“price/mix was influenced by a reduction in the sales price of certain LED luminaries reflecting the continued decline in the cost of purchased LED components.”
ATLANTA–(BUSINESS WIRE)–Acuity Brands, Inc. (AYI) (“Company”) today announced record fourth quarter net sales and diluted earnings per share (“diluted EPS”). Fiscal 2013 fourth quarter net sales of $579.8 million increased $65.5 million, or 13 percent, compared with the year-ago period. Fiscal 2013 fourth quarter net income increased to $44.9 million from $33.3 million in the prior-year period. Diluted EPS for the fourth quarter of fiscal 2013 increased 32 percent to a record $1.03 compared with $0.78 reported for the prior-year period.
Fiscal 2013 fourth quarter results included a $0.3 million pre-tax special charge associated with streamlining activities announced in the prior quarter. Prior year’s fourth quarter results included a pre-tax special charge and related expenses for streamlining actions totaling $6.5 million, or $0.10 per diluted share. Excluding the special charge and related expenses in both periods, adjusted diluted EPS increased 17 percent year-over-year.
Vernon J. Nagel, Chairman, President and Chief Executive Officer of Acuity Brands, commented, “We were very pleased with our fiscal 2013 fourth quarter and full year results as we continued to execute our strategies to extend our leadership position in North America. We believe our fourth quarter record results for net sales and earnings reflect our ability to provide customers truly differentiated value from our industry-leading portfolio of innovative lighting and control solutions along with superior service.”
Fiscal 2013 Fourth Quarter Results
The growth in net sales was due primarily to a more than 14 percent increase in sales volume, partially offset by the impact of an unfavorable change in product prices and the mix of products sold (“price/mix”). The Company experienced sales growth across most product categories and in key sales channels reflecting market share gains and growth in both the non-residential and residential markets, particularly for renovation and retrofit applications. Additionally, robust demand for the Company’s LED luminaires continued in the fourth quarter of fiscal 2013 as sales of these products more than doubled compared with the year-ago period. The Company estimated that the unfavorable price/mix in the current quarter compared with the year-ago period was due primarily to greater sales of less featured, value-oriented products sold through certain sales channels in the fourth quarter of fiscal 2013, including an increase in the number of large renovation projects, particularly for national retailers. In addition, price/mix was influenced by a reduction in the sales price of certain LED luminaries reflecting the continued decline in the cost of purchased LED components.
Operating profit for the fourth quarter of fiscal 2013 was $78.2 million, or 13.5 percent of net sales, compared with prior year’s $61.2 million, or 11.9 percent of net sales. Excluding the $0.3 million pre-tax special charge related to streamlining activities, fiscal 2013 fourth quarter adjusted operating profit of $78.5 million, or 13.5 percent of net sales, increased 16 percent compared with prior year’s adjusted operating profit of $67.7 million, or 13.2 percent of net sales.
Fiscal 2013 Full Year Results
Fiscal 2013 net sales were $2,089.1 million compared with $1,933.7 million for the prior-year period, an increase of $155.4 million, or 8 percent. Operating profit for fiscal 2013 was $221.5 million compared with $208.0 million for the year-ago period. Net income for fiscal 2013 was $127.4 million compared with $116.3 million for fiscal 2012. Diluted EPS for fiscal 2013 and 2012 were $2.95 and $2.72, respectively.
Fiscal 2013 adjusted operating profit increased $20.8 million to $246.5 million, or 11.8 percent of net sales, from prior year’s adjusted operating profit of $225.7 million, or 11.7 percent of net sales. Fiscal 2013 adjusted diluted EPS of $3.31 increased 10 percent over prior year’s adjusted diluted EPS of $3.00. Fiscal 2013 adjusted operating profit and adjusted diluted EPS exclude the impact of the $8.5 million, or $0.12 diluted EPS, pre-tax special charge related to streamlining activities, $8.4 million, or $0.12 diluted EPS, of temporary manufacturing inefficiencies related to production moves, and pre-tax loss of $8.1 million, or $0.12 diluted EPS, resulting from fraud perpetrated at a freight payment and audit service firm formerly retained by the Company. Fiscal 2012 adjusted operating profit and adjusted diluted EPS exclude the impact of $17.7 million, or $0.28 diluted EPS, of pre-tax special charges and expenses associated with the closing of the Cochran facility.
