NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Basis of Presentation
The accompanying condensed and consolidated financial statements of Allegion plc, an Irish public limited company, and its consolidated subsidiaries ("Allegion" or the "Company"), reflect the consolidated operations of the Company and have been prepared in accordance with United States Securities and Exchange Commission ("SEC") interim reporting requirements. Accordingly, the accompanying condensed and consolidated financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for full financial statements and should be read in conjunction with the consolidated financial statements included in the Allegion Annual Report on Form 10-K for the year ended
December 31, 2016
. In the opinion of management, the accompanying condensed and consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to state fairly the consolidated unaudited results for the interim periods presented.
Note 2 – Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements:
In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. The standard defines net realizable value as estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. The Company adopted the provisions of ASU 2015-11 on January 1, 2017. The adoption of ASU 2015-11 did not have a material impact on the condensed and consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." This update addresses the income tax consequences of intra-entity transfers of assets other than inventory. Previously, GAAP prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice over the years for transfers of certain intangible and tangible assets. The amendments in the update will require recognition of current and deferred income taxes resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs. Early adoption is permitted in 2017 if adoption takes place during the first interim reporting period. The Company elected to adopt early on January 1, 2017. As a result, during the first quarter, the Company recognized a cumulative effect within retained earnings of $5.0 million with an offset to other current assets and other noncurrent assets.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" (ASC 606). ASC 606 is a single, comprehensive revenue recognition model for all contracts with customers. The model is based on changes in contract assets (rights to receive consideration) and liabilities (obligations to provide a good or perform a service). Revenue is recognized based on the satisfaction of performance obligations, which occurs when control of a good or service transfers to a customer. ASC 606
contains expanded disclosure requirements relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption ("modified retrospective method"). This guidance will be effective for the Company January 1, 2018. The FASB has also issued the following standards which clarify ASU 2014-09 and have the same effective date as the original standard: ASU No. 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients and ASU 2016-10 Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing. The Company has completed a high-level assessment of the new standard’s impact and is currently performing a technical assessment of all customer contracts. The Company will choose the modified retrospective method upon adoption in 2018. The adoption of the new standard will not have a material impact on the Company's condensed and consolidated statements of comprehensive income, balance sheets or statements of cash flows. The Company anticipates expanding the condensed and consolidated financial statement disclosures in order to comply with ASU 2014-09.
In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
reflect lease expense for operating leases and amortization/interest expense for financing leases. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. ASU 2016-02 is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is assessing what impact ASU 2016-02 will have on the condensed and consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. The ASU will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is assessing what impact ASU 2016-13 will have on the condensed and consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Clarification of Certain Cash Receipts and Cash Payments." ASU 2016-15 eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. The ASU will be effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. The amendments in this update will be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. The Company is assessing what impact ASU 2016-15 will have on the condensed and consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, "Intangibles– Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment." ASU 2017-04 removes Step 2 from the goodwill impairment test. The ASU will be effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests after January 1, 2017. The Company is assessing what impact ASU 2017-04 will have on the condensed and consolidated financial statements.
In March 2017, the FASB issued 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 a subtotal of operating income. ASU 2017-07 also allows only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset). The ASU is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The amendments allow a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company is assessing what impact ASU 2017-07 will have on the condensed and consolidated financial statements.
Note 3 – Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in first-out (FIFO) method.
The major classes of inventory were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
March 31,
2017
|
|
December 31,
2016
|
|
Raw materials
|
$
|
63.6
|
|
|
$
|
56.7
|
|
|
Work-in-process
|
26.2
|
|
|
23.6
|
|
|
Finished goods
|
148.2
|
|
|
140.3
|
|
|
Total
|
$
|
238.0
|
|
|
$
|
220.6
|
|
Note 4 – Goodwill
The changes in the carrying amount of goodwill for the
three
months ended
March 31, 2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Americas
|
|
EMEIA
|
|
Asia Pacific
|
|
Total
|
|
December 31, 2016 (gross)
|
$
|
372.9
|
|
|
$
|
736.1
|
|
|
$
|
93.3
|
|
|
$
|
1,202.3
|
|
|
Accumulated impairment
|
—
|
|
|
(478.6
|
)
|
|
(6.9
|
)
|
|
(485.5
|
)
|
|
December 31, 2016 (net)
|
372.9
|
|
|
257.5
|
|
|
86.4
|
|
|
716.8
|
|
|
Acquisitions and settlements
|
3.1
|
|
|
(2.1
|
)
|
|
0.7
|
|
|
1.7
|
|
|
Currency translation
|
—
|
|
|
3.0
|
|
|
3.1
|
|
|
6.1
|
|
|
March 31, 2017 (net)
|
$
|
376.0
|
|
|
$
|
258.4
|
|
|
$
|
90.2
|
|
|
$
|
724.6
|
|
Note 5 – Intangible Assets
The gross amount of the Company’s intangible assets and related accumulated amortization were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
In millions
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
Completed technologies/patents
|
|
$
|
48.6
|
|
|
$
|
(26.3
|
)
|
|
$
|
22.3
|
|
|
$
|
48.0
|
|
|
$
|
(25.3
|
)
|
|
$
|
22.7
|
|
|
Customer relationships
|
|
290.4
|
|
|
(55.8
|
)
|
|
234.6
|
|
|
278.9
|
|
|
(51.6
|
)
|
|
227.3
|
|
|
Trademarks (finite-lived)
|
|
79.5
|
|
|
(38.6
|
)
|
|
40.9
|
|
|
78.5
|
|
|
(37.3
|
)
|
|
41.2
|
|
|
Other
|
|
11.5
|
|
|
(9.7
|
)
|
|
1.8
|
|
|
11.0
|
|
|
(9.4
|
)
|
|
1.6
|
|
|
Total finite-lived intangible assets
|
|
430.0
|
|
|
$
|
(130.4
|
)
|
|
299.6
|
|
|
416.4
|
|
|
$
|
(123.6
|
)
|
|
292.8
|
|
|
Trademarks (indefinite-lived)
|
|
68.6
|
|
|
|
|
68.6
|
|
|
64.6
|
|
|
|
|
64.6
|
|
|
Total
|
|
$
|
498.6
|
|
|
|
|
$
|
368.2
|
|
|
$
|
481.0
|
|
|
|
|
$
|
357.4
|
|
Intangible asset amortization expense was
$5.2 million
and
$5.0 million
for the
three
months ended
March 31, 2017
and
2016
. Future estimated amortization expense on existing intangible assets in each of the next five years amounts to approximately $
20.0 million
for full year
2017
, $
20.0 million
for
2018
, $
19.1 million
for
2019
, $
19.1 million
for
2020
, and $
19.1 million
for
2021
.
Note 6 – Acquisitions
On January 3, 2017, the Company acquired Republic Doors & Frames, LLC. through one of its subsidiaries. In 2016, we completed one business acquisition (Trelock GmbH)
.
These acquisitions
did not have a material impact on the condensed and consolidated financial statements.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Note 7 – Divestitures
As previously disclosed, the Company sold a majority stake of Bocom Wincent Technologies Co., Ltd. ("Systems Integration") in the fourth quarter of 2015, retaining 15% of the shares.
The Company currently estimates the fair value of the consideration to be
$2.7 million
, which is classified within Other noncurrent assets within the Condensed and Consolidated Balance Sheets. The Company does not expect to incur any material charges in future periods related to Systems Integration.
Note 8 – Debt and Credit Facilities
At March 31, long-term debt and other borrowings consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
March 31,
2017
|
|
December 31,
2016
|
|
Term Loan A Facility
|
$
|
868.1
|
|
|
$
|
879.8
|
|
|
5.75% Senior notes due 2021
|
300.0
|
|
|
300.0
|
|
|
5.875% Senior notes due 2023
|
300.0
|
|
|
300.0
|
|
|
Other debt, including capital leases, maturing in various amounts through 2024
|
1.1
|
|
|
2.3
|
|
|
Unamortized debt issuance costs, net
|
(17.3
|
)
|
|
(18.3
|
)
|
|
Total debt
|
1,451.9
|
|
|
1,463.8
|
|
|
Less current portion of long-term debt
|
47.1
|
|
|
48.2
|
|
|
Total long-term debt
|
$
|
1,404.8
|
|
|
$
|
1,415.6
|
|
Senior Secured Credit Facilities
The Company has credit facilities consisting of a
$938.4 million
Term Loan Facility due in 2020 (the "Term Loan A Facility") and a
500.0 million
Senior Secured Revolving Credit Facility (the "Revolver") maturing in 2020. The Company refers to these credit facilities as its "Senior Secured Credit Facilities."
