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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
Form 10-Q
_____________________________________________
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2021.
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 30309-7676
(Address of principal executive offices)
(404853-1400
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, $0.01 par value per shareAYINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filer
Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common stock $0.01 par value 35,018,213 shares as of January 3, 2022.



ACUITY BRANDS, INC.
Table of Contents

  Page No.




PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
ACUITY BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
 November 30, 2021August 31, 2021
 (unaudited)
ASSETS
Current assets: 
Cash and cash equivalents$504.0 $491.3 
Accounts receivable, less reserve for doubtful accounts of $1.0 and $1.2, respectively
529.3 571.8 
Inventories439.7 398.7 
Prepayments and other current assets126.9 82.5 
Total current assets1,599.9 1,544.3 
Property, plant, and equipment, net261.0 269.1 
Operating lease right-of-use assets54.7 58.0 
Goodwill1,091.0 1,094.7 
Intangible assets, net561.8 573.2 
Deferred income taxes1.9 1.9 
Other long-term assets35.3 33.9 
Total assets$3,605.6 $3,575.1 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: 
Accounts payable$409.3 $391.5 
Current operating lease liabilities15.6 15.9 
Accrued compensation67.7 95.3 
Other accrued liabilities202.6 189.5 
Total current liabilities695.2 692.2 
Long-term debt494.5 494.3 
Long-term operating lease liabilities44.0 46.7 
Accrued pension liabilities52.8 60.2 
Deferred income taxes100.6 101.0 
Other long-term liabilities145.6 136.2 
Total liabilities1,532.7 1,530.6 
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; 54,180,355 and 54,018,978 issued, respectively
0.5 0.5 
Paid-in capital1,004.6 995.6 
Retained earnings2,893.2 2,810.3 
Accumulated other comprehensive loss(108.9)(98.2)
Treasury stock, at cost, of 19,127,037 and 18,826,611 shares, respectively
(1,716.5)(1,663.7)
Total stockholders’ equity2,072.9 2,044.5 
Total liabilities and stockholders’ equity$3,605.6 $3,575.1 
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
1

ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions, except per-share data)
 Three Months Ended
 November 30, 2021November 30, 2020
Net sales$926.1 $792.0 
Cost of products sold540.3 459.6 
Gross profit385.8 332.4 
Selling, distribution, and administrative expenses270.7 246.0 
Special charges 0.7 
Operating profit115.1 85.7 
Other expense: 
Interest expense, net5.9 4.9 
Miscellaneous expense, net0.3 1.6 
Total other expense6.2 6.5 
Income before income taxes108.9 79.2 
Income tax expense21.3 19.6 
Net income$87.6 $59.6 
Earnings per share: 
Basic earnings per share$2.50 $1.58 
Basic weighted average number of shares outstanding35.1 37.6 
Diluted earnings per share$2.46 $1.57 
Diluted weighted average number of shares outstanding35.5 37.8 
Dividends declared per share$0.13 $0.13 
Comprehensive income:
Net income$87.6 $59.6 
Other comprehensive income (loss) items:
Foreign currency translation adjustments(11.9)4.6 
Defined benefit plans, net of tax1.2 1.6 
Other comprehensive (loss) income items, net of tax(10.7)6.2 
Comprehensive income$76.9 $65.8 
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.


2

ACUITY BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
 Three Months Ended
 November 30, 2021November 30, 2020
Cash flows from operating activities:
Net income$87.6 $59.6 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization24.3 25.0 
Share-based payment expense7.6 7.7 
Asset impairment 4.0 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable40.2 56.3 
Inventories(41.3)4.1 
Prepayments and other current assets(47.7)(20.3)
Accounts payable17.7 (9.2)
Other(4.7)(3.3)
Net cash provided by operating activities83.7 123.9 
Cash flows from investing activities:  
Purchases of property, plant, and equipment(9.3)(11.4)
Proceeds from sale of property, plant, and equipment 0.4 
Other investing activities0.3 (3.1)
Net cash used for investing activities(9.0)(14.1)
Cash flows from financing activities:  
Issuance of long-term debt 493.9 
Repayments of long-term debt (395.1)
Repurchases of common stock(56.3)(255.2)
Proceeds from stock option exercises and other8.6 0.3 
Payments of taxes withheld on net settlement of equity awards(6.7)(3.0)
Dividends paid(4.7)(5.0)
Net cash used for financing activities(59.1)(164.1)
Effect of exchange rate changes on cash and cash equivalents(2.9)0.6 
Net change in cash and cash equivalents12.7 (53.7)
Cash and cash equivalents at beginning of period491.3 560.7 
Cash and cash equivalents at end of period$504.0 $507.0 
Supplemental cash flow information:  
Income taxes paid during the period$28.3 $9.3 
Interest paid during the period$13.3 $15.1 
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
3

ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 — Description of Business and Basis of Presentation
Acuity Brands, Inc. (referred to herein as “we,” “our,” “us,” the “Company,” or similar references) is a market-leading industrial technology company. We use technology to solve problems in spaces and light. Through our two business segments, Acuity Brands Lighting and Lighting Controls (“ABL”) and the Intelligent Spaces Group (“ISG”), we design, manufacture, and bring to market products and services that make the world more brilliant, productive, and connected. We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management systems, and location-aware applications.
ABL Segment
ABL's portfolio of lighting solutions includes commercial, architectural, and specialty lighting in addition to lighting controls and components that can be combined to create integrated lighting controls systems. We offer devices such as luminaires that predominantly utilize light emitting diode (“LED”) technology designed to optimize energy efficiency and comfort for various indoor and outdoor applications. ABL's' portfolio of products includes but is not limited to the following brands: Lithonia Lighting®, Holophane®, Peerless®, Gotham®, Mark Architectural LightingTM, Winona® Lighting, Juno®, IndyTM, AculuxTM, Healthcare Lighting®, Hydrel®, American Electric Lighting®, Sunoptics®, eldoLED®, nLight®, Sensor Switch®, IOTA®, A-LightTM, CycloneTM, Eureka®, Lumniaire LEDTM, Luminis®, Dark to Light®, and RELOC® Wiring Solutions.
