Acuity Reports 2Q Results Beat Expectations; 3.5% Drop in Sales; “Re-evaluating Fixed Costs”

April 2, 2020 [addtoany]

ATLANTA, April 02, 2020 (GLOBE NEWSWIRE) — Acuity Brands, Inc. (AYI) (“Company”) today announced results for the second quarter ended on February 29, 2020.  Second quarter net sales were $824 million, a decrease of 3.5% compared with the year-ago period. Gross profit margin of 41.7% increased 260 basis points from the prior-year period.  Operating profit margin of 9.9% declined 130 basis points and adjusted operating profit margin of 12.3% declined 90 basis points from the prior-year period.  Diluted earnings per share (EPS) of $1.44 declined 13.8% and adjusted diluted EPS of $1.84 declined 7.5% from the prior-year period.  For the six months ended February 29, 2020, cash flow from operations increased $26 million, or 14.0%, from the prior-year period to $215 million.

Neil Ashe, President and Chief Executive Officer of Acuity Brands, commented, “Results for the second quarter were a combination of continuing trends with some signs of improvement.  We are embarking on the next generation of Acuity Brands while at the same time we are dealing with the shocks caused by the COVID-19 pandemic.  We are focused on the health and well-being of our associates while aggressively managing the risks and opportunities that the COVID-19 shocks present to the Company.  We enter this period with a strong balance sheet and a strong team.”

Fiscal 2020 Second Quarter Results

Fiscal 2020 second quarter net sales of $824 million decreased 3.5% compared with the prior-year period due primarily to a 7% decrease in volume, partially offset by a contribution from acquisitions of approximately 3%, and a 1% net favorable change in price and mix of products sold (“price/mix”).  Management estimates that price/mix was impacted by a favorable shift in sales channel mix, partially offset by an unfavorable mix of products sold.

Gross profit for the second quarter of fiscal 2020 increased $10 million to $344 million compared with $334 million in the prior-year period due primarily to the contribution from acquisitions, lower costs for certain inputs, and favorable price/mix.  These increases were partially offset by lower sales volume and increased tariffs.  Fiscal 2020 second quarter gross profit margin of 41.7% increased 260 basis points compared with the prior-year period’s gross profit margin.

Selling, distribution, and administrative (“SD&A”) expenses for the second quarter of fiscal 2020 totaled $261 million, an increase of $23 million, or approximately 9.8%, compared with the prior-year period.  The increase in SD&A expense in the second quarter was due primarily to the addition of costs from acquired businesses, increased commissions, higher professional fees, and higher variable incentive compensation.  Adjusted SD&A expenses for the second quarter of fiscal 2020 totaled $242 million, an increase of $20 million, or 8.9% compared with the prior-year period.

Operating profit for the second quarter of fiscal 2020 was $81 million, or 9.9% of net sales, compared with $96 million, or 11.2% of net sales, for the prior-year period.  The decrease in operating profit was due to higher SD&A expenses and increased special charges, partially offset by higher gross profit.  Adjusted operating profit for the second quarter of fiscal 2020 was $102 million, or 12.3% of net sales, compared with $112 million, or 13.2% of net sales, for the prior-year period.

Year-to-Date Results

Net sales for the first six months of fiscal 2020 were $1.66 billion compared with $1.79 billion reported for the prior-year period, a decrease of $128 million, or 7.2%.  Operating profit for the first six months of fiscal 2020 was $165 million compared with $212 million for the prior-year period, a decrease of $47 million, or 22.3%.  Operating profit margin for the first six months of fiscal 2020 decreased 200 basis points to 9.9% of net sales compared with 11.9% of net sales in the year-ago period.  Net income for the first six months of fiscal 2020 was $114 million, a decrease of $32 million, or 21.7%, compared with $146 million for the prior-year period. For the first six months of fiscal 2020, diluted EPS decreased 21.3% to $2.88 compared with $3.66 reported in the year-ago period.

Adjusted operating profit decreased by $26 million, or 10.5%, to $221 million for the first six months of fiscal 2020 compared with $247 million for the prior-year period.  Adjusted operating profit margin for the first six months of fiscal 2020 decreased 50 basis points to 13.3% of net sales compared with 13.8% of net sales in the year-ago period.  Adjusted net income for the first six months of fiscal 2020 was $157 million compared with $172 million in the prior-year period, a decrease of $15 million, or 8.4%.  Adjusted diluted earnings per share for the six months ended February 29, 2020 decreased $0.34, or 7.9%, to $3.97 compared with $4.31 for the prior-year period.

Cash Flows

Net cash provided by operating activities totaled $215 million during the first half of fiscal 2020 compared with $188 million in the prior-year period, an increase of $26 million, or 14.0%.  Cash and cash equivalents at the end of the second quarter of fiscal 2020 totaled $381 million.

Outlook

Mr. Ashe commented, “On January 31, I became CEO of Acuity Brands, and I am pleased with the strong foundation that is in place.  We have an industry leading lighting and controls business and an emerging technology opportunity.  We have a strong company in a period of great change.  We are aggressively adapting the business to current market dynamics and to respond to the impacts of the COVID-19 pandemic. Due to demand and other uncertainties, the near-term economic impact of COVID-19 cannot be reliably quantified at this time, and the impacts on our full year fiscal 2020 results and beyond are therefore uncertain.”

Conference Call

As previously announced, the Company will host a conference call to discuss second quarter results today, April 2, 2020, 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.

About Acuity Brands