UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended May 31, ~~2018.~~2019.
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to .

Commission file number 001-16583.

ACUITY BRANDS, INC.

(Exact name of registrant as specified in its charter)



Delaware		58-2632672
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
1170 Peachtree Street, N.E., Suite 2300, Atlanta, Georgia (Address of principal executive offices)		30309-7676 (Zip Code)

(404) 853-1400

(Registrant’s telephone number, including area code)

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 class	Trading symbol	Name of each exchange on which registered
Common stock, $0.01 par value per share	AYI	New 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 þ No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See ~~definition~~the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.



~~Large Accelerated Filer~~ þ	~~Accelerated Filer~~ o	~~Smaller Reporting Company~~ o
~~Non-accelerated Filer~~ oLarge accelerated filer þ	~~(Do not check if a smaller~~ Accelerated filer o	Non-accelerated filer o
Smaller reporting ~~company)~~ company o	Emerging growth ~~Company~~ company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

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 — ~~40,181,023~~39,899,076 shares as of June ~~29, 2018.~~28, 2019.

ACUITY BRANDS, INC.

Table of Contents



		Page No.
Part I. FINANCIAL INFORMATION
~~ITEM~~Item 1.	~~FINANCIAL STATEMENTS~~Financial Statements
	~~CONSOLIDATED BALANCE SHEETS~~Consolidated Balance Sheets -- ~~MAY~~May 31, ~~2018~~2019 (Unaudited) ~~AND AUGUST~~and August 31, ~~2017~~2018	1
	~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~Consolidated Statements of Comprehensive Income (Unaudited) -- ~~THREE AND NINE MONTHS ENDED MAY~~Three and nine months ended May 31, 2019 and 2018 ~~AND 2017~~	2
	~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~Consolidated Statements of Cash Flows (Unaudited) -- ~~NINE MONTHS ENDED MAY~~Nine months ended May 31, 2019 and 2018 ~~AND 2017~~	3
	~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes to Consolidated Financial Statements (Unaudited)	4
	~~ITEM 2.~~Note 1 — Description of Business and Basis of Presentation	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~4
	Note 2 — Significant Accounting Policies	264
	Note 3 — Acquisitions and Investments	5
	Note 4 — New Accounting Pronouncements	5
	Note 5 — Revenue Recognition	8
	Note 6 — Fair Value Measurements	10
	Note 7 — Goodwill and Intangible Assets	11
	Note 8 — Inventories	12
	Note 9 — Earnings Per Share	12
	Note 10 — Changes in Stockholders' Equity	13
	Note 11 — Comprehensive Income	14
	Note 12 — Debt and Lines of Credit	16
	Note 13 — Commitments and Contingencies	17
	Note 14 — Share-based Payments	19
	Note 15 — Pension Plans	19
	Note 16 — Special Charge	19
	Note 17 — Income Taxes	20
	Note 18 — Supplemental Guarantor Condensed Consolidating Financial Statements	21
~~ITEM 3.~~Item 2.	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Management's Discussion and Analysis of Financial Condition and Results of Operations	3730
~~ITEM 4.~~Item 3.	~~CONTROLS AND PROCEDURES~~Quantitative and Qualitative Disclosures about Market Risk	37

~~Part II. OTHER INFORMATION~~41
~~ITEM 1.~~Item 4.	~~LEGAL PROCEEDINGS~~	39
~~ITEM 1a.~~	~~RISK FACTORS~~	39
~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~	40
~~ITEM 5.~~	~~OTHER INFORMATION~~	40
~~ITEM 6.~~	~~EXHIBITS~~Controls and Procedures	41

~~EXHIBITS INDEX~~Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1a.	Risk Factors	42
Item 5.	Other Information	43
Item 6.	Exhibits	43

~~SIGNATURES~~INDEX TO EXHIBITS		4344

SIGNATURES		45

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

ACUITY BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)


	May 31, 2018			August 31, 2017			May 31, 2019			August 31, 2018
	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	94.3		$	311.1		$	333.7		$	129.1
Accounts receivable, less reserve for doubtful accounts of $2.0 and $1.9, respectively	572.6			573.3
Accounts receivable, less reserve for doubtful accounts of $1.3 and $1.3, respectively							586.0			637.9
Inventories	406.5			328.6			390.6			411.8
Prepayments and other current assets	32.4			32.6			69.0			32.3
Total current assets	1,105.8			1,245.6			1,379.3			1,211.1
Property, plant, and equipment, at cost:
Land	22.8			22.5			22.7			22.9
Buildings and leasehold improvements	187.3			180.7			190.0			189.1
Machinery and equipment	511.1			484.6			539.0			516.6
Total property, plant, and equipment	721.2			687.8			751.7			728.6
Less — Accumulated depreciation and amortization	(433.2		)	(400.1		)	(471.2		)	(441.9		)
Property, plant, and equipment, net	288.0			287.7			280.5			286.7
Goodwill	970.5			900.9			964.1			970.6
Intangible assets, net	504.6			448.8			473.1			498.7
Deferred income taxes	3.1			3.4			2.8			2.9
Other long-term assets	10.4			13.2			21.3			18.8
Total assets	$	2,882.4		$	2,899.6		$	3,121.1		$	2,988.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	464.5		$	395.1		$	378.8		$	451.1
Current maturities of long-term debt	1.6			0.4			9.1			0.4
Accrued compensation	58.4			41.8			66.4			67.0
Other accrued liabilities	147.6			163.6			176.7			164.2
Total current liabilities	672.1			600.9			631.0			682.7
Long-term debt	356.4			356.5			347.5			356.4
Accrued pension liabilities	86.7			96.9			61.9			64.6
Deferred income taxes	87.9			108.2			89.6			92.5
Self-insurance reserves	9.3			7.9			7.5			7.9
Other long-term liabilities	69.6			63.6			98.7			67.9
Total liabilities	1,282.0			1,234.0			1,236.2			1,272.0
Commitments and contingencies (see Commitments and Contingencies footnote)
Stockholders’ equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued	—			—			—			—
Common stock, $0.01 par value; 500,000,000 shares authorized; 53,644,873 and 53,549,840 issued, respectively	0.5			0.5
Common stock, $0.01 par value; 500,000,000 shares authorized; 53,754,706 and 53,667,327 issued, respectively							0.5			0.5
Paid-in capital	899.2			881.0			924.7			906.3
Retained earnings	1,896.2			1,659.9			2,204.9			1,999.2
Accumulated other comprehensive loss	(121.1		)	(99.7		)	(122.1		)	(114.8		)
Treasury stock, at cost — 13,676,689 and 11,678,002 shares, respectively	(1,074.4		)	(776.1		)
Treasury stock, at cost — 14,075,197 and 13,676,689 shares, respectively							(1,123.1		)	(1,074.4		)
Total stockholders’ equity	1,600.4			1,665.6			1,884.9			1,716.8
Total liabilities and stockholders’ equity	$	2,882.4		$	2,899.6		$	3,121.1		$	2,988.8

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ACUITY BRANDS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In millions, except per-share data)


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	May 31, 2018			May 31, 2017			May 31, 2018			May 31, 2017			May 31, 2019			May 31, 2018			May 31, 2019			May 31, 2018
Net sales	$	944.0		$	891.6		$	2,618.9		$	2,547.5		$	947.6		$	944.0		$	2,734.6		$	2,618.9
Cost of products sold	554.6			512.7			1,544.4			1,473.2			564.0			554.9			1,649.6			1,545.4
Gross profit	389.4			378.9			1,074.5			1,074.3			383.6			389.1			1,085.0			1,073.5
Selling, distribution, and administrative expenses	273.6			246.9			751.3			706.5			263.4			271.8			751.1			745.7
Special charge	9.9			0.5			10.7			1.7			(0.1		)	9.9			1.3			10.7
Operating profit	105.9			131.5			312.5			366.1			120.3			107.4			332.6			317.1
Other expense (income):
Interest expense, net	8.4			8.1			24.5			24.3			8.3			8.4			25.6			24.5
Miscellaneous income, net	(1.7		)	(1.2		)	(0.8		)	(8.5		)
Miscellaneous expense (income), net													0.2			(0.2		)	2.6			3.8
Total other expense	6.7			6.9			23.7			15.8			8.5			8.2			28.2			28.3
Income before income taxes	99.2			124.6			288.8			350.3			111.8			99.2			304.4			288.8
Income tax expense	26.2			42.4			47.4			119.1			23.4			26.2			70.1			47.4
Net income	$	73.0		$	82.2		$	241.4		$	231.2		$	88.4		$	73.0		$	234.3		$	241.4

Earnings per share:
Basic earnings per share	$	1.81		$	1.91		$	5.86		$	5.31		$	2.23		$	1.81		$	5.89		$	5.86
Basic weighted average number of shares outstanding	40.4			43.1			41.2			43.5			39.7			40.4			39.8			41.2
Diluted earnings per share	$	1.80		$	1.90		$	5.85		$	5.29		$	2.22		$	1.80		$	5.87		$	5.85
Diluted weighted average number of shares outstanding	40.5			43.3			41.3			43.7			39.8			40.5			39.9			41.3
Dividends declared per share	$	0.13		$	0.13		$	0.39		$	0.39		$	0.13		$	0.13		$	0.39		$	0.39

Comprehensive income:
Net income	$	73.0		$	82.2		$	241.4		$	231.2		$	88.4		$	73.0		$	234.3		$	241.4
Other comprehensive income (loss) items:
Foreign currency translation adjustments	(7.6		)	2.4			(15.6		)	(6.2		)	(8.7		)	(7.6		)	(12.6		)	(15.6		)
Defined benefit pension plans, net of tax	1.9			2.0			5.3			6.1
Other comprehensive (loss) income, net of tax	(5.7		)	4.4			(10.3		)	(0.1		)
Defined benefit plans, net of tax													1.3			1.9			5.3			5.3
Other comprehensive loss, net of tax													(7.4		)	(5.7		)	(7.3		)	(10.3		)
Comprehensive income	$	67.3		$	86.6		$	231.1		$	231.1		$	81.0		$	67.3		$	227.0		$	231.1

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

ACUITY BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)


	Nine Months Ended						Nine Months Ended
	May 31, 2018			May 31, 2017			May 31, 2019			May 31, 2018
Cash flows from operating activities:
Net income	$	241.4		$	231.2		$	234.3		$	241.4
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	58.5			56.5			65.7			58.5
Share-based payment expense	24.4			24.1			22.9			24.4
Loss on sale or disposal of property, plant, and equipment	0.1			0.3			0.6			0.1
Gain on sale of investment in unconsolidated affiliate	—			(7.2		)
Deferred income taxes	(32.0		)	(2.8		)	0.2			(32.0		)
Change in assets and liabilities, net of effect of acquisitions, divestitures, and exchange rate changes:
Accounts receivable	6.5			50.4			72.1			6.5
Inventories	(66.4		)	(47.1		)	20.5			(66.4		)
Prepayments and other current assets	0.6			(3.5		)	(23.6		)	0.6
Accounts payable	62.9			(37.7		)	(71.5		)	62.9
Other current liabilities	(2.6		)	(81.4		)	(21.6		)	(2.6		)
Other	7.3			15.2			12.4			6.3
Net cash provided by operating activities	300.7			198.0			312.0			299.7
Cash flows from investing activities:
Purchases of property, plant, and equipment	(32.2		)	(55.2		)	(39.8		)	(32.2		)
Proceeds from sale of property, plant, and equipment	—			5.5
Acquisition of businesses, net of cash acquired	(163.5		)	—			—			(163.5		)
Proceeds from sale of investment in unconsolidated affiliate	—			13.2
Other investing activities	—			(0.2		)	2.9			1.0
Net cash used for investing activities	(195.7		)	(36.7		)	(36.9		)	(194.7		)
Cash flows from financing activities:
Borrowings on credit facility	237.3			—			86.5			237.3
Repayments of borrowings on credit facility	(236.1		)	—			(86.5		)	(236.1		)
(Repayments) issuances of long-term debt	(0.3		)	1.1
Repayments of long-term debt							(0.3		)	(0.3		)
Repurchases of common stock	(298.4		)	(357.9		)	(48.7		)	(298.4		)
Proceeds from stock option exercises and other	1.6			2.7			0.5			1.6
Payments for employee taxes on net settlement of equity awards	(7.2		)	(13.2		)
Payments of taxes withheld on net settlement of equity awards							(4.9		)	(7.2		)
Dividends paid	(16.2		)	(17.2		)	(15.6		)	(16.2		)
Net cash used for financing activities	(319.3		)	(384.5		)	(69.0		)	(319.3		)
Effect of exchange rate changes on cash and cash equivalents	(2.5		)	(0.3		)	(1.5		)	(2.5		)
Net change in cash and cash equivalents	(216.8		)	(223.5		)	204.6			(216.8		)
Cash and cash equivalents at beginning of period	311.1			413.2			129.1			311.1
Cash and cash equivalents at end of period	$	94.3		$	189.7		$	333.7		$	94.3
Supplemental cash flow information:
Income taxes paid during the period	$	101.5		$	127.4		$	89.0		$	101.5
Interest paid during the period	$	23.7		$	22.9		$	24.8		$	23.7

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


1.	~~Description of Business and Basis of Presentation~~

Note 1 — Description of Business and Basis of Presentation

Acuity Brands, Inc. (“Acuity Brands”) is the parent company of Acuity Brands Lighting, Inc. (“ABL”) and other wholly-owned subsidiaries (Acuity Brands, ABL, and such other subsidiaries are collectively referred to herein as ~~the “Company”)~~“we,” “our,” “us,” “the Company,” or similar references) and was incorporated in 2001 under the laws of the State of Delaware. ~~The Company is~~We are one of the world’s leading providers of lighting and building management solutions and services for commercial, institutional, industrial, infrastructure, and residential applications throughout North America and select international markets. ~~The Company’s~~Our lighting and building management solutions include devices such as luminaires, lighting controls, controllers for various building systems, power supplies, prismatic skylights, and drivers, as well as integrated systems designed to optimize energy efficiency and comfort for various indoor and outdoor applications. Additionally, ~~the Company continues~~we continue to expand ~~its~~our solutions portfolio, including software and services, to provide a host of other economic benefits ~~including software and services~~resulting from data analytics that ~~enable~~enables the Internet of Things (“IoT”)~~. The Company's IoT solutions provide customers with access to robust data analytics; support~~, supports the advancement of smart buildings, smart cities, and the smart ~~grid;~~grid, and ~~allow~~allows businesses to develop custom applications to scale their operations. ~~The Company has~~We have one reportable segment serving the North American lighting market and select international markets.

~~The~~ We prepared the Consolidated Financial Statements ~~have been prepared by the Company~~ in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) ~~and~~to present the financial position, results of operations, and cash flows of Acuity Brands 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 ~~the Company’s~~our consolidated financial position as of May 31, ~~2018, the~~2019, our consolidated comprehensive income for the three andnine months ended May 31, 2019 and 2018, and ~~2017, and the~~our consolidated cash flows for the nine months ended May 31, ~~2018~~2019 and ~~2017.~~2018. Certain information and footnote disclosures normally included in ~~the Company’s~~our annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. However, ~~the Company believes~~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 of the Company as of and for the three years ended August 31, ~~2017~~2018 and notes thereto included in ~~the Company’s~~our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on October ~~26, 2017~~25, 2018 (File No. 001-16583) (“Form 10-K”).

The results of operations for the three andnine months ended May 31, ~~2018~~2019 and ~~2017~~2018 are not necessarily indicative of the results to be expected for the full fiscal year due primarily to seasonality, which results in ~~the~~our net sales and net income ~~of the Company~~ generally being higher in the second half of ~~its~~our fiscal year, the impact of any acquisitions, and, among other reasons, the continued uncertainty of general economic conditions that may impact ~~the~~our key end markets ~~of the Company~~ for the remainder of fiscal ~~2018.~~2019.


2.	~~Significant Accounting Policies~~

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

Certain prior-period amounts have been reclassified to conform to the current year presentation. No material reclassifications occurred during the current period. Refer to the New Accounting Pronouncements footnote for additional information regarding retrospective reclassifications related to accounting standards adopted in the current year.

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

3.Note 3 — Acquisitions and Investments

No acquisitions were completed during the first nine months of fiscal 2019. The following discussion relates to acquisitions completed during fiscal 2018.

IOTA Engineering, LLC

On May 1, 2018, using cash on hand and borrowings available under existing credit arrangements, ~~the Company~~we acquired all of the equity interests of IOTA Engineering, LLC (“IOTA”). IOTA is headquartered in Tucson, Arizona and manufactures highly engineered emergency lighting products and power equipment for commercial and institutional applications both in the U.S. and ~~internationally.~~international markets. The operating results of IOTA have been included in ~~the Company's~~our consolidated financial statements since the date of acquisition and are not material to ~~the Company's~~our financial condition, results of operations, or cash flows. ~~Preliminary amounts related to the acquisition accounting are reflected in the~~ ~~Consolidated Balance Sheets~~ as of May 31, 2018. These amounts are deemed to be provisional until disclosed otherwise, as the Company continues to gather information related to the identification and valuation of intangible and other acquired assets and liabilities.

Lucid Design Group, Inc.

On February 12, 2018, using cash on hand, ~~the Company~~we acquired all of the equity interests of Lucid Design Group, Inc (“Lucid”). Lucid is headquartered in Oakland, California and provides a data and analytics platform to make data-driven decisions to improve building efficiency and drive energy conservation and savings. The operating results of Lucid have been included in ~~the Company's~~our consolidated financial statements since the date of acquisition and are not material to ~~the Company's~~our financial condition, results of operations, or cash flows. ~~Preliminary amounts related to the acquisition accounting are reflected in the~~ ~~Consolidated Balance Sheets~~. These amounts are deemed to be provisional until disclosed otherwise, as the Company continues to gather information related to the identification and valuation of intangible and other acquired assets and liabilities.

Accounting for Fiscal 2018 Acquisitions

Acquisition-related costs were expensed as incurred. ~~Preliminary amounts~~Amounts related to the acquisition accounting for these acquisitions are reflected in the Consolidated Balance Sheets~~as of May 31, 2018.~~. The aggregate ~~preliminary~~ purchase price of these acquisitions reflects total goodwill and identified intangible assets of approximately ~~$75.7~~$76.8 million and ~~$79.1~~$81.8 million, ~~respectively.~~respectively, as of May 31, 2019. Identified intangible assets consist of indefinite-lived marketing-related intangibles as well as definite-lived customer-based and technology-based assets, which have a weighted average useful life of approximately 2214 years. ~~These amounts are deemed~~As of May 31, 2019, we have finalized the acquisition accounting for Lucid and IOTA. There were no material changes to ~~be provisional until disclosed otherwise,~~our financial statements as a result of the ~~Company continues to gather information related to~~finalization of the ~~identification and valuation of intangible and other acquired assets and liabilities. These amounts are expected to change as the Company finalizes the allocation.~~acquisition accounting for Lucid or IOTA.


4.	~~New Accounting Pronouncements~~

Note 4 — New Accounting Pronouncements

Accounting Standards Adopted in Fiscal ~~2018~~2019

ASU 2017-01 -— Clarifying the Definition of a Business

In ~~March 2016,~~January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~, (“ASU 2016-09”), which changes certain aspects of accounting for share-based payments to employees. The standard requires that all excess tax benefits and deficiencies previously recorded as additional paid-in capital be prospectively recorded in income tax expense, which could create volatility in the Company's effective income tax rate on a quarter by quarter basis due primarily to fluctuations in the Company's stock price and the timing of stock option exercises and vesting of restricted share grants. The standard also requires excess tax benefits to be presented as an operating activity on the statement of cash flows rather than as a financing activity and taxes paid for employee withholdings to be presented as a financing activity. The Company adopted ASU 2016-09 effective as of September 1, 2017. Excess tax benefits and deficiencies are recorded within ~~Income tax expense~~ ~~within the~~ ~~Consolidated Statements of Comprehensive Income~~ on a prospective basis as required by the standard; however, the Company elected to present changes to the statement of cash flows on a retrospective basis as allowed by the standard in order to maintain comparability between fiscal years. As such, cash flows from operations for the nine months ended May 31, 2017 increased $18.7 million, with a corresponding decrease to cash flows from financing activities, compared to amounts previously reported.

~~In February 2018, the FASB issued ASU No. 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income(Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~ ~~(“ASU 2018-02”), which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax~~

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

effects resulting from the U.S. Tax Cuts and Jobs Act (the “TCJA”) signed into law in December 2017. The Company adopted ASU 2018-02 effective as of the beginning of the current reporting period and recorded a reclassification for the stranded tax effects resulting from the TCJA from ~~Accumulated other comprehensive loss~~ to ~~Retained earnings~~ ~~in the amount of $11.1 million on the~~ ~~Consolidated Balance Sheets~~ ~~during the second quarter of fiscal 2018. Refer to the~~ ~~Income Taxes~~ ~~footnote for further details.~~

~~Accounting Standards Yet to Be Adopted~~

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Compensation — Retirement Benefits~~2017-01, Business Combinations (Topic ~~715)~~805): ~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~ (“ASU 2017-07”), which will change the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net periodic benefit pension cost will be presented separately outside of operating income. Additionally, only service costs may be capitalized in assets. ASU 2017-07 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. The provisions of ASU 2017-07 are not expected to have a material impact on the Company's financial condition, results of operations, or cash flows.

~~In January 2017, the FASB issued ASU No. 2017-01,~~ Clarifying the Definition of a Business (“ASU 2017-01”), which requires an evaluation of whether substantially all of the fair value of assets ~~acquired~~obtained in an acquisition is concentrated in a single identifiable asset or a group of similar identifiable assets. If so, the transaction does not qualify as a business. The guidance also requires an acquired business to include at least one substantive process and narrows the definition of outputs. We adopted ASU 2017-01 is effective ~~for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017.~~September 1, 2018 and applied the guidance prospectively. The ~~Company is currently evaluating the impact of the~~ provisions of ASU 2017-01 ~~and intends to implement the standard as required in fiscal 2019.~~did not have a material effect on our financial condition, results of operations, or cash flows.

ASU 2016-15 — Statement of Cash Flows

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which is intended to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. These cash flows ~~including~~include debt prepayment and extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance. We adopted ASU 2016-15 is effective ~~for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. The Company intends~~September 1, 2018 and applied the changes retrospectively. We maintain life insurance policies on certain former employees primarily to ~~implement~~satisfy obligations under certain deferred compensation plans. As required by the standard, proceeds from these policies are now classified as ~~required in fiscal~~cash inflows from investing activities. We received $0.8 million and $1.0 million from corporate-owned life insurance policies during the nine months ended May 31, 2019 and 2018, respectively. As such, cash flows from operations for the ~~provisions of ASU 2016-15 are not expected to have a material impact on the Company's financial statement disclosures.~~nine months ended May 31,

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~ (“ASU 2016-02”), which requires lessees to include most leases on the balance sheet. ASU 2016-02 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2018. In January 2018, the FASB issued ASU 2018-01, ~~Land Easement Practical Expedient for Transition to Topic 842~~, which establishes an optional transition practical expedient when applying the guidance in ASU 2016-02 and has the same effective date as the original standard. The Company is currently evaluating the impact of the provisions of ASU 2016-02 and intends to implement the standard as required in fiscal 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

2018 decreased $1.0 million, with a corresponding increase to cash flows from investing activities, compared to amounts previously reported. The remaining provisions of ASU 2016-15 did not impact our financial statements for the periods presented.

ASU 2017-07 — Presentation of Net Periodic Pension Cost

In March 2017, the FASB issued ASU No. 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”), which changes the presentation of net periodic pension cost related to employer sponsored defined benefit plans and other postretirement benefits. Service cost is now included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net periodic pension cost are presented separately outside of operating income. Additionally, only service costs may be capitalized in assets. We adopted ASU 2017-07 effective as of September 1, 2018. We applied the standard retrospectively for the presentation of the service cost component and the other components of net periodic pension cost within our income statements. As a practical expedient, we used amounts previously disclosed in the Pension and Defined Contribution Plans footnote of the Notes to Consolidated Financial Statements within our Form 10-K as the basis for retrospective application because amounts capitalized in inventory at a given point in time are de minimis and determining these amounts was impractical. Upon adoption of ASU 2017-07, our previously reported Operating profit for the three andnine months ended May 31, 2018 increased $1.5 million and $4.6 million, respectively, with a corresponding increase to Miscellaneous expense (income), net. The provisions of ASU 2017-07 have no impact to our net income or earnings per share.

