (“SD&A”) expenses for the year ended August 31, 2015 increased $76.6,
or 11.3%, to $756.9 compared with $680.3 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, and higher employee-related
costs, including variable incentive compensation costs, partially offset by savings from recent streamlining efforts.
Compared with the prior-year period, SD&A expenses as a percent of sales declined 40 basis points to 28.0% for fiscal
2015 from 28.4% in fiscal 2014. Adjusted SD&A expenses were $724.5, or 26.8% of net sales, in fiscal 2015 compared
to $657.2, or 27.5% of net sales, in the year-ago period.
During the year ended August 31, 2015, the Company recognized pre-tax special charges of $12.4 related primarily
to the Company's continued efforts to streamline the organization by realigning certain responsibilities primarily within
various selling, distribution, and administrative departments and the consolidation of certain production activities. During
fiscal 2014, the Company recorded a reversal of pre-tax special charges of $0.2 due primarily to lower-than-anticipated
costs related to previously-initiated streamlining efforts of $0.6 partially offset by production transfer costs of $0.4.
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 2015 was $376.3 compared with $299.1 reported for the prior-year period, an increase
of $77.2, or 25.8%. Operating profit margin increased 140 basis points to 13.9% for fiscal 2015 compared with 12.5%
for fiscal 2014 due primarily to higher gross profit, partially offset by higher costs to support greater sales volume,
special charges, and employee-related costs, including variable incentive compensation.
Adjusted operating profit increased $99.1, or 30.8%, to $421.1 compared with $322.0 for fiscal 2014. Adjusted
operating profit margin increased 210 basis points to 15.6% compared with adjusted operating profit margin of 13.5%
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) which includes gains and losses related to foreign exchange rate changes. Interest expense, net,
was $31.5 and $32.1 for the years ended August 31, 2015 and 2014, respectively. The Company reported net
miscellaneous expense of $1.2 in fiscal 2015 compared with $1.3 in fiscal 2014.
Provision for Income Taxes and Net Income
The effective income tax rate was 35.4% and 33.8% for the years ended August 31, 2015 and 2014, respectively.
The fiscal 2014 effective tax rate benefited from a reduction in certain income tax reserves which did not recur in fiscal
2015.
Net income for fiscal 2015 increased $46.3, or 26.3%, to $222.1 from $175.8 reported for fiscal 2014. The increase
in net income resulted primarily from higher operating profit partially offset by higher tax expense.
Adjusted net income for fiscal 2015 increased 33.2% to $254.1 compared with $190.8 in fiscal 2014. Adjusted
diluted earnings per share for fiscal 2015 were $5.83 compared with $4.40 for fiscal 2014, which represented an
increase of $1.43, or 32.5%.
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 and building management solutions portfolio combined with its extensive market
presence and financial strength. Management will continue to drive the creation of a world-class, cost-efficient supply
chain and service capability, while also reducing and/or eliminating resources allocated to specific areas of slower and/
28
or declining growth. Management continues to position the Company to optimize short-term performance while investing
in and deploying resources for long-term profitable growth opportunities.
During fiscal 2016, the Company recorded a pre-tax special charge of $15.0 for actions initiated to streamline the
organization, including the integration of recent acquisitions. These streamlining activities include the consolidation of
selected production activities and realignment certain responsibilities, primarily within various selling, distribution, and
administrative departments. Management expects to realize annual savings equal to at least twice the amount of the
charge and to achieve the full annualized run-rate by the end of the second quarter of fiscal 2017. Management expects
to incur additional costs associated with these and potential future integration and streamlining activities in fiscal 2017.
Overall, the economy in North America and certain markets the Company serves in Europe continue to move
along at a measured, but sometimes inconsistent pace. The 2016 U.S. presidential election and other events, such
as the United Kingdom’s referendum vote to exit the European Union, continue to create uncertainty and volatility. This
uncertainty and volatility has the potential to affect consumer and business sentiment which in turn could negatively
impact global economic activity. This notwithstanding, management remains bullish regarding the Company’s prospects
for continued future profitable growth. Management expects the growth rate for lighting and building management
solutions in the North American market, which includes renovation and retrofit activity and comprises approximately
96% percent of the Company’s revenues, will be in the mid-to-upper single digit range for fiscal 2017 based on third-
party forecasts and other key leading indicators. The Company’s order rates through the month of September seem
to reflect this favorable trend. In addition to the projected growth in the Company’s primary end-markets, management
believes that the Company should benefit from recent acquisitions, further growth from the introduction of new lighting
and building automation solutions, and expansion in underpenetrated geographies and channels.
From a longer term perspective, management expects that the Company’s addressable markets will experience
solid growth over the next decade, particularly as energy and environmental concerns come to the forefront along with
emerging opportunities for digital lighting to play a key role in the "Internet of Things" (IoT) through the use of intelligent
networked lighting and building automation systems that can collect and exchange data to increase efficiency as well
as provide a host of other economic benefits resulting from data analytics. Management remains positive about the
future prospects of the Company and its ability to outperform the markets it serves.
Accounting Standards Adopted in Fiscal 2016 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.
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 the Company.
29
The management 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 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 $947.8 as of August 31, 2016. The
Company utilized a qualitative assessment to determine the likelihood of impairment of goodwill as of June 1, 2016.
To do this, the Company identified and analyzed macroeconomic, industry, and company-specific factors. Additionally,
factors that most affect the fair value of the Company were compared to those used in the previous quantitative
impairment test to identify potentially significant variances to further support the reasonableness of the assumptions.
Taking into consideration these factors, the Company estimated the potential change in the fair value of goodwill
compared with the previous quantitative impairment test. As a result of this analysis, management believes the estimated
30
fair value of the reporting unit continues to exceed its carrying value by a substantial margin and does not represent
a more likely than not possibility of potential impairment. The goodwill analysis did not result in an impairment charge.
Indefinite-Lived Intangible Assets
The Company’s indefinite-lived intangible assets consist of seven trade names with an aggregate carrying value
of approximately $135.0. 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 9% and 16% as of June 1, 2016, 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 2016, the Company performed an evaluation of the fair values of its indefinite-lived trade names.
The Company’s expected revenues are based on the Company’s fiscal 2017 expectations and recent lighting market
growth estimates for fiscal 2017 through 2021. The Company also included revenue growth estimates based on current
initiatives expected to help the Company improve performance. During fiscal 2016, estimated theoretical royalty rates
ranged between 1% and 4%. During fiscal 2016, management began to rationalize the Company's portfolio of brands,
resulting in the initiation of the phase out of one of the trade names. The Company recognized an impairment charge
of $5.1 related to this trade name and concluded the trade name is definite-lived. The indefinite-lived intangible asset
analysis did not result in any other impairment charges, as the fair values exceeded the carrying values for each of
the other trade names. 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.
Definite-Lived Intangible Assets
The Company evaluates the remaining useful lives of its definite-lived intangible assets on an annual basis in
the fiscal fourth quarter or on an interim basis, if an event occurs or circumstances change that would warrant a revision
to the remaining period of amortization. The Company considers each reporting period whether an event occurred or
circumstances changed that would more likely than not indicate that the fair value of the definite-lived asset is below
its carrying value. The Company noted no such events or changes during fiscal 2016 or 2015.
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
31
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 up to certain limits. 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 provisions of
ASC Topic 718, Compensation — Stock Compensation (“ASC 718”).
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.
32
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.
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 2017 annual tax rate; (g) the
Company’s future amortization expense; (h) the Company's ability to integrate acquisitions and achieve accretive
results, and (i) 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.
33
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 the Company.
Interest Rates. Interest rate fluctuations expose the variable-rate debt of the Company to changes in interest
expense and cash flows. At August 31, 2016, 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, 2016, 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, 2016 would have decreased the estimated fair
value of these debt obligations by approximately $2.9. 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 produced or sourced
from the United States, and, to a lesser extent, in Europe. Based on fiscal 2016 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 $12, 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 $15. 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% decrease
in the value of the Mexican peso in relation to the U.S. dollar would favorably impact operating profit by approximately
$9, while a hypothetical increase of 10% in the value of the Mexican peso in relation to the U.S. dollar would negatively
impact operating profits by approximately $12. 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 2016, the Company purchased approximately
100,000 tons of steel and aluminum. The Company estimates that approximately 8% of raw materials purchased are
petroleum-based and that approximately five million gallons of diesel fuel were consumed in fiscal 2016. 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.
34
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, 2016 and 2015
Consolidated Statements of Comprehensive Income for the years ended August 31, 2016, 2015, and 2014
Consolidated Statements of Cash Flows for the years ended August 31, 2016, 2015, and 2014
Consolidated Statements of Stockholders’ Equity for the years ended August 31, 2016, 2015, and 2014
Notes to Consolidated Financial Statements
Schedule II — Valuation and Qualifying Accounts
Page
36
37
39
40
41
42
43
92
35
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, 2016. 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 (2013 Framework). Based on this assessment, management believes that, as of August 31, 2016, the
Company’s internal control over financial reporting is effective.
Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did
not include the internal controls of the acquired operations of Juno Lighting LLC and Distech Controls Inc. (collectively,
the “2016 Acquisitions”), which are included in the Company’s consolidated financial statements as of August 31, 2016
and for the period from the respective acquisition dates through August 31, 2016. As of August 31, 2016, the 2016
Acquisitions constituted less than 15% and 28% of the Company’s tangible assets and net tangible assets, respectively.
For the year ended August 31, 2016, the 2016 Acquisitions constituted less than 10% of both the Company's net sales
and pre-tax income.
The Company’s independent registered public accounting firm has issued an audit report on their audit of the
Company’s internal control over financial reporting. This report dated October 27, 2016 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
36
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, 2016
and 2015, 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, 2016. 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, 2016 and 2015, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended August 31, 2016, 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, 2016, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 Framework) and our report dated October 27, 2016 expressed an unqualified opinion
thereon.
/s/ Ernst & Young LLP
Atlanta, Georgia
October 27, 2016
37
Report of Independent Registered Public Accounting Firm
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, 2016, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 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.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not
include the internal controls of the acquired operations of Juno Lighting LLC (“Juno Lighting”) and Distech Controls
Inc. (“Distech Controls”) (collectively, the “2016 Acquisitions”), which are included in the company’s 2016 consolidated
financial statements of Acuity Brands, Inc. As of August 31, 2016, the 2016 Acquisitions constituted less than 15% and
28% of the company’s tangible assets and net tangible assets, respectively. For the year ended August 31, 2016, the
2016 Acquisitions constituted less than 10% of both the company's net sales and pre-tax income.
Our audit of internal control over financial reporting of Acuity Brands, Inc. also did not include an evaluation of
the internal control over financial reporting of Juno Lighting and Distech Controls.
