Share-based Payments

12 Months Ended

Aug. 31, 2021

Share-based Payment Arrangement [Abstract]

Omnibus Stock Compensation Incentive and Directors’ Equity Plans

In January 2018, our stockholders approved the Amended and Restated Acuity Brands, Inc. 2012 Omnibus Stock Compensation Incentive Plan (the “Stock Incentive Plan”), which, among other things, resulted in an aggregate of 2.7 million of shares authorized for issuance pursuant to the Stock Incentive Plan. The Compensation Committee of the Board of Directors (the “Compensation Committee") is authorized to issue awards consisting of incentive and non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock awards, performance stock units, stock bonus awards, and cash-based awards to eligible employees, non-employee directors, and outside consultants.

Shares available for grant under the Stock Incentive Plan, including those previously issued and outstanding prior to the amendment, were approximately 0.3 million, 0.7 million, and 1.4 million at August 31, 2021, 2020, and 2019, respectively. Any shares subject to an award under the Stock Incentive Plan that are forfeited, canceled, expired, or settled for cash will be available for future grant under the Stock Incentive Plan.

Restricted stock awards, performance stock awards, and director stock units representing certain deferrals into the Director Deferred Compensation Plan are valued based on the fair value of our common stock on the grant date. We review the values of our performance awards on a frequent and recurring basis and adjust those values based on the probability that the related performance metric will be satisfied. We utilize the Black-Scholes model in deriving the fair value estimates of our stock option awards that only have a service requirement, and we utilize the Monte Carlo simulation model to determine grant date fair value estimates of stock options also subject to a market condition.

Effective for certain restricted stock and performance stock grants awarded in fiscal 2020, the Compensation Committee reinstated a policy that provides for the continued vesting of stock awards following retirement for all eligible participants who have attained age 60 and have at least ten years of service with the Company. We deem the requisite service period for these awards for a participant to be the shorter of either the award's stated vesting period or the time from grant until the participant satisfies the age and service criteria. The Compensation Committee discontinued this policy effective for restricted stock and performance stock grants awarded in October 2020 and thereafter.

Effective for performance stock unit grants awarded in fiscal 2021, the Compensation Committee approved an amendment to replace the retirement provision that states if a person who receives a performance stock unit award has five years of service, a portion of the award becomes non-forfeitable on each anniversary date of the grant.

We generally recognize compensation cost for share-based payment transactions on a straight-line basis over an award's requisite service period as defined by ASC 718. In certain circumstances, such as when a performance award is subject to graded vesting, we apply the accelerated attribution method to recognize compensation cost related to our share-based payment awards.

Compensation expense recognized related to the awards under the current and prior equity incentive plans during the periods presented is summarized as follows (in millions):


	Year Ended August 31,
	2021		2020		2019
Restricted stock awards and units	$	15.1	$	24.6	$	25.1
Stock options	9.2		4.9		2.7
Performance stock units	6.8		7.3		—
Director stock units	1.4		1.4		1.4
Total share-based payment expense	$	32.5	$	38.2	$	29.2

Restricted Stock

As of August 31, 2021, we had approximately 0.4 million shares outstanding of restricted stock to officers, directors, and other key employees under the Stock Incentive Plan, including restricted stock units. The grants vest primarily over a four-year period and are valued at the closing stock price on the date of the grant.

Activity related to restricted stock awards during the periods presented was as follows (in millions, except per share data):


	Number of Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding at August 31, 2018	0.4	$	186.63
Granted	0.2	$	120.73
Vested	(0.2)	$	184.60
Forfeited*	—	$	159.88
Outstanding at August 31, 2019	0.4	$	156.32
Granted	0.2	$	122.10
Vested	(0.1)	$	171.92
Forfeited	(0.1)	$	135.43
Outstanding at August 31, 2020	0.4	$	134.68
Granted	0.2	$	108.79
Vested	(0.1)	$	150.44
Forfeited	(0.1)	$	116.33
Outstanding at August 31, 2021	0.4	$	116.77

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* Represents amounts of less than 0.1 million.

As of August 31, 2021, there was $28.1 million of total unrecognized compensation cost related to unvested restricted stock, which is expected to be recognized over a weighted-average period of 1.8 years. The total fair value of stock vested during the years ended August 31, 2021, 2020, and 2019 was approximately $19.5 million, $22.8 million, and $26.9 million, respectively.

Stock Options

As of August 31, 2021, we had approximately 1.2 million options outstanding to officers and other key employees under the Stock Incentive Plan. Of these options, 0.8 million vest and become exercisable over a three-year period (the "Service Options"). The remaining 0.4 million vest and become exercisable over a four-year period and are also subject to a market condition (the "Market Options"). Options issued under the Stock Incentive Plan are generally granted with an exercise price equal to the fair market value of our stock on the date of grant, but never less than the fair market value on the grant date, and expire 10 years from the date of grant.