The impact of the provisions of ASU 2017-07 on the Consolidated Statement of ComprehensiveIncome for the three and nine months ended May 31, 2018 are as follows (in millions):



	Three Months Ended May 31, 2018									Nine Months Ended May 31, 2018
	As Revised			Previously Reported			Higher (Lower)			As Revised		Previously Reported			Higher (Lower)
Cost of products sold	$	554.9		$	554.6		$	0.3		$	1,545.4	$	1,544.4		$	1.0
Selling, distribution, and administrative expenses	271.8			273.6			(1.8		)	745.7		751.3			(5.6		)
Miscellaneous expense (income), net	(0.2		)	(1.7		)	1.5			3.8		(0.8		)	4.6

ASC 606 — Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers(“ (“ASU 2014-09”), which ~~will replace most~~replaced the existing revenue recognition guidance in U.S. GAAP. Since the issuance of ASU 2014-09, the FASB released several amendments to improve and clarify the implementation guidance, as well as to change the effective date. These standards have been collectively codified within Accounting Standards Codification (“~~ASC"~~ASC”) 606, Revenue from Contracts with Customers (“(“ASC 606”). ASC 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard also requires additional disclosures about the nature, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in those judgments.

We adopted ASC 606 ~~permits two transition methods:~~effective September 1, 2018 using the ~~full~~modified retrospective method and ~~the modified retrospective method. Under the full retrospective method, the standard would be applied to each prior reporting period presented with the~~recognized a cumulative effect of applying ASC 606 of $13.0 million in Retained earnings on the Consolidated Balance Sheet as of this date. We applied the standard recognized at the earliest period shown. Under the modified retrospective method, the cumulative effect of applying the standard would be recognized at the date of initial application. ASC 606 is effective for annual reporting periods beginning after December 15, 2017.~~The Company will adopt the requirements~~to all contracts as of the ~~new standard on September 1, 2018.~~

~~The Company~~transition date. Information for prior years presented has an implementation team tasked with identifying potential differences that will result from applying the new revenue recognition standard to the Company's contracts with its customers. The implementation team reports the findings and progress of the project to management on a frequent basis and to the Audit Committee of the Board of Directors on a quarterly basis. The implementation team has completed its initial phase of contract reviewsnot been restated and continues to ~~evaluate~~reflect the ~~results~~authoritative accounting standards in effect for those periods.

Adjustments related to the adoption of ~~those reviews with respect to potential changes from adopting the new standard on the Company's consolidated financial statements. Management anticipates the most significant changes will relate to~~ASC 606 include additional ~~deferral~~deferrals of revenue recognition for ~~certain services provided~~service-type warranties and the gross presentation of right of return assets and refund liabilities for sales with a right of return. ~~Based on the current portfolio~~The effects of the ~~Company's revenue generating activities, these~~adoption of ASC 606 on our Consolidated Statement of Comprehensive Income for the three andnine months ended May 31, 2019, and the Consolidated Balance Sheet as of May 31, 2019 are as follows (in millions except per share amounts):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Consolidated Statement of Comprehensive Income	Three Months Ended May 31, 2019							Nine Months Ended May 31, 2019
	As Currently Reported		Without ASC 606 Adoption		Higher (Lower)			As Currently Reported		Without ASC 606 Adoption		Higher (Lower)
Net sales	$	947.6	$	951.4	$	(3.8	)	$	2,734.6	$	2,742.4	$	(7.8	)
Cost of products sold	564.0		566.2		(2.2		)	1,649.6		1,653.6		(4.0		)
Selling, distribution, and administrative expenses	263.4		263.4		—			751.1		750.9		0.2
Operating profit	120.3		121.9		(1.6		)	332.6		336.6		(4.0		)
Income tax expense	23.4		23.8		(0.4		)	70.1		71.1		(1.0		)
Net income	88.4		89.6		(1.2		)	234.3		237.3		(3.0		)

Basic earnings per share	$	2.23	$	2.26	$	(0.03	)	$	5.89	$	5.97	$	(0.08	)
Diluted earnings per share	2.22		2.25		(0.03		)	5.87		5.95		(0.08		)



Consolidated Balance Sheet	May 31, 2019
	As Currently Reported		Without ASC 606 Adoption	Higher (Lower)
Accounts receivable, net	$	586.0	564.7	$	21.3
Prepayments and other current assets	69.0		53.7	15.3
Other accrued liabilities	176.7		139.8	36.9
Deferred income tax liabilities	89.6		94.8	(5.2		)
Other long-term liabilities	98.7		77.8	20.9
Retained earnings	2,204.9		2,220.9	(16.0		)

Accounting Standards Yet to Be Adopted

In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”), which will require customers to apply internal-use software guidance to determine the implementation costs that are able to be capitalized. Capitalized implementation costs will be required to be amortized over the term of the arrangement, beginning when the cloud computing arrangement is ready for its intended use. ASU 2018-15 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2019. The standard allows changes to be applied either retrospectively or prospectively. We will adopt the standard as required in fiscal 2021. The provisions of ASU 2018-15 are not expected to have a material ~~impact~~effect on ~~the Company's consolidated~~our financial condition, results of operations, or cash flows. ~~Additionally,~~

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. The provisions of ASU 2016-13 are effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2019. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We will adopt the amendments as required in fiscal 2021. The provisions of ASU 2016-13 are not expected to have a material effect on our financial condition, results of operations, or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which requires lessees to include most leases on the balance sheet. ASU 2016-02 is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2018. Since the issuance of ASU 2016-02, the FASB released several amendments to improve and clarify the implementation guidance, as well as to change the allowable adoption methods. These standards have been collectively codified within ASC 842, Leases (“ASC 842”). The standard allows entities to present the effects of the accounting change as either a cumulative adjustment as of the beginning of the earliest period presented or as of the date of adoption. We have an implementation team tasked with reviewing our lease obligations and determining the impact of the new standard to our financial statements. The team is ~~in the process of~~also tasked with identifying appropriate changes to ~~the Company's~~our business processes, systems, and controls to support recognition and disclosure under the new standard. ~~Based on the implementation team's current findings and the overall expected immaterial impact of adoption,~~Currently, the implementation team has substantially completed its review of outstanding property and equipment leases, which represent our primary outstanding lease obligations. The team is ~~currently evaluating which adoption method would provide~~in the ~~most meaningful~~process of reviewing and analyzing other contracts that may have ASC 842 impacts, including information technology contracts. The implementation team reports its findings and progress of the project to management on a frequent basis and to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

the Audit Committee of the Board of Directors on a quarterly basis. Based on our current lease portfolio, we preliminarily expect ASC 842 to have a material impact on our consolidated balance sheets primarily related to the ~~Company's stakeholders.~~recognition of operating lease assets and liabilities. However, we do not expect the standard to have a material impact on our consolidated statements of comprehensive income or cash flows. Further details regarding our undiscounted future lease payments as well as the timing of those payments are included within the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements within our Form 10-K. We will adopt the standard as required on September 1, 2019.

All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.


5.	~~Fair Value Measurements~~

Note 5 — 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. Sales and use taxes collected on behalf of governmental authorities are excluded from revenues. Payment is generally due and received within 60 days from the point of sale or prior to the transfer of control of certain goods and services. No payment terms extend beyond one year, and we apply the practical expedient within ASC 606 to conclude that no significant financing terms exist within our contracts with customers. Allowances for cash discounts to customers are estimated using the expected value method based on historical experience and are recorded as a reduction to sales. Our standard terms and conditions of sale allow for the return of certain products within four months of the date of shipment. We also provide for limited product return rights to certain distributors and other customers, primarily for slow moving or damaged items subject to certain defined criteria. The ~~Company determines~~limited product return rights generally allow customers to return resalable products purchased within a specified time period and subject to certain limitations, including, at times, when accompanied by a replacement order of equal or greater value. At the time revenue is recognized, we record a refund liability for the expected value of future returns primarily based on historical experience, specific notification of pending returns, or based on contractual terms with the respective customers. Although historical product returns generally have been within expectations, there can be no assurance that future product returns will not exceed historical amounts. A significant increase in product returns could have a material adverse impact on our operating results in future periods.

Total refund liabilities recorded under ASC 606 related to rights of return, cash discounts, and other miscellaneous credits to customers were $38.8 million and $41.2 million as of May 31, 2019 and September 1, 2018, respectively, and are reflected within Other accrued liabilities on the Consolidated Balance Sheets. Additionally, we record right of return assets for products expected to be returned to our distribution centers, which are included within Prepayments and other current assets on the Consolidated Balance Sheets. Such assets totaled $15.3 million and $16.4 million as of May 31, 2019 and September 1, 2018, respectively.

We also maintain one-time or ongoing marketing and trade-promotion programs with certain customers that require us to estimate and accrue the expected costs of such programs. These arrangements include cooperative marketing programs, merchandising of our products, introductory marketing funds for new products, and other trade-promotion activities conducted by the customer. Costs associated with these programs are generally estimated based on the most likely amount expected to be settled based on the context of the individual contract and are reflected within the Consolidated Statements of Comprehensive Income in accordance with ASC 606, which in most instances requires such costs to be recorded as reductions of revenue. The refund liabilities associated with these programs totaled $31.8 million and $43.9 million as of May 31, 2019 and September 1, 2018, respectively, and are reflected within Other accrued liabilities on the Consolidated Balance Sheets.

Costs to obtain and fulfill contracts, such as sales commissions and shipping and handling activities, are short-term in nature and are expensed as incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Nature of Goods and Services

Products

Approximately 95% of revenues for the periods presented were generated from short-term contracts with our customers to deliver tangible goods such as luminaires, lighting controllers, controllers for various building systems, power supplies, prismatic skylights, and drivers. We record revenue from these contracts when the customer obtains control of those goods. For sales designated free on board shipping point, control is transferred at the time of shipment. For sales designated free on board destination, customers take control when a product is delivered to the customer’s delivery site.

Professional Services

We collect fees associated with training, installation, and technical support services, primarily related to the set up of our lighting solutions. We recognize revenue for these one-time services at the time the service is performed. We also sell certain service-type warranties that extend coverages for products beyond their base warranties. We account for service-type warranties as distinct performance obligations and recognize revenue for these contracts ratably over the life of the additional warranty period. Claims related to service-type warranties are expensed as incurred.

Software

Software sales include licenses for software, data usage fees, and software as a service arrangements, which generally extend for one year or less. We recognize revenue for software based on the contractual rights provided to a customer, which typically results in the recognition of revenue ratably over the contractual service period.

Shipping and Handling Activities

We account for all shipping and handling activities as activities to fulfill the promise to transfer products to our customers. As such, we do not consider shipping and handling activities to be separate performance obligations, and we expense these costs as incurred.

Contracts with Multiple Performance Obligations

A small portion (approximately 5% for the periods presented) of our revenue was derived from the combination of any or all of our products, professional services, and software licenses. Significant judgment may be required to determine which performance obligations are distinct and should be accounted for separately. We allocate the expected consideration to be collected to each distinct performance obligation based on its standalone selling price. Standalone selling price is generally determined using a cost plus margin valuation when no observable input is available. The amount of consideration allocated to each performance obligation is recognized as revenue in accordance with the timing for products, professional services, and software as described above.

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 as of May 31, 2019 and September 1, 2018 consists of the following (in millions):



	May 31, 2019		September 1, 2018
Current deferred revenues	$	8.5	$	4.8
Non-current deferred revenues	43.7		35.0

Current deferred revenues primarily consist of customer prepayments, software licenses, and to a lesser extent 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. 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

within Other long-term liabilities on the Consolidated Balance Sheets. Revenue recognized from beginning balances of contract liabilities during the nine months ended May 31, 2019 totaled $3.7 million.

Unsatisfied performance obligations that do not represent contract liabilities consist primarily of orders for physical goods that have not yet been shipped. This backlog of orders at any given time is affected by various factors, including seasonality, cancellations, sales promotions, production cycle times, and the timing of receipt and shipment of orders, which are usually shipped within a few weeks of order receipt. Accordingly, a comparison of backlog orders from period to period is not necessarily meaningful and may not be indicative of future shipments.

Disaggregated Revenues

Our lighting and building management solutions 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. The following table shows revenue from contracts with customers by sales channel for the three andnine months ended May 31, 2019 (in millions):



	Three Months Ended		Nine Months Ended
	May 31, 2019		May 31, 2019
Independent sales network	$	650.3	$	1,871.4
Direct sales network	97.2		283.5
Retail sales	58.7		217.8
Corporate accounts	97.1		224.5
Other	44.3		137.4
Total	$	947.6	$	2,734.6

Note 6 — Fair Value Measurements

We determine fair value measurements based on the assumptions a market participant would use in pricing an asset or liability. ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a three level hierarchy making a distinction between market participant assumptions based on (i) unadjusted quoted prices for identical assets or liabilities in an active market (Level 1), (ii) quoted prices in markets that are not active or inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (Level 2), and (iii) prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement (Level 3).

~~The Company's~~Our cash and cash equivalents (Level 1), which are required to be carried at fair value and measured on a recurring basis, were ~~$94.3~~$333.7 million and ~~$311.1~~$129.1 million as of May 31, ~~2018~~2019 and August 31, ~~2017,~~2018, respectively.

~~The Company utilizes~~We utilize valuation methodologies to determine the fair values of ~~its~~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.

~~The Company~~We used quoted market prices to determine the fair value of Level 1 assets and liabilities. No transfers between the levels of the fair value hierarchy occurred during the current fiscal period. In the event of a transfer in or out of a level within the fair value hierarchy, the transfers would be recognized on the date of occurrence.

Disclosures of fair value information about financial instruments (whether or not recognized in the balance sheet), for which it is practicable to estimate that value, are required each reporting period in addition to any financial instruments carried at fair value on a recurring basis as prescribed by ASC 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

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The carrying values and estimated fair values of certain of ~~the Company’s~~our financial instruments were as follows at May 31, ~~2018~~2019 and August 31, ~~2017~~2018 (in millions):



	May 31, 2019				August 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Senior unsecured public notes, net of unamortized discount and deferred costs	$	349.8	$	355.1	$	349.5	$	361.7
Industrial revenue bond	4.0		4.0		4.0		4.0
Bank loans	2.8		3.0		3.3		3.3

May 31, 2018 August 31, 2017
Carrying Value Fair Value Carrying Value Fair Value
Senior unsecured public notes, net of unamortized discount and deferred costs $ 349.4
$ 364.9
$ 349.1
$ 379.7
Industrial revenue bond 4.0
4.0
4.0
4.0
Bank loans 3.4
3.4
3.8
3.8
Revolving credit facility borrowings 1.2
1.2
—
—

The 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 industrial revenue bond is carried at the outstanding balance as of the end of the reporting period. The industrial revenue bond is a tax-exempt, variable-rate instrument that resets on a weekly basis; therefore, ~~the Company estimates~~we estimate that the face amount of the bond approximates fair value as of May 31, ~~2018~~2019 based on bonds of similar terms and maturity (Level 2).

The bank loans are carried at the outstanding balance as of the end of the reporting period. Fair value is estimated based on discounted future cash flows using rates currently available for debt of similar terms and maturity (Level 2).

The borrowings on the Company's revolving credit facility are carried at the outstanding balance as of the end of the reporting period. The borrowings are variable-rate instruments that reset on a short-term basis; therefore, the Company estimates that the face amount of the notes approximate fair values as of May 31, 2018 based on borrowings of similar terms and maturity (Level 2).

ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value to ~~the Company.~~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 ~~the Company’s~~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.


6.	~~Goodwill and Intangible Assets~~

Note 7 — Goodwill and Intangible Assets

Through multiple acquisitions, ~~the Company~~we acquired definite-lived intangible assets consisting primarily of trademarks and trade names associated with specific products, ~~with finite lives, definite-lived~~ distribution networks, patented technology, non-compete agreements, and customer relationships, which are amortized over their estimated useful lives. Indefinite-lived intangible assets consist of trade names that are expected to generate cash flows indefinitely.

~~The Company~~We recorded amortization expense of ~~$7.2~~$7.7 million and ~~$8.2~~$7.2 million during the three months ended May 31, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$20.5~~$23.1 million and ~~$21.9~~$20.5 million during the nine months ended May 31, ~~2018~~2019 and ~~2017,~~2018, respectively. Amortization expense is generally recorded on a straight-line basis and is expected to be approximately ~~$28.0 million in fiscal 2018, $29.8~~$30.7 million in fiscal 2019, ~~$29.8~~$30.7 million in fiscal 2020, ~~$26.9~~$27.9 million in fiscal 2021, ~~and $25.2~~$27.0 million in fiscal ~~2022. These estimated amounts include $1.7~~2022, and $25.8 million ~~for~~in fiscal 2023.

The changes in the carrying amount of goodwill during the nine months ended May 31, 2019 and 2018 are summarized below (in millions):



	Nine Months Ended
	May 31, 2019			May 31, 2018
Beginning balance	$	970.6		$	900.9
Additions from acquired businesses	—			75.7
Adjustments to provisional amounts	(0.2		)	—
Foreign currency translation adjustments	(6.3		)	(6.1		)
Ending balance	$	964.1		$	970.5

Further discussion of goodwill and ~~$3.8 million for fiscal 2019~~, ~~2020, 2021, and 2022 related to the~~other intangible assets ~~acquired associated with~~is included within the ~~IOTA and Lucid transactions. The acquisition accounting and~~Significant Accounting Policies footnote of the ~~related useful lives and amortization for the IOTA and Lucid acquisitions are preliminary as the Company continues~~Notes to ~~gather information related to the identification and valuation of intangible assets acquired.~~Consolidated Financial Statements within our Form 10-K.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~The change in the carrying amount of goodwill during the nine months ended May 31, 2018 is summarized below (in millions):~~Note 8 — Inventories

Balance at August 31, 2017 $ 900.9
Additions from acquired businesses 75.7
Foreign currency translation adjustments (6.1 )
Balance at May 31, 2018 $ 970.5

~~Further discussion of the Company’s goodwill and other intangible assets is included within the~~ ~~Significant Accounting Policies~~ ~~footnote of the~~ ~~Notes to Consolidated Financial Statements~~ ~~within the Company’s Form 10-K.~~


7.	~~Inventories~~

Inventories include materials, labor, ~~in-bound~~inbound freight, and related manufacturing overhead, are stated at the lower of cost (on a first-in, first-out or average cost basis) ~~or market,~~and net realizable value, and consist of the following (in millions):



	May 31, 2019			August 31, 2018
Raw materials, supplies, and work in process ⁽¹⁾	$	178.9		$	196.8
Finished goods	240.3			251.8
Inventories excluding reserves	419.2			448.6
Less: Reserves	(28.6		)	(36.8		)
Total inventories	$	390.6		$	411.8

May 31, 2018 August 31, 2017
Raw materials, supplies, and work in process ⁽¹⁾
$ 196.2
$ 176.5
Finished goods 251.4
180.8
Inventories excluding reserves 447.6
357.3
Less: Reserves (41.1 ) (28.7 )
Total inventories $ 406.5
$ 328.6


⁽¹⁾	Due to the immaterial amount of estimated work in process and the short lead times for the conversion of raw materials to finished goods, the Company does not believe the segregation of raw materials and work in process is meaningful information.

⁽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.

8.Note 9 — Earnings Per Share

Basic earnings per share for the periods presented 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.

The following table calculates basic earnings per common share and diluted earnings per common share for the three and nine months ended May 31, ~~2018~~2019 and ~~2017~~2018 (in millions, except per share data):



	Three Months Ended				Nine Months Ended
	May 31, 2019		May 31, 2018		May 31, 2019		May 31, 2018
Net income	$	88.4	$	73.0	$	234.3	$	241.4
Basic weighted average shares outstanding	39.7		40.4		39.8		41.2
Common stock equivalents	0.1		0.1		0.1		0.1
Diluted weighted average shares outstanding	39.8		40.5		39.9		41.3
Basic earnings per share	$	2.23	$	1.81	$	5.89	$	5.86
Diluted earnings per share	$	2.22	$	1.80	$	5.87	$	5.85

Three Months Ended Nine Months Ended
May 31, 2018 May 31, 2017 May 31, 2018 May 31, 2017
Net income $ 73.0
$ 82.2
$ 241.4
$ 231.2
Basic weighted average shares outstanding 40.4
43.1
41.2
43.5
Common stock equivalents 0.1
0.2
0.1
0.2
Diluted weighted average shares outstanding 40.5

43.3
41.3
43.7
Basic earnings per share $ 1.81
$ 1.91
$ 5.86
$ 5.31
Diluted earnings per share $ 1.80

$ 1.90

$ 5.85

$ 5.29

The following table presents stock options and restricted stock awards that were excluded from the diluted earnings per share calculation for the three andnine months ended May 31, ~~2018~~2019 and ~~2017~~2018 as the effect of inclusion would have been antidilutive:



	Three Months Ended		Nine Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Stock options	283,731	239,230	297,445	179,385
Restricted stock awards	107,800	240,783	169,672	257,617

Three Months Ended Nine Months Ended
May 31, 2018 May 31, 2017 May 31, 2018 May 31, 2017
Stock options 239,230
149,000
179,385
113,074
Restricted stock awards 240,783
176,249
257,617
87,219
Further discussion of our stock options and restricted stock 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.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Further discussion of the Company’s stock options and restricted stock awards is included within the~~ ~~Common Stock and Related Matters~~ ~~and~~ ~~Share-based Payments~~ ~~footnotes of the~~ ~~Notes to Consolidated Financial Statements~~ ~~within the Company’s Form 10-K.~~Note 10 — Changes in Stockholders' Equity


9.	~~Changes in Equity~~

The following ~~table summarizes~~tables summarize changes in the components of stockholders' equity for the three and nine months ended May 31, 2019 and 2018 (in millions):


	Common Stock Outstanding																		Common Stock Outstanding
	Shares		Amount		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock, at cost			Total			Shares		Amount		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock, at cost			Total
Balance, August 31, 2017	41.9		$	0.5	$	881.0	$	1,659.9		$	(99.7	)	$	(776.1	)	$	1,665.6
Balance, August 31, 2018																			40.0		$	0.5	$	906.3	$	1,999.2		$	(114.8	)	$	(1,074.4	)	$	1,716.8
Net income	—		—		—		241.4			—			—			241.4			—		—		—		79.6			—			—			79.6
Other comprehensive loss	—		—		—		—			(10.3		)	—			(10.3		)	—		—		—		—			(6.2		)	—			(6.2		)
Reclassification of stranded tax effects of the TCJA ⁽¹⁾	—		—		—		11.1			(11.1		)	—			—
ASC 606 adjustments																			—		—		—		(13.0		)	—			—			(13.0		)
Amortization, issuance, and cancellations of restricted stock grants	0.1		—		16.6		—			—			0.1			16.7			0.1		—		3.8		—			—			—			3.8
Employee stock purchase plan issuances	—		—		0.5		—			—			—			0.5			—		—		0.1		—			—			—			0.1
Cash dividends of $0.39 per share paid on common stock	—		—		—		(16.2		)	—			—			(16.2		)
Stock options exercised	—		—		1.1		—			—			—			1.1
Cash dividends of $0.13 per share paid on common stock																			—		—		—		(5.2		)	—			—			(5.2		)
Repurchases of common stock	(2.0	)	—		—		—			—			(298.4		)	(298.4		)	(0.2	)	—		—		—			—			(25.0		)	(25.0		)
Balance, May 31, 2018	40.0		$	0.5	$	899.2	$	1,896.2		$	(121.1	)	$	(1,074.4	)	$	1,600.4
Balance, November 30, 2018																			39.9		0.5		910.2		2,060.6			(121.0		)	(1,099.4		)	1,750.9
Net income																			—		—		—		66.3			—			—			66.3
Other comprehensive income																			—		—		—		—			6.3			—			6.3
Amortization, issuance, and cancellations of restricted stock grants																			—		—		7.1		—			—			—			7.1
Employee stock purchase plan issuances																			—		—		0.2		—			—			—			0.2
Cash dividends of $0.13 per share paid on common stock																			—		—		—		(5.3		)	—			—			(5.3		)
Repurchases of common stock																			(0.2	)	—		—		—			—			(23.7		)	(23.7		)
Balance, February 28, 2019																			39.7		0.5		917.5		2,121.6			(114.7		)	(1,123.1		)	1,801.8
Net income																			—		—		—		88.4			—			—			88.4
Other comprehensive loss																			—		—		—		—			(7.4		)	—			(7.4		)
Amortization, issuance, and cancellations of restricted stock grants																			—		—		7.0		—			—			—			7.0
Employee stock purchase plan issuances																			—		—		0.2		—			—			—			0.2
Cash dividends of $0.13 per share paid on common stock																			—		—		—		(5.1		)	—			—			(5.1		)
Balance, May 31, 2019																			39.7		$	0.5	$	924.7	$	2,204.9		$	(122.1	)	$	(1,123.1	)	$	1,884.9


⁽¹⁾	~~See~~ ~~Income Taxes~~ ~~footnote within the~~ ~~Notes to Consolidated Financial Statements~~ ~~for additional details.~~

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



	Common Stock Outstanding
	Shares		Amount		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock, at cost			Total
Balance, August 31, 2017	41.8		$	0.5	$	881.0	$	1,659.9		$	(99.7	)	$	(776.1	)	$	1,665.6
Net income	—		—		—		71.5			—			—			71.5
Other comprehensive loss	—		—		—		—			(8.9		)	—			(8.9		)
Amortization, issuance, and cancellations of restricted stock grants	0.1		—		2.5		—			—			0.1			2.6
Employee stock purchase plan issuances	—		—		0.2		—			—			—			0.2
Cash dividends of $0.13 per share paid on common stock	—		—		—		(5.5		)	—			—			(5.5		)
Stock options exercised	—		—		0.6		—			—			—			0.6
Balance, November 30, 2017	41.9		0.5		884.3		1,725.9			(108.6		)	(776.0		)	1,726.1
Net income	—		—		—		96.9			—			—			96.9
Other comprehensive income	—		—		—		—			4.3			—			4.3
Reclassification of stranded tax effects of the TCJA ⁽¹⁾	—		—		—		11.1			(11.1		)	—			—
Amortization, issuance, and cancellations of restricted stock grants	0.1		—		7.6		—			—			—			7.6
Employee stock purchase plan issuances	—		—		0.1		—			—			—			0.1
Cash dividends of $0.13 per share paid on common stock	—		—		—		(5.4		)	—			—			(5.4		)
Stock options exercised	—		—		0.5		—			—			—			0.5
Repurchases of common stock	(1.2	)	—		—		—			—			(194.3		)	(194.3		)
Balance, February 28, 2018	40.8		0.5		892.5		1,828.5			(115.4		)	(970.3		)	1,635.8
Net income	—		—		—		73.0			—			—			73.0
Other comprehensive loss	—		—		—		—			(5.7		)	—			(5.7		)
Amortization, issuance, and cancellations of restricted stock grants	—		—		6.5		—			—			—			6.5
Employee stock purchase plan issuances	—		—		0.2		—			—			—			0.2
Cash dividends of $0.13 per share paid on common stock	—		—		—		(5.3		)	—			—			(5.3		)
Repurchases of common stock	(0.8	)	—		—		—			—			(104.1		)	(104.1		)
Balance, May 31, 2018	40.0		$	0.5	$	899.2	$	1,896.2		$	(121.1	)	$	(1,074.4	)	$	1,600.4

______________________________________

⁽¹⁾See Income Taxes footnote of the Notes to Consolidated Financial Statements within our Form 10-K for additional details.