In our opinion, Acuity Brands, Inc. maintained, in all material respects, effective internal control over financial
reporting as of August 31, 2016, 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, 2016 and 2015, 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, 2016 of Acuity Brands, Inc. and our report dated October 27, 2016 expressed an
unqualified opinion thereon.
Atlanta, Georgia
October 27, 2016
38
/s/ Ernst & Young LLP
ACUITY BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
Current Assets:
Cash and cash equivalents
Accounts receivable, less reserve for doubtful accounts of $1.7 and $1.3 as of August 31, 2016 and 2015, respectively
Inventories
Prepayments and other current assets
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
Current maturities of long-term debt
Accrued compensation
Accrued pension liabilities, current
Other accrued liabilities
Total Current Liabilities
Long-Term Debt
Accrued Pension Liabilities, less current portion
Deferred Income Taxes
Self-Insurance Reserves, less current portion
Other Long-Term Liabilities
Total Liabilities
LIABILITIES AND STOCKHOLDERS’ EQUITY
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; 53,415,687 issued and 43,736,230 outstanding at August
31, 2016; 53,024,284 issued and 43,305,029 outstanding at August 31, 2015
Paid-in capital
Retained earnings
Accumulated other comprehensive loss items
Treasury stock, at cost, 9,679,457 shares at August 31, 2016 and 9,719,255 shares at August 31, 2015
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
August 31,
2016
2015
(In millions, except share
data)
$
$
413.2
572.8
295.2
41.7
1,322.9
756.8
411.7
224.8
20.1
1,413.4
23.1
174.4
448.2
645.7
377.9
267.8
947.8
381.4
5.1
23.0
1,357.3
$ 2,948.0
$
401.0
0.2
93.9
1.3
176.1
672.5
355.0
119.9
74.6
7.2
59.0
1,288.2
$
$
6.7
128.4
391.9
527.0
352.4
174.6
565.0
223.4
3.5
27.1
819.0
2,407.0
311.1
—
78.2
1.6
130.0
520.9
352.4
83.9
31.7
6.9
51.2
1,047.0
—
—
0.5
856.4
1,360.9
(139.4)
(418.6)
1,659.8
$ 2,948.0
$
0.5
797.1
1,093.0
(110.4)
(420.2)
1,360.0
2,407.0
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
39
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended August 31,
2016
2015
2014
Net Sales
Cost of Products Sold
Gross Profit
Selling, Distribution, and Administrative Expenses
Special Charge
Operating Profit
Other Expense (Income):
Interest expense, net
Miscellaneous (income) expense, 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 (Loss) Items:
Foreign currency translation adjustments
Defined benefit plans, net
Other Comprehensive Loss Items, net of tax
Comprehensive Income
(In millions, except per-share data)
3,291.3 $
2,706.7 $
2,393.5
1,855.1
1,436.2
946.0
15.0
475.2
32.2
(1.6)
30.6
444.6
153.8
1,561.1
1,145.6
756.9
12.4
376.3
31.5
1.2
32.7
343.6
121.5
290.8 $
222.1 $
6.67 $
5.13 $
43.5
43.1
6.63 $
5.09 $
43.8
43.4
1,414.3
979.2
680.3
(0.2)
299.1
32.1
1.3
33.4
265.7
89.9
175.8
4.07
42.8
4.05
43.0
0.52 $
0.52 $
0.52
290.8 $
222.1 $
175.8
$
$
$
$
$
$
(5.6)
(23.4)
(29.0)
(24.0)
(14.5)
(38.5)
0.7
(10.0)
(9.3)
$
261.8 $
183.6 $
166.5
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
40
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:
Depreciation and amortization
Share-based compensation expense
Excess tax benefits from share-based payments
(Gain) loss on the sale or disposal of property, plant, and equipment
Asset impairments
Deferred income taxes
Loss on financial instruments, net
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
Other investing activities
Net Cash Used for Investing Activities
Cash Provided by (Used for) Financing Activities:
Issuance of long-term debt
Proceeds from stock option exercises and other
Excess tax benefits from share-based payments
Dividends paid
Other financing activities
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 Year
Cash and Cash Equivalents at End of Year
Supplemental Cash Flow Information:
Income taxes paid during the period
Interest paid during the period
Years Ended August 31,
2016
2015
2014
(In millions)
$
290.8
$
222.1
$
175.8
62.6
27.7
(25.6)
(0.9)
5.1
(8.2)
—
(94.6)
(24.0)
(10.5)
65.3
60.6
(2.6)
345.7
(83.7)
2.2
(623.2)
—
(704.7)
2.5
14.2
25.6
(22.9)
—
19.4
(4.0)
(343.6)
756.8
413.2
120.7
32.8
$
$
$
45.8
18.2
(17.6)
0.7
—
2.8
2.6
(46.1)
(15.1)
0.7
23.1
59.3
(7.6)
288.9
(56.5)
1.3
(14.6)
(2.6)
(72.4)
—
11.6
17.6
(22.7)
(10.4)
(3.9)
(8.3)
204.3
552.5
756.8
106.3
32.2
$
$
$
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
$
$
$
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
41
ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
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
Excess tax benefits from share-based payments
Balance, August 31, 2014
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
Excess tax benefits from share-based payments
Balance, August 31, 2015
Net income
Other comprehensive loss
Common Stock issued from Treasury Stock for acquisition of business
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
Excess tax benefits from share-based payments
Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss Items
Treasury
Stock
Total
$
0.5
$
735.5
$
740.3
$
(62.6) $
(420.2) $
993.5
(In millions)
—
—
—
—
—
—
—
0.5
—
—
—
—
—
—
—
0.5
—
—
—
—
—
—
—
—
—
7.2
0.4
—
8.0
10.4
761.5
—
—
6.4
0.5
—
11.1
17.6
797.1
—
—
8.4
11.1
0.7
—
13.5
25.6
175.8
—
—
—
(22.5)
—
—
893.6
222.1
—
—
—
(22.7)
—
—
1,093.0
290.8
—
—
—
(22.9)
—
—
—
(9.3)
—
—
—
—
—
—
—
—
—
—
—
—
175.8
(9.3)
7.2
0.4
(22.5)
8.0
10.4
(71.9)
(420.2)
1,163.5
—
(38.5)
—
—
—
—
—
—
—
—
—
—
—
—
222.1
(38.5)
6.4
0.5
(22.7)
11.1
17.6
(110.4)
(420.2)
1,360.0
—
(29.0)
—
—
—
—
—
—
—
1.6
—
—
—
—
—
290.8
(29.0)
10.0
11.1
0.7
(22.9)
13.5
25.6
Balance, August 31, 2016
$
0.5
$
856.4
$
1,360.9
$
(139.4) $
(418.6) $ 1,659.8
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
42
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 and building management 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 and building management solutions
include devices such as luminaires, lighting controls,controllers for various building systems, power supplies, prismatic
skylights, and drivers, as well as integrated systems designed to optimize energy efficiency and comfort for various
indoor and outdoor applications. The Company has one reportable segment serving the North American lighting market
and select international markets.
The Company does not consider acquisitions a critical element of its strategy, but seeks opportunities to expand
and enhance its portfolio of solutions, including the following transactions:
On June 30, 2016, using cash on hand and treasury stock, the Company acquired DGLogik, Inc. ("DGLogik"), a
provider of innovative software solutions that enable and visualize the Internet of Things. DGLogik's solutions provide
users with the intelligence to better manage energy usage and improve facility performance. DGLogik is headquartered
in the San Francisco Bay Area, California.
On December 10, 2015, using cash on hand, the Company acquired Juno Lighting LLC ("Juno Lighting"), a
leading provider of downlighting and track lighting fixtures for both residential and commercial applications. Juno
Lighting is headquartered in Des Plaines, Illinois.
On December 9, 2015, using cash on hand, the Company acquired certain assets and assumed certain liabilities
of Geometri, LLC ("Geometri"), a provider of a software and services platform for mapping, navigation, and analytics.
On September 1, 2015, using cash on hand, the Company acquired Distech Controls Inc. ("Distech Controls"),
a provider of building automation solutions that allow for the integration of lighting, HVAC, access control, closed circuit
television, and related systems. Distech Controls is headquartered in Quebec, Canada.
During the quarter ended May 31, 2015, using cash on hand, the Company acquired substantially all of the assets
and assumed certain liabilities of ByteLight, Inc. (“ByteLight”), a provider of indoor location software for light-emitting
diode (“LED”) lighting. ByteLight is headquartered in Boston, Massachusetts.
The operating results of these acquisitions have been included in the Company’s consolidated financial statements
since the respective dates of acquisition.
In addition, during fiscal 2015, the Company made a strategic, non-controlling investment in a company
specializing in light sensory networks. This investment was accounted for using the cost method and is reflected in
Other long term assets on the Consolidated Balance Sheets.
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 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
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 liabilities associated with the programs totaled $41.0
and $35.6 of August 31, 2016 and 2015, respectively, are reflected within Other accrued liabilities on the Consolidated
Balance Sheets.
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 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 (less than 4%) 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, (iii)
monitoring and lighting control services, and (iv) providing services related to data analytics. 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. The Company considers time deposits and marketable securities with
an original maturity of three months or less when purchased to be cash equivalents.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
Accounts Receivable
The Company records accounts receivable at net realizable value. This value includes a reserve for doubtful
accounts to reflect losses anticipated on accounts receivable balances. The allowance is based on historical write-
offs, an analysis of past due accounts based on the contractual terms of the receivables, and 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 and building management solutions as well
as their dispersion across many different geographic areas. Receivables from The Home Depot were approximately
$62.7 and $59.9 at August 31, 2016 and 2015, respectively. No other single customer accounted for more than 10%
of consolidated receivables at August 31, 2016 or 2015. Additionally, net sales to The Home Depot accounted for
approximately 11% and 12% in fiscal 2015 and 2014, respectively. No single customer accounted for more than 10%
of net sales in fiscal 2016.
Reclassifications
Certain prior-period amounts have been reclassified to conform to the current year presentation, including a
reclassification of $23.1 from current deferred income taxes to noncurrent deferred income taxes as of August 31, 2015
on the Consolidated Balance Sheets, related to the adoption of Accounting Standards Update 2015-17. See the New
Accounting Pronouncements footnote for more information.
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, 2016.
