- First-quarter 2020 net earnings per share (EPS) of $0.00,
compared with 2019 EPS of $0.84; Adjusted 2020 EPS of $1.04, up
18.2 percent compared with 2019 adjusted EPS of $0.88
- First-quarter 2020 revenues of $674.7 million, up 3 percent
compared to 2019, up 4.3 percent on an organic basis
- First-quarter 2020 operating margin of 4.3 percent, compared
with 2019 operating margin of 16.5 percent; Adjusted operating
margin of 19 percent, increased 190 basis points compared with 2019
adjusted operating margin of 17.1 percent
- Previously withdrew 2020 outlook; Company will provide
update when visibility in the global markets returns to more
predictable levels
Allegion plc (NYSE: ALLE), a leading global provider of security
products and solutions, today reported first-quarter 2020 net
revenues of $674.7 million and net income of $0.4 million, or $0.00
per share. Excluding charges related to restructuring and
acquisitions, as well as goodwill and indefinite-lived trade name
impairments, adjusted net earnings were $97.4 million, or $1.04 per
share, up 18.2 percent when compared with first-quarter 2019
adjusted EPS of $0.88. Reported net earnings for first-quarter 2020
include $96.3 million ($1.01 per share) in non-cash charges related
to goodwill and indefinite-lived trade name impairments for our
non-U.S. operations, predominantly related to COVID-19 and expected
future impacts.
“Leading into the COVID-19 pandemic, the business, particularly
in the Americas, was performing very well,” said David D. Petratis,
Allegion chairman, president and CEO. “The organic growth and
adjusted margin expansion we experienced in the first quarter
reflect Allegion’s solid underlying fundamentals, which include the
strength and adaptability of our supply chain and our legacy
brands. Those fundamentals will serve us well as the global
pandemic subsides.”
First-quarter 2020 net revenues increased 3 percent when
compared to the prior-year period (up 4.3 percent on an organic
basis). Organic growth was led by the Americas region, at 8.2
percent, offset by weakness in EMEIA and Asia Pacific, which
experienced general weakness in end markets as well as initial
impacts from COVID-19. Reported revenues reflect solid pricing and
good Americas volume that more than offset impacts from weaker
markets in the other regions, foreign currency and
divestitures.
First-quarter 2020 operating income was $28.9 million, a
decrease of $79.1 million or 73.2 percent compared to 2019. The
decrease is related to the $96.3 million in charges from goodwill
and indefinite-lived trade name impairments. Adjusted operating
income in first-quarter 2020 was $128.2 million, representing an
increase of $16.1 million or 14.4 percent compared to 2019.
First-quarter 2020 operating margin was 4.3 percent, compared
with 16.5 percent in 2019. The adjusted operating margin in
first-quarter 2020 was 19 percent, compared with 17.1 percent in
2019. The 190-basis-point increase in adjusted operating margin is
driven primarily by strong volume leverage in the Americas, as well
as price and productivity exceeding inflation.
The Americas segment revenues increased 7.7 percent (up 8.2
percent on an organic basis). The revenue growth was driven by
solid pricing and strong volume. Both the non-residential and
residential businesses saw high-single digit growth in the quarter.
The Americas also experienced electronics growth of 12 percent in
the quarter.
The EMEIA segment revenues were down 9.1 percent (down 6.2
percent on an organic basis), reflecting softer end markets across
the region, COVID-19 impacts experienced late in the quarter,
effects from the Turkey divestiture last year and unfavorable
foreign currency.
The Asia-Pacific segment revenues decreased 11.1 percent (down
4.9 percent on an organic basis). The revenue decline in the
quarter was driven by continued weakness in Australian end markets
and COVID-19 impacts, as well as unfavorable currency effects.
Restructuring
On April 10, 2020, the company announced that it expects to
record restructuring charges of $30 to $35 million in total, of
which $20 to $25 million are expected to be incurred during 2020
with the remainder to be incurred during 2021. These initiatives
will be implemented across several businesses and functions outside
the United States and are intended to optimize and simplify the
company’s non-U.S. operations and cost structure.
Additional Items
Interest expense for first-quarter 2020 was $12.9 million, down
from $13.7 million for first-quarter 2019.
Other expense net for first-quarter 2020 was $4 million,
compared to other income net of $1.1 million in the same period of
2019.
The company’s effective tax rate for first-quarter 2020 was 95.8
percent, compared with 15.8 percent in 2019. The company’s adjusted
effective tax rate for first-quarter 2020 was 12.4 percent,
compared with 16 percent in 2019. The increase in the effective tax
rate compared to 2019 is primarily due to the unfavorable tax
impact related to the goodwill and indefinite-lived trade name
impairment charges. The decrease in adjusted effective tax rate is
related to the favorable benefit of excess share-based compensation
deductions.
