Commitments and Contingencies

9 Months Ended

May 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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, 2013, no material changes have occurred in the Company's reserves for self-insurance, litigation, environmental matters, or guarantees and indemnities, or relevant events and circumstances, from those disclosed in the Commitments and Contingencies footnote of the Notes to the Consolidated Financial Statements within the Company’s Form 10-K.

For more information on the Company’s commitments and contingencies, please refer to the Commitments and Contingencies footnote of the Notes to the Consolidated Financial Statements within the Company’s Form 10-K.

Product Warranty and Recall Costs

Acuity Brands records an allowance for the estimated amount of future warranty claims when the related revenue is recognized, primarily based on historical experience of identified warranty claims. However, there can be no assurance that future warranty costs will not exceed historical experience. Estimated recall costs are recognized upon such time that the Company becomes aware of product defects and other issues. If actual future warranty costs exceed historical amounts or unforeseen recall costs occur, additional allowances may be required, which could have a material adverse impact on the Company’s results of operations and cash flows in future periods.

Product warranty and recall reserves are included in Other accrued liabilities on the Consolidated Balance Sheets. The changes in product warranty and recall reserves during the nine months ended May 31, 2013 are summarized as follows:

Balance at August 31, 2012	$	4.0
Adjustments to the warranty and recall reserve	4.2
Payments made during the period	(4.1		)
Balance at May 31, 2013	$	4.1

Litigation

On March 25, 2013, a freight payment and audit service provider, Trendset, Inc. (“Trendset”), provided notice to its customers that all freight payment services would immediately cease as a result of fraud at Trendset. Management believes that the Company incurred a loss primarily related to funds disbursed by the Company to Trendset that were not subsequently remitted to freight carriers that provided services on behalf of the Company and additional costs related to recovery efforts. Based on available information, management estimates that the Company's loss was approximately $8.1 which is included in Selling, Distribution, and Administrative Expenses in the Consolidated Statements of Income. 

The Company is seeking to recover its loss through multiple sources including, but not limited to, claims against the freight service company, claims against certain parties affiliated with the freight service company, and claims under insurance policies maintained by the Company.  Numerous other Trendset customers are also pursuing claims against Trendset for their losses, and several with significant losses filed an involuntary petition commencing a bankruptcy proceeding against Trendset under Chapter 11 of the United States Bankruptcy Code. Based on available information, management cannot estimate the amount or timing of potential recovery, if any.   Any future recovery will be recorded when realized. The Company may incur additional costs in future periods as a result of these recovery activities.  It is the opinion of management that any future costs will not have a material adverse effect on the financial condition or results of operations of Acuity Brands.