View:
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) October 2, 2003
-----------------
ACUITY BRANDS, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-16583 No. 58-2632672
------------------------------ ----------- -------------------
(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
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 853-1400
--------------
None
-----------------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 12. Results of Operations and Financial Condition.
Attached hereto is a press release issued by Acuity Brands, Inc. (the
"Registrant") on October 2, 2003. A copy of the press release is filed herewith
as Exhibit 99.1 and is incorporated herein by reference.
EXHIBIT NO. DESCRIPTION
99.1 Press Release, issued by Registrant on October 2, 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: October 2, 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 FOURTH QUARTER AND FULL YEAR RESULTS
ATLANTA, October 2, 2003 -- Acuity Brands, Inc. (NYSE: AYI) announced today that
net income for the fourth quarter of fiscal 2003 was $14.3 million, or $0.34 per
share, compared to $15.4 million, or $0.37 per share, reported for the fourth
quarter of fiscal 2002. Included in net income and earnings per share for the
fourth quarter of fiscal 2003 were $8.0 million of pre-tax expense (or $0.12 per
share) related to the previously announced settlement of the litigation with the
Genlyte Thomas Group LLC ("Genlyte") and approximately $2.7 million of pre-tax
expense (or $0.04 per share) related to environmental matters discussed below.
The settlement with Genlyte was paid in August 2003. In addition, the Company
continued to reduce debt at a pace exceeding previous expectations, ending the
quarter with total debt of $445.8 million, down $48.6 million from May 31, 2003
and $97.3 million from August 31, 2002.
Net sales for the fourth quarter ended August 31, 2003 were $533.7 million
compared to $515.3 million reported in the year-ago period, an increase of $18.4
million, or 3.6 percent. The growth in net sales occurred primarily at Acuity
Lighting Group (ALG) due largely to increased shipments through certain channels
of distribution and the impact of previously announced price increases. Overall,
consolidated gross profit margins advanced to 43.2 percent of net sales in the
fourth quarter of fiscal 2003, from 40.5 percent reported in the year-ago
period, due primarily to the higher net sales noted above and the impact of
profit improvement programs that helped offset the cost of higher raw materials
and expenses associated with the consolidation of certain manufacturing
facilities at ALG. Consolidated operating expenses increased to 37.2 percent of
net sales in the fourth quarter of fiscal 2003, compared to 34.5 percent
reported in the year-ago period, due primarily to the settlement of the Genlyte
litigation, charges related to environmental matters at Acuity Specialty
Products Group discussed below, higher expenses for sales and marketing
initiatives, higher logistics costs, and increased corporate expenses associated
primarily with stock-based benefit programs. Consolidated operating profit of
$31.9 million was $1.1 million higher in the fourth quarter of fiscal 2003
compared to the year-ago period as the improvement in gross profit more than
offset the higher operating expenses. Excluding the Genlyte settlement and the
environmental matters, the 38 percent increase in net income in the fourth
quarter of fiscal 2003 compared to the year-ago period was due primarily to the
contribution margin from the higher net sales noted above, a lower effective
income tax rate, and lower interest expense associated with the decline in
outstanding borrowings throughout the current period.
Fourth Quarter Segment and Corporate Overview
Net sales at Acuity Lighting Group in the fourth quarter of fiscal 2003 were
$398.1 million compared to $382.0 million reported in the year-ago period, an
increase of $16.1 million, or 4.2 percent. The increase in net sales at ALG was
due primarily to greater shipments of products through channels of distribution
serving national accounts and home improvement centers and the impact of price
increases for certain products. This was partially offset by lower shipments to
certain other key commercial and industrial markets due primarily to the
continued economic weakness that prevailed throughout the quarter. The backlog
at ALG increased $3.4 million to $136.1 million at August 31, 2003 from $132.7
million at May 31, 2003 and decreased $8.6 million, or 5.9 percent, from August
31, 2002. Operating profit at ALG increased $7.5 million to $26.8 million in the
fourth quarter of fiscal 2003 from $19.3 million reported in the prior year.