The applicable margin for LIBOR rate borrowings range from
1.375%
to
1.875%
and the applicable margin for base rate borrowings range from 0.375% to 0.875%, in each case depending on the corporate credit or family rating. The Revolver and the Term Loan A Facility mature on October 15, 2020.
Outstanding borrowings under the Senior Secured Credit Facilities currently accrue interest at LIBOR plus an applicable margin. The margin for the Term Loan A Facility borrowings was
1.375%
as of
March 31, 2017
.
To manage the Company's exposure to fluctuations in LIBOR rates, the Company has forward starting interest rate swaps to fix the interest rate paid during the contract period for
$525.0 million
of the Company's variable rate Term Loan A Facility. Swaps with notional amounts totaling
$275.0 million
expire in September 2017 and swaps effective September 2017 with notional amounts totaling
$250.0 million
expire in December 2020.
The Company repaid
$11.7 million
of principal on its Term Loan A Facility during the
three months ended March 31, 2017
. At
March 31, 2017
, the Company did not have any borrowings outstanding under the Revolver and had
$18.9 million
of letters of credit outstanding. Allegion plc is primary borrower under the Senior Secured Credit Facilities.
Senior Notes
A wholly-owned subsidiary of the Company has issued
$300.0 million
of
5.75%
senior notes due 2021 (the "2021 Senior Notes"). The 2021 Senior Notes accrue interest at the rate of
5.75%
per annum, payable semi-annually on April 1 and October 1 of each year. The 2021 Senior Notes mature on October 1, 2021.
In September 2015, Allegion plc issued
$300.0 million
of
5.875%
senior notes due 2023 (the "2023 Senior Notes"). The 2023 Senior Notes accrue interest at the rate of
5.875%
per annum, payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2016. The 2023 Senior Notes mature on September 15, 2023.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
The weighted-average interest rate for borrowings was
2.6%
under the Term Loan A Facility (including the effect of interest rate swaps) at
March 31, 2017
,
5.75%
under the 2021 Senior Notes and
5.875%
under the 2023 Senior Notes.
Note 9 – Financial Instruments
In the normal course of business, the Company uses various financial instruments, including derivative instruments, to manage the risks associated with interest and currency rate exposures. These financial instruments are not used for trading or speculative purposes.
On the date a derivative contract is entered into, the Company designates the derivative instrument as a cash flow hedge of a forecasted transaction, a cash flow hedge of a recognized asset or liability, or as an undesignated derivative. The Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.
The fair market value of derivative instruments is determined through market-based valuations and may not be representative of the actual gains or losses that will be recorded when these instruments mature due to future fluctuations in the markets in which they are traded.
The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are highly effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be a highly effective hedge, the fair market value changes of the instrument are recorded to accumulated other comprehensive income (AOCI).
Any ineffective portion of a derivative instrument’s change in fair value is recorded in Net earnings in the period of change. If the hedging relationship ceases to be highly effective, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument will be recorded in Net earnings.
Currency Hedging Instruments
The gross notional amount of the Company’s currency derivatives was $
136.3 million
and $
132.6 million
at
March 31, 2017
and
December 31, 2016
, respectively. At
March 31, 2017
and
December 31, 2016
, gains of $
0.6 million
and $
0.8 million
, net of tax, were included in Accumulated other comprehensive loss related to the fair value of the Company’s currency derivatives designated as cash flow hedges. The amount expected to be reclassified into Net earnings over the next twelve months is a gain of $
0.6 million
. The actual amounts that will be reclassified to Net earnings may vary from this amount as a result of changes in market conditions. Gains and losses associated with the Company’s currency derivatives not designated as hedges are recorded in Net earnings as changes in fair value occur. At
March 31, 2017
, the maximum term of the Company’s currency derivatives was less than one year.
Interest Rate Swaps
To manage the Company's exposure to fluctuations in LIBOR rates, the Company has forward starting interest rate swaps to fix the interest rate paid during the contract period for
$525.0 million
of the Company's variable rate Term Loan A Facility. Swaps with notional amounts totaling
$275.0 million
expire in September 2017 and swaps effective September 2017 with notional amounts totaling
$250.0 million
expire in December 2020.
These interest rate swaps met the criteria to be accounted for as cash flow hedges of variable rate interest payments. Consequently, the changes in fair value of the interest rate swaps were recognized in Accumulated other comprehensive loss. At
March 31, 2017
and
December 31, 2016
, gains of
$2.8 million
and
$2.6 million
were recorded in Accumulated other comprehensive loss related to these interest rate swaps. The amount expected to be reclassified into Net earnings over the next twelve months is a loss of
$0.1 million
. The actual amounts that will be reclassified to Net earnings may vary from this amount as a result of changes in market conditions.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
The fair values of derivative instruments included within the Condensed and Consolidated Balance Sheets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset derivatives
|
|
Liability derivatives
|
|
In millions
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2017
|
|
December 31,
2016
|
|
Derivatives designated as hedges:
|
|
|
|
|
|
|
|
|
Currency derivatives
|
$
|
0.4
|
|
|
$
|
0.7
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
Interest rate swaps
|
4.6
|
|
|
4.6
|
|
|
0.1
|
|
|
0.4
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
Currency derivatives
|
0.6
|
|
|
0.3
|
|
|
0.2
|
|
|
0.2
|
|
|
Total derivatives
|
$
|
5.6
|
|
|
$
|
5.6
|
|
|
$
|
0.4
|
|
|
$
|
0.7
|
|
Asset and liability currency derivatives included in the table above are recorded within Other current assets and Accrued expenses and other current liabilities, respectively. Asset and liability interest rate swap derivatives included in the table above are recorded within Other noncurrent assets and Other current liabilities.
The amounts associated with derivatives designated as hedges affecting Net earnings and Accumulated other comprehensive loss for the
three
months ended
March 31
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss)
recognized in Accumulated other comprehensive loss
|
|
Location of gain
(loss) recognized
in Net earnings
|
|
Amount of gain (loss) reclassified from Accumulated other comprehensive loss and
recognized into Net earnings
|
|
In millions
|
2017
|
|
2016
|
|
|
2017
|
|
2016
|
|
Currency derivatives
|
$
|
0.9
|
|
|
$
|
0.4
|
|
|
Cost of goods sold
|
|
$
|
1.1
|
|
|
$
|
3.3
|
|
|
Interest rate swaps
|
0.3
|
|
|
(1.4
|
)
|
|
Interest expense
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
1.2
|
|
|
$
|
(1.0
|
)
|
|
|
|
$
|
1.1
|
|
|
$
|
3.3
|
|
The gains and losses associated with the Company's non-designated currency derivatives, which are offset by changes in the fair value of the underlying transactions, are included within Other (income) expense, net in the condensed and consolidated statements of comprehensive income.
Concentration of Credit Risk
The counterparties to the Company’s forward contracts and swaps consist of a number of investment grade major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, the credit ratings and the concentration of risk in these financial institutions are monitored on a continuous basis and present no significant credit risk to the Company.
Note 10 – Pensions and Postretirement Benefits Other than Pensions
The Company sponsors several U.S. defined benefit and defined contribution plans covering substantially all of its U.S. employees. Additionally, the Company has non-U.S. defined benefit and defined contribution plans covering eligible non-U.S. employees. Postretirement benefits, other than pensions, provide healthcare benefits, and in some instances, life insurance benefits for certain eligible employees.
