29.10.2015

Allegion Reports Third-Quarter 2015 Financial Results

DUBLIN (Oct 29, 2015) – 

  • Third-quarter 2015 net loss per share from continuing operations of ($0.28) inclusive of one-time disposal charges, compared with 2014 earnings per share (EPS) of $0.65; adjusted 2015 EPS of $0.92, up 35.3 percent compared with 2014 adjusted EPS of $0.68
  • Third-quarter 2015 revenue of $544.5 million, down 0.4 percent compared to 2014, up 5.1 percent on an organic basis
  • Third-quarter 2015 operating margin of 20.3 percent, compared with 2014 operating margin of 19.4 percent; adjusted operating margin of 21.5 percent, improved 120 basis points compared with 2014 adjusted operating margin of 20.3 percent
  • Full-year 2015 EPS from continuing operations outlook of $1.46 to $1.51, and $2.85 to $2.90 per share on an adjusted basis (previously $2.70 to $2.80 on an adjusted basis)2.65 to $2.75 on an adjusted basis)

Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported third-quarter 2015 net revenues of $544.5 million and net loss of $27.1 million, or $0.28 loss per share from continuing operations. Excluding charges related to restructuring, acquisitions and divestitures, adjusted net earnings were $89.5 million, or $0.92 per share, up 35.3 percent when compared with third-quarter 2014 adjusted EPS of $0.68.

Third-quarter net revenues decreased 0.4 percent, when compared to the prior year period (up 5.1 percent on an organic basis). Electronic product sales grew more than 30 percent in the quarter, reflecting the benefit of increased innovation and new product introductions. 

The Americas segment revenue decreased 1 percent (up 7 percent on an organic basis). The organic growth was driven by strong non-residential and residential performance. Overall revenue declined due to unfavorable foreign currency and the divestiture of the company’s Venezuelan business, partially offset by the benefit of prior acquisitions.

The EMEIA segment revenues increased 2.2 percent (up 2.2 percent on an organic basis), reflecting improved pricing, soft but stable markets and acquisitions that more than offset unfavorable foreign currency.

The Asia Pacific segment revenues were flat, when compared to the prior year period (down 10.2 percent on an organic basis). Strong growth in the hardware business and favorable contribution from acquisitions offset unfavorable foreign currency and a decline in the system integration business, Bocom Wincent, that reflects softening local economies as well as the delay and timing of large projects.   

Third-quarter adjusted operating margin was 21.5 percent, compared with 20.3 percent in 2014. The 120-basis-point improvement in adjusted operating margin was driven by favorable price, volume leverage, acquisitions and productivity that more than offset increased investments, inflation and unfavorable foreign exchange rates. All regions delivered adjusted operating margin improvement in the quarter.

“We continue to execute at a very high level, delivering industry-leading organic growth and margins,” said David D. Petratis, Allegion chairman, president and CEO. “We are achieving strong results while executing on a significant number of initiatives. In the past few months, we’ve finalized three acquisitions, completed one divestiture and announced another, issued $300 million of senior notes, completed the amendment of our credit facility and achieved ratification of our restructuring plan for our Italian operations.”

“Organic growth throughout the last 12 months has exceeded 6 percent for the business, led by double-digit electronics growth,” Petratis added. “Our electronics portfolio continues to expand, now including the addition of Schlage Sense – our most advanced residential lock yet with Grade 1 security, built-in alarm technology and smart phone capability.”

Additional Items

The company's adjusted effective tax rate for the third quarter of 2015 was 15.1 percent. The comparable adjusted effective tax rate for the third quarter of 2014 was 28.9 percent. The decrease reflects the favorable changes in the company’s mix of income earned in lower-rate jurisdictions and the benefit of discrete tax items recorded in the quarter.

Divestitures

As previously announced in August 2015, the company divested its majority ownership in its Venezuelan business.  Consistent with that announcement, reported results reflect a $26.1 million non-cash charge, which primarily represents cumulative currency translation adjustments that have been deferred in equity and reclassified to a loss in net earnings from continuing operations.

Furthermore, as previously announced, the company has agreed to sell a majority stake in its Bocom Wincent Technologies Co., Ltd. business. Aligned with that communication, the company recorded a charge of $84.4 million in the third quarter as a result of the difference between the anticipated net proceeds and net book value.