~~10.~~	~~Comprehensive Income~~

Note 11 — Comprehensive Income

Comprehensive income represents a measure of all changes in equity that result from recognized transactions and other economic events other than transactions with owners in their capacity as owners. Other comprehensive income (loss) ~~for the Company~~ includes foreign currency translation and pension adjustments. The before tax amounts of the defined benefit pension plan items reclassified from Accumulated other comprehensive loss are included in Miscellaneous expense, net on the Consolidated Statements of Comprehensive Income. See the Pension Plans footnote within the Notes to Consolidated Financial Statements for additional details.

The following table presents the changes in each component of accumulated other comprehensive loss during the nine months ended May 31, 2019 and 2018 (in millions):



	Foreign Currency Items			Defined Benefit Pension Plans			Accumulated Other Comprehensive Loss Items
Balance at August 31, 2018	$	(53.9	)	$	(60.9	)	$	(114.8	)
Other comprehensive (loss) income before reclassifications	(12.6		)	0.9			(11.7		)
Amounts reclassified from accumulated other comprehensive loss	—			4.4			4.4
Net current period other comprehensive (loss) income	(12.6		)	5.3			(7.3		)
Balance at May 31, 2019	$	(66.5	)	$	(55.6	)	$	(122.1	)

Foreign Currency Items Defined Benefit Pension Plans Accumulated Other Comprehensive Loss Items
Balance at August 31, 2017 $ (28.7 ) $ (71.0 ) $ (99.7 )
Other comprehensive loss before reclassifications (15.6 ) —
(15.6 )
Amounts reclassified from accumulated other comprehensive income —
5.3
5.3
Net current period other comprehensive (loss) income (15.6 ) 5.3
(10.3 )
Reclassification of stranded tax effects of TCJA ⁽¹⁾
—
(11.1 ) (11.1 )
Balance at May 31, 2018 $ (44.3 ) $ (76.8 ) $ (121.1 )


⁽¹⁾	~~See~~ ~~Income Taxes~~ ~~footnote within the~~ ~~Notes to Consolidated Financial Statements~~ ~~for additional details.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



	Foreign Currency Items			Defined Benefit Pension Plans			Accumulated Other Comprehensive Loss Items
Balance at August 31, 2017	$	(28.7	)	$	(71.0	)	$	(99.7	)
Other comprehensive loss before reclassifications	(15.6		)	—			(15.6		)
Amounts reclassified from accumulated other comprehensive loss	—			5.3			5.3
Net current period other comprehensive (loss) income	(15.6		)	5.3			(10.3		)
Reclassification of stranded tax effects of TCJA ⁽¹⁾	—			(11.1		)	(11.1		)
Balance at May 31, 2018	$	(44.3	)	$	(76.8	)	$	(121.1	)

______________________________________

⁽¹⁾See Income Taxes footnote of the Notes to Consolidated Financial Statements within our Form 10-K for additional details.

The following table presents the tax expense or benefit allocated to each component of other comprehensive ~~income (loss)~~loss for the three and nine months ended May 31, ~~2018~~2019 and ~~2017~~2018 (in millions):



	Three Months Ended
	May 31, 2019									May 31, 2018
	Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Foreign currency translation adjustments	$	(8.7	)	$	—		$	(8.7	)	$	(7.6	)	$	—		$	(7.6	)
Defined benefit pension plans:
Amortization of defined benefit pension items:
Prior service cost	0.8			(0.2		)	0.6			0.8			(0.1		)	0.7
Actuarial losses	1.0			(0.3		)	0.7			1.7			(0.5		)	1.2
Total defined benefit pension plans, net	1.8			(0.5		)	1.3			2.5			(0.6		)	1.9
Other comprehensive loss	$	(6.9	)	$	(0.5	)	$	(7.4	)	$	(5.1	)	$	(0.6	)	$	(5.7	)



	Nine Months Ended
	May 31, 2019									May 31, 2018
	Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount
Foreign currency translation adjustments	$	(12.6	)	$	—		$	(12.6	)	$	(15.6	)	$	—		$	(15.6	)
Defined benefit pension plans:
Actuarial gain or loss	1.3			(0.4		)	0.9			—			—			—
Amortization of defined benefit pension items:
Prior service cost	2.3			(0.5		)	1.8			2.4			(0.7		)	1.7
Actuarial losses	3.1			(0.8		)	2.3			5.1			(1.5		)	3.6
Settlement losses	0.4			(0.1		)	0.3			—			—			—
Total defined benefit pension plans, net	7.1			(1.8		)	5.3			7.5			(2.2		)	5.3
Other comprehensive loss	$	(5.5	)	$	(1.8	)	$	(7.3	)	$	(8.1	)	$	(2.2	)	$	(10.3	)

Three Months Ended
May 31, 2018 May 31, 2017
Before Tax Amount Tax (Expense) Benefit Net of Tax Amount Before Tax Amount Tax (Expense) Benefit Net of Tax Amount
Foreign currency translation adjustments $ (7.6 ) $ —
$ (7.6 ) $ 2.4
$ —
$ 2.4
Defined benefit pension plans:
Amortization of defined benefit pension items:
Prior service cost⁽¹⁾
0.8
(0.1 ) 0.7
0.8
(0.2 ) 0.6
Actuarial losses ⁽¹⁾
1.7
(0.5 ) 1.2
2.2
(0.8 ) 1.4
Total defined benefit pension plans, net 2.5
(0.6 ) 1.9
3.0
(1.0 ) 2.0
Other comprehensive (loss) income $ (5.1 ) $ (0.6 ) $ (5.7 ) $ 5.4
$ (1.0 ) $ 4.4

Nine Months Ended
May 31, 2018 May 31, 2017
Before Tax Amount Tax (Expense) Benefit Net of Tax Amount Before Tax Amount Tax (Expense) Benefit Net of Tax Amount
Foreign currency translation adjustments $ (15.6 ) $ —
$ (15.6 ) $ (6.2 ) $ —
$ (6.2 )
Defined benefit pension plans:
Amortization of defined benefit pension items:
Prior service cost ⁽¹⁾
2.4
(0.7 ) 1.7
2.4
(0.7 ) 1.7
Actuarial losses ⁽¹⁾
5.1
(1.5 ) 3.6
6.6
(2.2 ) 4.4
Total defined benefit pension plans, net 7.5
(2.2 ) 5.3
9.0
(2.9 ) 6.1
Other comprehensive (loss) income $ (8.1 ) $ (2.2 ) $ (10.3 ) $ 2.8
$ (2.9 ) $ (0.1 )


⁽¹⁾	~~The before tax amount of these other comprehensive income (loss) components is included in net periodic pension cost. See~~ ~~Pension Plans~~ ~~footnotewithin the~~ ~~Notes to Consolidated Financial Statements~~ ~~for additional details.~~


~~11.~~	~~Debt~~

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 12 — Debt and Lines of Credit

Lines of Credit

On ~~August 27, 2014, the Company executed~~June 29, 2018, we entered into a ~~$250.0~~credit agreement (“Credit Agreement”) with a syndicate of banks that provides us with a $400.0 million five-year unsecured revolving credit facility ~~(the “Revolving~~(“Revolving Credit Facility”) and a $400.0 million unsecured delayed draw term loan facility (“Term Loan Facility”). ~~The~~We had no borrowings outstanding under the current Revolving Credit Facility ~~will mature, and all amounts~~or Term Loan Facility as of May 31, 2019. Additionally, we had no borrowings outstanding ~~will be due and payable, on~~under our previous credit facility as of August ~~27, 2019.~~ 31, 2018.

Generally, amounts outstanding under the Revolving Credit Facility allow for borrowings to bear interest at aeither the Eurocurrency ~~Rate.~~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~~Interbank Offered Rate (“LIBOR”) for the applicable currency plus a margin as determined by the Company's leverage ratio (“Applicable Margin”). The Applicable Margin is based on the Company’s leverage ratio, as defined in the Revolving Credit Facility, with such margin ranging from 1.000% to 1.575%. The Company had $1.2 million in borrowings outstanding under the Revolving Credit Facility as of May 31, 2018. Additionally, the Company is required to pay certain fees in connection with the Revolving Credit Facility, including administrative service fees and an annual facility fee. The annual facility fee is payable quarterly, in arrears, and is determined by the Company’s leverage ratio as defined in the Revolving Credit Facility. This facility fee ranges from 0.125% to 0.300% of the aggregate $250.0 million commitment of the lenders under the Revolving Credit Facility.

The Revolving Credit Facility contains financial covenants, including a minimum interest coverage ratio (“Minimum Interest Coverage Ratio”) and a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness to earnings before interest, taxes, depreciation, and amortization expense (“EBITDA”), as such terms are defined in the Revolving Credit Facility agreement. These ratios are computed at the end of each fiscal quarter for the most recent 12-month period. The Revolving Credit Facility allows for a Minimum Interest Coverage Ratio of 2.50 and a Maximum Leverage Ratio of 3.50, subject to certain conditions defined in the financing agreement.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

As of May 31, 2018, the Company was in compliance with all financial covenants under the Revolving Credit Facility. As of May 31, 2018, the Company had outstanding letters of credit totaling $10.2 million, primarily for securing collateral requirements under the Company's casualty insurance programs and for providing credit support for the Company’s industrial revenue bond (not an outstanding amount under the Revolving Credit Facility). At May 31, 2018, the Company had additional borrowing capacity under the Revolving Credit Facility of $243.5 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less outstanding letters of credit of $5.3 million issued under the Revolving Credit Facility and $1.2 million in borrowings on the Revolving Credit Facility. During June 2018, the Company entered into a new revolving credit facility and term loan facility. Refer to the ~~Subsequent Events~~ ~~footnote in the~~ ~~Notes to Consolidated Financial Statements~~ ~~for further information.~~

~~Long-term Debt~~

~~At May 31, 2018, the Company had $350.0 million of publicly-traded, senior unsecured notes outstanding at a 6% interest~~or screen rate that are scheduled to mature in December 2019 (the “Unsecured Notes”) and $4.0 million of tax-exempt industrial revenue bonds that are scheduled to mature in 2021. The Company also had $3.4 million outstanding under fixed-rate bank loans. Further discussion of the Company's long-term debt is included within the ~~Debt and Lines of Credit~~ ~~footnote of the~~ ~~Notes to Consolidated Financial Statements~~ ~~within the Company’s Form 10-K.~~

~~Interest Expense, net~~

Interest expense, net, is comprised primarily of interest expense on long-term debt, obligations in connection with non-qualified retirement benefits, and Revolving Credit Facility borrowings, partially offset by interest income earned on cash and cash equivalents.

~~The following table summarizes the components of interest expense, net for the three and nine months ended May 31, 2018 and 2017 (in millions):~~

Three Months Ended Nine Months Ended
May 31, 2018
May 31, 2017 May 31, 2018
May 31, 2017
Interest expense $ 8.9
$ 8.5
$ 26.3
$ 25.6
Interest income (0.5 ) (0.4 ) (1.8 ) (1.3 )
Interest expense, net $ 8.4
$ 8.1
$ 24.5
$ 24.3


~~12.~~	~~Commitments and Contingencies~~

In the normal course of business, the Company is 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 reserves and claims, legal and contractual issues, environmental laws and regulations, guarantees, and indemnities. The Company establishes reserves when the associated costs related to uncertainties or guarantees become probable and can be reasonably estimated. For the period ended May 31, 2018, no material changes have occurred in the Company's reserves 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 the Company's Form 10-K.~~

~~Trade Compliance Matters~~

In the course of routine reviews of import and export activity, the Company previously determined that it misclassified and/or inaccurately valued certain international shipments of products. The Company is conducting a detailed review of this activity to determine the extent of any liabilities and implementing the appropriate remedial measures. At this time, the Company is unable to determine the likelihood or amount of loss, if any, associated with these shipments.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~Product Warranty and Recall Costs~~

The Company's products generally have a standard warranty term of five years. The Company records an allowance for the estimated amount of future warranty costs when the related revenue is recognized. Estimated costs related to product recalls based on a formal campaign soliciting repair or return of that product are accrued when they are deemed to be probable and can be reasonably estimated. Estimated future warranty and recall costs are primarily based on historical experience of identified warranty and recall claims. In certain limited cases, the Company has warranty arrangements for terms that exceed the standard term. Given that these longer-term warranties are not included in the Company’s historical experience, the Company utilizes estimated failure rates from industry sources to determine the potential future warranty cost. However, there can be no assurance that future warranty or recall costs will not exceed historical amounts or that new technology products, which may include extended warranties, may not generate unexpected costs. If actual future warranty or recall costs exceed historical amounts, additional allowances may be required, which could have a material adverse impact on the Company’s results of operations and cash flows.

~~Reserves for product warranty and recall costs are included in~~ ~~Other accrued liabilities~~ ~~and~~ ~~Other long-term liabilities~~ ~~on the~~ ~~Consolidated Balance Sheets.~~ ~~The changes in the reserves for product warranty and recall costs during the nine months ended May 31, 2018 and 2017 are summarized as follows (in millions):~~

Nine Months Ended
May 31, 2018 May 31, 2017
Beginning balance $ 22.0
$ 15.5
Warranty and recall costs 21.4
23.4
Payments and other deductions (19.5 ) (19.9 )
Acquired warranty and recall liabilities 0.6
—
Ending balance $ 24.5
$ 19.0

~~Securities Class Action~~

On January 3, 2018, a shareholder filed a class action complaint in the United States District Court for the District of Delaware against the Company and certain of its officers on behalf of all persons who purchased or otherwise acquired the Company’s 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 the Company’s stock between October 15, 2015 and April 3, 2017. A motion to consolidate the cases has been filed and is presently pending, unopposed. The cases were transferred on April 30, 2018, to the United States District Court for the Northern District of Georgia. The complaints allege that the defendants 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 the Company’s products and (ii) overstated the Company’s ability to achieve profitable sales growth. The plaintiffs seek class certification, unspecified monetary damages, costs, and attorneys’ fees. The Company disputes the allegations in the complaints and intends to vigorously defend against the claims. Estimating an amount or range of possible losses 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 factual and legal issues have not been resolved. For these reasons, the Company is currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matters described above. The Company is insured, in excess of a self-retention, for Directors and Officers liability.

~~Table of Contents~~

~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~Other Litigation~~

The Company is 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 any such pending and threatened legal proceedings will not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company. However, in the event of unexpected future developments, it is possible that the ultimate resolution of any such matters, if unfavorable, could have a material adverse effect on the financial condition, results of operations, or cash flows of the Company in future periods. The Company establishes reserves for legal claims when associated costs become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the amounts reserved for such claims. However, the Company cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the amounts reserved.


~~13.~~	~~Share-based Payments~~

The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors of the Company, including stock options and restricted shares (all part of the Company's equity incentive plan), and share units representing certain deferrals into the Company's director deferred compensation plan or the Company's supplemental deferred savings plan.

~~The following table presents share-based payment expense and new shares issued upon exercise of stock options for the three and nine months ended May 31, 2018 and 2017 (in millions, except shares):~~

Three Months Ended
Nine Months Ended
May 31, 2018
May 31, 2017
May 31, 2018
May 31, 2017
Share-based payment expense $ 7.6
$ 8.1
$ 24.4
$ 24.1
Shares issued from option exercises —
2,524
9,364
14,554

~~Further details regarding each of these award programs and the Company's share-based payments are included within the~~ ~~Share-based Payments~~ ~~footnote of the~~ ~~Notes to Consolidated Financial Statements~~ ~~within the Company’s Form 10-K.~~

~~14. Pension Plans~~

The Company has several pension plans, both qualified and non-qualified, covering certain hourly and salaried employees. Benefits paid under these plans are based generally on employees’ years of service and/or compensation during the final years of employment. Plan assets are invested primarily in equity and fixed income securities.

~~Net periodic pension cost for the Company’s defined benefit pension plans during the three and nine months ended May 31, 2018 and 2017 included the following components before tax (in millions):~~

Three Months Ended
Nine Months Ended
May 31, 2018
May 31, 2017
May 31, 2018
May 31, 2017
Service cost $ 0.7
$ 0.9
$ 2.1
$ 2.7
Interest cost 2.2
2.0
6.6
6.0
Expected return on plan assets (3.1 ) (2.8 ) (9.3 ) (8.4 )
Amortization of prior service cost 0.8
0.8
2.4
2.4
Recognized actuarial loss 1.7
2.2
5.1
6.6
Net periodic pension cost $ 2.3
$ 3.1
$ 6.9
$ 9.3

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~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

During the current period, the Company contributed an additional $5.0 million to its domestic defined benefit plans, resulting in total contributions of $8.0 million to these plans for fiscal 2018. No additional contributions are expected to be made to the domestic defined benefit plans for the remainder of the year.

~~Further details regarding the Company's pension plans are included within the~~ ~~Pension and Defined Contribution Plans~~ ~~footnote of the~~ ~~Notes to Consolidated Financial Statements~~ ~~within the Company’s Form 10-K.~~


~~15.~~	~~Special Charge~~

During fiscal 2018, the Company recognized special charges primarily related to the planned consolidation of certain facilities and associated reduction in employee headcount. During fiscal 2017, the Company recognized special charges consisting primarily of severance and employee-related benefit costs for the elimination of certain operations and positions following a realignment of the Company's operating structure, including positions within various selling, distribution, and administrative (“SD&A”) departments.

~~Costs reflected within~~ ~~Special charge~~ ~~on the~~ ~~Consolidated Statements of Comprehensive Income~~ ~~for the three and nine months ended May 31, 2018 are summarized as follows (in millions):~~

Three Months Ended Nine Months Ended
May 31, 2018 May 31, 2017 May 31, 2018 May 31, 2017
Severance and employee-related costs $ 9.9
$ 0.3
$ 10.5
$ 0.1
Lease termination and other restructuring costs —
0.2
0.2
1.6
Special Charge $ 9.9
$ 0.5
$ 10.7
$ 1.7

~~As of May 31, 2018, remaining restructuring reserves were $17.3 million and are included in~~ ~~Accrued compensation~~ ~~and~~ ~~Other long-term liabilities~~ ~~on the~~ ~~Consolidated Balance Sheets. The changes in the reserves related to these programs during the nine months ended May 31, 2018 are summarized as follows (in millions):~~

Fiscal 2018 Actions Fiscal 2017 Actions Fiscal 2016 Actions Total
Balance at August 31, 2017 $ —
$ 11.2
$ 1.4
$ 12.6
Severance costs 10.6
—
(0.1 ) 10.5
Payments made during the period —
(4.8 ) (1.0 ) (5.8 )
Balance at May 31, 2018 $ 10.6
$ 6.4
$ 0.3
$ 17.3

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~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~


~~16.~~	~~Income Taxes~~

On December 22, 2017, the President of the United States signed into law the TCJA, which reduces the federal corporate tax rate from 35% to 21% effective January 1, 2018 and requires a one-time transition tax on accumulated unremitted foreign earnings. During the second quarter of fiscal 2018, the Company recognized a provisional tax benefit estimate of $31.2 million within ~~Income tax expense~~ ~~on the~~ ~~Consolidated Statements of Comprehensive Income~~ ~~following the enactment of the TCJA~~. ~~This provisional amount included a benefit of $32.3 million to decrease the Company's deferred income taxesto a revised statutory federal rate as well as a current estimate for the provision for unremitted foreign earnings of approximately $1.1 million.~~

Amounts reflected in the current fiscal year are not finalized as the Company continues to evaluate the impact of the TCJA on these components of the Company's ultimate tax liability. Although the Company is able to make a reasonable estimate of the impact of the corporate rate change to its deferred taxes, further evaluation of the TCJA may change the measurement of, or identify new, deferred tax amounts. Additionally, the Company has not completed its analysis of the total post-1986 earnings and profits not previously subject to income taxes, including the determination of amounts held in cash and other certain assets specified by the TCJA. Upon finalization of this calculation, the provisional amount recorded for unremitted foreign earnings may change.

The TCJA also includes a provision for a global intangible low-taxed income (“GILTI”) tax. Companies can either account for taxes on GILTI in the period in which they are incurred or establish deferred tax liabilities for the expected future taxes associated with GILTI. The Company has not yet made a policy election with respect to its treatment of these taxes.

~~Additionally, the Company reclassified $11.1 million from~~ ~~Accumulated other comprehensive loss~~ to ~~Retained earnings~~ ~~in relation to the revaluation of deferred tax assets related to the Company's defined benefit plans during the second quarter of fiscal 2018.~~


~~17.~~	~~Subsequent Events~~

On June 29, 2018, the Company entered into a credit agreement (“Credit Agreement”) with a syndicate of banks that provides the Company with a $400.0 million five-year unsecured revolving credit facility (“New Revolving Credit Facility”) and a $400.0 million unsecured delayed draw term loan facility (“Term Loan Facility”). On June 29, 2018, the Company had $90.4 million borrowings outstanding under the New Revolving Credit Facility and no borrowings under the Term Loan Facility. At June 29, 2018, the Company had additional borrowing capacity under the Credit Agreement of $704.3 million under the most restrictive covenant in effect at the time, which represents the full amount of the New Revolving Credit Facility and the Term Loan Facility less the outstanding letters of credit of $5.3 million issued and $90.4 million in borrowings on the New Revolving Credit Facility. Available borrowings under the Credit Agreement may be used for general corporate purposes, working capital, refinancing indebtedness under the prior Revolving Credit Facility, share repurchases, and non-hostile acquisitions.

