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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 25, 2003
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ACUITY BRANDS, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-16583 No. 58-2632672
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1170 Peachtree Street, N.E.
Suite 2400, Atlanta, GA 30309
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 853-1400
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None
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(Former name or former address, if changed since last report)
ITEM 5. Other Events.
Attached hereto is a press release issued by Acuity Brands, Inc. (the
"Registrant") on March 25, 2003. A copy of the press release is filed
herewith as Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
None.
(b) Pro Forma Financial Information.
None.
(c) Exhibits.
The following exhibit is filed herewith:
EXHIBIT NO. DESCRIPTION
99.1 Press Release, issued by Registrant on March 25, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 25, 2003
ACUITY BRANDS, INC.
BY: /S/ VERNON J. NAGEL
----------------------------
Vernon J. Nagel
Executive Vice President and
Chief Financial Officer
Exhibit 99.1
Company Contact:
Karen Holcom
Acuity Brands, Inc.
(404) 853-1437
ACUITY BRANDS REPORTS
2003 SECOND QUARTER RESULTS
ATLANTA, March 25, 2003 - Acuity Brands, Inc. (NYSE: AYI) announced today that
sales for its second quarter ended February 28, 2003 were $489.4 million
compared to $468.2 million reported in the year ago period, an increase of $21.2
million, or 4.5 percent. The sales percentage increase occurred equally at both
Acuity Lighting Group (ALG) and Acuity Specialty Products Group (ASP). Net
income for the second quarter of fiscal 2003 was $7.7 million, or $0.19 per
share, compared to $10.6 million, or $0.26 per share, reported in the second
quarter of fiscal 2002. This represents a decrease in both net income and
earnings per share of approximately 27 percent. The Company continued to reduce
debt, ending the quarter with total debt of $519.6 million, down $24.2 million
from November 30, 2002. These consolidated results were generally consistent
with management's expectations.
The decline in net income compared to the year ago period was largely due to a
planned decrease in production volume resulting in lower absorption of
manufacturing costs, primarily at ALG. This resulted in the acceleration of
approximately $2.9 million of greater expense in the second quarter of fiscal
2003. Also contributing to the decline in net income were higher costs for
certain raw materials, greater expenses for non-discretionary items, and
increased spending for new product introductions and expanded marketing and
logistics initiatives. The impact of these higher costs was partially offset by
the contribution margin earned from the higher sales volume noted above,
benefits from profit improvement initiatives, and cost containment programs.
The Company continued to have significant success at reducing its level of
working capital, particularly inventory, through improved manufacturing
efficiency and productivity, while supporting its sales growth initiatives.
These improvements in manufacturing capabilities are expected to allow more
effective utilization of inventory assets. While the temporary reduction in
product output had a negative impact on the earnings reported in the second
quarter as noted above, the decline in inventory contributed to the generation
of positive free cash flow that was used to pay down debt.
Second Quarter Segment and Corporate Overview
Sales at Acuity Lighting Group in the second quarter of fiscal 2003 were $368.8
million compared to $352.8 million reported in the year ago period, an increase
of $16.0 million, or 4.5 percent. The increase in sales at ALG was primarily due
to greater shipments of products through channels of distribution serving
national accounts, home improvement centers, and other key commercial and
industrial markets. In the second quarter ALG announced a sales price increase
for certain products. The terms and conditions of the price increase resulted in
a significant influx of orders in the second quarter with delivery dates that
extend into the third quarter of fiscal 2003. As a consequence, the backlog at
ALG increased $45.0 million, or 37.8 percent, to $164.1 million from November
30, 2002 and 6.6 percent over the year ago period. Operating profit for Acuity
Lighting Group decreased $3.2 million to $18.8 million in the second quarter of
fiscal 2003 from $22.0 million reported in the prior year. Operating profit
margins dropped to 5.1 percent from 6.2 percent, as the variable contribution
margin from the higher sales volume was more than offset by the lost absorption
of manufacturing costs as noted above; continued pricing pressure in certain
markets and product mix changes; higher raw material costs, particularly steel
and fuel costs; and greater spending for certain sales and marketing initiatives
and for non-discretionary expenses such as insurance.