The $8.5 million pre-tax special charge incurred in fiscal 2013 included $1 million of pre-tax special charges incurred during the first half of the year related to streamlining activities initiated in the prior year and $7.5 million of pre-tax special charges incurred in the second half of the year associated with actions initiated in fiscal 2013 to further streamline the organization. The streamlining actions initiated in fiscal 2013 include the realignment of responsibilities, primarily within various SD&A departments, as well as the planned closure of two small production facilities. The $7.5 million of special charges consisted primarily of severance and employee-related costs. Management expects to incur production transfer expenses and other costs associated with these additional streamlining actions totaling approximately $2 million during the next two fiscal quarters. Management estimates that the total annualized pre-tax savings associated with the streamlining activities initiated in 2013 to be approximately $15 million, of which approximately $2 million was realized in the fourth quarter of fiscal 2013. Management currently expects to be at the total annualized savings run rate from the streamlining activities by the end of calendar year 2013 following the completion of the transfer of production and closure of the facilities.
Outlook
Mr. Nagel commented, “Our outlook has not changed materially during the past quarter. Third-party forecasts and leading indicators suggest that the growth rate for the North American lighting market, which includes renovation and retrofit activity, will continue to be in the mid-single digit range during the remainder of calendar 2013 and into 2014. While we still expect to see some volatility in demand among certain sales channels and geographies, our expectation for the future is that overall demand in our end markets will continue to improve and be more consistent and broad-based. The favorable trend in our September order rates seems to reflect this improvement. We believe opportunities continue to exist that will allow us to continue to outperform the markets we serve as we did in fiscal 2013. These opportunities include benefits from growing renovation and tenant improvement projects, further expansion in underpenetrated geographies and channels, and growth from the introduction of new products and lighting solutions.”
Mr. Nagel concluded, “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 independent registered public accounting firm’s audit opinion with respect to the Company’s fiscal year-end financial statements will not be issued until the Company completes its annual report on Form 10-K, including its evaluation of the effectiveness of internal controls over financial reporting. Accordingly, the financial results reported in this earnings release are preliminary pending completion of the audit.
Non-GAAP Financial Measures
Acuity Brands’ management included in this news release the terms “adjusted gross profit margin”, “adjusted operating profit”, “adjusted operating profit margin”, “adjusted net income”, and “adjusted diluted EPS” which are non-GAAP financial measures provided to enhance the reader’s overall understanding of the Company’s current financial performance and prospects for the future. Specifically, management believes that adjusted gross profit margin, adjusted operating profit, adjusted operating profit margin, adjusted net income, and adjusted diluted EPS provide useful information to investors by excluding or adjusting items related to special charges associated with efforts to streamline the organization, related temporary manufacturing inefficiencies, and losses incurred as a result of fraud perpetrated at the freight payment and audit service firm formerly retained by the Company, all of which affected fiscal 2013 gross profit, operating profit, net income and diluted EPS. Management believes these items impacted the comparability of the Company’s results and that they are not reflective of fixed costs that the Company will incur over the long term. However, the Company has incurred similar charges, other than with respect to losses incurred as a result of fraud perpetrated at the freight payment and audit service firm, in prior fiscal years and continually evaluates streamlining measures which could result in additional charges in future periods. These non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with GAAP. The most directly comparable GAAP measure for adjusted gross profit margin is “gross profit margin” which includes the temporary manufacturing inefficiencies. The most directly comparable GAAP measures for adjusted operating profit, adjusted operating profit margin, adjusted net income, and adjusted diluted EPS are “operating profit,” “operating profit margin,” “net income,” and “diluted EPS,” respectively, which include the impact of the special charge, manufacturing inefficiencies, abandonment of inventory, and fraud-related loss. The non-GAAP financial measures included in this news release have been reconciled to the nearest GAAP measure.