Acuity Brands Posts Fiscal 2009 2Q Results

Apr 07, 2009 (Close-Up Media via COMTEX) -- AYIW | Quote | Chart | News | PowerRating -- Acuity Brands, Inc. has announced results for the second quarter of fiscal 2009, including net sales of $386.1 million, a decline of 20 percent compared with $482.6 million for the year-ago period.

In a release on April 2, the company noted that operating profit for the second quarter of fiscal 2009 was $28.6 million, or 7.4 percent of net sales, compared with $60.7 million, or 12.6 percent of net sales, for the year-ago period. Diluted earnings per share (EPS) for the second quarter of fiscal 2009 were $0.35 compared with $0.82 for the prior year. The results for the second quarter of fiscal 2009 include a $4.6 million pre-tax special charge, or $0.07 per diluted share. The special charge relates primarily to the further acceleration of previously announced streamlining activities as explained below. Fiscal 2009 second quarter adjusted operating profit, which excludes the special charge, was $33.2 million, or 8.6 percent of net sales.

The decline in net sales was due primarily to lower demand for lighting fixtures in most commercial and industrial markets and continued weakness in the residential housing market. The impact of the stronger dollar on international sales contributed approximately 2 percentage points to the year-over-year decline in net sales. Management estimates that an enhanced mix of products sold and price increases implemented in the prior year to offset higher material costs partially offset the decline in unit volume by approximately 2 percentage points. The acquisition of Lighting Control and Design contributed less than 1 percent to net sales in the second quarter of fiscal 2009.

Nagel, Chairman, President, and Chief Executive Officer of Acuity Brands, said, "Our performance for the second quarter of 2009 reflects the continued steep decline in construction activity as a direct result of deteriorating economic conditions around the globe. As we previously commented, profitability for the second quarter of fiscal 2009 was also negatively impacted by higher raw material and component costs resulting from last year's spike in commodity prices and due to its temporary duration we were not able to pass this increase onto our customers in the form of higher prices. We estimate the impact of the higher raw material costs in our second quarter was over $6 million, or 1.6 percent of net sales. Benefits from our continuous improvement initiatives and streamlining efforts allowed us to partially mitigate the impact of these items."

Diluted earnings per share from continuing operations for the first half of fiscal 2009 were $0.83, a decrease of 46 percent compared with $1.54 per share for the prior year period. Income from continuing operations for the first half of fiscal 2009 declined to $33.8 million, a decrease of 48 percent versus the year-ago period while net sales declined 15 percent to $838.2 million.

Special Charges

The Company accelerated its previously announced streamlining efforts during the second quarter of fiscal 2009 with an additional reduction in the Company's workforce of approximately 200 associates and recorded a special charge of $4.6 million for related severance, amortization of retention pay, and benefits. Results for the first half of both fiscal 2009 and 2008 include special charges of $26.6 million, or $0.41 per diluted share, and $14.6 million, or $0.21 per diluted share, respectively. The special charges relate to actions to streamline and simplify the Company's organizational structure. Annualized cost savings of $14 million have been realized from streamlining actions taken during the first half of fiscal 2008. Management expects to realize more than $50 million of annualized cost savings as a result of the streamlining actions taken in fiscal 2009 of which approximately $20 million is expected to be realized in the second half of the current fiscal year following the consolidation of previously announced manufacturing operations that are scheduled to be substantially complete by the fiscal fourth quarter.

Cash and cash equivalents at the end of the second fiscal quarter totaled $72.3 million, a decrease of $224.8 million from the $297.1 million at the beginning of the fiscal year. The decrease in cash was due primarily to the retirement of $160 million in debt obligations and $31 million utilized for acquisitions and investments. Also contributing to the decline in cash were $12 million in capital expenditures and $11 million in dividends to stockholders.

Outlook

Nagel said, "Rising unemployment and tight credit markets as well as other factors have created great uncertainty regarding the direction and vitality of our economy. These factors have contributed to very low consumer and business confidence levels resulting in a decidedly bearish sentiment regarding future near-term construction activity. As a result of extreme volatility in the market place, the correlation of traditional measures for gauging future construction activity is making it difficult to forecast future shorter-term demand for lighting fixtures. Nevertheless, we expect the percentage decline in our full year revenues compared with the year ago period to be at least in the middle to upper teens.

"Our profitability in the second half of fiscal 2009 should benefit from seasonally higher sales, increased benefits from previously announced streamlining actions, and lower material costs as compared to the first half of the fiscal year, partially offset by a more competitive pricing environment. We expect cash flows to be positive in the second half of fiscal 2009 driven by inventory reductions following the completion of the consolidation of certain manufacturing facilities. Efforts to lower inventory may negatively impact profitability in the second half due to the under-absorption of costs as we temporarily produce fewer products than we sell. While the recent acquisition of Lighting Control and Design and the proposed acquisition of Sensor Switch, Inc. are important strategic additions with great longer-term potential, they are not expected to materially impact our results for the remainder of fiscal 2009.

"Our backlog at the end of the second quarter was $138 million, down 14 percent versus the prior year, and incoming orders in March are down nearly 20 percent compared with the year ago period.

"While the current turmoil in the economic environment will likely negatively impact results in the near-term, we remain very positive about the long-term future performance 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 profitable growth opportunities for the long-term. We continue to focus on and invest in industry-leading product innovation incorporating sustainable design and increased service and product capabilities to better serve our existing customers as well as the renovation and relight market. With our recent acquisition of Lighting Control and Design and completion of our announced acquisition of Sensor Switch, Inc., we are creating a platform with extensive capabilities affording us the opportunity to be an industry leader. We will offer some of the most technologically advanced sustainable lighting solutions incorporating both controls and fixtures to maximize energy savings while delivering exceptional quality. We believe these acquisitions will accelerate our participation in both the new construction market and the building energy management systems market while greatly expanding our presence in the very large and dynamic renovation and relight market."

Nagel concluded, "These are extraordinarily challenging times. However, our past and future actions to create value for our customers, invest in our associates to be even more customer-focused and productive, and more effectively deploy assets to generate greater returns for our shareholders should enhance the Company's opportunity to prosper over the long-term."

Acuity Brands owns and operates Acuity Brands Lighting, Inc. and Acuity Brands Technology Services, Inc.

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