Acuity Brands(AYI) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Acuity Brands, Inc., including the Balance Sheets, Statements of Comprehensive Income, and Statements of Cash Flows, along with detailed notes explaining the company's business, accounting policies, acquisitions, debt, equity, and other financial details for the period ended November 30, 2019 Consolidated Balance Sheets The Consolidated Balance Sheets show an increase in total assets and stockholders' equity, primarily driven by goodwill and intangible assets from acquisitions, while current assets decreased due to a significant reduction in cash and cash equivalents | Metric | Nov 30, 2019 (millions) | Aug 31, 2019 (millions) | Change (millions) | | :----------------------------------- | :---------------------- | :---------------------- | :---------------- | | Total Assets | $3,305.2 | $3,172.4 | +$132.8 | | Total Liabilities | $1,317.9 | $1,253.5 | +$64.4 | | Total Stockholders' Equity | $1,987.3 | $1,918.9 | +$68.4 | | Cash and Cash Equivalents | $266.6 | $461.0 | -$194.4 | | Goodwill | $1,115.5 | $967.3 | +$148.2 | | Intangible Assets, net | $621.5 | $466.0 | +$155.5 | Consolidated Statements of Comprehensive Income For the three months ended November 30, 2019, Acuity Brands experienced a decline in net sales, net income, and diluted EPS compared to the prior-year period, despite an improvement in gross profit margin | Metric | Nov 30, 2019 (millions) | Nov 30, 2018 (millions) | Change (millions) | Change (%) | | :----------------------------------- | :---------------------- | :---------------------- | :---------------- | :--------- | | Net Sales | $834.7 | $932.6 | -$97.9 | -10.5% | | Gross Profit | $355.8 | $367.5 | -$11.7 | -3.2% | | Operating Profit | $83.6 | $116.4 | -$32.8 | -28.2% | | Net Income | $57.0 | $79.6 | -$22.6 | -28.4% | | Diluted Earnings Per Share | $1.44 | $1.98 | -$0.54 | -27.3% | | Gross Profit Margin | 42.6% | 39.4% | +3.2% | | Consolidated Statements of Cash Flows Cash flows from operating activities remained stable, but significant cash was used for investing activities, primarily due to acquisitions, leading to a substantial net decrease in cash and cash equivalents for the three months ended November 30, 2019 | Metric | Nov 30, 2019 (millions) | Nov 30, 2018 (millions) | Change (millions) | | :----------------------------------- | :---------------------- | :---------------------- | :---------------- | | Net Cash Provided by Operating Activities | $129.6 | $131.8 | -$2.2 | | Net Cash Used for Investing Activities | ($315.1) | ($11.3) | -$303.8 | | Net Cash Used for Financing Activities | ($9.5) | ($34.1) | +$24.6 | | Net Change in Cash and Cash Equivalents | ($194.4) | $85.7 | -$280.1 | | Acquisition of Businesses, net of cash acquired | ($302.0) | — | -$302.0 | Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's financial reporting, including its business description, accounting policies, acquisitions, debt, equity, and other financial details Note 1 — Description of Business and Basis of Presentation Acuity Brands is a leading provider of lighting and building management solutions, expanding into IoT and smart building software. Interim results are not necessarily indicative of the full fiscal year - Acuity Brands is a leading provider of lighting and building management solutions and services for commercial, institutional, industrial, infrastructure, and residential applications, primarily in North America. The company is expanding its portfolio to include software and services for IoT, smart buildings, smart cities, and the smart grid[12] - The unaudited interim consolidated financial statements reflect normal and recurring adjustments necessary for fair presentation, but certain information and footnote disclosures have been condensed or omitted compared to annual statements[14] - Results for the three months ended November 30, 2019, are not necessarily indicative of the full fiscal year due to seasonality (net sales and income generally higher in the second half), impact of acquisitions, and continued economic uncertainties[15] Note 2 — Significant Accounting Policies Financial statement preparation requires management estimates and assumptions, which may differ from actual results. No material reclassifications occurred - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenue, and expense. Actual results could differ from these estimates[16] Note 3 — Acquisitions In