Wed. Feb 26th, 2020

Trader Alerts: Acuity Brands, Inc. (NYSE: AYI)

30 min read

Acuity Brands, Inc. (NYSE: AYI) today announced fiscal 2020 1st-quarter net sales of $834.70(M), a decline of 10.50 percent compared with the year-ago period.  Operating profit for the 1st-quarter of fiscal 2K19 was $83.60(M), a decline of 28.0 percent compared with the year-ago period.  The decline in operating profit was due primarily to a decline in net sales, higher share-based payment expense, and inclined special charges for streamlining activities. Net income for the 1st-quarter of fiscal 2020 was $57.00(M), a decline of 28.00 percent compared with the prior-year period.  Fiscal 2020 1st-quarter diluted earnings per share (“EPS”) of $1.440 declined 27.00 percent compared with the year-ago period.

Adjusted diluted EPS for the 1st-quarter of fiscal 2020 declined 8.20 percent to $2.130 compared with the year-ago period.  Adjusted operating profit for the 1st-quarter of fiscal 2020 declined 11.30 percent, to $119.00(M) compared with the year-ago period.  Adjusted operating profit margin for the 1st-quarter fiscal 2020 was 14.30 percent compared with 14.40 percent in the year-ago period.

Fiscal 2020 1st-Quarter Results

The decline in fiscal 2020 1st-quarter net sales was primarily due to a 16.00 percent decline in volume, partially offset by a 3 percent net favorable change in price and mix of products sold (“price/mix”) and a contribution from acquisitions of approximately 2.5 percent.  Changes in foreign currency rates did not have a meaningful impact on 1st-quarter net sales.  Management estimates that price/mix was impacted by a favorable shift in sales channel mix and, to a lesser extent, realization from price inclines implemented in fiscal 2K19, partially offset by an unfavorable mix of products sold.

Gross profit for the 1st-quarter of fiscal 2020 declined $11.7(M) to $355.8(M) compared with $367.5(M) in the prior-year period primarily due to lower sales volume and inclined tariffs, partially offset by favorable price/mix, lower costs for certain inputs, and the contribution from acquisitions.  Fiscal 2020 1st-quarter gross profit margin of 42.6 percent inclined 320 basis points compared with prior year’s gross profit margin.  The improvement in gross profit margin was primarily due to favorable sales channel mix, partially offset by the mix of products sold and lower net sales volume.  Fiscal 2020 1st-quarter adjusted gross profit margin of 42.8 percent inclined 330 basis points compared with prior year’s adjusted gross profit margin.

Selling, distribution, and administrative (“SD&A”) expenses for the 1st-quarter of fiscal 2020 totaled $265.3(M), an incline of $15.2(M), or approximately 6.1 percent, compared with the prior-year period.  The incline was primarily due to higher share-based payment expense, the addition of acquisitions, and higher professional fees associated with recent acquisitions.  Share-based payment expense inclined due to changes made to the equity incentive program as part of the Company’s comprehensive review of its compensation programs that was performed during the past year, which resulted in the acceleration of share-based payment expense in the 1st-quarter.  Adjusted SD&A expenses for the 1st-quarter of fiscal 2020 totaled $237.9(M), an incline of $3.3(M), or 1.4 percent compared with the prior-year period.  The incline in adjusted SD&A expenses was primarily due to the added operating costs associated with recent acquisitions.

Special Charge

The Company recorded a pre-tax special charge of $6.9(M) in the 1st-quarter of fiscal 2020 compared with a pre-tax special charge of $1.0(M) in the prior fiscal-year period.  The special charge consisted primarily of severance costs and expense associated with the consolidation of certain facilities. Management believes that these streamlining actions will better align the Company’s cost structure with current market demand while permitting continued investment in future growth initiatives.  Management expects to achieve pre-tax savings in fiscal 2020 in excess of the special charge amount with most of the benefit occurring in the second half of the fiscal year.

Cash Flows

Net cash provided by operating activities totaled $129.6(M) for the 1st-quarter of fiscal 2020 compared with $131.8(M) for the year-ago period.  Cash and cash equivalents at the end of the 1st-quarter of fiscal 2020 totaled $266.6(M), a decline of $194.4(M) since the beginning of the fiscal year.  During the 1st-quarter of fiscal 2020, the Company spent $302.0(M) on acquisitions and paid dividends to stockholders of over $5(M).

Financing

In December 2K19, the Company borrowed the full $400(M) available under its existing delayed drawdown term loan.  The majority of the proceeds were used to refinance the $350(M) public notes that matured on December 15, 2K19.  Borrowings under the term loan are based on short-term interest rates that are currently approximately half the rate of the refinanced public notes.  The interest savings associated with refinancing the public debt is estimated between $7 and $8(M) for the remainder of fiscal 2020, assuming no meaningful changes in short-term interest rates.

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