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Article by DailyStocks_admin    (01-19-09 04:37 AM)

The Daily Magic Formula Stock for 01/18/2009 is Acuity Brands Inc. According to the Magic Formula Investing Web Site, the ebit yield is 20% and the EBIT ROIC is 75-100%.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

Acuity Brands, Inc. (“Acuity Brands”) is the parent company of Acuity Brands Lighting, Inc. and other subsidiaries (collectively referred to herein as “the Company”). Acuity Brands was incorporated in 2001 under the laws of the State of Delaware. The Company designs, produces, and distributes a broad array of indoor and outdoor lighting fixtures and related products and services for commercial and institutional, industrial, infrastructure, and residential applications for various markets throughout North America and select international markets.

The Company is one of the world’s leading providers of lighting fixtures for new construction, renovation, and facility maintenance applications. Products include a full range of indoor and outdoor lighting for commercial and institutional, industrial, infrastructure, and residential applications. The Company manufactures or procures lighting products in the United States, Mexico, Europe, and China. These products and related services are marketed under numerous brand names, including Lithonia Lighting ® , Holophane ® , Peerless ® , Mark Architectural Lighting™, Hydrel ® , American Electric Lighting ® , Gotham ® , Carandini ® , SpecLight ® , Metal Optics ® , Antique Street Lamps™, Synergy ® Lighting Controls, SAERIS™ and ROAM ® . As of August 31, 2008, the Company manufactures products in 13 plants in North America and three plants in Europe.

Principal customers include electrical distributors, retail home improvement centers, national accounts, electric utilities, municipalities, and lighting showrooms located in North America and select international markets. In North America, the Company’s products are sold through independent sales agents and factory sales representatives who cover specific geographic areas and market segments. Products are delivered through a network of distribution centers, regional warehouses, and commercial warehouses using both common carriers and a company-owned truck fleet. To serve international customers, the Company employs a sales force that utilizes distribution methods to meet specific individual customer or country requirements. In fiscal 2008, North American sales accounted for approximately 96% of net sales. See Note 13: Geographic Information of the Notes to Consolidated Financial Statements for more information concerning the domestic and international net sales of the Company.

Specialty Products Business Spin-off

Acuity Brands completed the spin-off of its specialty products business (the “Spin-off”), Zep Inc. (“Zep”), on October 31, 2007, by distributing all of the shares of Zep common stock, par value $.01 per share, to the Company’s stockholders of record as of October 17, 2007. The Company’s stockholders received one Zep share, together with an associated preferred stock purchase right, for every two shares of the Company’s common stock they owned. Stockholders received cash in lieu of fractional shares for amounts less than one full Zep share.

As a result of the Spin-off, Acuity Brands’ financial statements have been prepared with the net assets, results of operations, and cash flows of the specialty products business presented as discontinued operations. All historical statements have been restated to conform to this presentation. Refer to Note 2— Discontinued Operations of the Notes to Consolidated Financial Statements .

Industry Overview

Based on industry sources, the Company estimates that in fiscal 2008 the size of the North American lighting and lighting-related fixture market was approximately $11.2 billion. This includes non-portable light fixtures (as defined by the National Electrical Manufacturers Association), poles for outdoor lighting products, and emergency lighting fixtures. This market estimate excludes portable and vehicular lighting

fixtures and related lighting components such as lighting ballasts. The U.S. market, which represents approximately 85% of the North American market, is relatively fragmented. The Company estimates that the top four manufacturers (including Acuity Brands Lighting) represent approximately 54% of the total North American lighting market. The remainder of the North American lighting market is made up of hundreds of smaller lighting manufacturers.

The Company operates in a highly competitive industry that is affected by volatility in a number of general business and economic factors, such as gross domestic product growth, employment, credit availability and commodity costs. The construction market, including non-residential, the Company’s primary market, as well as residential, is sensitive to the volatility of these general economic factors. Based on industry sources, the Company estimates that new construction and additions in fiscal 2008 accounted for approximately 83% of the non-residential market while alterations accounted for approximately 17%. This mix can vary over time depending on economic conditions. Construction spending on infrastructure projects such as highways, streets, and urban developments also has a material impact on the demand for the Company’s infrastructure-focused products. Demand for the Company’s lighting products sold though its retail channels are highly dependent on economic drivers such as consumer spending and discretionary income, along with housing construction and home improvement spending.

A growing source of demand for the lighting industry is being attributed to the renovation and replacement of lighting systems in existing buildings. The potential market size is estimated to be significant (possibly greater than $70 billion of installed base) due to square footage of existing non-residential buildings containing older, less efficient lighting systems.

The industry is influenced by the development of new lighting technologies including light emitting diode (“LED”), electronic ballasts, embedded controls, more effective optical designs, federal and state requirements for updated energy codes, and design technologies addressing sustainability. The traditional lighting manufacturers, including the Company, are offering product solutions based on these technologies utilizing internally developed, licensed, or acquired intellectual property. In addition, the traditional lighting manufacturers are experiencing competition from new smaller entrants with a focus on new technology based lighting solutions.

Consolidation remains a key trend in both the lighting and broader electrical industries leading to more extensive product offerings and increased globalization. Recent combinations among electrical distributors and the acquisition by Koninklijke Philips Electronics N.V. of The Gentlyte Group Incorporated are evidence of this trend.

Products

The Company produces a wide variety of lighting fixtures and related products and services used in the following applications:

Commercial & Institutional — Applications are represented by stores, hotels, offices, schools, and hospitals, as well as other government and public buildings. Products that serve these applications include recessed, surface and suspended lighting products, recessed downlighting, and track lighting, as well as special application lighting products. The outdoor areas associated with these application products are addressed by a variety of outdoor lighting products, such as area and flood lighting, decorative site lighting, and landscape lighting.

Industrial — Applications primarily include warehouses and manufacturing facilities, utilizing a variety of glass and acrylic high intensity discharge (“HID”) and fluorescent lighting products.

Infrastructure — Applications include highways, tunnels, airports, railway yards, and ports. Products that serve these applications include street, area, high-mast, off-set roadway, and sign lighting.

Residential — Applications are addressed with a combination of decorative fluorescent and downlighting products, as well as utilitarian fluorescent products.

Other Applications & Products — Other products include emergency lighting fixtures, which are primarily used in non-residential buildings, and lighting control and flexible wiring systems.


•

Services — Applications include monitoring and controlling of lighting systems through machine to machine wireless network technology in the utility and municipality markets as well as energy audit and turn-key labor renovation and relight services in the commercial, industrial, retail, manufacturing, and warehousing markets.

Lighting fixtures for numerous applications in a multitude of industry segments accounted for approximately 85%, 86%, and 87% of total consolidated net sales for Acuity Brands in fiscal years 2008, 2007, and 2006, respectively. This does not include sales related to items such as wiring products, controls, poles, emergency lighting and services.

Sales and Marketing

Sales. The Company calls on customers in the North American market with separate sales forces targeted at delivering appropriate products and services to specific customer, channel, and geographic segments. As of August 31, 2008, these sales forces consist of approximately 240 company-employed salespeople and a network of approximately 160 independent sales agencies, each of which employs numerous salespeople. The Company also operates two separate European sales forces and an international sales group coordinating export sales outside of North America and Europe.

