Acuity Brands Reports Record Second Quarter Results.

ATLANTA -- Acuity Brands, Inc. (NYSE: AYI) today announced record results for the second quarter of fiscal 2008, including a 64 percent increase in diluted earnings per share (EPS) from continuing operations of $0.82 compared with $0.50 for the prior year period. Income from continuing operations for the second quarter of fiscal 2008 rose 55 percent to $34.1 million compared with $22.0 million for the prior year second quarter. The Company generated record second quarter net sales of $482.6 million, an 8.6 percent increase over $444.3 million reported in the year-ago period. The results for both periods exclude the specialty chemicals business, which was spun off to the shareholders of Acuity Brands on October 31, 2007 as Zep Inc. The historical results of the specialty chemicals business are now reported in discontinued operations of the Company.

Vernon J. Nagel, Chairman, President, and Chief Executive Officer of Acuity Brands said, "We are very pleased to report record quarter-over-quarter results from continuing operations for the 12th quarter in a row. Our strong second quarter performance reflects the benefits from programs implemented to create greater value for our customers, to invest in our associates to be more customer-focused and productive, and to more effectively deploy our assets to generate greater returns for our stakeholders."

The year-over-year increase in net sales reflects an enhanced mix of products sold, more favorable pricing, and unit volume growth. Additionally, net sales from the prior year's acquisition of Mark Architectural Lighting and favorable foreign currency translation of international sales each contributed approximately one percentage point to the year-over-year growth in net sales.

Operating profit for the second quarter of fiscal 2008 was $60.7 million, or 12.6 percent of net sales, as compared to prior year's $39.7 million, or 8.9 percent of net sales. The year-over-year 370 basis point improvement in operating profit margin was due to several factors including: a better mix of products sold driven by new products; more favorable pricing; incremental profit contribution on unit volume growth; and improved productivity.

The Company also achieved record results for the first half of fiscal year 2008 including diluted earnings per share from continuing operations, income from continuing operations, and net sales. Diluted earnings per share from continuing operations for the six months ended February 29, 2008 was $1.54, an increase of 31 percent compared to $1.18 per share for the prior year period. Income from continuing operations for the first half of fiscal 2008 rose to $65.1 million, an increase of 26 percent versus the year-ago period while net sales climbed 7.5 percent to $991.4 million. Results for the first half of fiscal 2008 include a special charge of $14.6 million, or $0.21 per diluted share, recorded in the first quarter. The special charge relates to actions to streamline and simplify the Company's organizational structure and operations as a result of the spin-off of Zep Inc. The Company expects to realize annual cost savings of approximately $14 million as a result of its reorganization efforts. The full benefits are expected to be realized beginning in the first quarter of fiscal 2009.

Acuity Brands completed the spin-off of Zep Inc. on October 31, 2007. Therefore, the Company reflects the results of Zep Inc. as a discontinued operation reported as a one-line item on the income statement. For the first half of fiscal 2008, the Company reported income from discontinued operations of $0.1 million, or effectively no impact on diluted earnings per share, compared to the prior year's first half income of $6.4 million, or $0.15 per diluted share. Income from discontinued operations for the first half of fiscal 2008 includes non-tax-deductible spin-off costs of $5.5 million, or $0.13 per diluted share, primarily for legal and professional fees.

Including the results of discontinued operations, the Company reported first half fiscal 2008 diluted earnings per share of $1.55, or $65.2 million of net income, compared to $1.32 diluted earnings per share in the first half of fiscal 2007, or $57.9 million of net income.

Cash and cash equivalents at the end of the second quarter totaled $185.1 million, a decrease of $28.6 million from the $213.7 million at the beginning of the fiscal year. During the six months ending February 29, 2008, the Company repurchased nearly 2.9 million shares of outstanding common stock at a cost of approximately $130 million. The use of cash for stock repurchases was partially offset by a $62.5 million cash dividend received from Zep Inc. prior to the spin-off.

Outlook

Mr. Nagel commented, "We remain positive about our performance for the remainder of fiscal 2008. As such, this year we expect to meet or exceed our long-term financial goals including operating margin expansion, earnings growth, and cash flow generation.