Sales at Acuity Specialty Products Group in the second quarter of fiscal 2003
were $120.6 million, an increase of 4.5 percent over the same period one year
earlier. The increase in sales was driven by greater product penetration in key
channels of distribution including home improvement centers and certain
industrial market segments, such as food processing and preparation and vehicle
wash. Operating profit at ASP for the second quarter of fiscal 2003 declined
$3.6 million to $4.8 million from $8.4 million reported in the year ago period.
Operating margins declined to 4.0 percent from 7.3 percent a year ago. The
decline in operating profit was primarily due to startup costs associated with a
number of initiatives, including new product introductions and expanded
marketing and logistics programs, all of which are expected to benefit future
periods. In addition, ASP incurred higher costs for certain raw materials and
certain non-discretionary spending, including medical and other insurances. This
was partially offset by increased selling prices and the greater contribution
margin from the higher sales volume noted above.
Corporate expenses were $4.2 million in the second quarter of fiscal 2003
compared to $3.2 million in the year ago period. The increase was due primarily
to higher expense associated with certain stock-based benefit plans, liability
insurance, and expanded audit services. Net interest expense of $9.5 million in
the second quarter of fiscal 2003 was lower than net interest expense of $10.2
million reported in the year ago period due to a reduction in both debt balances
and interest rates.
Net sales for the first half of fiscal 2003 increased $44.7 million, or 4.7
percent, to $994.6 million compared to $949.9 million reported in the same
period a year ago. Net income for the first six months was $18.2 million, or
$0.44 per share, compared to last year's first half net income of $22.1 million,
or $0.54 per share. Net income and earnings per share were down approximately 18
percent in the first half of fiscal 2003 compared to the year ago period.
Outlook
James S. Balloun, Chairman, President, and Chief Executive Officer of Acuity
Brands, said, "During the second quarter we continued to implement programs
aimed at making our businesses stronger and more financially viable, while
confronting the difficult conditions that continue to prevail in certain key
markets, particularly non-residential construction. For example, we implemented
sales price increases on many products throughout the Company, reflecting the
strength of our value propositions and the need to generate acceptable margins
to fund future innovations and to continue to build greater customer service
capabilities. In addition, the benefits of continued investments to improve our
manufacturing capabilities allowed us to significantly reduce inventory during
the quarter, particularly at ALG, while meeting the needs of our expanding
customer base. These programs will continue to improve our financial
performance, including better margins, higher returns on invested capital, and
lower debt. These initiatives and actions are not without a short-term cost. For
example, we reduced the levels of inventory by lowering our production output in
the second quarter, while supporting a 4.5 percent increase in sales. This
resulted in less absorption of manufacturing costs, leading to the acceleration
of greater expense and reduced gross profits during the quarter. However, the
benefits are twofold: we are becoming more efficient in our manufacturing
capabilities, thus reducing future costs, and we now need less investment in
working capital to support our businesses. As a consequence, we were again able
to significantly reduce outstanding debt in the quarter because of lower working
capital requirements. As of February 28, 2003, our outstanding debt balance was
$519.6 million, a reduction of $24.2 million since November 30, 2002 and
approximately $124 million over the last five quarters. We have achieved this
while paying approximately $6 million in quarterly dividends and investing in
our businesses.
"Overall, the results for the second quarter were generally in line with our
internal expectations. We are pleased with our ability to generate revenue
growth under these difficult economic conditions. We have been able to do this
by expanding our customer base and extending our market leading brands into more
channels of distribution. However, we are not as pleased with our earnings
performance. Earnings continue to be impacted by numerous controllable and
uncontrollable factors. Uncontrollable factors included pricing pressures,
rising raw material costs (including steel and petroleum-based components), and
non-discretionary spending for insurance, all of which continue to persist.
Controllable factors included costs associated with lowering levels of
inventory, as previously mentioned, and investments in sales and marketing
initiatives at both businesses designed to strengthen our capabilities. We
continue to make these investments because of high expectations for future
benefit and the knowledge that past investments have had a significant benefit
on current performance by partially offsetting the impact of the negative
factors noted above. Overall, while the net impact of these factors resulted in
lower operating margins in the quarter when compared with the year ago period,
these investments are positioning the Company for a higher level of performance
than we had in the past.