Marketing. The Company markets its products to a multitude of end users through a broad spectrum of marketing and promotional vehicles, including direct customer contact, trade shows, on-site training, print advertising in industry publications, product brochures, and other literature, as well as the Internet and other electronic media. The Company owns and operates many training and display facilities, including its Center for Light + Space, a new direct sales and marketing office dedicated to serving the New York City lighting market. New York continues to grow in importance in the world of lighting, with its influence accelerating around the country and the world.

Customers

Customers of the Company include electrical distributors, retail home improvement centers, national accounts, electric utilities, utility distributors, municipalities, contractors, catalogs, and lighting showrooms. In addition, there are a variety of other professionals, which for any given project could represent a significant influence in the product specification process. These generally include contractors, engineers, architects, and lighting designers.

A single customer of Acuity Brands Lighting, The Home Depot, accounted for approximately 11%, 15%, and 15% of net sales of the Company during fiscal years 2008, 2007, and 2006, respectively. Approximately 90% of product purchased by The Home Depot is resold to end-users in the home improvement market as the Company serves both residential and commercial consumer needs of this customer. The remainder of product sourced to The Home Depot is installed in that retail center’s new and existing facilities. The loss of The Home Depot’s business could temporarily adversely affect the Company’s results of operations.

Manufacturing

The Company operates 16 manufacturing facilities, including seven facilities in the United States, six facilities in Mexico, and three facilities in Europe. The Company utilizes a blend of internal and outsourced manufacturing processes and capabilities to fulfill a variety of customer needs in the most cost-effective manner. Critical processes, such as reflector forming and anodizing and high-end glass production, are primarily performed at company-owned facilities, offering the ability to differentiate end-products through superior capabilities. Other critical components, such as lamps, sockets, and ballasts, are purchased primarily from outside vendors. Investment is focused on improving capabilities, product quality, and manufacturing efficiency. The integration of local suppliers’ factories and warehouses also provides an opportunity to lower Company-owned component inventory while maintaining high service levels through frequent just-in-time deliveries. The Company also utilizes contract manufacturing from U.S., Asian, and European sources for certain products and purchases certain finished goods, including poles, to complement its area lighting fixtures and a variety of residential and commercial lighting equipment. Net sales of product manufactured by others currently accounts for approximately 22% of the Company’s net sales. Of total product manufactured by the Company, U.S. operations produce approximately 45%; Mexico produces approximately 51%; and Europe produces approximately 4%.

Management continues to focus on certain initiatives to make the Company more globally competitive. One of these initiatives relates to enhancing the Company’s global supply chain and includes the consolidation of certain manufacturing facilities into more efficient locations. Since the beginning of fiscal 2002, the Company has closed eleven manufacturing facilities which reduced the total square footage used for manufacturing by approximately 25%. This initiative resulted in increased production in international locations, primarily Mexico, and greater sourcing from the Company’s network of worldwide vendors.

Subsequent to fiscal 2008, the Company announced plans to accelerate its ongoing programs to streamline operations including the consolidation of certain manufacturing facilities and the reduction of certain overhead costs. The impact of these actions will result in the closure of two manufacturing facilities and the downsizing of a third facility. These actions will allow the Company to better leverage efficiencies in its supply chain and support areas, while funding continued investments in other areas that support future growth opportunities.

CEO BACKGROUND

Director Nominees for Terms Expiring at the 2011 Annual Meeting

Name and Principal Business Affiliations

PETER C. BROWNING
• 67 years old
• Director since December 2001
• Lead Director of Nucor Corporation since 2006
• Non-executive Chairman of Nucor Corporation from September 2000 to 2006
• Dean of the McColl Graduate School of Business at Queens University of Charlotte, North Carolina, from March 2002 to May 2005
• Executive of Sonoco Products Company 1993 to 2000. Last served as President and Chief Executive Officer from 1998 to July 2000
• Executive of National Gypsum Company 1989 to 2003. Last served as Chairman, President and Chief Executive Officer.
• Executive of Continental Can Company 1964 to 1989. Last served as Executive Vice President.
• Director: EnPro Industries, Inc., Lowe’s Companies, Inc., Nucor Corporation, The Phoenix Companies, Inc., and Wachovia Corporation
• Member of the Compensation and Governance Committees of the Board
• If elected, three-year term expires at the Annual Meeting for Fiscal Year 2011

JOHN L. CLENDENIN
• 74 years old
• Director since December 2001
• Chairman Emeritus of BellSouth Corporation since December 1997; also served as Chairman from December 1996 to December 1997 and as Chairman, President, and Chief Executive Officer from 1983 until December 1996
• Director: Powerwave Technologies, Inc.
• Member of the Audit and Governance Committees of the Board
• If elected, three-year term expires at the Annual Meeting for Fiscal Year 2011

RAY M. ROBINSON
• 60 years old
• Director since December 2001
• Non-executive Chairman of Citizens Trust Bank since May 2003
• President of Atlanta’s East Lake Golf Club from May 2003 to December 2005, and President Emeritus since December 2005
• Vice Chairman of Atlanta’s East Lake Community Foundation since January 2005 and Chairman from November 2003 until January 2005
• President of the Southern Region of AT&T Corporation from 1996 to May 2003
• Director: Aaron Rents, Inc., American Airlines, Avnet, Inc., and Citizens Trust Bank (trading as Citizens Bancshares)
• Chairman of the Compensation Committee and a member of the Executive and Governance Committees of the Board
• If elected, three-year term expires at the Annual Meeting for Fiscal Year 2011



MANAGEMENT DISCUSSION FROM LATEST 10K

The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes included within this report. References made to years are for fiscal year periods. Dollar amounts are in thousands, except share and per-share data and as indicated.

The purpose of this discussion and analysis is to enhance the understanding and evaluation of the results of operations, financial position, cash flows, indebtedness, and other key financial information of Acuity Brands and its subsidiaries for the years ended August 31, 2008 and 2007. For a more complete understanding of this discussion, please read the Notes to Consolidated Financial Statements included in this report.

Overview

Company

Acuity Brands Inc. (“Acuity Brands”) is the parent company of Acuity Brands Lighting and other subsidiaries (collectively referred to herein as “the Company”). Acuity Brands, with its principal office in Atlanta, Georgia, employs approximately 6,500 people worldwide.

The Company designs, produces, and distributes a broad array of indoor and outdoor lighting fixtures and related products and services for commercial and institutional, industrial, infrastructure, and residential applications for various markets throughout North America and select international markets. The Company is one of the world’s leading producers and distributors of lighting fixtures, with a broad, highly configurable product offering, consisting of roughly 500,000 active products as part of over 2,000 product groups that are sold to approximately 5,000 customers. As of August 31, 2008, the Company operates 16 manufacturing facilities and six distribution facilities along with four warehouses to serve its extensive customer base.

Acuity Brands completed the Spin-off of its specialty products business, Zep, on October 31, 2007, by distributing all of the shares of Zep common stock, par value $.01 per share, to the Company’s stockholders of record as of October 17, 2007. The Company’s stockholders received one Zep share, together with an associated preferred stock purchase right, for every two shares of the Company’s common stock they owned. Stockholders received cash in lieu of fractional shares for amounts less than one full Zep share.

