DUBLIN (April 30, 2015):
Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported first-quarter 2015 net revenues of $458.7 million and net earnings of $45.6 million, or $0.47 per share from continuing operations. Excluding charges related to a Venezuela currency devaluation, adjusted net earnings were $49.7 million, or $0.51 per share, up 15.9 percent compared with 2014 adjusted EPS.
First-quarter net revenues decreased 1.7 percent compared to the prior year period (up 5.9 percent on an organic basis). The Americas segment increased total revenue by 2.6 percent (up 7.7 percent on an organic basis), driven by high single-digit non-residential growth and low single-digit residential (excluding Venezuela) growth. The Asia Pacific segment grew revenue 3.2 percent (up 1.4 percent on an organic basis) and the EMEIA segment revenues were down 17.6 percent (up 0.7 percent on an organic basis).
First-quarter operating margin was 15.5 percent, compared with 14.5 percent in 2014. First-quarter adjusted operating margin was 16.4 percent, compared with 16.5 percent in 2014. Adjusted operating margin was slightly down year-over-year as favorable price, volume leverage and productivity were more than offset by increased investments, inflation and currency exchange.
“We posted solid results in the first quarter with EPS up nearly 16 percent and remain on track to achieve the objectives we communicated during our investor day,” said David D. Petratis, Allegion chairman, president and chief executive officer. “Organic revenue grew nearly 6 percent with contributions from all regions. As expected, adjusted margins were relatively flat in the first quarter reflecting investments in our new products and channel initiatives, as well as absorbing the challenges of currency headwinds.”
“I was especially pleased with the revenue growth of the Americas non-residential business as well as a 200 basis point increase in EMEIA margins reflective of our ongoing improvement plan,” Petratis added. “We remain focused on execution of our capital allocation plan with a $30 million share repurchase and announced acquisitions of Brio and Zero International.”
In February 2015, the Venezuelan government announced changes to its exchange rate system that included the launch of a new, market-based system called the Marginal Currency System, or “SIMADI,” that replaced the SICAD II rate. The Company adopted the SIMADI rate after its introduction and recorded a charge of $7.0 million (before tax and non-controlling interest), or $0.04 per diluted share. The charge includes remeasurement of net monetary assets ($2.8 million) and a non-cash impairment charge to adjust Venezuelan inventory balances ($4.2 million).
Interest expense for the first quarter of 2015 was $1.5 million lower than the prior year as a result of the refinancing of the Company’s senior credit facility in 2014 and lower debt balances.
Other expense net items for the first quarter of 2015 were $3.2 million worse than the prior year, reflecting the previously mentioned Venezuelan asset remeasurement charge.
The Company's adjusted effective tax rate for the first quarter of 2015 was 20.2 percent. The comparable adjusted effective tax rate for the first quarter of 2014 was 29.8 percent. The decrease reflects the favorable changes in the Company’s mix of income earned in lower rate jurisdictions.
Cash Flow and Liquidity
Available cash flow was negative $4.8 million for first quarter 2015, an improvement of $4.4 million versus the prior year. The Company ended first quarter 2015 with cash of $229.6 million and total debt of $1,252.1 million. The Company did not have any borrowings outstanding under its $500 million revolving credit facility as of March 31, 2015.
During the first quarter of 2015, the Company repurchased approximately 0.5 million shares for approximately $30.0 million related to the $200 million share repurchase program approved by the Company's board of directors in February 2014.
As previously announced, Allegion's board of directors declared a quarterly dividend of $0.10 per ordinary share of the Company. The dividend is payable June 30, 2015, to shareholders of record on June 16, 2015.
The Company affirms previous full-year guidance of adjusted EPS from continuing operations of $2.65 to $2.75 per share and reported EPS from continuing operations of $2.61 to $2.71. The guidance assumes 2015 full-year organic revenue, which excludes currency and acquisitions, to increase in the range of 3.5 to 4.5 percent compared with 2014. The improvement in organic growth versus prior guidance is driven by stronger Americas volume. Full-year 2015 reported revenues are forecasted to decline 3.5 to 4.5 percent. The decline in total revenue projections versus prior guidance reflects increased currency headwinds in the EMEIA region.
Furthermore, the guidance assumes a full-year effective tax rate of approximately 22 percent from continuing operations as well as an average diluted share count for the full-year of approximately 97 million shares. This guidance assumes minimal earnings contribution from the Company’s Venezuela operations given exchange rate volatility.
The Company continues to target available cash flow of approximately 95 percent of net earnings from continuing operations.
Conference Call Information
On Thursday, April 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. EDT, to review the Company's results.
A real-time, listen-only webcast of the conference call will be broadcast live online. Individuals wishing to listen may access the call through the Company's website at http://investor.allegion.com.
Allegion (NYSE: ALLE) is a global pioneer in safety and security, with leading brands like CISA®, Interflex®, LCN®, Schlage® and Von Duprin ®. Focusing on security around the door and adjacent areas, Allegion produces a range of solutions for homes, businesses, schools and other institutions. Allegion is a $2 billion company, with products sold in almost 130 countries.
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 2015 financial performance, the Company's growth strategy, the Company's capital allocation strategy, the Company’s tax planning 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 the Securities and Exchange Commission from time to time, including its Form 10-K for the year ended December 31, 2014, Form 10-Q for the quarter ended March 31, 2015 and in our other SEC filings. 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.