Principal customers of ABL include electrical distributors, retail home improvement centers, electric utilities, national accounts, digital retailers, lighting showrooms, and energy service companies located in North America and select international markets serving new construction, renovation and retrofit, and maintenance and repair applications. ABL's lighting and lighting controls solutions are sold primarily through a network of independent sales agencies that cover specific geographic areas and market channels, by internal sales representatives, through consumer retail channels, and directly to large corporate accounts. Products are delivered directly from our manufacturing facilities or through a network of distribution centers, regional warehouses, and commercial warehouses using both common carriers and a company-managed truck fleet. To serve international customers, the sales forces utilize a variety of distribution methods to meet specific individual customer or country requirements.
ABL comprised approximately 95% of consolidated revenues during the three months ended November 30, 2021 and 2020.
ISG Segment
ISG delivers products and services that make spaces smarter, safer, and greener. ISG offers building management systems and location-aware applications and sells predominantly to system integrators. Our building management system includes products for controlling heating, ventilation, and air conditioning (“HVAC”), lighting, shades, and building access that deliver end-to-end optimization of those building systems. AtriusTM, our intelligent building platform, enhances the occupant experience, improves building system management, and automates labor intensive tasks while delivering operational energy efficiency and cost reductions. Through a connected and converged building system architecture, our platform delivers different applications, allows clients to upgrade over time with natural refresh cycles, and deploys new capability through both software and hardware updates. Customers of ISG primarily include system integrators as well as retail stores, airports, and enterprise campuses throughout North America and select international locations. ISG products and solutions are marketed under numerous brand names, including but not limited to Distech Controls®, AtriusTM, and Rockpile Ventures.
ISG comprised approximately 5% of consolidated revenues during the three months ended November 30, 2021 and 2020.
We have prepared the Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) to present the financial position, results of operations, and cash flows of Acuity Brands, Inc. and its wholly-owned subsidiaries.
These unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present fairly our consolidated financial position as of November 30, 2021, our consolidated comprehensive income for the three months ended November 30, 2021 and 2020, and our consolidated cash flows for the three months ended November 30, 2021 and 2020. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with U.S. GAAP have been
4

ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
condensed or omitted. However, we believe that the disclosures included herein are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited consolidated financial statements as of and for the three years ended August 31, 2021 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October 27, 2021 (File No. 001-16583) (“Form 10-K”).
The results of operations for the three months ended November 30, 2021 are not necessarily indicative of the results to be expected for the full fiscal 2022 year due primarily to continued uncertainty of general economic conditions that may impact our key end markets for the remainder of fiscal 2022, seasonality, and the impact of any acquisitions, among other reasons. Additionally, we are uncertain of the future impact of the ongoing COVID-19 pandemic or recovery of prior deterioration in economic conditions to our sales channels, supply chain, manufacturing, and distribution as well as overall construction, renovation, and consumer spending.
Note 2 — Significant Accounting Policies
Use of Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.
Reclassifications
We have recast prior period segment and disaggregated revenue information to conform to the current year presentation. See Segment Information footnote of the Notes to Consolidated Financial Statements for further details. No other material reclassifications occurred during the current period.
Note 3 — Acquisitions
The following discussion relates to fiscal 2021 acquisitions. There were no acquisitions during fiscal 2022.
Fiscal 2021 Acquisition
ams OSRAM's North American Digital Systems Business
On July 1, 2021, using cash on hand, we acquired certain assets and liabilities of ams OSRAM’s North American Digital Systems business (“OSRAM DS”). This acquisition is intended to enhance our LED driver and controls technology portfolio and accelerate our innovation, expand our access to market through a more fulsome original equipment manufacturer (“OEM”) product offering, and give us more control over our supply chain.
Rockpile Ventures
On May 18, 2021, using cash on hand, we acquired all of the equity interests of Rockpile Ventures, an accelerator of edge artificial intelligence (“AI”) startups. Rockpile Ventures helps early-stage artificial intelligence companies drive co-engineering and co-selling partnerships with major cloud ecosystems, enabling faster adoption from proof-of-concept trials to market scale.
Accounting for Acquisitions
We accounted for the acquisitions of Rockpile Ventures and OSRAM DS in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Acquired assets and liabilities were recorded at their estimated acquisition-date fair values, and acquisition-related costs were expensed as incurred. The aggregate purchase price of these acquisitions reflects preliminary goodwill of $10.0 million and definite-lived customer-based intangible assets of $6.1 million, which have a preliminary useful life of approximately 11 years. Goodwill recognized from these acquisitions is comprised primarily of expected synergies from obtaining more control over our supply chain and technology, combining the operations of the acquired business with our operations, and acquiring the associated trained workforce. As of November 30, 2021, goodwill from these
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
acquisitions totaling $6.9 million is expected to be tax deductible. Amounts recognized for these acquisitions are deemed to be provisional until disclosed otherwise, as we continue to gather information related to the identification and valuation of acquired assets and liabilities, including but not limited to, acquired interests in technology startups, tax-related items, final net working capital purchase adjustments, if any, and the residual impacts on the valuation of intangible assets.
Note 4 — New Accounting Pronouncements
Accounting Standards Adopted in Fiscal 2022
Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”)
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC Topic 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, or our fiscal 2022. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We adopted ASU 2019-11 as of September 1, 2021 as required by the standard. This standard did not have a material effect on our financial condition, results of operations, or cash flows.
Accounting Standards Yet to Be Adopted
ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”)
In October 2021, the FASB issued ASU 2021-08, which requires companies to recognize and measure contract assets and contract liabilities acquired in a business combination as if the acquiring company originated the related revenue contracts. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, or our fiscal 2024, with early adoption permitted. We are currently assessing the impacts of ASU 2021-08 to determine whether we will adopt early or in fiscal 2024. Amendments within the standard are required to be applied on a prospective basis from the date of adoption. We will apply the provisions of ASU 2021-08 after adoption to future acquisitions, if any.
All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.
Note 5 — Fair Value Measurements
We determine fair value measurements based on the assumptions a market participant would use in pricing an asset or liability. ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a three level hierarchy that distinguishes between market participant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (Level 3).
We utilize valuation methodologies to determine the fair values of our financial assets and liabilities in conformity with the concepts of “exit price” and the fair value hierarchy as prescribed in ASC 820. 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. 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.
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Financial Instruments Recorded at Fair Value
We used quoted market prices to determine the fair value of Level 1 assets and liabilities. Our cash and cash equivalents (Level 1), which are required to be carried at fair value and measured on a recurring basis, were $504.0 million and $491.3 million as of November 30, 2021 and August 31, 2021, respectively.