Pension Plans
The noncontributory defined benefit pension plans covering non-collectively bargained U.S. employees provide benefits on an average pay formula while most plans for collectively bargained U.S. employees provide benefits on a flat dollar benefit formula. The non-U.S. pension plans generally provide benefits based on earnings and years of service. The Company also maintains additional other supplemental plans for officers and other key employees.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
The components of the Company’s net periodic pension benefit costs for the
three
months ended
March 31
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
In millions
|
2017
|
|
2016
|
|
Service cost
|
$
|
2.2
|
|
|
$
|
2.3
|
|
|
Interest cost
|
2.5
|
|
|
2.5
|
|
|
Expected return on plan assets
|
(2.9
|
)
|
|
(2.5
|
)
|
|
Net amortization of:
|
|
|
|
|
Prior service costs
|
0.1
|
|
|
0.2
|
|
|
Plan net actuarial losses
|
1.1
|
|
|
1.3
|
|
|
Net periodic pension benefit cost
|
$
|
3.0
|
|
|
$
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
|
|
In millions
|
2017
|
|
2016
|
|
Service cost
|
$
|
0.8
|
|
|
$
|
0.8
|
|
|
Interest cost
|
2.1
|
|
|
2.9
|
|
|
Expected return on plan assets
|
(3.4
|
)
|
|
(3.7
|
)
|
|
Amortization of plan net actuarial losses
|
0.4
|
|
|
0.6
|
|
|
Net periodic pension benefit cost
|
$
|
(0.1
|
)
|
|
$
|
0.6
|
|
The Company made employer contributions of
$50.1 million
(of which $50.0 million was discretionary) and $
0.1 million
during the
three
months ended
March 31, 2017
and
2016
to its defined benefit pension plans. Additional contributions of approximately
$9.2 million
are expected during the remainder of
2017
.
Postretirement Benefits Other Than Pensions
The Company sponsors a postretirement plan that provides for healthcare benefits, and in some instances, life insurance benefits that cover certain eligible retired employees. The Company funds postretirement benefit obligations principally on a pay-as-you- go basis. Generally, postretirement health benefits are contributory with contributions adjusted annually. Life insurance plans for retirees are primarily noncontributory.
The components of net periodic postretirement benefit income for the
three
months ended
March 31
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
In millions
|
2017
|
|
2016
|
|
Interest cost
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
Amortization of prior service gains
|
(0.4
|
)
|
|
(0.4
|
)
|
|
Net periodic postretirement benefit income
|
$
|
(0.3
|
)
|
|
$
|
(0.3
|
)
|
Note 11 – Fair Value Measurement
Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurements are based on a framework that utilizes the inputs market participants use to determine the fair value of an asset or liability and establishes a fair value hierarchy to prioritize those inputs. The fair value hierarchy is comprised of three levels that are described below:
|
|
|
|
•
|
Level 1 – Inputs based on quoted prices in active markets for identical assets or liabilities.
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
|
|
|
|
•
|
Level 2 – Inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
|
|
|
|
|
•
|
Level 3 – Unobservable inputs based on little or no market activity and that are significant to the fair value of the assets and liabilities.
|
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability based on the best information available under the circumstances. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and liabilities measured at fair value at
March 31, 2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements
|
|
Total
fair value
|
|
In millions
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
|
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
Foreign currency contracts
|
—
|
|
|
1.0
|
|
|
—
|
|
|
1.0
|
|
|
Total asset recurring fair value measurements
|
—
|
|
|
5.6
|
|
|
—
|
|
|
5.6
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
Interest rate swaps
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
Deferred compensation plans
|
—
|
|
|
18.2
|
|
|
—
|
|
|
18.2
|
|
|
Total liability recurring fair value measurements
|
—
|
|
|
18.6
|
|
|
—
|
|
|
18.6
|
|
|
Financial instruments not carried at fair value
|
|
|
|
|
|
|
|
|
Total debt
|
—
|
|
|
1,499.3
|
|
|
—
|
|
|
1,499.3
|
|
|
Total financial instruments not carried at fair value
|
$
|
—
|
|
|
$
|
1,499.3
|
|
|
$
|
—
|
|
|
$
|
1,499.3
|
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Assets and liabilities measured at fair value at
December 31, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurements
|
|
Total
fair value
|
|
In millions
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
|
Recurring fair value measurements
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Interest rate swap
|
$
|
—
|
|
|
$
|
4.6
|
|
|
$
|
—
|
|
|
$
|
4.6
|
|
|
Foreign currency contracts
|
—
|
|
|
1.0
|
|
|
—
|
|
|
1.0
|
|
|
Total asset recurring fair value measurements
|
—
|
|
|
5.6
|
|
|
—
|
|
|
5.6
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
Interest rate swap
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|
Deferred compensation plans
|
—
|
|
|
16.8
|
|
|
—
|
|
|
16.8
|
|
|
Total liability recurring fair value measurements
|
—
|
|
|
17.5
|
|
|
—
|
|
|
17.5
|
|
|
Financial instruments not carried at fair value
|
|
|
|
|
|
|
|
|
Total debt
|
—
|
|
|
1,510.6
|
|
|
—
|
|
|
1,510.6
|
|
|
Total financial instruments not carried at fair value
|
$
|
—
|
|
|
$
|
1,510.6
|
|
|
$
|
—
|
|
|
$
|
1,510.6
|
|
The Company determines the fair value of its financial assets and liabilities using the following methodologies:
|
|
|
|
•
|
Foreign currency contracts
– These instruments include foreign currency contracts for non-functional currency balance sheet exposures. The fair value of the foreign currency contracts are determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily accessible and observable.
|
|
|
|
|
•
|
Interest rate swaps
– These instruments include interest rate swap contracts for up to
$525.0 million
of the Company's variable rate debt. The fair value of the derivative instruments are determined based on quoted prices for the Company's swaps, which are not considered an active market.
|
|
|
|
|
•
|
Deferred compensation plans
- These include obligations related to deferred compensation adjusted for market performance. The fair value is obtained based on observable market prices quoted on public exchanges for similar instruments.
|
|
|
|
|
•
|
Debt
– These securities are recorded at cost and include senior notes maturing through
2024
. The fair value of the long-term debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments.
|
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings are a reasonable estimate of their fair value due to the short-term nature of these instruments.
These methodologies used by the Company to determine the fair value of its financial assets and liabilities at
March 31, 2017
are the same as those used at
December 31, 2016
. There have been no significant transfers between Level 1 and Level 2 categories.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Note 12 – Equity
The reconciliation of Ordinary shares is as follows:
|
|
|
|
|
|
|
In millions
|
Total
|
|
December 31, 2016
|
95.3
|
|
|
Shares issued under incentive plans, net
|
0.4
|
|
|
Repurchase of ordinary shares
|
(0.4
|
)
|
|
March 31, 2017
|
95.3
|
|
During the
three
months ended
March 31, 2017
, the Company paid
$30.0 million
to repurchase
0.4 million
ordinary shares on the open market under a share repurchase program previously approved by its Board of Directors.