As a result of the Spin-off, the Company’s financial statements have been prepared with the net assets, results of operations, and cash flows of the specialty products business presented as discontinued operations. All historical statements have been restated to conform to this presentation.

Strategy

Throughout 2008, Acuity Brands made significant progress towards key initiatives designed to enhance and streamline its operations, including its product development and service capabilities, to create a stronger, more effective organization that is capable of consistently achieving its long-term financial goals, which are as follows:


• Generating operating margins in excess of 12%;


• Growing earnings per share in excess of 15% per annum;


• Providing a return on stockholders’ equity of 20% or better;

• Maintaining the Company’s debt to total capitalization ratio below 40%; and


• Generating cash flow from operations less capital expenditures that is in excess of net income.

To increase the probability of the Company achieving these financial goals, management will continue to implement programs to enhance its capabilities at providing unparalleled customer service; creating a globally competitive cost structure by eliminating non-value added activities, lowering transaction costs, and improving productivity; and introducing new and innovative products and services more rapidly and cost effectively. In addition, the Company has invested considerable resources to teach and train associates to utilize tools and techniques that accelerate success in these key areas as well as to create a culture that demands excellence through continuous improvement. The expected outcome of these activities will be to better position the Company to deliver on its full potential, to provide a platform for future growth opportunities, and to allow the Company to achieve its long-term financial goals. See the Outlook section below for additional information.

Liquidity and Capital Resources

Principle sources of liquidity for Acuity Brands are cash on hand, operating cash flows generated primarily from its business operations and various sources of borrowings. The ability of Acuity Brands to generate sufficient cash flow from operations and access certain capital markets, including borrowing from banks, is necessary for Acuity Brands to fund its operations, to pay dividends, to meet its obligations as they become due, and to maintain compliance with covenants contained in its financing agreements.

Based on its cash on hand, availability under existing financing arrangements and current projections of cash flow from operations, Acuity Brands believes that it will be able to meet its liquidity needs over the next 12 months. These needs are expected to include funding its operations as currently planned, making anticipated capital investments, funding certain potential acquisitions, funding foreseen improvement initiatives, paying quarterly stockholder dividends as currently anticipated, paying principal and interest on borrowings as currently scheduled, and making required contributions into the Company’s employee benefit plans, as well as potentially repurchasing shares of Acuity Brands’ outstanding common stock as authorized by the Company’s Board of Directors. Since October 2005, the Company’s Board of Directors has authorized the repurchase of ten million shares of the Company’s outstanding common stock, of which approximately 9.5 million had been repurchased as of August 31, 2008. The Company currently expects to invest approximately $35.0 to $40.0 million primarily for equipment, tooling, and new and enhanced information technology capabilities during fiscal year 2009. The Company expects to contribute approximately $3.8 million during fiscal year 2009 to fund its defined benefit plans. Barring any significant cash requirements for possible acquisitions, the Company currently intends to use cash on hand to pay off the $160 million in publicly traded notes that are scheduled to mature during the second quarter of fiscal 2009.

Looking beyond fiscal 2009, the Company has $200 million of public notes scheduled to mature during fiscal 2010. The Company believes that it will be able to either refinance or retire these notes as they come due based on current cash balances, the recently executed $250 million 5-year Revolving Credit Facility maturing in October 2012, and future cash provided by operations.

Cash Flow

Acuity Brands uses available cash and cash flow from operations as well as proceeds from the exercise of stock options, if any, to fund operations and capital expenditures, to repurchase stock, to fund acquisitions, and to pay dividends. During fiscal 2008, Acuity Brands received $4.5 million in cash from stock issuances in connection with stock option exercises and employee stock purchases and a cash dividend from Zep of $58.4 million as part of the Spin-off. These receipts were more than offset by returns to shareholders during the period in the form of repurchases of Acuity Brands’ common stock totaling $155.7 million and the payment of $22.5 million in dividends. Acuity Brands’ available cash position at August 31, 2008 was $297.1 million, an increase of $83.4 million from August 31, 2007. The increase in Acuity Brands’ available cash position was due primarily to the contribution from operating activities discussed below, the dividend received from Zep, and the proceeds from the exercise of stock options partially offset by the repurchase of stock, dividends paid, and capital investments.

Index to Financial Statements

The Company generated $221.8 million of net cash provided by operating activities from continuing operations during fiscal year 2008 compared with $208.7 million generated in the prior-year period, an increase of $13.1 million or 6.3%. Net cash provided by operating activities increased due primarily to higher income from continuing operations and the cash flow impact of decreased operating working capital (calculated by adding accounts receivable, net, plus inventories, and subtracting accounts payable) and less prepayments and certain other current assets, partially offset by decreased accrued liabilities. Changes in operating working capital provided cash of approximately $22.8 million and $16.0 million during fiscal 2008 and 2007, respectively. The variance during fiscal 2008 is due primarily to improved collections of accounts receivable partially offset by lower accounts payable. The decrease in accrued liabilities during fiscal year 2008 is due in part to payments under the Company’s variable incentive plans and for periodic tax filings. Operating working capital as a percentage of net sales at the end of fiscal 2008 decreased to 10.3% from 11.8% in fiscal 2007. At August 31, 2008, the current ratio (calculated as total current assets divided by total current liabilities) of the Company was 1.4 compared with 1.8 at August 31, 2007.

Management believes that investing in assets and programs that will over time increase the overall return on its invested capital is a key factor in driving stockholder value. The Company invested $27.2 million and $31.5 million in fiscal year 2008 and 2007, respectively, primarily for new tooling, machinery, equipment, and information technology. As noted above, the Company expects to invest approximately $35.0 to $40.0 million for new plant, equipment, tooling, and new and enhanced information technology capabilities during fiscal year 2009. Barring any significant cash requirements for possible acquisitions, the Company currently intends to use cash on hand to pay off the $160 million in publicly traded notes that are scheduled to mature during the second quarter of fiscal 2009.

Capitalization

The current capital structure of the Company is comprised principally of senior notes and equity of its stockholders. As of August 31, 2008, the Company had no borrowings under the Revolving Credit Facility discussed below. As of August 31, 2008, total debt outstanding of $363.9 million remained substantially unchanged from August 31, 2007 and consisted primarily of fixed-rate obligations.

On October 19, 2007, the Company executed a $250 million revolving credit facility (the “Revolving Credit Facility”) that replaced the $200 million revolving credit facility scheduled to mature in January 2009. During the first quarter of fiscal 2008, the Company wrote off $0.3 million in deferred financing costs as additional interest expense in connection with this replacement. The Revolving Credit Facility matures in October 2012 and contains financial covenants including a minimum interest coverage ratio and a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness to EBITDA (earnings before interest, taxes, depreciation and amortization expense), as such terms are defined in the Revolving Credit Facility agreement. These ratios are computed at the end of each fiscal quarter for the most recent 12-month period. The Revolving Credit Facility allows for a Maximum Leverage Ratio of 3.50, subject to certain conditions defined in the financing agreement. The Company was in compliance with all financial covenants and had no outstanding borrowings at August 31, 2008 under the Revolving Credit Facility. At August 31, 2008, the Company had additional borrowing capacity under the Revolving Credit Facility of $241.3 million under the most restrictive covenant in effect at the time, which represents the full amount of the Revolving Credit Facility less outstanding letters of credit of $8.7 million.