We hold a small number of investments in equity and debt financial instruments totaling $8.8 million and $5.3 million as of November 30, 2021 and August 31, 2021, respectively. We generally account for these investments at fair value on a recurring basis. Changes in the fair values of these financial instruments during the three months ended November 30, 2021 and November 30, 2020 were de minimis.
Our strategic equity investments represent less than a 20% ownership interest in each of the privately-held entities, and we do not exercise significant influence or control any of the entities. Certain of these investments do not have readily determinable fair value. We have elected the practical expedient in ASC Topic 321, Investments—Equity Securities, to measure these investments at cost less any impairment adjusted for observable price changes, if any. During the first quarter of fiscal 2021, we recorded an impairment charge of $4.0 million for one of these investments as a recapitalization of the underlying company diluted our holding value. This impairment is reflected in Miscellaneous expense, net for the three months ended November 30, 2020 within our Consolidated Statements of Comprehensive Income.
Disclosures of Fair Value of Financial Instruments
Disclosures of fair value information about financial instruments, for which it is practicable to estimate that value, are required each reporting period in addition to any financial instruments carried at fair value on a recurring basis as prescribed by ASC Topic 825, Financial Instruments (“ASC 825”). In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.
Our senior unsecured public notes are carried at the outstanding balance, net of unamortized bond discount and deferred costs, as of the end of the reporting period. Fair value is estimated based on discounted future cash flows using rates currently available for debt of similar terms and maturity (Level 2). The estimated fair value of our senior unsecured public notes was $488.9 million and $496.5 million as of November 30, 2021 and August 31, 2021, respectively. See Debt and Lines of Credit footnote for further details on our long-term borrowings.
ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value to us. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instruments. In evaluating our management of liquidity and other risks, the fair values of all assets and liabilities should be taken into consideration, not only those presented above.
Note 6 — Inventories
Inventories include materials, labor, inbound freight, and related manufacturing overhead; are stated at the lower of cost (on a first-in, first-out or average cost basis) and net realizable value; and consist of the following as of the dates presented (in millions):
 November 30, 2021August 31, 2021
Raw materials, supplies, and work in process (1)
$228.9 $209.5 
Finished goods251.5 227.2 
Inventories excluding reserves480.4 436.7 
Less: Reserves(40.7)(38.0)
Total inventories$439.7 $398.7 
_______________________________________
(1) Due to the immaterial amount of estimated work in process and the short lead times for the conversion of raw materials to finished goods, we do not believe the segregation of raw materials and work in process is meaningful information.
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
We review inventory quantities on hand and record a provision for excess or obsolete inventory primarily based on estimated future demand and current market conditions. A significant change in customer demand or market conditions could render certain inventory obsolete and could have a material adverse impact on our operating results in the period the change occurs.
Note 7 — Property, Plant, and Equipment
Property, plant, and equipment consist of the following as of the dates presented (in millions):
 November 30, 2021August 31, 2021
Land$22.1 $22.4 
Buildings and leasehold improvements198.0 198.0 
Machinery and equipment626.1 624.9 
Total property, plant, and equipment, at cost846.2 845.3 
Less: Accumulated depreciation and amortization(585.2)(576.2)
Property, plant, and equipment, net$261.0 $269.1 
As of November 30, 2021 and August 31, 2021, we classified as held for sale one building with a total carrying value of $6.6 million within Prepayments and other current assets on the Consolidated Balance Sheets. At each balance sheet date, we concluded the fair value less costs to sell exceeded the carrying value of each of these assets.
Note 8 — Goodwill and Intangible Assets
Through multiple acquisitions, we acquired definite-lived intangible assets consisting primarily of customer relationships, patented technology, distribution networks, and trademarks and trade names associated with specific products, which are amortized over their estimated useful lives. Indefinite-lived intangible assets consist of trade names that are expected to generate cash flows indefinitely.
We recorded amortization expense for definite-lived intangible assets of $10.3 million and $10.1 million during the three months ended November 30, 2021 and 2020, respectively. Amortization expense is generally recorded on a straight-line basis and is expected to be approximately $41.2 million in fiscal 2022, $40.5 million in fiscal 2023, $40.0 million in fiscal 2024, $31.9 million in fiscal 2025, and $29.1 million in fiscal 2026.
The following table summarizes the changes in the carrying amount of goodwill by segment during the periods presented (in millions):
ABLISGTotal
Balance as of August 31, 2021$1,022.2 $72.5 $1,094.7 
Foreign currency translation adjustments(3.0)(0.7)(3.7)
Balance as of November 30, 2021$1,019.2 $71.8 $1,091.0 
ABLISGTotal
Balance as of August 31, 2020$1,012.6 $67.4 $1,080.0 
Foreign currency translation adjustments0.4 0.2 0.6 
Balance as of November 30, 2020$1,013.0 $67.6 $1,080.6 
Further discussion of goodwill and other intangible assets is included within the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements within our Form 10-K.
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 9 — Other Current Liabilities
Other current liabilities consist of the following as of the dates presented (in millions):
 November 30, 2021August 31, 2021
Customer incentive programs(1)
$40.4 $33.9 
Refunds to customers(1)
26.3 28.1 
Current deferred revenues(1)
8.9 7.7 
Sales commissions25.6 28.9 
Freight costs16.7 17.5 
Warranty and recall costs(2)
16.3 16.8 
Tax-related items(3)
5.7 11.7 
Interest on long-term debt(4)
5.0 2.4 
Other(5)
57.7 42.4 
Total other current liabilities$202.6 $189.4 
____________________________________
(1)Refer to the Revenue Recognition footnote of the Notes to Consolidated Financial Statements within our Form 10-K for additional information.
(2)Refer to the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements for additional information.
(3)Includes accruals for income, property, sales and use, and value added taxes.
(4)Refer to the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for additional information.
(5)Includes an accrual of $15.8 million as of November 30, 2021, related to the securities class action matter. Refer to the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements for additional information.
Note 10 — Debt and Lines of Credit
Long-term Debt
On November 10, 2020, Acuity Brands Lighting, Inc. issued $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 15, 2030 (the "Unsecured Notes"). The Unsecured Notes bear interest at a rate of 2.150% per annum and were issued at a price equal to 99.737% of their face value. Interest on the Unsecured Notes is paid semi-annually in arrears on June 15 and December 15 of each year. The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Brands, Inc. and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Brands, Inc. We recorded $4.8 million of deferred issuance costs related to the Unsecured Notes as a direct deduction from the face amount of the Unsecured Notes. These issuance costs are amortized over the 10-year term of the Unsecured Notes. As of November 30, 2021, the balance of the Unsecured Notes net of unamortized discount and deferred issuance costs was $494.5 million.