fiscal 2020, Acuity Brands acquired TLG and LocusLabs, adding goodwill and intangible assets. Operating results are included since acquisition dates - On September 17, 2019, Acuity Brands acquired The Luminaires Group (TLG), a provider of specification-grade luminaires, complementing its lighting portfolio[20] - On November 25, 2019, Acuity Brands acquired LocusLabs, Inc., a software platform supporting indoor navigation applications[21] - The aggregate purchase price for TLG and LocusLabs included preliminary total goodwill of approximately $147.8 million and identified intangible assets of approximately $165.0 million as of November 30, 2019[22] Note 4 — New Accounting Pronouncements Acuity Brands adopted ASC 842 (Leases) in fiscal 2020, recognizing lease liabilities and ROU assets. Other ASUs are being evaluated or planned for adoption - Acuity Brands adopted ASC 842 (Leases) using the modified retrospective method, applying it to all leases existing as of September 1, 2019[25] Impact of ASC 842 Adoption (as of September 1, 2019) | Metric | Amount (millions) | | :----------------------------------- | :---------------- | | Total Operating Lease Liabilities Recognized | $64.7 | | Long-term Operating Lease Liabilities | $49.3 | | Current Operating Lease Liabilities | $15.4 | | Previously Recorded Net Deferred Rent Derecognized | $5.1 | | ROU Assets Recorded | $59.6 | - The company is currently evaluating the impacts of ASU No. 2019-12, Simplifying the Accounting for Income Taxes, effective for fiscal years beginning after December 15, 2021[27] Note 5 — Fair Value Measurements Fair value measurements use a three-level hierarchy. Cash and cash equivalents are Level 1 assets, while certain debt instruments are Level 2 - Fair value measurements are based on a three-level hierarchy: Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable and significant inputs)[31] Cash and Cash Equivalents (Level 1) | Date | Amount (millions) | | :------------------- | :---------------- | | November 30, 2019 | $266.6 | | August 31, 2019 | $461.0 | Carrying Values and Estimated Fair Values of Financial Instruments (Level 2) | Instrument | Nov 30, 2019 Carrying Value (millions) | Nov 30, 2019 Fair Value (millions) | Aug 31, 2019 Carrying Value (millions) | Aug 31, 2019 Fair Value (millions) | | :---------------------------------------------------- | :----------------------------------- | :--------------------------------- | :----------------------------------- | :--------------------------------- | | Senior unsecured public notes, net | $350.0 | $350.1 | $349.9 | $352.7 | | Industrial revenue bond | $4.0 | $4.0 | $4.0 | $4.0 | | Bank loans | $2.3 | $2.4 | $2.7 | $2.9 | Note 6 — Inventories Inventories, valued at the lower of cost and net realizable value, increased slightly due to raw materials, supplies, and work in process Inventories (in millions) | Category | Nov 30, 2019 | Aug 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Raw materials, supplies, and work in process | $190.6 | $179.4 | | Finished goods | $186.8 | $183.7 | | Inventories excluding reserves | $377.4 | $363.1 | | Less: Reserves | ($24.8) | ($22.3) | | Total inventories | $352.6 | $340.8 | Note 7 — Property, Plant, and Equipment Net property, plant, and equipment remained relatively stable, with minor increases in buildings and machinery Property, Plant, and Equipment, Net (in millions) | Category | Nov 30, 2019 | Aug 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Land | $22.7 | $22.6 | | Buildings and leasehold improvements | $193.6 | $190.7 | | Machinery and equipment | $557.7 | $544.4 | | Total property, plant, and equipment, at cost | $774.0 | $757.7 | | Less: Accumulated depreciation and amortization | ($495.6) | ($480.4) | | Property, plant, and equipment, net | $278.4 | $277.3 | Note 8 — Leases Following ASC 842 adoption, the company recognized operating lease liabilities and ROU assets. Total lease cost was $6.0 million for the quarter - The company leases property and equipment under operating lease arrangements, primarily for distribution centers and manufacturing facilities in the U.S. and Mexico[41] Operating Lease Liabilities and Payments (in millions) | Metric | Nov 30, 2019 | | :----------------------------------- | :----------- | | Present value of lease liabilities | $66.1 | | Total undiscounted lease payments | $70.0 | | Weighted average discount rate | 2.2% | | Weighted average remaining lease term | 6 years | | Total lease cost (3 months ended Nov 30, 2019) | $6.0 | | Cash paid for operating lease liabilities (3 months ended Nov 30, 2019) | $4.5 | | ROU assets obtained from lease liabilities (3 months ended Nov 30, 2019) | $5.1 | Note 9 — Goodwill and Intangible Assets Goodwill increased due to acquisitions. Amortization expense for definite-lived intangible assets was $9.6 million for the quarter Goodwill (in millions) | Metric | Nov 30, 2019 | Nov 30, 2018 | | :----------------------------------- | :----------- | :----------- | | Beginning balance | $967.3 | $970.6 | | Additions from acquired businesses | $147.8 | — | | Foreign currency translation adjustments | $0.4 | ($3.7) | | Ending balance | $1,115.5 | $966.9 | Amortization Expense (in millions) | Period | Amount | | :----------------------------------- | :----- | | Three months ended Nov 30, 2019 | $9.6 | | Three months ended Nov 30, 2018 | $7.7 | | Expected fiscal 2020 | $41.3 | | Expected fiscal 2021 | $39.0 | | Expected fiscal 2022 | $38.1 | | Expected fiscal 2023 | $36.9 | | Expected fiscal 2024 | $36.0 | Note 10 — Debt and Lines of Credit Acuity Brands has a $400.0 million revolving credit facility and a $400.0 million term loan facility, with no outstanding borrowings as of November 30, 2019. Post-period, senior unsecured notes were repaid - Acuity Brands has a $400.0 million five-year unsecured revolving credit facility and a $400.0 million unsecured delayed draw term loan facility[51] - As of November 30, 2019, there were no borrowings outstanding under either the Revolving Credit Facility or the Term Loan Facility[51] - The company was in compliance with all financial covenants and had an additional borrowing capacity of $796.2 million as of November 30, 2019[54] - In December 2019, the $350.0 million senior unsecured notes that matured were repaid in full using borrowings from the Term Loan Facility[56][92] Interest Expense, Net (in millions) | Metric | Nov 30, 2019 | Nov 30, 2018 | | :------------------- | :----------- | :----------- | | Interest expense | $9.0 | $9.2 | | Interest income | ($0.7) | ($0.5) | | Interest expense, net | $8.3 | $8.7 | Note 11 — Commitments and Contingencies The company is subject to legal claims, including patent infringement and a securities class action, which are being vigorously defended. Reserves for product warranty increased slightly - Acuity Brands is subject to legal claims, including patent infringement allegations by Lighting Science Group Corp. related to LED luminaires and systems, and a securities class action alleging false or misleading statements regarding sales trends and growth[64][65] - The company disputes the allegations and intends to vigorously defend against these claims, but the ultimate timing, outcome, or range of possible losses cannot be reasonably estimated at this stage[64][65] Reserves for Product Warranty and Recall Costs (in millions) | Metric | Nov 30, 2019 | Nov 30, 2018 | | :----------------------------------- | :----------- | :----------- | | Beginning balance | $11.5 | $27.3 | | Warranty and recall costs | $7.9 | $5.4 | | Payments and other deductions | ($7.8) | ($5.6) | | Acquired warranty and recall liabilities | $0.1 | — | | ASC 606 adjustments | — | ($14.8) | | Ending balance | $11.7 | $12.3 | Note 12 — Changes in Stockholders' Equity Stockholders' equity increased by $68.4 million, primarily due to net income and other comprehensive income, partially offset by cash dividends Changes in Stockholders' Equity (in millions) | Metric | Nov 30, 2019 | Aug 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Balance, August 31 | $1,918.9 | $1,716.8 | | Net income | $57.0 | $79.6 | | Other comprehensive income (loss) | $3.8 | ($6.2) | | Share-based payment amortization, issuances, and cancellations | $12.6 | $3.8 | | Employee stock purchase plan issuances | $0.2 | $0.1 | | Cash dividends paid | ($5.2) | ($5.2) | | Repurchases of common stock | — | ($25.0) | | Balance, November 30 | $1,987.3 | $1,750.9 | Note 13 — Revenue Recognition Revenue is recognized when control of goods and services is transferred to customers, net of allowances. Total net sales were $834.7 million for the quarter - Revenue is recognized when control of goods and services is transferred to customers, measured as the expected consideration, net of rebates, sales incentives, returns, and discounts[70] Contract Liabilities (in millions) | Category | Nov 30, 2019 | Aug 