ATLANTA — Acuity Brands, Inc. (“Company”) announced record third quarter results for net sales, net income, and diluted earnings per share (“EPS”). Fiscal 2016 third quarter net sales of $851.5 million increased $167.8 million, or 25 percent, compared with the year-ago period. Operating profit for the third quarter of fiscal 2016 was $121.0 million, an increase of $21.8 million, or 22 percent, over the year-ago period. Net income for the third quarter of fiscal 2016 was $74.0 million, an increase of 15 percent compared with the prior-year period. Fiscal 2016 third quarter diluted EPS of $1.69 increased 14 percent compared with $1.48 for the year-ago period.
Adjusted diluted EPS for the third quarter of fiscal 2016 increased 40 percent to $2.06 compared with adjusted diluted EPS of $1.47 for the year-ago period. Adjusted operating profit for the third quarter of fiscal 2016 increased $38.0 million, or 35 percent, to $146.1 million, or 17.2 percent of net sales, compared with the year-ago period adjusted operating profit of $108.1 million, or 15.8 percent of net sales. Adjusted results for both periods exclude the impact of amortization expense for acquired intangible assets, share-based compensation expense, acquisition-related items (including acquired profit in inventory and professional fees), and special charge for streamlining activities. 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, “We were extremely pleased with our achievement of record third quarter results. These results are even more impressive when one considers that we continued to invest in our strong sales growth and areas with significant future growth potential, including the expansion of our solid state luminaire and controls portfolio as well as our building management, software, and Internet of Things solutions. Adjusted gross profit margin was 44.5 percent, a quarterly record, and represented an increase of 130 basis points over prior year’s third quarter, while adjusted operating profit margin of 17.2 percent increased 140 basis points over last year’s third quarter. The integration of recent acquisitions, which include Distech Controls, Juno Lighting and Geometri, continues to go well. We believe our record third quarter results reflect our ability to provide customers with truly differentiated value from our industry-leading portfolio of innovative lighting and building automation solutions along with superior service.”
Third Quarter Results
The 25 percent year-over-year growth in fiscal 2016 third quarter net sales was primarily due to a 16 percent increase in volume as well as a 12 percent increase from acquisitions, partially offset by a net unfavorable change in product prices and mix of products sold (“price/mix”) of approximately 2 percent and a 1 percent unfavorable impact from changes in foreign currency exchange rates. The increase in volume was broad-based across most product categories and key sales channels. Sales of LED-based products represented approximately 60 percent of fiscal 2016 third quarter total net sales.
During the third quarter of fiscal 2016, the Company recorded a pre-tax special charge of $9.7 million for actions initiated to streamline the organization, including the integration of recent acquisitions. These streamlining activities include the consolidation of selected production activities and realignment of certain responsibilities, primarily within various selling, distribution, and administrative departments. Management expects to realize annual savings equal to at least twice the amount of the charge and to achieve the full annualized run-rate by the end of the first quarter of fiscal 2017.
Net cash provided by operating activities totaled $243.9 million for the first nine months of fiscal 2016 compared with $158.2 million for the year-ago period, representing a year-over-year increase of 54 percent. Cash and cash equivalents at the end of the third quarter of fiscal 2016 totaled $337.0 million, a decrease of $419.8 million since the beginning of the fiscal year. The Company used cash of $613.7 million for acquisitions.
Net sales for the first nine months of fiscal 2016 increased 22 percent to $2,365.9 million compared with$1,947.2 million for the prior-year period. Results for the first nine months of fiscal 2016 include operating profit of $340.1 million, net income of $207.9 million, and diluted EPS of $4.75.
Adjusted operating profit for the first nine months of fiscal 2016 increased $101.5 million, or 34 percent, to $399.1 million, or 16.9 percent of net sales, compared with prior year’s adjusted operating profit of$297.6 million, or 15.3 percent of net sales. Adjusted net income for the first nine months of fiscal 2016 was $246.5 million compared with $177.4 million for the prior-year period, an increase of 39 percent. Adjusted diluted EPS for the first nine months of fiscal 2016 increased $1.56, or 38 percent, to $5.63compared with adjusted diluted EPS of $4.07 for the year-ago period. Adjusted results for the first nine months of fiscal 2016 and 2015 exclude amortization expense for acquired intangible assets, share-based compensation expense, acquisition-related items (including profit in inventory, professional fees, and certain contract termination costs), net gain on financial instruments, and special charge for streamlining activities. The total impact of these items on diluted EPS for the first nine months of fiscal 2016 and 2015 was $0.88 and $0.35 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.
Mr. Nagel commented, “The U.K. referendum vote to exit the European Union has created a great deal of uncertainty and generated significant volatility in the global financial markets. This uncertainty and volatility have the potential to affect consumer and business sentiment which could negatively impact global economic activity. This notwithstanding, we remain bullish regarding the Company’s prospects for continued future profitable growth. Third-party forecasts issued in recent months as well as key leading indicators suggest that the growth rate for the North American lighting market, which includes renovation and retrofit activity and comprises over 97 percent of the Company’s revenues, will be in the mid-to-upper single digit range for the remainder of fiscal 2016 with expectations that overall demand in our end markets will continue to experience solid growth over the next several years. Our order rates through the month of June reflect this favorable trend. We expect to continue to outperform the growth rates of the markets we serve by executing our strategies focused on growth opportunities for new construction and renovation projects, expansion into underpenetrated geographies and channels, and growth from the continued introduction of new lighting and building automation solutions as part of our integrated, tiered solutions strategy.”
Mr. Nagel concluded, “We believe the lighting and lighting-related industry as well as building automation systems will experience solid growth over the next decade, particularly as energy and environmental concerns come to the forefront along with emerging opportunities for digital lighting to play a key role in the Internet of Things. We believe we are uniquely positioned to fully participate in this exciting industry.”
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