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,
2016
2015
$
170.3 $
145.3
315.6
(20.4)
$
295.2 $
125.7
113.9
239.6
(14.8)
224.8
(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 property classified as held for sale. As of August 31, 2016, the carrying value of the property
held for sale was $5.4, which is included in Prepayments and other current assets on the Consolidated Balance Sheets.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
Goodwill and Other Intangibles
Goodwill amounted to $947.8 and $565.0 as of August 31, 2016 and 2015, respectively. The change in the carrying
amount of goodwill during fiscal 2016 is summarized as follows:
Balance as of August 31, 2015
Additions from acquired businesses
Foreign currency translation adjustments
Balance as of August 31, 2016
$
$
565.0
381.5
1.3
947.8
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,
2016
2015
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
$
112.3 $
(39.9) $
72.7 $
27.2
61.8
157.9
4.9
(10.7)
(33.0)
(29.3)
(4.8)
25.4
61.8
55.2
5.1
$
$
364.1 $
(117.7) $
220.2 $
135.0
$
99.5
(30.3)
(9.7)
(30.8)
(20.8)
(4.7)
(96.3)
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 increase in the gross
carrying amounts for the acquired intangible assets was due primarily to the acquisitions of Distech Controls, Juno
Lighting, Geometri and DGLogik (refer to the Acquisitions and Investments footnote), while decreases were due to the
impairment of an indefinite-lived trade name and foreign currency translation adjustments.
The Company recorded amortization expense of $21.4, $11.0, and $11.2 related to intangible assets with finite
lives during fiscal 2016, 2015, and 2014, respectively. Amortization expense is generally recorded on a straight-line
basis and is expected to be approximately $23.0 in fiscal 2017, $23.0 in fiscal 2018, $23.0 in fiscal 2019, $22.6 in fiscal
2020, and $21.2 in fiscal 2021.
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 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 2016, a qualitative fair value analysis 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 2016, 2015, or 2014.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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. During fiscal
2016, management began to rationalize the Company's portfolio of brands, resulting in the initiation of the phase out
of one of the trade names. The Company recognized an impairment charge of $5.1 related to this trade name and
concluded the trade name is definite-lived. The impairment charge is included in Selling, Distribution, and Administrative
Expenses in the Consolidated Statements of Comprehensive Income. The indefinite-lived intangible asset analysis
did not result in any other impairment charges, as the fair values exceeded the carrying values for each of the other
trade names. None of the analyses for the indefinite-lived trade names resulted in an impairment charge during fiscal
2015 or 2014.
Other Long-Term Assets
Other long-term assets consist of the following:
Deferred contract costs
Capitalized software costs(1)
Investment in noncontrolling affiliate(2)
Other(3)
Total
_______________________________________
August 31,
2016
2015
$
8.3 $
10.7
0.8
8.0
5.9
1.6
8.0
6.8
$
23.0 $
27.1
(1)
(2)
The Company recorded amortization expense related to capitalized software costs of $0.3, $0.4, and $0.4 in fiscal 2016, 2015, and 2014,
respectively.
The Company holds an equity investment in an unconsolidated affiliate. This strategic investment represents less than a 20% ownership
interest in the privately-held affiliate, and the Company does not maintain power over or control of the entity. The Company accounts for
this investment using the cost method. Subsequent to fiscal 2016, this investment was sold resulting in the recognition of a gain.
(3) Other - Amounts primarily include deferred debt issuance costs related to its revolving credit facility and company-owned life insurance
investments. The Company maintains life insurance policies on 74 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, 2016.
Other Long-Term Liabilities
Other long-term liabilities consist of the following:
Deferred compensation and postretirement benefits other than pensions(1)
Long-term warranty obligations
Unrecognized tax position liabilities, including interest(2)
Multi-employer pension plan withdrawal liabilities
Other(3)
Total
_______________________________________
August 31,
2016
2015
$
37.3 $
34.1
4.9
6.1
3.9
6.8
2.5
5.2
0.2
9.2
$
59.0 $
51.2
(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 life
insurance policies on certain current and former officers and other key employees as a means of satisfying a portion of these obligations.
(2) See the Income Taxes footnote for more information.
(3) Other - Amount primarily includes deferred revenue and deferred rent.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 $124.0, $105.6, and $100.9 in fiscal 2016, 2015, and 2014, 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 the Director Deferred Compensation Plan. The Company recorded $27.7, $18.2, and $17.7 of share-
based expense for the years ending August 31, 2016, 2015, and 2014, respectively. The total income tax benefit
recognized for share-based compensation arrangements was $9.6, $6.4, and $6.0 for the years ended August 31,
2016, 2015, and 2014, 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 $25.6,
$17.6, and $10.4 for fiscal 2016, 2015, and 2014, 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 $40.9, $34.4, and $31.8 during fiscal 2016, 2015, and 2014, 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 $47.1, $41.1, and $35.3 during fiscal 2016, 2015,
and 2014, 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 $18.4, $12.0,
and $13.3 during fiscal 2016, 2015, and 2014, respectively. The increase during fiscal 2016 is primarily due to the
impact of acquisitions.
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 $7.0, $6.6, and $6.1
in fiscal 2016, 2015, and 2014, respectively. These costs have been included within Selling, Distribution, and
Administrative Expenses in the Company’s Consolidated Statements of Comprehensive Income.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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
Foreign Currency Translation
Years Ended August 31,
2016
2015
2014
$
$
33.3 $
32.6 $
(1.1)
(1.1)
32.2 $
31.5 $
32.6
(0.5)
32.1
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 income of $0.8 in fiscal
2016, expense of $0.7 in fiscal 2015, and expense of $1.5 in fiscal 2014.
Income Taxes
The Company is taxed at statutory corporate rates after adjusting income reported for financial statement purposes
for certain items that are treated differently for income tax purposes. Deferred income tax expenses or benefits result
from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and
liabilities.
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 Loss Items,
net of tax.
Balance at August 31, 2015
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive income
Net current-period other comprehensive loss
Balance at August 31, 2016
Foreign
Currency Items
Defined Benefit
Pension Plans
Accumulated
Other
Comprehensive
Loss Items
$
$
(42.1) $
(68.3) $
(5.6)
—
(5.6)
(28.7)
5.3
(23.4)
(47.7) $
(91.7) $
(110.4)
(34.3)
5.3
(29.0)
(139.4)
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
The following table presents the tax (expense)/benefit allocated to each component of other comprehensive
income (expense).
Years Ended August 31,
2016
Tax
(Expense)
or Benefit
Before
Tax
Amount
Net of Tax
Amount
Before
Tax
Amount
2015
Tax
(Expense)
or Benefit
Net of Tax
Amount
Before
Tax
Amount
2014
Tax
(Expense)
or Benefit
Net of Tax
Amount
$
(5.6) $
— $
(5.6) $
(24.0) $
— $
(24.0) $
0.7
$
— $
0.7
Foreign Currency Translation
Adjustments
Defined Benefit Pension
Plans:
Actuarial losses
(42.2)
13.5
(28.7)
(27.9)
10.7
(17.2)
(18.2)
5.6
(12.6)
Amortization of defined
benefit pension items:
Prior service cost (1)
Actuarial losses (1)
Total Defined Benefit
Plans, net
Other Comprehensive
Income (Loss)
3.1
4.9
(1.1)
(1.6)
2.0
3.3
1.4
4.1
(0.6)
(2.2)
0.8
1.9
0.8
3.1
(0.3)
(1.0)
0.5
2.1
(34.2)
10.8
(23.4)
(22.4)
7.9
(14.5)
(14.3)
4.3
(10.0)
$
(39.8) $
10.8
$
(29.0) $
(46.4) $
7.9
$
(38.5) $
(13.6) $
4.3
$
(9.3)
_______________________________________
(1)
The before tax amount of these 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 2016
In November 2015, the Financial Accounting Standards Board ("FASB") issued ASU No. 2015-17, Balance
Sheet Classification of Deferred Taxes ("ASU 2015-17"), requiring that all tax liabilities and assets be classified as
noncurrent in a classified statement of financial position. ASU 2015-17 is effective for annual reporting periods beginning
after December 15, 2016. The Company early adopted ASU 2015-17, which resulted in a reclassification of $23.1 from
current deferred income taxes to noncurrent deferred income taxes on the Consolidated Balance Sheets as of
August 31, 2015.
Accounting Standards Yet to Be Adopted
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment
Accounting, ("ASU 2016-09"), which will change certain aspects of accounting for share-based payments to employees.
ASU 2016-09 is effective for fiscal years (and interim reporting periods within those years) beginning after December
15, 2016. The standard requires that all excess tax benefits and deficiencies currently recorded as additional paid in
capital be prospectively recorded in income tax expense. As such, implementation of this standard could create
volatility in the Company's effective income tax rate on a quarter by quarter basis. The volatility in the effective income
tax rate is due primarily to fluctuations in the Company's stock price and the timing of stock option exercises and
vesting of restricted share grants. The standard also requires excess tax benefits to be presented as an operating
activity on the statement of cash flows rather than as a financing activity. This element of the guidance may be applied
retrospectively or prospectively. The Company intends to implement the standard as required in fiscal 2018.
In February 2016, the FASB issued ASU No. 2016-02, Leases, ("ASU 2016-02"), which requires lessees to
include most leases on the balance sheet. ASU 2016-02 is effective for fiscal years (and interim reporting periods
within those years) beginning after December 15, 2018. The Company is currently evaluating the impact of the
provisions of ASU 2016-02.
In July 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the
Accounting for Measurement-Period Adjustments ("ASU 2015-16"), which simplifies the accounting for measurement-
period adjustments to provisional amounts recognized in a business combination. ASU 2015-16 is effective for fiscal
years (and interim reporting periods within those years) beginning after December 15, 2016. The provisions of ASU
2015-16 are not expected to have a material effect on the Company's financial condition, results of operations, or cash
flows.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting For Fees Paid In A Cloud Computing
Arrangement (“ASU 2015-05”), which provides guidance for a customer's accounting for cloud computing costs. ASU
2015-05 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15,
2015. The provisions of ASU 2015-05 are not expected to have a material effect on the Company's financial condition,
results of operations, or 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, 2017. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method.
The Company is currently evaluating the impact of the provisions of ASU 2014-09.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or
not applicable.
4.
Acquisitions and Investments
The Company does not consider acquisitions a critical element of its strategy but seeks opportunities for growth
through acquisitions and investments. In recent years, the Company has acquired or made investments in a number
of businesses that participate in the lighting, building management and related markets, including the businesses
discussed below. The acquisitions and investments were made with the intent to further expand and complement the
Company’s lighting and building management solutions portfolio. The purchased companies were fully incorporated
into the Company’s operations.
Fiscal 2016 Acquisitions
DGLogik, Inc.
On June 30, 2016, using cash on hand and treasury stock, the Company acquired DGLogik, Inc. ("DGLogik"), a
provider of innovative software solutions that enable and visualize the Internet of Things. DGLogik's solutions provide
users with the intelligence to better manage energy usage and improve facility performance. DGLogik is headquartered
in the San Francisco Bay Area, California.