The fair value of each Service Option was estimated on the date of grant using the Black-Scholes model, and the fair value of each Market Option was estimated on the date of grant using the Monte Carlo simulation model. The dividend yield was calculated based on annual dividends paid and the trailing 12-month average closing stock price at the time of grant. Expected volatility was based on historical volatility of our stock, calculated using the most recent time period equal to the expected life of the options. The risk-free interest rate was based on the U.S. Treasury yield for a term equal to the expected life of the options at the time of grant for the Service Options and equal to the contractual term for the Market Options. We used historical exercise behavior data of similar employee groups to determine the expected life of the Service Options. The expected life of the Market Options is based on projected exercise dates resulting from the Monte Carlo simulation for each award tranche. All inputs noted above are estimates made at the time of grant. All inputs into the Black-Scholes model and the Monte Carlo simulation are estimates made at the time of grant. Actual realized value of each option grant could materially differ from these estimates, without impact to future reported net income.

The following weighted average assumptions were used to estimate the fair value of the stock options granted in the fiscal years presented:


	Market Options		Service Options
	2021	2020	2020	2019
Dividend yield	0.5%	0.4%	0.4%	0.4%
Expected volatility	36.5%	33.7%	33.7%	32.8%
Risk-free interest rate	0.7%	1.5%	1.3%	3.0%
Expected life of options	8 years	7 years	5 years	4 years
Weighted-average fair value of options	$40.45	$44.74	$34.22	$34.06

There were no Market Options granted in fiscal 2019. There were no Service Options granted during the fiscal year ended August 31, 2021.

Stock option activity during the periods presented was as follows:


	Outstanding				Exercisable
	Number of Options (in millions)		Weighted Average Exercise Price		Number of Options (in millions)		Weighted Average Exercise Price
Outstanding at August 31, 2018	0.3		$	154.69	0.2		$	134.13
Granted	0.1	*	$	116.40


Outstanding at August 31, 2019	0.4		$	146.70	0.3		$	147.51
Granted	0.5		$	121.87
Exercised	—	*	$	116.36

Outstanding at August 31, 2020	0.9		$	133.19	0.4		$	151.07
Granted	0.3		$	108.96
Exercised	—	*	$	108.58

Outstanding at August 31, 2021	1.2		$	127.98	0.5		$	142.36
Range of option exercise prices:

$40.01 - $100.00 (average life - 1.1 years)	0.1		$	62.54	0.1		$	62.54
$100.01 - $160.00 (average life - 7.9 years)	1.0		$	119.18	0.3		$	125.13
$160.01 - $210.00 (average life - 4.2 years)	0.1		$	207.80	0.1		$	207.80
$210.01 - $239.76 (average life - 5.1 years)	—	*	$	239.76	0.1	*	$	239.76

___________________________

* Represents amounts of less than 0.1 million.

The total intrinsic value of options exercised was $1.2 million during the year ended August 31, 2021 and de minimis during the year ended August 31, 2020. There were no options exercised during fiscal 2019. As of August 31, 2021, the total intrinsic value of options outstanding was $70.9 million, the total intrinsic value of options expected to vest was $42.8 million, and the total intrinsic value of options exercisable was $27.4 million. As of August 31, 2021, there was $17.0 million of total unrecognized compensation cost related to unvested options. This cost is expected to be recognized over a weighted-average period of approximately 2.2 years.

Performance Stock Units

Beginning in fiscal 2020, the Board approved grants of performance stock units to certain executives and key employees. These grants vest primarily over a three-year period and are valued at the closing stock price at the date of grant. The actual number of performance stock units earned for these awards will be determined at the end of the related performance period based on the level of achievement of established performance thresholds. We recognize compensation expense for these grants proportionately over the requisite service period for each employee when it becomes probable that the performance metric will be satisfied. For performance stock units subject to graded vesting, we apply the accelerated attribution method for expense recognition. As of August 31, 2021, we had approximately 0.1 million performance stock units outstanding.

As of August 31, 2021 there was $3.8 million of total unrecognized compensation cost related to unvested performance stock units. This cost is expected to be recognized over a weighted-average period of approximately 1.5 years.

Employee Deferred Stock Units

We previously allowed employees to defer a portion of restricted stock awards granted in fiscal 2003 and fiscal 2004 into the SDSP as stock units. The stock units are payable in shares of stock at the time of distribution from the SDSP. As of August 31, 2021, approximately 7,000 fully vested stock units remain deferred, but undistributed, under the Stock Incentive Plan. There was no compensation expense related to these stock units during fiscal years 2021, 2020, and 2019.

Director Deferred Stock Units

Total shares available for issuance under the Director Plan were approximately 0.3 million, 0.3 million, and 0.4 million at August 31, 2021, 2020, and 2019, respectively. As of August 31, 2021, approximately 0.1 million stock units were deferred but undistributed under the Director Plan.

Employee Stock Purchase Plan

Employees are able to purchase, through payroll deduction, common stock at a 5% discount on a monthly basis. There were 1.5 million shares of our common stock reserved for purchase under the plan, of which approximately 1.0 million shares remain available as of August 31, 2021. Employees may participate at their discretion.