The components of Equity for the
three
months ended
March 31, 2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Allegion plc
shareholders’
equity
|
|
Noncontrolling
interests
|
|
Total
equity
|
|
Balance at December 31, 2016
|
$
|
113.3
|
|
|
$
|
3.1
|
|
|
$
|
116.4
|
|
|
Net earnings
|
68.4
|
|
|
0.3
|
|
|
68.7
|
|
|
Currency translation
|
13.1
|
|
|
0.2
|
|
|
13.3
|
|
|
Pension and OPEB adjustments, net of tax
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
Total comprehensive income
|
81.2
|
|
|
0.5
|
|
|
81.7
|
|
|
Cumulative effect of change in accounting principle
|
(5.0
|
)
|
|
—
|
|
|
(5.0
|
)
|
|
Share-based compensation
|
5.0
|
|
|
—
|
|
|
5.0
|
|
|
Dividends to ordinary shareholders
|
(15.2
|
)
|
|
—
|
|
|
(15.2
|
)
|
|
Repurchase of ordinary shares
|
(30.0
|
)
|
|
—
|
|
|
(30.0
|
)
|
|
Shares issued under incentive plans, net
|
2.1
|
|
|
—
|
|
|
2.1
|
|
|
Balance at March 31, 2017
|
$
|
151.4
|
|
|
$
|
3.6
|
|
|
$
|
155.0
|
|
The components of Equity for the
three
months ended
March 31, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Allegion plc
shareholders’
equity
|
|
Noncontrolling
interests
|
|
Total
equity
|
|
Balance at December 31, 2015
|
$
|
25.6
|
|
|
$
|
4.1
|
|
|
$
|
29.7
|
|
|
Net earnings
|
57.7
|
|
|
1.1
|
|
|
58.8
|
|
|
Currency translation
|
31.3
|
|
|
1.5
|
|
|
32.8
|
|
|
Change in value of marketable securities and derivatives qualifying as cash flow hedges, net of tax
|
(9.2
|
)
|
|
—
|
|
|
(9.2
|
)
|
|
Pension and OPEB adjustments, net of tax
|
4.5
|
|
|
—
|
|
|
4.5
|
|
|
Total comprehensive income
|
84.3
|
|
|
2.6
|
|
|
86.9
|
|
|
Share-based compensation
|
4.6
|
|
|
—
|
|
|
4.6
|
|
|
Acquisition/divestiture of noncontrolling interests
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
Dividends to noncontrolling interests
|
—
|
|
|
(2.7
|
)
|
|
(2.7
|
)
|
|
Dividends to ordinary shareholders
|
(11.5
|
)
|
|
—
|
|
|
(11.5
|
)
|
|
Shares issued under incentive plans, net
|
1.0
|
|
|
—
|
|
|
1.0
|
|
|
Repurchase of ordinary shares
|
(30.0
|
)
|
|
—
|
|
|
(30.0
|
)
|
|
Balance at March 31, 2016
|
$
|
73.7
|
|
|
$
|
4.0
|
|
|
$
|
77.7
|
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Other Comprehensive Income (Loss)
The changes in Accumulated other comprehensive income (loss) for the
three
months ended
March 31, 2017
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
Cash flow hedges
|
|
Pension and OPEB Items
|
|
Foreign Currency Items
|
|
Total
|
|
December 31, 2016
|
|
$
|
3.4
|
|
|
$
|
(120.5
|
)
|
|
$
|
(147.2
|
)
|
|
$
|
(264.3
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
|
1.2
|
|
|
(1.2
|
)
|
|
13.1
|
|
|
13.1
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
(1.1
|
)
|
|
1.2
|
|
|
—
|
|
|
0.1
|
|
|
Tax expense
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
March 31, 2017
|
|
$
|
3.5
|
|
|
$
|
(120.8
|
)
|
|
$
|
(134.1
|
)
|
|
$
|
(251.4
|
)
|
The changes in Accumulated other comprehensive income (loss) for the
three
months ended
March 31, 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
Cash flow hedges and marketable securities
|
|
Pension and OPEB Items
|
|
Foreign Currency Items
|
|
Total
|
|
December 31, 2015
|
|
$
|
14.0
|
|
|
$
|
(139.3
|
)
|
|
$
|
(106.9
|
)
|
|
$
|
(232.2
|
)
|
|
Other comprehensive loss before reclassifications
|
|
(0.9
|
)
|
|
3.1
|
|
|
31.3
|
|
|
33.5
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
(9.1
|
)
|
|
1.7
|
|
|
—
|
|
|
(7.4
|
)
|
|
Tax (benefit) expense
|
|
0.8
|
|
|
(0.4
|
)
|
|
—
|
|
|
0.4
|
|
|
March 31, 2016
|
|
$
|
4.8
|
|
|
$
|
(134.9
|
)
|
|
$
|
(75.6
|
)
|
|
$
|
(205.7
|
)
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Reclassifications out of Accumulated other comprehensive income (loss) for the
three
months ended
March 31, 2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Reclassified from Accumulated Other Comprehensive Income
|
|
|
In millions
|
|
Three months ended
|
|
Statement of Comprehensive Income Line Item
|
|
Reclasses below represent (Income) loss to the Statement of Comprehensive Income
|
|
|
|
|
|
|
|
Gains losses on cash flow hedges:
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
(1.1
|
)
|
|
Cost of goods sold
|
|
|
|
(1.1
|
)
|
|
Earnings before income taxes
|
|
|
|
0.3
|
|
|
Provision for income taxes
|
|
|
|
$
|
(0.8
|
)
|
|
Net earnings
|
|
|
|
|
|
|
|
Defined benefit pension items:
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
Prior-service gains
|
|
$
|
(0.3
|
)
|
|
(a)
|
|
Actuarial losses
|
|
1.5
|
|
|
(a)
|
|
|
|
1.2
|
|
|
Earnings before income taxes
|
|
|
|
(0.3
|
)
|
|
Provision for income taxes
|
|
|
|
0.9
|
|
|
Net earnings
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
0.1
|
|
|
Net earnings
|
(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost and net periodic postretirement benefit cost (see Note 10 for additional details).
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Reclassifications out of Accumulated other comprehensive income (loss) for the
three
months ended
March 31, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Reclassified from Accumulated Other Comprehensive Income
|
|
|
In millions
|
|
Three months ended
|
|
Statement of Comprehensive Income Line Item
|
|
Reclasses below represent (Income) loss to the Statement of Comprehensive Income
|
|
|
|
|
|
|
|
Gains on cash flow hedges:
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
(3.3
|
)
|
|
Cost of goods sold
|
|
|
|
(3.3
|
)
|
|
Earnings before income taxes
|
|
|
|
0.8
|
|
|
Provision for income taxes
|
|
|
|
$
|
(2.5
|
)
|
|
Net earnings
|
|
|
|
|
|
|
|
Gains and losses on marketable securities:
|
|
|
|
|
|
Realized gain on sale of securities
|
|
$
|
(5.8
|
)
|
|
Other, net
|
|
|
|
(5.8
|
)
|
|
Earnings before income taxes
|
|
|
|
—
|
|
|
Provision for income taxes
|
|
|
|
$
|
(5.8
|
)
|
|
Net earnings
|
|
|
|
|
|
|
|
Defined benefit pension items:
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
Prior-service gains
|
|
$
|
(0.2
|
)
|
|
(a)
|
|
Actuarial losses
|
|
1.9
|
|
|
(a)
|
|
|
|
1.7
|
|
|
Earnings before income taxes
|
|
|
|
(0.4
|
)
|
|
Provision for income taxes
|
|
|
|
1.3
|
|
|
Net earnings
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
(7.0
|
)
|
|
Net earnings
|
(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost and net periodic postretirement benefit cost (see Note 10 for additional details).
Note 13 – Share-Based Compensation
The Company records share-based compensation awards using a fair value method and recognizes compensation expense for an amount equal to the fair value of the share-based payment issued in its financial statements. The Company’s share-based compensation plans include programs for stock options, restricted stock units ("RSUs"), performance share units ("PSUs") and deferred compensation.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Compensation Expense
Share-based compensation expense is included in selling and administrative expenses within net income. The expenses recognized for the
three
months ended
March 31
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
In millions
|
2017
|
|
2016
|
|
Stock options
|
$
|
1.2
|
|
|
$
|
1.3
|
|
|
RSUs
|
2.4
|
|
|
2.0
|
|
|
PSUs
|
1.7
|
|
|
1.3
|
|
|
Deferred compensation
|
0.8
|
|
|
0.2
|
|
|
Pre-tax expense
|
6.1
|
|
|
4.8
|
|
|
Tax benefit
|
(2.0
|
)
|
|
(1.4
|
)
|
|
After-tax expense
|
$
|
4.1
|
|
|
$
|
3.4
|
|
Stock Options/RSUs
Eligible participants may receive (i) stock options, (ii) RSUs or (iii) a combination of both stock options and RSUs. Grants issued during the
three
months ended
March 31
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
Number
granted
|
|
Weighted-
average fair
value per award
|
|
Number
granted
|
|
Weighted-
average fair
value per award
|
|
Stock options
|
165,113
|
|
|
$
|
18.22
|
|
|
230,259
|
|
|
$
|
15.86
|
|
|
RSUs
|
96,609
|
|
|
$
|
71.84
|
|
|
101,815
|
|
|
$
|
57.85
|
|
The fair value of each of the Company's stock option and RSU awards is expensed on a straight-line basis over the required service period, which is generally the
3
-year vesting period. However, for stock options and RSUs granted to retirement eligible employees, the Company recognizes expense for the fair value at the grant date.
