Acuity Brands Reports Fiscal 2009 Fourth Quarter and Full Year Results

October 7, 2009 8:15 AM EDT

ATLANTA--(BUSINESS WIRE)-- Acuity Brands, Inc. (NYSE: AYI) today announced diluted earnings per share (EPS) from continuing operations for the fourth quarter of fiscal 2009 of $0.68 compared with $1.02 for the prior year period. The Company reported fourth quarter net sales of $422.6 million, a decline of 19 percent compared with the $522.8 million reported in the year-ago period. Comparable shipment volumes declined approximately 17 percent versus the year-ago period. As a result of the stronger dollar, the translation impact on international sales reduced fiscal 2009 fourth quarter net sales by approximately one percentage point as compared with the prior year period. Recent acquisitions contributed approximately $15 million to fourth quarter net sales and essentially offset the negative impact from unfavorable price/mix changes.

Operating profit for the fourth quarter of fiscal 2009 was $49.9 million, or 11.8 percent of net sales, compared with $73.7 million, or 14.1 percent of net sales, for the year-ago period. Benefits from on-going streamlining efforts, productivity improvements, and lower incentive-based compensation helped to partially offset the full impact of the decline in shipment volume and unfavorable price/mix changes. During the fourth quarter, the Company realized savings of approximately $11 million from streamlining actions initiated in the first half of fiscal 2009. Income from continuing operations for the fourth quarter of fiscal 2009 was $29.1 million compared with $41.9 million for the same period a year ago.

Mr. Nagel, Chairman, President, and Chief Executive Officer of Acuity Brands, commented, "Our associates continue to demonstrate their resolve and skill by delivering superior value to our customers and solid performance for our shareholders while confronting extremely challenging market conditions. Net sales for the fourth quarter of 2009 were impacted by the significant decline in new construction activity due to lower economic activity and tight lending standards for real estate. We were able to partially mitigate the impact of lower sales by maintaining our pricing discipline and realizing benefits from our continuous improvement initiatives and on-going streamlining efforts, while continuing to invest in innovative and energy-efficient products. I am particularly pleased with our strong operating profit margin for the fourth quarter."

The consolidated income tax rate for the fourth quarter of 2009 was 32.6 percent compared with 36.5 percent for the fourth quarter of 2008. The decrease in the tax rate was due primarily to the impact of favorable discrete tax items on the lower earnings amount. Additionally, last year's tax rate was negatively impacted by an unfavorable discrete item associated with the repatriation of foreign cash.

2009 Fiscal Year

Fiscal 2009 diluted EPS from continuing operations decreased 43 percent to $2.05 compared with $3.57 reported for fiscal 2008. Results for both fiscal year 2009 and 2008 include pre-tax special charges of $26.7 million, or $0.41 per diluted share, and $14.6 million, or $0.21 per diluted share, respectively. The special charges related to actions to streamline and simplify the Company's organizational structure and operations. Consolidated net sales in fiscal 2009 were $1,657.4 million compared with $2,026.6 million reported in the year-ago period, a decline of 18 percent. Operating profit for fiscal 2009 was $153.8 million compared with operating profit of $261.1 million reported in the prior year, a decrease of 41 percent. The special charges reduced operating margins for fiscal year 2009 and 2008 by 160 basis points and 70 basis points, respectively. Income from continuing operations for fiscal 2009 was $85.2 million compared with $148.6 million reported for fiscal 2008.

For fiscal 2009, the Company reported $2.1 million of other income compared with $2.1 million of other expense in the year-ago period representing a favorable change of over $4.2 million. The year-over-year favorable change was due primarily to the impact of changes in exchange rates on foreign currency items and other non-operating items.

The consolidated income tax rate for fiscal 2009 was 33.1 percent compared with 35.5 percent for fiscal 2008. The decrease in the annual tax rate was due primarily to the greater impact of tax credits and deductions on the lower earnings amount.

Acuity Brands completed the spin-off of Zep Inc. on October 31, 2007. Therefore, the Company reflects the results of Zep Inc. as a discontinued operation reported as a one-line item on the income statement. For fiscal years 2009 and 2008, the Company reported losses from discontinued operations of $0.3 million, or $0.01 per diluted share, and $0.4 million, or $0.01 per diluted share, respectively.