Acuity Brands has $160 million of public notes scheduled to mature during February 2009 and $200 million of public notes scheduled to mature in August 2010. The Company believes that it will be able to either refinance or retire these notes as they come due based on current cash balances, the recently executed $250 million 5-year Revolving Credit Facility maturing in October 2012, and future cash provided by operations. See Note 5: Debt and Lines of Credit of the Notes to Consolidated Financial Statements .

During fiscal year 2008, the Company’s consolidated stockholders’ equity decreased $96.5 million to $575.5 million at August 31, 2008 from $672.0 million at August 31, 2007. The decrease was due primarily to the distribution of Zep, the repurchase of outstanding common stock and the payment of dividends, partially offset by net income earned in the period as well as stock issuances resulting from the exercise of stock options and purchases under the Employee Stock Purchase Plan. The Company’s debt to total capitalization ratio (calculated by dividing total debt by the sum of total debt and total stockholders’ equity) was 38.7% and 35.1% at August 31, 2008 and August 31, 2007, respectively. The ratio of debt, net of cash, to total capitalization, net of cash, was 10.4% at August 31, 2008 and 18.3% at August 31, 2007.

Dividends

Acuity Brands paid cash dividends on common stock of $22.5 million ($0.54 per share) during 2008 compared with $26.4 million ($0.60 per share) in 2007. Acuity Brands currently plans to pay quarterly dividends at a rate of $0.13 per share. All decisions regarding the declaration and payment of dividends by Acuity Brands are at the discretion of the Board of Directors of Acuity Brands and will be evaluated from time to time in light of Acuity Brands’ financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors the Acuity Brands’ board deems relevant.

Results from Continuing Operations

Net sales were $2,026.6 million for fiscal 2008 compared with $1,964.8 million reported in the prior-year period, an increase of $61.8 million, or 3.1%. For fiscal 2008, the Company reported income from continuing operations of $148.6 million (including a $9.1 million after-tax special charge for estimated costs the Company incurred to simplify and streamline its operations as a result of the Spin-off) compared with $128.7 million earned in fiscal 2007. Diluted earnings per share from continuing operations were $3.57 (including $0.21 loss related to the special charge) for fiscal 2008 as compared with $2.93 reported for fiscal 2007, an increase of 21.8%.

On July 17, 2007, Acuity Brands acquired substantially all the assets and assumed certain liabilities of Mark Architectural Lighting. Mark Architectural Lighting, located in Edison, New Jersey, is a specification-oriented manufacturer of high-quality lighting products. The acquisition gives the Company a stronger presence in the Northeast, particularly the New York City metropolitan area, and is a complement to the

Index to Financial Statements

Center for Light+Space, the Company’s sales and marketing office in New York City. Mark Architectural Lighting, which had fiscal 2006 sales of over $22 million, will continue operations in its existing facility, focusing on key customers and competencies. The operating results of Mark Architectural Lighting have been included in the Company’s consolidated financial statements since the date of acquisition.

Net Sales

The 3.1% increase in net sales is due primarily to an enhanced mix of products sold and improved pricing. The Company’s sales and profitability continue to benefit from a disciplined approach to pricing and a richer mix of new and innovative products sold at higher per unit sales prices that offer customers greater benefits and features, such as more energy efficiency and an improved lighting experience. The Company estimates that greater shipments of the Company’s products both for new construction and relighting of existing non-residential buildings, excluding large retailers, increased by approximately 2% in fiscal year 2008 compared with 2007, partially offset by an approximately 3% decline in volume resulting from weakness in the residential market and reduced new store openings by certain large retailers. The Mark Architectural Lighting acquisition contributed approximately $18.0 million incrementally to net sales for fiscal 2008. Additionally, favorable foreign currency fluctuation added approximately $19.1 million to the increase in net sales in fiscal 2008.

Gross Profit

Gross profit margins increased 240 basis points to 40.3% of net sales for fiscal 2008 from 37.9% reported for the prior-year period. Gross profit increased $71.5 million, or 9.6% to $815.8 million for fiscal 2008 compared with $744.3 million for the prior-year period. The improvement in gross profit and gross profit margin was largely attributable to improved pricing and a greater mix of higher-margin products sold. In addition, benefits from the contribution of Mark Architectural Lighting and programs to improve productivity and quality contributed to the increased profitability. These gains offset increases in costs for raw materials, components, and freight as well as increases associated with employee wages and related benefits and freight costs.

Operating Profit

Selling, Distribution, and Administrative (“SD&A”) expenses were $540.1 million for fiscal 2008 compared with $521.9 million in the prior-year period, which represented an increase of $18.2 million, or 3.5%. Approximately half of the increase in SD&A expenses was due to higher commissions paid to the Company’s sales forces and agents, which typically vary directly with sales. Additionally, fiscal 2007 was favorably impacted by a $6.6 million pre-tax gain (net of related legal costs) resulting from a settlement for a commercial dispute involving reimbursement of warranty and product liability costs associated with a product line purchased from a third party in fiscal year 2002. The balance of the increase in SD&A expenses was due primarily to an increase in the Company’s investment in product marketing and development activities and the impact from fluctuations in foreign currency exchange rates partially offset by lower expenses for the Company’s other general and administrative costs due to cost containment programs. Merit based and inflationary wage increases were fully offset by benefits from the actions taken during fiscal 2008 to streamline and simplify operations.

Gross profit less SD&A expenses was $275.7 million in fiscal 2008 compared with $222.4 million in the prior-year period, which represented an increase of $53.3 million, or 24.0%. The increase was due to gross profit improvements partially offset by increased SD&A expenses as noted above. The Company believes this measure provides greater comparability and enhanced visibility into the improvements realized.

As part of the Company’s initiative to streamline and simplify operations, largely in connection with actions related to the Spin-off, the Company recorded during the first quarter of fiscal 2008 a pre-tax charge of $14.6 million to reflect severance and related employee benefit costs associated with the elimination of certain positions worldwide and the costs associated with the early termination of certain leases.

Operating profit was $261.1 million for fiscal 2008 compared with $222.4 million reported for the prior-year period, an increase of $38.7 million, or 17.4%. Operating profit margin increased 160 basis points to 12.9% compared with 11.3% in the year-ago period. The improvement in operating profit in fiscal 2008 compared with the prior-year period was due primarily to the increased gross profit noted above, partially offset by the $14.6 million special charge and the $6.6 million favorable commercial dispute settlement in the prior-year period.

Income from Continuing Operations before Provision for Taxes

Other expense for Acuity Brands consists primarily of interest expense and foreign exchange rate gain or loss. Interest expense, net, was $28.4 million and $29.9 million for fiscal 2008 and 2007, respectively. Interest expense, net, decreased 5.0% in fiscal 2008 compared with fiscal 2007 due primarily to greater interest income earned on higher invested cash balances, partially offset by lower short-term interest rates. The fluctuation in miscellaneous expense (income) is primarily due to the impact of exchange rates on foreign currency transactions and other non-operating items.

