DUBLIN (July 27, 2017):
Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported second-quarter 2017 net revenues of $627 million and net earnings of $105.5 million, or $1.10 per share. Excluding charges related to restructuring and acquisitions, adjusted net earnings were $106.8 million, or $1.11 per share, up 12.1 percent when compared with second-quarter 2016 adjusted EPS of $0.99.
Second-quarter net revenues increased 7.2 percent, when compared to the prior year period (up 6.2 percent on an organic basis). Reported revenues reflect solid organic growth and contribution from acquisitions that were partially offset by foreign currency.
“Allegion delivered another strong quarter as evidenced by the overall and organic revenue growth rates across all regions,” said David D. Petratis, Allegion chairman, president and CEO. “The Americas continued its momentum, delivering another solid quarter of above-market growth, and EMEIA saw its best organic growth quarter since our spin-off from Ingersoll-Rand.”
The Americas segment revenue increased 7.4 percent (up 6.1 percent on an organic basis). The continued strength in revenue growth was driven by favorable price, low-double digit organic growth in residential markets, and solid performance in non-residential markets related to channel initiatives and new products. Revenues from acquisitions, which more than offset the impact of unfavorable foreign currency, also added to overall growth. Revenue was also favorably impacted from timing of orders in the second quarter of 2017, which mostly offset the tough comparable due to an ERP implementation the prior year.
The EMEIA segment revenues were up 6.3 percent both on a reported and organic basis, reflecting strong growth in the portable security business and solid pricing in the quarter. The contributions from acquisitions offset the impact of unfavorable currency.
The Asia Pacific segment revenues increased 9 percent, when compared to the prior year period (up 7.8 percent on an organic basis). Favorable contributions from acquisitions along with strong growth in electronic locks drove the revenue growth. Foreign currency had minimal impact during the quarter.
Second-quarter 2017 operating income was $134.1 million, an increase of $9.8 million or 7.9 percent over 2016. Adjusted operating income in second-quarter 2017 was $136 million, representing an increase of $10.3 million or 8.2 percent compared to 2016.
Second-quarter 2017 operating margin was 21.4 percent, compared with 21.3 percent in 2016. The adjusted operating margin in second-quarter 2017 was 21.7 percent, compared with 21.5 percent in 2016. The 20-basis-point improvement in adjusted operating margin was driven by strong price performance, volume leverage and productivity, which more than offset unfavorable product mix, increased investments and inflation.
“We continue to see margin expansion even while continuing to invest in the business. Those investments are driving above-market growth, which, in turn, is flowing to the bottom line,” Petratis added.
Interest expense for second-quarter 2017 was $16.1 million, down slightly from the $16.5 million for second-quarter 2016.
Other income net for second-quarter 2017 was $5.2 million, driven primarily by the previously announced sale of the company’s equity investment in iDevices. This compares to other income net for second-quarter 2016 of $8.6 million, which included contributions from the sale of non-strategic marketable securities.
The company’s effective tax rate for second-quarter 2017 was 14.1 percent, compared with 18 percent in 2016. The company’s adjusted effective tax rate for second-quarter 2017 was 14.4 percent, compared with 18.1 percent in 2016. The decrease in the adjusted effective tax rate is primarily due to discrete tax items, which included a $0.09 per share favorable benefit from the release of a valuation allowance, partially offset by mix of income earned in higher tax rate jurisdictions.
Cash Flow and Liquidity
Year-to-date 2017 available cash flow was $42.6 million, down $42.1 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, in the first quarter, partially offset by increased earnings.
The company ended second-quarter 2017 with cash of $245.5 million and total debt of $1,441 million. The company did not have any borrowings outstanding under its $500 million revolving credit facility at June 30, 2017.
During the second 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 remains committed to a balanced and flexible capital allocation policy in order to drive shareholder value.
The company raised full-year 2017 reported revenue growth guidance to a range of 6.5 to 7.5 percent compared to 2016. Organic revenue growth is raised to a range of 6 to 7 percent.
The company updated the full-year 2017 reported EPS with a range of $3.55 to $3.72, or $3.65 to $3.80 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 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, July 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 $2.2 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-Qs for the quarters ended March 31, 2017 and June 30, 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.