"Our backlog at the end of the second quarter was $163 million, down 2 percent versus the prior year; the decline was due primarily to improved cycle times, the timing of certain orders, and a reduction in late backlog. More importantly, incoming orders in March continued at a positive pace compared with the year ago period. To help offset a recent spike in various commodity prices, we recently announced a price increase ranging between 3 and 10 percent, effective early May. Also, we expect to realize benefits from our on-going initiatives to improve productivity and contain costs, including expected savings from efforts to streamline the organization announced in the first quarter of fiscal 2008. In addition, we continue to position the Company, by expanding our extensive product offerings and enhancing our service capabilities, to benefit from opportunities in the growing renovation and the lighting retrofit markets as businesses seek to reduce energy costs and improve aesthetics.

"Looking ahead to the second half of 2008 and beyond, we continue to see challenges as well as opportunities. While the United States economy is experiencing a slowdown resulting from the disruption in the housing and credit markets, it is impossible to predict the precise timing or impact on the growth rate of non-residential construction, the Company's primary market. Several factors influence the future rate of growth of new construction in the non-residential market including: economic vitality, employment, commercial property values and rental rates, occupancy rates, the cost and availability of financing for new construction, the costs of building materials, and to a lesser degree the relative strength of the housing market. Concerns by building owners and developers regarding several of these factors, particularly current economic vitality, as well as availability of capital to fund projects, contributed to the decline in reported non-residential contract awards for February 2008, potentially a harbinger for decline in future commercial construction activity in certain sectors of the market. Although these concerns are worrisome, the Federal Reserve and the U.S. Treasury implemented a number of actions designed to boost investor and public confidence about the overall direction of the U.S. economy, including lowering interest rates and increasing liquidity in the financial markets. We expect these actions will have a positive influence on the longer-term trends for overall construction in North America."

Mr. Nagel concluded, "We believe both past and future actions to provide customers with superior value propositions, create new and innovative products and services, expand into new markets, and simplify and streamline the organization will enhance the Company's opportunity to prosper over the long-term."

Please see the Company's Form 10-Q filed with the Securities and Exchange Commission today for more information on fiscal 2008 results. You may access the 10-Q through the Company's website at www.acuitybrands.com.

Conference Call

As previously announced, the Company will host a conference call to discuss second quarter results today at 10:00 a.m. ET. Interested parties may listen to this call live today or hear a replay at the Company's Web site: www.acuitybrands.com.

Acuity Brands, Inc. owns and operates Acuity Brands Lighting. With fiscal year 2007 net sales of approximately $2.0 billion, Acuity Brands Lighting is one of the world's leading providers of lighting fixtures and related services and includes brands such as Lithonia Lighting[R], Holophane[R], Peerless[R], Mark Architectural Lighting[R], Hydrel[R], American Electric Lighting[R], Gotham[R], Carandini[R], SpecLight[R], MetalOptics[R], Antique Street Lamps[TM], and Synergy Lighting Controls[R]. Headquartered in Atlanta, Georgia, Acuity Brands employs approximately 7,000 associates and has operations throughout North America and in Europe and Asia.

Forward-Looking Statements 

This release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that may be considered forward-looking include statements incorporating terms such as "expects," "believes," "intends," "anticipates," "may," and similar terms that relate to future events, performance, or results of the Company and specifically include statements made in this press release regarding: (a) realization of annual cost savings of approximately $14 million as a result of the Company's reorganization efforts, (b) optimism concerning performance for the remainder of fiscal 2008 and meeting or exceeding the Company's long-term financial goals including operating margin expansion, earnings growth, and cash flow generation; (c) realization of benefits from on-going initiatives to improve productivity and contain costs including expected savings from efforts to streamline the organization announced in the first quarter of fiscal 2008; and (d) the expectation that actions taken by the Federal Reserve and the U.S. Treasury will have a positive influence on the longer-term trends for overall construction in North America. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the historical experience of Acuity Brands 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. Please see the other risk factors more fully described in the Company's SEC filings including the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 3, 2008. A variety of other risks and uncertainties are discussed in the Company's filings with the SEC, including the risks discussed in Part I, "Item 1a. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended August 31, 2007. The discussion of those risks is specifically incorporated herein by reference. Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events.

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