Provision for Income Taxes and Income from Continuing Operations

Income from continuing operations for fiscal 2008 increased $19.9 million to $148.6 million (including $9.1 million after-tax for the special charge) from $128.7 million reported for the prior-year period. The increase in income from continuing operations resulted primarily from the above noted increase in operating profit, partially offset by higher tax expense.

The effective income tax rate reported by the Company was 35.5% and 33.7% for fiscal 2008 and 2007, respectively. The current period tax rate was adversely affected by taxes related to the repatriation of foreign cash and increased income in jurisdictions with higher tax rates. The Company estimates that the effective tax rate for fiscal 2009 will be approximately 35.5%.

Results from Discontinued Operations and Net Income

The loss from discontinued operations for fiscal 2008 was $0.4 million, a decrease of $19.8 million from the prior-year period income of $19.4 million. The decrease was due primarily to the contribution of only two months of operating results in fiscal 2008 rather than a full year in fiscal 2007. In addition, discontinued operations were negatively impacted by approximately $5.5 million in costs related to the Spin-off during the first quarter of fiscal 2008. These non-tax deductible costs consist primarily of legal, accounting, financial advice and other professional fees to complete the Spin-off.

Net income for fiscal 2008 increased $0.2 million to $148.3 million from $148.1 million reported for the prior-year period. The increase in net income resulted primarily from the above noted increase in income from continuing operations, partially offset by the results from discontinued operations.

Outlook

The performance of Acuity Brands, like most companies, is influenced by a multitude of factors including the health of the economic environment. Today, it is clear many of the major economies and financial markets throughout the world are experiencing unprecedented volatility, creating uncertainty both for consumers and businesses. This situation is exacerbated by political uncertainties in many countries, including the United States. The vitality of the Company’s business is determined by underlying economic factors such as employment levels, credit availability, consumer demand, commodity costs and government policy, particularly as it impacts capital formation and risk taking by businesses and commercial developers. As such, the current conditions make it difficult to forecast the direction or intensity of future economic activity. This is evidenced by some independent third party forecasting entities in late October 2008 adjusting their projections for non-residential construction in North America to be down upper single digit to lower double digit percentage points in unit volume year-over-year due to a forecasted decrease in spending as a result of these weak economic conditions and tighter lending requirements. While the Company’s backlog at August 31, 2008 increased 4% to $177.1 million from a comparable $170.3 million at the end of the prior year, management believes the increase was influenced by orders placed in advance of a price increase that went into effect at the end of August 2008, which could adversely affect orders during the first quarter of fiscal 2009. As a result of the economic uncertainty noted above, the Company is currently experiencing softness in incoming orders and expects orders to remain soft for the foreseeable future due to contracting North American and European construction activity.

In addition, during much of fiscal 2008, the Company experienced significantly rising component and commodities prices, particularly for steel and petroleum. Prices on these commodities have recently declined somewhat, though management expects a high degree of volatility in pricing for these products to continue which could pressure the Company’s margins. While the Company has taken and expects to continue to take actions to recover higher component, raw material and freight costs through price increases, management does not believe competitive market forces will allow the Company to pass on more than these expected cost increases or to significantly retain current pricing on commodity sensitive products should those specific commodity costs sharply decline.

To meet these market challenges and to better realize the opportunities, the Company is accelerating its continuous improvement efforts to streamline and enhance operations, reducing spending in certain areas and accelerating investments in others offering greater growth potential. The Company intends to record a special cash charge of approximately $17 million in the first quarter of fiscal 2009 related to the planned consolidation of certain manufacturing operations and a reduction in workforce. As a part of the manufacturing consolidation, the Company also expects to incur an additional non-cash charge for the impairment of assets related to the closing of two manufacturing facilities and the downsizing of a third facility; however, the amount of such charge has not been determined at this time.

The Company expects to realize benefits from these streamlining actions during fiscal year 2009 that will exceed the amount of the cash charge incurred. Upon completing the planned consolidation of the manufacturing operations, which is scheduled to be finished by the fiscal fourth quarter of 2009, the Company expects to realize annualized benefits of more than $36 million. These actions will directly impact approximately 800 personnel including both manufacturing positions and salaried positions in mostly non-customer interfacing areas of the business. These planned actions will enable the Company to redeploy and invest resources in other areas where the Company believes it can create greater value for all stakeholders and accelerate profitable growth opportunities, including a continued focus on industry-leading product innovation incorporating sustainable design, relighting, and customer connectivity. In addition, as part of these growth initiatives management expects to introduce more new products during the coming year than in any other period in its history, many of which will incorporate LED technology.

The Company continues to invest and deploy resources to capitalize on growth opportunities in the renovation and relight markets offering new proprietary energy-efficient products and services to customers while also providing an aesthetically superior lighting environment. Management also sees opportunities to expand market presence in key markets, such as the New York City metropolitan area where the Company has historically had limited participation in this large and dynamic market. The Company expects cash flow from operations to remain strong in 2009 and intends to invest between $35 million and $40 million in capital expenditures during the year. Also, the Company estimates the annual tax rate to approximate 35.5% for 2009.

Looking ahead to 2009 and beyond, management believes its focus on improving productivity, accelerating investments to introduce more innovative and energy-efficient products, expanding market presence in key sectors such as the renovation and relight markets, and enhancing services to customers will provide growth opportunities which will enable Acuity Brands to outperform the market. Additionally, management believes these actions and investments will position the Company to meet or exceed its long-term financial goals.


MANAGEMENT DISCUSSION FOR LATEST QUARTER

Outlook

The performance of Acuity Brands, like most companies, is influenced by a multitude of factors including the health of the economic environment. Today, it is clear many of the major economies and financial markets throughout the world are experiencing unprecedented volatility, creating uncertainty both for consumers and businesses. This situation is exacerbated by political uncertainties in many countries, including the United States. The vitality of the Company’s business is determined by underlying economic factors such as employment levels, credit availability, consumer demand, commodity costs and government policy, particularly as it impacts capital formation and risk taking by businesses and commercial developers. As such, the current conditions make it difficult to forecast the direction or intensity of future economic activity. This is evidenced by some independent third party forecasting entities in late October 2008 adjusting their projections for non-residential construction in North America to be down upper single digit to lower double digit percentage points in unit volume year-over-year due to a forecasted decrease in spending as a result of these weak economic conditions and tighter lending requirements. While the Company’s backlog at August 31, 2008 increased 4% to $177.1 million from a comparable $170.3 million at the end of the prior year, management believes the increase was influenced by orders placed in advance of a price increase that went into effect at the end of August 2008, which could adversely affect orders during the first quarter of fiscal 2009. As a result of the economic uncertainty noted above, the Company is currently experiencing softness in incoming orders and expects orders to remain soft for the foreseeable future due to contracting North American and European construction activity.

In addition, during much of fiscal 2008, the Company experienced significantly rising component and commodities prices, particularly for steel and petroleum. Prices on these commodities have recently declined somewhat, though management expects a high degree of volatility in pricing for these products to continue which could pressure the Company’s margins. While the Company has taken and expects to continue to take actions to recover higher component, raw material and freight costs through price increases, management does not believe competitive market forces will allow the Company to pass on more than these expected cost increases or to significantly retain current pricing on commodity sensitive products should those specific commodity costs sharply decline.