Including the results of discontinued operations, the Company reported diluted EPS of $2.04 for fiscal 2009, or $85.0 million of net income, compared to diluted EPS of $3.56 for fiscal 2008, or $148.3 million of net income.

For fiscal 2009, the Company generated over $71 million in free cash flow after $21 million of capital expenditures. Cash and cash equivalents at August 31, 2009 totaled $18.7 million, a decrease of $278.4 million since the beginning of the fiscal year. The decrease in cash was due primarily to the retirement of the $160 million public notes that matured in February 2009 and $162 million utilized for acquisitions and other strategic investments, partially offset by the free cash flow noted above. Total debt outstanding at August 31, 2009 was $231.6 million, a decrease of $132.4 million since the beginning of the fiscal year.

Outlook

Mr. Nagel commented, "Looking ahead to next year, we continue to foresee a difficult and challenging economic environment, particularly for non-residential construction activity, a primary market for us. Our backlog at the end of the fourth quarter was down 23 percent on a year-over-year comparable basis. Key indicators continue to signal declines for North American non-residential construction activity and our expectation is that the overall markets we serve will decline in the mid-teens in our coming fiscal year. In addition to the recent acquisitions which significantly increased our presence in the fast-growing lighting controls market, we believe the execution of our strategies to accelerate investments in innovative and energy-efficient products, enhance services to our customers, and expand market presence in key sectors such as home centers and the renovation and relight market will provide growth opportunities which should enable us to outperform the overall markets we serve.

"We expect our profitability in fiscal 2010 to reflect additional benefits from recent acquisitions and streamlining actions initiated during 2009. Although pricing is likely to become more competitive in certain channels and geographies, we expect to offset this negative impact through productivity improvements and lower material, component, and freight costs. We intend to invest approximately $35 million in capital expenditures during fiscal 2010, and we estimate the annual tax rate to approximate 35 percent for the year.

"Although fiscal 2010 results will continue to be negatively impacted by current economic conditions, we remain very positive about the long-term potential of our company and our ability to outperform the market. We continue to position the Company to optimize short-term performance while investing in and deploying resources to further our long-term profitable growth opportunities."

Mr. Nagel concluded, "Looking beyond the current environment, we believe the lighting and lighting-related industry will experience solid growth over the next decade, particularly as energy and environmental concerns come to the forefront, and we believe we are well positioned to fully participate in this exciting industry."

The Company's independent registered public accountant's audit opinion with respect to the fiscal year-end financial statements will not be issued until the Company completes its annual report on Form 10-K, including its evaluation of internal controls over financial reporting. Accordingly, the financial results reported in this earnings release are preliminary pending completion of the audit. In addition, the classification of the purchase price allocation for recent acquisitions, LC&D and Sensor Switch, remain subject to finalization.

Conference Call

As previously announced, the Company will host a conference call to discuss fourth quarter results today, October 7, 2009, at 10:00 a.m. ET. Interested parties may listen to this call live today or hear a replay at the Company's Web site: www.acuitybrands.com.

Acuity Brands, Inc., the parent company of Acuity Brands Lighting, Inc. and other subsidiaries, is one of the world's leading providers of lighting fixtures and related products and services with fiscal year 2009 net sales of over $1.6 billion. The Company's brands include Lithonia Lighting(R), Holophane(R), Peerless(R), Mark Architectural Lighting(TM), Hydrel(R), American Electric Lighting(R), Gotham(R), Carandini(R), MetalOptics(R), Antique Street Lamps(TM), RELOC(R), Lighting Control & Design(TM), Sensor Switch(R), Synergy(R) Lighting Controls, SAERIS(TM), and ROAM(R). Headquartered in Atlanta, Georgia, Acuity Brands employs approximately 6,000 associates and has operations throughout North America and in Europe and Asia.

