DUBLIN (July 28, 2016):
Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported second-quarter 2016 net revenues of $584.9 million and net earnings of $95 million, or $0.98 per share from continuing operations. Excluding charges related to restructuring and acquisitions, adjusted net earnings were $96.1 million, or $0.99 per share, up 39.4 percent when compared with second-quarter 2015 adjusted EPS of $0.71.
Second-quarter net revenues increased 12.6 percent, when compared to the prior year period (up 8.9 percent on an organic basis). Reported revenues reflect positive organic growth and contribution from acquisitions that were partially offset by prior year divestitures and foreign currency. All regions delivered profitable growth reflecting stable markets and the benefit of growth investments in new products and channel strategies.
The Americas segment revenue increased 8.6 percent (up 9.8 percent on an organic basis). The strong growth in the quarter reflects continued growth in residential and non-residential markets, as well as the anticipated shift in revenue from first to second quarter related to an ERP implementation at one of the company’s primary manufacturing locations.
The EMEIA segment revenues increased 44.9 percent (up 3 percent on an organic basis), reflecting acquisitions, improved pricing, slightly improving markets and favorable foreign currency. Acquisitions contributed approximately $35 million in revenue in the quarter.
The Asia Pacific segment revenues were down 20 percent, when compared to the prior year period (up 12.9 percent on an organic basis). Excluding the previously divested system integration business from prior year results, organic growth was up 23.6 percent. The strong growth reflects strength in Australia and New Zealand multi-family and hospitality verticals, as well as China residential and transportation verticals.
Second-quarter reported operating margin was 21.3 percent, compared with 18.4 percent in 2015. On an adjusted basis, second-quarter operating margin was 21.5 percent, compared with 19.5 percent in 2015. The 200-basis-point improvement in adjusted operating margin was driven by favorable price, material deflation, productivity, product mix and volume leverage that more than offset increased investments and inflation. All regions delivered adjusted operating margin improvement in the quarter.
“The second quarter results once again demonstrate our ability to grow globally and to efficiently leverage incremental volume,” said David D. Petratis, Allegion chairman, president and CEO. “We’ve quickly recovered throughput related to the first quarter ERP implementation, and continue to benefit from growth in both residential and non-residential markets and our investments in the business.”
“I am pleased with the direction of the company and believe the business is performing at a high level,” Petratis added. “All regions delivered organic growth and margin expansion in the quarter, and we continue to remain focused on capital allocation with the acquisition of Trelock.”
Interest expense for the second quarter of 2016 was $5.2 million higher than the prior year, primarily due to the issuance of $300 million of senior notes in 2015.
Other income net for the second quarter of 2016 was $8.6 million primarily due to the sale of non-strategic marketable securities. When compared to other expense net for the second quarter of 2015 of $0.4 million, other income increased $9 million versus the prior year.
The company’s effective tax rate for the second quarter of 2016 was 18 percent, compared with 22.6 percent in 2015. The decrease in the effective tax rate is primarily due to favorable changes in the mix of income earned in lower rate jurisdictions.
Cash Flow and Liquidity
Year-to-date 2016 available cash flow was $84.7 million, an increase of $69.9 million versus the prior year. The company ended second-quarter 2016 with cash of $169.1 million and total debt of $1,485.7 million. The company did not have any borrowings outstanding under its $500 million revolving credit facility at June 30, 2016.
On June 30, 2016, the company completed the acquisition of Trelock GmbH (Trelock). Trelock is a portable safety and security provider headquartered in Münster, Germany, producing branded bicycle locks, lights and electronic control units that strengthen the company’s global portable security and safety offerings.
The company raises full-year 2016 revenue guidance with year-over-year growth of 8 to 9 percent, and organic growth estimates of 5 to 6 percent. The increase in organic growth versus prior guidance is driven by stronger volume in all regions.
The company also updates the full-year 2016 reported EPS with a range of $3.20 to $3.35, or $3.30 to $3.40 per share on an adjusted basis. Adjustments to 2016 EPS include estimated impacts for known restructuring and acquisition activities. The guidance assumes a full-year adjusted effective tax rate of approximately 19 percent from continuing operations, as well as an average diluted share count for the full year of approximately 97 million shares.
The company continues to target full-year available cash flow of approximately $280 to $300 million.
Conference Call Information
On Thursday, July 28, 2016, 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.
Allegion (NYSE: ALLE) is a global pioneer in safety and security, with leading brands like CISA®, Interflex®, LCN®, Schlage®, SimonsVoss® 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 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 ongoing operations. 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 2016 financial performance, the Company’s growth strategy, the Company’s capital allocation strategy, the Company’s tax planning strategies, the Company’s ability to successfully implement new information technology systems, and the performance of the markets in which the Company operates. These forward-looking statements are based on the Company's current available information and its current assumptions, expectations and projections about future events. They are subject to future events, risks and uncertainties - many of which are beyond the Company’s 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 Dec. 31, 2015, Form 10-Qs for the quarters ended March 31, 2016 and June 30, 2016 and in its other SEC filings. The Company assumes no obligations to update these forward-looking statements.
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