Acuity Brands, Inc. (NYSE:AYI) Q3 2019 Earnings Conference Call Transcript

Jul 02, 2019 • 10:00 am ET

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Acuity Brands, Inc. (NYSE:AYI) Q3 2019 Earnings Conference Call Transcript

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Presentation
Executive
Vernon J. Nagel

Ricky will explain later in the call.

In adding back these items, one can see, adjusted operating profit for the third quarter of 2019 was $135.5 million or 14.3% of net sales compared with adjusted operating profit of $137.3 million in the year ago period of 14.5% of net sales. Adjusted diluting earnings per share was $2.53 a third quarter record, up 7% from the year ago period. Results this period were benefited by a lower effective tax rate, as Ricky will explain later in the call. Net cash provided by operating activities was a strong $312 million for the first nine months of the year, up nicely over the year ago period, and our cash position at the end of the quarter grew to $334 million, leaving us with plenty of liquidity to execute our growth strategies.

Looking at some specific details for the quarter, net sales were essentially flat when compared with the year ago period. Overall, net sales volume grew more than 1%, which was mostly offset by unfavorable foreign exchange rates and the adoption of ACS 606 (sic) (ASC 606). Changes in product prices and the mix of products sold were essentially flat compared with the prior year as higher pricing was offset by changes in the mix of products sold and customer mix within certain channels. We estimate the realization from recent price increases contributed low single-digit growth to overall net sales for the quarter.

From a channel perspective, the increase in net sales in our independent sales network was largely offset by lower net sales in the retail channel, compared with the year ago period. The decline in net sales in the retail channel was primarily due to the impact of efforts initiated this year to eliminate certain product categories that do not meet our expected profit margin profile.

We believe our growth in net sales this quarter was also muted by the impact of customers primarily in the independent sales network channel pulling forward orders into the first half of the year in advance of announced price increases. We know -- while we noted this activity in our previous two earnings calls, we were unable to determine the precise impact of the sales shift between quarters.

Looking more closely at the details of our net sales this quarter, net sales through our independent sales network were up almost 3%. Our growth in this channel was benefited by implemented price increases, market share gains in certain biting categories, particularly for lighting controls and growth of our building management solutions platform at this (inaudible) 13:12, which again performed exceptionally well this quarter.

We believe the growth rate of our C&I business within the independent sales network channel was more than double the overall rate of growth for this particular market. Our growth in C&I was primarily due to greater shipments of certain high volume, more basic, lesser featured LED fixtures, primarily for applications on smaller and mid-sized commercial projects, significant growth of our lighting controls