The New Revolving Credit Facility replaced the Company's $250.0 million Revolving Credit Facility, which was scheduled to mature on August 27, 2019. Generally, amounts outstanding under the New Revolving Credit Facility allow for borrowings to bear interest at either the Eurocurrency Rate or the base rate at the Company's option. 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 LIBOR for the applicable currency plus an applicable margin. The Eurocurrency applicable margin is based on ~~the Company’s~~our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 1.000% to 1.375%. Base ~~Rate~~rate advances bear interest at an alternate base rate plus an applicable margin. The base rate applicable margin is based on ~~the Company’s~~our leverage ratio, as defined in the Credit Agreement, with such margin ranging from ~~0.0%~~0.000% to 0.375%.

The Term Loan Facility allows for borrowings to be drawn over a ~~one-year~~ period ending ~~June 29,~~December 31, 2019, utilizing up to four separate installments, which are U.S. dollar denominated. Borrowings under the Term Loan Facility will amortize in equal quarterly installments of 2.5% per year in year one, 2.5% per year in year two, 5.0% per year in year three, 5.0% per year in year four, and 7.5% per year in year five. Any remaining borrowings under the Term Loan Facility are due and payable in full on June 29, 2023. The Term Loan Facility allows for borrowings to bear interest at either a Eurocurrency Rate or the base rate, at ~~the Company’s option.~~our option, in each case 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 LIBOR or screen rate for the applicable currency plus an applicable margin. The Eurocurrency applicable margin is based on ~~the~~

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~~ACUITY BRANDS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~Company’s~~our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 0.875% to 1.250%. Base Rate advances bear interest at an alternate base rate plus an applicable margin. The base rate applicable margin is based on ~~the Company’s~~our leverage ratio, as defined in the Credit Agreement, with such margin ranging from 0.0% to 0.25%.

~~The Company is~~We are required to pay certain fees in connection with the Credit Agreement, including administrative service fees and annual facility fees. The annual facility fee is payable quarterly, in arrears, and is determined by ~~the Company’s~~our leverage ratio as defined in the Credit Agreement. The facility fee ranges from 0.125% to ~~0.250%~~0.25% of the aggregate $800.0 million commitment of the lenders under the Credit Agreement.

The Credit Agreement contains financial covenants, including a minimum interest expense coverage ratio (“~~New~~ Minimum Interest Expense Coverage Ratio”) and a leverage ratio (“~~New~~ Maximum Leverage Ratio”) of total indebtedness to ~~EBITDA,~~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 ~~New~~ Minimum Interest Expense Coverage Ratio of 2.50 and a ~~New~~ Maximum Leverage Ratio of 3.50, subject to certain conditions, as such terms are defined in the ~~financing agreement.~~Credit Agreement.

We were in compliance with all financial covenants under the Credit Agreement as of May 31, 2019. At May 31, 2019, we had additional borrowing capacity under the Credit Agreement of $794.7 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility and the Term Loan Facility less the outstanding letters of credit of $5.3 million issued under the Revolving Credit Facility. As of May 31, 2019, we had outstanding letters of credit totaling $9.5 million, primarily for securing collateral requirements under our casualty insurance programs and for providing credit support for our industrial revenue bond, which includes the $5.3 million issued under the Revolving Credit Facility.

Long-term Debt

At May 31, 2019, we had $350.0 million of publicly-traded, senior unsecured notes outstanding at a 6% interest rate that are scheduled to mature in December 2019 (the “Unsecured Notes”). Although the Unsecured Notes will mature within one year from May 31, 2019, we have the ability and intent to refinance these borrowings using availability under our Term Loan Facility, subject to satisfying the applicable conditions precedent. Currently, we plan to refinance the Unsecured Notes in full at maturity with borrowings under the Term Loan Facility, of which $341.1 million of the current carrying value of the Unsecured Notes would be due more than one year from the anticipated refinancing date. As such, this amount is reflected within Long-term debt on the Consolidated Balance Sheets as of May 31, 2019. We also had $4.0 million of tax-exempt industrial revenue bonds that are scheduled to mature in 2021 and $2.8 million

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

outstanding under fixed-rate bank loans outstanding at May 31, 2019. Further discussion of our long-term debt is included within the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

Interest Expense, net

The following table summarizes the components of interest expense, net for the three andnine months ended May 31, 2019 and 2018 (in millions):



	Three Months Ended						Nine Months Ended
	May 31, 2019			May 31, 2018			May 31, 2019			May 31, 2018
Interest expense	$	9.1		$	8.9		$	27.4		$	26.3
Interest income	(0.8		)	(0.5		)	(1.8		)	(1.8		)
Interest expense, net	$	8.3		$	8.4		$	25.6		$	24.5


~~18.~~	~~Supplemental Guarantor Condensed Consolidating Financial Statements~~

Note 13 — 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 reserves and claims, legal and contractual issues, environmental laws and regulations, guarantees, and indemnities. We establish reserves when the associated costs related to uncertainties or guarantees become probable and can be reasonably estimated. For the period ended May 31, 2019, no material changes have occurred in our reserves 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.

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 allowance for the estimated amount of future warranty costs when the related revenue is recognized. Estimated costs related to product recalls based on a formal campaign soliciting repair or return of that product are accrued when they are deemed to be probable and can be reasonably estimated. Estimated future warranty and recall costs are primarily based on historical experience of identified warranty and recall claims. However, there can be no assurance that future warranty or recall costs will not exceed historical amounts or that new technology products may not generate unexpected costs. If actual future warranty or recall costs exceed historical amounts, additional allowances may be required, which could have a material adverse impact on our results of operations and cash flows.

Reserves for these product warranty and recall costs are included in Other accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets. The changes in the reserves for product warranty and recall costs during the nine months ended May 31, 2019 and 2018 are summarized as follows (in millions):

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



	Nine Months Ended
	May 31, 2019			May 31, 2018
Beginning balance	$	27.3		$	22.0
Warranty and recall costs	12.9			21.4
Payments and other deductions	(14.2		)	(19.5		)
Acquired warranty and recall liabilities	—			0.6
ASC 606 adjustments ⁽¹⁾	(14.8		)	—
Ending balance	$	11.2		$	24.5

^{______________________________}

⁽¹⁾Certain service-type warranties accounted for as contingent liabilities prior to the adoption of ASC 606 are now reflected as contract liabilities effective September 1, 2018. Refer to the New Accounting Pronouncements and Revenue Recognition footnotes for additional information.

Securities Class Action

On January 3, 2018, a shareholder filed a class action complaint 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 the Company and certain of our current officers and one former executive 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 the Company’s products and (ii) overstated our ability to achieve profitable sales growth. The plaintiff seeks class certification, unspecified monetary damages, costs, and attorneys’ fees. We dispute the allegations and intend to vigorously defend against the claims. We have filed a motion to dismiss the Consolidated Complaint. Estimating an amount or range of possible losses 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 factual 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 a range of possible losses resulting from the matters described above. We maintain Director and Officer insurance policies that may cover any liability arising out of this litigation up to the policies’ limits, subject to a self-insured retention and other terms and conditions.

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 any such 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 reserves for legal claims when associated costs become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the amounts reserved for such claims. However, we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the amounts reserved.

Trade Compliance Matters

In the course of routine reviews of import and export activity, we previously determined that we misclassified and/or inaccurately valued certain international shipments of products. We are conducting a detailed review of this activity to determine the extent of any liabilities and implementing the appropriate remedial measures. At this time, we are unable to determine the likelihood or amount of loss, if any, associated with these shipments.

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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, including stock options and restricted shares (all part of our equity incentive plan), and share units representing certain deferrals into our director deferred compensation plan or our supplemental deferred savings plan.

The following table presents share-based payment expense and new shares issued upon exercise of stock options for the three andnine months ended May 31, 2019 and 2018 (in millions, except shares):



	Three Months Ended				Nine Months Ended
	May 31, 2019		May 31, 2018		May 31, 2019		May 31, 2018
Share-based payment expense	$	7.6	$	7.6	$	22.9	$	24.4
Shares issued from option exercises	—		—		—		9,364

Further details regarding each of these award programs and our share-based payments are included within the Share-based Payments footnote of the Notes to Consolidated Financial Statements within our Form 10-K.

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 annual contributions to the plans to the extent indicated by actuarial valuations and statutory requirements. Plan assets are invested primarily in equity and fixed income securities.

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 during the three andnine months ended May 31, 2019 and 2018 included the following components before tax (in millions):



	Three Months Ended						Nine Months Ended
	May 31, 2019			May 31, 2018			May 31, 2019			May 31, 2018
Service cost	$	0.8		$	0.7		$	2.4		$	2.1
Interest cost	2.2			2.2			6.7			6.6
Expected return on plan assets	(3.1		)	(3.1		)	(9.4		)	(9.3		)
Amortization of prior service cost	0.8			0.8			2.3			2.4
Settlement loss	—			—			0.4			—
Recognized actuarial loss	1.0			1.7			3.1			5.1
Net periodic pension cost	$	1.7		$	2.3		$	5.5		$	6.9

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 — Special Charge

During fiscal 2019, we recognized pre-tax special charges of $1.3 million. These charges primarily related to move costs associated with the previously announced transfer of activities from a planned facility closure. During fiscal 2018, we recognized special charges consisting primarily of severance and employee-related benefit costs for the elimination of certain operations and positions following a realignment of our operating structure, including positions within various selling, distribution, and administrative (“SD&A”) departments. Further details regarding our special charges are included within the Special Charge 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)

Costs reflected within Special charge on the Consolidated Statements of Comprehensive Income for the three and nine months ended May 31, 2019 and 2018 are summarized as follows (in millions):



	Three Months Ended					Nine Months Ended
	May 31, 2019			May 31, 2018		May 31, 2019			May 31, 2018
Severance and employee-related costs	$	—		$	9.9	$	(0.8	)	$	10.5
Move and other restructuring costs	(0.1		)	—		2.1			0.2
Total special charge	$	(0.1	)	$	9.9	$	1.3		$	10.7

As of May 31, 2019, remaining restructuring reserves were $3.9 million and are included in Accrued compensation on the Consolidated Balance Sheets. The changes in the reserves related to these programs during the nine months ended May 31, 2019 are summarized as follows (in millions):



	Fiscal 2018 Actions			Fiscal 2017 Actions			Total
Balance at August 31, 2018	$	9.2		$	0.9		10.1
Severance costs	(0.4		)	(0.4		)	(0.8		)
Payments made during the period	(4.9		)	(0.5		)	(5.4		)
Balance at May 31, 2019	$	3.9		$	—		$	3.9

Note 17 — Income Taxes

During the second quarter of fiscal 2019, we finalized our accounting for the tax effects of the U.S. Tax Cuts and Jobs Act (“TCJA”) in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”). As a result, we recorded a net tax benefit of $0.9 million related to TCJA impacts including, but not limited to, our one-time transition tax, deferred income taxes, and executive compensation.

Previously, we asserted that all undistributed earnings and original investments in foreign subsidiaries were indefinitely reinvested and, therefore, had not recorded any deferred taxes related to any outside basis differences associated with our foreign subsidiaries. As of May 31, 2019, the estimated undistributed earnings from foreign subsidiaries was $84.4 million. A significant portion of these earnings was subject to U.S. federal taxation in fiscal 2018 as part of the one-time transition tax. We are no longer asserting indefinite reinvestment on the portion of our unremitted earnings that were previously subject to U.S. federal taxation with the one-time transition tax. Accordingly, we recognized a deferred income tax liability of $0.6 million for certain foreign withholding taxes and U.S. state taxes during the second quarter of fiscal 2019. With respect to unremitted earnings and original investments in foreign subsidiaries where we are continuing to assert indefinite reinvestment, any future remittances could be subject to additional foreign withholding taxes, U.S. state taxes, and certain tax impacts relating to foreign currency exchange effects. It is not practicable to estimate the amount of any unrecognized tax effects on these reinvested earnings and original investments in foreign subsidiaries.

We have elected to account for the tax on Global Intangible Low-Taxed Income (“GILTI”) as a period cost and, therefore, do not record deferred taxes related to GILTI on our foreign subsidiaries.

Further details regarding the effects of the TCJA are included within the Income Taxes 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 18 — Supplemental Guarantor Condensed Consolidating Financial Statements

In December 2009, ABL, the 100% owned and principal operating subsidiary of Acuity Brands, refinanced the then current outstanding debt through the issuance of the Unsecured Notes. See Debt and Lines of Credit footnote for further information.

In accordance with the registration rights agreement by and between ABL and the guarantors to the Unsecured Notes and the initial purchasers of the Unsecured Notes, ABL and the guarantors to the Notes filed a registration statement with the SEC for an offer to exchange the Unsecured Notes for an issue of SEC-registered notes with identical terms. Due to the filing of the registration statement and offer to exchange, ~~the Company~~we determined the need for compliance with Rule 3-10 of SEC Regulation S-X (“Rule 3-10”). In lieu of providing separate audited financial statements for ABL and ABL IP Holding, ~~the Company has~~we have included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(d) of SEC Regulation S-X since the Unsecured Notes are fully and unconditionally guaranteed by Acuity Brands and ABL IP Holding. The column marked “Parent” represents the financial condition, results of operations, and cash flows of Acuity Brands. The column marked “Subsidiary Issuer” represents the financial condition, results of operations, and cash flows of ABL. The column entitled “Subsidiary Guarantor” represents the financial condition, results of operations, and cash flows of ABL IP Holding. Lastly, the column listed as “Non-Guarantors” includes the financial condition, results of operations, and cash flows of the non-guarantor direct and indirect subsidiaries of Acuity Brands, which consist primarily of foreign subsidiaries. Consolidating adjustments were necessary in order to arrive at consolidated amounts. In addition, the equity method of accounting was used to calculate investments in subsidiaries. Accordingly, this basis of presentation is not intended to present the Company's financial condition, results of operations, or cash flows for any purpose other than to comply with the specific requirements for parent-subsidiary guarantor reporting.

1721

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEETS

(In millions)


	May 31, 2018													May 31, 2019
	Parent		Subsidiary Issuer		Subsidiary Guarantor		Non- Guarantors		Consolidating Adjustments			Consolidated		Parent		Subsidiary Issuer		Subsidiary Guarantor		Non- Guarantors		Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	7.6	$	—	$	—	$	86.7	$	—		$	94.3	$	257.8	$	17.2	$	—	$	58.7	$	—		$	333.7
Accounts receivable, net	—		504.0		—		68.6		—			572.6		—		510.5		—		75.5		—			586.0
Inventories	—		381.9		—		24.6		—			406.5		—		367.1		—		23.5		—			390.6
Other current assets	7.2		13.0		—		12.2		—			32.4		20.8		29.7		—		18.5		—			69.0
Total current assets	14.8		898.9		—		192.1		—			1,105.8		278.6		924.5		—		176.2		—			1,379.3
Property, plant, and equipment, net	0.2		228.6		—		59.2		—			288.0		0.2		222.1		—		58.2		—			280.5
Goodwill	—		745.5		2.7		222.3		—			970.5		—		745.7		2.7		215.7		—			964.1
Intangible assets, net	—		283.7		107.3		113.6		—			504.6		—		274.9		104.3		93.9		—			473.1
Deferred income taxes	35.4		—		—		—		(32.3		)	3.1		36.0		—		—		6.3		(39.5		)	2.8
Other long-term assets	0.2		8.1		—		2.1		—			10.4		0.5		19.0		—		1.8		—			21.3
Investments in and amounts due from affiliates	1,659.3		430.9		267.8		—		(2,358.0		)	—		1,675.5		453.8		311.6		—		(2,440.9		)	—
Total assets	$	1,709.9	$	2,595.7	$	377.8	$	589.3	$	(2,390.3	)	$	2,882.4	$	1,990.8	$	2,640.0	$	418.6	$	552.1	$	(2,480.4	)	$	3,121.1

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	0.2	$	435.7	$	—	$	28.6	$	—		$	464.5	$	0.7	$	357.8	$	—	$	20.3	$	—		$	378.8
Current maturities of long-term debt	—		1.2		—		0.4		—			1.6		—		8.7		—		0.4		—			9.1
Other accrued liabilities	8.2		161.6		—		36.2		—			206.0		8.4		188.5		—		46.2		—			243.1
Total current liabilities	8.4		598.5		—		65.2		—			672.1		9.1		555.0		—		66.9		—			631.0
Long-term debt	—		353.4		—		3.0		—			356.4		—		345.1		—		2.4		—			347.5
Deferred income taxes	—		93.3		—		26.9		(32.3		)	87.9		—		103.3		—		25.8		(39.5		)	89.6
Other long-term liabilities	101.1		46.1		—		18.4		—			165.6		96.8		57.5		—		13.8		—			168.1
Amounts due to affiliates	—		—		—		159.5		(159.5		)	—		—		—		—		126.4		(126.4		)	—
Total stockholders’ equity	1,600.4		1,504.4		377.8		316.3		(2,198.5		)	1,600.4		1,884.9		1,579.1		418.6		316.8		(2,314.5		)	1,884.9
Total liabilities and stockholders’ equity	$	1,709.9	$	2,595.7	$	377.8	$	589.3	$	(2,390.3	)	$	2,882.4	$	1,990.8	$	2,640.0	$	418.6	$	552.1	$	(2,480.4	)	$	3,121.1

1822

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEETS

(In millions)



	August 31, 2018
	Parent		Subsidiary Issuer		Subsidiary Guarantor			Non- Guarantors		Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	80.5	$	—	$	—		$	48.6	$	—		$	129.1
Accounts receivable, net	—		560.7		—			77.2		—			637.9
Inventories	—		386.6		—			25.2		—			411.8
Other current assets	2.3		18.6		—			11.4		—			32.3
Total current assets	82.8		965.9		—			162.4		—			1,211.1
Property, plant, and equipment, net	0.2		226.8		—			59.7		—			286.7
Goodwill	—		746.5		2.7			221.4		—			970.6
Intangible assets, net	—		286.6		106.5			105.6		—			498.7
Deferred income taxes	36.4		—		—			6.2		(39.7		)	2.9
Other long-term assets	1.2		15.6		—			2.0		—			18.8
Investments in and amounts due from affiliates	1,707.0		370.6		279.5			—		(2,357.1		)	—
Total assets	$	1,827.6	$	2,612.0	$	388.7		$	557.3	$	(2,396.8	)	$	2,988.8
							��
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	0.3	$	420.7	$	—		$	30.1	$	—		$	451.1
Current maturities of long-term debt	—		—		—			0.4		—			0.4
Other accrued liabilities	18.8		170.1		—			42.3		—			231.2
Total current liabilities	19.1		590.8		—			72.8		—			682.7
Long-term debt	—		353.5		—			2.9		—			356.4
Deferred income taxes	—		106.5		—			25.7		(39.7		)	92.5
Other long-term liabilities	91.7		34.0		—			14.7		—			140.4
Amounts due to affiliates	—		—		—			138.8		(138.8		)	—
Total stockholders’ equity	1,716.8		1,527.2		388.7			302.4		(2,218.3		)	1,716.8
Total liabilities and stockholders’ equity	$	1,827.6	$	2,612.0	$	388.7		$	557.3	$	(2,396.8	)	$	2,988.8

August 31, 2017
Parent
Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantors
Consolidating Adjustments Consolidated
ASSETS
Current assets:

Cash and cash equivalents $ 237.7
$ —
$ —
$ 73.4
$ —
$ 311.1
Accounts receivable, net —
494.6
—
78.7
—
573.3
Inventories —
305.5
—
23.1
—
328.6
Other current assets 1.6
15.8
—
15.2
—
32.6
Total current assets 239.3
815.9
—
190.4
—
1,245.6
Property, plant, and equipment, net 0.2
228.3
—
59.2
—
287.7
Goodwill —
677.7
2.7
220.5
—
900.9
Intangible assets, net —
235.5
109.8
103.5
—
448.8
Deferred income taxes 51.6
—
—
8.0
(56.2 ) 3.4
Other long-term assets 1.5
10.9
—
0.8
—
13.2
Investments in and amounts due from affiliates 1,500.3
330.4
234.2
—
(2,064.9 ) —
Total assets $ 1,792.9
$ 2,298.7
$ 346.7
$ 582.4
$ (2,121.1 ) $ 2,899.6

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable $ 0.9
$ 366.4
$ —
$ 27.8
$ —
$ 395.1
Current maturities of long-term debt —
—
—
0.4
—
0.4
Other accrued liabilities 27.6
138.9
—
38.9
—
205.4
Total current liabilities 28.5
505.3
—
67.1
—
600.9
Long-term debt —
353.1
—
3.4
—
356.5
Deferred income taxes —
134.6
—
29.8
(56.2 ) 108.2
Other long-term liabilities 98.7
49.3
—
20.4
—
168.4
Amounts due to affiliates —
—
—
128.8
(128.8 ) —
Total stockholders’ equity 1,665.7
1,256.4
346.7
332.9
(1,936.1 ) 1,665.6
Total liabilities and stockholders’ equity $ 1,792.9
$ 2,298.7
$ 346.7
$ 582.4
$ (2,121.1 ) $ 2,899.6

1923

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(In millions)


	Three Months Ended May 31, 2018																	Three Months Ended May 31, 2019
	Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated			Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated
Net sales:
External sales	$	—		$	843.7		$	—	$	100.3		$	—		$	944.0		$	—		$	843.5		$	—	$	104.1		$	—		$	947.6
Intercompany sales	—			—			13.7		44.6			(58.3		)	—			—			—			13.9		48.2			(62.1		)	—
Total sales	—			843.7			13.7		144.9			(58.3		)	944.0			—			843.5			13.9		152.3			(62.1		)	947.6
Cost of products sold	—			476.6			—		118.6			(40.6		)	554.6			—			500.3			—		110.5			(46.8		)	564.0
Gross profit	—			367.1			13.7		26.3			(17.7		)	389.4			—			343.2			13.9		41.8			(15.3		)	383.6
Selling, distribution, and administrative expenses	11.2			240.7			0.8		38.6			(17.7		)	273.6			10.7			230.4			0.7		36.9			(15.3		)	263.4
Intercompany charges	(0.8		)	0.7			—		0.1			—			—			(0.8		)	(0.1		)	—		0.9			—			—
Special charge	—			9.9			—		—			—			9.9			—			(0.1		)	—		—			—			(0.1		)
Operating (loss) profit	(10.4		)	115.8			12.9		(12.4		)	—			105.9			(9.9		)	113.0			13.2		4.0			—			120.3
Interest expense, net	2.9			4.2			—		1.3			—			8.4			2.7			4.3			—		1.3			—			8.3
Equity earnings in subsidiaries	(82.8		)	4.7			—		—			78.1			—			(99.3		)	(7.9		)	—		—			107.2			—
Miscellaneous income, net	—			(0.7		)	—		(1.0		)	—			(1.7		)
Income (loss) before income taxes	69.5			107.6			12.9		(12.7		)	(78.1		)	99.2
Miscellaneous expense (income), net																		1.4			(0.7		)	—		(0.5		)	—			0.2
Income before income taxes																		85.3			117.3			13.2		3.2			(107.2		)	111.8
Income tax (benefit) expense	(3.5		)	31.3			1.6		(3.2		)	—			26.2			(3.1		)	22.9			2.8		0.8			—			23.4
Net income (loss)	73.0			76.3			11.3		(9.5		)	(78.1		)	73.0
Net income																		88.4			94.4			10.4		2.4			(107.2		)	88.4

Other comprehensive income (loss) items:
Foreign currency translation adjustments	(7.6		)	(7.6		)	—		—			7.6			(7.6		)	(8.7		)	(8.7		)	—		—			8.7			(8.7		)
Defined benefit pension plans, net	1.9			1.4			—		0.5			(1.9		)	1.9
Other comprehensive income items, net of tax	(5.7		)	(6.2		)	—		0.5			5.7			(5.7		)
Comprehensive income (loss)	$	67.3		$	70.1		$	11.3	$	(9.0	)	$	(72.4	)	$	67.3
Defined benefit plans, net of tax																		1.3			1.1			—		0.2			(1.3		)	1.3
Other comprehensive (loss) income items, net of tax																		(7.4		)	(7.6		)	—		0.2			7.4			(7.4		)
Comprehensive income																		$	81.0		$	86.8		$	10.4	$	2.6		$	(99.8	)	$	81.0

2024

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(In millions)



