The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes. References made to years are for fiscal year periods.

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 for the three and nine month periods ended May 31, 2009 and May 31, 2008. For a more complete understanding of this discussion, please read the Notes to Consolidated Financial Statements included in this report. Also, please refer to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2008, filed with the Securities and Exchange Commission on October 27, 2008 ("Form 10-K") for additional information regarding the Company.

Overview

Company

Acuity Brands is the parent company of Acuity Brands Lighting and other subsidiaries (collectively referred to herein as the "Company"). The Company, with its principal office in Atlanta, Georgia, employs approximately 6,000 people worldwide.

The Company designs, produces, and distributes a broad array of indoor and outdoor lighting fixtures and related products and services for commercial and institutional, industrial, infrastructure, and residential applications for various markets throughout North America and select international markets. The Company is one of the world's leading producers and distributors of lighting fixtures, with a broad, highly configurable product offering, consisting of roughly 500,000 active products as part of over 2,000 product groups that are sold to approximately 5,000 customers. The Company operates 23 factories and distribution facilities along with three warehouses to serve its extensive customer base.

Acuity Brands completed the spin-off of its specialty products business (the "Spin-off"), Zep Inc. ("Zep"), on October 31, 2007, by distributing all of the shares of Zep common stock, par value $.01 per share, to Acuity Brands' stockholders of record as of October 17, 2007. Acuity Brands' stockholders received one Zep share, together with an associated preferred stock purchase right, for every two shares of the Company's common stock they owned. Stockholders received cash in lieu of fractional shares for amounts less than one full Zep share.

As a result of the Spin-off, Acuity Brands' financial statements have been prepared with the results of operations and cash flows of the specialty products business presented as discontinued operations. All historical statements have been restated to conform to this presentation.

On December 31, 2008, the Company acquired for cash and stock substantially all the assets and assumed certain liabilities of Lighting Control & Design, Inc. ("LC&D"). LC&D, located in Glendale, California, is a manufacturer of comprehensive digital lighting controls and software. LC&D offers a breadth of products, ranging from dimming and building interfaces to digital thermostats, all within a single, scalable system. LC&D had calendar year 2008 sales of approximately $18 million. The operating results of LC&D have been included in the Company's consolidated financial statements since the date of acquisition.

On April 20, 2009, the Company acquired 100% of the outstanding capital stock of Sensor Switch, Inc. ("Sensor Switch"), an industry-leading developer and manufacturer of lighting controls and energy management systems. Sensor Switch, based in Wallingford, Connecticut, offers a wide-breadth of products and solutions that substantially reduce energy consumption including occupancy sensors, photocontrols, and distributed lighting control devices. Sensor Switch generated sales in excess of $37 million during its fiscal year ending October 31, 2008. Total consideration for the purchase was approximately $205 million consisting of stock, cash and an unsecured promissory note. The operating results of Sensor Switch have been included in the Company's consolidated financial statements since the date of acquisition.

Liquidity and Capital Resources

Primary sources of liquidity for Acuity Brands are operating cash flows generated primarily from its business operations and various sources of borrowings. The ability of Acuity Brands to generate sufficient cash flow from operations and access certain capital markets, including banks, is necessary to fund its operations, to pay dividends, to meet its obligations as they become due, and to maintain compliance with covenants contained in its financing agreements.

Based on its cash on hand, availability under existing financing arrangements and current projections of cash flow from operations, Acuity Brands believes that it will be able to meet its liquidity needs over the next 12 months. These needs are expected to include funding its operations as currently planned, making anticipated capital investments, funding potential acquisitions, funding foreseen improvement initiatives, paying quarterly stockholder dividends as currently anticipated, paying principal and interest on borrowings as currently scheduled, and making required contributions into its employee benefit plans,

as well as potentially repurchasing shares of its outstanding common stock as authorized by the Board of Directors. Since October 2005, the Company's Board of Directors has authorized the repurchase of ten million shares of Acuity Brands' outstanding common stock, of which approximately 9.5 million had been repurchased at May 31, 2009. The Company currently expects to invest approximately $25 million primarily for new plant, equipment, tooling, and new and enhanced information technology capabilities during fiscal year 2009, of which $15.1 million was invested in the first nine months of fiscal 2009. The Company expects to contribute approximately $3.8 million during fiscal year 2009 to fund its defined benefit plans. As of May 31, 2009, the assets in the qualified defined benefit plans declined approximately 22% compared to the values reported in the Company's Form 10-K. The Company does not expect this decline to materially impact the contributions for fiscal years 2009 and 2010.