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Current deferred revenues | $7.4 | $4.7 | | Non-current deferred revenues | $47.7 | $46.4 | Revenue by Sales Channel (in millions) | Sales Channel | Nov 30, 2019 | Nov 30, 2018 | | :----------------------------------- | :----------- | :----------- | | Independent sales network | $618.0 | $651.0 | | Direct sales network | $84.3 | $99.0 | | Retail sales | $53.4 | $85.2 | | Corporate accounts | $33.5 | $51.2 | | Other | $45.5 | $46.2 | | Total | $834.7 | $932.6 | Note 14 — Share-based Payments Share-based payment expense increased significantly due to changes in the equity incentive program, including new performance share unit grants Share-based Payment Expense (in millions) | Period | Amount | | :----------------------------------- | :----- | | Three months ended Nov 30, 2019 | $16.7 | | Three months ended Nov 30, 2018 | $7.8 | - The Board approved grants of performance share units to executives and key employees, vesting over three years based on performance thresholds. Approximately 37,000 performance share units were outstanding as of November 30, 2019[78] - A policy was reinstated for restricted stock and performance share grants awarded in October 2019 and thereafter, providing for continued vesting after retirement for eligible participants (age 60 with 10+ years of service)[79] Note 15 — Pension Plans Net periodic pension cost for the quarter was $2.3 million, slightly higher than the prior year, with service cost allocated across expenses Net Periodic Pension Cost (in millions) | Component | Nov 30, 2019 | Nov 30, 2018 | | :----------------------------------- | :----------- | :----------- | | Service cost | $1.2 | $0.8 | | Interest cost | $1.8 | $2.2 | | Expected return on plan assets | ($3.1) | ($3.1) | | Amortization of prior service cost | $1.0 | $0.8 | | Settlement loss | — | $0.4 | | Recognized actuarial loss | $1.4 | $1.1 | | Net periodic pension cost | $2.3 | $2.2 | Note 16 — Special Charges Special charges increased significantly to $6.9 million, primarily due to severance costs and ROU asset lease impairments related to facility closures and acquisitions - During fiscal 2020, Acuity Brands recognized pre-tax special charges of $6.9 million, primarily for severance costs and ROU asset lease impairments related to planned facility closures[83] - These actions are expected to streamline business activities, integrate recent acquisitions, reduce spending, and allow continued investment in growth initiatives[83] Special Charges (in millions) | Category | Nov 30, 2019 | Nov 30, 2018 | | :----------------------------------- | :----------- | :----------- | | Severance and employee-related costs | $5.1 | ($0.5) | | Other restructuring costs | $1.8 | $1.5 | | Total special charges | $6.9 | $1.0 | Note 17 — Earnings Per Share Basic and diluted earnings per share decreased to $1.44 for the quarter, reflecting lower net income Earnings Per Share (in millions, except per share data) | Metric | Nov 30, 2019 | Nov 30, 2018 | | :----------------------------------- | :----------- | :----------- | | Net income | $57.0 | $79.6 | | Basic weighted average shares outstanding | 39.5 | 40.0 | | Diluted weighted average shares outstanding | 39.6 | 40.1 | | Basic earnings per share | $1.44 | $1.99 | | Diluted earnings per share | $1.44 | $1.98 | Antidilutive Stock Options and Restricted Stock Awards Excluded from Diluted EPS | Category | Nov 30, 2019 | Nov 30, 2018 | | :----------------------------------- | :----------- | :----------- | | Stock options | 278,972 | 212,048 | | Restricted stock awards | 118,036 | 197,014 | Note 18 — Comprehensive Income Comprehensive income for the quarter was $60.8 million, including net income and positive other comprehensive income items Comprehensive Income (in millions) | Metric | Nov 30, 2019 | Nov 30, 2018 | | :----------------------------------- | :----------- | :----------- | | Net income | $57.0 | $79.6 | | Other comprehensive income (loss) items, net of tax | $3.8 | ($6.2) | | Comprehensive income | $60.8 | $73.4 | Changes in Accumulated Other Comprehensive Loss (in millions) | Component | Nov 30, 2019 | Aug 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Balance at August 31 | ($151.4) | ($114.8) | | Net current period other comprehensive income (loss) | $3.8 | ($6.2) | | Balance at November 30 | ($147.6) | ($121.0) | Note 19 — Subsequent Event In December 2019, Acuity Brands borrowed $400.0 million from its Term Loan Facility to repay maturing Unsecured Notes, leaving $396.2 million in additional borrowing capacity - In December 2019, Acuity Brands borrowed the full $400.0 million available under its Term Loan Facility[92] - The proceeds were primarily used to repay the $350.0 million Unsecured Notes, which matured on December 15, 2019, and related accrued interest[92] - As of the filing date, the company had an additional borrowing capacity of $396.2 million under the Credit Agreement[92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Acuity Brands' financial performance, liquidity, and capital resources, detailing business, acquisitions, cash flow, debt, and outlook Overview Acuity Brands is a leading provider of lighting and building management solutions, expanding into IoT. Recent acquisitions enhance its portfolio, but quarterly results are not indicative of full-year performance - Acuity Brands is a leading provider of lighting and building management solutions and services, expanding its portfolio to include software and services for IoT, smart buildings, smart cities, and the smart grid[95] - In fiscal 2020, the company acquired The Luminaires Group (TLG) to enhance its lighting portfolio and LocusLabs, Inc. for indoor navigation software[96][97] - The results for the three months ended November 30, 2019, are not necessarily indicative of the full fiscal year due to seasonality, the impact of acquisitions, and continued economic uncertainties[98] Liquidity and Capital Resources Acuity Brands relies on operating cash flows, cash on hand, and borrowings to fund operations, capital expenditures, dividends, and acquisitions, expecting to meet all liquidity needs - Principal sources of liquidity include operating cash flows, cash on hand, and various borrowings[99] - Expected short-term cash needs include funding operations, capital investments, quarterly dividends, debt payments, employee benefit contributions, possible acquisitions, and potential share repurchases[103] - The company believes it will meet liquidity needs over the next 12 months and long-term through cash on hand, projected operating cash flow, and borrowing availability[103] Cash Flow Cash and cash equivalents decreased by $194.4 million. Operating cash flow was $129.6 million, while investing activities used $315.1 million, primarily for acquisitions Cash Position and Operating Cash Flow (in millions) | Metric | Nov 30, 2019 | Aug 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Cash position | $266.6 | $461.0 | | Net cash flows from operations (3 months) | $129.6 | $131.8 | | Net cash used for investing activities (3 months) | $315.1 | $11.3 | | Acquisitions (3 months) | $302.0 | — | | Capital expenditures (3 months) | $11.6 | $14.0 | Capitalization Total debt outstanding was $356.3 million. The company maintained compliance with covenants and had significant borrowing capacity. Stockholders' equity increased to $1.99 billion Debt and Capitalization Ratios (in millions) | Metric | Nov 30, 2019 | Aug 31, 2019 | | :----------------------------------- | :----------- | :----------- | | Total debt outstanding | $356.3 | $356.6 | | Consolidated stockholders' equity | $1,990 | $1,920 | | Debt to total capitalization ratio | 15.2% | 15.7% | | Debt, net of cash, to total capitalization, net of cash | 4.3% | (5.8)% | - The company had a $400.0 million revolving credit facility and a $400.0 million term loan facility, with no borrowings outstanding as of November 30, 2019, and was in compliance with all financial covenants[110] - Additional borrowing capacity under the Credit Agreement was $796.2 million as of November 30, 2019[110] Dividends Acuity Brands paid $5.2 million ($0.13 per share) in common stock dividends, consistent with the prior year, with future decisions at the Board's discretion Dividends Paid on Common Stock (in millions) | Period | Amount | Per Share | | :----------------------------------- | :----- | :-------- | | Three months ended Nov 30, 2019 | $5.2 | $0.13 | | Three months ended Nov 30, 2018 | $5.2 | $0.13 | Contractual Obligations In December 2019, the company fully utilized its Term Loan Facility to refinance Unsecured Notes. The Term Loan amortizes quarterly, with no other material changes to obligations - In December 2019, Acuity Brands borrowed the full $400.0 million available under its Term Loan Facility to repay the Unsecured Notes that matured on December 