Forward Looking Information

This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that may be considered forward-looking include statements incorporating terms such as "expects," "believes," "intends," "anticipates," "may," "should", and similar terms that relate to future events, performance, or results of the Company and specifically include statements made in this press release regarding: (a) fiscal 2010 decline in non-residential construction activity and the overall markets served by the Company; (b) expectation of solid growth over the next decade for the lighting and lighting-related industry and the Company's position to fully participate; (c) growth opportunities created by accelerating investments in innovative and energy-efficient product, enhancing services, and furthering the Company's market presence in key sectors; (d) ability for the Company to outperform the markets it serves; (e) benefits from acquisitions and streamlining actions on fiscal 2010 profitability; (f) intentions to invest approximately $35 million in capital expenditures in fiscal 2010; and (g) fiscal 2010 annual tax rate of 35 percent. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the historical experience of Acuity Brands 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. Please see the other risk factors more fully described in the Company's SEC filings including the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 2, 2009 and risks discussed in Part I, "Item 1a. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended August 31, 2008. The discussion of those risks is specifically incorporated herein by reference. Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events.

ACUITY BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)

                                                   August 31,
                                                                  August 31,
                                                   2009
                                                                  2008
                                                   (Preliminary)

ASSETS

Current Assets:

Cash and cash equivalents                          $ 18,683       $ 297,096

Accounts receivable, less reserve for doubtful
accounts of $1,888 at August 31, 2009 and $1,640     227,371        268,971
at August 31, 2008

Inventories                                          140,797        145,725

Deferred income taxes                                16,710         18,251

Prepayments and other current assets                 19,339         26,104

Total Current Assets                                 422,900        756,147

Property, Plant, and Equipment, at cost:

Land                                                 7,273          9,501

Buildings and leasehold improvements                 111,810        126,450

Machinery and equipment                              334,725        334,641

Total Property, Plant, and Equipment                 453,808        470,592

Less - Accumulated depreciation and amortization     307,979        309,086

Property, Plant, and Equipment, net                  145,829        161,506

Other Assets:

Goodwill                                             514,952        342,306

Intangible assets                                    177,009        129,319

Deferred income taxes                                2,626          2,226

Other long-term assets                               23,859         17,187

Total Other Assets                                   718,446        491,038

Total Assets                                       $ 1,287,175    $ 1,408,691

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Current maturities of long-term debt               $ 209,535      $ 159,983

Accounts payable                                     162,299        205,776

Accrued compensation                                 35,309         67,463

Other accrued liabilities                            68,946         89,344

Total Current Liabilities                            476,089        522,566

Long-Term Debt                                       22,047         203,953

Accrued Pension Liabilities, less current portion    51,125         26,686

Deferred Income Taxes                                12,962         23,983

Self-Insurance Reserves, less current portion        8,792          8,853

Other Long-Term Liabilities                          47,448         47,104

Commitments and Contingencies

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; 49,851,316 issued and 42,433,143
outstanding at August 31, 2009; and 49,689,408       499            497
issued and 40,201,708 outstanding at August 31,
2008

Paid-in capital                                      645,436        626,435

Retained earnings                                    402,516        366,904

Accumulated other comprehensive loss                 (57,423   )    (22,819   )

Treasury stock, at cost, 7,418,173 shares at         (322,316  )    (395,471  )
August 31, 2009 and 9,487,700 at August 31, 2008

Total Stockholders' Equity                           668,712        575,546

Total Liabilities and Stockholders' Equity         $ 1,287,175    $ 1,408,691

ACUITY BRANDS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per-share data)

                        Three Months Ended          Twelve Months Ended

                        August 31,     August 31,   August 31,
                                                                   August 31,
                        2009           2008         2009
                                                                   2008
                        (Preliminary)  (Unaudited)  (Preliminary)

Net Sales               $ 422,611      $ 522,757    $ 1,657,404    $ 2,026,644

Cost of Products Sold     257,241        310,378      1,022,308      1,210,849

Gross Profit              165,370        212,379      635,096        815,795

Selling, Distribution,
and Administrative        115,350        138,638      454,606        540,097
Expenses

Special Charge            102            --           26,737         14,638

Operating Profit          49,918         73,741       153,753        261,060

Other Expense
(Income):

Interest expense, net     6,660          7,140        28,542         28,415

Miscellaneous expense     76             640          (2,112    )    2,095
(income), net

Total Other Expense       6,736          7,780        26,430         30,510

Income from Continuing
Operations before         43,182         65,961       127,323        230,550
Provision for Income
Taxes