Juno Lighting LLC
On December 10, 2015, using cash on hand, the Company acquired for approximately $380 all of the equity
interests of Juno Lighting LLC ("Juno Lighting"), a leading provider of downlighting and track lighting fixtures for both
residential and commercial applications. Juno Lighting is headquartered in Des Plaines, Illinois. At the time of
acquisition, Juno Lighting generated annual revenues of approximately $250 (unaudited).
Geometri LLC
On December 9, 2015, using cash on hand, the Company acquired certain assets and assumed certain liabilities
of Geometri, LLC ("Geometri"), a provider of a software and services platform for mapping, navigation, and analytics.
Distech Controls Inc.
On September 1, 2015, using cash on hand, the Company acquired for approximately $240 all of the outstanding
capital stock of Distech Controls Inc. ("Distech Controls"), a provider of building automation solutions that allow for the
integration of lighting, HVAC, access control, closed circuit television, and related systems. Distech Controls is
headquartered in Quebec, Canada. At the time of acquisition, Distech Controls generated annual revenues of
approximately $80 Canadian Dollars (unaudited).
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
Accounting for Fiscal 2016 Acquisitions
The operating results of these acquisitions have been included in the Company's consolidated financial statements
since the respective dates of acquisition. Acquisition-related costs were expensed as incurred. Preliminary amounts
related to the acquisition accounting for these investments are reflected in the Consolidated Balance Sheets as of
August 31, 2016. The aggregate consideration of these acquisitions was preliminarily allocated as follows:
Consideration
Cash paid, net of cash acquired
Shares issued from Treasury Stock
Total Purchase Price
Allocation
Goodwill
Intangible assets:
Customer-based1
Marketing-related2
Technology-based3
Property and equipment
Other assets acquired
Deferred tax liabilities
Other liabilities assumed
$
$
623.2
10.0
633.2
$
381.5
102.3
42.3
39.3
63.1
120.5
(58.3)
(57.5)
633.2
$
______________________________
(1) Customer-based intangibles have useful lives between 12 and 20 years, with a weighted average amortization period of
approximately 17 years.
(2) Marketing-related intangibles are considered indefinite-lived.
(3) Technology-based intangibles have useful lives between five and 10 years, with a weighted average amortization period of
approximately 8 years.
These amounts are deemed to be provisional until disclosed otherwise, as the Company continues to gather
information related to the identification and valuation of intangible and other acquired assets and liabilities. These
amounts are expected to change as the Company finalizes the allocation.
Proforma results of operations have not been presented because the effects of these acquisitions, individually
and in the aggregate, were not material to the Company's consolidated results of operations. The acquisitions
represented less than 10% of net sales and pre-tax income on a proforma basis (assuming acquisition transactions
were completed as of September 1, 2014) for the years ended August 31, 2016 and 2015 (unaudited).
Goodwill recognized in these acquisitions is comprised primarily of expected benefits related to expanding the
Company’s solutions portfolio, including software and services, to provide a host of economic benefits resulting from
data analytics that enables the Internet of Things (IoT) and supports the advancement of smart buildings, smart cities,
and the smart grid as well as the trained workforce acquired with these businesses and expected synergies from
combining the operations of the Company and the acquired businesses. Goodwill from these acquisitions totaling $6.0
is tax deductible.
Fiscal 2015 Acquisition and Investment
On April 15, 2015, using cash on hand, the Company acquired substantially all of the assets and assumed certain
liabilities of ByteLight, Inc. (“ByteLight”), a provider of indoor location software for light-emitting diode (“LED”) lighting.
The operating results of ByteLight have been included in the Company’s consolidated financial statements since the
date of acquisition. Management finalized the acquisition accounting for ByteLight during the fourth quarter of fiscal
2015 and the amounts are reflected in the Consolidated Balance Sheets.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
In addition, during fiscal 2015, the Company made a strategic, non-controlling investment in a company
specializing in light sensory networks. This investment was accounted for using the cost method and is reflected in
Other long term assets on the Consolidated Balance Sheets.
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, 2016 and 2015:
Assets:
Cash and cash equivalents
Other
Liabilities:
Other
Fair Value Measurements as of:
August 31, 2016
August 31, 2015
Level 1
Total Fair
Value
Level 1
Total Fair
Value
$
413.2 $
413.2 $
756.8 $
756.8
0.5
0.5
0.5
0.5
$
0.5 $
0.5 $
0.5 $
0.5
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 quoted market prices to determine the fair value of Level 1 assets and liabilities. No transfers
between the levels of the fair value hierarchy occurred during the current fiscal period. In the event of a transfer in or
out of a level within the fair value hierarchy, the transfers would be recognized on the date of occurrence.
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.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
The carrying values and estimated fair values of certain of the Company’s financial instruments were as follows
at August 31, 2016 and 2015:
August 31, 2016
Fair
Value
Carrying
Value
August 31, 2015
Fair
Value
Carrying
Value
Assets:
Investment in noncontrolling affiliate
$
8.0
$
14.4
$
8.0
$
8.0
Liabilities:
Senior unsecured public notes, net of unamortized discount and deferred costs $
348.7
$
388.8
$
348.4
$
386.4
Industrial revenue bond
Bank Loans
4.0
2.5
4.0
2.6
4.0
—
4.0
—
Investment in noncontrolling affiliate represents a strategic investment accounted for using the cost method. The
Company based the fair value of the investment on an offer by a third party to purchase the business. The sale
transaction subsequently closed in October 2016. (Level 3).
The senior unsecured public notes are carried at the outstanding balance, including bond discounts and deferred
costs, as of the end of the reporting period. Fair value is estimated based on discounted future cash flows using rates
currently available for debt of similar terms and maturity (Level 2).
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, 2016 based on bonds of similar
terms and maturity (Level 2).
The bank loans are carried at the outstanding balance as of the end of the reporting period. Fair value is estimate
based on discounted future cash flows using rates currently available for debt 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.
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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, 2016 and 2015:
Fair value of plan assets at beginning of year
$
123.9
$
122.5
$
32.6
$
Domestic Plans
August 31,
International Plans
August 31,
2016
2015
2016
2015
$
192.2
$
171.5
$
49.8
$
52.5
3.6
8.0
—
27.5
(8.3)
—
223.0
3.1
6.8
10.5
7.6
(7.3)
—
192.2
0.1
1.7
—
17.9
(3.6)
(8.6)
57.3
7.9
5.3
(8.3)
—
0.7
8.0
(7.3)
—
128.8
123.9
5.2
1.1
(3.6)
(5.0)
30.3
(94.2) $
(68.3) $
(27.0) $
(1.3) $
(1.5) $
(92.9)
(66.8)
(94.2) $
(68.3) $
220.4
$
189.2
$
— $
(27.0)
(27.0) $
57.3
$
(10.8) $
(13.9) $
— $
(96.9)
(71.1)
(28.2)
(107.7) $
(85.0) $
(28.2) $
0.1
1.8
—
0.5
(1.0)
(4.1)
49.8
35.2
(0.1)
1.1
(1.0)
(2.6)
32.6
(17.2)
(0.1)
(17.1)
(17.2)
49.8
—
(19.4)
(19.4)
$
3.1
5.3
$
3.1
3.1
— $
3.7
—
2.9
Change in Benefit Obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Amendments
Actuarial loss
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 the end of year
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
$
$
$
$
$
$
$
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
During fiscal 2015, the domestic plans recognized $10.5 related to the following amendments to the Acuity Brands,
Inc. 2002 Supplemental Executive Retirement Plan:
•
•
•
An incremental benefit was added for participants who were actively employed by the Company on June 26,
2015 (or who first become a participant on or after June 26, 2015). The incremental benefit provides a monthly
benefit for 180 months commencing at age 60 equal to 1.4% of the participant's "average annual compensation"
multiplied by his years of credited service not to exceed 10 years, divided by 12. Participants may elect to
receive the actuarial equivalent of the incremental benefit in the form of a lump sum cash payment.
The definition of actuarial equivalent (with respect to accrued benefits other than the participant’s vested
accrued benefit as of December 31, 2004) was changed. Prior to the amendment, the definition of actuarial
equivalent used an interest rate equal to the lesser of 7% per annum or the yield on 10-Year U.S. Treasury
Bonds plus 1.50%; after the amendment, an interest rate equal to the lesser of 2.5% per annum or the yield
on 10-Year U.S. Treasury Bonds will be used.
Upon the occurrence of a Section 409A change in control event (as defined in the SERP), the SERP shall be
terminated consistent with the requirements of Treasury Regulation section 1.409A-3(j)(4)(ix)(B), and the
Company shall, within five (5) days of such an event, pay to each participant a lump sum cash payment equal
to the lump sum actuarial equivalent of the participant’s accrued benefit as of such date.
Components of net periodic pension cost for the fiscal years ended August 31, 2016, 2015, and 2014 included
the following:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Settlement
Recognized actuarial loss
Net periodic pension cost
Domestic Plans
International Plans
2016
2015
2014
2016
2015
2014
$
3.6 $
3.1 $
2.4 $
0.1 $
0.1 $
8.0
(9.2)
3.1
—
3.0
6.8
(9.2)
1.4
—
2.2
7.0
(8.0)
0.8
—
2.0
1.7
(1.9)
—
—
1.9
1.8
(1.8)
—
—
1.9
$
8.5 $
4.3 $
4.2 $
1.8 $
2.0 $
0.1
1.9
(2.0)
—
(0.1)
1.1
1.0
Weighted average assumptions used in computing the benefit obligation are as follows:
Discount rate
Rate of compensation increase
Domestic Plans
International Plans
2016
2015
2016
2015
3.2%
5.5%
4.3%
5.5%
2.1%
2.8%
3.7%
3.1%
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
2016
2015
2014
2016
2015
2014
4.3%
7.5%
5.5%
4.0%
7.5%
5.5%
4.8%
7.5%
5.5%
2.1%
6.5%
2.8%
3.6%
5.6%
3.1%
4.5%
6.2%
3.3%
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 $1.2 and $1.6 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
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
estimates that each 100 basis point reduction in the expected return on plan assets would result in additional net
periodic pension cost of $1.3 and $0.3 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 2016, 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
2016, the international asset target allocation approximated 60% equity securities, 25% fixed income securities, 10%
multi-strategy funds, and 5% real estate securities.