15, 2019[115] - Borrowings under the Term Loan Facility amortize in equal quarterly installments, with any remaining balance due on June 29, 2023[115] Results of Operations Net sales decreased by 10.5% due to lower volumes, despite improved gross profit margin. Operating profit and net income declined significantly due to lower sales and higher expenses Key Financial Performance (in millions, except per share data) | Metric | Nov 30, 2019 | Nov 30, 2018 | Change (millions) | Percent Change | | :----------------------------------- | :----------- | :----------- | :---------------- | :------------- | | Net sales | $834.7 | $932.6 | ($97.9) | (10.5)% | | Gross profit | $355.8 | $367.5 | ($11.7) | (3.2)% | | Gross profit percent of net sales | 42.6% | 39.4% | +320 bps | | | Selling, distribution, and administrative expenses | $265.3 | $250.1 | $15.2 | 6.1% | | Special charges | $6.9 | $1.0 | $5.9 | NM | | Operating profit | $83.6 | $116.4 | ($32.8) | (28.2)% | | Operating profit percent of net sales | 10.0% | 12.5% | (250) bps | | | Net income | $57.0 | $79.6 | ($22.6) | (28.4)% | | Diluted earnings per share | $1.44 | $1.98 | ($0.54) | (27.3)% | Adjusted Key Financial Performance (in millions, except per share data) | Metric | Nov 30, 2019 | Nov 30, 2018 | Change (millions) | Percent Change | | :----------------------------------- | :----------- | :----------- | :---------------- | :------------- | | Adjusted gross profit | $356.9 | $368.7 | ($11.8) | (3.2)% | | Adjusted gross profit percent of net sales | 42.8% | 39.5% | +330 bps | | | Adjusted selling, distribution, and administrative expenses | $237.9 | $234.6 | $3.3 | 1.4% | | Adjusted operating profit | $119.0 | $134.1 | ($15.1) | (11.3)% | | Adjusted operating profit percent of net sales | 14.3% | 14.4% | (10) bps | | | Adjusted net income | $84.2 | $92.8 | ($8.6) | (9.3)% | | Adjusted diluted earnings per share | $2.13 | $2.32 | ($0.19) | (8.2)% | - Net sales decreased 10.5% due to a 16% decrease in sales volumes, partially offset by a 3% net favorable change in product prices and mix, and a 2.5% contribution from acquired businesses[121] Outlook Acuity Brands is cautious about lighting market conditions due to construction declines and trade issues. The strategy focuses on market share, margin, cost containment, and technology-driven solutions for long-term growth - The company expects to drive market share gains and enhance margins in fiscal 2020, while implementing cost containment measures[132] - Market demand for lighting products is expected to remain sluggish due to continued declines in private non-residential construction spending, global trade uncertainties (tariffs), and potential U.S. election impacts[132] - Long-term prospects are positive, with expectations for solid growth in addressable markets, especially with digital lighting's role in IoT and smart building automation systems[137] - Refinancing the Unsecured Notes with the Term Loan Facility is estimated to save $7 million to $8 million in interest for the remainder of fiscal 2020[136] Critical Accounting Estimates Management relies on estimates and assumptions for revenue, inventory, asset recoverability, and various reserves. No material changes occurred in critical accounting estimates - The preparation of financial statements requires management to make estimates and assumptions related to revenue recognition, inventory valuation, amortization and recoverability of long-lived assets (including goodwill and intangible assets), share-based payment expense, and various reserves (medical, product warranty, recall, retirement benefits, litigation)[139] - No material changes in critical accounting estimates occurred during the current period[140] Cautionary Statement Regarding Forward-Looking Information This section warns that forward-looking statements are subject to risks and uncertainties, including customer relations, competition, market demand, litigation, and economic factors - The filing contains forward-looking statements regarding financial performance, liquidity, capital structure, market conditions, growth strategies, tax rates, amortization, and legal matters[141] - Readers are cautioned not to place undue reliance on forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially[141] - Key risks include customer and supplier relationships, competition, market demand, litigation, and economic, political, governmental, and technological