Provision for Income      14,096         24,056       42,126         81,918
Taxes

Income from Continuing    29,086         41,905       85,197         148,632
Operations

Income (Loss) from
Discontinued              10           _              (288      )    (377      )
Operations

Net Income              $ 29,096       $ 41,905     $ 84,909       $ 148,255

Earnings Per Share:

Basic Earnings per
Share from Continuing   $ 0.69         $ 1.05       $ 2.09         $ 3.66
Operations

Basic Loss per Share
from Discontinued         0.00           0.00         (0.01     )    (0.01     )
Operations

Basic Earnings per      $ 0.69         $ 1.05       $ 2.08         $ 3.65
Share

Basic Weighted Average
Number of Shares          42,168         40,022       40,781         40,655
Outstanding

Diluted Earnings per
Share from Continuing   $ 0.68         $ 1.02       $ 2.05         $ 3.57
Operations

Diluted Loss per Share
from Discontinued         0.00           0.00         (0.01     )    (0.01     )
Operations

Diluted Earnings per    $ 0.68         $ 1.02       $ 2.04         $ 3.56
Share

Diluted Weighted
Average Number of         43,087         41,080       41,557         41,609
Shares Outstanding

Dividends Declared per  $ 0.13         $ 0.13       $ 0.52         $ 0.54
Share

ACUITY BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

                                                    Twelve Months Ended

                                                    August 31,
                                                                   August 31,
                                                    2009
                                                                   2008
                                                    (Preliminary)

Cash Provided by (Used for) Operating Activities:

Net income                                          $ 84,909       $ 148,255

Add: Loss from Discontinued Operations                288            377

Income from Continuing Operations                     85,197         148,632

Adjustments to reconcile net income to net cash
provided by (used for) operating activities:

Depreciation and amortization                         35,736         33,840

Excess tax benefits from share-based payments         (381     )     (5,022   )

Gain on the sale or disposal of property, plant,      43             177
and equipment

Impairments of property, plant, and equipment         1,558          --

Deferred income taxes                                 (388     )     2,573

Other non-cash items                                  10,226         5,355

Change in assets and liabilities, net of effect of
acquisitions, divestitures and foreign currency:

Accounts receivable                                   43,165         26,573

Inventories                                           10,284         811

Prepayments and other current assets                  12,208         12,749

Accounts payable                                      (44,416  )     (4,626   )

Other current liabilities                             (62,528  )     (10,903  )

Other                                                 2,026          11,644

Net Cash Provided by Operating Activities             92,730         221,803

Cash Provided by (Used for) Investing Activities:

Purchases of property, plant, and equipment           (21,248  )     (27,166  )

Proceeds from sale of property, plant, and            183            198
equipment

Acquisitions                                          (162,081 )     (3,500   )

Net Cash Used for Investing Activities                (183,146 )     (30,468  )

Cash Provided by (Used for) Financing Activities:

Repayments of long-term debt                          (162,395 )     (8       )

Employee stock purchase plan issuances                265            509

Stock options exercised                               2,773          4,039

Repurchases of common stock                           --             (155,650 )

Excess tax benefits from share-based payments         381            5,022

Dividend received from Zep Inc.                       --             58,379

Dividends paid                                        (21,634  )     (22,466  )

Net Cash Used for Financing Activities                (180,610 )     (110,175 )

Cash Flows from Discontinued Operations:

Net Cash (Used for) Provided by Operating             (288     )     4,250
Activities

Net Cash Used for Investing Activities                --             (410     )

Net Cash Used for Financing Activities                --             (2,333   )

Net Cash (Used for) Provided by Discontinued          (288     )     1,507
Operations

Effect of Exchange Rate Changes on Cash               (7,099   )     755

Net Change in Cash and Cash Equivalents               (278,413 )     83,422

Cash and Cash Equivalents at Beginning of Period      297,096        213,674

Cash and Cash Equivalents at End of Period          $ 18,683       $ 297,096

Supplemental Cash Flow Information:

Income taxes paid during the period                 $ 40,529       $ 84,381

Interest paid during the period                     $ 29,057       $ 34,847

    Source: Acuity Brands, Inc.

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