The Company’s pension plan asset allocation at August 31, 2016 and 2015 by asset category is as follows:
Equity securities
Fixed income securities
Multi-strategy investments
Real estate
Total
% of Plan Assets
Domestic Plans
International Plans
2016
2015
2016
2015
55.4%
39.1%
—%
5.5%
55.8%
39.1%
—%
5.1%
61.1%
25.0%
8.9%
5.0%
64.1%
21.5%
9.5%
4.9%
100.0%
100.0%
100.0%
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,
2016 and 2015:
Assets
Mutual Funds:
Fair Value Measurements
Fair Value
as of
Quoted Market
Prices in Active
Markets for
Identical Assets
August 31, 2016
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Domestic large cap equity fund
$
46.5 $
46.5 $
— $
Foreign equity fund
Real Estate Fund
Short-Term Fixed Income Investments
Fixed-Income Investments
Collective Trust: Domestic small cap equities
12.3
7.1
6.2
44.2
12.5
$
128.8
12.3
—
6.2
—
—
—
—
—
44.2
12.5
—
—
7.1
—
—
—
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
Fair Value Measurements
Fair Value
as of
Quoted Market
Prices in Active
Markets for
Identical Assets
August 31, 2015
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Mutual Funds:
Domestic large cap equity fund
$
44.9 $
44.9 $
— $
Foreign equity fund
Real Estate Fund
Short-Term Fixed Income Investments
Fixed-Income Investments
Collective Trust: Domestic small cap equities
11.9
6.3
6.6
41.8
12.4
$
123.9
11.9
—
6.6
—
—
—
—
—
41.8
12.4
—
—
6.3
—
—
—
The following tables present the fair value of the international pension plan assets by major category as of
August 31, 2016 and 2015:
Fair Value Measurements
Assets
Equity Securities
Short-Term Investments
Real Estate Fund
Multi-Strategy Investments
Fixed-Income Investments
Assets
Equity Securities
Real Estate Fund
Multi-Strategy Investments
Fixed-Income Investments
Fair Value
as of
Quoted Market
Prices in Active
Markets for
Identical Assets
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
August 31, 2016
$
18.5 $
(Level 1)
— $
18.5 $
0.5
1.5
2.7
7.1
$
30.3
0.5
—
—
—
—
—
2.7
7.1
Fair Value Measurements
—
—
1.5
—
—
Fair Value
as of
Quoted Market
Prices in Active
Markets for
Identical Assets
August 31, 2015
$
20.9 $
(Level 1)
1.6
3.1
7.0
$
32.6
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
— $
20.9 $
—
—
—
—
3.1
7.0
—
1.6
—
—
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.
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
The tables below present a rollforward of the domestic and international pension plans’ Level 3 assets for the
years ended August 31, 2016 and 2015:
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
Balance, beginning of year
Net unrealized loss relating to instruments still held at the reporting date
Balance, end of year
Domestic Real Estate Fund
Years Ended August 31,
2016
2015
6.3 $
0.5
0.3
7.1 $
5.6
0.5
0.2
6.3
International Real Estate Fund
Years Ended August 31,
2016
2015
1.6 $
(0.1)
1.5 $
1.7
(0.1)
1.6
$
$
$
$
The Company expects to contribute approximately $2.3 and $1.0 during fiscal 2017 to its domestic and
international defined benefit plans, respectively. These amounts are based on the total contributions required during
fiscal 2017 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:
2017
2018
2019
2020
2021
2022-2026
Domestic
Plans
International
Plans
$
7.9 $
8.1
8.3
8.5
11.9
69.0
3.3
3.4
3.5
3.6
3.7
20.0
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 $0.7, $0.5, and $0.4 for the years ended August 31, 2016,
2015, and 2014, respectively. During fiscal 2016 as a result of closing a facility, the Company withdrew from one of
these multi-employer pension plans and incurred a withdrawal liability of $3.9.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 $6.9, $5.6, and $5.3 for the years ended August 31, 2016, 2015, and
2014, respectively. Employer matching amounts are allocated in accordance with the participants’ investment elections
for elective deferrals. At August 31, 2016, assets of the domestic defined contribution plans included shares of the
Company’s common stock with a market value of approximately $22.3, which represented approximately 7.3% of the
total fair market value of the assets in the Company’s domestic defined contribution plans.
7.
Debt and Lines of Credit
Debt
The Company’s debt at August 31, 2016 and 2015 consisted of the following:
August 31,
2016
2015
Senior unsecured public notes due December 2019, principal
$
350.0
$
350.0
Senior unsecured public notes due December 2019, unamortized discount and deferred costs
Industrial revenue bond due 2021
Bank loans
Total debt outstanding
(1.3)
4.0
2.5
(1.6)
4.0
—
$
355.2
$
352.4
Future principal payments of long-term debt are $0.2, $0.3, $0.3, $350.3, $4.3, and $1.1 in fiscal 2017, 2018,
2019, 2020, 2021, and after 2021, respectively.
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 0.7%
at August 31, 2016 and 0.1% at August 31, 2015.
The Company also had $2.5 outstanding under fixed-rate bank loans executed during fiscal 2016. These loans
have interest rates between 0.8% and 2.0% and mature over seven to 12 years, subject to monthly or quarterly
repayment schedules.
Lines of Credit
On August 27, 2014, the Company executed a $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
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 the Company's
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,
2016. As of August 31, 2016, the Company had outstanding letters of credit totaling $11.0, primarily for securing
collateral requirements under the Company's casualty insurance programs and providing credit support for the
Company’s industrial revenue bond (not an outstanding amount under the Revolving Credit Facility). At August 31,
2016, the Company had additional borrowing capacity under the Revolving Credit Facility of $243.9 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 $6.1 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, 2016, 2015, and 2014 were as follows:
(Amounts and shares in millions)
Balance at August 31, 2013
Issuance of restricted stock grants, net of forfeitures
Stock options exercised
Balance at August 31, 2014
Issuance of restricted stock grants, net of forfeitures
Stock options exercised
Balance at August 31, 2015
Issuance of restricted stock grants, net of forfeitures
Stock options exercised
Balance at August 31, 2016
Common Stock
Shares
Amount
(At par)
52.2 $
0.2
0.2
52.6 $
0.2
0.2
53.0 $
0.1
0.3
53.4 $
0.5
—
—
0.5
—
—
0.5
—
—
0.5
As of August 31, 2016 and 2015, the Company had 9.7 million repurchased shares recorded as treasury stock
at an original repurchase cost of $418.6 and $420.2.
In September 2011, the Company's Board of Directors authorized the repurchase of two million shares of the
Company's outstanding common stock. No shares have been repurchased under this plan.
Preferred Stock
The Company has 50 million shares of preferred stock authorized. No shares of preferred stock were issued in
fiscal 2016 or 2015 and no shares of preferred stock are outstanding.
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 40,000 and 44,000 were excluded from the diluted
earnings per share calculation for the years ended August 31, 2016 and 2015, respectively, as the effect of inclusion
would have been antidilutive. Approximately 4,000 and 26,000 shares of restricted stock were excluded from the diluted
earnings per share calculation for the years ended August 31, 2016 and 2015, respectively.
The following table calculates basic earnings per common share and diluted earnings per common share for the
years ended August 31, 2016, 2015, and 2014:
(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,
2016
2015
2014
$
$
$
$
$
290.8 $
222.1 $
175.8
(0.4)
(1.0)
(1.6)
290.4 $
221.1 $
174.2
43.5
43.1
6.67 $
5.13 $
42.8
4.07
290.8 $
222.1 $
175.8
(0.4)
(1.0)
(1.6)
290.4 $
221.1 $
174.2
43.5
0.3
43.8
43.1
0.3
43.4
$
6.63 $
5.09 $
42.8
0.2
43.0
4.05
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 authorized 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.
Shares available for grant under all plans were approximately 1.6 million, 1.8 million, and 2.1 million at August 31,
2016, 2015, and 2014, respectively. Forfeited shares are returned to the pool of shares available for grant.
Restricted Stock Awards
As of August 31, 2016, the Company had approximately 444,000 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 $23.7, $14.8, and $14.2
in fiscal 2016, 2015, and 2014, respectively.
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
Activity related to restricted stock awards during the fiscal year ended August 31, 2016 was as follows:
Outstanding at August 31, 2015
Granted
Vested
Forfeited
Outstanding at August 31, 2016
Number of
Shares
(in millions)
0.5
0.2
(0.2)
(0.1)
0.4
Weighted
Average
Grant Date
Fair Value Per
Share
$
$
$
$
$
116.02
209.49
94.19
182.42
159.50
As of August 31, 2016, there was $52.6 of total unrecognized compensation cost related to unvested restricted
stock, which is expected to be recognized over a weighted-average period of 1.8 years. The total fair value of shares
vested during the years ended August 31, 2016, 2015, and 2014, was approximately $18.8, $14.3, and $13.0,
respectively.
Stock Options
As of August 31, 2016, the Company had approximately 258,000 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, 2016, there were
no options outstanding under the Director’s Plan. Compensation expense recognized related to the awards under the
current and prior equity incentive plans was $2.9, $2.4, and $2.4 in fiscal 2016, 2015, and 2014, respectively. There
was no expense related to the director plan in fiscal 2016, 2015, and 2014.
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
2016
0.3%
30.7%
1.4%
4 years
$52.83
2015
0.4%
33.9%
1.5%
4 years
$37.43
2014
0.7%
38.4%
1.3%
5 years
$34.37
63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
Stock option activity during the years ended August 31, 2016, 2015, and 2014 was as follows:
Outstanding at August 31, 2013
Granted
Exercised
Outstanding at August 31, 2014
Granted
Exercised
Outstanding at August 31, 2015
Granted
Exercised
Outstanding at August 31, 2016
Range of option exercise prices:
$40.00 - $100.00 (average life - 5.9 years)
$100.01 - $160.00 (average life - 7.7 years)
$160.01 - $210.00 (average life - 9.2 years)
_______________________________________
*
Represents shares of less than 0.1.
Outstanding
Exercisable
Number of
Shares
(in millions)
0.8
Weighted
Average
Exercise Price
$43.16
Number of
Shares
(in millions)
0.5
Weighted
Average
Exercise Price
$38.00
0.1
(0.2)
0.7
0.1
(0.3)
0.5
0.1
(0.3)
0.3
0.1
0.1
0.1
$103.74
$40.31
$50.58
$135.63
$39.35
$71.95
$207.80
$51.34
$129.85
$61.59
$121.45
$207.80
0.5
0.3
0.1
0.1
—
—
$41.05
$51.05
$83.89
$61.59
*
$114.81
$—
The total intrinsic value of options exercised during the years ended August 31, 2016, 2015, and 2014 was $50.0,
$33.3, and $16.3, respectively. As of August 31, 2016, the total intrinsic value of options outstanding was $37.5, the
total intrinsic value of options expected to vest was $37.3, and the total intrinsic value of options exercisable was $21.9.
As of August 31, 2016, there was $3.8 of total unrecognized compensation cost related to unvested options. That cost
is expected to be recognized over a weighted-average period of approximately 1.4 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, 2016, approximately 10,000 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 2016, 2015, and 2014.
