Acuity Brands Reports Fiscal 2009 Fourth Quarter and Full Year Results

• Press Release
• Source: Acuity Brands, Inc.
• On 8:15 am EDT, Wednesday October 7, 2009

ATLANTA--(BUSINESS WIRE)--Acuity Brands, Inc. (NYSE: AYI - News) 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.

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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^®, Holophane^®, Peerless^®, Mark Architectural Lighting™, Hydrel^®, American Electric Lighting^®, Gotham^®, Carandini^®, MetalOptics^®, Antique Street Lamps™, RELOC^®, Lighting Control & Design™, Sensor Switch^®, Synergy^® Lighting Controls, SAERIS™, and ROAM^®. 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.
Dan Smith, 404-853-1423