Cash Flow

Acuity Brands uses available cash and cash flow from operations as well as proceeds from the exercise of stock options to fund operations and capital expenditures, to repurchase stock, to fund acquisitions, and to pay dividends. During the nine months ended May 31, 2009, the Company received $2.8 million in cash primarily from stock issuances in connection with stock option exercises. These receipts were more than offset by returns to stockholders during the first nine months through the payment of $16.0 million in dividends. Acuity Brands' available cash position at May 31, 2009 was $28.3 million, a decrease of $268.8 million from August 31, 2008. The decrease in the Company's available cash position was due primarily to repayments of debt, acquisitions, dividends paid, and capital investments partially offset by cash provided by operating activities and proceeds from the exercise of stock options.

The Company generated $27.4 million of net cash from operating activities during the first nine months of fiscal year 2009 compared with $110.6 million generated in the prior-year period, a decrease of $83.2 million. This decline was due primarily to lower net income, the cash flow impact of increased operating working capital (calculated by adding accounts receivable, net, plus inventories, and subtracting accounts payable), and a reduction in other accrued liabilities (primarily payment of prior year's incentive compensation). Operating working capital increased by approximately $13.5 million to $222.4 million at May 31, 2009 from $208.9 million at August 31, 2008, due primarily to operating working capital associated with acquired businesses and to higher levels of inventory required to appropriately service customers during the previously announced consolidation of certain manufacturing facilities. Additionally, raw materials inventory increased to support manufacturing of products previously manufactured by outside vendors. Management believes that investing in assets and programs that will over time increase the overall return on its invested capital is a key factor in driving stockholder value. The Company invested $15.1 million and $21.4 million in the first nine months of fiscal year 2009 and 2008, respectively, primarily for new tooling, machinery, equipment, and information technology. As noted above, the Company expects to invest during fiscal year 2009 approximately $25 million for new plant, equipment, tooling, and new and enhanced information technology capabilities.

During the third fiscal quarter, the Company completed the acquisition of Sensor Switch. A cash payment of approximately $131 million was funded from available cash on hand and from borrowings under the Company's Revolving Credit Facility. The Company also issued a $30 million unsecured promissory note payable over three years as consideration in the agreement.

Capitalization

The current capital structure of Acuity Brands is comprised principally of senior notes and equity of its stockholders. As of May 31, 2009, total debt outstanding decreased $69.2 million to $294.8 million compared to $364.0 million at August 31, 2008, due primarily to the repayment of the $160 million 6% notes, which matured in February 2009, offset by both additional borrowings under the Revolving Credit Facility and the issuance of a $30 million unsecured promissory note. Proceeds from the additional borrowings were used to finance the acquisition of Sensor Switch.

On October 19, 2007, the Company executed a $250 million revolving credit facility (the "Revolving Credit Facility"). The Revolving Credit Facility matures in October 2012 and contains financial covenants including a minimum interest coverage ratio and a leverage ratio ("Maximum Leverage Ratio") of total indebtedness to EBITDA (earnings before interest, taxes, depreciation and amortization expense), 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 Maximum Leverage Ratio of 3.50, subject to certain conditions defined in the financing agreement. As of May 31, 2009, the Company was in compliance with all financial covenants and had $60.8 million of outstanding borrowings under the Revolving Credit Facility. At May 31, 2009, the Company had borrowing capacity under the Revolving Credit Facility of $180.5 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less outstanding borrowings and outstanding letters of credit of $8.7 million. See Note 7 - Debt of the Notes to Consolidated Financial Statements.