Cash Flow and Liquidity
Year-to-date 2020 available cash flow was $19 million, an
increase of $43.9 million versus the prior year. The year-over-year
increase in available cash flow is due to higher net earnings
(excluding non-cash impairment charges), improvements in net
working capital and slightly lower capital expenditures.
The company ended first-quarter 2020 with cash and cash
equivalents of $245.3 million, as well as total debt of $1,431.4
million.
Share Repurchase
During first-quarter 2020, the company repurchased approximately
0.9 million shares for approximately $94.1 million under previously
authorized share-repurchase programs.
2020 Outlook
The company previously withdrew its 2020 outlook for revenue and
EPS due to the uncertainty surrounding the COVID-19 pandemic, as
well as its impact on demand and the supply chain.
“During this time of uncertainty, we remain deeply committed to
do what’s right for our employees, customers and the communities
where we operate, as well as our business health and essential
critical infrastructure. We expect the COVID-19 pandemic will cause
near-term negative financial impacts to revenue, income and cash
flow for our business, which is why we are taking proactive
measures – such as reductions in discretionary spending,
eliminating non-essential investment spend, implementing a hiring
freeze and temporarily suspending share repurchases – to help
mitigate those impacts. We will continue to assess the global
market landscape during these volatile times and will provide an
outlook when we have more visibility,” Petratis added.
Conference Call Information
On Thursday, April 23, 2020, 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
https://investor.allegion.com.
About Allegion™
Allegion (NYSE: ALLE) is a global pioneer in seamless access,
with leading brands like CISA®, Interflex®, LCN®, Schlage®,
SimonsVoss® and Von Duprin®. Focusing on security around the door
and adjacent areas, Allegion secures people and assets with a range
of solutions for homes, businesses, schools and other institutions.
Allegion had $2.9 billion in revenue in 2019, and sells products in
almost 130 countries.
For more, visit www.allegion.com.
Non-GAAP Measures
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. The company presents operating income,
operating margin, net earnings and diluted earnings per share (EPS)
on both a U.S. GAAP basis and on an adjusted (non-GAAP) basis,
revenue growth on a U.S. GAAP basis and organic revenue growth on a
non-GAAP basis, and adjusted EBITDA and adjusted EBITDA margin
(both non-GAAP measures). The company presents these non-GAAP
measures because management believes they provide useful
perspective of the company’s underlying business results, trends
and a more comparable measure of period-over-period results. These
measures are also used to evaluate senior management and are a
factor in determining at-risk compensation. Investors should not
consider non-GAAP measures as alternatives to the related GAAP
measures. Further information about the adjusted non-GAAP financial
tables is attached to this news release.
Forward-Looking Statements
This press release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933, and Section 21E of
the Securities Exchange Act of 1934, including statements regarding
the potential impacts of the global COVID-19 pandemic and the
Company's 2020 financial performance, the company’s business plans
and strategy, 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 generally are identified by the words
“believe,” “project,” “expect,” “anticipate,” “estimate,”
“forecast,” “outlook,” “intend,” “strategy,” “future,”
“opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,”
“will continue,” “will likely result,” or the negative thereof or
variations thereon or similar expressions generally intended to
identify forward-looking statements. Forward-looking statements may
relate to such matters as projections of revenue, margins,
expenses, tax provisions, earnings, cash flows, benefit
obligations, dividends, share purchases, or other financial items;
any statements of the plans, strategies, and objectives of
management for future operations, including those relating to any
statements concerning expected development, performance, or market
share relating to our products and services; any statements
regarding future economic conditions or our performance; any
statements regarding pending investigations, claims or disputes;
any statements of expectation or belief; and any statements of
assumptions underlying any of the foregoing. These statements are
based on the company's currently available information and our
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, 2019, Form 10-Q for the
quarter ended March 31, 2020, and in its other SEC filings. The
company undertakes no obligation to update these forward-looking
statements.