Lines of Credit
On June 29, 2018, we entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks that provides us with a $400.0 million five-year unsecured revolving credit facility (the “Revolving Credit Facility”). We had no borrowings outstanding under the Revolving Credit Facility as of November 30, 2021 or August 31, 2021. The Credit Agreement expires in June 2023, and we plan to enter into a new agreement prior to this expiration.
Generally, amounts outstanding under the Revolving Credit Facility allow for borrowings to bear interest at either the Eurocurrency Rate or the base rate at our option, plus an applicable margin. Eurocurrency Rate advances can be denominated in a variety of currencies, including U.S. Dollars, and amounts outstanding bear interest at a periodic fixed rate equal to the London Inter-Bank Offered Rate (“LIBOR”) or screen rate for the applicable currency plus an applicable margin. The Eurocurrency Rate applicable margin is based on our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 1.000% to 1.375%. Base rate advances bear interest at an alternate base rate plus an applicable margin. The base rate applicable margin is based on our leverage ratio with such margin ranging from 0.000% to 0.375%.
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
On July 27, 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that it will phase out rates for the calculation of LIBOR. As a result of this change, certain LIBOR tenors and currencies were eliminated on December 31, 2021 with all other tenors and currencies of LIBOR anticipated to be eliminated on June 30, 2023.
We are required to pay certain fees in connection with the Credit Agreement, including administrative service fees and an annual facility fee. The annual facility fee is payable quarterly, in arrears, and is determined by our leverage ratio. The annual facility fee ranges from 0.125% to 0.250% of the aggregate $400.0 million commitment of the lenders under the Credit Agreement. The Credit Agreement contains financial covenants, including a minimum interest expense coverage ratio (“Minimum Interest Expense Coverage Ratio”) and a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness to earnings before interest, tax, depreciation, and amortization (“EBITDA”), as such terms are defined in the Credit Agreement. These ratios are computed at the end of each fiscal quarter for the most recent 12-month period. The Credit Agreement generally allows for a Minimum Interest Expense Coverage Ratio of 2.50 and a Maximum Leverage Ratio of 3.50, subject to certain conditions.
We were in compliance with all financial covenants under the Credit Agreement as of November 30, 2021. As of November 30, 2021, we had outstanding letters of credit totaling $4.1 million, primarily for securing collateral requirements under our casualty insurance programs. At November 30, 2021, we had additional borrowing capacity under the Credit Agreement of $395.9 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less the outstanding letters of credit of $4.1 million issued under the Revolving Credit Facility.
Borrowings and repayments on our Revolving Credit Facility with terms of three months or less are reported on a net basis on our Consolidated Statements of Cash Flows.
Interest Expense, net
Interest expense, net, is comprised primarily of interest expense on long-term debt, line of credit borrowings, and loans that are secured by and presented net of company-owned life insurance policies on our Consolidated Balance Sheets. Interest expense is partially offset by interest income earned on cash and cash equivalents.
The following table summarizes the components of interest expense, net for the periods presented (in millions):
 Three Months Ended
 November 30, 2021November 30, 2020
Interest expense$6.2 $5.1 
Interest income(0.3)(0.2)
Interest expense, net$5.9 $4.9 
Note 11 — Commitments and Contingencies
In the normal course of business, we are subject to the effects of certain contractual stipulations, events, transactions, and laws and regulations that may, at times, require the recognition of liabilities, such as those related to self-insurance estimated liabilities and claims, legal and contractual issues, environmental laws and regulations, guarantees, and indemnities. We establish estimated liabilities when the associated costs related to uncertainties or guarantees become probable and can be reasonably estimated. For the period ended November 30, 2021, no material changes have occurred in our estimated liabilities for self-insurance, litigation, environmental matters, guarantees and indemnities, or relevant events and circumstances, from those disclosed in the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements within our Form 10-K other than the items discussed below.
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Product Warranty and Recall Costs
Our products generally have a standard warranty term of five years that assure our products comply with agreed upon specifications. We record an accrual for the estimated amount of future warranty costs when the related revenue is recognized. Estimated costs related to product recalls based on a formal campaign soliciting repair or return of that product are accrued when they are deemed to be probable and can be reasonably estimated. Estimated future warranty and recall costs are primarily based on historical experience of identified warranty and recall claims. However, there can be no assurance that future warranty or recall costs will not exceed historical amounts or that new technology products may not generate unexpected costs. If actual future warranty or recall costs exceed historical amounts, additional increases in the accrual may be required, which could have a material adverse impact on our results of operations and cash flows.
Estimated liabilities for product warranty and recall costs are included in Other accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets based upon when we expect to settle the incurred warranty. The following table summarizes changes in the estimated liabilities for product warranty and recall costs during the periods presented (in millions):
Three Months Ended
November 30, 2021November 30, 2020
Beginning balance$20.3 $16.1 
Warranty and recall costs4.4 6.6 
Payments and other deductions(4.5)(5.9)
Ending balance$20.2 $16.8 
Securities Class Action
On October 5, 2021, the parties to the shareholder class action litigation previously disclosed (and further described below) executed a term sheet for settlement of the litigation, subject to documentation of the settlement and approval of the District Court after notice to class members. On December 2, 2021, the lead plaintiff in the case filed an unopposed motion seeking preliminary approval of the settlement which attaches the settlement stipulation and exhibits thereto. If the settlement is approved, we expect that the agreed-upon settlement payment of $15.8 million will be funded entirely by applicable Directors and Officers liability insurance. As such, we do not anticipate a significant net loss or cash outflow as a result of the settlement of this matter. As of November 30, 2021, we reflected a liability for the settlement amount within Other current liabilities and a corresponding receivable for the offsetting insurance proceeds within Prepayments and other current assets on the Consolidated Balance Sheets.
