ATLANTA, Oct. 02, 2019 (GLOBE NEWSWIRE) — Acuity Brands, Inc. (AYI) (the “Company”) today announced that fiscal 2019 fourth quarter net sales were $938.1 million compared with $1,061.2 million in the year-ago period. Operating profit for the fourth quarter of fiscal 2019 was $130.3 million compared with $143.7 million in the year-ago period. Net income for the fourth quarter of fiscal 2019 was $96.1 million compared with $108.2 million in the prior-year period. Fiscal 2019 fourth quarter diluted earnings per share (“EPS”) was $2.42 compared with $2.70 in the year-ago period.
Adjusted diluted EPS for the fourth quarter of fiscal 2019 increased 2.6 percent to $2.75, a quarterly record, compared with the year-ago period. Fiscal 2019 adjusted net income increased 1.5 percent to $109.0 million compared with $107.4 million for the prior-year period. Adjusted operating profit for the fourth quarter of fiscal 2019 was $146.1 million compared with $156.0 million in the year-ago period, while adjusted operating profit margin of 15.6 percent increased 90 basis points over the prior-year period. Adjusted results are non-GAAP financial measures that exclude the impact of amortization expense for acquired intangible assets, share-based payment expense, acquisition-related items (including acquired profit in inventory and professional fees), special charge/credit associated with streamlining activities, gain associated with the sale of the Company’s former Spanish lighting business, and an income tax net benefit for discrete items associated with the Tax Cuts and Jobs Act of 2017 (“TCJA”). Management believes these items impacted the comparability of the Company’s results and that adjusted financial measures enhance the reader’s overall understanding of the Company’s current financial performance by making results comparable between periods. A reconciliation of adjusted financial measures to the most directly comparable U.S. GAAP measure is provided in the tables at the end of this release.
Vernon J. Nagel, Chairman and Chief Executive Officer of Acuity Brands, commented, “We achieved solid results despite sluggish market conditions. We delivered record adjusted net income and adjusted diluted earnings per share notwithstanding the decline in fourth quarter net sales and operating profit compared with the year-ago period. While various factors, including some that were anticipated, contributed to the decline in fourth quarter net sales, we were pleased to achieve meaningful year-over-year improvement in both adjusted gross profit margin and adjusted operating profit margin. Our fourth quarter results reflect the benefit of price increases that we implemented to help offset the impact of tariffs and inflationary cost pressures as well as efforts to reduce our exposure to products whose profitability has been most negatively impacted by tariffs, many sold primarily through the retail sales channel. Additionally, we reported record fourth quarter and full-year net cash provided by operating activities. Fiscal 2019 full-year net cash provided by operating activities was a record $495 million, an increase of over 40 percent compared with the prior year.”
Mr. Nagel continued, “Finally, we are excited to welcome aboard the associates of the recently acquired The Luminaires Group, whose specification-grade luminaires for commercial, institutional, hospitality, and municipal markets complement and expand our architectural lighting portfolio.”
Fiscal 2019 Fourth Quarter Results
The 11.6 percent year-over-year decline in fiscal 2019 fourth quarter net sales was primarily due to a 16 percent decrease in volume, partially offset by a 5 percent net favorable change in product prices and mix of products sold (“price/mix”). The volume decline was a result of several factors, which included prior year’s fourth quarter significant initial stocking of product in the stores of a new customer in the retail sales channel that did not repeat in the current period, elimination of certain products in our portfolio sold primarily through the retail sales channel that did not meet our return objectives, as well as softer market conditions. While many key sales channels experienced declines in the fourth quarter, more than half of the sales decline occurred in the retail sales channel. The favorable change in price/mix was due to implemented price increases and changes in sales channel mix that was partially offset by changes in the mix of product sold. Management estimates that the realization from recent price increases contributed in the low single-digit range to the positive price/mix. The combined negative impact of changes in foreign currencies, the adoption of ASC 606, and acquisitions net of divestitures totaled less than one-half of a percentage point of net sales.
Gross profit for the fourth quarter of fiscal 2019 decreased $17.2 million to $394.7 million compared with $411.9 million in the prior-year period primarily due to lower sales volume, which was partially offset by favorable price/mix. Fiscal 2019 fourth quarter gross profit margin of 42.1 percent increased 330 basis points compared with prior year’s gross profit margin and 320 basis points compared with the prior year’s adjusted gross profit margin. The primary contributors to the improvement in gross profit margin were positive price capture from implemented price increases, favorable sales channel mix that reflected lower sales in the retail sales channel, and productivity improvements. Management estimates that the improvement in gross profit margin was partially offset by approximately 50 basis points due to the under-absorption of manufacturing costs as a result of inventory reduction efforts.