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, 2016, 2015, and 2014. As of
August 31, 2016, approximately 130,000 share units were deferred, but undistributed, under the 2006 Plan and the
2011 Plan.
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
Compensation expense recognized related to the share units under these plans was $1.1 million, $1.0 million,
and $0.8 million in fiscal 2016, 2015, and 2014, 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, 2016. 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 up to certain limits. 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 $15.1, $12.1, $9.6, $7.5, $5.7, and $10.2 for fiscal
2017, 2018, 2019, 2020, 2021, and after 2021, respectively.
Total rent expense was $17.6, $16.0, and $16.5 in fiscal 2016, 2015, and 2014, 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, 2016 include $193.8 in fiscal 2017 and $4.8 in fiscal
2018. As of August 31, 2016, the Company had no purchase obligations extending beyond August 31, 2018.
Collective Bargaining Agreements
Approximately 73% of the Company’s total work force is covered by collective bargaining agreements. Collective
bargaining agreements representing approximately 69% 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
65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 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, 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.
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
The Company 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.
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
The changes in product warranty and recall reserves (included in Other accrued liabilities and Other long-term
liabilities on the Consolidated Balance Sheets) during the fiscal years ended August 31, 2016, 2015, and 2014 are
summarized as follows:
Balance at September 1
Warranty and recall costs
Payments and other deductions
Acquired warranty and recall liabilities
Balance at August 31
Trade Compliance Matters
2016
2015
2014
$
9.6 $
8.5 $
25.7
(20.8)
1.0
16.1
(15.0)
—
$
15.5 $
9.6 $
5.9
19.5
(16.9)
—
8.5
Prior to the close of the acquisition, Distech Controls discovered shipments by it and its subsidiaries during the
past five years of standard commercial building control products directly or indirectly to customers in a country that
may constitute violations of U.S. and Canadian sanctions or export regulations, including those administered by the
U.S. Office of Foreign Asset Control (“OFAC”) and the Export Controls Division of the Canadian Department of Foreign
Affairs, Trade and Development ("DFATD"). Distech Controls estimates that it received total revenue of approximately
$0.3 from these shipments. Distech Controls has voluntarily self-reported the potential violations to OFAC and DFATD
and retained outside counsel that conducted an investigation of the matter and filed a full voluntary disclosure with
these agencies. Now that the Company has acquired Distech Controls, the Company has greater access to information
regarding Distech Controls’ prior operations and will continue to assess the matter and implement related ongoing
compliance and remediation efforts.
The Company intends to fully cooperate with respect to any investigations by governmental agencies of the
potential violations. The former shareholders of Distech Controls have jointly agreed to indemnify the Company for
damages, if any, as a result of, in respect of, connected with or arising out of the potential violations or any inaccuracy
or breach of the representations made by Distech Controls to the Company related thereto, up to a specified aggregate
amount, which is not material to the Company's consolidated financial statements. These indemnity obligations are
supported by an escrow account containing proceeds from the transaction equal to the specified aggregate amount.
The Company currently believes that this indemnity will be sufficient to cover any damages related to the potential
violations and the costs and expenses related to the investigation thereof and any related remedial actions. The
Company therefore does not expect this matter to have a material adverse effect on the business, financial condition,
cash flow, or results of operations of the Company. There can be no assurance, however, that actual damages, costs
and expenses will not be in excess of the indemnity or that the Company and its affiliates will not be subject to other
damages, including but not limited to damage to the Company's reputation or monetary or non-monetary penalties as
permitted under applicable trade laws, that may not be fully covered by the indemnity. Estimated liabilities for legal
fees as well as potential fines or penalties related to this matter are included in Other accrued liabilities within the
Consolidated Balance Sheets.
The Company discovered through a review of shipment activity that it misclassified certain shipments of component
parts to its manufacturing facilities under applicable import/export regulations. Although no claim has been asserted
against the Company, the Company is reviewing these shipments to determine the extent of any liabilities and the
extent of available remedial measures. The Company is unable at this time to determine the likelihood or amount of
any loss associated with the misclassification of these shipments.
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
11.
Special Charge
During fiscal 2016 and 2015, the Company recorded a pre-tax special charge consisting primarily of severance
and employee-related costs, for actions initiated to streamline the organization, including the integration of recent
acquisitions. These streamlining activities include the consolidation of selected production activities and realignment
of certain responsibilities, primarily within various selling, distribution, and administrative 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 spending in certain areas while permitting continued investment in future growth initiatives, such as
new products, expanded market presence, and technology and innovation.
The details of the special charges during the years ended August 31, 2016 and 2015 are summarized as follows:
Severance and employee-related costs
Multi-employer pension plan withdrawal costs
Production transfer costs
Lease termination costs
Special charge
Year ended August 31,
2016
2015
9.9 $
3.9
1.2
—
15.0 $
11.4
—
0.5
0.5
12.4
$
$
As of August 31, 2016, remaining reserves were $6.6 and are included in Accrued Compensation on the
Consolidated Balance Sheets. The changes in the reserves related to these programs during the year ended August 31,
2016 are summarized as follows:
Balance as of August 31, 2015
Severance and employee-related costs
Payments made during the period
Balance as of August 31, 2016
Fiscal 2016
Actions
Fiscal 2015
Actions
Total
$
$
— $
4.9 $
10.4
(4.0)
(0.5)
(4.2)
6.4
$
0.2 $
4.9
9.9
(8.2)
6.6
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
(Benefit) provision for deferred taxes
Total provision for income taxes
Years Ended August 31,
2016
2015
2014
$
139.6 $
101.5 $
17.6
5.1
(8.5)
13.1
4.3
2.6
$
153.8 $
121.5 $
77.1
9.0
4.3
(0.5)
89.9
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
A reconciliation of the federal statutory rate to the total provision for income taxes is as follows:
Years Ended August 31,
2016
2015
2014
Federal income tax computed at statutory rate
$
155.6 $
120.3 $
State income tax, net of federal income tax benefit
Foreign permanent differences and rate differential
Other, net
11.0
(2.0)
(10.8)
8.6
(1.4)
(6.0)
Total provision for income taxes
$
153.8 $
121.5 $
93.0
6.7
(1.0)
(8.8)
89.9
Components of the net deferred income tax liabilities at August 31, 2016 and 2015 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
Net operating losses
Other accruals not yet deductible
Other assets
Total deferred income tax assets
Valuation Allowance
Net deferred income tax liabilities
August 31,
2016
2015
$
(22.5) $
(161.6)
(3.7)
(187.8)
4.0
41.7
28.9
14.3
33.5
12.3
134.7
(16.4)
$
(69.5) $
(9.6)
(105.1)
(4.2)
(118.9)
3.9
29.2
27.5
15.7
18.8
10.6
105.7
(15.0)
(28.2)
The Company currently intends to indefinitely reinvest all undistributed earnings of and original investments in
foreign subsidiaries, which amounted to approximately $83.2 at August 31, 2016; however, this amount could fluctuate
due to changes in business, economic, or other conditions. Earnings is the most significant component of the basis
difference which is indefinitely reinvested. 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, 2016, the Company had state tax credit carryforwards of approximately $1.1, which will expire
between 2018 and 2025. At August 31, 2016, the Company had federal net operating loss carryforwards of $24.3 that
expire beginning in 2030, state net operating loss carryforwards of $12.5 that begin expiring in 2028, and foreign net
operating loss carryforwards of $21.2 that begin expiring in 2017.
The gross amount of unrecognized tax benefits as of August 31, 2016 and 2015 totaled $5.2 and $4.5, respectively,
which includes $3.9 and $2.2, respectively, 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
2012 or for foreign income tax examinations before 2010. The Company does not anticipate unrecognized tax benefits
will significantly increase or decrease within the next twelve months.
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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, 2016 and 2015 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 due to lapse of statute of limitations
Unrecognized tax benefits balance at August 31
2016
2015
$
$
4.5 $
1.0
0.5
(0.8)
5.2 $
3.0
0.8
1.5
(0.8)
4.5
Total accrued interest was $0.9 and $0.7 as of August 31, 2016 and 2015, respectively. There were no accruals
related to income tax penalties during fiscal 2016. 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 reportable segment. Sales of lighting and building management solutions, excluding
services, accounted for approximately 99% of total consolidated net sales in fiscal 2016, 2015, and 2014. 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
2016
2015
2014
2,928.3 $
2,450.1 $
2,155.0
363.0
256.6
238.5
3,291.3 $
2,706.7 $
2,393.5
457.6 $
364.0 $
17.6
12.3
475.2 $
376.3 $
287.8
11.3
299.1
430.8 $
329.4 $
257.1
13.8
14.2
8.6
444.6 $
343.6 $
265.7
254.5 $
179.6 $
41.4
25.6
295.9 $
205.2 $
148.3
31.2
179.5
$
$
$
$
$
$
$
$
_______________________________________
(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
(3)
assets for U.S. based operations.
Long-lived assets include net property, plant, and equipment, long-term deferred income tax assets, and other long-term assets.
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
14.
Supplemental Guarantor Condensed Consolidating Financial Statements
In December 2009, ABL, the 100% 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.