	Three Months Ended May 31, 2018
	Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated
Net sales:
External sales	$	—		$	843.7		$	—	$	100.3		$	—		$	944.0
Intercompany sales	—			—			13.7		44.6			(58.3		)	—
Total sales	—			843.7			13.7		144.9			(58.3		)	944.0
Cost of products sold	—			477.0			—		118.6			(40.7		)	554.9
Gross profit	—			366.7			13.7		26.3			(17.6		)	389.1
Selling, distribution, and administrative expenses	9.7			240.7			0.8		38.2			(17.6		)	271.8
Intercompany charges	(0.8		)	0.7			—		0.1			—			—
Special charge	—			9.9			—		—			—			9.9
Operating (loss) profit	(8.9		)	115.4			12.9		(12.0		)	—			107.4
Interest expense, net	2.9			4.2			—		1.3			—			8.4
Equity earnings in subsidiaries	(82.8		)	4.6			—		0.1			78.1			—
Miscellaneous expense (income), net	1.5			(1.0		)	—		(0.7		)	—			(0.2		)
Income (loss) before income taxes	69.5			107.6			12.9		(12.7		)	(78.1		)	99.2
Income tax (benefit) expense	(3.5		)	31.3			1.6		(3.2		)	—			26.2
Net income (loss)	73.0			76.3			11.3		(9.5		)	(78.1		)	73.0

Other comprehensive income (loss) items:
Foreign currency translation adjustments	(7.6		)	(7.6		)	—		—			7.6			(7.6		)
Defined benefit plans, net of tax	1.9			1.4			—		0.5			(1.9		)	1.9
Other comprehensive (loss) income items, net of tax	(5.7		)	(6.2		)	—		0.5			5.7			(5.7		)
Comprehensive income (loss)	$	67.3		$	70.1		$	11.3	$	(9.0	)	$	(72.4	)	$	67.3

Three Months Ended May 31, 2017
Parent
Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantors
Consolidating Adjustments Consolidated
Net sales:

External sales $ —
$ 795.0
$ —
$ 96.6
$ —
$ 891.6
Intercompany sales —
—
12.8
39.7
(52.5 ) —
Total sales —
795.0
12.8
136.3
(52.5 ) 891.6
Cost of products sold —
446.6
—
104.3
(38.2 ) 512.7
Gross profit —
348.4
12.8
32.0
(14.3 ) 378.9
Selling, distribution, and administrative expenses 11.4
213.4
0.9
35.5
(14.3 ) 246.9
Intercompany charges (1.3 ) 0.1
—
1.2
—
—
Special charge —
0.5
—
—
—
0.5
Operating (loss) profit (10.1 ) 134.4
11.9
(4.7 ) —
131.5
Interest expense, net 2.7
4.1
—
1.3
—
8.1
Equity earnings in subsidiaries (90.5 ) 2.7
—
—
87.8
—
Miscellaneous (income) expense, net —
(2.0 ) —
0.8
—
(1.2 )
Income (loss) before income taxes 77.7
129.6
11.9
(6.8 ) (87.8 ) 124.6
Income tax (benefit) expense (4.5 ) 44.2
4.2
(1.5 ) —
42.4
Net income (loss) 82.2
85.4
7.7
(5.3 ) (87.8 ) 82.2

Other comprehensive income (loss) items:
Foreign currency translation adjustments 2.4
2.4
—
—
(2.4 ) 2.4
Defined benefit pension plans, net 2.0
0.7
—
0.7
(1.4 ) 2.0
Other comprehensive income items, net of tax 4.4
3.1
—
0.7
(3.8 ) 4.4
Comprehensive income (loss) $ 86.6
$ 88.5
$ 7.7
$ (4.6 ) $ (91.6 ) $ 86.6

2125

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(In millions)


	Nine Months Ended May 31, 2018																	Nine Months Ended May 31, 2019
	Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated			Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated
Net sales:
External sales	$	—		$	2,328.3		$	—	$	290.6		$	—		$	2,618.9		$	—		$	2,429.0		$	—	$	305.6		$	—		$	2,734.6
Intercompany sales	—			—			38.2		129.3			(167.5		)	—			—			—			40.2		151.2			(191.4		)	—
Total sales	—			2,328.3			38.2		419.9			(167.5		)	2,618.9			—			2,429.0			40.2		456.8			(191.4		)	2,734.6
Cost of products sold	—			1,347.0			—		318.8			(121.4		)	1,544.4			—			1,467.4			—		330.1			(147.9		)	1,649.6
Gross profit	—			981.3			38.2		101.1			(46.1		)	1,074.5			—			961.6			40.2		126.7			(43.5		)	1,085.0
Selling, distribution, and administrative expenses	35.0			647.1			2.4		112.9			(46.1		)	751.3			30.4			650.2			2.1		111.9			(43.5		)	751.1
Intercompany charges	(2.7		)	(0.1		)	—		2.8			—			—			(3.0		)	(0.1		)	—		3.1			—			—
Special charge	—			10.7			—		—			—			10.7			—			1.3			—		—			—			1.3
Operating (loss) profit	(32.3		)	323.6			35.8		(14.6		)	—			312.5			(27.4		)	310.2			38.1		11.7			—			332.6
Interest expense, net	8.2			12.2			—		4.1			—			24.5			8.8			13.1			—		3.7			—			25.6
Equity earnings in subsidiaries	(269.9		)	2.6			—		0.1			267.2			—			(265.8		)	(19.9		)	—		0.1			285.6			—
Miscellaneous expense (income), net	—			1.3			—		(2.1		)	—			(0.8		)	4.8			(1.4		)	—		(0.8		)	—			2.6
Income (loss) before income taxes	229.4			307.5			35.8		(16.7		)	(267.2		)	288.8
Income before income taxes																		224.8			318.4			38.1		8.7			(285.6		)	304.4
Income tax (benefit) expense	(12.0		)	58.5			4.7		(3.8		)	—			47.4			(9.5		)	68.8			8.0		2.8			—			70.1
Net income (loss)	241.4			249.0			31.1		(12.9		)	(267.2		)	241.4
Net income																		234.3			249.6			30.1		5.9			(285.6		)	234.3

Other comprehensive income (loss) items:
Foreign currency translation adjustments	(15.6		)	(15.6		)	—		—			15.6			(15.6		)	(12.6		)	(12.6		)	—		—			12.6			(12.6		)
Defined benefit pension plans, net	5.3			3.9			—		1.4			(5.3		)	5.3
Defined benefit plans, net of tax																		5.3			3.4			—		0.8			(4.2		)	5.3
Other comprehensive (loss) income items, net of tax	(10.3		)	(11.7		)	—		1.4			10.3			(10.3		)	(7.3		)	(9.2		)	—		0.8			8.4			(7.3		)
Comprehensive income (loss)	$	231.1		$	237.3		$	31.1	$	(11.5	)	$	(256.9	)	$	231.1
Comprehensive income																		$	227.0		$	240.4		$	30.1	$	6.7		$	(277.2	)	$	227.0

2226

Table of Contents

ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

(In millions)



	Nine Months Ended May 31, 2018
	Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated
Net sales:
External sales	$	—		$	2,328.3		$	—	$	290.6		$	—		$	2,618.9
Intercompany sales	—			—			38.2		129.3			(167.5		)	—
Total sales	—			2,328.3			38.2		419.9			(167.5		)	2,618.9
Cost of products sold	—			1,348.1			—		318.8			(121.5		)	1,545.4
Gross profit	—			980.2			38.2		101.1			(46.0		)	1,073.5
Selling, distribution, and administrative expenses	30.4			647.2			2.4		111.7			(46.0		)	745.7
Intercompany charges	(2.6		)	(0.2		)	—		2.8			—			—
Special charge	—			10.7			—		—			—			10.7
Operating (loss) profit	(27.8		)	322.5			35.8		(13.4		)	—			317.1
Interest expense, net	8.2			12.2			—		4.1			—			24.5
Equity earnings in subsidiaries	(269.9		)	2.5			—		0.2			267.2			—
Miscellaneous expense (income), net	4.5			0.3			—		(1.0		)	—			3.8
Income (loss) before income taxes	229.4			307.5			35.8		(16.7		)	(267.2		)	288.8
Income tax (benefit) expense	(12.0		)	58.5			4.7		(3.8		)	—			47.4
Net income (loss)	241.4			249.0			31.1		(12.9		)	(267.2		)	241.4

Other comprehensive income (loss) items:
Foreign currency translation adjustments	(15.6		)	(15.6		)	—		—			15.6			(15.6		)
Defined benefit plans, net of tax	5.3			3.9			—		1.4			(5.3		)	5.3
Other comprehensive (loss) income items, net of tax	(10.3		)	(11.7		)	—		1.4			10.3			(10.3		)
Comprehensive income (loss)	$	231.1		$	237.3		$	31.1	$	(11.5	)	$	(256.9	)	$	231.1

Nine Months Ended May 31, 2017
Parent
Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantors
Consolidating Adjustments Consolidated
Net sales:

External sales $ —
$ 2,254.0
$ —
$ 293.5
$ —
$ 2,547.5
Intercompany sales —
—
36.0
128.3
(164.3 ) —
Total sales —
2,254.0
36.0
421.8
(164.3 ) 2,547.5
Cost of products sold —
1,280.3
—
316.9
(124.0 ) 1,473.2
Gross profit —
973.7
36.0
104.9
(40.3 ) 1,074.3
Selling, distribution, and administrative expenses 35.8
609.6
2.7
98.6
(40.2 ) 706.5
Intercompany charges (3.3 ) 0.5
—
2.8
—
—
Special charge —
1.7
—
—
—
1.7
Operating (loss) profit (32.5 ) 361.9
33.3
3.5
(0.1 ) 366.1
Interest expense, net 8.2
12.1
—
4.0
—
24.3
Equity earnings in subsidiaries (257.6 ) (6.3 ) —
0.2
263.7
—
Miscellaneous income, net —
(8.5 ) —
—
—
(8.5 )
Income before income taxes 216.9
364.6
33.3
(0.7 ) (263.8 ) 350.3
Income tax (benefit) expense (14.3 ) 122.9
11.8
(1.3 ) —
119.1
Net income 231.2
241.7
21.5
0.6
(263.8 ) 231.2

Other comprehensive income (loss) items:
Foreign currency translation adjustments (6.2 ) (6.2 ) —
—
6.2
(6.2 )
Defined benefit pension plans, net 6.1
2.1
—
2.1
(4.2 ) 6.1
Other comprehensive (loss) income items, net of tax (0.1 ) (4.1 ) —
2.1
2.0
(0.1 )
Comprehensive income $ 231.1
$ 237.6
$ 21.5
$ 2.7
$ (261.8 ) $ 231.1

2327

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(In millions)


	Nine Months Ended May 31, 2018																	Nine Months Ended May 31, 2019
	Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated			Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments		Consolidated
Net cash provided by operating activities	$	253.6		$	19.1		$	—	$	28.0		$	—		$	300.7		$	245.0		$	48.4		$	—	$	18.6		$	—	$	312.0
Cash flows from investing activities:
Purchases of property, plant, and equipment	—			(21.9		)	—		(10.3		)	—			(32.2		)	—			(33.0		)	—		(6.8		)	—		(39.8		)
Investments in subsidiaries	(163.5		)	—			—		—			163.5			—
Acquisition of businesses, net of cash acquired	—			(136.6		)	—		(26.9		)	—			(163.5		)
Net cash used for investing activities	(163.5		)	(158.5		)	—		(37.2		)	163.5			(195.7		)
Other investing activities																		0.8			2.1			—		—			—		2.9
Net cash provided by (used for) investing activities																		0.8			(30.9		)	—		(6.8		)	—		(36.9		)
Cash flows from financing activities:
Borrowings on credit facility	—			237.3			—		—			—			237.3			—			86.5			—		—			—		86.5
Repayments of borrowings on credit facility	—			(236.1		)	—		—			—			(236.1		)	—			(86.5		)	—		—			—		(86.5		)
Repayments of long-term debt	—			—			—		(0.3		)	—			(0.3		)	—			—			—		(0.3		)	—		(0.3		)
Proceeds from stock option exercises and other	1.6			—			—		—			—			1.6			0.5			—			—		—			—		0.5
Repurchases of common stock	(298.4		)	—			—		—			—			(298.4		)	(48.7		)	—			—		—			—		(48.7		)
Employee taxes on net settlement of equity awards	(7.2		)	—			—		—			—			(7.2		)
Intercompany capital	—			136.6			—		26.9			(163.5		)	—
Withholding taxes on net settlement of equity awards																		(4.9		)	—			—		—			—		(4.9		)
Dividends paid	(16.2		)	—			—		—			—			(16.2		)	(15.6		)	—			—		—			—		(15.6		)
Net cash (used for) provided by financing activities	(320.2		)	137.8			—		26.6			(163.5		)	(319.3		)
Net cash used for financing activities																		(68.7		)	—			—		(0.3		)	—		(69.0		)
Effect of exchange rates changes on cash	—			1.6			—		(4.1		)	—			(2.5		)	0.2			(0.3		)	—		(1.4		)	—		(1.5		)
Net change in cash and cash equivalents	(230.1		)	—			—		13.3			—			(216.8		)	177.3			17.2			—		10.1			—		204.6
Cash and cash equivalents at beginning of period	237.7			—			—		73.4			—			311.1			80.5			—			—		48.6			—		129.1
Cash and cash equivalents at end of period	$	7.6		$	—		$	—	$	86.7		$	—		$	94.3		$	257.8		$	17.2		$	—	$	58.7		$	—	$	333.7

2428

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ACUITY BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(In millions)



	Nine Months Ended May 31, 2018
	Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated
Net cash provided by operating activities	$	252.6		$	19.1		$	—	$	28.0		$	—		$	299.7
Cash flows from investing activities:
Purchases of property, plant, and equipment	—			(21.9		)	—		(10.3		)	—			(32.2		)
Investments in subsidiaries	(163.5		)	—			—		—			163.5			—
Acquisitions of business, net of cash acquired	—			(136.6		)	—		(26.9		)	—			(163.5		)
Other investing activities	1.0			—			—		—			—			1.0
Net cash used for investing activities	(162.5		)	(158.5		)	—		(37.2		)	163.5			(194.7		)
Cash flows from financing activities:
Borrowings on credit facility	—			237.3			—		—			—			237.3
Repayments of borrowings on credit facility	—			(236.1		)	—		—			—			(236.1		)
Repayments of long-term debt	—			—			—		(0.3		)	—			(0.3		)
Proceeds from stock option exercises and other	1.6			—			—		—			—			1.6
Repurchases of common stock	(298.4		)	—			—		—			—			(298.4		)
Withholding taxes on net settlement of equity awards	(7.2		)	—			—		—			—			(7.2		)
Intercompany capital	—			136.6			—		26.9			(163.5		)	—
Dividends paid	(16.2		)	—			—		—			—			(16.2		)
Net cash (used for) provided by financing activities	(320.2		)	137.8			—		26.6			(163.5		)	(319.3		)
Effect of exchange rate changes on cash	—			1.6			—		(4.1		)	—			(2.5		)
Net change in cash and cash equivalents	(230.1		)	—			—		13.3			—			(216.8		)
Cash and cash equivalents at beginning of period	237.7			—			—		73.4			—			311.1
Cash and cash equivalents at end of period	$	7.6		$	—		$	—	$	86.7		$	—		$	94.3

Nine Months Ended May 31, 2017
Parent
Subsidiary
Issuer

Subsidiary
Guarantor

Non-
Guarantors
Consolidating Adjustments Consolidated
Net cash provided by operating activities $ 157.7
$ 31.7
$ —
$ 8.6
$ —
$ 198.0
Cash flows from investing activities:
Purchases of property, plant, and equipment —
(44.3 ) —
(10.9 ) —
(55.2 )
Proceeds from sale of property, plant, and equipment —
0.1
—
5.4
—
5.5
Proceeds from sale of investment —
13.2
—
—
—
13.2
Other investing activities —
(0.2 ) —
—
—
(0.2 )
Net cash used for investing activities —
(31.2 ) —
(5.5 ) —
(36.7 )
Cash flows from financing activities:

Issuance of long-term debt —
—
—
1.1
—
1.1
Proceeds from stock option exercises and other 2.7
—
—
—
—
2.7
Repurchases of common stock (357.9 ) —
—
—
—
(357.9 )
Employee taxes on net settlement of equity awards (13.2 ) —
—
—
—
(13.2 )
Dividends paid (17.2 ) —
—
—
—
(17.2 )
Net cash (used for) provided by financing activities (385.6 ) —
—
1.1
—
(384.5 )
Effect of exchange rate changes on cash —
(0.5 ) —
0.2
—
(0.3 )
Net change in cash and cash equivalents (227.9 ) —
—
4.4
—
(223.5 )
Cash and cash equivalents at beginning of period 368.2
—
—
45.0
—
413.2
Cash and cash equivalents at end of period $ 140.3
$ —
$ —
$ 49.4
$ —
$ 189.7


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. (“Acuity Brands”) and its subsidiaries as of May 31, ~~2018~~2019 and for the three andnine months ended May 31, ~~2018~~2019 and ~~2017.~~2018. 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 ~~the Company’s~~Acuity Brands' Annual Report on Form 10-K for the fiscal year ended August 31, ~~2017,~~2018, filed with the Securities and Exchange Commission (the “SEC”) on October ~~26, 2017~~25, 2018 (“Form 10-K”).

Overview

Company

Acuity Brands is the parent company of Acuity Brands Lighting, Inc. (“ABL”) and other subsidiaries (Acuity Brands, ABL, and such other subsidiaries are collectively referred to herein as ~~the “Company”)~~“we,” “our,” “us,” “the Company,” or similar references). ~~The Company has its~~Our principal office is located in Atlanta, Georgia.

~~The Company is~~We are one of the world’s leading providers of lighting and building management solutions and services for commercial, institutional, industrial, infrastructure, and residential applications throughout North America and select international markets. ~~The Company’s~~Our lighting and building management solutions include devices such as luminaires, lighting controls, controllers for various building systems, power supplies, prismatic skylights, and drivers, as well as integrated systems designed to optimize energy efficiency and comfort for various indoor and outdoor applications. Additionally, ~~the Company continues~~we continue to expand ~~its~~our solutions portfolio, including software and services, to provide a host of other economic benefits ~~including software and services~~resulting from data analytics that ~~enable~~enables the Internet of Things (“IoT”)~~. The Company's IoT solutions provide customers with access to robust data analytics; support~~, supports the advancement of smart buildings, smart cities, and the smart ~~grid;~~grid, and ~~allow~~allows businesses to develop custom applications to scale their operations. As of May 31, ~~2018, the Company operates 20~~2019, we operate 18 manufacturing facilities and ~~seven~~eight distribution facilities along with three warehouses to serve ~~its~~our extensive customer base.

~~The Company does~~We do not consider acquisitions a critical element of ~~its~~our strategy but ~~seeks~~seek opportunities to expand and enhance ~~its~~our portfolio of solutions, including the following ~~transactions:~~transactions that were completed in the prior fiscal year:

On May 1, 2018, using cash on hand and borrowings available under existing credit arrangements, ~~the Company~~we acquired IOTA Engineering, LLC (“IOTA”). IOTA is headquartered in Tucson, Arizona and manufactures highly engineered emergency lighting products and power equipment for commercial and institutional applications both in the U.S. and internationally.

On February 12, 2018, using cash on hand, ~~the Company~~we acquired Lucid Design Group, Inc (“Lucid”). Lucid is headquartered in Oakland, California and provides a data and analytics platform to make data-driven decisions to improve building efficiency and drive energy conservation and savings.

No acquisitions were completed during the first nine months of fiscal ~~2017.~~2019.

The results of operations for the nine months ended May 31, 2019 and 2018 are not necessarily indicative of the results to be expected for the full fiscal year due primarily to seasonality, which results in our net sales and net income generally being higher in the second half of our fiscal year, the impact of any acquisitions, and, among other reasons, the continued uncertainty of general economic conditions that may impact our key end markets for the remainder of fiscal 2019.

Liquidity and Capital Resources

~~The Company’s~~Our principal sources of liquidity are operating cash flows generated primarily from ~~its~~our business operations, cash on hand, and various sources of borrowings. ~~The~~Our ability ~~of the Company~~ to generate sufficient cash flow from operations or to access certain capital markets, including banks, is necessary to fund ~~its~~our operations and capital expenditures, pay dividends, repurchase shares, meet ~~its~~ obligations as they become due, and maintain compliance with covenants contained in ~~its~~our financing agreements.

~~The Company~~For the first nine months of fiscal 2019, we paid $39.8 million for property, plant, and equipment, primarily for new and enhanced information technology capabilities, equipment, tooling, and facility enhancements. We currently ~~expects~~expect to invest approximately 1.5% of net sales in capital expenditures during fiscal ~~2018. For the first nine months of fiscal 2018, $32.2 million had been invested, primarily for equipment, tooling, facility enhancements, and new and enhanced information technology capabilities.~~2019.

In March 2018, the Board of Directors (the “Board”) authorized the repurchase of up to six million shares of the Company's common stock. As of May 31, ~~2018, 0.8~~2019, 1.2 million shares had been ~~purchased~~repurchased under this ~~authorization. The Company expects~~authorization, of

which 0.4 million shares were repurchased in fiscal 2019. We expect to repurchase the remaining shares available for repurchase on an opportunistic ~~basis. The~~basis subject to various factors including stock price, Company ~~has repurchased a total~~performance, market conditions and other possible uses of ~~2.0 million shares in fiscal 2018.~~cash.

~~The Company's~~Our short-term cash needs are expected to include funding operations as currently ~~planned,~~planned; making ~~anticipated~~ capital investments as currently anticipated; paying quarterly stockholder dividends as currently ~~anticipated,~~anticipated; paying principal and

interest on ~~borrowings~~debt as currently scheduled, including our senior unsecured notes maturing in December 2019, which we expect to repay with borrowings available under existing credit arrangements; making required contributions to ~~its~~our employee benefit ~~plans,~~plans; funding possible ~~acquisitions,~~acquisitions; and potentially repurchasing ~~up to 5.2 million~~ shares of ~~its~~our outstanding common stock as authorized by the Board. ~~Management believes~~We believe that ~~the Company~~we will be able to meet ~~its~~our liquidity needs over the next 12 months based on ~~its~~our cash on hand, current projections of cash flow from operations, and borrowing availability under ~~recently executed~~ financing arrangements. Additionally, ~~management believes~~we believe that ~~the Company’s~~our cash flows from operations and sources of funding, including, but not limited to, future borrowings and capacity, will sufficiently support ~~the~~our long-term liquidity ~~needs of the Company.~~

~~During June 2018, the Company entered into a new revolving credit facility and term loan facility. Refer to the~~ ~~Subsequent Events~~ ~~footnote in the~~ ~~Notes to Consolidated Financial Statements~~ ~~for further information.~~needs.

Cash Flow

~~The Company uses~~We use available cash and cash flow from operations, borrowings on credit arrangements, and proceeds from the exercise of stock options to fund operations, capital expenditures, and acquisitions if any; to repurchase Company ~~stock,~~stock; and to pay dividends.

~~The Company’s~~Our cash position at May 31, ~~2018~~2019 was ~~$94.3~~$333.7 million, ~~a decrease~~an increase of ~~$216.8~~$204.6 million from August 31, ~~2017.~~2018. During the nine months ended May 31, ~~2018, the Company~~2019, we generated net cash flows from operations of ~~$300.7~~$312.0 million. Cash generated from operating activities, as well as cash on-hand, was used during the nine months ended May 31, ~~2018~~2019 primarily to repurchase ~~two~~0.4 million shares of ~~the Company's~~our outstanding common stock for ~~$298.4~~$48.7 million, ~~to fund acquisitions of $163.5 million, to~~ fund capital expenditures of ~~$32.2~~$39.8 million, to pay dividends to stockholders of ~~$16.2~~$15.6 million, and to pay ~~employee~~withholding taxes on the net settlement of equity awards of ~~$7.2~~$4.9 million.

