DUBLIN (April 26, 2018):
Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported first-quarter 2018 net revenues of $613.1 million and net earnings of $72.2 million, or $0.75 per share. Excluding charges related to restructuring and acquisitions, adjusted net earnings were $76.6 million, or $0.80 per share, up 9.6 percent when compared with first-quarter 2017 adjusted EPS of $0.73.
First-quarter net revenues increased 11.7 percent, when compared to the prior year period (up 3.3 percent on an organic basis). Reported revenues reflect modest organic growth as well as benefits from acquisitions and foreign currency.
The Americas segment revenue increased 7.7 percent (up 2.7 percent on an organic basis). The revenue growth was driven by favorable price and high-teens growth in electronics, which offset the impact of order choppiness. The newly acquired TGP and AD Systems businesses contributed 4.7 percent to the overall growth.
The EMEIA segment revenues were up 26.9 percent (up 5.9 percent on an organic basis), reflecting solid volume, favorable price, favorable foreign currency and contributions from the QMI acquisition. The organic growth was driven by strong volume across most products and geographies along with solid price realization.
“First-quarter revenues increased in all three regions and reflected modest organic growth,” said David D. Petratis, Allegion chairman, president and CEO. “European markets continued to rebound and delivered solid organic growth for the region, while Americas’ end-market fundamentals remained strong, including electronics growth, which grew high-teens.”
The Asia-Pacific segment revenues increased 3.9 percent (up 0.2 percent on an organic basis). Favorable currency drove the revenue growth in the quarter.
First-quarter 2018 operating income was $98.7 million, a decrease of $0.8 million or 0.8 percent compared to 2017. Adjusted operating income in first-quarter 2018 was $104.2 million, representing an increase of $2.8 million or 2.8 percent compared to 2017.
First-quarter 2018 operating margin was 16.1 percent, compared with 18.1 percent in 2017. The adjusted operating margin in first-quarter 2018 was 17 percent, compared with 18.5 percent in 2017. The 150-basis-point decline in adjusted operating margin was driven by increased investments, dilution related to acquisitions, inflation and unfavorable mix partially offset by favorable price, productivity and volume.
“We delivered double-digit, top-line revenue growth in the quarter, while accelerated inflationary pressures challenged operating margins. Pricing in the quarter was solid, and even with the margin pressures, we delivered a nearly 10-percent increase in EPS. We remain focused on executing our strategy to drive increased shareholder returns and are well positioned to achieve the full-year commitments put forth in Allegion’s prior earnings call,” Petratis added.
Interest expense for first-quarter 2018 was $12.9 million, down from the $15.9 million for first-quarter 2017. The decrease is driven by the refinancing of the company’s debt completed in 2017.
Other income net for first-quarter 2018 was $0.4 million. This compares to other expense net for first-quarter 2017 of $1.3 million.
The company’s effective tax rate for first-quarter 2018 was 16 percent, compared with 16.5 percent in 2017. The company’s adjusted effective tax rate for first-quarter 2018 was 16.2 percent, compared with 16.9 percent in 2017. The decrease in the adjusted effective tax rate is primarily due to decreased tax rates related to U.S. tax reform.
Cash Flow and Liquidity
Year-to-date 2018 available cash flow was negative $18.8 million, a $29.9 million improvement versus the prior year. The year-over-year improvement in available cash flow is primarily due to the $50 million discretionary pension funding payment in the prior year along with higher earnings. Those increases were partially offset by increases in cash taxes and working capital.
The company ended first-quarter 2018 with cash of $151.8 million and total debt of $1,509.4 million.
During the first quarter of 2018, 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 2018 revenue outlook reflecting total growth of 10.5 to 11.5 percent and organic growth of 4 to 5 percent compared to 2017.
The company affirms full-year 2018 reported EPS with a range of $4.20 to $4.35, or $4.35 to $4.50 per share on an adjusted basis. Adjustments to 2018 EPS include estimated impacts for restructuring and acquisition activities. The outlook assumes a full-year adjusted effective tax rate of approximately 16 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 $380 to $400 million.
Conference Call Information
On Thursday, April 26, 2018, 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 $2.4 billion company, with products sold in approximately 130 countries.
For more, visit www.allegion.com.
Adoption of New Accounting Standard
During the first quarter, the company adopted ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” ASU 2017-07 requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the statement of comprehensive income separately from the service cost component and outside of a subtotal of operating income. The company has applied ASU 2017-07 retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. As a result of adopting the new accounting standard, there is a minor restatement within the prior year P&L with no impact revenue, net earnings or earnings per share. Schedule 6, accompanying this press release, summarizes the impact to prior periods.
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 2018 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, 2017, Form 10-Q for the quarter ended March 31, 2018, and in its 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.
For the financial tables associated with this press release, please download the pdf below.