The case was originally filed on January 3, 2018, in the United States District Court for the District of Delaware against the Company and certain of our officers on behalf of all persons who purchased or otherwise acquired our stock between June 29, 2016 and April 3, 2017. On February 20, 2018, a different shareholder filed a second class action complaint in the same venue against the same parties on behalf of all persons who purchased or otherwise acquired our stock between October 15, 2015 and April 3, 2017. The cases were transferred on April 30, 2018, to the United States District Court for the Northern District of Georgia and subsequently were consolidated as In re Acuity Brands, Inc. Securities Litigation, Civil Action No. 1:18-cv-02140-MHC (N.D. Ga.). On October 5, 2018, the court-appointed lead plaintiff filed a consolidated amended class action complaint (the “Consolidated Complaint”), which supersedes the initial complaints. The Consolidated Complaint is brought on behalf of all persons who purchased our common stock between October 7, 2015 and April 3, 2017 and alleges that we and certain of our former officers/executives violated the federal securities laws by making false or misleading statements and/or omitting to disclose material adverse facts that (i) concealed known trends negatively impacting sales of our products and (ii) overstated our ability to achieve profitable sales growth. The plaintiffs seek unspecified monetary damages, costs, and attorneys’ fees. We dispute the allegations in the complaints. We filed a motion to dismiss the Consolidated Complaint. On August 12, 2019, the court entered an order granting our motion to dismiss in part and dismissing all claims based on 42 of the 47 statements challenged in the Consolidated Complaint but also denying the motion in part and allowing claims based on five challenged statements to proceed to discovery. The Eleventh Circuit Court of Appeals granted the Company permission to file an interlocutory appeal of the District Court’s class certification order, and the briefing of that appeal has been completed. On October 7, 2021, the Eleventh Circuit Court of Appeals entered an order holding the appeal from the class certification order in abeyance pending a
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
decision from the District Court concerning approval of the proposed settlement.
Shareholder Derivative Complaint
On October 1, 2021, certain alleged shareholders of the Company filed a putative derivative complaint in the United States District Court for the Northern District of Georgia asserting claims against three of the individuals named as defendants in the above securities action for breach of fiduciary duty and certain other claims arising out of the alleged facts and circumstances upon which the claims in the above securities class action are based (the “Derivative Complaint”). The Company is named as a nominal defendant, and the plaintiffs seek on behalf of the Company unspecified damages from the individual defendants and other relief. Prior to filing the Derivative Complaint, the derivative plaintiffs sent letters to the Company’s Board of Directors (the “Board”) demanding that the Company investigate and pursue substantially the same claims against the individual defendants that are asserted in the Derivative Complaint. The Company’s Board formed a demand evaluation committee consisting of independent directors to investigate these matters and make a recommendation to the Board regarding the best interests of the Company in connection therewith. The committee’s work is ongoing. On December 14, 2021, the Company filed a motion to stay the derivative action pending the conclusion of the related securities class action or, in the alternative, to dismiss the derivative action without prejudice as premature, given the demand evaluation committee’s ongoing work. Also on December 14, 2021, the individual defendants filed a motion to dismiss the Derivative Complaint for failure to adequately plead any claim for relief against them.
Estimating an amount or range of possible losses or gains resulting from litigation proceedings is inherently difficult, particularly where the matters involve indeterminate claims for monetary damages and are in the stages of the proceedings where key evidential and legal issues have not been resolved. For these reasons, we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or gains or a range of possible losses or gains resulting from the matters described above.
Litigation
We are subject to various other legal claims arising in the normal course of business, including patent infringement, employment matters, and product liability claims. Based on information currently available, it is the opinion of management that the ultimate resolution of pending and threatened legal proceedings will not have a material adverse effect on our financial condition, results of operations, or cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of any such matters, if unfavorable, could have a material adverse effect on our financial condition, results of operations, or cash flows in future periods. We establish estimated liabilities for legal claims when associated costs become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the amounts accrued for such claims. However, we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the accrued amounts.

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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 12 — Changes in Stockholders' Equity
The following tables summarize changes in the components of stockholders' equity for the periods presented (in millions):
Common Stock Outstanding
SharesAmountPaid-in
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Loss
Treasury
Stock, at cost
Total
Balance, August 31, 202135.2 $0.5 $995.6 $2,810.3 $(98.2)$(1,663.7)$2,044.5 
Net income— — — 87.6 — — 87.6 
Other comprehensive loss— — — — (10.7)— (10.7)
Share-based payment amortization, issuances, and cancellations0.1 — 0.4 — — — 0.4 
Employee stock purchase plan issuances— — 0.6 — — — 0.6 
Cash dividends of $0.13 per share paid on common stock
— — — (4.7)— — (4.7)
Stock options exercised0.1 — 8.0 — — — 8.0 
Repurchases of common stock(0.3)— — — — (52.8)(52.8)
Balance, November 30, 202135.1 $0.5 $1,004.6 $2,893.2 $(108.9)$(1,716.5)$2,072.9 
Common Stock Outstanding
SharesAmountPaid-in
Capital
Retained
Earnings
Accumulated Other
Comprehensive
Loss
Treasury
Stock, at cost
Total
Balance, August 31, 202038.9 $0.5 $963.6 $2,523.3 $(132.7)$(1,227.2)$2,127.5 
Net income— — — 59.6 — — 59.6 
Other comprehensive income— — — — 6.2 — 6.2 
Cumulative effect of adoption of ASC 326— — — (0.2)— — (0.2)
Share-based payment amortization, issuances, and cancellations0.1 — 4.7 — — — 4.7 
Employee stock purchase plan issuances— — 0.3 — — — 0.3 
Cash dividends of $0.13 per share paid on common stock
— — — (5.0)— — (5.0)
Repurchases of common stock(2.6)— — — — (256.1)(256.1)
Balance, November 30, 202036.4 $0.5 $968.6 $2,577.7 $(126.5)$(1,483.3)$1,937.0 
Note 13 — Revenue Recognition
We recognize revenue when we transfer control of goods and services to our customers. Revenue is measured as the amount of consideration we expect to receive in exchange for goods and services and is recognized net of allowances for rebates, sales incentives, product returns, and discounts to customers. Further details regarding revenue recognition are included within the Revenue Recognition footnote of the Notes to Consolidated Financial Statements within our Form 10-K.
Contract Balances
Our rights related to collections from customers are unconditional and are reflected within Accounts receivable on the Consolidated Balance Sheets. We do not have any other significant contract assets. Contract liabilities arise when we receive cash or an unconditional right to collect cash prior to the transfer of control of goods or services.
The amount of transaction price from contracts with customers allocated to our contract liabilities consists of the following as of the periods presented (in millions):
November 30, 2021August 31, 2021
Current deferred revenues$8.9 $7.7 
Non-current deferred revenues55.9 56.7 
Current deferred revenues primarily consist of software licenses as well as professional service and sales-type warranty fees collected prior to performing the related service. Current deferred revenues are included within Other current liabilities on the Consolidated Balance Sheets. These services are expected to be performed within one year
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
from the dates presented. Non-current deferred revenues primarily consist of long-term service-type warranties, which are typically recognized ratably as revenue between five and ten years from the date of sale, and are included within Other long-term liabilities on the Consolidated Balance Sheets. Revenue recognized from beginning balances of contract liabilities during the three months ended November 30, 2021 totaled $3.1 million.