Operating profit margins at ALG improved to 6.7 percent of net sales from 5.0
percent reported in the year-ago period. The increase in operating profit was
due primarily to the contribution margin from the higher net sales noted above
and continuous improvement programs, including sourcing initiatives to lower
product costs, and significant improvements in the operations at the facility in
Matamoros, Mexico. This was partially offset by an $8.0 million charge for the
settlement of the Genlyte litigation, costs associated with the consolidation of
certain manufacturing facilities, higher raw material costs, greater spending
for sales and marketing initiatives associated with new product introductions
and further penetration of the home improvement channel, and higher logistics
costs.
Net sales at Acuity Specialty Products Group (ASP) in the fourth quarter of
fiscal 2003 were $135.6 million, an increase of $2.3 million over the same
period one year earlier. Net sales increased at ASP as greater shipments to mass
merchandisers and home improvement centers and higher net sales in Europe and
Canada were partially offset by softness in the core industrial and
institutional channel attributable to weak economic conditions. Operating profit
at ASP for the fourth quarter of fiscal 2003 declined $5.6 million to $10.3
million from $15.9 million reported in the year-ago period, while operating
margins declined to 7.6 percent from 11.9 percent a year ago. The decline in
operating profit was due primarily to the charges related to environmental
matters discussed below and a $1.9 million charge to reflect the fair market
value of certain inventories. In addition, profitability at ASP was impacted by
rising costs for certain raw materials, partially offset by various initiatives
to reduce expenses.
Corporate expenses were $5.3 million in the fourth quarter of fiscal 2003
compared to $4.3 million in the year-ago period. The increase was due primarily
to higher expense associated with certain stock-based benefit programs,
liability insurance, and expanded audit services. Net interest expense in the
fourth quarter of fiscal 2003 declined to $8.9 million from $9.8 million
reported in the year-ago period due to a reduction in outstanding debt balances.
Fiscal 2003 Full Year Results
In 2003, Acuity Brands increased net sales by $76.5 million, or 3.9 percent, to
$2,049.3 million compared to $1,972.8 million reported for the prior year.
Fiscal 2003 net income was $47.8 million, or $1.15 per share, compared to last
year's net income of $52.0 million, or $1.26 pro forma earnings per share.
Included in net income and earnings per share in fiscal 2003 were $8.0 million
of pre-tax expense (or $0.12 per share) for the settlement of the Genlyte
litigation and approximately $2.7 million of pre-tax expense (or $0.04 per
share) for the environmental matters noted below. In addition, the Company
incurred approximately $2.0 million in legal costs over the past two years
associated with the Genlyte litigation. The Genlyte settlement and substantially
all legal fees were paid by August 31, 2003. As of August 31, 2003, the
outstanding debt balance was $445.8 million, a reduction of $97.3 million from
the end of fiscal 2002. Stockholders' equity at August 31, 2003 was $408.3
million, an increase of $6.3 million from August 31, 2002. The increase in 2003
was primarily the result of net income partially offset by dividends and a
tax-effected adjustment of $22.5 million related to the Company's pension
obligations. Debt to total capitalization declined to 52.2 percent as of August
31, 2003 from 57.5 percent at the end of fiscal 2002.
Legal Matters
In August 2003, ASP received a grand jury subpoena from the United States
Attorney for the Northern District of Georgia concerning the operation of ASP's
wastewater pretreatment plant and ASP's management of hazardous waste at a
facility in Atlanta, Georgia. The grand jury investigation appears to relate to
the discharge of wastewater from the facility to the City of Atlanta's sanitary
sewer system and ASP's practices in connection with the sampling of the
facility's wastewater discharges for permitting purposes. ASP is cooperating
with the investigation by the U.S. Attorney's Office and is in the process of
collecting the required documents. The U.S. Attorney's Office investigation
follows an inquiry by the City of Atlanta, which regulates the wastewater
discharge at the facility. The Company has tentatively settled the matter with
the City of Atlanta. For the fourth quarter of fiscal 2003, the Company recorded
an aggregate charge of approximately $2.7 million to cover various costs
including off-site disposal, the estimated costs of resolution of these
proceedings with the City of Atlanta and the U.S. Attorney's Office, and the
estimated legal expenses to be incurred by the Company in these matters. The
proceedings with the U.S. Attorney are at a preliminary stage, and developments
in the investigation and the terms of any final settlement or adjudication of
these matters could cause the Company to record additional charges in future
periods.