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
CONDENSED CONSOLIDATING BALANCE SHEETS
At August 31, 2016
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Parent
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, net
Deferred income taxes
Other long-term assets
$
368.2
$
— $
— $
—
—
2.5
370.7
0.3
—
—
47.5
1.4
503.0
274.7
14.3
792.0
217.8
735.8
168.1
—
20.4
299.6
—
—
—
—
—
2.7
113.4
—
—
200.5
45.0
69.8
20.5
24.9
160.2
49.7
209.3
99.9
6.5
1.2
—
$
— $
—
—
—
—
—
—
—
(48.9)
—
(1,847.7)
413.2
572.8
295.2
41.7
1,322.9
267.8
947.8
381.4
5.1
23.0
—
Investments in and amounts due from affiliates
1,347.6
Total Assets
$ 1,767.5
$ 2,233.7
$
316.6
$
526.8
$
(1,896.6) $
2,948.0
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Current maturities of long-term debt
Accrued liabilities
Total Current Liabilities
Long-Term Debt
Deferred Income Taxes
Other Long-Term Liabilities
Amounts due to affiliates
Total Stockholders’ Equity
$
1.2
—
14.5
15.7
—
—
92.0
—
$
371.3
$
— $
28.5
$
— $
401.0
—
215.4
586.7
352.8
95.5
64.8
—
—
—
—
—
—
—
—
0.2
41.4
70.1
2.2
28.0
29.3
96.9
—
—
—
—
(48.9)
—
(96.9)
0.2
271.3
672.5
355.0
74.6
186.1
—
1,659.8
1,133.9
316.6
300.3
(1,750.8)
1,659.8
Total Liabilities and Stockholders’ Equity
$ 1,767.5
$ 2,233.7
$
316.6
$
526.8
$
(1,896.6) $
2,948.0
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
CONDENSED CONSOLIDATING BALANCE SHEETS
Current Assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Other current assets
Total Current Assets
Property, Plant, and Equipment, net
Goodwill
Intangible assets, net
Deferred income taxes
Other long-term assets
Investments in and amounts due from affiliates
At August 31, 2015
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Parent
ASSETS
$
479.9
$
— $
— $
276.9
$
— $
—
—
1.6
481.5
0.3
—
—
41.9
1.3
934.7
365.5
208.6
11.6
585.7
139.8
524.2
87.4
—
23.8
333.5
—
—
—
—
—
2.7
117.3
—
—
168.5
46.2
16.2
6.9
346.2
34.5
38.1
18.7
5.2
2.0
—
—
—
—
—
—
—
—
(43.6)
—
(1,436.7)
756.8
411.7
224.8
20.1
1,413.4
174.6
565.0
223.4
3.5
27.1
—
Total Assets
$ 1,459.7
$ 1,694.4
$
288.5
$
444.7
$ (1,480.3) $
2,407.0
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
$
0.9
$
291.6
$
— $
20.4
21.3
—
—
78.4
—
162.7
454.3
352.4
75.3
42.7
—
—
—
—
—
—
—
1,360.0
769.7
288.5
18.6
26.7
45.3
—
—
20.9
77.5
301.0
$
— $
—
—
—
(43.6)
—
(77.5)
311.1
209.8
520.9
352.4
31.7
142.0
—
(1,359.2)
1,360.0
Total Liabilities and Stockholders’ Equity
$ 1,459.7
$ 1,694.4
$
288.5
$
444.7
$ (1,480.3) $
2,407.0
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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, net
Equity earnings in subsidiaries
Miscellaneous income, net
Income (Loss) before Provision for Income Taxes
Provision for Income Taxes
Net Income (Loss)
Other Comprehensive Income (Loss) Items:
Foreign Currency Translation Adjustments
Defined Benefit Pension Plans, net
Other Comprehensive Income (Loss) Items after
Provision for Income Taxes
Other Comprehensive Income (Loss)
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Year Ended August 31, 2016
$
— $
2,919.7
$
— $
371.6
$
— $
3,291.3
—
—
—
—
47.2
(59.5)
—
12.3
10.5
(289.2)
—
291.0
0.2
290.8
(5.6)
(23.4)
(29.0)
—
2,919.7
1,602.2
1,317.5
834.6
50.4
15.0
417.5
16.1
(3.2)
—
404.6
137.7
266.9
(5.6)
(11.4)
(17.0)
47.4
47.4
—
47.4
3.8
—
—
43.6
—
—
—
43.6
15.6
28.0
—
—
—
131.2
502.8
379.3
123.5
112.6
9.1
—
1.8
5.6
0.2
(1.6)
(2.4)
0.3
(2.7)
—
(9.5)
(9.5)
(178.6)
(178.6)
(126.4)
(52.2)
(52.2)
—
—
—
—
292.2
—
(292.2)
—
(292.2)
5.6
20.9
26.5
$ 261.8
$
249.9
$
28.0
$
(12.2) $
(265.7) $
—
3,291.3
1,855.1
1,436.2
946.0
—
15.0
475.2
32.2
—
(1.6)
444.6
153.8
290.8
(5.6)
(23.4)
(29.0)
261.8
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 expense (income), net
Income (Loss) before Provision for Income Taxes
Provision for Income Taxes
Net Income (Loss)
Other Comprehensive Income (Loss) Items:
Foreign Currency Translation Adjustments
Defined Benefit Pension Plans, net
Other Comprehensive Income (Loss) Items after
Provision for Income Taxes
Other Comprehensive Income (Loss)
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Year Ended August 31, 2015
$
— $
2,446.9
$
— $
259.8
$
— $
2,706.7
—
—
—
—
34.0
(45.4)
—
11.4
9.9
(221.2)
—
222.7
0.6
222.1
(24.0)
(14.5)
(38.5)
—
2,446.9
1,388.0
1,058.9
684.4
39.7
12.4
322.4
21.8
(5.2)
2.8
303.0
103.5
199.5
(24.0)
6.3
(17.7)
41.2
41.2
—
41.2
4.0
—
—
37.2
—
—
—
37.2
14.9
22.3
—
—
—
$ 183.6
$
181.8
$
22.3
$
105.5
365.3
276.5
88.8
77.8
5.7
—
5.3
(0.2)
—
(1.6)
7.1
2.5
4.6
—
0.5
0.5
5.1
(146.7)
(146.7)
(103.4)
(43.3)
(43.3)
—
—
—
—
226.4
—
(226.4)
—
(226.4)
24.0
(6.8)
17.2
$
(209.2) $
—
2,706.7
1,561.1
1,145.6
756.9
—
12.4
376.3
31.5
—
1.2
343.6
121.5
222.1
(24.0)
(14.5)
(38.5)
183.6
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 (Loss) Items:
Foreign Currency Translation Adjustments
Defined Benefit Pension Plans, net
Other Comprehensive Income (Loss) Items after
Provision for Income Taxes
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Year Ended August 31, 2014
$
— $
2,150.6
$
— $
242.9
$
— $
2,393.5
—
—
—
—
27.8
(39.6)
—
11.8
10.0
(174.2)
—
176.0
0.2
175.8
0.7
(10.0)
(9.3)
—
2,150.6
1,255.5
895.1
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)
37.2
37.2
—
37.2
4.1
—
—
33.1
—
—
—
33.1
13.1
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
—
(5.2)
(5.2)
(132.0)
(132.0)
(91.7)
(40.3)
(40.3)
—
—
—
—
178.2
1.1
(179.3)
—
(179.3)
(0.7)
8.9
8.2
—
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)
Other Comprehensive Income (Loss)
$ 166.5
$
153.0
$
20.0
$
(1.9) $
(171.1) $
166.5
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Net Cash Provided by Operating Activities
$
277.0
$
54.8
$
— $
13.9
$
— $
345.7
Parent
Subsidiary
Issuer
Subsidiary
Guarantor
Non-
Guarantors
Consolidating
Adjustments
Consolidated
Year Ended August 31, 2016
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 and intangible assets
—
—
(405.6)
—
Net Cash (Used for) Provided by Investing Activities
(405.6)
Cash Provided by (Used for) Financing Activities:
Issuance of long-term debt
Proceeds from stock option exercises and other
Repurchases of common stock
Excess tax benefits from share-based payments
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 Year
—
14.2
—
25.6
—
(22.9)
16.9
—
(111.7)
479.9
(67.1)
0.2
—
(393.9)
(460.8)
—
—
—
—
405.6
—
405.6
0.4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(16.6)
2.0
—
(229.3)
(243.9)
2.5
—
—
—
—
—
2.5
(4.4)
(231.9)
276.9
—
—
405.6
—
405.6
—
—
—
—
(405.6)
—
(405.6)
—
—
—
Cash and Cash Equivalents at End of Year
$
368.2
$
— $
— $
45.0
$
— $
(83.7)
2.2
—
(623.2)
(704.7)
2.5
14.2
—
25.6
—
(22.9)
19.4
(4.0)
(343.6)
756.8
413.2
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Net Cash Provided by Operating Activities
$ 212.1
$
55.2
$
— $
21.6
$
— $
288.9
Year Ended August 31, 2015
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
Other investing activities
—
—
(41.9)
1.3
(254.7)
(245.2)
—
—
(14.6)
(2.6)
Net Cash (Used for) Provided by Investing Activities
(254.7)
(303.0)
Cash Provided by (Used for) Financing Activities:
Proceeds from stock option exercises and other
Excess tax benefits from share-based payments
Intercompany capital
Dividends paid
Other financing activities
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 Year
11.6
17.6
—
(22.7)
—
6.5
—
(36.1)
516.0
—
—
245.2
—
—
245.2
(0.5)
(3.1)
3.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(14.6)
—
—
—
—
—
—
499.9
—
—
(14.6)
499.9
—
—
254.7
—
(10.4)
244.3
(7.8)
243.5
33.4
—
—
(499.9)
—
—
(499.9)
—
—
—
Cash and Cash Equivalents at End of Year
$ 479.9
$
— $
— $
276.9
$
— $
(56.5)
1.3
—
(14.6)
(2.6)
(72.4)
11.6
17.6
—
(22.7)
(10.4)
(3.9)
(8.3)
204.3
552.5
756.8
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ACUITY BRANDS, INC
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 2016
736.6 $
319.4 $
68.4 $
1.58 $
1.57 $
777.8 $
336.9 $
65.5 $
1.50 $
1.49 $
851.5 $
377.9 $
74.0 $
1.70 $
1.69 $
925.5
402.1
82.9
1.90
1.89
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal Year 2015
647.4 $
273.0 $
51.1 $
1.18 $
1.17 $
616.1 $
255.7 $
46.4 $
1.07 $
1.07 $
683.7 $
295.6 $
64.5 $
1.49 $
1.48 $
759.5
321.3
60.1
1.39
1.37
$
$
$
$
$
$
$
$
$
$
Certain amounts in the tables above have been rounded. Accordingly, the sum of the quarters may not be an exact
match to the full year amounts.
80
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, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time
periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms. Disclosure controls and
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 Exchange Act is accumulated and communicated to
management, including the principal executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
As required by SEC rules, the Company has evaluated the effectiveness of the design and operation of its
disclosure controls and procedures as of August 31, 2016. 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 at a reasonable assurance level as of August 31, 2016. 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.
During fiscal 2016, the Company completed its acquisitions of Distech Controls Inc. ("Distech Controls") and
Juno Lighting LLC ("Juno Lighting"). SEC guidance permits management to omit an assessment of an acquired
business' internal control over financial reporting from management's assessment of internal control over financial
reporting for a period not to exceed one year from the date of the acquisition. Accordingly, management has not
assessed Distech Controls' or Juno Lighting's internal control over financial reporting as of August 31, 2016.
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 2016 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 as it relates to Internal Control Over Financial
Reporting, respectively, and are incorporated herein by reference.
Excluding the acquisitions, 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.
The Company began integrating Distech Controls and Juno Lighting into its existing control procedures from the
date of acquisition. The Company does not anticipate the integration of the acquired companies to result in changes
that would materially affect its internal control over financial reporting.
Item 9b.
Other Information
None.
81
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 6, 2017, 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 6,
2017, 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 6, 2017, 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 6, 2017, 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 2016 Summary Compensation Table,
Fiscal 2016 Grants of Plan-Based Awards, Outstanding Equity Awards at Fiscal 2016 Year-End, Option Exercises and
Stock Vested in Fiscal 2016, Pension Benefits in Fiscal 2016, Fiscal 2016 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 6, 2017, 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 6, 2017, 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 6, 2017,
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 6,
2017, to be filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference.