The average fair value of the stock options granted is determined using the Black-Scholes option-pricing model. The following assumptions were used during the
three
months ended
March 31
:
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Dividend yield
|
0.89
|
%
|
|
0.83
|
%
|
|
Volatility
|
24.93
|
%
|
|
28.85
|
%
|
|
Risk-free rate of return
|
2.08
|
%
|
|
1.38
|
%
|
|
Expected life
|
6.0 years
|
|
|
6.0 years
|
|
Expected volatility is based on the weighted average of the implied volatility of a group of the Company’s peers due to the lack of trading history for the Company's ordinary shares. The risk-free rate of return is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the award is granted with a maturity equal to the expected life of the award. Historical peer data is used to estimate forfeitures within the Company’s valuation model. The expected life of the Company’s stock option awards is derived from the simplified approach based on the weighted average time to vest and the remaining contractual term and represents the period of time that awards are expected to be outstanding.
Performance Shares
The Company has a Performance Share Program for key employees. The program provides awards in the form of PSUs based on performance against pre-established objectives. The annual target award level is expressed as a number of the Company's ordinary
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
shares. All PSUs are settled in the form of ordinary shares unless deferred. During the
three
months ended
March 31, 2017
, the Company granted PSUs with a maximum award level of approximately
0.1 million
shares.
In February 2015, 2016 and 2017, the Company’s Compensation Committee granted PSUs that were based
50%
upon a performance condition, measured at each performance period by earnings per share ("EPS") growth, and
50%
upon a market condition, measured by the Company’s relative total shareholder return ("TSR") as compared to the TSR of the industrial group of companies in the S&P 400 Capital Goods Index over the one-year, two-year, and three-year performance periods. The fair values of the market condition were estimated using a Monte Carlo Simulation approach in a risk-neutral framework based upon historical volatility, risk-free rates and correlation matrix.
Deferred Compensation
The Company allows key employees to defer a portion of their eligible compensation into a number of investment choices including its ordinary share equivalents. Any amounts invested in ordinary share equivalents will be settled in ordinary shares of the Company at the time of distribution.
Note 14 – Restructuring Activities
During the three months ended March 2017 and 2016, the Company incurred costs of
$0.8 million
and
$1.6 million
, respectively, associated with ongoing restructuring actions. These actions included workforce reductions as well as the closure and consolidation of manufacturing facilities in an effort to increase efficiencies across multiple lines of business.
2015 Italy Restructuring Plan
In the second quarter of 2015, management committed to a restructuring plan in Italy. The plan aims to improve competitive position, ensure long-term viability and enhance customer experience. Expenses incurred for this plan for the three months ended March 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
In millions
|
2017
|
|
2016
|
|
EMEIA
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
Total
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
|
|
|
|
|
Cost of goods sold
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
Selling and administrative expenses
|
—
|
|
|
0.1
|
|
|
Total
|
$
|
0.1
|
|
|
$
|
0.2
|
|
The above expenses primarily related to severance charges.
Other Restructuring Plans
Restructuring charges recorded during the
three months ended March 31
as part of other restructuring plans were as follows:
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
In millions
|
2017
|
|
2016
|
|
Americas
|
$
|
(0.1
|
)
|
|
$
|
1.3
|
|
|
EMEIA
|
0.8
|
|
|
—
|
|
|
Asia Pacific
|
—
|
|
|
0.1
|
|
|
Total
|
$
|
0.7
|
|
|
$
|
1.4
|
|
|
|
|
|
|
|
Cost of goods sold
|
$
|
(0.1
|
)
|
|
$
|
—
|
|
|
Selling and administrative expenses
|
0.8
|
|
|
1.4
|
|
|
Total
|
$
|
0.7
|
|
|
$
|
1.4
|
|
The EMEIA charges primarily related to workforce reductions in an effort to increase efficiencies.
The changes in the restructuring reserve during the three months ended March 31, 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Americas
|
|
EMEIA
|
|
Total
|
|
December 31, 2016
|
$
|
0.3
|
|
|
$
|
3.2
|
|
|
$
|
3.5
|
|
|
Additions, net of reversals
|
(0.1
|
)
|
|
0.9
|
|
|
0.8
|
|
|
Cash and non-cash uses
|
(0.1
|
)
|
|
(2.4
|
)
|
|
(2.5
|
)
|
|
March 31, 2017
|
$
|
0.1
|
|
|
$
|
1.7
|
|
|
$
|
1.8
|
|
The majority of the costs accrued as of March 31, 2017 will be paid within one year.
Note 15 – Other (Income) Expense, Net
The components of Other (income) expense, net for the
three
months ended
March 31
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
In millions
|
2017
|
|
2016
|
|
Interest income
|
$
|
(0.1
|
)
|
|
$
|
(0.5
|
)
|
|
Foreign currency exchange loss
|
0.1
|
|
|
3.0
|
|
|
(Earnings) loss from equity investments
|
0.6
|
|
|
(3.5
|
)
|
|
Other
|
—
|
|
|
(7.8
|
)
|
|
Other (income) expense, net
|
$
|
0.6
|
|
|
$
|
(8.8
|
)
|
Other expense, net for the three months ended March 31, 2017 was primarily related to the Company's portion of equity losses associated with an equity method investment. During the three months ended
March 31, 2016
the Company recorded gains from the sale of marketable securities of
$5.8 million
, which is included in Other in the table above. Additionally, earnings from equity method investments included a gain recognized by an investment in the first quarter of 2016.
Note 16 – Income Taxes
The effective income tax rates for the three months ended
March 31, 2017
and
2016
were
16.5%
and
21.6%
. The decrease in the effective tax rate compared to
2016
is primarily due to the favorable benefit of vesting and exercise of share based compensation awards and the year over year change in the timing of amounts recognized for uncertain tax positions, which are partially offset by unfavorable changes in the mix of income earned in lower rate jurisdictions.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Note 17 – Earnings Per Share (EPS)
Basic EPS is calculated by dividing Net earnings attributable to Allegion plc by the weighted-average number of ordinary shares outstanding for the applicable period. Diluted EPS is calculated after adjusting the denominator of the basic EPS calculation for the effect of all potentially dilutive ordinary shares, which in the Company’s case, includes shares issuable under share-based compensation plans.
The following table summarizes the weighted-average number of ordinary shares outstanding for basic and diluted earnings per share calculations for the
three
months ended
March 31
:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
In millions
|
2017
|
|
2016
|
|
Weighted-average number of basic shares
|
95.3
|
|
|
95.9
|
|
|
Shares issuable under incentive stock plans
|
0.8
|
|
|
1.0
|
|
|
Weighted-average number of diluted shares
|
96.1
|
|
|
96.9
|
|
At
March 31, 2016
,
0.4 million
stock options were excluded from the computation of weighted average diluted shares outstanding because the effect of including these shares would have been anti-dilutive.
Note 18 – Business Segment Information
The Company classifies its businesses into the following
three
reportable segments based on industry and market focus: Americas, EMEIA and Asia Pacific.
Segment operating income is the measure of profit and loss that the Company’s chief operating decision maker uses to evaluate the financial performance of the business and as the basis for resource allocation, performance reviews, and compensation. For these reasons, the Company believes that Segment operating income represents the most relevant measure of segment profit and loss. The Company’s chief operating decision maker may exclude certain charges or gains, such as corporate charges and other special charges, from Operating income to arrive at a Segment operating income that is a more meaningful measure of profit and loss upon which to base its operating decisions. The Company defines Segment operating margin as Segment operating income as a percentage of Net revenues.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
A summary of operations by reportable segment for the
three
months ended
March 31
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
In millions
|
2017
|
|
2016
|
|
Net revenues
|
|
|
|
|
Americas
|
$
|
407.6
|
|
|
$
|
363.0
|
|
|
EMEIA
|
118.4
|
|
|
118.5
|
|
|
Asia Pacific
|
22.8
|
|
|
20.8
|
|
|
Total
|
$
|
548.8
|
|
|
$
|
502.3
|
|
|
Segment operating income (loss)
|
|
|
|
|
Americas
|
$
|
107.6
|
|
|
$
|
90.2
|
|
|
EMEIA
|
6.9
|
|
|
8.0
|
|
|
Asia Pacific
|
0.6
|
|
|
(0.1
|
)
|
|
Total
|
115.1
|
|
|
98.1
|
|
|
Reconciliation to Operating income
|
|
|
|
|
Unallocated corporate expense
|
(16.3
|
)
|
|
(15.6
|
)
|
|
Operating income
|
$
|
98.8
|
|
|
$
|
82.5
|
|
|
Reconciliation to earnings before income taxes
|
|
|
|
|
Interest expense
|
15.9
|
|
|
16.3
|
|
|
Other (income) expense, net
|
0.6
|
|
|
(8.8
|
)
|
|
Earnings before income taxes
|
$
|
82.3
|
|
|
$
|
75.0
|
|
Note 19 – Commitments and Contingencies
The Company is involved in various litigations, claims and administrative proceedings, including those related to environmental and product warranty matters. Amounts recorded for identified contingent liabilities are estimates, which are reviewed periodically and adjusted to reflect additional information when it becomes available. Subject to the uncertainties inherent in estimating future costs for contingent liabilities, except as expressly set forth in this note, management believes that any liability which may result from these legal matters would not have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.
