DUBLIN (April 27, 2017):
Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported first-quarter 2017 net revenues of $548.8 million and net earnings of $68.4 million, or $0.71 per share. Excluding charges related to restructuring and acquisitions, adjusted net earnings were $69.7 million, or $0.73 per share, up 19.7 percent when compared with first-quarter 2016 adjusted EPS of $0.61.
First-quarter net revenues increased 9.3 percent, when compared to the prior year period (up 8 percent on an organic basis). Reported revenues reflect strong organic growth and contribution from acquisitions that were partially offset by foreign currency.
The Americas segment revenue increased 12.3 percent (up 10.3 percent on an organic basis). The robust growth was driven by low-double digit organic growth in non-residential markets, solid performance of strategic initiatives and delayed shipments in prior year related to an ERP implementation. The newly acquired Republic Door business and favorable foreign currency also added to overall growth. In the residential business, revenues grew mid-single digits driven by solid markets and improved pricing.
“Allegion continues to perform at a superior level as demonstrated by our strong start in 2017,” said David D. Petratis, Allegion chairman, president and CEO. “In the first quarter, the Americas led that success through our channel initiatives, electronics growth and strong market demand in both non-residential and residential businesses.”
The EMEIA segment revenues were down 0.1 percent (up 1.3 percent on an organic basis), reflecting unfavorable foreign currency predominantly offset by organic growth and contribution from acquisitions. The organic growth was primarily driven by improved price realization and solid growth in the SimonsVoss business.
The Asia Pacific segment revenues increased 9.6 percent, when compared to the prior year period (up 4.8 percent on an organic basis). The strong growth in Australia and New Zealand added to favorable contributions from acquisitions and favorable foreign currency.
First-quarter 2017 operating income was $98.8 million, an increase of $16.3 million or 19.8 percent over 2016. Adjusted operating income in first-quarter 2017 was $100.7 million, representing an increase of $16.1 million or 19 percent compared to 2016.
First-quarter 2017 operating margin was 18 percent, compared with 16.4 percent in 2016. The adjusted operating margin in first-quarter 2017 was 18.3 percent, compared with 16.8 percent in 2016. The 150-basis-point improvement in adjusted operating margin was driven by strong volume leverage along with favorable price, productivity and product mix that more than offset increased investments and inflation. All regions delivered adjusted operating margin improvement in the quarter.
“We continue to deliver profitable growth by remaining laser focused on the execution of our strategy. The strong returns that we see from our organic investments are key to driving above-market growth and increasing shareholder value,” Petratis added.
Interest expense for first-quarter 2017 was $15.9 million, down slightly from the $16.3 million for first-quarter 2016.
Other expense net for first-quarter 2017 was $0.6 million. This compares to other income net for first-quarter 2016 of $8.8 million, which included contributions from the sale of non-strategic marketable securities.
The company’s effective tax rate for first-quarter 2017 was 16.5 percent, compared with 21.6 percent in 2016. The company’s adjusted effective tax rate for first-quarter 2017 was 16.9 percent, compared with 21.8 percent in 2016. The decrease in the adjusted effective tax rate is primarily due to favorable discrete tax items partially offset by mix of income earned in higher tax rate jurisdictions.
Cash Flow and Liquidity
Year-to-date 2017 available cash flow was negative $48.7 million, down $40.5 million versus the prior year. The year-over-year decrease in available cash flow is primarily due to a previously announced $50 million discretionary pension funding payment partially offset by increased earnings.
The company ended first-quarter 2017 with cash of $189.6 million and total debt of $1,451.9 million. The company did not have any borrowings outstanding under its $500 million revolving credit facility at March 31, 2017.
During the first quarter of 2017, the company repurchased approximately 0.4 million shares for approximately $30 million related to the $500 million share repurchase authorization approved by the company's board of directors in February 2017.
The company affirms full-year 2017 revenue guidance reflecting total growth and organic growth of 5.5 to 6.5 percent compared to 2016.
The company updated the full-year 2017 reported EPS with a range of $3.57 to $3.72, or $3.60 to $3.75 per share on an adjusted basis. Adjustments to 2017 EPS include estimated impacts for restructuring and acquisition activities. The guidance assumes a full-year adjusted effective tax rate of approximately 18.5 to 19.5 percent, as well as an average diluted share count for the full year of approximately 96 million shares.
The company continues to target full-year available cash flow of approximately $300 to $320 million (inclusive of the $50 million discretionary pension funding payment).
Conference Call Information
On Thursday, April 27, 2017, 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 a.m. ET, 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 approximately 130 countries.
For more, visit www.allegion.com.
This news release also includes adjusted non-GAAP financial information which should be considered supplemental to, not a substitute for, or superior to, the financial measure calculated in accordance with GAAP. Further information about the adjusted non-GAAP financial tables is attached to this news 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 2017 financial performance, the Company’s growth strategy, the Company’s capital allocation strategy, the Company’s tax planning strategies, 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, 2016, Form 10-Q for the quarter ended March 31, 2017, and in its other SEC filings. The Company assumes no obligations to update these forward-looking statements.
For more information and our financial tables, please download our full earnings release below.
To view the webcast, please see our investor relations events and presentations.