DUBLIN, Ireland, April 30, 2014 - Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported first quarter 2014 net revenues of $472.5 million, down 0.2 percent compared to the prior year, and EPS from continuing operations of $0.37 per share.
Excluding the impact of one-time separation costs and other special items, net revenues increased 3.7 percent on an adjusted basis (up 3.0% on an organic basis). Adjusted EPS from continuing operations were $0.44 per share which is slightly down from prior year as favorable operating results, lower tax rate, and a prior-year one-time foreign exchange loss was more than offset by higher interest expense and investment.
For the first quarter of 2014, operating margin was 14.1 percent (16.1 percent on an adjusted basis). Operating margin in the first quarter of 2013 was 14.5 percent (16.1 percent on an adjusted basis). Adjusted operating margin was consistent year-over-year as favorable price, volume and productivity offset increased investments, inflation and unfavorable business mix.
“In the first quarter, we delivered solid results as all regions contributed to an increase of 3.7 percent in adjusted revenue,” said David D. Petratis, chairman, president and chief executive officer. “We continue to invest in our growth platform including electronic offerings, channel effectiveness and acquisitions.”
“Although first quarter weather disrupted economic activity and impacted commercial shipments, we compensated with continued residential growth. We still see opportunity in North America for full-year non-residential growth in the low to mid-single digits weighted to the second half of the year. And we continue to make progress in Europe to improve margin and operating performance,” Petratis added.
*Adjustments to GAAP revenue, operating margin, and EPS from continuing operations consist of items such as the impact of change in order flow through the Company's consolidated joint venture in Asia, restructuring charges, and one-time separation costs related to the spin-off from Ingersoll Rand to better illustrate year over year performance. Please see the disclosure below and the supplemental schedules attached to this earnings release for additional information regarding these adjustments.
Interest expense for the first quarter of 2014 was $12.7 million higher than the prior period due to $1.3 billion of additional indebtedness incurred as a result of the spin-off from Ingersoll Rand. The Company's effective tax rate for the first quarter of 2014 was 30.3%. The comparable effective tax rate for the first quarter of 2013 was 32.3%.
Cash Flow and Liquidity
Available cash flow was negative $10.1 million for first quarter 2014 reflecting normal seasonality. In first quarter 2013, available cash flow was negative $4.9 million. The year-over-year decrease in available cash flow reflects increased investment in capital projects and one-time separation costs. The Company ended first quarter 2014 with unrestricted cash of $205.4 million and total debt of $1,334.9 million, of which $40.1 million is collateralized by restricted cash of the same amount. The Company did not have any borrowings outstanding under its $500 million revolving credit facility at March 31, 2014.
On April 9, 2014, Allegion's board of directors declared a quarterly dividend of $0.08 per ordinary share. The dividend is payable June 30, 2014, to shareholders of record June 16, 2014.
Allegion affirms previous guidance of adjusted EPS from continuing operations of $2.25 to $2.40 per share and GAAP reported EPS from continuing operations of $1.95 to $2.15. This guidance assumes full-year revenue growth of 0.9% to 1.9%, adjusted revenue growth of 3.5% to 4.5%, and restructuring and spin-off costs of $0.25 to $0.30 per share, net of tax. This guidance includes additional interest expense of $0.27 per share, net of tax, representing the full year impact of the additional indebtedness associated with the spin-off from Ingersoll Rand and assumes an effective tax rate of approximately 31%. The Company's 2014 guidance 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, May 1, 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 8:00 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 27 global brands, including strategic brands CISA®, Interflex®, LCN®, Schlage® and Von Duprin®.
For more, visit http://www.allegion.com.
The Company has presented revenue, operating income, operating margin, EBITDA, EBITDA margin, earnings from continuing operations, and diluted earnings per share (EPS) from continuing operations 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 Europe, Middle East, India and Africa (EMEIA) strategy and the strength of the markets in which the Company operates. These forward-looking statements are based on the Company's current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these 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, 2013 and in our other SEC filings. The Company assumes no obligations to update these forward looking statements.
To view the webcast, please see our investor relations events and presentations.