Environmental Matters
The Company is dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the Company is currently engaged in site investigations and remediation activities to address environmental cleanup from past operations at current and former production facilities. The Company regularly evaluates its remediation programs and considers alternative remediation methods that are in addition to, or in replacement of, those currently utilized by the Company based upon enhanced technology and regulatory changes. Changes to the Company's remediation programs may result in increased expenses and increased environmental reserves.
The Company is sometimes a party to environmental lawsuits and claims and from time to time receives notices of potential violations of environmental laws and regulations from the U.S. Environmental Protection Agency and similar state authorities. It has also been identified as a potentially responsible party ("PRP") for cleanup costs associated with off-site waste disposal at federal Superfund and state remediation sites. For all such sites, there are other PRPs and, in most instances, the Company’s involvement is minimal.
In estimating its liability, the Company has assumed it will not bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based on our understanding of the parties’ financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
During the
three
months ended
March 31, 2017
and
2016
, the Company recorded $
0.8 million
and $
1.0 million
of expenses for environmental remediation at sites presently or formerly owned or leased by us. As of
March 31, 2017
and
December 31, 2016
, the Company has recorded reserves for environmental matters of $
30.1 million
and $
30.6 million
. Of the total reserve, $
9.5 million
and $
9.6 million
relate to remediation of sites previously disposed by the Company. Environmental reserves are classified as Accrued expenses and other current liabilities or Other noncurrent liabilities based on their expected term. The Company's total current environmental reserve at
March 31, 2017
and
December 31, 2016
was $
9.7 million
and $
6.1 million
, respectively, and the remainder is classified as non-current. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.
Warranty Liability
Standard product warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience. The Company assesses the adequacy of its liabilities and will make adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available.
The changes in the standard product warranty liability for the
three
months ended
March 31
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2017
|
|
2016
|
|
Balance at beginning of period
|
$
|
13.3
|
|
|
$
|
11.7
|
|
|
Reductions for payments
|
(1.7
|
)
|
|
(1.4
|
)
|
|
Accruals for warranties issued during the current period
|
2.2
|
|
|
1.6
|
|
|
Changes to accruals related to preexisting warranties
|
(0.1
|
)
|
|
(0.2
|
)
|
|
Translation
|
—
|
|
|
0.1
|
|
|
Balance at end of period
|
$
|
13.7
|
|
|
$
|
11.8
|
|
Standard product warranty liabilities are classified as Accrued expenses and other current liabilities.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Note 20 – Guarantor Financial Information
Allegion US Holding Company, Inc. ("Allegion US Holding") is the issuer of the 2021 Senior Notes and a guarantor of the 2023 Senior Notes. Allegion plc is the issuer of the 2023 Senior Notes and a guarantor of the 2021 Senior Notes. Schlage Lock Company LLC and Von Duprin LLC (together, the “Other Subsidiary Guarantors”) are all guarantors of the 2021 Senior Notes and the 2023 Senior Notes. The following condensed and consolidated financial information of Allegion plc, Allegion US Holding, the Other Subsidiary Guarantors and the other Allegion subsidiaries that are not guarantors (the “Other Subsidiaries”) on a combined basis as of
March 31, 2017
and for the
three
months ended
March 31, 2017
and
2016
, is being presented in order to meet the reporting requirements under the 2021 Senior Notes and 2023 Senior Notes indentures and Rule 3-10 of Regulation S-X. In accordance with Rule 3-10(d) of Regulation S-X, separate financial statements for Allegion plc, Allegion US Holding and the Other Subsidiary Guarantors are not required to be filed with the SEC, as the subsidiary debt issuer and the guarantors are directly or indirectly 100% owned by the Parent and the guarantees are full and unconditional and joint and several.
Condensed and Consolidated Statement of Comprehensive Income
For the
three
months ended
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Allegion plc
|
|
Allegion US Holding
|
|
Other Subsidiary Guarantors
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
|
Net revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
389.8
|
|
|
$
|
267.6
|
|
|
$
|
(108.6
|
)
|
|
$
|
548.8
|
|
|
Cost of goods sold
|
—
|
|
|
—
|
|
|
224.5
|
|
|
192.1
|
|
|
(108.6
|
)
|
|
308.0
|
|
|
Selling and administrative expenses
|
1.1
|
|
|
—
|
|
|
85.7
|
|
|
55.2
|
|
|
—
|
|
|
142.0
|
|
|
Operating income (loss)
|
(1.1
|
)
|
|
—
|
|
|
79.6
|
|
|
20.3
|
|
|
—
|
|
|
98.8
|
|
|
Equity earnings (loss) in affiliates, net of tax
|
80.5
|
|
|
18.0
|
|
|
0.6
|
|
|
67.8
|
|
|
(166.9
|
)
|
|
—
|
|
|
Interest expense
|
11.0
|
|
|
4.8
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
15.9
|
|
|
Intercompany interest and fees
|
—
|
|
|
24.7
|
|
|
(31.0
|
)
|
|
6.3
|
|
|
—
|
|
|
—
|
|
|
Other expense, net
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
Earnings (loss) before income taxes
|
68.4
|
|
|
(11.5
|
)
|
|
110.6
|
|
|
81.7
|
|
|
(166.9
|
)
|
|
82.3
|
|
|
Provision (benefit) for income taxes
|
—
|
|
|
(11.4
|
)
|
|
42.4
|
|
|
(17.4
|
)
|
|
—
|
|
|
13.6
|
|
|
Net earnings (loss)
|
68.4
|
|
|
(0.1
|
)
|
|
68.2
|
|
|
99.1
|
|
|
(166.9
|
)
|
|
68.7
|
|
|
Less: Net loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|
Net earnings (loss) attributable to Allegion plc
|
$
|
68.4
|
|
|
$
|
(0.1
|
)
|
|
$
|
68.2
|
|
|
$
|
98.8
|
|
|
$
|
(166.9
|
)
|
|
$
|
68.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
$
|
81.2
|
|
|
$
|
0.2
|
|
|
$
|
69.1
|
|
|
$
|
111.4
|
|
|
$
|
(180.2
|
)
|
|
$
|
81.7
|
|
|
Less: Total comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