Unsatisfied performance obligations that do not represent contract liabilities are expected to be satisfied within one year from November 30, 2021 and consist primarily of orders for physical goods that have not yet been shipped.
Disaggregated Revenues
Our ABL segment's lighting and lighting controls are sold primarily through independent sales agents who cover specific geographic areas and market channels, by internal sales representatives, through consumer retail channels, and directly to large corporate accounts. ISG sells predominantly to system integrators. The following table shows revenue from contracts with customers by sales channel and reconciles to our segment information for the periods presented (in millions):
Three Months Ended
November 30, 2021November 30, 2020
ABL:
Independent sales network$636.8 $559.5 
Direct sales network90.0 80.1 
Retail sales46.9 56.0 
Corporate accounts37.0 22.9 
Other72.9 35.1 
Total ABL883.6 753.6 
ISG46.4 40.8 
Eliminations(3.9)(2.4)
Total$926.1 $792.0 
Note 14 — Share-based Payments
We account for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors over the related requisite service period, including stock options, performance stock units, and restricted stock (all part of our equity incentive plan), as well as stock units representing certain deferrals into our director deferred compensation plan or our supplemental deferred savings plan.
The following table presents share-based payment expense for the periods presented (in millions):
Three Months Ended
November 30, 2021November 30, 2020
Share-based payment expense$7.6 $7.7 
We recognized excess tax benefits of $4.2 million related to share-based payment awards during the three months ended November 30, 2021.
Further details regarding our share-based payments are included within the Share-based Payments footnote of the Notes to Consolidated Financial Statements within our Form 10-K.
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ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 15 — Pension Plans
We have several pension plans, both qualified and non-qualified, covering certain hourly and salaried employees. Benefits paid under these plans are based generally on employees’ years of service and/or compensation during the final years of employment. We make at least the minimum annual contributions to the plans to the extent indicated by actuarial valuations and statutory requirements. Plan assets are invested primarily in fixed income and equity securities.
Service cost of net periodic pension cost is allocated between Cost of products sold and Selling, distribution, and administrative expenses in the Consolidated Statements of Comprehensive Income based on the nature of the employee's services. All other components of net periodic pension cost are included within Miscellaneous expense, net in the Consolidated Statements of Comprehensive Income. Net periodic pension cost included the following components before tax for the periods presented (in millions):
 Three Months Ended
 November 30, 2021November 30, 2020
Service cost$1.2 $1.2 
Interest cost1.5 1.6 
Expected return on plan assets(3.4)(3.3)
Amortization of prior service cost0.7 0.7 
Recognized actuarial loss0.9 1.4 
Net periodic pension cost$0.9 $1.6 
Further details regarding our pension plans are included within the Pension and Defined Contribution Plans footnote of the Notes to Consolidated Financial Statements within our Form 10-K.
Note 16 — Earnings Per Share
Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed similarly but reflects the potential dilution that would occur if dilutive options were exercised, all unvested share-based payment awards were vested, and other distributions related to deferred stock agreements were incurred. Common stock equivalents are calculated using the treasury stock method. The dilutive effects of share-based payment awards subject to market and/or performance conditions that were not met during the period are excluded from the computation of diluted earnings per share.
The following table calculates basic earnings per common share and diluted earnings per common share for the periods presented (in millions, except per share data):
Three Months Ended
November 30, 2021November 30, 2020
Net income$87.6 $59.6 
Basic weighted average shares outstanding35.1 37.6 
Common stock equivalents0.4 0.2 
Diluted weighted average shares outstanding35.5 37.8 
Basic earnings per share$2.50 $1.58 
Diluted earnings per share$2.46 $1.57 
15

ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The following table presents stock options, performance stock awards, and restricted stock awards that were excluded from the diluted earnings per share calculation for the periods presented as the effect of inclusion would have been antidilutive (in millions):
Three Months Ended
November 30, 2021November 30, 2020
Stock options0.1 1.1 
Performance stock awards * 
Restricted stock awards *0.2 
_______________________________________
* Represents shares of less than 0.1 million.
Further discussion of our share-based payment awards is included within the Common Stock and Related Matters and Share-based Payments footnotes of the Notes to Consolidated Financial Statements within our Form 10-K.
Note 17 — 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. Comprehensive income includes our net income as well as other comprehensive income (loss) items. Other comprehensive income (loss) items include foreign currency translation and pension adjustments.
The following table presents the changes in each component of accumulated other comprehensive loss net of tax during the periods presented (in millions):
 Foreign Currency Items Defined Benefit Pension Plans Accumulated Other Comprehensive Loss Items
Balance at August 31, 2021$(40.2)$(58.0)$(98.2)
Other comprehensive loss before reclassifications(11.9) (11.9)
Amounts reclassified from accumulated other comprehensive loss (1)
 1.2 1.2 
Net current period other comprehensive (loss) income(11.9)1.2 (10.7)
Balance at November 30, 2021$(52.1)$(56.8)$(108.9)
 Foreign Currency Items Defined Benefit Pension Plans Accumulated Other Comprehensive Loss Items
Balance at August 31, 2020$(53.5)$(79.2)$(132.7)
Other comprehensive income before reclassifications4.6  4.6 
Amounts reclassified from accumulated other comprehensive loss (1)
 1.6 1.6 
Net current period other comprehensive income4.6 1.6 6.2 
Balance at November 30, 2020$(48.9)$(77.6)$(126.5)
_______________________________________
(1) The before tax amounts of the defined benefit pension plan items are included in net periodic pension cost. See the Pension and Defined Contribution Plans footnote for additional details.