82
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, 2016 and 2015
Consolidated Statements of Comprehensive Income for the years ended August 31, 2016, 2015,
and 2014
Consolidated Statements of Cash Flows for the years ended August 31, 2016, 2015, and 2014
Consolidated Statements of Stockholders’ Equity for the years ended August 31, 2016, 2015, and
2014
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
(2)
(3) Exhibits filed with this report (begins on next page):
Copies of exhibits will be furnished to stockholders upon request at a nominal fee. Requests should
be sent to Acuity Brands, Inc., Investor Relations Department, 1170 Peachtree Street, N.E.,
Suite 2300, Atlanta, Georgia 30309-7676
36
37
39
40
41
42
43
92
83
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, 2016, 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.
EXHIBIT 2
EXHIBIT 3
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.
(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,
2016.
EXHIBIT 4
(a) Form of Certificate representing Acuity
Brands, Inc. Common Stock.
(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.
EXHIBIT 10(i)
(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.
84
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.
85
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.
(15) Acuity Brands, Inc. 2002 Executives’
Deferred Compensation Plan as Amended
on December 30, 2002 and as Amended
and Restated January 1, 2005.
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, Effective As of
January 1, 2003, As Amended and
Restated Effective As of June 26, 2015
(26) Form of Amended and restated Change in
Control Agreement entered into as of April
21, 2006.
(27) Letter Agreement relating to Supplemental
Executive Retirement Plan between Acuity
Brands, Inc. and Vernon J. Nagel.
(28) Employment Letter between Acuity
Brands, Inc. and Vernon J. Nagel, dated
June 29, 2004.
(29) Amended and Restated Severance
Agreement, entered into as of January 20,
2004, by and between Acuity Brands, Inc.
and Vernon J. Nagel.
86
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(1) of
the registrant’s Form 10-Q as filed with
the Commission on July 1, 2015, which is
incorporated by reference.
Reference is made to Exhibit 99.1 of
registrant’s Form 8-K filed with the
Commission on April 27, 2006, which is
incorporated herein by reference.
Reference is made to Exhibit 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.
(30) Amendment dated April 21, 2006 to the
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Vernon J. Nagel.
(31) Amendment No. 2 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Vernon J. Nagel.
(32) Amendment No. 3 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement, between Acuity Brands, Inc.
and Vernon J. Nagel.
(33) Amendment No. 4 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement, between Acuity Brands, Inc.
and Vernon J. Nagel.
(34) Form of Incentive Stock Option
Agreement for Executive Officers.
(35) Form of Nonqualified Stock Option
Agreement for Executive Officers.
(36) Premium-Priced Nonqualified Stock
Option Agreement for Executive Officers
between Acuity Brands, Inc. and Vernon J.
Nagel.
(37) Acuity Brands, Inc. Matching Gift
Program.
(38) Employment Letter dated November 16,
2005 between Acuity Brands, Inc. and
Richard K. Reece.
(39) Amendment No. 1 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Richard K. Reece.
(40) Amendment No. 2 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Richard K. Reece.
(41) Amendment No. 3 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Richard K. Reece.
(42) Amendment No. 4 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Richard K. Reece.
(43) Amendment No. 5 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Richard K. Reece.
(44) Amendment No. 6 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Richard K. Reece.
87
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.
Reference is made to Exhibit 10(iii)A(46)
of the registrant's Form 10-K as filed with
the Commission on October 29, 2014,
which is incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(43)
of the registrant's Form 10-K as filed with
the Commission on October 27, 2015,
which is incorporated herein by reference.
Filed with the Commission as part of this
Form 10-K.
(45) Form of Nonqualified Stock Option
Agreement for Executive Officers.
(46) Amended and Restated Acuity Brands,
Inc. Long-Term Incentive Plan.
(47) Acuity Brands, Inc. Long-Term Incentive
Plan Fiscal Year 2008 Plan Rules for
Executive Officers.
(48) Acuity Brands, Inc. 2007 Management
Compensation and Incentive Plan.
(49) Acuity Brands, Inc. Management
Compensation and Incentive Plan Fiscal
Year 2008 Plan Rules for Executive
Officers.
(50) Form of Nonqualified Stock Option
Agreement for Key Employees effective
October 24, 2008.
(51) Form of Nonqualified Stock Option
Agreement for Executive Officers of Acuity
Brands, Inc. effective October 24, 2008.
(52) Employment Letter dated July 27, 2006
between Acuity Brands, Inc. and Mark A.
Black.
(53) Severance Agreement dated November
19, 2008, by and between Acuity Brands
Lighting, Inc. and Mark A. Black.
(54) Amendment No. 1 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Mark A. Black.
(55) Amendment No. 2 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Mark A. Black.
(56) Amendment No. 3 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Mark A. Black.
(57) Amendment No. 4 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Mark A. Black.
(58) Amendment No. 5 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Mark A. Black.
(59) Amendment No. 6 to Acuity Brands, Inc.
Amended and Restated Severance
Agreement between Acuity Brands, Inc.
and Mark A. Black.
(60) Amended and Restated Change in
Control Agreement.
88
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(1) of
the registrant's Form 10-Q as filed with
the Commission on January 9, 2015.
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.
Reference is made to Exhibit 10(iii)A(58)
of the registrant's Form 10-K as filed with
the Commission on October 29, 2014,
which is incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(57)
of the registrant's Form 10-K as filed with
the Commission on October 27, 2015,
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(2) of
the registrant's Form 10-Q as filed with
the Commission on January 9, 2015.
(61) Amended and Restated Change in
Control Agreement.
(62) Form of Indemnification Agreement.
(63) Acuity Brands, Inc. 2012 Omnibus Stock
Incentive Compensation Plan.
(64) Acuity Brands, Inc. 2012 Management
Cash Incentive Plan.
(65) Form of Stock Notification and Award
Agreement for restricted stock, effective
October 24, 2013.
(66) Form of Stock Notification and Award
Agreement for stock options, effective
October 24, 2013.
(67) Form of Stock Notification and Award
Agreement for restricted stock, effective
October 27, 2014.
(68) Form of Stock Notification and Award
Agreement for stock options, effective
October 27, 2014.
(69) Form of Stock Notification and Award
Agreement for stock options, effective
April 1, 2016.
(70) Form of Restricted Stock Award
Agreement for U.S. Grantees
(71) Form of Restricted Stock Award
Agreement for Non-U.S. Grantees
(72) Form of Nonqualified Stock Option Award
Agreement
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.
Reference is made to Exhibit 10(iii)A(65)
of the registrant's Form 10-K as filed with
the Commission on October 29, 2014,
which is incorporated herein by reference.
Reference is made to Exhibit 10(iii)A(66)
of the registrant's Form 10-K as filed with
the Commission on October 29, 2014,
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 6, 2016, 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.
(73) Form of Nonqualified Stock Option Award
Agreement for Named Executive Officers
Filed with the Commission as part of this
Form 10-K.
EXHIBIT 21
List of Subsidiaries.
Filed with the Commission as part of this
Form 10-K.
EXHIBIT 23
Consent of Independent Registered Public
Accounting Firm.
Filed with the Commission as part of this
Form 10-K.
EXHIBIT 24
Powers of Attorney.
EXHIBIT 31
(a) Rule 13a-14(a)/15d-14(a) Certification,
signed by Vernon J. Nagel.
Filed with the Commission as part of this
Form 10-K.
Filed with the Commission as part of this
Form 10-K.
(b) Rule 13a-14(a)/15d-14(a) Certification,
signed by Richard K. Reece.
Filed with the Commission as part of this
Form 10-K.
EXHIBIT 32
(a) Section 1350 Certification, signed by
Vernon J. Nagel.
(b) Section 1350 Certification, signed by
Richard K. Reece.
Filed with the Commission as part of this
Form 10-K.
Filed with the Commission as part of this
Form 10-K.
89
Filed with the Commission as part of this
Form 10-K.
EXHIBIT 101
The following financial information from
the Company's Annual Report on Form
10-K for the year ended August 31, 2016,
filed on October 27, 2016, formatted in
XBRL (Extensible Business Reporting
Language): (i) the Consolidated Balance
Sheets as of August 31, 2016 and 2015,
(ii) the Consolidated Statements of
Comprehensive Income for the years
ended August 31, 2016, 2015, and 2014,
(iii) the Consolidated Statements of Cash
Flows for the years ended August 31,
2016, 2015, and 2014, (iv) the
Consolidated Statements of Stockholders'
Equity for the years ended August 31,
2016, 2015, and 2014 and (v) the Notes to
Consolidated Financial Statements.
90
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 27, 2016
By:
/S/ VERNON J. NAGEL
ACUITY BRANDS, INC.
Vernon J. Nagel
Chairman, President, and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ VERNON J. NAGEL
Vernon J. Nagel
/s/ RICHARD K. REECE
Richard K. Reece
*
W. Patrick Battle
*
Peter C. Browning
*
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 27, 2016
Executive Vice President and Chief
Financial Officer (Principle Financial
and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
October 27, 2016
October 27, 2016
October 27, 2016
October 27, 2016
October 27, 2016
October 27, 2016
October 27, 2016
October 27, 2016
October 27, 2016
October 27, 2016
*BY:
/s/ RICHARD K. REECE
Richard K. Reece
Attorney-in-Fact
October 27, 2016
91
Schedule II
Acuity Brands, Inc.
Valuation and Qualifying Accounts
For the Years Ended August 31, 2016, 2015, and 2014
(In millions)
Year Ended August 31, 2016
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, 2015
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, 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
Balance at
Additions and Reductions
Charged to
Beginning of
Year
Costs and
Expenses
Other
Accounts
Deductions
Balance at
End of Year
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1.3
6.2
3.0
1.3
15.0
1.9
4.3
2.7
1.3
13.6
1.5
1.5
2.2
1.0
12.4
0.3
62.6
32.0
11.9
(0.2)
0.1
44.7
21.7
9.1
(0.4)
0.8
35.9
19.5
7.4
0.4
0.4
0.9
0.9
—
1.6
—
—
—
—
1.8
—
—
—
—
0.8
0.3 $
58.8 $
31.2 $
11.5 $
1.7
10.9
4.7
1.7
— $
16.4
0.7 $
42.8 $
21.4 $
9.1 $
1.3
6.2
3.0
1.3
— $
15.0
0.4 $
33.1 $
19.0 $
7.1 $
1.9
4.3
2.7
1.3
— $
13.6
92
1170 Peachtree Street, NE
Suite 2300
Atlanta, Georgia 30309-7676
404-853-1400
www.acuitybrands.com