~~The Company~~We generated ~~$300.7~~$312.0 million of cash flow from operating activities during the nine months ended May 31, ~~2018~~2019 compared with ~~$198.0~~$299.7 million in the prior-year period, an increase of ~~$102.7~~$12.3 million, due primarily to lower operating working capital ~~requirements, reduced variable incentive payments for prior year performance, and decreased payments for income taxes.~~requirements. Operating working capital (calculated by adding accounts receivable plus inventories, and subtracting accounts ~~payable-net~~payable, net of acquisitions and the impact of foreign exchange rate changes) decreased approximately ~~$3.0~~$21.1 million during the first nine months of fiscal ~~2018~~2019 compared to a ~~$34.4~~$3.0 million ~~increase~~decrease during the first nine months of fiscal ~~2017. The increase in inventory during the nine months ended May 31,~~ 2018 ~~was~~ due primarily to ~~customer expansion in the home center/showroom channel, new product launches, and a buildup of finished goods to support committed projects in the corporate accounts channel. This increase in~~greater cash collections from customers year over year as well as fewer inventory ~~was mostly~~purchases, partially offset by ~~a corresponding increase in accounts payable during~~ the ~~same period.~~timing of payments for trade payables.

~~Management believes~~We believe that investing in assets and programs that will over time increase the overall return on ~~its~~our invested capital is a key factor in driving stockholder value. ~~The Company invested $32.2~~We paid $39.8 million and ~~$55.2~~$32.2 million in the first nine months of fiscal ~~2018~~2019 and ~~2017,~~2018, respectively, primarily related to investments in new information technology, equipment, tooling, and facility ~~enhancements, and information technology. The Company expects~~enhancements. We expect to invest approximately 1.5% of net sales primarily for new equipment, tooling, facility enhancements, and information technology capabilities during fiscal ~~2018.~~2019.

Capitalization

~~The~~Our current capital structure ~~of the Company~~ is comprised principally of senior unsecured notes and equity of ~~its~~our stockholders. Total debt outstanding was ~~$358.0~~$356.6 million and ~~$356.9~~$356.8 million at May 31, ~~2018~~2019 and August 31, ~~2017,~~2018, respectively, and consisted primarily of fixed-rate obligations.

On December 8, 2009, ABL issued $350.0 million of senior unsecured notes due in ~~fiscal 2020~~December 2019 (the “Unsecured Notes”) in a private placement transaction. The Unsecured Notes were subsequently exchanged for ~~SEC-registered~~SEC registered notes with substantially identical terms. The Unsecured Notes bear interest at a rate of 6% per annum and were issued at a price equal to 99.797% of their face value and for a term of 10ten years. Although the Unsecured Notes will mature within one year from the balance sheet, we have the ability and intent to refinance these borrowings using availability under our unsecured delayed draw term loan facility (“Term Loan Facility”) as described below. Currently, we plan to refinance the Unsecured Notes in full with borrowings under the Term Loan Facility, of which $341.1 million of the carrying value would be due greater than one year from the anticipated refinancing date. As such, this amount is reflected within Long-term debt on the Consolidated Balance Sheets as of May 31, 2019. See the Debt and Lines of Credit footnote of the Notes to Consolidated Financial Statements for more information.

On June 29, 2018, ~~the Company~~we entered into a credit agreement (“Credit Agreement”) with a syndicate of banks that provides ~~the Company~~us with a $400.0 million five-year unsecured revolving credit facility (“~~New~~ Revolving Credit Facility”) and a $400.0 million ~~unsecured delayed draw term loan facility (“~~Term Loan ~~Facility”).~~Facility. On ~~June 29, 2018, the Company~~May 31, 2019, we had ~~$90.4 million~~no borrowings outstanding under the ~~New~~ Revolving Credit Facility and no borrowings under the Term Loan Facility. ~~The Company was~~We were in compliance with all financial covenants under the Credit Agreement

as of ~~June 29, 2018.~~May 31, 2019. At ~~June 29, 2018, the Company~~May 31, 2019, we had additional borrowing capacity under the Credit Agreement of ~~$704.3~~$794.7 million under the most restrictive covenant in effect at the time, which represents the full amount of the ~~New~~ Revolving Credit Facility and the Term Loan Facility less the outstanding letters of credit of $5.3 million issued ~~and $90.4 million in borrowings~~ on the ~~New~~ Revolving Credit Facility. As of ~~June 29, 2018, the Company~~May 31, 2019, we had outstanding

letters of credit totaling ~~$10.2~~$9.5 million, primarily for securing collateral requirements under ~~the Company's~~our casualty insurance programs and for providing credit support for ~~the Company’s~~our industrial revenue bond, including $5.3 million issued under the ~~New~~ Revolving Credit Facility. See the Debt and ~~Subsequent Events~~ ~~footnotes~~Lines of Credit footnote of the Notes to Consolidated Financial Statements for more information.

During the first nine months of fiscal ~~2018, the Company’s~~2019, our consolidated stockholders’ equity ~~decreased $65.2~~increased $168.1 million to ~~$1.60~~$1.88 billion at May 31, ~~2018,~~2019, from ~~$1.67~~$1.72 billion at August 31, ~~2017.~~2018. The ~~decrease~~increase was due primarily to ~~share repurchases, the payment of dividends, shares withheld for employee taxes on vested restricted stock grants, and foreign currency translation adjustments, partially offset by~~ net income earned in the period, ~~stock issuances resulting primarily~~partially offset by share repurchases, adjustments related to the adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), the ~~exercise~~payment of ~~stock options,~~dividends, and ~~amortization of pension plan prior service costs and actuarial losses. The Company’s~~foreign currency translation adjustments. Our debt to total capitalization ratio (calculated by dividing total debt by the sum of total debt and total stockholders’ equity) was ~~18.3%~~15.9% and ~~17.6%~~17.2% at May 31, ~~2018~~2019 and August 31, ~~2017,~~2018, respectively. The ratio of debt, net of cash, to total capitalization, net of cash, was ~~14.1%~~1.2% and 11.7% at May 31, ~~2018~~2019 and ~~2.7% at~~ August 31, ~~2017.~~2018, respectively.

Dividends

~~Acuity Brands~~We paid dividends on ~~its~~our common stock of ~~$16.2~~$15.6 million and ~~$17.2~~$16.2 million ($0.39 per share) during the nine months ended May 31, ~~2018~~2019 and ~~2017,~~2018, respectively. All decisions regarding the declaration and payment of dividends ~~by Acuity Brands~~ are at the discretion of the Board and are evaluated regularly in light of ~~the Company’s~~our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Board deems relevant.

Results of Operations

Third Quarter of Fiscal ~~2018~~2019 Compared with Third Quarter of Fiscal ~~2017~~2018

The following table sets forth information comparing the components of net income for the three months ended May 31, ~~2018~~2019 and ~~2017~~2018 (in millions except per share data):


	Three Months Ended												Three Months Ended
	May 31, 2018			May 31, 2017			Increase (Decrease)				Percent Change		May 31, 2019			May 31, 2018			Increase (Decrease)				Percent Change
Net sales	$	944.0		$	891.6		$	52.4			5.9	%	$	947.6		$	944.0		$	3.6			0.4	%
Cost of products sold	554.6			512.7			41.9				8.2	%	564.0			554.9			9.1				1.6	%
Gross profit	389.4			378.9			10.5				2.8	%	383.6			389.1			(5.5		)		(1.4	)%
Percent of net sales	41.3		%	42.5		%	(120		)	bps			40.5		%	41.2		%	(70		)	bps
Selling, distribution, and administrative expenses	273.6			246.9			26.7				10.8	%	263.4			271.8			(8.4		)		(3.1	)%
Special charge	9.9			0.5			9.4				NM		(0.1		)	9.9			(10.0		)		NM
Operating profit	105.9			131.5			(25.6		)		(19.5	)%	120.3			107.4			12.9				12.0	%
Percent of net sales	11.2		%	14.7		%	(350		)	bps			12.7		%	11.4		%	130			bps
Other expense (income):
Interest expense, net	8.4			8.1			0.3				3.7	%	8.3			8.4			(0.1		)		(1.2	)%
Miscellaneous income, net	(1.7		)	(1.2		)	(0.5		)		NM
Miscellaneous expense (income), net													0.2			(0.2		)	0.4				NM
Total other expense	6.7			6.9			(0.2		)		NM		8.5			8.2			0.3				NM
Income before income taxes	99.2			124.6			(25.4		)		(20.4	)%	111.8			99.2			12.6				12.7	%
Percent of net sales	10.5		%	14.0		%	(350		)	bps			11.8		%	10.5		%	130			bps
Income tax expense	26.2			42.4			(16.2		)		(38.2	)%	23.4			26.2			(2.8		)		NM
Effective tax rate	26.4		%	34.0		%							20.9		%	26.4		%
Net income	$	73.0		$	82.2		$	(9.2	)		(11.2	)%	$	88.4		$	73.0		$	15.4			21.1	%
Diluted earnings per share	$	1.80		$	1.90		$	(0.10	)		(5.3	)%	$	2.22		$	1.80		$	0.42			23.3	%
NM - not meaningful

Net sales were $~~944.0~~947.6 million for the three months ended May 31, ~~2018~~2019 compared with ~~$891.6~~$944.0 million reported for the three months ended May 31, ~~2017,~~2018, an increase of ~~$52.4~~$3.6 million, or ~~5.9%~~0.4%. For the three months ended May 31, ~~2018, the Company~~2019,

we reported net income of ~~$73.0~~$88.4 million, ~~a decrease~~an increase of ~~$9.2~~$15.4 million, or ~~11.2%~~21.1%, compared with ~~$82.2~~

$73.0 million for the three months ended May 31, ~~2017.~~2018. For the third quarter of fiscal ~~2018~~2019, diluted earnings per share ~~decreased 5.3%~~increased 23.3% to ~~$1.80~~$2.22 compared with ~~$1.90~~$1.80 reported in the year-ago period.

Fiscal 2019 results were impacted by the adoption of ASC 606, which resulted in a decrease to revenues, gross profit, and operating profit of $3.8 million, $1.6 million, and $1.6 million, respectively, during the three months ended May 31, 2019. Additionally, fiscal 2018 results were restated to reflect the impact of adopting Accounting Standards Update No. 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). Upon adoption of ASU 2017-07, our previously reported operating profit and other expense both increased $1.5 million for the three months ended May 31, 2018. The provisions of ASU 2017-07 had no impact to our previously reported net income or earnings per share. See New Accounting Pronouncements footnote of the Notes to Consolidated Financial Statements for further details.

The following table reconciles certain U.S. generally accepted accounting principles (“U.S. GAAP”) financial measures to the corresponding non-U.S. GAAP measures referred to in the discussion of ~~the Company’s~~our results of operations, which exclude the impact of excess inventory adjustments, acquisition related items, ~~excess inventory adjustments,~~ amortization of acquired intangible assets, share-based payment expense, and special charges associated primarily with continued efforts to streamline the organization. Although the impacts of some of these items have been recognized in prior periods and could recur in future periods, ~~management~~we typically ~~excludes~~exclude these charges during internal reviews of performance and ~~uses~~use these non-U.S. GAAP measures for baseline comparative operational analysis, decision making, and other activities. These non-U.S. GAAP financial measures, including adjusted gross profit and margin, adjusted selling, distribution, and administrative (“SD&A”) expenses and adjusted SD&A expenses as a percent of net sales, adjusted operating profit and margin, adjusted net income, and adjusted diluted earnings per share, are provided to enhance the user’s overall understanding of ~~the Company’s~~our current financial performance. Specifically, ~~the Company believes~~we believe these non-U.S. GAAP measures provide greater comparability and enhanced visibility into ~~the Company's~~our results of operations. The non-U.S. GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with U.S. GAAP.


(In millions, except per share data)	Three Months Ended											Three Months Ended
	May 31, 2018			May 31, 2017			Increase (Decrease)			Percent Change		May 31, 2019			May 31, 2018			Increase (Decrease)			Percent Change
Gross profit	$	389.4		$	378.9							$	383.6		$	389.1
Add-back: Acquisition-related items ⁽¹⁾	0.5			—								—			0.5
Add-back: Excess inventory ⁽²⁾	3.1			—								—			3.1
Adjusted gross profit	$	393.0		$	378.9		$	14.1		3.7	%	$	383.6		$	392.7		$	(9.1	)	(2.3	)%
Percent of net sales	41.6		%	42.5		%	(90		)	bps		40.5		%	41.6		%	(110		)	bps

Selling, distribution, and administrative expenses	$	273.6		$	246.9							$	263.4		$	271.8
Less: Amortization of acquired intangible assets	(7.2		)	(8.2		)						(7.7		)	(7.2		)
Less: Share-based payment expense	(7.6		)	(8.1		)						(7.6		)	(7.6		)
Less: Acquisition-related items ⁽¹⁾	(1.6		)	—								—			(1.6		)
Adjusted selling, distribution, and administrative expenses	$	257.2		$	230.6		$	26.6		11.5	%	$	248.1		$	255.4		$	(7.3	)	(2.9	)%
Percent of net sales	27.2		%	25.9		%	130			bps		26.2		%	27.1		%	(90		)	bps

Operating profit	$	105.9		$	131.5							$	120.3		$	107.4
Add-back: Amortization of acquired intangible assets	7.2			8.2								7.7			7.2
Add-back: Share-based payment expense	7.6			8.1								7.6			7.6
Add-back: Acquisition-related items ⁽¹⁾	2.1			—								—			2.1
Add-back: Excess inventory ⁽²⁾	3.1			—								—			3.1
Add-back: Special charge	9.9			0.5								(0.1		)	9.9
Adjusted operating profit	$	135.8		$	148.3		$	(12.5	)	(8.4	)%	$	135.5		$	137.3		$	(1.8	)	(1.3	)%
Percent of net sales	14.4		%	16.6		%	(220		)	bps		14.3		%	14.5		%	(20		)	bps

Net income	$	73.0		$	82.2							$	88.4		$	73.0
Add-back: Amortization of acquired intangible assets	7.2			8.2								7.7			7.2
Add-back: Share-based payment expense	7.6			8.1								7.6			7.6
Add-back: Acquisition-related items ⁽¹⁾	2.1			—								—			2.1
Add-back: Excess inventory ⁽²⁾	3.1			—								—			3.1
Add-back: Special charge	9.9			0.5								(0.1		)	9.9
Total pre-tax adjustments to net income	29.9			16.8								15.2			29.9
Income tax effects	(7.0		)	(5.9		)						(3.0		)	(7.0		)
Adjusted net income	$	95.9		$	93.1		$	2.8		3.0	%	$	100.6		$	95.9		$	4.7		4.9	%

Diluted earnings per share	$	1.80		$	1.90							$	2.22		$	1.80
Adjusted diluted earnings per share	$	2.37		$	2.15		$	0.22		10.2	%	$	2.53		$	2.37		$	0.16		6.8	%

^{______________________________}

⁽¹⁾Acquisition-related items include profit in inventory and professional fees.

⁽²⁾Excess inventory related to the closure of a facility.

Net Sales

Net sales for the three months ended May 31, ~~2018~~2019 increased ~~5.9%~~0.4% compared with the prior-year period due primarily to ana greater than 1% increase ~~of approximately 10%~~ in sales ~~volume and a combined 1% favorable impact of acquired revenues from acquisitions and~~volumes, partially offset by unfavorable foreign exchange rate changes ~~partially offset by~~and the ~~unfavorable impact~~adoption of ~~changes~~ASC 606. Changes in product prices and ~~the~~ mix of products sold (“price/mix”) were flat compared to the prior year as higher pricing was offset by changes in the mix of ~~approximately 5%. The increase in~~products sold and customer mix within certain channels; the realization from recent price increases was estimated to have contributed low single-digit growth to overall net sales ~~was due primarily~~for the quarter. Acquired revenues from acquisitions net of lost revenues from divestitures were flat compared to ~~greater shipments of Atrius-based luminaires to customers in certain key vertical applications and~~the prior year period. From a channel perspective, increased sales in the ~~infrastructure/utility channel, partially~~independent sales network were largely offset by lower ~~shipments for larger commercial projects~~sales in the retail channel compared to the prior year period, which was primarily due to ~~continued tepid conditions within~~ the ~~North American non-residential lighting market. Unfavorable price/mix reflected changes in both~~impact of a planned program this year to eliminate certain product mix, which included substitutions to certain products with lower price points, and sales channel mix, which included declines in generally higher priced solutions, primarily for larger commercial projects. Price/mix was also impacted by lower pricing on certain luminaires, reflecting increased competition in more basic, lesser-featured

products. Sales of LED-based products accounted for over two-thirds of total net sales during the third quarter of fiscal 2018 and approximately two-thirds of total net sales during the third quarter of fiscal 2017.categories that do not meet our expected profit margin profile. Due to the changing dynamics of ~~the Company's~~our product portfolio, including the increase of integrated lighting and building

management solutions, it is not possible to precisely quantify or differentiate the individual components of volume, price, and mix.

Gross Profit

Gross profit for the third quarter of fiscal ~~2018 increased $10.5~~2019 decreased $5.5 million, or ~~2.8%~~1.4%, to ~~$389.4~~$383.6 million compared with ~~$378.9~~$389.1 million in the prior-year period. Gross profit margin decreased ~~120~~70 basis points to ~~41.3%~~40.5% for the three months ended May 31, ~~2018~~2019 compared with ~~42.5%~~41.2% in the prior-year period. ~~Gross~~The decline in gross profit margin was ~~lower than the prior-year period~~ due primarily to ~~unfavorable price/mix, increased wages, and additional reserves for excess~~a shift in sales among key customers within the retail channel as well as under-absorption of manufacturing costs as a result of inventory ~~related to the closure of a facility, partially offset by higher sales volumes, productivity improvements, and lower quality costs.~~reduction efforts. Adjusted gross profit margin for the three months ended May 31, ~~2018~~2019 declined 90110 basis points to ~~41.6%~~40.5% compared with ~~42.5%~~41.6% in the prior year period.

Operating Profit

SD&A expenses for the three months ended May 31, ~~2018~~2019 were ~~$273.6~~$263.4 million compared with ~~$246.9~~$271.8 million in the prior-year period, ~~an increase~~a decrease of ~~$26.7~~$8.4 million, or ~~10.8%~~3.1%. The ~~increase~~decrease in SD&A expenses was due primarily to ~~higher employee related costs, including additional headcount from acquisitions, increased~~a decrease in outbound freight, ~~charges and commissions~~which was partially due to ~~support greater~~the customer shift within the retail sales ~~volume, and higher~~channel, as well as lower professional fees related to ~~recent~~ acquisitions. SD&A expenses for the third quarter of fiscal ~~2018~~2019 were ~~29.0%~~27.8% of net sales compared with ~~27.7%~~28.8% for the prior-year period. Adjusted SD&A expenses for the three months ended May 31, ~~2018~~2019 were ~~$257.2~~$248.1 million ~~(27.2%~~(26.2% of net sales) compared with ~~$230.6~~$255.4 million ~~(25.9%~~(27.1% of net sales) in the prior-year period.

~~The Company~~We recognized pre-tax special ~~charges~~charge credits of ~~$9.9~~$0.1 million during the third quarter of fiscal ~~2018~~2019 compared with pre-tax special charges of ~~$0.5~~$9.9 million recorded during the third quarter of fiscal ~~2017.~~2018. Further details regarding ~~the Company's~~our special charges are included in the Special Charge footnote of the Notes to Consolidated Financial Statements.

Operating profit for the third quarter of fiscal ~~2018~~2019 was ~~$105.9~~$120.3 million ~~(11.2%~~(12.7% of net sales) compared with ~~$131.5~~$107.4 million ~~(14.7%~~(11.4% of net sales) for the prior-year period, ~~a decrease~~an increase of ~~$25.6~~$12.9 million, or ~~19.5%~~12.0%. The ~~decrease~~increase in operating profit was primarily due to ~~the impact of price/mix on gross profit, higher~~lower SD&A expenses and ~~increased~~decreased special charges, partially offset by ~~higher sales volumes.~~lower gross profit.

Adjusted operating profit decreased by ~~$12.5~~$1.8 million, or ~~8.4%~~1.3%, to ~~$135.8~~$135.5 million for the third quarter of fiscal ~~2018~~2019 compared with ~~$148.3~~$137.3 million for the third quarter of fiscal ~~2017.~~2018. Adjusted operating profit margin decreased ~~220 basis points~~ to ~~14.4%~~14.3% for the third quarter of fiscal ~~2018~~2019 compared with ~~16.6%~~14.5% for the year-ago period.

Other Expense (Income)

Other expense (income) consists principally of net interest expense and net miscellaneous ~~income,~~expense, which includes non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related transactions, and non-operating gains and losses. Interest expense, net, was ~~$8.4~~$8.3 million and ~~$8.1~~$8.4 million for the three months ended May 31, 2019 and 2018, ~~and 2017,~~ respectively. ~~The Company~~We reported net miscellaneous expense of $0.2 million and net miscellaneous income of ~~$1.7 million and $1.2~~$0.2 million for the three months ended May 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

Income Taxes and Net Income

~~The Company’s~~Our effective income tax rate was ~~26.4%~~20.9% and ~~34.0%~~26.4% for the three months ended May 31, ~~2018~~2019 and ~~2017,~~2018, respectively. The ~~effective income~~decline in the current fiscal tax rate reflects a lower federal statutory rate and the recognition of certain research and development cost tax credits, including claims for ~~the three months ended May 31, 2018 was significantly impacted by the provisions of the TCJA, which was enacted~~prior periods, during the ~~second quarter of fiscal 2018. Further details regarding the TCJA are included in the~~ ~~Income Taxes~~ ~~footnote of the~~ ~~Notes to Consolidated Financial Statements. The Company~~current period. We currently ~~estimates~~estimate that ~~the Company’s~~our blended consolidated effective income tax rate, before any discrete items, will approximate ~~26%~~22% to ~~28% for the remainder of fiscal 2018 and 23% to 25%~~24% for fiscal 2019.

Net income for the third quarter of fiscal ~~2018 decreased $9.2~~2019 increased $15.4 million to ~~$73.0~~$88.4 million from ~~$82.2~~$73.0 million reported for the prior-year period. The ~~decrease~~increase in net income resulted primarily from an increased ~~SD&A expenses~~operating profit compared to the prior-year period and ~~special charges incurred during the quarter, partially offset by~~to a ~~smaller provision for~~lesser extent lower income ~~taxes.~~tax expense. Diluted earnings per share for the three months ended May 31, ~~2018 decreased $0.10~~2019 increased $0.42 to ~~$1.80~~$2.22 compared with diluted earnings per share of ~~$1.90~~$1.80 for the prior-year period.

This increase reflects higher net income and a reduced share count.

Adjusted net income for the third quarter of fiscal ~~2018~~2019 was ~~$95.9~~$100.6 million, compared with ~~$93.1~~$95.9 million in the prior-year period, which represented an increase of ~~$2.8~~$4.7 million, or ~~3.0%~~4.9%. Adjusted diluted earnings per share for the three months ended May 31, ~~2018~~2019 increased ~~$0.22,~~$0.16, or ~~10.2%~~6.8%, to ~~$2.37~~$2.53 compared with ~~$2.15~~$2.37 for the prior-year period.