To meet these market challenges and to better realize the opportunities, the Company is accelerating its continuous improvement efforts to streamline and enhance operations, reducing spending in certain areas and accelerating investments in others offering greater growth potential. The Company intends to record a special cash charge of approximately $17 million in the first quarter of fiscal 2009 related to the planned consolidation of certain manufacturing operations and a reduction in workforce. As a part of the manufacturing consolidation, the Company also expects to incur an additional non-cash charge for the impairment of assets related to the closing of two manufacturing facilities and the downsizing of a third facility; however, the amount of such charge has not been determined at this time.

The Company expects to realize benefits from these streamlining actions during fiscal year 2009 that will exceed the amount of the cash charge incurred. Upon completing the planned consolidation of the manufacturing operations, which is scheduled to be finished by the fiscal fourth quarter of 2009, the Company expects to realize annualized benefits of more than $36 million. These actions will directly impact approximately 800 personnel including both manufacturing positions and salaried positions in mostly non-customer interfacing areas of the business. These planned actions will enable the Company to redeploy and invest resources in other areas where the Company believes it can create greater value for all stakeholders and accelerate profitable growth opportunities, including a continued focus on industry-leading product innovation incorporating sustainable design, relighting, and customer connectivity. In addition, as part of these growth initiatives management expects to introduce more new products during the coming year than in any other period in its history, many of which will incorporate LED technology.

The Company continues to invest and deploy resources to capitalize on growth opportunities in the renovation and relight markets offering new proprietary energy-efficient products and services to customers while also providing an aesthetically superior lighting environment. Management also sees opportunities to expand market presence in key markets, such as the New York City metropolitan area where the Company has historically had limited participation in this large and dynamic market. The Company expects cash flow from operations to remain strong in 2009 and intends to invest between $35 million and $40 million in capital expenditures during the year. Also, the Company estimates the annual tax rate to approximate 35.5% for 2009.

Looking ahead to 2009 and beyond, management believes its focus on improving productivity, accelerating investments to introduce more innovative and energy-efficient products, expanding market presence in key sectors such as the renovation and relight markets, and enhancing services to customers will provide growth opportunities which will enable Acuity Brands to outperform the market. Additionally, management believes these actions and investments will position the Company to meet or exceed its long-term financial goals.

Cautionary Statement Regarding Forward-Looking Information

This filing contains forward-looking statements, within the meaning of the federal securities laws. Statements made herein that may be considered forward-looking include statements incorporating terms such as “expects,” “believes,” “intends,” “anticipates” and similar terms that relate to future events, performance, or results of the Company. In addition, the Company, or the executive officers on the Company’s behalf, may from time to time make forward-looking statements in reports and other documents the Company files with the Securities and Exchange Commission (“SEC”) or in connection with oral statements made to the press, potential investors or others. Forward-looking statements include, without limitation: (a) the Company’s projections regarding financial performance, liquidity, capital structure, capital expenditures, and dividends; (b) expectations about the impact of volatility and uncertainty in general economic conditions; (c) external or internal forecasts projecting unit volume decline; (d) expectations about the impact of volatility and uncertainty in component and commodity costs and the Company’s ability to manage those costs as well as the Company’s response with pricing of its products; (e) the Company’s ability to execute and realize benefits from initiatives related to streamlining its operations, capitalizing on growth opportunities, expanding in key markets, enhancing service to the customer, and investing in product innovation; and (f) the Company’s ability to achieve its long-term financial goals and measures. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this quarterly report. Except as required by law, the Company undertakes no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this quarterly report or to reflect the occurrence of unanticipated events. The Company’s forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the historical experience of the Company and management’s present expectations or projections. These risks and uncertainties include, but are not limited to, customer and supplier relationships and prices; competition; ability to realize anticipated benefits from initiatives taken and timing of benefits; market demand; litigation and other contingent liabilities; and economic, political, governmental, and technological factors affecting the Company. In addition, additional risks that could cause the Company’s actual results to differ materially from those expressed in the Company’s forward-looking statements are discussed in Part I, “Item 1a. Risk Factors” of Acuity Brands’ Form 10-K, and are specifically incorporated herein by reference.


CONF CALL

Dan Smith

Good morning. With me today to discuss our first quarter results are Vernon Nagel, our Chairman, President and Chief Executive Officer and Richard Reece, our Executive Vice President and Chief Financial Officer. We are web casting today’s conference call at www.acuitybrands.com.

I would like to remind everyone that during this call, we may make projections or forward-looking statements regarding future events or future financial performance of the company. Such statements involve risk and uncertainties, such that actual results may differ materially.

Please refer to our most recent 10-K and 10-Q SEC filings and today’s press release, which identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements.

Now, let me turn the call over to Vernon Nagel.

Vernon Nagel

Thank you Dan. Good morning everyone. Richard and I would like to make a few comments and then we would be happy to answer your questions. I also apologize in advance as I am fighting a cold here.

Our results for the first quarter 2009 reflect the impact that the turbulent economic conditions throughout the world are having on all manufacturing companies and the impact of our aggressive streamlining actions which we announced previously.

While our results for the quarter were disappointing relative to our original expectations, upon closer examination we actually executed very well overcoming a number of challenges. This quarter’s results reflect the first in 15 quarters where we did not set records for period over period improvement though I believe we performed at least as well, if not better, than our served markets.

In spite of the many challenges we faced in the quarter, as I will explain in more detail, we achieved great success on a number of strategic priorities including accelerating programs to introduce new, more energy efficient products and services, enhance customer service, expand into new markets and improve our productivity.

I know many of you have already seen our results and Richard will provide more detail later in the call, but I would like to make a few comments on key highlights.

Net sales for the quarter were $452 million, down 11% compared with the year-ago period. Operating profit was $33.7 million, down from $54.9 million reported in first quarter last year. Diluted earnings per share was $0.48 compared with $0.72 from the year-ago period.

Included in our first quarter results was a pre-tax special charge of $22.1 million or $0.34 per share. The charge in this period is for the cost associated with our previously announced actions to accelerate the streamlining of the organization structure to be more consistent with the current economic environment and to consolidate certain manufacturing operations.

The charge is larger than our previously announced estimate due to more aggressive actions than originally planned. Accordingly, we now expect to realize approximately $45 million in annualized cost savings, up from our previous estimate of $36 million from these actions once they are completed by the end of the fourth quarter of this year.

As you will recall, operating profit in the first quarter of 2008 was reduced by a pre-tax charge of $14.6 million or $0.21 per share primarily associated with the spin off of the specialty chemical business. I find it useful to add back these special charges recorded in both periods in order to make our results comparable between periods. Doing so I see our operating profit was $55.8 million in the first quarter of 2009, representing a margin of 12.3% of net sales. This compares with $69.5 million of operating profit or 13.7% of net sales for the prior period.

Similarly, the diluted earnings per share excluding the impact of these special charges was $0.82 for the first quarter of 2009 compared with $0.93 in the year-ago period, a decline of 12%. These results, while very positive given the dramatic fall off in economic activity, do not fully reflect our accomplishments in the first quarter given the magnitude of the challenges.