factors[141] Item 3. Quantitative and Qualitative Disclosures about Market Risk Acuity Brands is exposed to market risks from fluctuations in interest rates, foreign exchange rates, and commodity prices, with no material changes since the prior Form 10-K - The company is exposed to market risks primarily from fluctuations in interest rates, foreign exchange rates, and commodity prices[143] - There have been no material changes to the company's exposure from market risks compared to those disclosed in its Form 10-K[143] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective. The assessment of internal control for newly acquired businesses was omitted, but integration has begun - Management, including the principal executive officer and principal financial officer, concluded that the design and operation of disclosure controls and procedures are effective at a reasonable assurance level as of November 30, 2019[145] - The assessment of internal control over financial reporting for the recently acquired businesses, The Luminaires Group (TLG) and LocusLabs, Inc., was omitted as permitted by SEC guidance for a period not exceeding one year from acquisition date[146] - Excluding the acquisitions, there have been no material changes in internal control over financial reporting during the most recent fiscal quarter[146] PART II. OTHER INFORMATION Item 1. Legal Proceedings Acuity Brands is involved in ongoing legal proceedings, including patent infringement and a securities class action, which are being vigorously defended. Management believes the resolution will not have a material adverse effect - Acuity Brands is facing patent infringement complaints from Lighting Science Group Corp. (LSG) regarding certain LED luminaires and systems, with LSG seeking import/sale preclusion orders and unspecified monetary damages[148] - A securities class action lawsuit alleges the company made false or misleading statements regarding sales trends and profitable growth. The court dismissed most claims but allowed some to proceed to discovery[149] - The company is also reviewing trade compliance matters related to misclassified/inaccurately valued international shipments and is subject to other legal claims in the normal course of business. Management believes the ultimate resolution of pending and threatened legal proceedings will not have a material adverse effect[150][151] Item 1a. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Form 10-K - No material changes in risk factors have occurred from those disclosed in Part I, Item 1a. Risk Factors of the company's Form 10-K[154] Item 5. Other Information This section reports the declaration of a quarterly dividend and the results of the annual stockholders' meeting, where directors were elected, auditors ratified, but executive compensation was not approved Declaration of Dividend On January 8, 2020, the Board of Directors declared a quarterly dividend of $0.13 per share, payable on February 3, 2020 - On January 8, 2020, the Board of Directors declared a quarterly dividend of $0.13 per share[156] - The dividend is payable on February 3, 2020, to stockholders of record on January 20, 2020[156] Results of Annual Stockholders Meeting Stockholders elected nine directors and ratified Ernst & Young LLP. However, the advisory vote on executive compensation was not approved - Stockholders elected nine directors nominated by the Board of Directors for a one-year term[157] - The appointment of Ernst & Young LLP as the company's independent registered public accounting firm was ratified[157] - The advisory vote on the compensation of the named executive officers of the company was not approved by stockholders[157] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and XBRL data files - The exhibits include the Restated Certificate of Incorporation, Certificate of Amendment, Amended and Restated Bylaws, Certifications of the Chief Executive Officer and Chief Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and XBRL Instance Document and Taxonomy Extension Documents[161] SIGNATURES The report is duly signed on behalf of Acuity Brands, Inc. by Vernon J. Nagel, Chairman and Chief Executive Officer, and Karen J. Holcom, Senior Vice President and Chief Financial Officer, on January 9, 2020 - The report was signed by Vernon J. Nagel, Chairman and Chief Executive Officer, and Karen J. Holcom, Senior Vice President and Chief Financial Officer, on January 9, 2020[163]