Comments
James S. Balloun, Chairman, President, and Chief Executive Officer of Acuity
Brands, said, "As we conclude fiscal 2003, I am pleased to report that, along
with solid financial results, we continued to make substantial progress
throughout the year in further implementing strategies and initiatives focused
at making our businesses stronger and more successful financially. While we
enjoyed many accomplishments in 2003, both financially and operationally, we
also resolved the Genlyte litigation, which resulted in a $0.12 per share charge
to earnings, and addressed certain environmental matters at ASP, which resulted
in a $0.04 per share charge to earnings. Excluding the impact of those charges,
our full year results would have been essentially in the middle of the range of
our earnings guidance provided at the beginning of the year, while fourth
quarter earnings per share would have advanced 35 percent over the year-ago
period. We accomplished this while continuing to confront difficult economic
conditions throughout much of the year in key markets, including commercial and
industrial construction, electrical utilities, and other industrial
manufacturing sectors. Also in 2003, profitability was impacted by numerous
controllable and uncontrollable factors. Uncontrollable factors included pricing
pressures from certain competitors, rising product related costs (including
steel and petroleum-based components), and non-discretionary spending for
various insurance programs. Controllable factors included investments made to
expand our global supply chain, to develop and introduce new products, to
accelerate sales and marketing initiatives (including the Genesis project
designed to further strengthen the Zep sales force), and most importantly, to
implement our new, robust organizational development program. The investments in
these areas, which reduced profitability in 2003, are designed to strengthen our
capabilities for the future. Overall in 2003, our business units were able to
offset the cost of many of these initiatives and the negative influences
impacting our key markets because of profit improvement programs implemented to
better manage discretionary spending, to lower product costs (including
strategic sourcing), and to enhance manufacturing efficiencies.
"In addition, we accelerated initiatives to streamline our manufacturing
capabilities, improve margins through better pricing and selling effectiveness,
and penetrate new markets with superior value propositions. These initiatives
all had a positive impact on our financial and operational results in 2003. For
example, in 2003, consolidated net sales grew by 3.9 percent, a significant
achievement when most indicators showed that our primary markets had declined or
were flat during the year. We accomplished this by further penetrating key
channels at both business units, including home improvement centers, which had
an added benefit of providing further diversification and growth opportunities
to our business portfolio. While some of these growth initiatives had a
short-term cost impact due to higher marketing and startup costs, thus lowering
our profitability, we are confident about the growth potential of these and
other key markets as we collaborate more closely with our strongest partners in
each channel to more effectively serve the needs of the ultimate consumer.
Another positive indicator of our many profit improvement initiatives was our
consolidated gross margins, which advanced to 41.6 percent in 2003, almost one
full point, from the year-ago period, reflecting the strength of our value
propositions, benefits of price increases, and our effort to build a more
globally competitive supply chain while absorbing the rising costs of raw
materials and various insurance costs.
"As I have mentioned in previous press releases, our goal continues to be to
generate more acceptable margins and cash flow to fund future innovations and to
build greater customer service capabilities while providing higher returns to
our shareholders. We advanced our gross profit margins while absorbing costs
associated with ongoing efforts to consolidate our North American manufacturing
base (these efforts are referred to as "MNT") at ALG to more cost-effective
facilities within our supply chain network. We believe that this program to
consolidate our manufacturing base, coupled with our strategic sourcing
initiative, will have a significant impact on improving our future service
capabilities, profitability, and cash flow. While the investment for this
program and others will be significant over the next 18 months, both in terms of
capital and management focus, we have worked diligently to improve our financial
position in order to have the capacity to invest in initiatives, like MNT, which
will provide shareholders with significant benefits in the future. Our financial
position continued to strengthen throughout 2003 in light of our ability to
generate cash flow, primarily through our many supply chain initiatives, which
resulted in substantially lower debt. As of August 31, 2003, our outstanding
debt balance was $445.8 million, a reduction of $97.3 million since the end of
2002 and approximately $197.8 million, or 30.7 percent, since November 30, 2001,
when the Company became an independent entity. We have achieved this in 2003
while reinvesting in our businesses and continuing to pay to our shareholders
approximately $6.0 million in quarterly dividends.