So let me share some additional information with you. First, as I mentioned in my last conference call with you, raw materials and components costs increased dramatically from June through September. For example, steel rose almost 50% in that very short time period. This change would have increased our annualized costs by more than $50 million just for steel. In response, we reacted immediately announcing price increases on certain products ranging from 5-10% for orders placed after the end of August.

These announced price increases were in addition to a 3-5% price increase on certain products put in place in early June. Unfortunately the August price increase could not be realized quickly enough to offset most of the unprecedented rise of raw materials in our first quarter. The impact of higher raw materials and component costs reduced our first quarter gross profit and operating profit by an estimated $17 million compared with the year-ago quarter.

This is an astounding amount, representing almost 4% of our net sales. We estimate we were able to pass along only about half of this increase through higher prices initiated earlier in the year because of the speed and timing of the cost increases, suggesting we reduced our profitability by about $8 million or 170 basis points of margin in the first quarter.

Equally astounding was the drop in certain commodity costs in September through December. For example, the cost of steel declined approximately 50% in that time frame. The bad news here is we have higher cost inventory purchased in the normal course while pricing in the marketplace for the most part seems to reflect pre-September pricing levels.

This means our profitability and margins will again be under pressure in the second quarter due to the unprecedented spike in material costs. We estimate this unusual event could reduce gross profit in the second quarter by more than $5 million.

These tremendous moves in cost for items such as steel, resins, fuel and components in such a short time are again unprecedented. Given the nature of the quotation cycle of the industry we serve, it is virtually impossible to pass along these increases in such a short time.


Said differently, it means we absorbed the increases in materials, fuel and component costs in the quarter through the implementation of actions to enhance pricing, a better mix of products sold, drive greater productivity and other aggressive cost reductions and our operating profit margins before the special charge were still 12.3%. This is a strong demonstration of how well our associates executed in a very challenging and difficult economic environment.

Another fact you may find interesting is the last time we had comparable net sales of approximately $450 million was in the third quarter of 2006. Our operating profit margin then was 8.2%. Today we are more than 400 basis points better, even while absorbing these excessive material costs.

We have been able to produce these results because of the great progress we have made in four key areas of strategic focus; customer service, pricing and margin management, product portfolio expansion including significant additions to our stable of sustainable and energy efficient products and company-wide productivity.

Let me talk a little bit about our net sales in the quarter. We were off approximately 11% from the year-ago period or about $57 million. About 2/3 of the decline in net sales occurred because of lower shipments for new store construction to big box retailers and residential construction. As we noted in our fourth quarter conference call these two channels have been hit especially hard by the decline in consumer demand due to the weakened economy. The balance of the decline in net sales in the period was primarily for non-residential construction in North America, particularly for commercial and industrial buildings such as offices and warehouses.

More specifically, the drop in demand for non-residential construction has been more pronounced in certain geographical areas in North America including the southeast, Midwest and southwest portions of the United States. The southeast and southwest were more exposed to the collapse of the residential construction market while portions of the Midwest continue to feel the effects of the troubled automotive industry.

On the good news front, our operations in Mexico delivered positive year-over-year growth in sales and we continued to enjoy growth in certain product lines introduced in the last few years with differentiated features and significant energy saving benefits.

We believe the sales of our products in the renovation and re-light market helped steady an almost $20 million for the quarter. This was quite an accomplishment as many retailers put store renovation activity on hold to focus on the holiday sales season.

Overall, while it is impossible to calculate precisely the impact of pricing actions, product mix and unit volume changes, we believe pricing and product mix changes helped partially offset a middle teen’s percentage decline in unit volume primarily in the retail and residential channels noted above.

Foreign currency reduced our net sales by about 1%.

I will talk more about our future growth strategies and our expectations for the construction market later in the call. I would now like to turn the call over to Rick to make a few brief comments on our overall financial performance before I make some remarks regarding our strategic plans and outlook for the balance of 2009.

Ricky?

Richard Reece

Thank you Vern. Good morning everyone. I would like to wish each of you a prosperous and healthy New Year. As Vern said earlier, I would like to provide some details around our earnings results and then I will discuss our cash flow, financial condition and conclude with a little more information regarding the special charge we took this quarter.

Gross profit for the fourth [sic] quarter was 38.7% of sales. This gross profit margin reflects a decrease of only 120 basis points compared with the year-ago period. I will echo what Vern said. This is an impressive accomplishment considering the 11% decline in sales and significant rise in raw material and component costs. Clearly our disciplined approach to pricing, improved mix of products sold, productivity gains and benefits from previously announced streamlining efforts are benefiting our results.

Selling, distribution and administrative costs held flat at 26.3% of sales in this quarter compared with the prior year. Again, highlighting the benefits of previous streamlining actions and our proactive management of these costs in anticipation of a more challenging market.

Net interest expense in the first quarter increased approximately $1 million due primarily to reduced interest income on our conservatively invested cash.

Miscellaneous income related primarily to the impact of exchange rates on foreign currency transactions yielded a favorable swing of $3.9 million between this quarter and last year.

Lastly, the income tax rate decreased in the quarter to 35.1% compared with 35.9% for the first quarter of 2008. This decrease was due primarily to a larger benefit from increased exports of goods manufactured in the U.S.

Now let’s look at the cash flow in the first quarter of fiscal 2009. Cash flow used in operation in the first three months of fiscal 2009 was $8.2 million. This reflects the typical use of cash in our first quarter to pay prior year incentive compensation and to annually fund certain non-qualified benefit obligations. In addition, we consumed cash as inventory increased due to higher costs of raw materials and components as well as temporarily raised inventory levels in order to appropriately serve customers during the manufacturing facility consolidations.

Capital expenditures and acquisitions consumed $12.5 million of cash for the quarter as we continue to invest in new products and capabilities. For the full fiscal year we are still committed to our long-term goal of generating free cash flow, as we define as cash flow from operations less capital expenditures, to exceed net income. We ended the quarter with cash of $264.6 million, down $32.5 million from year end. This reduction in cash reflects the use of cash in operations, investments in fixed assets, acquisitions and dividends paid to stockholders.

We continue to maintain financial flexibility as reflected by our net debt to capital ratio which was 15% at November 30, 2008. Our availability under our revolving credit facility is $241 million as of November 30, 2008.

I will conclude my prepared remarks with some additional information regarding our planned streamlining actions. As a result of these planned actions we recorded a pre-tax charge of $22.1 million in the first quarter of fiscal 2009. This is greater than we had previously indicated due to more aggressive actions and including a $1.6 million non-cash charge for the impairment of assets related to the consolidation of manufacturing facilities which had not been quantified at the time of our previous announcement.

The cash charge of $20.5 million consists primarily of severance to the approximately 800 people directly affected by these actions and will be paid out throughout much of fiscal year 2009. Regarding the benefits from these actions, as Vern said previously, we expect to realize approximately $45 million in annual savings once the actions are fully implemented.

For fiscal year 2009, we expect to realize savings of approximately $28 million with Âľ of this benefit in the second half of the year as the plant consolidations are completed. We expect to have approximately $2.5 million in additional costs that we will incur primarily in the second and third fiscal quarters of 2009 related to the planned actions that in accordance with accounting rules we are not able to include in the charge taken this quarter.

Thank you and I’ll now turn the call back to Vern.