"We remain confident about the long-term potential of the solid businesses that
comprise Acuity Brands. However, we are cautious about our near-term results due
to uncertainties in the economic environment, particularly for non-residential
construction, which is one of the key drivers of the lighting fixture market. We
anticipate that the results for the third quarter of fiscal year 2003 will
reflect the historical seasonal pattern of greater sales, the benefits of a
strong backlog at ALG, and the positive impact of various initiatives to enhance
margins, including previously mentioned price increases. Assuming no further
deterioration in the economy and the benefit of the previously mentioned items,
we continue to expect our full year earnings to be in the range of $1.20 to
$1.40 per share."
Conference Call and Board News
As previously announced, the Company will host a conference call to discuss
second quarter results on March 25, 2003 at 4:00 p.m. EST. Interested parties
may listen to this call live today or hear a replay until April 15, 2003 at the
Company's Web site: www.acuitybrands.com.
The Board of Directors will hold its regular quarterly meeting on April 2, 2003.
Acuity Brands, Inc., with fiscal year 2002 sales of approximately $2.0 billion,
is comprised of Acuity Lighting Group and Acuity Specialty Products Group.
Acuity Lighting Group is the world's leading lighting fixture manufacturer and
includes brands such as Lithonia(R), Holophane(R), Peerless(R), Hydrel(R), and
American Electric Lighting(R). Acuity Specialty Products Group is a leading
provider of specialty chemicals and includes brands such as Zep(R), Enforcer(R),
and Selig Industries(TM). Headquartered in Atlanta, Georgia, Acuity Brands
employs 11,800 people and has operations throughout North America and in Europe.
Forward-Looking Statements
Certain information contained in this press release constitutes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are inherently uncertain and involve
risks. Consequently, actual results may differ materially from those indicated
by the forward-looking statements. Statements made herein that may be considered
forward looking include statements concerning: (a) expected benefits of
improvements in manufacturing capabilities; (b) expected future benefits of
startup costs associated with a number of initiatives, including new product
introductions and expanded marketing and logistic programs at Acuity Specialty
Products Group; (c) the impact of programs aimed at making the Company's
businesses stronger and more financially viable on future financial performance,
including better margins, higher returns on invested capital, and lower debt;
(d) expected future cost reductions resulting from more efficient manufacturing;
(e) anticipated benefits of investments in sales and marketing initiatives at
both of the Company's businesses; and (f) forecasted results for the third
quarter and earnings per share for the full fiscal year of 2003. A variety of
risks and uncertainties could cause the Company's actual results to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements. The risks and uncertainties include
without limitation the following: (a) the uncertainty of general business and
economic conditions, including the potential for a more severe slowdown in
non-residential construction, changes in interest rates, and fluctuations in
commodity and raw material prices or foreign currency rates; (b) the Company's
ability to realize the anticipated benefits of initiatives expected to reduce
costs, improve profits, enhance customer service, increase manufacturing
efficiency, reduce debt, and expand product offerings and brands in the market
through a variety of channels; (c) the risk that projected future cash flows
from operations are not realized; (d) unexpected developments in the Company's
legal and environmental proceedings; and (e) the other risk factors more fully
described in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on November 11, 2002.
ACUITY BRANDS, INC.