"While the near-term economic outlook remains somewhat cloudy, we remain
confident that the long-term potential for the businesses that comprise Acuity
Brands is bright. Our results and accomplishments in 2003 confirm that we are
moving in the right direction. We continue to make substantial progress in
further implementing initiatives and expanding programs aimed at making our
businesses stronger and more successful financially even in this stagnant
economic climate. While we cannot predict the pace at which the economies of the
world will rebound, we can continue to make our company a better investment for
our shareholders by staying focused and executing well on the initiatives and
strategies in place. In that respect, we intend to build on the positive
momentum generated in 2003 as we enter 2004. Earnings projections for fiscal
2004 will be provided later in October, once the business plan for fiscal 2004
has been approved by the Board of Directors."
Conference Call and Board News
As previously announced, the Company will host a conference call to discuss
fourth quarter and full year results on October 2, 2003 at 4:00 p.m. EDT.
Interested parties may listen to this call live today or hear a replay until
October 23, 2003 at the Company's Web site: www.acuitybrands.com.
The Board of Directors will hold its regular quarterly meeting on October 11,
2003.
Acuity Brands, Inc., with fiscal year 2003 net 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 Lighting(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 approximately 11,400 people and has operations
throughout North America and in Europe and Asia.
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) the impact of certain
investments to expand the Company's global supply chain, to develop and
introduce new products, to accelerate sales and marketing initiatives, and to
implement the Company's organizational development program on the Company's
future capabilities; (b) the Company's expectations regarding the potential
outcome of the investigation of the U.S. Attorney for the Northern District of
Georgia into ASP's wastewater pretreatment plant and hazardous waste management;
(c) the anticipated growth potential of certain markets, including the home
improvement centers, at both business units; (d) the impact of the Company's
investment in MNT and other programs, including the strategic sourcing
initiative, at ALG on future service capabilities, profitability, and cash flow;
(e) anticipated future shareholder benefits related to the Company's
initiatives; and (f) the long-term potential for the businesses that comprise
Acuity Brands. 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 matters; 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 AUGUST 31
-----------------------------------------------------------
NET SALES OPERATING PROFIT (LOSS)
(Amounts in thousands, except per-share data) 2003 2002 2003 2002
- --------------------------------------------------------------------------- ----------------------------
Lighting Equipment $ 398,058 $ 382,024 $ 26,832 $ 19,265
Specialty Products 135,596 133,260 10,337 15,857
--------------------------- -----------------------------
$ 533,654 $ 515,284 37,169 35,122
Corporate (5,297) (4,321)
Other income (expense), net (1) (764) 2,674
Interest expense, net (8,860) (9,778)
------------------------------
Income before taxes 22,248 23,697
Income taxes 7,959 8,336
------------------------------
Net income $ 14,289 $ 15,361
==============================
Earnings per Share:
Basic earnings per share $ .34 $ .37
Basic weighted-average shares outstanding during period 41,516 41,341
Diluted earnings per share: $ .34 $ .37
Diluted weighted-average shares outstanding during period 42,168 41,561
YEAR ENDED AUGUST 31
-----------------------------------------------------------
NET SALES OPERATING PROFIT (LOSS)
(Amounts in thousands, except per-share data) 2003 2002 2003 2002
- --------------------------------------------------------------------------- ----------------------------
Lighting Equipment $1,538,751 $1,474,882 $ 96,825 $ 89,553
Specialty Products 510,557 497,914 31,313 44,931
--------------------------- -----------------------------
$2,049,308 $1,972,796 128,138 134,484
Corporate (17,862) (14,357)
Other income (expense), net (1) 1,688 3,399
Interest expense, net (37,383) (40,690)
------------------------------
Income before taxes 74,581 82,836
Income taxes 26,799 30,812
------------------------------
Net income $ 47,782 $ 52,024
==============================
Earnings per Share:
Basic earnings per share $ 1.15 n/a
Basic weighted-average shares outstanding during period 41,459 n/a
Diluted earnings per share: $ 1.15 n/a
Diluted weighted-average shares outstanding during period 41,721 n/a
Pro Forma Earnings per Share (2):
Basic earnings per share n/a $ 1.26
Basic weighted-average shares outstanding during period n/a 41,286
(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 year 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)
AUGUST 31 AUGUST 31 AUGUST 31 AUGUST 31
(Amounts in thousands, except 2003 2002 2003 2002
per-share data)
- -------------------------------------------------------------- --------------------------------------------------------------------
Assets Liabilities and Stockholders' Equity
Current Assets Current Liabilities
Cash and short-term investments $ 16,053 $ 2,694 Short-term debt $ 54,339 $ 132,491
Receivables, net 302,276 322,735 Accounts payable 165,656 161,713
Inventories, net 188,799 216,942 Accrued salaries, commissions, & bonuses 49,217 36,459
Other current assets 51,424 48,626 Other accrued liabilities 90,239 100,144
----------- ---------- ---------- ----------
Total Current Liabilities 359,451 430,807
Total Current Assets 558,552 590,997
Long-Term Debt, less current maturities 391,469 410,630
Other Long-Term Liabilities 129,005 114,565
Property,Plant,and Equipment,net 222,558 240,679 Stockholders' Equity 408,294 401,952
Other Assets 507,109 526,278 ---------- ----------
----------- ---------- Total Liabilities & Stockholders' Equity $1,288,219 $1,357,954
Total Assets $1,288,219 $1,357,954 ========== ==========
=========== ========== Current Ratio 1.6 1.4
Percent of Debt to Total Capitalization 52.2% 57.5%
CONDENSED CONSOLIDATED CASH FLOWS (Unaudited)
YEAR ENDED YEAR ENDED
AUGUST 31 AUGUST 31
---------------------------------------------------------------------------------------
(Amounts in thousands) 2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
Cash Provided by (Used for): Cash Provided by (Used for):
Operations- Financing-
Net income $ 47,782 $52,024 Debt $(97,313) $(65,709)
Depreciation and amortization 46,039 49,494 Dividends (24,911) (18,606)
Other operating activities 66,524 45,323 Net activity with NSI - (18,632)
----------- ---------- Other financing activities 1,794 830
Cash Provided by Operations 160,345 146,841 ---------- -----------
=========== ========== Cash Used for Financing (120,430) (102,117)
========== ===========
Investing- Effect of Exchange Rate on Cash (217) (147)
Capital expenditures (28,154) (33,482) ---------- -----------
Acquisitions - (24,765)
Sale of assets 1,815 8,358 Net Change in Cash 13,359 (5,312)
----------- ---------- Cash at Beginning of Year 2,694 8,006
---------- -----------
Cash Used for Investing $(26,339) $(49,889) Cash at End of Year $ 16,053 $ 2,694
=========== ========== ========== ===========
ACUITY BRANDS, INC.
NET INCOME AND EARNINGS PER SHARE RECONCILIATION (Unaudited)
THREE MONTHS ENDED AUGUST 31
-------------------------------------------------
DILUTED
NET INCOME EARNINGS PER SHARE
(Amounts in thousands, except per-share data) 2003 2002 2003 2002
---------- ---------- ---------- ----------
Income before patent litigation settlement and wastewater charges $ 21,137 $ 15,361 $ 0.50 $ 0.37
Patent litigation settlement (5,120) - (0.12) -
Wastewater facility charges (1,728) - (0.04) -
---------- ---------- ----------- ----------
Net income $ 14,289 $ 15,361 $ 0.34 $ 0.37
========== ========== =========== ==========
YEAR ENDED AUGUST 31
-------------------------------------------------
DILUTED PRO FORMA
EARNINGS EARNINGS
NET INCOME PER SHARE PER SHARE (1)
(Amounts in thousands, except per-share data) 2003 2002 2003 2002
---------- ---------- ----------- ----------
Income before patent litigation settlement and wastewater charges $ 54,630 $ 52,024 $ 1.31 $ 1.26
Patent litigation settlement (5,120) - (0.12) -
Wastewater facility charges (1,728) - (0.04) -
---------- ---------- ----------- ----------
Net income $ 47,782 $ 52,024 $ 1.15 $ 1.26
========== ========== =========== ==========
RATIO OF DEBT TO TOTAL CAPITALIZATION
AUGUST 31 AUGUST 31
(Amounts in thousands, except per-share data) 2003 2002
---------- -----------
Total debt $445,808 $543,121
Total stockholders' equity 408,294 401,952
---------- -----------
Total capitalization $854,102 $945,073
========== ===========
Debt-to-total-capitalization ratio 52.2% 57.5%
========== ===========
(1) Actual per share data has not been presented for periods prior to the second
quarter of fiscal year 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.