Acuity Brands Reports Fiscal 2020 Third Quarter Results
July 2, 2020
Acuity Brands announced results for the third quarter ended on May 31, 2020. Third quarter net sales were $776 million, a decrease of 18.1% compared with the prior-year period. Gross profit margin of 42.2% increased 170 basis points compared with the prior-year period. Operating profit margin of 10.7% decreased 200 basis points and adjusted operating profit margin of 13.5% decreased 80 basis points compared with the prior-year period. Diluted earnings per share (EPS) of $1.52 decreased by 31.5% and adjusted diluted EPS of $1.94 decreased by 23.3% compared with the prior-year period. For the nine months ended May 31, 2020, cash generated from operations of $378 million increased $66 million, or 21.3%, compared with the prior-year period.
Neil Ashe, President and Chief Executive Officer of Acuity Brands, commented, “Our company performed well in this challenging market environment associated with the global COVID-19 pandemic. The combined strength of our go-to-market channels, product portfolio, and supply chain allowed us to effectively serve the needs of customers across many categories. Despite our lower revenues, we were able to expand gross margins and to generate cash through a combination of actions that we took both before and during the pandemic.”
Fiscal 2020 Third Quarter Results
Fiscal 2020 third quarter net sales of $776 million decreased 18.1% compared with the prior-year period due primarily to a 20% decrease in volume largely as a result of the negative impact on demand due to the COVID-19 pandemic, partially offset by the benefit from acquisitions of approximately 2%. The change in product prices and mix of products sold was flat year over year as a favorable shift in sales channel mix was offset by overall lower pricing.
Gross profit for the third quarter of fiscal 2020 decreased $56 million to $328 million compared with $384 million in the prior-year period, due primarily to lower sales volume, partially offset by lower costs for certain inputs as well as the contributions from acquisitions. Fiscal 2020 third quarter gross profit margin of 42.2% increased 170 basis points compared with the prior-year period’s gross profit margin. The improvement in gross profit margin was due primarily to lower costs for certain inputs, contributions from acquisitions, and favorable sales channel mix partially offset by lower average selling prices.
Selling, distribution, and administrative (“SD&A”) expenses for the third quarter of fiscal 2020 totaled $241 million, a decrease of $22 million, or approximately 8.4%, compared with the prior-year period. The decrease in SD&A expense in the third quarter was due primarily to decreased freight and commissions associated with lower sales volume along with a reduction in costs across multiple expense categories as the Company adjusted spending in response to the lower net sales. The decrease in SD&A expenses was partially offset by the additional costs from recent acquisitions, including additional amortization of acquired intangibles, commissions, and employee costs. SD&A expenses for the third quarter of fiscal 2020 were 31.1% of net sales compared with 27.8% of net sales for the prior-year period. Adjusted SD&A expenses for the third quarter of fiscal 2020 totaled $223 million (28.7% of net sales) compared with $248 million (26.2% of net sales) in the prior-year period.
The Company recognized a pre-tax special charge of $3 million during the third quarter of fiscal 2020, which consisted primarily of severance and employee-related charges for actions taken in response to reduced demand due to the COVID-19 pandemic.
Operating profit for the third quarter of fiscal 2020 was $83 million, or 10.7% of net sales, compared with $120 million, or 12.7% of net sales, for the prior-year period. The decrease in operating profit was due to lower gross profit and increased special charges, partially offset by lower SD&A expenses. Adjusted operating profit for the third quarter of fiscal 2020 was $105 million, or 13.5% of net sales, compared with $136 million, or 14.3% of net sales, for the prior-year period.
Year-to-Date Results
Net sales for the first nine months of fiscal 2020 were $2.4 billion compared with $2.7 billion reported for the prior-year period, a decrease of $300 million, or 11.0%. Operating profit for the first nine months of fiscal 2020 was $248 million compared with $333 million for the prior-year period, a decrease of $85 million, or 25.4%. Operating profit margin for the first nine months of fiscal 2020 decreased 200 basis points to 10.2% of net sales compared with 12.2% of net sales in the year-ago period. Net income for the first nine months of fiscal 2020 was $175 million, a decrease of $60 million, or 25.5%, compared with $234 million for the prior-year period. For the first nine months of fiscal 2020, diluted EPS decreased $1.47, or 25.0%, to $4.40 compared with $5.87 reported in the year-ago period.
Adjusted operating profit decreased by $56 million, or 14.8%, to $326 million for the first nine months of fiscal 2020 compared with $382 million for the prior-year period. Adjusted operating profit margin for the first nine months of fiscal 2020 decreased 60 basis points to 13.4% of net sales compared with 14.0% of net sales in the year-ago period. Adjusted net income for the first nine months of fiscal 2020 was $235 million compared with $272 million in the prior-year period, a decrease of $38 million, or 13.9%. Adjusted diluted earnings per share for the first nine months of fiscal 2020 decreased $0.92, or 13.5%, to $5.91 compared with $6.83 for the prior-year period.
Cash Flows
Net cash provided by operating activities totaled $378 million during the nine months of fiscal 2020 compared with $312 million in the prior-year period, an increase of $66 million, or 21.3%. Cash and cash equivalents at the end of the third quarter of fiscal 2020 totaled $521 million.
Outlook
Mr. Ashe commented, “We are demonstrating the durability of our business and our continued ability to generate cash. However, there is still great uncertainty around demand and the timing of any economic recovery. Also, we expect pricing pressure and continued costs related to tariffs in the fourth quarter of fiscal 2020. As we look forward, we plan to continue to balance the management of our costs with the investment in our transformation and we have a robust new product portfolio that is positioned to benefit from a recovery in demand.”