First Nine Months of Fiscal ~~2018~~2019 Compared with First Nine Months of Fiscal ~~2017~~2018

The following table sets forth information comparing the components of net income for the nine months ended May 31, ~~2018~~2019 and ~~2017~~2018 (in millions except per share data):


	Nine Months Ended												Nine Months Ended
	May 31, 2018			May 31, 2017			Increase (Decrease)				Percent Change		May 31, 2019			May 31, 2018			Increase (Decrease)				Percent Change
Net sales	$	2,618.9		$	2,547.5		$	71.4			2.8	%	$	2,734.6		$	2,618.9		$	115.7			4.4	%
Cost of products sold	1,544.4			1,473.2			71.2				4.8	%	1,649.6			1,545.4			104.2				6.7	%
Gross profit	1,074.5			1,074.3			0.2				—	%	1,085.0			1,073.5			11.5				1.1	%
Percent of net sales	41.0		%	42.2		%	(120		)	bps			39.7		%	41.0		%	(130		)	bps
Selling, distribution, and administrative expenses	751.3			706.5			44.8				6.3	%	751.1			745.7			5.4				0.7	%
Special charge	10.7			1.7			9.0				NM		1.3			10.7			(9.4		)		NM
Operating profit	312.5			366.1			(53.6		)		(14.6	)%	332.6			317.1			15.5				4.9	%
Percent of net sales	11.9		%	14.4		%	(250		)	bps			12.2		%	12.1		%	10			bps
Other expense (income)
Interest expense, net	24.5			24.3			0.2				0.8	%	25.6			24.5			1.1				4.5	%
Miscellaneous income, net	(0.8		)	(8.5		)	7.7				NM
Miscellaneous expense, net													2.6			3.8			(1.2		)		NM
Total other expense	23.7			15.8			7.9				NM		28.2			28.3			(0.1		)		NM
Income before income taxes	288.8			350.3			(61.5		)		(17.6	)%	304.4			288.8			15.6				5.4	%
Percent of net sales	11.0		%	13.8		%	(280		)	bps			11.1		%	11.0		%	10			bps
Income tax expense	47.4			119.1			(71.7		)		NM		70.1			47.4			22.7				NM
Effective tax rate	16.4		%	34.0		%							23.0		%	16.4		%
Net income	$	241.4		$	231.2		$	10.2			4.4	%	$	234.3		$	241.4		$	(7.1	)		(2.9	)%
Diluted earnings per share	$	5.85		$	5.29		$	0.56			10.6	%	$	5.87		$	5.85		$	0.02			0.3	%
NM - not meaningful

Net sales were ~~$2.62~~$2.73 billion for the nine months ended May 31, ~~2018~~2019 compared with ~~$2.55~~$2.62 billion reported for the nine months ended May 31, ~~2017,~~2018, an increase of ~~$71.4~~$115.7 million, or ~~2.8%~~4.4%. For the nine months ended May 31, ~~2018, the Company~~2019, we reported net income of ~~$241.4~~$234.3 million, ~~an increase~~a decrease of ~~$10.2~~$7.1 million, or ~~4.4%~~2.9%, compared with ~~$231.2~~$241.4 million for the nine months ended May 31, ~~2017.~~2018. For the first nine months of fiscal ~~2018,~~2019, diluted earnings per share increased ~~10.6%~~0.3% to ~~$5.85~~$5.87 compared with ~~$5.29~~$5.85 reported in the year-ago period.

Fiscal 2019 results were impacted by the adoption of ASC 606, which resulted in a decrease to revenues, gross profit, and operating profit of $7.8 million, $3.8 million, and $4.0 million, respectively, during the nine months ended May 31, 2019. Additionally, fiscal 2018 results were restated to reflect the impact of adopting ASU 2017-07. Upon adoption of ASU 2017-07, our previously reported operating profit and other expense both increased $4.6 million for the nine months ended May 31, 2018. The provisions of ASU 2017-07 had no impact to our previously reported net income or earnings per share. See New Accounting Pronouncements footnote of the Notes to Consolidated Financial Statements for further details.

The following table reconciles certain U.S. GAAP financial measures to the corresponding non-U.S. GAAP measures referred to in the discussion of ~~the Company’s~~our results of operations, which exclude the impact of ~~acquisition-related items,~~manufacturing inefficiencies, excess inventory adjustments, ~~certain manufacturing inefficiencies,~~acquisition-related items, amortization of acquired intangible assets, share-based payment expense, special charges associated primarily with continued efforts to streamline the organization, and certain discrete income tax benefits of the ~~TCJA,~~U.S. Tax Cuts and ~~the sale of an investment in an unconsolidated affiliate.~~Jobs Act (“TCJA”). These non-U.S. GAAP financial measures, including adjusted gross profit and margin, adjusted SD&A expenses and adjusted SD&A expenses as a percent of net sales, adjusted operating profit and margin, ~~adjusted other expense,~~ adjusted net income, and adjusted diluted earnings per share, are provided to enhance the user’s overall understanding of ~~the Company’s~~our current financial performance. Specifically, ~~the Company believes~~we believe these non-U.S. GAAP measures provide greater comparability and enhanced visibility into ~~the~~our results of operations. The non-U.S. GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with U.S. GAAP.


(In millions, except per share data)	Nine Months Ended											Nine Months Ended
	May 31, 2018			May 31, 2017			Increase (Decrease)			Percent Change		May 31, 2019			May 31, 2018			Increase (Decrease)			Percent Change
Gross profit	$	1,074.5		$	1,074.3							$	1,085.0		$	1,073.5
Add-back: Acquisition-related items ⁽¹⁾	0.5			—
Add-back: Manufacturing inefficiencies ⁽²⁾	—			1.6
Add-back: Manufacturing inefficiencies ⁽¹⁾												0.9			—
Add-back: Acquisition-related items ⁽²⁾												1.2			0.5
Add-back: Excess inventory ⁽³⁾	3.1			—								—			3.1
Adjusted gross profit	$	1,078.1		$	1,075.9		$	2.2		0.2	%	$	1,087.1		$	1,077.1		$	10.0		0.9	%
Percent of net sales	41.2		%	42.2		%	(100		)	bps		39.8		%	41.1		%	(130		)	bps

Selling, distribution, and administrative expenses	$	751.3		$	706.5							$	751.1		$	745.7
Less: Amortization of acquired intangible assets	(20.5		)	(21.9		)						(23.1		)	(20.5		)
Less: Share-based payment expense	(24.4		)	(24.1		)						(22.9		)	(24.4		)
Less: Acquisition-related items ⁽¹⁾⁽²⁾	(1.8		)	—								—			(1.8		)
Adjusted selling, distribution, and administrative expenses	$	704.6		$	660.5		$	44.1		6.7	%	$	705.1		$	699.0		$	6.1		0.9	%
Percent of net sales	26.9		%	25.9		%	100			bps		25.8		%	26.7		%	(90		)	bps

Operating profit	$	312.5		$	366.1							$	332.6		$	317.1
Add-back: Amortization of acquired intangible assets	20.5			21.9								23.1			20.5
Add-back: Share-based payment expense	24.4			24.1								22.9			24.4
Add-back: Acquisition-related items ⁽¹⁾	2.3			—
Add-back: Manufacturing inefficiencies ⁽²⁾	—			1.6
Add-back: Manufacturing inefficiencies ⁽¹⁾												0.9			—
Add-back: Acquisition-related items ⁽²⁾												1.2			2.3
Add-back: Excess inventory ⁽³⁾	3.1			—								—			3.1
Add-back: Special charge	10.7			1.7								1.3			10.7
Adjusted operating profit	$	373.5		$	415.4		$	(41.9	)	(10.1	)%	$	382.0		$	378.1		$	3.9		1.0	%
Percent of net sales	14.3		%	16.3		%	(200		)	bps		14.0		%	14.4		%	(40		)	bps

Other expense	$	23.7		$	15.8
Add-back: Gain on sale of investment in unconsolidated affiliate	—			7.2
Adjusted other expense	$	23.7		$	23.0		$	0.7		3.0	%

Net income	$	241.4		$	231.2							$	234.3		$	241.4
Add-back: Amortization of acquired intangible assets	20.5			21.9								23.1			20.5
Add-back: Share-based payment expense	24.4			24.1								22.9			24.4
Add-back: Acquisition-related items ⁽¹⁾	2.3			—
Add-back: Manufacturing inefficiencies ⁽²⁾	—			1.6
Add-back: Manufacturing inefficiencies ⁽¹⁾												0.9			—
Add-back: Acquisition-related items ⁽²⁾												1.2			2.3
Add-back: Excess inventory ⁽³⁾	3.1			—								—			3.1
Add-back: Special charge	10.7			1.7								1.3			10.7
Less: Gain on sale of investment in unconsolidated affiliate	—			(7.2		)
Total pre-tax adjustments to net income	61.0			42.1								49.4			61.0
Income tax effect	(15.7		)	(14.7		)						(11.3		)	(15.7		)
Less: Discrete income tax benefits of the TCJA ⁽⁴⁾	(31.2		)	—								—			(31.2		)
Adjusted net income	$	255.5		$	258.6		$	(3.1	)	(1.2	)%	$	272.4		$	255.5		$	16.9		6.6	%

Diluted earnings per share	$	5.85		$	5.29							$	5.87		$	5.85
Adjusted diluted earnings per share	$	6.19		$	5.92		$	0.27		4.6	%	$	6.83		$	6.19		$	0.64		10.3	%

^{______________________________}

⁽¹⁾~~Acquisition-related items include profit in inventory and professional fees.~~

⁽²⁾Incremental costs incurred due to manufacturing inefficiencies directly related to the closure of a facility.

⁽²⁾Acquisition-related items include profit in inventory and professional fees.

⁽³⁾Excess inventory related to the closure of a facility.

⁽⁴⁾Discrete income tax benefits of the TCJA ~~include provisional estimates~~ recognized within Income tax expense on the Consolidated Statements of Comprehensive Income. See Income Taxes footnote within the Notes to Consolidated Financial Statements for additional details.

Net Sales

Net sales for the nine months ended May 31, ~~2018~~2019 increased ~~$71.4~~$115.7 million, or ~~2.8%~~4.4%, compared with the prior-year period due primarily to an increase in sales volume of approximately 5% and ~~the~~a less than 1% favorable impact of acquired revenues from ~~foreign exchange rate changes~~acquisitions net of ~~approximately 1%,~~lost revenues from divestitures. This increase was partially offset by ~~the~~a 1% unfavorable impact of ~~changes~~adopting ASC 606 and movements in ~~price/mix of approximately 3%.~~foreign exchange rates. The increase in net sales was due primarily to greater shipments ~~of Atrius-based luminaires to customers in certain~~within our key ~~vertical applications and increased~~ sales inchannels except the ~~infrastructure/utility channel, partially~~retail sales channel. Price/mix was flat year over year as the benefits from recently announced price increases were offset by ~~lower shipments through the home center/showroom~~unfavorable changes primarily in sales channel ~~and certain international channels~~mix as well as ~~for larger commercial projects due to continued tepid conditions~~customer mix within ~~the North American non-residential lighting market. Unfavorable price/mix reflected changes in both product mix, which included substitutions to~~ certain products with lower price points, and sales channel mix, which included declines in generally higher priced solutions, primarily for commercial projects. Price/mix was also impacted by lower pricing on certain luminaires, reflecting increased competition in more basic, lesser-featured products. Sales of LED-based luminaires during the first nine months of both fiscal 2018 and fiscal 2017 accounted for approximately two-thirds of total net sales.channels. Due to the changing dynamics of ~~the Company's~~our product portfolio, including the increase of integrated lighting and building management solutions, it is not possible to precisely quantify or differentiate the individual components of volume, price, and mix.

Gross Profit

Gross profit for the first nine months of fiscal ~~2018~~2019 increased ~~$0.2~~$11.5 million compared to the prior-year period. Gross profit margin decreased to ~~41.0%~~39.7% for the nine months ended May 31, ~~2018~~2019 compared with ~~42.2%~~41.0% in the prior-year period. ~~Gross~~The decline in gross profit margin was ~~lower than~~due primarily to a shift in sales among key customers within the ~~prior-year period primarily due to unfavorable price/mix, increased wages,~~retail channel as well as under-absorption of manufacturing costs as a result of inventory reduction efforts as well as higher materials and ~~additional reserves for excess inventory related to the closure of a facility. These declines were partially offset by higher sales volumes, productivity improvements, and lower quality~~freight costs. Adjusted gross profit for the nine months ended May 31, ~~2018~~2019 was ~~$1.078 billion (41.2%~~$1,087.1 million (39.8% of net sales) compared with ~~$1.076 billion (42.2%~~$1,077.1 million (41.1% of net sales) in the prior-year period.

Operating Profit

SD&A expenses for the nine months ended May 31, ~~2018~~2019 were ~~$751.3~~$751.1 million compared with ~~$706.5~~$745.7 million in the prior-year period, an increase of ~~$44.8~~$5.4 million, or ~~6.3%~~0.7%. The increase in SD&A expenses was primarily due to higher employee related costs, ~~including additional headcount from acquisitions,~~ increased ~~freight charges and~~ commissions to support ~~greater~~higher sales volume, ~~higher professional fees related~~and expenses associated with acquired businesses, partially offset by lower outbound freight charges, which was partially due to ~~recent acquisitions, and to a lesser degree, certain other operating expenses.~~the customer shift within the retail sales channel. SD&A expenses for the first nine months of fiscal ~~2018~~2019 were ~~28.7%~~27.5% of net sales compared with ~~27.7%~~28.5% for the prior-year period. Adjusted SD&A expenses for the nine months ended May 31, ~~2018~~2019 were ~~$704.6~~$705.1 million ~~(26.9%~~(25.8% of net sales) compared with ~~$660.5~~$699.0 million ~~(25.9%~~(26.7% of net sales) in the prior-year period.

~~The Company~~We recognized a pre-tax special charge of $1.3 million during the first nine months of fiscal 2019, compared with a pre-tax special charge of $10.7 million during the first nine months of fiscal ~~2018, compared with a pre-tax special charge of $1.7 million during the first nine months of fiscal 2017.~~2018. Further details regarding ~~the Company's~~our special charges are included in the Special Charge footnote of the Notes to Consolidated Financial Statements.

Operating profit for the first nine months of fiscal ~~2018~~2019 was ~~$312.5~~$332.6 million compared with ~~$366.1~~$317.1 million for the prior-year period, ~~a decrease~~an increase of ~~$53.6~~$15.5 million, or ~~14.6%~~4.9%. The ~~decrease~~increase in operating profit was due primarily to an increase in gross profit and lower special charge, partially offset by an increase in SD&A ~~expenses and a higher special charge.~~expenses.

Adjusted operating profit ~~decreased~~increased by ~~$41.9~~$3.9 million, or ~~10.1%~~1.0%, to ~~$373.5~~$382.0 million for the first nine months of fiscal ~~2018~~2019 compared with ~~$415.4~~$378.1 million for the first nine months of fiscal ~~2017.~~2018. Adjusted operating profit margin for the first nine months of fiscal ~~2018~~2019 decreased ~~200~~40 basis points to ~~14.3%~~14.0% compared with ~~16.3%~~14.4% in the year-ago period.

Other Expense (Income)

Other expense (income) consists principally of net interest expense and net miscellaneous ~~income,~~expense, which includes non-service related components of net periodic pension cost, gains and losses associated with foreign currency-related ~~transactions.~~transactions, and non-operating gains and losses. Interest expense, net, was $25.6 million and $24.5 million for the nine months ended May 31, 2019 and 2018, ~~compared with $24.3~~respectively. We reported net miscellaneous expense of $2.6 million and $3.8 million for the nine months ended May 31, ~~2017. The Company reported net miscellaneous~~2019 and 2018, respectively.

Income Taxes and Net Income

Our effective income ~~of $0.8 million in the first nine months of fiscal 2018 compared with net miscellaneous income of $8.5 million in the prior-year period. Net miscellaneous income~~tax rate was 23.0% and 16.4% for the nine months ended May 31, ~~2017 included a $7.2 million gain associated with the sale of an investment in an unconsolidated affiliate.~~

~~Income Taxes~~2019 and ~~Net Income~~

~~The Company’s effective income tax rate was 16.4% and 34.0% for the nine months ended May 31,~~ 2018, ~~and 2017,~~ respectively. The effective income rate for the nine months ended ~~May 31,~~ 2018 was significantly impacted by the TCJA, which was enacted during the second quarter of fiscal 2018. Further details regarding the TCJA are included in the Income Taxes footnote of the Notes to Consolidated Financial Statements. We currently estimate that our blended consolidated effective income tax rate, before any discrete items, will approximate 22% to 24% for fiscal 2019.

Net income for the first nine months of fiscal ~~2018 increased $10.2~~2019 decreased $7.1 million to ~~$241.4~~$234.3 million from ~~$231.2~~$241.4 million reported for the prior-year period. The ~~increase~~decrease in net income resulted primarily from ~~the~~a one-time tax benefit ~~from~~for income taxes ~~recognized~~ related to the TCJA ~~partially offset by a decrease~~recorded in ~~operating profit and lower miscellaneous income.~~2018 that did not recur in the current fiscal year. Diluted earnings per share for the

nine months ended May 31, ~~2018~~2019 increased ~~$0.56~~$0.02 to ~~$5.85~~$5.87 compared with diluted earnings per share of ~~$5.29~~$5.85 for the prior-year period. This increase reflects higher operating profit and a reduced share count, partially offset by higher net income tax expense.

Adjusted net income for the first nine months of fiscal ~~2018~~2019 was ~~$255.5~~$272.4 million compared with ~~$258.6~~$255.5 million in the prior-year period, which represented ~~a decrease~~an increase of ~~$3.1~~$16.9 million, or ~~1.2%~~6.6%. Adjusted diluted earnings per share for the nine months ended May 31, ~~2018~~2019 increased ~~$0.27,~~$0.64, or ~~4.6%~~10.3%, to ~~$6.19~~$6.83 compared with ~~$5.92~~$6.19 for the prior-year period.

Outlook

~~Management continues~~We continue to believe the execution of ~~the Company's~~our strategy will provide attractive opportunities for profitable growth over the long-term. ~~The Company's~~Our strategy is to capitalize on market growth and share gain opportunities by continuing to expand and leverage ~~its~~our industry-leading lighting and building management solutions portfolio, coupled with ~~its~~our extensive market presence and financial strength, to produce attractive financial performance over the long-term. These opportunities include serving its traditional new construction and renovation markets as well as leveraging its unique, technology driven solutions portfolio to capture market share in the nascent, but rapidly growing, market for data capture, analytics, and other services, transforming buildings and campuses from cost centers to strategic assets.

Third-party forecasts and several leading indicators continue to suggest that ~~demand in~~ the North American lighting market, ~~the Company’s~~our primary market, will ~~improve modestly in second half of calendar 2018 following several quarters of weak demand. Recent softness~~increase in the ~~lighting industry has created a challenging environment for management~~low-single digit range in calendar 2019, although some leading indicators of future market demand, such as the Architectural Billings Index and the Dodge Momentum Index, have recently softened. We continue to ~~deliver financial performance~~believe that the forecasts reflect reasonable growth expectations, but we are somewhat cautious given the angst in the ~~short term while, at~~marketplace due to the ~~same time, continuing~~uncertainties around trade policy issues and the potential impact that tariffs and higher prices may have on overall demand. Additionally, we expect that labor shortages in certain markets will continue to ~~invest~~dampen growth rates for both the construction and lighting markets.

We believe our fiscal fourth quarter net sales could be down modestly compared with prior year’s net sales, which benefitted from the significant initial stocking of product in ~~attractive longer-term opportunities. Management expects~~the stores of a new customer in the retail sales channel. Also, fourth quarter net sales may be negatively impacted by our efforts to enhance our margin profile as we expect to continue our program of reviewing portions of our product portfolio and services offerings with the objective of eliminating those items and activities that do not meet our return objectives. Lastly, we believe our fourth quarter adjusted operating profit margin will exceed prior-year’s fourth quarter margin as well as improve on a sequential basis from the third quarter.

We expect to continue to outperform the growth rates of the markets that ~~the Company serves~~we serve in future periods, subject to quarterly volatility and excluding our actions to prune less profitable portions of our product portfolio, by ~~executing its~~continuing to execute our various strategies. These strategies ~~focused~~focus on growth opportunities for new construction and renovation projects, expansion into underpenetrated geographies and channels, and growth from the continued introduction of new lighting and building management solutions as part of ~~the Company’s~~our integrated, tiered solutions ~~strategy.~~strategy, including leveraging our unique, technology driven solutions portfolio to capture market share in the nascent, but rapidly growing, market for data capture, analytics, and other services, assisting in transforming buildings and campuses from cost centers to strategic assets.

~~Management expects~~We expect the pricing environment to continue to be challenging in portions of the market, particularly for more basic, lesser-featured products sold through certain sales channels as well as shifts in product mix, both of which ~~are expected to~~could continue to negatively impact net sales and margins. ~~Management expects~~We expect recently announced price increases to mitigate some of the pricing pressures in the market but not to have any material impact on product substitution trends to lower priced alternatives. We expect to continue to introduce products and solutions to more effectively compete in these portions of the market and to accelerate programs to reduce product costs in order to maintain ~~the Company’s~~our competitiveness and drive improved profitability.

~~During~~The U.S. federal government has recently imposed tariffs on certain Chinese imports and threatened to impose tariffs on all products imported from Mexico. We produce a meaningful percentage of our products in Mexico and certain components used in our products as well as certain sourced finished products are sourced from China and are impacted by the ~~third quarter~~recently imposed Chinese tariffs. Our efforts to mitigate the impact of these added costs include a variety of activities, such as finding alternative suppliers, in-sourcing the production of certain products, and raising prices. We believe that our mitigation activities, including recently announced price increases once fully enacted, will assist to offset the added costs. Future U.S. policy changes that may be implemented, including additional tariffs, could have a positive or negative consequence on our financial performance depending on how the changes influence many factors, including business and consumer sentiment.

During fiscal 2018, ~~the Company recognized a pre-tax special charge of $9.9 million, primarily related to~~we announced the planned consolidation of certain facilities and associated reduction in employee workforce. ~~The~~We recognized $11.9 million to date in special ~~charge consisted~~charges for this initiative primarily ofrelated to severance, employee benefit costs, and ~~employee-related benefit~~relocation costs. The Company also recorded a $3.1 million charge during the third quarter of fiscal 2018 to reserve for raw material inventory located at one of the facilities where production activities will cease because it would not be cost effective to relocate that inventory. Management expectsWe expect to incur additional costs in future periods ~~associated with the closing of facilities,~~ primarily ~~attributable~~related to early lease termination ~~costs~~ and additional relocation costs. Annual savings realized from the streamlining activities, once

fully completed, are expected to exceed the amount of the special ~~charge and will be reinvested~~charges recognized. We expect to reinvest most of the savings in activities to support higher-growth opportunities, as well as drive improved profitability.

~~On June 29,~~During the fourth quarter of fiscal 2018, ~~the Company~~we entered into a new credit agreement with a syndicate of banks that increased ~~the Company’s~~our borrowing capacity under such ~~agreement~~agreements from $250 million to $800 million. The increase in borrowing capacity provides ~~the Company~~us with the resources to support growth opportunities, including acquisitions, accommodate the current stock repurchase program, of which ~~5.2~~4.8 million shares remain available for ~~repurchase.~~repurchase as of July 2, 2019, and refinance our outstanding senior unsecured notes that mature in late calendar 2019. The extent and timing of actual stock repurchases will be subject to various factors, including stock price, company performance, expected future market conditions, and other possible uses of cash, including acquisitions. ~~The Company~~We may increase ~~its~~our leverage to accommodate the stock repurchase program.

Management expects the TCJA that was passed on December 22, 2017, to favorably impact the Company’s net income, diluted earnings per share, and cash flows in future periods, due primarily to the reduction in the federal corporate tax rate from 35% to 21% effective for periods beginning January 1, 2018. Additionally, positive business sentiment and other favorable aspects of the new tax law could incentivize additional investments in facilities and infrastructure in the U.S. that may increase future demand in the end-markets that the Company serves. Management currently estimates that the Company’s blended consolidated effective income tax rate (“tax rate”) for full-year fiscal 2018 will approximate 26% to 28% before discrete items, compared with nearly 35% for the prior year. Management currently estimates that the fiscal 2019 tax rate will approximate 23% to 25% before discrete items. The aforementioned tax related estimates may differ from actual results, possibly materially, due to changes in interpretations of the TCJA and assumptions made by the Company, as well as guidance that may be issued and actions the Company may take as a result of the TCJA.

Notwithstanding the TCJA, a great amount of rhetoric and debate remains regarding a wide range of policy options with respect to monetary, regulatory, and trade, amongst others, that the U.S. federal government has and may pursue, including the recent imposition of tariffs on certain imports and continuing discussions on amending or terminating North American Free Trade Agreement (“NAFTA”). Certain of the components used in the Company’s products are impacted by the recently imposed tariffs on China imports but the Company does not currently believe it will have a material adverse financial effect. Any future policy changes that may be implemented could have a positive or negative consequence on the Company’s financial performance depending on how the changes would influence many factors, including business and consumer sentiment. While management is proactively identifying and evaluating potential contingency options under various policy scenarios, it is too early to comment or speculate at this time on the potential ramification of these endless scenarios.