Vernon Nagel

Thank you Ricky. As we look forward we obviously see challenges but more importantly opportunities. Without a doubt this is the most challenging economic environment most have experienced in decades. The rapid and steep decline in demand in overall construction markets has been unprecedented.

Similarly, the rise and then the dramatic fall off in commodity prices were equally unique. How long will these turbulent economic conditions prevail? Only time will tell. What we do know is key indicators for our traditional markets for residential and non-residential construction are signaling a significant decline in the available market for the balance of 2009.

Clearly it is impossible to know the future growth rate of the construction markets or for how long into the future these conditions may prevail. It is clear; those factors which influence the future growth rate of new construction including the future vitality of the economy, job creation, consumer sentiment, occupancy rates and the availability of capital are all signaling declines in future demand.

This information is all widely known. All this seems to support the forecast by independent third parties that unit volume for the construction put in place in the non-residential construction market could be down at least middle teens in 2009 compared to 2008.

So, again the two questions many shareholders may have; what are we doing to enhance our performance in this environment and most importantly what are our strategies to drive profitable growth?

First, we would like to share with you just a few key observations. With the construction forecast to be down, this creates a significant headwind for all companies serving construction in North America and Europe.

Second, originally we expected material costs to be significantly higher in 2009 compared with 2008. It certainly started out that way with commodity costs increasing dramatically in late summer and early fall. Now certain commodity costs have declined to levels in place before our August price increase.

For example, the cost of steel declined approximately 50% August through December. While we hope commodity costs will remain at current levels we are weary. Particularly regarding steel prices. Any increase in demand coupled with the ongoing reduction in capacity by steel producers could spark a rapid and significant increase in steel prices.

As I noted earlier the increase in commodity costs significantly impacted our results in the first quarter and because of our FIFO accounting policy and the method of purchasing materials we expect our gross profit and operating profit in the second quarter to be negatively impacted by at least $5 million as these higher cost materials are sold as finished goods.

Additionally, because certain commodity costs, particularly steel, have declined in some cases to pre-summer levels, we no longer expect to realize significant benefit from our price increase to customers effective for orders placed after the end of August 2008.

With regard to pricing in general, the overall market continues to be competitive which is nothing remarkable. We see different competitors in certain sectors and channels as well as certain geographies becoming more aggressive as they adjust to declining demand. Again this is not new to us. We remain diligent in our approach to pricing, seeking to differentiate our products and services on features and benefits and demonstrating our full value to customers.

Our strategy to maintain our disciplined approach coupled with new product introduction allowed us to improve our price mix meaningfully in the first quarter. Looking forward we continue to see opportunities in this environment and our strategy is to leverage our industry leading products and market presence as well as our considerable financial strength to capitalized on those opportunities.

So, our strategy to drive profitable growth in 2009 and beyond remains intact. Simply put, focus our considerable resources on the following four key areas: Customer service, organizational productivity, new, innovative and energy efficient products and expansion into new markets particularly renovation and re-light.

These four areas have been to varying degrees key elements to our strategy for the last few years yielding growth and upper quartile financial performance and we expect that to continue over the longer term.

First, with regard to customer service and productivity I cannot stress enough the positive impact our focused approach on providing customers with the very best value in the marketplace has had on our performance over the last three years. This has been due to a combination of innovative products, great quality, superior delivery and competitive pricing.

Further, we continue to better align our organization in a manner which accelerates our continuous improvement efforts in these critical areas of focus. Additionally, we believe the acceleration of our streamlining actions will allow us to enhance efficiencies while continuing to provide our customers with superior value.

Our efforts in these areas have proven to be a winning formula for us. As we noted earlier we expect to realize over $45 million in annualized savings from these actions by the time they are completed at the end of our fiscal 2009.

Second, we have consistently stated over the last three years that a key driver of the improvement in our profitability has been the introduction of new products and a better mix of products sold. Clearly these efforts have benefited our results this quarter. Newly innovative and highly energy efficient products that provide a superior lighting experience will continue to be the key to our future success.

In that regard, we are on path to introduce more products during 2009 than we have during any previous year in our company’s long history, enhancing our industry leading position.

For example, we introduced our Ecos line of LED down lighting products for the high end commercial buildings market incorporating proprietary technology. This line was received with great fanfare. While these new products will positively impact our 2009 results, particularly in the second half, we believe they have the opportunity for providing a meaningful impact in 2010 and beyond.

Third, we continue to accelerate our expansion into new markets including New York City and the renovation and re-light as well as our enhanced value proposition targeting more traditional segments of the market to better serve the needs of our existing customer base.

Of particular note is the renovation and re-light market. We continue to see great opportunity as higher energy costs and a desire for better lighting and greater awareness for a need for a more sustainable lighting solution comes to the forefront of thinking by business, government leaders and building owners throughout the world.

We are positioned well to not only participate in the evolving re-light industry but to accelerate that change and growth by providing unique, innovative solutions to meet the needs of our growing customer base. As I noted earlier, our revenues in the first quarter for this market held steady compared to the year-ago period at almost $20 million.

Additionally, yesterday’s announced acquisition of the assets of Lighting Control & Design will enhance our portfolio of lighting controls and energy management solutions thus providing opportunities to accelerate our growth in this dynamic and expanding market. We are very excited about the prospects of the LC&D team joining our family of companies. They have built an exceptional brand in the marketplace and we look forward to investing in their very bright future.

So what does all this mean for Acuity Brands for the balance of 2009? While our company policy is not to give annual earnings guidance, instead focusing on those key strategic and technical actions that can best help us achieve our long-term financial goals on a consistent basis, we do have a few observations which may provide you with insight into our focus for the balance of 2009 and beyond.

We expect pricing in the many markets to fall back to levels in place before the price increase announced in late August. Again, as a reminder, we said we expected the August price increase to cover higher raw material and component costs only. So from a profitability perspective this should have little impact once we get past the impact of the spike increases that I noted earlier.

We expect to continue to drive productivity in our business as we have consistently done in the past, targeting 70 basis points or more of margin improvement excluding the impact of the changes in unit volume. Excluding the streamlining charge, we expect to realize about $28 million in savings in fiscal 2009 from the streamlining efforts initiated this quarter. We expect unit volume in the construction portion of the market to be down. How much, we don’t know. But we are anticipating declines forecasted by Dodge and other independent groups to be in the mid teens on a percentage basis.

However, we hope to offset a portion of this market decline by expanding our presence in existing channels and geographies, entering new markets such as renovation and re-light and accelerating our introduction of new products and services which will be introduced at a record pace for us in 2009.

While we have a demonstrated track record of successfully executing our strategies, the uncertainty and volatility currently in the marketplace make it a challenge to precisely quantify how successful we will be in achieving our goals in 2009.

However, in summary we believe the execution of our longer term strategies to focus on productivity improvement, accelerate investments in innovative and energy efficient products, expand market presence in key sectors such as renovation and re-light and enhance services to our customers will provide growth opportunities which will enable us to out perform the market in 2009.

As we look beyond the current environment, because this too shall pass, we believe the lighting industry will experience solid growth over the next decade particularly as energy and environmental concerns come to the forefront and we are positioned well to fully participate in this exciting industry.

Thank you and with that we will entertain any questions you have.



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