Dublin, Ireland - October 30, 2014: Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported third quarter 2014 net revenues of $546.7 million, up 3.3 percent compared to the prior year, and net earnings of $62.4 million, or $0.64 per share from continuing operations. This compares with net earnings of negative $77.7 million, or negative $0.81 per share from continuing operations, for the 2013 third quarter.
Third quarter net revenues increased 6.8 percent on an adjusted basis (up 6.4 percent on an adjusted organic basis). The increase in revenues is due to strength in the Americas and Asia Pacific segments offsetting lower EMEIA revenue. The Americas segment growth was driven by mid-single digit volume increases in both the non-residential and residential segments. The Asia Pacific segment delivered modest volume growth and benefited from a previously announced acquisition. The EMEIA segment revenues were impacted by continued market softness, geopolitical uncertainty and divested businesses in the current year.
Adjusted net earnings were $65.5 million, or $0.68 per share from continuing operations, an increase of approximately 42 percent as compared to prior year. The increase in earnings reflect strong demand in the Americas, continued margin improvement in EMEIA and a reduction in the effective tax rate.
Third quarter operating margin was 19.3 percent compared with negative 4.0 percent in 2013. Third quarter adjusted operating margin was 20.2 percent compared with 18.7 percent in 2013, an increase of +150 basis points. Adjusted operating margin was up year-over-year in all regions as favorable price, volume leverage and productivity more than offset increased investments and inflation.
"We grew revenue in uncertain markets, and continue to deliver industry leading margin performance with year-over-year improvement in all regions," said David D. Petratis, chairman, president and chief executive officer. "I am pleased with the solid operational leverage of our business as we continue to execute on our growth strategies while making investments to position the company for the future."
The Company also reported negative $2.1 million or negative $0.02 per share in the third quarter from discontinued operations. This compares with 2013 discontinued operations of negative $0.4 million. The discontinued operations are related to the previously announced divestiture of the United Kingdom (UK) Door businesses.
Interest expense for the third quarter of 2014 was $12.2 million higher than the prior period due to the additional indebtedness incurred as a result of the spin-off from Ingersoll Rand. The Company's adjusted effective tax rate for the third quarter of 2014 was 29.0 percent. The comparable adjusted effective tax rate for the third quarter of 2013 was 49.3 percent.
Cash Flow and Liquidity
Year-to-date 2014 available cash flow was $135 million, down $9.7 million versus prior year. The year-over-year decrease in available cash flow reflects increased capital expenditures related to new product development, information systems and spin related projects. The Company ended third quarter 2014 with cash of $251.4 million and total debt of $1,279.5 million. The Company did not have any borrowings outstanding under its $500 million revolving credit facility at September 30, 2014. As previously announced, the Company has completed an amendment and extension of its senior credit facility. Assuming LIBOR rates remain constant, the refinancing would result in approximately $5 million of annual interest expense savings.
During the third quarter of 2014, the Company repurchased approximately 0.4 million shares with an average price paid per share of $51.07 for approximately $20 million under the Company's $200 million share repurchase program.
Allegion expects full-year revenues to increase approximately 4.5 percent versus prior year on an adjusted basis. For the remainder of the year, the Company expects modest market growth in the Americas, favorable timing of system integration revenues in Asia Pacific offsetting weakness in the EMEIA region. The Company is raising adjusted EPS guidance to a range of $2.37 to $2.42. Restructuring, spin costs and the write-off of unamortized debt issuance costs are expected to be approximately $0.30 per share. Including these costs, EPS for 2014 continuing operations are expected to be in the range of $2.07 to $2.12. The outlook includes a full year effective tax rate of approximately 28 percent from continuing operations, reflecting the execution of our tax planning strategies. The average diluted share count for the full year is forecasted to be approximately 97 million shares. The updated outlook assumes the official exchange rate for the Venezuelan bolivar and does not take into consideration the impact of a potential currency devaluation in Venezuela. The Company continues to target available cash flow that approximates net earnings from continuing operations.
Conference Call Information
On Thursday, October 30, David D. Petratis, chairman, president and chief executive officer, and Patrick Shannon, senior vice president and chief financial officer, will conduct a conference call for analysts and investors, beginning at 8:30 a.m. E.T., to review the Company's results.
A real-time, listen-only webcast of the conference call will be broadcast live over the Internet. Individuals wishing to listen can access the call through the Company's website at http://investor.allegion.com.
Allegion (NYSE: ALLE) creates peace of mind by pioneering safety and security. As a $2 billion provider of security solutions for homes and businesses, Allegion employs more than 8,000 people and sells products in more than 120 countries across the world. Allegion comprises 25 global brands, including strategic brands CISA®, Interflex®, LCN®, Schlage® and Von Duprin®.
For more, visit www.allegion.com.
The Company has presented revenue, operating income, operating margin, EBITDA, EBITDA margin, earnings from continuing operations, diluted earnings per share (EPS) from continuing operations and effective tax rate on both a U.S. GAAP basis and on an adjusted basis because the Company's management believes it may assist investors in evaluating the Company's on-going operations as a standalone company. The Company believes these non-GAAP disclosures provide important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. Investors should not consider these non-GAAP measures as alternatives to the related GAAP measures. A reconciliation of the non-GAAP measures used to their most directly comparable GAAP measure is presented as a supplemental schedule to this earnings release.
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's 2014 financial performance, the Company's growth strategy, the Company's capital allocation strategy, the Company's tax rate strategies, the Company's Europe, Middle East, India and Africa (EMEIA) strategy and the performance of the markets in which the Company operates. These forward-looking statements are based on the Company's currently available information and our current assumptions, expectations and projections about future events. They are subject to future events, risks and uncertainties - many of which are beyond our control - as well as potentially inaccurate assumptions, that could cause actual results to differ materially from those in the forward-looking statements. Further information on these factors and other risks that may affect the Company's business is included in filings it makes with theSecurities and Exchange Commission from time to time, including its Form 10-K for the year ended December 31, 2013, Form 10-Q for the quarter ended March 31, 2014, and the Form 10-Qs for the quarters ended June 30, 2014 and September 30, 2014. The Company assumes no obligations to update these forward looking statements.
For more information and our financial tables, please see our full earnings release.
To view the webcast, please see our investor relations events and presentations.