Acuity Brands(AYI) - 2022 Q1 - Quarterly Report

Part I. FINANCIAL INFORMATION Financial Statements Acuity Brands, Inc.'s unaudited consolidated financial statements and notes for periods ended November 30, 2021 Consolidated Balance Sheets As of November 30, 2021, total assets were $3.61 billion, a slight increase from $3.58 billion at August 31, 2021, driven by higher cash and inventories, partially offset by a decrease in accounts receivable Consolidated Balance Sheet Highlights (in millions) | Account | Nov 30, 2021 (Unaudited) | Aug 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $1,599.9 | $1,544.3 | | Cash and cash equivalents | $504.0 | $491.3 | | Inventories | $439.7 | $398.7 | | Total Assets | $3,605.6 | $3,575.1 | | Total Current Liabilities | $695.2 | $692.2 | | Long-term debt | $494.5 | $494.3 | | Total Liabilities | $1,532.7 | $1,530.6 | | Total Stockholders' Equity | $2,072.9 | $2,044.5 | Consolidated Statements of Comprehensive Income For the three months ended November 30, 2021, net sales increased by 16.9% to $926.1 million, net income rose by 47.0% to $87.6 million, and diluted earnings per share increased by 56.7% to $2.46 Consolidated Statements of Comprehensive Income (in millions, except per share data) | Metric | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | Net sales | $926.1 | $792.0 | | Gross profit | $385.8 | $332.4 | | Operating profit | $115.1 | $85.7 | | Net income | $87.6 | $59.6 | | Diluted earnings per share | $2.46 | $1.57 | | Dividends declared per share | $0.13 | $0.13 | Consolidated Statements of Cash Flows Net cash provided by operating activities for the three months ended November 30, 2021, was $83.7 million, a decrease from the prior year, primarily due to increased working capital, with cash and cash equivalents ending at $504.0 million Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $83.7 | $123.9 | | Net cash used for investing activities | $(9.0) | $(14.1) | | Net cash used for financing activities | $(59.1) | $(164.1) | | Net change in cash and cash equivalents | $12.7 | $(53.7) | | Cash and cash equivalents at end of period | $504.0 | $507.0 | Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial data, including segment information, acquisitions, debt structure, and a litigation settlement - The company operates through two business segments: Acuity Brands Lighting and Lighting Controls (ABL), which accounted for ~95% of revenue, and the Intelligent Spaces Group (ISG), which accounted for ~5%[18][20][21] - There were no acquisitions in fiscal 2022. In fiscal 2021, the company acquired ams OSRAM's North American Digital Systems business and Rockpile Ventures[27][28][29] - The company has $500.0 million in 2.150% senior unsecured notes due 2030 and a $400.0 million unsecured revolving credit facility, which was undrawn as of November 30, 2021[56][57] - A shareholder class action lawsuit was settled for $15.8 million, which is expected to be fully funded by Directors and Officers liability insurance, resulting in no significant net loss or cash outflow for the company[71] Disaggregated Revenue by Sales Channel (in millions) | Sales Channel | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | ABL Total | $883.6 | $753.6 | | Independent sales network | $636.8 | $559.5 | | Direct sales network | $90.0 | $80.1 | | Retail sales | $46.9 | $56.0 | | ISG Total | $46.4 | $40.8 | | Total Net Sales | $926.1 | $792.0 | Segment Operating Profit (in millions) | Segment | Three Months Ended Nov 30, 2021 | Three Months Ended Nov 30, 2020 | | :--- | :--- | :--- | | ABL Operating Profit | $128.1 | $98.4 | | ISG Operating Profit (Loss) | $2.0 | $(0.1) | | Unallocated corporate amounts | $(15.0) | $(12.6) | | Total Operating Profit | $115.1 | $85.7 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the first quarter of fiscal 2022, highlighting increased net sales and operating profit, strong liquidity, and capital allocation priorities Q1 FY2022 vs Q1 FY2021 Performance (in millions, except per share data) | Metric | Q1 FY2022 | Q1 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $926.1 | $792.0 | 16.9% | | Gross profit | $385.8 | $332.4 | 16.1% | | Operating profit | $115.1 | $85.7 | 34.3% | | Net income | $87.6 | $59.6 | 47.0% | | Diluted EPS | $2.46 | $1.57 | 56.7% | - Net sales growth of 16.9% was attributed to strong go-to-market activities, customer service focus, recovery in end markets, and price increases. Acquired companies contributed less than 4% to the sales increase[129] - Gross profit margin decreased slightly by 30 basis points to 41.7%, as price increases and productivity improvements were largely able to offset escalating material, conversion, and freight costs[130] - Operating profit margin improved by 160 basis points to 12.4% due to better leveraging of operating costs, despite higher SD&A expenses related to increased sales and acquisitions[131][132] - The effective tax rate decreased to 19.6% from 24.7% YoY, primarily due to favorable discrete items related to excess tax benefits on share-based payments[134] - The company maintained a strong liquidity position with $504.0 million in cash and $395.9 million of additional borrowing capacity under its revolving credit facility[112][115] - During the quarter, the company repurchased 0.3 million shares for $52.8 million and paid dividends of $4.7 million[122][123] Quantitative and Qualitative Disclosures about Market Risk The company reports no material changes to its exposure to market risks, including interest rates, foreign exchange rates, and commodity prices, since its last Form 10-K filing - There have been no material changes to the company's exposure to market risks (interest rates, foreign exchange, commodity prices) since the last Form 10-K filing[143] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of November 30, 2021, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of November 30, 2021[145] - The assessment of internal control over financial reporting excluded the fiscal 2021 acquisitions of Rockpile Ventures and OSRAM DS, which collectively represented less than 4% of consolidated assets, equity, sales, and pre-tax income[146] Part II. OTHER INFORMATION Legal Proceedings This section incorporates by reference information on legal proceedings from the 'Commitments and Contingencies' footnote in Part I, noting any new reportable developments - Information regarding legal proceedings is detailed in the 'Commitments and Contingencies' footnote of the Notes to Consolidated Financial Statements, which is incorporated by reference into this item[150] Risk Factors The company reports no material changes in its risk factors from those disclosed in its Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the company's Form 10-K[151] Unregistered Sales of Equity Securities and Use of Proceeds During the quarter ended November 30, 2021, the company repurchased 300,426 shares of common stock at an average price of $175.75 per share, with 3.5 million shares remaining available for repurchase Share Repurchase Activity (Quarter Ended Nov 30, 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Sep 2021 | 248,779 | $174.51 | | Oct 2021 | 51,647 | $181.73 | | Nov 2021 | 0 | $0.00 | | Total | 300,426 | $175.75 | - As of November 30, 2021, 3.5 million shares were still available for repurchase under the authorized program[153] Other Information On January 6, 2022, the Board of Directors declared a quarterly dividend of $0.13 per share, payable on February 1, 2022 - A quarterly dividend of $0.13 per share was declared on January 6, 2022[155] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and various corporate governance and compensation plan documents - The report includes a list of filed exhibits, such as CEO/CFO certifications (Exhibits 31, 32) and compensation plan documents (Exhibit 10)[161][162][163]