ATLANTA — Acuity Brands, Inc. today announced record fourth quarter and full-year results for net sales, net income, and diluted earnings per share. Fiscal 2018 fourth quarter net sales of $1.06 billion increased approximately $104 million, or 11 percent, compared with the year-ago period. Operating profit for the fourth quarter of fiscal 2018 was $142 million compared with $153 million in the year-ago period. Net income for the fourth quarter of fiscal 2018 was $108 million, an increase of approximately 20 percent compared with the prior-year period. Fiscal 2018 fourth quarter diluted EPS of $2.70 increased approximately 26 percent compared with the year-ago period.
Adjusted diluted EPS for the fourth quarter of fiscal 2018 increased 5 percent to $2.68 compared with the year-ago period. Adjusted operating profit for the fourth quarter of fiscal 2018 was $154 million compared with $176 million in the year-ago period, and adjusted operating profit margin decreased 390 basis points over the prior-year period to 14.5 percent. Adjusted results 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 for planned streamlining activities, gain associated with the sale of the Company’s 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, President, and Chief Executive Officer of Acuity Brands, commented, “Our fourth quarter performance was solid, particularly against the backdrop of a challenging lighting market where larger commercial projects remained soft and input costs rose significantly. Net sales growth of 11 percent was robust and was driven primarily by volume growth in our Contractor Select portfolio, Atrius-enabled luminaires, and Holophane solutions. Overall, we experienced solid growth in net sales in most channels and geographies. This was the first time in our history that we generated quarterly net sales in excess of $1 billion.”
Nagel continued, “The most significant factors impacting our fourth quarter operating profit and margin were changes in price/mix as well higher input costs for various items such as electronic components, freight, wages, and certain commodity-related items, such as steel. Many of these input costs experienced dramatic increases in price in the fourth quarter due to several economic factors, including previously announced and enacted tariffs and wage inflation due to the tight labor market. We estimate the inflationary impact of these items reduced our fourth quarter gross profit by more than $20 million and lowered our adjusted gross profit margin by 200 basis points. Recently announced product price increases are expected to recover these higher costs, however, we do typically experience a delay between incurring higher costs and realizing the benefits of an increase in sales prices.”
Fiscal 2018 Fourth Quarter Results
The 11 percent year-over-year growth in fiscal 2018 fourth-quarter net sales was primarily due to a 13 percent increase in volume as well as a 1 percent increase from acquisitions, partially offset by a 3 percent net unfavorable change in product prices and mix of products sold (“price/mix”). The net unfavorable price/mix was primarily due to lower pricing on certain luminaires as a result of increased competition in portions of the market for more basic, lesser-featured products, and to a lesser degree, changes in product mix reflecting the substitution of certain products with less costly form factors resulting in lower price points.
Gross profit for the fourth quarter of fiscal 2018 increased $5 million, or 1.3 percent, to $412 million compared with $407 million in the prior-year period due to higher sales volumes and productivity improvements, largely offset by unfavorable price/mix, and higher material, component, and freight costs. Fiscal 2018 fourth-quarter gross profit margin of 38.9 percent declined 360 basis points compared with prior year’s gross profit margin, while adjusted gross profit margin of 39.0 percent declined 350 basis points compared with the year-ago period. Selling, distribution, and administrative (“SD&A”) expenses for the fourth quarter of fiscal 2018 totaled $275 million, an increase of over $30 million, or approximately 12 percent, compared with the prior-year period, due primarily to increased freight and commission expense to support the greater sales volume, higher employee-related costs, and increased expenses for marketing and outside services.
The Company reversed a previously recorded special charge of $5 million during the fourth quarter of fiscal 2018 as certain planned streamlining activities were no longer expected to occur, primarily due to the Company’s sale of its Spanish lighting business during the quarter. The Company recorded a special charge of approximately $10 million during the prior-year fourth quarter, which included planned streamlining activities associated with the Spanish business.
The Company reported net miscellaneous income of $4 million for the fourth quarter of fiscal 2018, which reflected a $5 million gain associated with the sale of the Spanish lighting business. The gain was primarily due to the recognition of favorable accumulated foreign currency translation adjustments previously recorded in other comprehensive income.
Fiscal 2018 Full-Year Results
Net sales for fiscal 2018 increased $175 million, or 5 percent, to $3.68 billion. Results for fiscal 2018 include operating profit of $455 million, net income of $350 million, and diluted EPS of $8.52.
Adjusted operating profit for fiscal 2018 decreased $64 million, or 11 percent, to $528 million compared with prior year’s adjusted operating profit of $592 million. Fiscal 2018 adjusted net income decreased $3 million, or 1 percent, to $363 million compared with $366 million for the prior-year period. Adjusted diluted EPS for fiscal 2018 increased $0.39, or 5 percent, to $8.84 compared with adjusted diluted EPS of $8.45 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/credit for planned streamlining activities, manufacturing inefficiencies and excess inventory adjustments related to the closure of a facility, gain associated with the sale of the Company’s Spanish lighting business, gain associated with the sale of an investment in an unconsolidated affiliate, and an income tax net benefit for discrete items associated with the TCJA. The total impact of these items on diluted EPS for fiscal 2018 and 2017 was $0.32 and $1.02, 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 2018 totaled $129 million, a decrease of $182 million since the beginning of the fiscal year. Net cash provided by operating activities totaled $353 million for the full year compared with $337 million for the year-ago period, representing a year-over-year increase of 5 percent. During fiscal 2018, the Company spent $163 million to acquire two businesses, Lucid Design Group and IOTA Engineering, and $298 million to repurchase two million shares of Acuity Brands common stock under its authorized stock repurchase programs.
Nagel commented, “We remain cautiously optimistic for fiscal 2019. Third-party forecasts and leading indicators suggest that the North American lighting market, the Company’s primary market, is projected to be up low-single digits in fiscal 2019. Our focus in fiscal 2019 is to garner additional top-line growth driven primarily by outperforming the growth rates of the markets we serve through execution of our previously announced growth strategies, continue to improve the mix of products and solutions sold as we execute our tiered solutions strategy, and leverage our fixed cost infrastructure to achieve targeted incremental margins to improve our overall profitability.”
Nagel continued, “We have taken a number of actions during the past several months that we believe will offset much of the recent inflationary cost pressures, including announced price increases as well as other measures to reduce costs and improve productivity. We believe that our actions will begin to offset these cost pressures midway through our first quarter of fiscal 2019. Various components used in the Company’s products as well as certain purchased finished products are impacted by the recently imposed tariffs on various China imported goods and may be further impacted by proposed future tariffs. Management continues to identify and implement actions to mitigate the financial impact of the tariffs, including the recently announced price increases.”
Management estimates a fiscal 2019 annual tax rate of approximately 25 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 2019 capital expenditures will approximate 1.5 percent of net sales.
Nagel concluded, “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 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.Tagged with Acuity Brands, financial results