16

ACUITY BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The following table summarizes the tax expense or benefit allocated to each component of other comprehensive income (loss) for the periods presented (in millions):
Three Months Ended
November 30, 2021November 30, 2020
 Before Tax Amount Tax (Expense) Benefit Net of Tax Amount Before Tax Amount Tax (Expense) Benefit Net of Tax Amount
Foreign currency translation adjustments$(11.9)$ $(11.9)$4.6 $ $4.6 
Defined benefit pension plans:
Amortization of defined benefit pension items:
Prior service cost
0.7 (0.2)0.5 0.7 (0.2)0.5 
Actuarial losses0.9 (0.2)0.7 1.4 (0.3)1.1 
Total defined benefit pension plans, net1.6 (0.4)1.2 2.1 (0.5)1.6 
Other comprehensive (loss) income$(10.3)$(0.4)$(10.7)$6.7 $(0.5)$6.2 
Note 18 — Segment Information
During the third quarter of fiscal 2021, we completed a realignment of our operations and structure to better support our business strategy. As a result, beginning in the third quarter of fiscal 2021, we now report our financial results of operations in two reportable segments, ABL and ISG, consistent with how our chief operating decision maker currently evaluates operating results, assesses performance, and allocates resources within the Company. We have recast historical information to conform to the current segment structure.
The accounting policies of our reportable segments are the same as those described in the Significant Accounting Policies footnote of the Notes to Consolidated Financial Statements within our Form 10-K. Corporate expenses that are primarily administrative in function and benefit the Company on an entity-wide basis are not allocated to our segments. These include expenses related to governance, policy setting, compliance, and certain other shared services functions. Additionally, we do not allocate net interest expense, net miscellaneous expense, special charges, or assets to our segments. Accordingly, this information is not used by the chief operating decision maker to make operating decisions and assess performance and is therefore excluded from our disclosures.
The following table presents financial information by operating segment for the periods presented (in millions):
ABLISGCorporate
Eliminations(1)
Total
Three Months Ended November 30, 2021:
Net sales$883.6 $46.4 $ $(3.9)$926.1 
Operating profit (loss)128.1 2.0 (15.0) 115.1 
Depreciation and amortization20.4 3.6 0.3  24.3 
Three Months Ended November 30, 2020:
Net sales$753.6 $40.8 $ $(2.4)$792.0 
Operating profit (loss)98.4 (0.1)(12.6) 85.7 
Depreciation and amortization21.1 3.6 0.3  25.0 
____________________________
(1) This column represents intersegment sales. Profit on these sales eliminates within gross profit on a consolidated basis.
The following table reconciles operating profit by segment to income before income taxes (in millions):
Three Months Ended
November 30, 2021November 30, 2020
Operating profit - ABL$128.1 $98.4 
Operating profit (loss) - ISG2.0 (0.1)
Unallocated corporate amounts(15.0)(12.6)
Operating profit115.1 85.7 
Interest expense, net5.9 4.9 
Miscellaneous expense, net0.3 1.6 
Income before income taxes$108.9 $79.2 
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results of operations, financial position, cash flows, indebtedness, and other key financial information of Acuity Brands, Inc. (referred to herein as “we,” “our,” “us,” the “Company,” or similar references) and its subsidiaries as of November 30, 2021 and for the three months ended November 30, 2021 and 2020. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included within this report. Also, please refer to Acuity Brands' Annual Report on Form 10-K for the fiscal year ended August 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on October 27, 2021 (“Form 10-K”).
Overview
Company
We are a market-leading industrial technology company. We use technology to solve problems in spaces and light. Through our two business segments, Acuity Brands Lighting and Lighting Controls (“ABL”) and the Intelligent Spaces Group (“ISG”) we design, manufacture, and bring to market products and services that make the world more brilliant, productive, and connected. We achieve growth through the development of innovative new products and services, including lighting, lighting controls, building management systems, and location-aware applications.
We achieve customer-focused efficiencies that allow us to increase market share and deliver superior returns. We look to aggressively deploy capital to grow the business and to enter attractive new verticals.
The results of operations for the three months ended November 30, 2021 are not necessarily indicative of the results to be expected for the full fiscal 2022 year due primarily to continued uncertainty of general economic conditions that may impact our key end markets for fiscal 2022, seasonality, and the impact of any acquisitions, among other reasons. Additionally, we are uncertain of the future impact of the ongoing COVID-19 pandemic or recovery of prior deterioration in economic conditions to our sales channels, supply chain, manufacturing, and distribution as well as overall construction, renovation, and consumer spending.
Financial Condition, Capital Resources, and Liquidity
We have numerous sources of capital, including cash on hand and cash flows generated from operations as well as various sources of financing. Our ability to generate sufficient cash flow from operations or to access certain capital markets, including banks, is necessary to meet our capital allocation priorities, which are to reinvest in our organic growth, make strategic acquisitions and investments, pay dividends, and repurchase shares. Sufficient cash flow generation is also critical to fund our operations in the short and long-term and to maintain compliance with covenants contained in our financing agreements.
Our significant contractual cash requirements primarily include principal and interest on long-term debt, payments for operating lease liabilities, and certain purchase obligations incurred in the ordinary course of business that are enforceable and legally binding. Our obligations related to these items are described further within Management’s Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report filed on Form 10-K. We believe that we will be able to meet our liquidity needs over the next 12 months based on our cash on hand, current projections of cash flows from operations, and borrowing availability under financing arrangements. Additionally, we believe that our cash flows from operations and sources of funding, including, but not limited to, future borrowings and borrowing capacity, will sufficiently support our long-term liquidity needs. In the event of a sustained market deterioration, we may need additional capital, which would require us to evaluate available alternatives and take appropriate actions.
Cash
Our cash position at November 30, 2021 was $504.0 million, an increase of $12.7 million from August 31, 2021. Cash generated from operating activities and cash on-hand were used during the current year to fund our capital allocation priorities as discussed below.
We generated $83.7 million of cash flows from operating activities during the three months ended November 30, 2021 compared with $123.9 million in the prior-year period, a decrease of $40.2 million, due primarily to increased operating working capital, particularly inventories, to support the growth in the business as well as the timing of payments for income taxes and prior year payroll tax deferrals under the Coronavirus Aid, Relief, and Economic Security Act of 2020.
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Financing Arrangements
See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for discussion of our various financing arrangements, including the terms of our $400.0 million five-year unsecured revolving credit facility (“Revolving Credit Facility”) as well as the $500.0 million aggregate principal amount of 2.150% senior unsecured notes due December 15, 2030 (the “Unsecured Notes”). At November 30, 2021, our outstanding debt balance was $494.5 million compared to our cash position of $504.0 million. We were in compliance with all financial covenants under our financing arrangements as of November 30, 2021.
At November 30, 2021, we had additional borrowing capacity under the revolving credit facility of $395.9 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less the outstanding letters of credit of $4.1 million issued under the facility. As of November 30, 2021, our cash on hand combined with the additional borrowing capacity under the revolving credit facility totaled $899.9 million.