Selling, distribution, and administrative (“SD&A”) expenses for the fourth quarter of fiscal 2019 totaled $263.9 million, a decrease of $9.4 million, or approximately 3.4 percent, compared with the prior-year period The decrease was largely due to reduced freight expense resulting primarily from lower sales volume.
The effective income tax rate for the fourth quarter was 20.2 percent compared to 21.1 percent in the prior-year period. The decline in the current fiscal tax rate reflects the recognition of certain research and development cost tax credits, including claims for prior periods, during the current period. Prior year’s fourth quarter tax rate benefited from $3.4 million of discrete income tax benefits resulting from the TCJA.
Fiscal 2019 Full-Year Results
Net sales for fiscal 2019 of $3.67 billion declined 0.2 percent compared with prior year’s $3.68 billion. Results for fiscal 2019 include operating profit of $462.9 million, net income of $330.4 million, and diluted EPS of $8.29.
Adjusted operating profit for fiscal 2019 decreased $6.0 million, or 1.1 percent, to $528.1 million compared with prior year’s adjusted operating profit of $534.1 million. Fiscal 2019 adjusted net income increased $18.5 million, or 5.1 percent, to $381.4 million compared with $362.9 million for the prior-year period. Adjusted diluted EPS for fiscal 2019 increased $0.73, or 8.3 percent, to $9.57 compared with adjusted diluted EPS of $8.84 for the year-ago period. Adjusted results exclude amortization expense for acquired intangible assets, share-based payment expense, acquisition-related items (including acquired profit in inventory and professional fees), special charge for streamlining activities, manufacturing inefficiencies and excess inventory adjustments related to the closure of a facility, gain associated with the sale of the Company’s former Spanish lighting business, and an income tax net benefit for discrete items associated with the TCJA. The total impact of these items on diluted EPS for fiscal 2019 and 2018 was $1.28 and $0.32, respectively. A reconciliation of adjusted financial measures to the most directly comparable U.S. GAAP measure is provided in the tables at the end of this release.
Cash and cash equivalents at the end of the fourth quarter of fiscal 2019 totaled $461 million, an increase of $332 million for the fiscal year. Net cash provided by operating activities totaled $495 million for the full year, a company record, compared with $352 million for the year-ago period, representing an increase of over 40 percent. During fiscal 2019, the Company repurchased 650,000 shares of its common stock under its previously authorized stock repurchase program at a total cost of $81.6 million and paid dividends to shareholders totaling $20.8 million.
Mr. Nagel commented, “We remain cautious about overall market conditions within the lighting industry for fiscal 2020 primarily due to continued economic uncertainties caused by global trade issues, including tariffs. We expect market demand for lighting products to remain sluggish until there is more clarity regarding these global trade issues. Nonetheless, our focus for fiscal 2020 will be to drive top-line growth through market share gains and enhance margins, while implementing appropriate cost containment measures as necessitated by market demand.”
Mr. Nagel continued, “We believe our fiscal 2020 first quarter net sales could be down in the mid-to-high single-digit percentage range compared with first quarter of fiscal 2019 primarily due to the pull forward of orders by customers in advance of announced price increases in the prior-year period as well as our recent efforts to reduce our exposure to products whose profitability has been most negatively impacted by tariffs and are sold primarily through the retail sales channel. The decline in net sales should be partially mitigated by the recently acquired The Luminaires Group. While we believe prior year’s pull forward of orders contributed significantly to last year’s first quarter net sales growth rate of 11 percent, we are unable to specifically quantify its impact. Therefore, it is not possible to precisely know how this will impact this year’s first quarter results compared with the year-ago period.”
Management estimates a fiscal 2020 annual tax rate of approximately 23 percent before any discrete items, assuming the tax rates in the Company’s taxing jurisdictions remain generally consistent throughout the year. Additionally, management expects fiscal 2020 capital expenditures will approximate 1.7 percent of net sales.
Mr. Nagel concluded, “Our focus for fiscal 2020 and beyond is to garner top-line growth through market share gains thereby outperforming the growth rates of the key markets and channels we serve through execution of our previously announced growth strategies, increase margins by selling a richer mix of products and solutions as we execute our tiered solutions strategy, and leverage our fixed cost infrastructure to achieve targeted incremental margins. We continue to believe the lighting and lighting-related industry as well as building management systems have the potential to experience solid growth over the next decade, particularly as owners and users of lighting equipment and buildings continue to see the potential to transform those investments into strategic assets by deploying our distinctive solutions. We believe we are uniquely positioned to fully participate in this exciting industry.”
The independent registered public accounting firm’s audit report with respect to the Company’s fiscal year-end financial statements will not be issued until the Company files 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.