0.5
|
|
|
Total comprehensive income (loss) attributable to Allegion plc
|
$
|
81.2
|
|
|
$
|
0.2
|
|
|
$
|
69.1
|
|
|
$
|
110.9
|
|
|
$
|
(180.2
|
)
|
|
$
|
81.2
|
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Condensed and Consolidated Statement of Comprehensive Income
For the
three
months ended
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Allegion plc
|
|
Allegion US Holding
|
|
Other Subsidiary Guarantors
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
|
Net revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
347.9
|
|
|
$
|
257.5
|
|
|
$
|
(103.1
|
)
|
|
$
|
502.3
|
|
|
Cost of goods sold
|
—
|
|
|
—
|
|
|
205.9
|
|
|
183.2
|
|
|
(103.1
|
)
|
|
286.0
|
|
|
Selling and administrative expenses
|
1.0
|
|
|
—
|
|
|
78.7
|
|
|
54.1
|
|
|
—
|
|
|
133.8
|
|
|
Operating income (loss)
|
(1.0
|
)
|
|
—
|
|
|
63.3
|
|
|
20.2
|
|
|
—
|
|
|
82.5
|
|
|
Equity earnings (loss) in affiliates, net of tax
|
70.4
|
|
|
25.4
|
|
|
0.5
|
|
|
71.1
|
|
|
(167.4
|
)
|
|
—
|
|
|
Interest expense
|
11.1
|
|
|
5.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
16.3
|
|
|
Intercompany interest and fees
|
—
|
|
|
23.8
|
|
|
(32.5
|
)
|
|
8.7
|
|
|
—
|
|
|
—
|
|
|
Other (income) expense, net
|
0.1
|
|
|
—
|
|
|
(20.1
|
)
|
|
11.2
|
|
|
—
|
|
|
(8.8
|
)
|
|
Earnings (loss) before income taxes
|
58.2
|
|
|
(3.5
|
)
|
|
116.4
|
|
|
71.3
|
|
|
(167.4
|
)
|
|
75.0
|
|
|
Provision (benefit) for income taxes
|
0.5
|
|
|
(11.1
|
)
|
|
44.8
|
|
|
(18.0
|
)
|
|
—
|
|
|
16.2
|
|
|
Net earnings (loss)
|
57.7
|
|
|
7.6
|
|
|
71.6
|
|
|
89.3
|
|
|
(167.4
|
)
|
|
58.8
|
|
|
Less: Net earnings attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
1.1
|
|
|
Net earnings (loss) attributable to Allegion plc
|
$
|
57.7
|
|
|
$
|
7.6
|
|
|
$
|
71.6
|
|
|
$
|
88.2
|
|
|
$
|
(167.4
|
)
|
|
$
|
57.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
$
|
84.3
|
|
|
$
|
6.2
|
|
|
$
|
72.3
|
|
|
$
|
116.7
|
|
|
$
|
(192.6
|
)
|
|
$
|
86.9
|
|
|
Less: Total comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
2.6
|
|
|
Total comprehensive income (loss) attributable to Allegion plc
|
$
|
84.3
|
|
|
$
|
6.2
|
|
|
$
|
72.3
|
|
|
$
|
114.1
|
|
|
$
|
(192.6
|
)
|
|
$
|
84.3
|
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Condensed and Consolidated Balance Sheet
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Allegion plc
|
|
Allegion US Holding
|
|
Other Subsidiary Guarantors
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1.9
|
|
|
$
|
8.7
|
|
|
$
|
69.9
|
|
|
$
|
109.1
|
|
|
$
|
—
|
|
|
$
|
189.6
|
|
|
Accounts and notes receivable, net
|
—
|
|
|
—
|
|
|
143.4
|
|
|
125.5
|
|
|
—
|
|
|
268.9
|
|
|
Inventories
|
—
|
|
|
—
|
|
|
79.2
|
|
|
158.8
|
|
|
—
|
|
|
238.0
|
|
|
Other current assets
|
0.2
|
|
|
15.6
|
|
|
14.7
|
|
|
35.1
|
|
|
(19.9
|
)
|
|
45.7
|
|
|
Accounts and notes receivable affiliates
|
—
|
|
|
382.4
|
|
|
482.9
|
|
|
322.6
|
|
|
(1,187.9
|
)
|
|
—
|
|
|
Total current assets
|
2.1
|
|
|
406.7
|
|
|
790.1
|
|
|
751.1
|
|
|
(1,207.8
|
)
|
|
742.2
|
|
|
Investment in affiliates
|
1,303.6
|
|
|
2,830.9
|
|
|
217.0
|
|
|
3,604.3
|
|
|
(7,955.8
|
)
|
|
—
|
|
|
Property, plant and equipment, net
|
—
|
|
|
—
|
|
|
119.8
|
|
|
112.3
|
|
|
—
|
|
|
232.1
|
|
|
Goodwill and other intangible assets, net
|
—
|
|
|
—
|
|
|
180.6
|
|
|
912.2
|
|
|
—
|
|
|
1,092.8
|
|
|
Notes receivable affiliates
|
—
|
|
|
1,145.4
|
|
|
3,444.7
|
|
|
1,690.6
|
|
|
(6,280.7
|
)
|
|
—
|
|
|
Other noncurrent assets
|
5.1
|
|
|
14.7
|
|
|
64.4
|
|
|
34.1
|
|
|
—
|
|
|
118.3
|
|
|
Total assets
|
$
|
1,310.8
|
|
|
$
|
4,397.7
|
|
|
$
|
4,816.6
|
|
|
$
|
7,104.6
|
|
|
$
|
(15,444.3
|
)
|
|
$
|
2,185.4
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accruals
|
$
|
2.1
|
|
|
$
|
8.8
|
|
|
$
|
168.8
|
|
|
$
|
191.6
|
|
|
$
|
(19.9
|
)
|
|
$
|
351.4
|
|
|
Short-term borrowings and current maturities of long-term debt
|
46.9
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
47.1
|
|
|
Accounts and notes payable affiliates
|
0.1
|
|
|
56.6
|
|
|
665.6
|
|
|
465.6
|
|
|
(1,187.9
|
)
|
|
—
|
|
|
Total current liabilities
|
49.1
|
|
|
65.4
|
|
|
834.4
|
|
|
657.4
|
|
|
(1,207.8
|
)
|
|
398.5
|
|
|
Long-term debt
|
1,109.2
|
|
|
294.6
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
1,404.8
|
|
|
Notes payable affiliate
|
—
|
|
|
2,679.0
|
|
|
71.4
|
|
|
3,530.3
|
|
|
(6,280.7
|
)
|
|
—
|
|
|
Other noncurrent liabilities
|
1.1
|
|
|
—
|
|
|
89.5
|
|
|
136.5
|
|
|
—
|
|
|
227.1
|
|
|
Total liabilities
|
1,159.4
|
|
|
3,039.0
|
|
|
995.3
|
|
|
4,325.2
|
|
|
(7,488.5
|
)
|
|
2,030.4
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity (deficit)
|
151.4
|
|
|
1,358.7
|
|
|
3,821.3
|
|
|
2,775.8
|
|
|
(7,955.8
|
)
|
|
151.4
|
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
|
3.6
|
|
|
Total equity (deficit)
|
151.4
|
|
|
1,358.7
|
|
|
3,821.3
|
|
|
2,779.4
|
|
|
(7,955.8
|
)
|
|
155.0
|
|
|
Total liabilities and equity
|
$
|
1,310.8
|
|
|
$
|
4,397.7
|
|
|
$
|
4,816.6
|
|
|
$
|
7,104.6
|
|
|
$
|
(15,444.3
|
)
|
|
$
|
2,185.4
|
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Condensed and Consolidated Balance Sheet
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Allegion plc
|
|
Allegion US Holding
|
|
Other Subsidiary Guarantors
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
0.5
|
|
|
$
|
0.1
|
|
|
$
|
166.0
|
|
|
$
|
145.8
|
|
|
$
|
—
|
|
|
$
|
312.4
|
|
|
Accounts and notes receivable, net
|
—
|
|
|
—
|
|
|
140.0
|
|
|
120.0
|
|
|
—
|
|
|
260.0
|
|
|
Inventories
|
—
|
|
|
—
|
|
|
77.6
|
|
|
143.0
|
|
|
—
|
|
|
220.6
|
|
|
Other current assets
|
0.4
|
|
|
49.7
|
|
|
9.4
|
|
|
145.1
|
|
|
(168.3
|
)
|
|
36.3
|
|
|
Accounts receivable affiliates
|
—
|
|
|
331.6
|
|
|
395.0
|
|
|
320.6
|
|
|
(1,047.2
|
)
|
|
—
|
|
|
Total current assets
|
0.9
|
|
|
381.4
|
|
|
788.0
|
|
|
874.5
|
|
|
(1,215.5
|
)
|
|
829.3
|
|
|
Investment in affiliates
|
1,229.4
|
|
|
2,814.1
|
|
|
193.4
|
|
|
3,422.6
|
|
|
(7,659.5
|
)
|
|
—
|
|
|
Property, plant and equipment, net
|
—
|
|
|
—
|
|
|
122.0
|
|
|
104.6
|
|
|
—
|
|
|
226.6
|
|
|
Goodwill and other intangible assets, net
|
—
|
|
|
—
|
|
|
180.8
|
|
|
893.4
|
|
|
—
|
|
|
1,074.2
|
|
|
Notes receivable affiliates
|
53.2