From a longer term perspective, ~~management expects~~we expect that ~~the Company’s~~our addressable markets have the potential to experience solid growth over the next decade, particularly as energy and environmental concerns continue to come to the forefront along with emerging opportunities for digital lighting to play a key role in the IoT through the use of intelligent networked lighting and building automation systems that can collect and exchange data to increase efficiency as well as provide a host of other economic benefits resulting from data analytics. ~~Management remains~~We remain positive about the future prospects of the Company and ~~its~~our ability to outperform the markets ~~it serves.~~we serve.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses the financial condition and results of operations as reflected in ~~the Company’s~~ our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. As discussed in the Description of Business and Basis of Presentation footnote of the Notes to Consolidated Financial Statements, the preparation of financial statements in conformity with U.S. GAAP requires ~~management~~us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expense during the reporting period. On an ongoing basis, ~~management evaluates its~~we evaluate our estimates and judgments, including those related to revenue recognition; inventory valuation; amortization and the recoverability of long-lived assets, including goodwill and intangible assets; share-based payment expense; medical, product warranty and recall, and other reserves; retirement benefits; and litigation. ~~Management bases its~~We base our estimates and judgments on ~~its~~our substantial historical experience and other relevant factors, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. ~~Management discusses~~We discuss the development of accounting estimates with the ~~Company’s~~ Audit Committee of the Board.

There have been no material changes in ~~the Company’s~~our critical accounting estimates during the current period. We adopted ASC 606 during the current fiscal year, which required changes to our revenue policies but did not have a material impact to our financial condition, results of operations, or cash flows. Refer to the Revenue Recognition footnote within the Notes to Consolidated Financial Statements for further details regarding our accounting policies and critical accounting estimates under ASC 606.

For a detailed discussion of other significant accounting policies that may involve a higher degree of judgment, ~~please~~ refer to ~~the Company’s~~our Form 10-K.

Cautionary Statement Regarding Forward-Looking Information

This filing contains forward-looking statements within the meaning of the federal securities laws. Statements made herein that may be considered forward-looking include statements incorporating terms such as “expects,” “believes,” “intends,” “anticipates,” and similar terms that relate to future events, performance, or results of the Company. In addition, the Company, or the executive officers on the Company’s behalf, may from time to time make forward-looking statements in reports and other documents ~~the Company files~~we file with the ~~SEC~~U.S. Securities and Exchange Commission or in connection with oral statements made to the press, current and potential investors, or others. Forward-looking statements include, without limitation: (a) ~~the Company’s~~our projections regarding financial performance, liquidity, capital structure, capital expenditures, investments, share repurchases, and ~~dividends;~~dividends, including our intent and ability to refinance our senior unsecured notes; (b) expectations about the impact of any changes in demand as well as volatility and uncertainty in general economic conditions and the pricing environment; (c) external forecasts projecting the North American lighting and building management solutions market growth rate and growth in ~~the Company's~~our addressable markets; (d) ~~the Company's~~our ability to execute and realize benefits from initiatives related to streamlining ~~its~~our operations, capitalize on growth opportunities, expand in key markets as well as underpenetrated geographies and channels, and introduce new lighting and building management solutions; (e) ~~the Company’s~~our estimate of ~~its~~our fiscal ~~2018 and~~ 2019 effective income tax ~~rates, as well as the impact of the TCJA on the Company's financial position,~~rate, results of operations, and cash

flows; (f) ~~the Company’s~~our estimate of future amortization expense; (g) ~~the Company’s~~our ability to achieve ~~its~~our long-term financial goals and measures and outperform the markets ~~its serves;~~we serve; (h) the impact ~~to the Company~~ of changes in the political landscape and related policy changes, including monetary, regulatory, and trade policies; ~~and~~ (i) ~~the Company's~~our expectations related to mitigating efforts around recently imposed tariffs; (j) our expectations about the resolution of trade compliance, securities class action, and/or other legal ~~matters.~~matters; and (k) the impacts of new accounting pronouncements. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this quarterly report. Except as required by law, ~~the Company undertakes~~we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this quarterly report or to reflect the occurrence of unanticipated events. ~~The Company’s~~Our forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from ~~the~~our historical experience ~~of the Company~~ and management’s present expectations or projections. These risks and uncertainties include, but are not limited to, customer and supplier relationships and prices; competition; ability to realize anticipated benefits from initiatives taken and timing of benefits; market demand; litigation and other contingent liabilities; and economic, political, governmental, and technological factors affecting ~~the Company.~~us. Also, additional risks that could cause ~~the Company’s~~our actual results to differ materially from those expressed in ~~the Company’s~~our forward-looking statements are discussed in Part I, Item 1a. Risk Factorsof ~~the Company's~~our Form ~~10-K, and are specifically incorporated herein by reference.~~10-K.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

General. ~~The Company is~~ We are exposed to market risks that may impact ~~its~~ our Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income, and Consolidated Statements of Cash Flows due primarily to fluctuations in interest rates, foreign exchange rates, and commodity prices. There have been no material changes to ~~the Company’s~~our exposure from market risks from those disclosed in Part II, Item 7a. Quantitative and Qualitative Disclosures About Market Risk of ~~the Company’s~~our Form 10-K.


Item 4.	Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to reasonably ensure that information required to be disclosed in the reports filed or submitted by ~~the Company~~us under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission (the “SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to reasonably ensure that information required to be disclosed by ~~the Company~~us in the reports filed under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

As required by SEC rules, ~~the Company has~~we have evaluated the effectiveness of the design and operation of ~~its~~our disclosure controls and procedures as of May 31, ~~2018.~~2019. This evaluation was carried out under the supervision and with the participation of management, including the principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that the design and operation of ~~the Company’s~~our disclosure controls and procedures are effective at a reasonable assurance level as of May 31, ~~2018.~~2019. However, because all disclosure procedures must rely to a significant degree on actions or decisions made by employees throughout the organization, such as reporting of material events, the Company and its reporting officers believe that they cannot provide absolute assurance that all control issues and instances of fraud or errors and omissions, if any, within the Company will be

detected. Limitations within any control system, including ~~the Company’s~~our control system, include faulty judgments in decision-making or simple errors or mistakes. In addition, controls can be circumvented by an individual, by collusion between two or more people, or by management override of the control. Because of these limitations, misstatements due to error or fraud may occur and may not be detected.

During the nine months ended May 31, 2018, the Company completed its acquisitions of IOTA Engineering, LLC (“IOTA”) and Lucid Design Group, Inc (“Lucid”). SEC guidance permits management to omit an assessment of an acquired business' internal control over financial reporting from management's assessment of internal control over financial reporting for a period not to exceed one year from the date of the acquisition. Accordingly, management has not assessed IOTA's or Lucid's internal control over financial reporting as of May 31, 2018. Excluding the acquisitions, there have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.The Company began integrating IOTA and Lucid into its existing control procedures from their respective dates of acquisition. The Company does not anticipate the integration of the acquired companies to result in changes that would materially affect its internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

On January 3, 2018, a shareholder filed a class action complaint in the United States District Court for the District of Delaware against the Company and certain of ~~its~~our officers on behalf of all persons who purchased or otherwise acquired ~~the Company’s~~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 ~~the Company’s~~our stock between October 15, 2015 and April 3, 2017. ~~A motion to consolidate the cases has been filed and is presently pending, unopposed.~~ The cases were transferred on April 30, 2018, to the United States District Court for the Northern District of ~~Georgia.~~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 ~~complaints allege~~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 the ~~defendants~~Company and certain of our current officers and one former executive 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 the Company’s products and (ii) overstated ~~the Company’s~~our ability to achieve profitable sales growth. The ~~plaintiffs seek~~plaintiff seeks class certification, unspecified monetary damages, costs, and attorneys’ fees. ~~The Company disputes~~We dispute the allegations ~~in the complaints~~ and ~~intends~~intend to vigorously defend against the claims. We have filed a motion to dismiss the Consolidated Complaint. Estimating an amount or range of possible losses 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 factual and legal issues have not been resolved. For these reasons, ~~the Company is~~we are currently unable to predict the ultimate timing or outcome of or reasonably estimate the possible losses or a range of possible losses resulting from the matters described above. ~~The Company is insured, in excess~~We maintain Director and Officer insurance policies that may cover any liability arising out of this litigation up to the policies’ limits, subject to a ~~self-retention, for Directors~~self-insured retention and ~~Officers liability.~~other terms and conditions.

~~The Company is~~We are subject to various other legal claims arising in the normal course of business, including, but not limited to, patent infringement, product liability claims, and employment matters. ~~The Company is~~We are self-insured up to specified limits for certain types of claims, including product liability, and isare fully self-insured for certain other types of claims, including environmental, product recall, and patent infringement. Based on information currently available, it is the opinion of management that the ultimate resolution of any such pending and threatened legal proceedings will not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company. However, in the event of unexpected future developments, it is possible that the ultimate resolution of any such matters, if unfavorable, could have a material adverse effect on ~~the~~our financial condition, results of operations, or cash flows ~~of the Company~~ in future periods. ~~The Company establishes~~We establish reserves for legal claims when the costs associated with the claims become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher than the amounts reserved for such claims. However, ~~the Company~~we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the amounts reserved.

Information regarding reportable legal proceedings is contained in Part I, Item 3. Legal Proceedings in the Company’s Form 10-K. Information set forth in this report’s Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements describes any legal proceedings that became reportable during the quarter ended May 31, ~~2018,~~2019, and updates any descriptions of previously reported legal proceedings in which there have been material developments during such quarter. The discussion of legal proceedings included within the Commitments and Contingencies footnote of the Notes to Consolidated Financial Statements is incorporated into this Item 1 by reference.


Item 1a.	Risk Factors

There have been no material changes in ~~the Company’s~~our risk factors from those disclosed in Part I, Item 1a. Risk Factors of ~~the Company’s~~our Form 10-K.

~~Item 2.~~ ~~Unregistered Sales of Equity Securities and Use of Proceeds~~

In March 2018, the Board authorized the repurchase of up to six million shares of the Company's common stock. The Company has repurchased a total of 2.0 million shares in fiscal 2018. The following table reflects activity related to equity securities purchased by the Company during the quarter ended May 31, 2018:

Purchases of Equity Securities
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Maximum Number of Shares that May Yet Be Purchased Under the Plans
3/1/2018 through 3/31/2018 —
$ —
—
6,000,000
4/1/2018 through 4/30/2018 800,000
$ 130.12
800,000
5,200,000
5/1/2018 through 5/31/2018 —
$ —
—
5,200,000
Total 800,000
$ 130.12
800,000
5,200,000


Item 5.	Other Information

~~Creation of a Direct Financial Obligation~~

On June 29, 2018, the Company entered into a credit agreement (“Credit Agreement”) with a syndicate of banks, consisting of JP Morgan as the administrative agent and other lenders as parties thereto, that provides the Company with a $400.0 million five-year unsecured revolving credit facility (“New Revolving Credit Facility”) and a $400.0 million unsecured delayed draw term loan facility (“Term Loan Facility”). Available borrowings under the Credit Agreement may be used for general corporate purposes, working capital, refinancing indebtedness under the prior Revolving Credit Facility, share repurchases, and non-hostile acquisitions.

The New Revolving Credit Facility replaced the Company's $250.0 million Revolving Credit Facility with a syndicate of banks,consisting of JP Morgan as the administrative agent and other lenders as parties thereto, which was scheduled to mature on August 27, 2019. Generally, amounts outstanding under the New Revolving Credit Facility allow for borrowings to bear interest at either the Eurocurrency Rate or the base rate at the Company's option. 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 LIBOR for the applicable currency plus an applicable margin. The Eurocurrency applicable margin is based on the Company’s 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 the Company’s leverage ratio, as defined in the Credit Agreement, with such margin ranging from 0.0% to 0.375%.

The Term Loan Facility allows for borrowings to be drawn over a one-year period ending June 29, 2019, utilizing up to four separate installments, and are U.S. dollar denominated. Borrowings under the Term Loan Facility will amortize in equal quarterly installments of 2.5% per year in year one, 2.5% per year in year two, 5.0% per year in year three, 5.0% per year in year four, and 7.5% per year in year five. Any remaining borrowings under the Term Loan Facility are due and payable in full on June 29, 2023. The Term Loan Facility allows for borrowings to bear interest at either a Eurocurrency Rate or the base rate, at the Company’s option. 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 LIBOR for the applicable currency plus an applicable margin. The Eurocurrency applicable margin is based on the Company’s leverage ratio, as defined in the Credit Agreement, with such margin ranging from 0.875% to 1.250%. Base Rate advances bear interest at an alternate base rate plus an applicable margin. The base rate applicable margin is based on the Company’s leverage ratio, as defined in the Credit Agreement, with such margin ranging from 0.0% to 0.25%.

The Company is required to pay certain fees in connection with the Credit Agreement, including administrative service fees and annual facility fees. The annual facility fee is payable quarterly, in arrears, and is determined by the Company’s leverage ratio as defined in the Credit Agreement. The facility fee ranges from 0.125% to 0.250% of the aggregate $800.0 million commitment of the lenders under the Credit Agreement.

The Credit Agreement contains contains customary covenants regarding the preservation and maintenance of our corporate existence, material compliance with laws, payment of taxes, and maintenance of insurance and of our properties.The Credit Agreement contains financial covenants, including a minimum interest expense coverage ratio (“New Minimum Interest Expense Coverage Ratio”) and a leverage ratio (“New Maximum Leverage Ratio”) of total indebtedness to 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 New Minimum Interest Expense Coverage Ratio of 2.50 and a New Maximum Leverage Ratio of 3.50, subject to certain conditions defined in the financing agreement. The Credit Agreement includes customary events of default, including, but not limited to, the failure to pay any interest, principal or fees when due, the failure to perform any covenant or agreement, inaccurate or false representations or warranties, insolvency or bankruptcy, change of control, the occurrence of certain ERISA events and judgment defaults.

Declaration of Dividend

On June ~~29, 2018,~~28, 2019, the the Board of Directors (the “Board”) declared a quarterly dividend of $0.13 per share. The dividend is payable on August 1, ~~2018~~2019 to stockholders of record on July ~~18, 2018.~~17, 2019.

Compensatory Arrangements of Certain Officers

On June 28, 2019, the Board approved certain amendments to the Acuity Brands, Inc. 2002 Supplemental Executive Retirement Plan (“SERP”) maintained for the benefit of certain executive officers of the Company and the Acuity Brands, Inc. Supplemental Deferred Saving Plan (“SDSP”) maintained for the benefit of certain executive officers and certain other members of senior management of the Company. The amendments follow a comprehensive assessment of our various compensation and benefit programs with an objective to ensure such company benefits are competitive with comparable companies in order to attract and retain executive talent while facilitating a performance-based culture. The comprehensive assessment was initiated following the results of the most recent advisory vote on named executive officer compensation. As a result of the comprehensive assessment as well as feedback received from investors, the Board also approved changes to our cash bonus and equity incentive programs in an effort to enhance the alignment of executive compensation with performance. These changes included, but were not limited to:

addition of performance-based restricted shares utilizing a 3-year performance metric;

elimination of stock options;

addition of Return on Invested Capital in excess of Weighted Average Cost of Capital as a performance metric under both the cash bonus and equity incentive programs; and

elimination of annual Diluted Earnings Per Share as a metric under both the cash bonus and equity incentive plans.

The SERP was amended and restated, effective as of July 1, 2019, in the following significant respects:

(i)

An additional benefit was provided for those participants who were actively employed in the capacity of the Company’s Chief Executive Officer or the Company’s Chief Financial Officer on July 1, 2019. The additional benefit (“Supplemental Accrued Benefit”) provides a monthly benefit for 180 months commencing at age 60 (or following retirement thereafter) equal to 1.4% of the participant's "average annual compensation" multiplied by his years of credited service not to exceed 10 years, divided by 12. Participants may elect to receive the actuarial equivalent of the incremental benefit in the form of a lump sum cash payment.

(ii)

A modified benefit (“Modified Accrued Benefit”) was provided for eligible employees who first become a participant on or after September 1, 2019, and who have been both an active employee and an eligible participant in the Acuity Brands, Inc. 2005 Supplemental Deferred Savings Plan for a period of at least 10 years. The Modified Accrued Benefit provides for a monthly benefit payable for 180 months commencing at age 60 (or following retirement thereafter) equal to 2.8% of the participant's "average annual compensation" multiplied by his years of credited service not to exceed 10 years, divided by 12.

The SDSP was amended and restated, effective as of July 1, 2019, in the following significant respects:


(i)	For an executive who becomes a participant in the SERP on or after September 1, 2019 and receives the Modified Accrued Benefit under the SERP, the executive shall continue to be eligible to receive the employer matching and supplemental contribution credits under the SDSP.

This summary of the amendments to the SERP and SDSP is qualified in its entirety by reference to the full text of the Acuity Brands, Inc. 2002 Supplemental Executive Retirement Plan, effective as of January 1, 2003, as amended and restated effective as of July 1, 2019, and the Acuity Brands, Inc. 2005 Supplemental Deferred Savings Plan, as amended and restated effective July 1, 2019, except where otherwise noted, which are set forth in Exhibits 10(b) and 10(c) to this Quarterly Report filed on Form 10-Q.


Item 6.	Exhibits

Exhibits are listed on the Index to Exhibits.

INDEX TO EXHIBITS



EXHIBIT 3	(a)	Restated Certificate of Incorporation of Acuity Brands, Inc. (formerly Acuity Brands Holdings, Inc.), dated as of September 26, 2007.	Reference is made to Exhibit 3.1 of registrant's Form 8-K as filed with the Commission on September 26, 2007, which is incorporated herein by reference.
	(b)	Certificate of Amendment of Acuity Brands, Inc. (formerly Acuity Brands Holdings, Inc.), dated as of September 26, 2007.	Reference is made to Exhibit 3.2 of registrant's Form 8-K as filed with the Commission on September 26, 2007, which is incorporated herein by reference.
	(c)	Certificate of Amendment to the Restated Certificate of Incorporation of Acuity Brands, Inc., dated as of January 6, 2017.	Reference is made to Exhibit 3.C of registrant's Form 10-Q as filed with the Commission on January 9, 2017, which is incorporated herein by reference.
	(d)	Amended and Restated Bylaws of Acuity Brands, Inc., dated as of January 6, 2017.	Reference is made to Exhibit 3.D of registrant's Form 10-Q as filed with the Commission on January 9, 2017, which is incorporated herein by reference.
EXHIBIT 10	~~(1)~~(a)	~~Five-Year~~Amendment No. 1 dated as of April 22, 2019 to Credit Agreement dated as of June 29, ~~2019.~~2018.	Reference is made to Exhibit 10.1 of registrant's Form 8-K as filed with the Commission on April 24, 2019, which is incorporated herein by reference.
	(b)	Acuity Brands, Inc. 2005 Supplemental Deferred Savings Plan as Amended and Restated effective July 1, 2019	Filed with the Commission as part of this Form 10-Q.
	(c)	Acuity Brands, Inc. 2002 Supplemental Executive Retirement Plan Amended and Restated as of July 1, 2019.	Filed with the Commission as part of this Form 10-Q.
EXHIBIT 31	(a)	Certification of the Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed with the Commission as part of this Form 10-Q.
	(b)	Certification of the Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed with the Commission as part of this Form 10-Q.
EXHIBIT 32	(a)	Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed with the Commission as part of this Form 10-Q.
	(b)	Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed with the Commission as part of this Form 10-Q.
EXHIBIT 101	.INS	XBRL Instance Document	The ~~following financial information from~~instance document does not appear in the ~~Company's Quarterly Report on~~Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
	.SCH	XBRL Taxonomy Extension Schema Document.	Filed with the Commission as part of this Form ~~10-Q for~~10-Q.
	.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	Filed with the ~~quarter ended May 31, 2018, filed on July 3, 2018, formatted in~~ Commission as part of this Form 10-Q.
	.DEF	XBRL ~~(Extensible Business Reporting Language): (i)~~Taxonomy Extension Definition Linkbase Document.	Filed with the ~~Consolidated Balance Sheets, (ii)~~Commission as part of this Form 10-Q.
	.LAB	XBRL Taxonomy Extension Label Linkbase Document.	Filed with the ~~Consolidated Statements~~Commission as part of ~~Income, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to Consolidated Financial Statements.~~this Form 10-Q.
	.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	Filed with the Commission as part of this Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ACUITY BRANDS, INC.



Date:	July ~~3, 2018~~2, 2019	By:	/S/ VERNON J. NAGEL
			VERNON J. NAGEL CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER



Date:	July ~~3, 2018~~2, 2019	By:	/S/ RICHARD K. REECE
			RICHARD K. REECE EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (Principal Financial and Accounting Officer)

4345



	Fiscal 2018 Actions		Fiscal 2017 Actions			Fiscal 2016 Actions			Total
Balance at August 31, 2017	$	—	$	11.2		$	1.4		$	12.6
Severance costs	10.6		—			(0.1		)	10.5
Payments made during the period	—		(4.8		)	(1.0		)	(5.8		)
Balance at May 31, 2018	$	10.6	$	6.4		$	0.3		$	17.3



	Three Months Ended May 31, 2017
	Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated
Net sales:
External sales	$	—		$	795.0		$	—	$	96.6		$	—		$	891.6
Intercompany sales	—			—			12.8		39.7			(52.5		)	—
Total sales	—			795.0			12.8		136.3			(52.5		)	891.6
Cost of products sold	—			446.6			—		104.3			(38.2		)	512.7
Gross profit	—			348.4			12.8		32.0			(14.3		)	378.9
Selling, distribution, and administrative expenses	11.4			213.4			0.9		35.5			(14.3		)	246.9
Intercompany charges	(1.3		)	0.1			—		1.2			—			—
Special charge	—			0.5			—		—			—			0.5
Operating (loss) profit	(10.1		)	134.4			11.9		(4.7		)	—			131.5
Interest expense, net	2.7			4.1			—		1.3			—			8.1
Equity earnings in subsidiaries	(90.5		)	2.7			—		—			87.8			—
Miscellaneous (income) expense, net	—			(2.0		)	—		0.8			—			(1.2		)
Income (loss) before income taxes	77.7			129.6			11.9		(6.8		)	(87.8		)	124.6
Income tax (benefit) expense	(4.5		)	44.2			4.2		(1.5		)	—			42.4
Net income (loss)	82.2			85.4			7.7		(5.3		)	(87.8		)	82.2

Other comprehensive income (loss) items:
Foreign currency translation adjustments	2.4			2.4			—		—			(2.4		)	2.4
Defined benefit pension plans, net	2.0			0.7			—		0.7			(1.4		)	2.0
Other comprehensive income items, net of tax	4.4			3.1			—		0.7			(3.8		)	4.4
Comprehensive income (loss)	$	86.6		$	88.5		$	7.7	$	(4.6	)	$	(91.6	)	$	86.6



	Nine Months Ended May 31, 2017
	Parent			Subsidiary Issuer			Subsidiary Guarantor		Non- Guarantors			Consolidating Adjustments			Consolidated
Net sales:
External sales	$	—		$	2,254.0		$	—	$	293.5		$	—		$	2,547.5
Intercompany sales	—			—			36.0		128.3			(164.3		)	—
Total sales	—			2,254.0			36.0		421.8			(164.3		)	2,547.5
Cost of products sold	—			1,280.3			—		316.9			(124.0		)	1,473.2
Gross profit	—			973.7			36.0		104.9			(40.3		)	1,074.3
Selling, distribution, and administrative expenses	35.8			609.6			2.7		98.6			(40.2		)	706.5
Intercompany charges	(3.3		)	0.5			—		2.8			—			—
Special charge	—			1.7			—		—			—			1.7
Operating (loss) profit	(32.5		)	361.9			33.3		3.5			(0.1		)	366.1
Interest expense, net	8.2			12.1			—		4.0			—			24.3
Equity earnings in subsidiaries	(257.6		)	(6.3		)	—		0.2			263.7			—
Miscellaneous income, net	—			(8.5		)	—		—			—			(8.5		)
Income before income taxes	216.9			364.6			33.3		(0.7		)	(263.8		)	350.3
Income tax (benefit) expense	(14.3		)	122.9			11.8		(1.3		)	—			119.1
Net income	231.2			241.7			21.5		0.6			(263.8		)	231.2

Other comprehensive income (loss) items:
Foreign currency translation adjustments	(6.2		)	(6.2		)	—		—			6.2			(6.2		)
Defined benefit pension plans, net	6.1			2.1			—		2.1			(4.2		)	6.1
Other comprehensive (loss) income items, net of tax	(0.1		)	(4.1		)	—		2.1			2.0			(0.1		)
Comprehensive income	$	231.1		$	237.6		$	21.5	$	2.7		$	(261.8	)	$	231.1



Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that May Yet Be Purchased Under the Plans
3/1/2018 through 3/31/2018	—	$	—	—	6,000,000
4/1/2018 through 4/30/2018	800,000	$	130.12	800,000	5,200,000
5/1/2018 through 5/31/2018	—	$	—	—	5,200,000
Total	800,000	$	130.12	800,000	5,200,000