The Unsecured Notes were issued by Acuity Brands Lighting, Inc., a wholly-owned subsidiary of Acuity Brands, Inc. The Unsecured Notes are fully and unconditionally guaranteed on a senior unsecured basis by Acuity Brands, Inc. and ABL IP Holding LLC, a wholly-owned subsidiary of Acuity Brands, Inc. The following tables present summarized financial information for Acuity Brands, Inc., Acuity Brands Lighting, Inc., and ABL IP Holding LLC on a combined basis after the elimination of all intercompany balances and transactions between the combined group as well as any investments in non-guarantors as of the dates and during the period presented (in millions):
Summarized Balance Sheet InformationNovember 30, 2021August 31, 2021
Current assets$1,222.6 $1,172.0 
Amounts due from non-guarantor affiliates238.5 213.4 
Non-current assets1,381.1 1,391.7 
Current liabilities602.7 595.1 
Non-current liabilities818.7 815.7 
Summarized Income Statement InformationThree Months Ended November 30, 2021
Net sales$781.2 
Gross profit324.7 
Net income84.9 
Capital Allocation Priorities
Effective capital allocation is a key driver of stockholder value. Our capital allocation priorities are to invest in our business for growth, to invest in mergers and acquisitions, to maintain our dividend, and to make share repurchases.
Organic Growth Investments
We invested $9.3 million and $11.4 million during the three months ended November 30, 2021 and 2020, respectively, in property, plant, and equipment, primarily related to investments in new and enhanced information technology capabilities, tooling, equipment, and facility enhancements. We currently expect to invest approximately 1.5% of net sales on capital expenditures during fiscal 2022.
Strategic Acquisitions and Investments
We seek opportunities to strategically expand and enhance our portfolio of solutions. There were no acquisitions during the first quarter of fiscal 2022. We invested in acquisitions of businesses, net of cash acquired, of $75.3 million in the year ended August 31, 2021. These acquisitions included the following transactions:
On July 1, 2021, using cash on hand, we acquired certain assets and liabilities of ams OSRAM’s North American Digital Systems (“OSRAM DS”) business. This acquisition is intended to enhance our light emitting diode (“LED”) driver and controls technology portfolio and accelerate our innovation, expand our access to market through a more fulsome OEM product offering, and give us more control over our supply chain.
19

On May 18, 2021, using cash on hand, we acquired all of the equity interests of Rockpile Ventures, an accelerator of edge artificial intelligence startups. Rockpile Ventures helps early-stage artificial intelligence companies drive co-engineering and co-selling partnerships with major cloud ecosystems, enabling faster adoption from proof-of-concept trials to market scale.
Please refer to the Acquisitions footnote of the Notes to Consolidated Financial Statements for more information.
Dividends
We paid dividends on our common stock of $4.7 million ($0.13 per share) and $5.0 million ($0.13 per share) during the three months ended November 30, 2021 and 2020, respectively. All decisions regarding the declaration and payment of dividends are at the discretion of the Board of Directors (the “Board”) and are evaluated regularly in light of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Board deems relevant.
Share Repurchases
During the first quarter of fiscal 2022, we repurchased 0.3 million shares of our outstanding common stock for $52.8 million. Total cash outflows for share repurchases during the quarter were $56.3 million. As of November 30, 2021, the maximum number of shares that may yet be repurchased under the share repurchase program authorized by the Board equaled 3.5 million shares. We expect to repurchase shares on an opportunistic basis subject to various factors including stock price, Company performance, market conditions, and other possible uses of cash.
The COVID-19 Pandemic
The COVID-19 pandemic has resulted in intermittent worldwide government restrictions on the movement of people, goods, and services resulting in increased volatility in and disruptions to global markets. We remain committed to prioritizing the health and well-being of our associates and their families and ensuring that we operate effectively. We have implemented policies to screen associates, contractors, and vendors for COVID-19 symptoms upon entering our manufacturing, distribution, and open-office facilities in the United States, Mexico, and other locations as permitted by law. We have also implemented one-way traffic flows, additional cleaning requirements for common spaces, mandatory face coverings, hand sanitizer stations, socially-distanced workspaces, and self-serve pay stations within our cafeterias to mitigate the spread of the virus. Additionally, we have required certain employees whose job functions can be performed remotely to work primarily from home.
The COVID-19 pandemic has had an adverse impact on our results of operations. The pandemic has caused reduced construction and renovation spending as well as a disruption in our supply chain for certain components, both of which negatively impacted our operating results. Although our facilities are open, a resurgence in COVID-19 cases, including as a result of new variants, may lead to the reimposition of previously lifted business closure requirements, the imposition of new restrictions, or the issuance of new or revised local or national health guidance. We also continue to incur additional health and safety costs including expenditures for personal protection equipment and facility enhancements to maintain proper distancing guidelines issued by the Centers for Disease Control and Prevention. We have taken actions to reduce costs, including the realignment of headcount with current volumes, a limit on all non-essential employee travel, other efforts to decrease discretionary spending, and reductions in our real estate footprint. Additionally, we elected to defer certain employer payroll taxes as allowable under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES" Act) signed into law on March 27, 2020. Half of these deferrals were paid in December 2021, and the remaining deferrals are due in December 2022.
Although we have implemented significant measures to mitigate further spread of the virus, our employees, customers, suppliers, and contractors may continue to experience disruptions to business activities due to potential further government-mandated or voluntary shutdowns, general economic conditions, or other negative impacts of the COVID-19 pandemic. We are continuously monitoring the adverse effects of the pandemic and identifying steps to mitigate those effects. As the COVID-19 pandemic is continually evolving, we are uncertain of its ultimate duration and impact. See Part I, Item 1a. Risk Factors of our Form 10-K for further details regarding the potential impacts of COVID-19 to our results of operations, financial position, and cash flows.

20

Results of Operations
First Quarter of Fiscal 2022 Compared with First Quarter of Fiscal 2021
The following table sets forth information comparing the components of net income for the three months ended November 30, 2021 and 2020 (in millions except per share data):
Three Months Ended
 November 30, 2021November 30, 2020Increase (Decrease) Percent Change
Net sales$926.1 $792.0 $134.1 16.9 %
Cost of products sold540.3 459.6 80.7 17.6 %
Gross profit385.8 332.4 53.4 16.1 %
Percent of net sales41.7 %42.0 %(30)bps 
Selling, distribution, and administrative expenses270.7 246.0 24.7