|
|
|
1,149.8
|
|
|
3,444.7
|
|
|
1,679.8
|
|
|
(6,327.5
|
)
|
|
—
|
|
|
Other noncurrent assets
|
5.4
|
|
|
14.8
|
|
|
61.9
|
|
|
35.2
|
|
|
—
|
|
|
117.3
|
|
|
Total assets
|
$
|
1,288.9
|
|
|
$
|
4,360.1
|
|
|
$
|
4,790.8
|
|
|
$
|
7,010.1
|
|
|
$
|
(15,202.5
|
)
|
|
$
|
2,247.4
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accruals
|
$
|
7.0
|
|
|
$
|
4.7
|
|
|
$
|
353.2
|
|
|
$
|
184.8
|
|
|
$
|
(168.3
|
)
|
|
$
|
381.4
|
|
|
Short-term borrowings and current maturities of long-term debt
|
46.9
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
48.2
|
|
|
Accounts and notes payable affiliates
|
0.4
|
|
|
36.4
|
|
|
629.6
|
|
|
380.8
|
|
|
(1,047.2
|
)
|
|
—
|
|
|
Total current liabilities
|
54.3
|
|
|
41.1
|
|
|
982.8
|
|
|
566.9
|
|
|
(1,215.5
|
)
|
|
429.6
|
|
|
Long-term debt
|
1,120.2
|
|
|
294.4
|
|
|
—
|
|
|
1.0
|
|
|
—
|
|
|
1,415.6
|
|
|
Notes payables affiliate
|
—
|
|
|
2,690.7
|
|
|
53.3
|
|
|
3,583.5
|
|
|
(6,327.5
|
)
|
|
—
|
|
|
Other noncurrent liabilities
|
1.1
|
|
|
—
|
|
|
138.7
|
|
|
146.0
|
|
|
—
|
|
|
285.8
|
|
|
Total liabilities
|
1,175.6
|
|
|
3,026.2
|
|
|
1,174.8
|
|
|
4,297.4
|
|
|
(7,543.0
|
)
|
|
2,131.0
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity (deficit)
|
113.3
|
|
|
1,333.9
|
|
|
3,616.0
|
|
|
2,709.6
|
|
|
(7,659.5
|
)
|
|
113.3
|
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
3.1
|
|
|
—
|
|
|
3.1
|
|
|
Total equity (deficit)
|
113.3
|
|
|
1,333.9
|
|
|
3,616.0
|
|
|
2,712.7
|
|
|
(7,659.5
|
)
|
|
116.4
|
|
|
Total liabilities and equity
|
$
|
1,288.9
|
|
|
$
|
4,360.1
|
|
|
$
|
4,790.8
|
|
|
$
|
7,010.1
|
|
|
$
|
(15,202.5
|
)
|
|
$
|
2,247.4
|
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Condensed and Consolidated Statement of Cash Flows
For the
three
months ended
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Allegion plc
|
|
Allegion US Holding
|
|
Other Subsidiary Guarantors
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
|
Net cash provided by (used in) operating activities
|
$
|
3.0
|
|
|
$
|
15.9
|
|
|
$
|
(31.5
|
)
|
|
$
|
85.0
|
|
|
$
|
(113.3
|
)
|
|
$
|
(40.9
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
—
|
|
|
(3.0
|
)
|
|
(4.8
|
)
|
|
—
|
|
|
(7.8
|
)
|
|
Acquisition of and equity investments in businesses, net of cash acquired
|
—
|
|
|
—
|
|
|
(22.2
|
)
|
|
1.4
|
|
|
—
|
|
|
(20.8
|
)
|
|
Other investing activities, net
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
Net cash used in investing activities
|
—
|
|
|
—
|
|
|
(25.2
|
)
|
|
(2.6
|
)
|
|
—
|
|
|
(27.8
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt repayments, net
|
(11.7
|
)
|
|
—
|
|
|
—
|
|
|
(1.2
|
)
|
|
—
|
|
|
(12.9
|
)
|
|
Net inter-company proceeds (payments)
|
53.2
|
|
|
(7.3
|
)
|
|
22.8
|
|
|
(68.7
|
)
|
|
—
|
|
|
—
|
|
|
Dividends paid
|
—
|
|
|
—
|
|
|
(62.2
|
)
|
|
(51.1
|
)
|
|
113.3
|
|
|
—
|
|
|
Dividends paid to shareholders
|
(15.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15.2
|
)
|
|
Repurchase of ordinary shares
|
(30.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30.0
|
)
|
|
Other financing activities, net
|
2.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.1
|
|
|
Net cash provided by (used in) financing activities
|
(1.6
|
)
|
|
(7.3
|
)
|
|
(39.4
|
)
|
|
(121.0
|
)
|
|
113.3
|
|
|
(56.0
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
1.9
|
|
|
Net increase (decrease) in cash and cash equivalents
|
1.4
|
|
|
8.6
|
|
|
(96.1
|
)
|
|
(36.7
|
)
|
|
—
|
|
|
(122.8
|
)
|
|
Cash and cash equivalents - beginning of period
|
0.5
|
|
|
0.1
|
|
|
166.0
|
|
|
145.8
|
|
|
—
|
|
|
312.4
|
|
|
Cash and cash equivalents - end of period
|
$
|
1.9
|
|
|
$
|
8.7
|
|
|
$
|
69.9
|
|
|
$
|
109.1
|
|
|
$
|
—
|
|
|
$
|
189.6
|
|
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
Condensed and Consolidated Statement of Cash Flows
For the
three
months ended
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Allegion plc
|
|
Allegion US Holding
|
|
Other Subsidiary Guarantors
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
|
Net cash provided by (used in) operating activities
|
$
|
(3.0
|
)
|
|
$
|
19.9
|
|
|
$
|
7.6
|
|
|
$
|
87.5
|
|
|
$
|
(112.8
|
)
|
|
$
|
(0.8
|
)
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
(6.9
|
)
|
|
—
|
|
|
(7.4
|
)
|
|
Proceeds from sales and maturities of marketable securities
|
—
|
|
|
—
|
|
|
—
|
|
|
6.6
|
|
|
—
|
|
|
6.6
|
|
|
Other investing activities, net
|
—
|
|
|
—
|
|
|
|
|
|
(2.0
|
)
|
|
—
|
|
|
(2.0
|
)
|
|
Net cash used in investing activities
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
(2.3
|
)
|
|
—
|
|
|
(2.8
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt repayments, net
|
(11.7
|
)
|
|
—
|
|
|
—
|
|
|
(16.6
|
)
|
|
—
|
|
|
(28.3
|
)
|
|
Net inter-company proceeds (payments)
|
54.3
|
|
|
(11.3
|
)
|
|
19.7
|
|
|
(62.7
|
)
|
|
—
|
|
|
—
|
|
|
Dividends paid
|
—
|
|
|
—
|
|
|
(67.7
|
)
|
|
(45.1
|
)
|
|
112.8
|
|
|
—
|
|
|
Dividends paid to shareholders
|
(11.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11.4
|
)
|
|
Repurchase of ordinary shares
|
(30.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30.0
|
)
|
|
Other financing activities, net
|
0.8
|
|
|
—
|
|
|
—
|
|
|
(5.9
|
)
|
|
—
|
|
|
(5.1
|
)
|
|
Net cash provided by (used in) financing activities
|
2.0
|
|
|
(11.3
|
)
|
|
(48.0
|
)
|
|
(130.3
|
)
|
|
112.8
|
|
|
(74.8
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
4.2
|
|
|
—
|
|
|
4.2
|
|
|
Net increase (decrease) in cash and cash equivalents
|
(1.0
|
)
|
|
8.6
|
|
|
(40.9
|
)
|
|
(40.9
|
)
|
|
—
|
|
|
(74.2
|
)
|
|
Cash and cash equivalents - beginning of period
|
3.3
|
|
|
0.3
|
|
|
73.8
|
|
|
122.3
|
|
|
—
|
|
|
199.7
|
|
|
Cash and cash equivalents - end of period
|
$
|
2.3
|
|
|
$
|
8.9
|
|
|
$
|
32.9
|
|
|
$
|
81.4
|
|
|
$
|
—
|
|
|
$
|
125.5
|
|
Note 21 – Subsequent Events
On April 5, 2017, the Company's Board of Directors declared a quarterly dividend of
$0.16
cents per ordinary share. The dividend is payable June 30, 2017 to shareholders of record on June 15, 2017.
On April 5, 2017, iDevices LLC, including the Company's equity investment, was acquired by a third party. The Company expects to record an immaterial gain in the second quarter of 2017.