During the first nine months of fiscal year 2009, the Company's consolidated stockholders' equity increased $82.9 million to $658.5 million at May 31, 2009 from $575.6 million at August 31, 2008. The increase was due primarily to net income earned

in the period and stock issuances related to the acquisition of Sensor Switch, as well as stock issuances resulting from the exercise of stock options and purchases under the Employee Stock Purchase Plan, partially offset by the impact of foreign currency rate fluctuations on accumulated other comprehensive loss items and the payment of dividends. The Company's debt to total capitalization ratio (calculated by dividing total debt by the sum of total debt and total stockholders' equity) was 30.9% and 38.7% at May 31, 2009 and August 31, 2008, respectively. The ratio of debt, net of cash, to total capitalization, net of cash, was 28.8% at May 31, 2009 and 10.4% at August 31, 2008.

Dividends

The Company paid cash dividends on common stock of $16.0 million ($0.39 per share) during the first nine months of fiscal year 2009 compared with $17.1 million ($0.41 per share) during the first nine months of fiscal year 2008. The Company currently plans to pay quarterly dividends at an annual rate of $0.52 per share; however, each quarterly dividend must be approved by the Board of Directors and the actual amount to be paid, if any, is subject to change.

Results of Operations

Third Quarter of Fiscal 2009 Compared with Third Quarter of Fiscal 2008

The following table sets forth information comparing the components of net
income for the three months ended May 31, 2009 with the three months ended
May 31, 2008:



                                               Three Months Ended
                                            May 31,          May 31,           Increase             Percent
($ in millions, except per-share data)       2009              2008           (Decrease)            Change
Net Sales                                  $   396.6         $  512.4        $     (115.8 )           (22.6 )%
Cost of Products Sold                          243.0            304.2               (61.2 )           (20.1 )%

Gross Profit                                   153.6            208.2               (54.6 )           (26.2 )%
Percent of net sales                            38.7 %           40.6 %              (190 ) bp
Selling, Distribution, and
Administrative Expenses                        112.1            136.5               (24.4 )           (17.9 %)
Special Charge                                    -                -                   -                 -  %

Operating Profit                                41.5             71.7               (30.2 )           (42.1 )%
Percent of net sales                            10.5 %           14.0 %              (350 ) bp
Other Expense
Interest Expense, net                            6.4              7.2                (0.8 )           (11.1 %)
Miscellaneous Expense                            2.0              1.6                 0.4              25.0 %

Total Other Expense                              8.4              8.8                (0.4 )            (4.5 %)

Income from Continuing Operations
before Provision for Income Taxes               33.1             62.9               (29.8 )           (47.4 )%
Percent of net sales                             8.3 %           12.3 %              (400 ) bp
Provision for Taxes                             10.8             21.3               (10.5 )           (49.3 %)

Effective tax rate                              32.5 %           33.8 %
Income from Continuing Operations               22.3             41.7               (19.4 )           (46.5 )%
Loss from Discontinued Operations, net
of tax                                          (0.3 )           (0.5 )               0.2              40.0 %

Net Income                                 $    22.0         $   41.1        $      (19.1 )           (46.5 )%

Diluted Earnings per Share from
Continuing Operations                      $    0.54         $   1.01        $      (0.47 )           (46.5 )%

Diluted Loss per Share from
Discontinued Operations                    $   (0.01 )       $  (0.01 )      $         -                 -  %

Results from Continuing Operations

Net sales were $396.6 million for the three months ended May 31, 2009 compared with $512.4 million reported in the prior-year period, a decrease of $115.8 million, or 22.6%. For the three months ended May 31, 2009, the Company reported income from continuing operations of $22.3 million compared with $41.7 million for the three months ended May 31, 2008. Diluted earnings per share from continuing operations were $0.54 for the third quarter of fiscal 2009 as compared with $1.01 reported for the third quarter of fiscal 2008, a decrease of 47.5%.

Net Sales

The 22.6% decline in net sales for the three months ended May 31, 2009 compared with the prior-year period was due primarily to lower volume of product shipments and unfavorable impact of foreign currency fluctuation which were only partially offset by revenues from recent acquisitions. The lower volume of product shipments is due primarily to continued

declining demand in the residential and non-residential construction markets, particularly for commercial and office buildings. The LC&D and Sensor Switch acquisitions contributed approximately 2% to net sales during the third quarter of fiscal 2009. Unfavorable fluctuation in foreign currency exchange rates contributed approximately $9.5 million, or 2%, to the decrease in net sales during the third quarter of fiscal 2009.