ALLEGION PLC
Condensed and Consolidated Income
Statements
(In millions, except per share
data)
UNAUDITED
Three months ended March
31,
2020
2019
Net revenues
$
674.7
$
655.0
Cost of goods sold
381.6
378.1
Gross profit
293.1
276.9
Selling and administrative expenses
167.9
168.9
Impairment of goodwill and
indefinite-lived trade names
96.3
—
Operating income
28.9
108.0
Interest expense
12.9
13.7
Other expense (income), net
4.0
(1.1
)
Earnings before income taxes
12.0
95.4
Provision for income taxes
11.5
15.1
Net earnings
0.5
80.3
Less: Net earnings attributable to
noncontrolling interests
0.1
0.1
Net earnings attributable to Allegion
plc
$
0.4
$
80.2
Basic earnings per ordinary
share
attributable to Allegion plc
shareholders:
$
—
$
0.85
Diluted earnings per ordinary
share
attributable to Allegion plc
shareholders:
$
—
$
0.84
Shares outstanding - basic
92.7
94.5
Shares outstanding - diluted
93.3
95.1
ALLEGION PLC
Condensed and Consolidated Balance
Sheets
(In millions)
UNAUDITED
March 31, 2020
December 31, 2019
ASSETS
Cash and cash equivalents
$
245.3
$
355.3
Restricted cash
3.4
3.4
Accounts and notes receivables, net
343.1
329.8
Inventories
275.5
269.9
Other current assets
54.7
43.4
Total current assets
922.0
1,001.8
Property, plant and equipment, net
289.2
291.4
Goodwill
773.0
873.3
Intangible assets, net
485.3
510.9
Other noncurrent assets
288.2
289.8
Total assets
$
2,757.7
$
2,967.2
LIABILITIES AND EQUITY
Accounts payable
$
198.7
$
221.0
Accrued expenses and other current
liabilities
254.6
285.9
Short-term borrowings and current
maturities of long-term debt
3.4
0.1
Total current liabilities
456.7
507.0
Long-term debt
1,428.0
1,427.6
Other noncurrent liabilities
259.2
272.2
Equity
613.8
760.4
Total liabilities and equity
$
2,757.7
$
2,967.2
ALLEGION PLC
Condensed and Consolidated Statement of
Cash Flows
(In millions)
UNAUDITED
Three months ended March
31,
2020
2019
Operating Activities
Net earnings
$
0.5
$
80.3
Depreciation and amortization
19.8
20.7
Impairment of goodwill and
indefinite-lived trade names
96.3
—
Changes in assets and liabilities and
other non-cash items
(85.8
)
(113.6
)
Net cash provided by (used in) operating
activities
30.8
(12.6
)
Investing Activities
Capital expenditures
(11.8
)
(12.3
)
Acquisition of and equity investments in
businesses, net of cash acquired
—
(4.6
)
Other investing activities, net
(7.0
)
(0.8
)
Net cash used in investing activities
(18.8
)
(17.7
)
Financing Activities
Debt proceeds (repayments), net
3.2
(9.0
)
Dividends paid to ordinary
shareholders
(29.0
)
(25.2
)
Repurchase of ordinary shares
(94.1
)
(63.8
)
Other financing activities, net
3.1
(1.2
)
Net cash used in financing activities
(116.8
)
(99.2
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(5.2
)
(0.5
)
Net decrease in cash, cash equivalents and
restricted cash
(110.0
)
(130.0
)
Cash, cash equivalents and restricted cash
- beginning of period
358.7
290.6
Cash, cash equivalents and restricted cash
- end of period
$
248.7
$
160.6
SUPPLEMENTAL
SCHEDULES ALLEGION PLC
SCHEDULE 1
SELECTED OPERATING SEGMENT
INFORMATION
(In millions)
Three months ended March
31,
2020
2019
Net revenues
Americas
$
512.1
$
475.3
EMEIA
129.9
142.9
Asia Pacific
32.7
36.8
Total net revenues
$
674.7
$
655.0
Operating income (loss)
Americas
$
146.6
$
120.9
EMEIA
1.1
10.8
Asia Pacific
(97.9
)
(1.5
)
Corporate unallocated
(20.9
)
(22.2
)
Total operating income
$
28.9
$
108.0
ALLEGION PLC
SCHEDULE 2
The Company presents operating income,
operating margin, net earnings and diluted earnings per share (EPS)
on both a U.S. GAAP basis and on an adjusted (non-GAAP) basis,
revenue growth on a U.S. GAAP basis and organic revenue growth on a
non-GAAP basis, and adjusted EBITDA and adjusted EBITDA margin
(both non-GAAP measures). The Company presents these non-GAAP
measures because management believes they provide useful
perspective of the Company’s underlying business results and trends
and a more comparable measure of period-over-period results. These
measures are also used to evaluate senior management and are a
factor in determining at-risk compensation. Investors should not
consider non-GAAP measures as alternatives to the related U.S. GAAP
measures.
The Company defines the presented non-GAAP measures as
follows:
- Adjustments to operating income, operating margin, net
earnings, EPS and EBITDA include items such as goodwill,
indefinite-lived trade name, and other asset impairment charges,
restructuring charges, acquisition and integration costs, debt
refinancing costs and charges related to the divestiture of
businesses;
- Organic revenue growth is defined as U.S. GAAP revenue growth
excluding the impact of divestitures, acquisitions and currency
effects; and
- Available cash flow is defined as U.S. GAAP net cash from
operating activities less capital expenditures.
These non-GAAP measures may not be defined
and calculated the same as similar measures used by other
companies.