SUMMARY OF OPERATIONS (Unaudited)
THREE MONTHS ENDED FEBRUARY 28
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SALES OPERATING PROFIT (LOSS)
(Amounts in thousands, except per-share data) 2003 2002 2003 2002
- --------------------------------------------------------------------------- ----------------------------
Lighting Equipment $ 368,792 $ 352,788 $ 18,826 $ 22,007
Specialty Products 120,595 115,457 4,811 8,387
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$ 489,387 $ 468,245 23,637 30,394
Corporate (4,231) (3,163)
Other income (expense), net (1) 2,115 (12)
Interest expense, net (9,519) (10,186)
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Income before taxes 12,002 17,033
Income taxes 4,321 6,475
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Net income $ 7,681 $ 10,558
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Earnings per Share:
Basic earnings per share $ .19 $ .26
Basic weighted-average shares outstanding during period 41,443 41,273
Diluted earnings per share: $ .19 $ .26
Diluted weighted-average shares outstanding during period 41,470 41,303
SIX MONTHS ENDED FEBRUARY 28
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SALES OPERATING PROFIT (LOSS)
(Amounts in thousands, except per-share data) 2003 2002 2003 2002
- --------------------------------------------------------------------------- ----------------------------
Lighting Equipment $ 751,450 $ 716,898 $ 44,893 $ 47,069
Specialty Products 243,163 233,038 8,482 15,298
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$ 994,613 $ 949,936 53,375 62,367
Corporate (7,687) (5,861)
Other income (expense), net (1) 1,997 (264)
Interest expense, net (19,293) (20,609)
------------------------------
Income before taxes 28,392 35,633
Income taxes 10,221 13,541
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Net income $ 18,171 $ 22,092
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Earnings per Share:
Basic earnings per share $ .44 n/a
Basic weighted-average shares outstanding during period 41,417 n/a
Diluted earnings per share: $ .44 n/a
Diluted weighted-average shares outstanding during period 41,444 n/a
Pro Forma Earnings per Share (2):
Basic earnings per share n/a $ .54
Basic weighted-average shares outstanding during period n/a 41,246
(1) Other income (expense), net consists primarily of gains or losses on the sale of assets and foreign currency gains or losses.
(2) Actual per share data has not been presented for periods prior to the second quarter of fiscal 2002 since the businesses
that comprise Acuity Brands were wholly owned subsidiaries of National Service Industries, Inc. during those periods.
Additionally, public trading of the Acuity Brands shares did not commence until December 3, 2001; therefore, no historical
market share prices exist for the calculation of the potential dilutive effect of stock options for the periods prior to the
second quarter of fiscal year 2002. As a result, pro forma diluted earnings per share is not presented for those periods.
ACUITY BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
FEBRUARY 28 AUGUST 31 FEBRUARY 28 AUGUST 31
(Amounts in thousands, except 2003 2002 2003 2002
per-share data)
- -------------------------------------------------------------- --------------------------------------------------------------------
Assets Liabilities and Stockholders' Equity
Current Assets
Cash and short-term investments $ 9,470 $ 2,694 Current Liabilities $ 405,036 $ 430,807
Receivables, net 311,289 322,735 Long-Term Debt, less current maturities 392,086 410,630
Inventories 196,966 216,942 Deferred Income Taxes 24,867 23,480
Other current assets 53,330 48,626 Other Long-Term Liabilities 86,786 91,085
----------- ---------- Stockholders' Equity 408,400 401,952
Total Current Assets 571,055 590,997 ---------- ----------
$1,317,175 $1,357,954
========== ==========
Property,Plant,and Equipment,net 228,575 240,679 Current Ratio 1.4 1.4
Other Assets 517,545 526,278 Percent of Debt to Total Capitalization 56.0% 57.5%
----------- ----------
Total Assets $1,317,175 $1,357,954
=========== ==========
CONDENSED CONSOLIDATED CASH FLOWS (Unaudited)
SIX MONTHS ENDED SIX MONTHS ENDED
FEBRUARY 28 FEBRUARY 28
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(Amounts in thousands) 2003 2002(3) 2003 2002 (3)
- ----------------------------------------------------------------------------------------------------------------------------
Cash Provided by (Used for): Cash Provided by (Used for):
Operations- Financing-
Net income $ 18,171 $22,092 Debt $(23,505) $ (101)
Depreciation and amortization 23,459 25,930 Dividends (12,437) (6,197)
Other operating activities 12,364 9,423 Net activity with NSI - (18,633)
----------- ---------- Other financing activities 928 -
Cash Provided by Operations 53,994 57,445 ---------- -----------
----------- ---------- Cash Used for Financing (35,014) (24,931)
---------- -----------
Investing- Effect of Exchange Rate on Cash (430) (482)
Capital expenditures (13,542) (16,456) ---------- -----------
Acquisitions - (24,765)
Sale of assets 1,768 1,691 Net Change in Cash 6,776 (7,498)
----------- ---------- Cash at Beginning of Year 2,694 8,006
---------- -----------
Cash Used for Investing $(11,774) $(39,530) Cash at End of Period $ 9,470 $ 508
----------- ---------- ========== ===========
(3) Certain prior period amounts have been reclassified to conform with the current year presentation.