Gross Profit

Gross profit margins decreased 190 basis points to 38.7% of net sales for the three months ended May 31, 2009 from 40.6% reported for the prior-year period. Gross profit decreased $54.6 million, or 26.2%, to $153.6 million for the three months ended May 31, 2009 compared with $208.2 million for the prior-year period. The decline in gross profit and gross profit margin was largely attributable to overall volume declines and increased raw materials and component costs. The Company estimates that raw material and component costs increased cost of goods sold by approximately $8 million compared to the year-ago period with very little of this increase recovered in higher prices. These factors were partially offset by benefits from both programs to improve productivity and actions taken during the first half of fiscal 2009 to streamline and simplify operations. The impact on gross profit from raw material and commodity costs not recovered through price and product mix is expected to continue to be unfavorable, although at a lower rate, for the remainder of the fiscal year.

Operating Profit

Selling, distribution, and administrative ("SD&A") expenses were $112.1 million for the three months ended May 31, 2009 compared with $136.5 million in the prior-year period, which represented a decrease of $24.4 million, or 17.9%. The majority of the decrease in SD&A expenses was due primarily to benefits from the actions taken during the first half of fiscal 2009 to streamline and simplify operations as well as benefits from other general and administrative cost containment programs. Additionally, items that typically vary directly with sales such as freight and commissions as well as lower expenses for the Company's incentive compensation plans benefited the third quarter of fiscal 2009 as compared to the prior-year period. Partially offsetting these benefits were selected investments in sales and marketing resources and new products and services as well as incremental SD&A expenses related to LC&D and Sensor Switch. SD&A expenses as a percent of sales were 28.3% for the third quarter of fiscal 2009 compared to 26.6% for the year-ago period. The increase in SD&A expenses as a percent of sales is due primarily to additional investments in product innovation and technology and certain sales and marketing activities, expansion of the Company's capabilities to service the renovation and relight market, and a higher rate of SD&A spend from the recent acquisitions.

For the three months ended May 31, 2009, the Company estimates that it realized savings of approximately $10 million from actions taken in the first half of fiscal 2009 to streamline and simplify operations.

Operating profit was $41.5 million for the three months ended May 31, 2009 compared with $71.7 million reported for the prior-year period, a decrease of $30.2 million, or 42.1%. Operating profit margin declined 350 basis points to 10.5% compared with 14.0% in the year-ago period. The decrease in operating profit margin in the third quarter of fiscal 2009 compared with the prior-year period was due primarily to the decrease in gross profit partially offset by the decrease in SD&A expenses noted above.

Other Expense (Income)

Other expense for Acuity Brands consists primarily of interest expense and foreign exchange related gains and losses. Interest expense, net, was $6.4 million and $7.2 million for the three months ended May 31, 2009 and May 31, 2008, respectively. Interest expense, net, decreased 11.1% in the third quarter of fiscal 2009 compared with the third quarter of fiscal 2008 due primarily to lower average outstanding debt balances ($160 million 6% notes matured in second quarter of fiscal 2009), partially offset by reduced interest income resulting from both a lower cash position and lower short-term interest rates. The fluctuation in miscellaneous expense (income) was due primarily to the impact of exchange rates on foreign currency transactions.

Provision for Income Taxes and Income from Continuing Operations

The effective income tax rate reported by the Company was 32.5% and 33.8% for the three months ended May 31, 2009 and May 31, 2008, respectively. The effective tax rate for the third quarter of fiscal 2009 is lower than the year-ago period due primarily to tax deductions having a greater impact as a result of lower pre-tax earnings compared with the prior-year period. The Company estimates that the effective tax rate for the year will be approximately 33.5% if the rates in its taxing jurisdictions remain generally consistent throughout the year.

Income from continuing operations for the third quarter of fiscal 2009 decreased $19.4 million to $22.3 million from $41.7 million reported for the prior-year period. The decrease in income from continuing operations resulted primarily from the above noted decrease in operating profit, partially offset by lower tax expense.

Results from Discontinued Operations and Net Income

The Company incurred a $0.3 million loss from discontinued operations for the third quarter of fiscal 2009 compared to $0.5 million in the prior-year period. The losses in both periods were due to income tax adjustments.

Net income for the third quarter of fiscal 2009 decreased $19.1 million to $22.0 million from $41.1 million reported for the prior-year period. The decrease in net income resulted primarily from the above noted decrease in income from continuing operations.