The charges related to the Venezuelan business and Bocom Wincent are reflected as “loss on divestitures” in the attached income statement and are included as adjustments to earnings in the attached non-GAAP reconciliation.

Cash Flow and Liquidity

Year-to-date 2015 available cash flow was $98.7 million, down $36.3 million versus the prior year. The year-over-year decrease in available cash flow primarily reflects increased operating cash requirements and one-time cash tax payments, partially offset by a decrease in capital expenditures. 

The company ended third-quarter 2015 with cash of $175.2 million and total debt of $1,634.9 million. In September, the company issued $300 million in 5.875 percent senior notes due 2023. The company has nearly $400 million available under its $500 million revolving credit facility as of Sept. 30, 2015.

Acquisitions

On July 31, 2015, the company completed the acquisition of Milre Systek Co., Ltd. (Milre). Milre is a leading security solutions manufacturer in South Korea, focused on producing high-quality and innovative electronic door locks.

On Sept. 1, 2015, the company completed the acquisition of SimonsVoss Technologies GmbH (SimonsVoss) for approximately $230 million. SimonsVoss, headquartered in Munich, Germany, brings a legacy of global experts, innovation and technical expertise in the European electronic lock market segment. SimonsVoss generated sales of approximately $69.2 million in 2014.

On Sept. 1, 2015, the company completed the acquisition of AXA Stenman Holding (AXA) for approximately $208 million. AXA is a European residential and portable security provider headquartered in Veenendaal, the Netherlands, with production facilities in the Netherlands, France and Poland. AXA manufactures and sells a branded portfolio of portable locks and lights as well as a wide variety of window and door hardware. AXA generated sales of approximately $79.8 million in 2014.

2015 Outlook

The company is increasing its adjusted earnings per share to $2.85 to $2.90 (previously $2.70 to $2.80). The company is updating its guidance for reported EPS from continuing operations to a range of $1.46 to $1.51. Adjustments to EPS include the impact of the Venezuelan devaluation in the first quarter, acquisition expenses, expenses related to the company’s previously announced restructuring plan in Italy and charges related to the disposal of the company’s Venezuelan and Bocom Wincent businesses.

The guidance assumes 2015 full-year organic revenue growth, which excludes currency and acquisitions, in the range of 2.5 to 4 percent compared with 2014 (previous guidance up 4 to 5 percent). The decrease in organic growth versus prior guidance is driven by a reduction in Bocom Wincent revenue estimates in the fourth quarter, partially offset by stronger volume in the Americas. Full-year 2015 reported revenues are forecasted to decline 1.5 to 2.5 percent compared to 2014 (previous guidance down 2.5 to 3.5 percent). The improvement in total revenue projections versus prior guidance reflects inclusion of closed acquisitions.

The guidance assumes a full-year adjusted effective tax rate of approximately 20 percent from continuing operations, as well as an average diluted share count for the full year of approximately 97 million shares.

The company estimates full-year available cash flow of approximately $200 million.

Subsequent Events

In October 2015, the company reached an agreement to provide severance benefits to certain employees in Italy as part of its previously announced 2015 Italian restructuring plan. As a result of the agreement, the company will record additional severance charges of approximately $8.4 million in the fourth quarter. The estimated charges are reflected in the current reported EPS guidance and will result in cash expenditures, primarily in 2016.

Conference Call Information

On Thursday, Oct. 29, 2015, David D. Petratis, chairman, president and CEO, 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

About Allegion™

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.

Non-GAAP Measures

The Company has presented 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. 

Forward-Looking Statements

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 Italian restructuring plan, the performance of the markets in which the Company operates and the Company’s announced divestiture of Bocom Wincent, including the ability to timely close and the expected impact. 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-Qs for the quarters ended March 31, June 30 and September 30, 2015, and in our other SEC filings. The Company assumes no obligations to update these forward-looking statements.

For full financial tables and results, download the complete press release below.

Contact:

Media:
Maria Pia Tamburri - Director, Public Affairs
+1.317.810.3399
Maria.Taburri@allegion.com

Analysts:
Tom Martineau - Director, Investor Relations
+1.317.810.3759
Tom.Martineau@allegion.com

Source: Allegion plc

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