Nine Months of Fiscal 2009 Compared with Nine Months of Fiscal 2008

As a result of the Spin-off, effected October 31, 2007, all results of
operations reflect the specialty products business as discontinued operations.
The following table sets forth information comparing the components of net
income for the nine months ended May 31, 2009 with the nine months ended May 31,
2008:



                                              Nine Months Ended
($ in millions, except per-share           May 31,          May 31,           Increase             Percent
data)                                       2009             2008            (Decrease)            Change
Net Sales                                 $ 1,234.8        $ 1,503.9        $     (269.1 )           (17.9 )%
Cost of Products Sold                         765.1            900.5              (135.4 )           (15.0 )%

Gross Profit                                  469.7            603.4              (133.7 )           (22.2 )%
Percent of net sales                           38.0 %           40.1 %              (210 ) bp
Selling, Distribution, and
Administrative Expenses                       339.3            401.5               (62.2 )            15.5 %
Special Charge                                 26.6             14.6                12.0              82.2 %

Operating Profit                              103.8            187.3               (83.5 )           (44.6 )%
Percent of net sales                            8.4 %           12.5 %              (410 ) bp
Other Expense (Income)
Interest Expense, net                          21.9             21.3                 0.6               2.8 %
Miscellaneous (Income) Expense                 (2.2 )            1.4                (3.6 )          (257.1 )%

Total Other Expense                            19.7             22.7                (3.0 )           (13.2 )%

Income from Continuing Operations
before Provision for Income Taxes              84.1            164.6               (80.5 )           (48.9 )%
Percent of net sales                            6.8 %           10.9 %              (410 ) bp
Provision for Taxes                            28.0             57.9               (29.9 )           (51.6 )%

Effective tax rate                             33.3 %           35.2 %
Income from Continuing Operations              56.1            106.7               (50.6 )           (47.4 )%
Loss from Discontinued Operations,
net of tax                                     (0.3 )           (0.4 )               0.1              25.0 %

Net Income                                $    55.8        $   106.3        $      (50.5 )           (47.5 )%

Diluted Earnings per Share from
Continuing Operations                     $    1.36        $    2.55        $      (1.19 )           (46.7 )%

Diluted Loss per Share from
Discontinued Operations                   $   (0.01 )      $   (0.01 )      $         -                 -  %

Results from Continuing Operations

Net sales were $1,234.8 million for the nine months ended May 31, 2009 compared with $1,503.9 million reported in the prior-year period, a decrease of $269.1 million, or 17.9%. For the nine months ended May 31, 2009, the Company reported income from continuing operations of $56.1 million (including a $16.8 million after-tax special charge for estimated costs the Company has or intends to incur to simplify and streamline its operations and consolidate certain manufacturing facilities) compared with $106.7 million (including a $9.1 million after-tax special charge for estimated costs the Company incurred to simplify and streamline its operations as a result of the Spin-off) earned for the nine months ended May 31, 2008. Diluted earnings per share from continuing operations were $1.36 (including $0.41 related to the special charge) for the nine months of fiscal 2009 as compared with $2.55 (including $0.21 related to the special charge) reported for the nine months of 2008, a decrease of 46.7%.

Net Sales

The 17.9% decline in net sales for the nine months ended May 31, 2009 compared with the prior-year period was due primarily to lower volume of product shipments and unfavorable impact of foreign currency fluctuation, partially offset by both an enhanced mix of products sold and favorable pricing. The Company experienced declines in product shipments as a result of continued declining demand in the residential and non-residential construction markets, particularly in commercial and office buildings. These volume declines were partially offset by benefits from a richer mix of new and innovative products, which offer customers greater benefits and features, sold at higher per unit sales prices and improved pricing primarily implemented to offset increased material costs. The Company estimates that an enhanced mix of products sold and improved pricing favorably impacted sales by approximately 2%. The LC&D and Sensor Switch acquisitions contributed less than 1% to net sales during the period. Unfavorable fluctuation in foreign currency exchange rates contributed approximately $26.3 million, or 2%, to the decrease in net sales during the nine months of fiscal 2009.

Gross Profit

Gross profit margins decreased 210 basis points to 38.0% of net sales for the . . .