RECONCILIATION OF GAAP TO NON-GAAP NET
EARNINGS
(In millions, except per share
data)
Three months ended March 31,
2020
Three months ended March 31,
2019
Reported
Adjustments
Adjusted (non-GAAP)
Reported
Adjustments
Adjusted (non-GAAP)
Net revenues
$
674.7
$
—
$
674.7
$
655.0
$
—
$
655.0
Operating income
28.9
99.3
(1)
128.2
108.0
4.1
(1)
112.1
Operating margin
4.3
%
19.0
%
16.5
%
17.1
%
Earnings before income taxes
12.0
99.3
(2)
111.3
95.4
4.1
(2)
99.5
Provision for income taxes
11.5
2.3
(3)
13.8
15.1
0.8
(3)
15.9
Effective income tax rate
95.8
%
12.4
%
15.8
%
16.0
%
Net earnings
0.5
97.0
97.5
80.3
3.3
83.6
Non-controlling interests
0.1
—
0.1
0.1
—
0.1
Net earnings attributable to Allegion
plc
$
0.4
$
97.0
$
97.4
$
80.2
$
3.3
$
83.5
Diluted earnings per ordinary share
attributable to
Allegion plc shareholders:
$
—
$
1.04
$
1.04
$
0.84
$
0.04
$
0.88
(1)
Adjustments to operating income for the three months ended March
31, 2020, consist primarily of $96.3 million of goodwill and
indefinite-lived trade name impairment charges, as well as $3.0
million of restructuring charges and acquisition and integration
expenses. Adjustments to operating income for the three months
ended March 31, 2019, consist of $4.1 million of restructuring
charges and acquisition and integration expenses.
(2)
Adjustments to earnings before income taxes for the three months
ended March 31, 2020 and 2019, consist of the adjustments to
operating income discussed above.
(3)
Adjustments to the provision for income taxes for the three
months ended March 31, 2020 and 2019, consist of $2.3 million and
$0.8 million, respectively, of tax expense related to the excluded
items discussed above.
ALLEGION PLC
SCHEDULE 3
RECONCILIATION OF GAAP TO NON-GAAP
REVENUE AND OPERATING INCOME BY REGION
(In millions)
Three months ended March 31,
2020
Three months ended March 31,
2019
As Reported
Margin
As Reported
Margin
Americas
Net revenues (GAAP)
$
512.1
$
475.3
Operating income (GAAP)
$
146.6
28.6
%
$
120.9
25.4
%
Restructuring charges
—
—
%
1.8
0.4
%
Acquisition and integration costs
—
—
%
0.4
0.1
%
Adjusted operating income
146.6
28.6
%
123.1
25.9
%
Depreciation and amortization
8.5
1.7
%
9.1
1.9
%
Adjusted EBITDA
$
155.1
30.3
%
$
132.2
27.8
%
EMEIA
Net revenues (GAAP)
$
129.9
$
142.9
Operating income (GAAP)
$
1.1
0.8
%
$
10.8
7.6
%
Restructuring charges
0.7
0.5
%
0.8
0.5
%
Acquisition and integration costs
—
—
%
0.1
0.1
%
Impairment of indefinite-lived trade
name
1.5
1.2
%
—
—
%
Adjusted operating income
3.3
2.5
%
11.7
8.2
%
Depreciation and amortization
8.1
6.3
%
8.3
5.8
%
Adjusted EBITDA
$
11.4
8.8
%
$
20.0
14.0
%
Asia Pacific
Net revenues (GAAP)
$
32.7
$
36.8
Operating loss (GAAP)
$
(97.9
)
(299.4
)%
$
(1.5
)
(4.1
)%
Restructuring charges
1.5
4.6
%
0.5
1.4
%
Acquisition and integration costs
—
—
%
0.3
0.8
%
Impairment of goodwill and
indefinite-lived trade names
94.8
289.9
%
—
—
%
Adjusted operating loss
(1.6
)
(4.9
)%
(0.7
)
(1.9
)%
Depreciation and amortization
1.2
3.7
%
1.2
3.3
%
Adjusted EBITDA
$
(0.4
)
(1.2
)%
$
0.5
1.4
%
Corporate
Operating loss (GAAP)
$
(20.9
)
$
(22.2
)
Acquisition and integration costs
0.8
0.2
Adjusted operating loss
(20.1
)
(22.0
)
Depreciation and amortization
1.1
1.1
Adjusted EBITDA
$
(19.0
)
$
(20.9
)
Total
Net revenues
$
674.7
$
655.0
Adjusted operating income
128.2
19.0
%
112.1
17.1
%
Depreciation and amortization
18.9
2.8
%
19.7
3.0
%
Adjusted EBITDA
$
147.1
21.8
%
$
131.8
20.1
%
ALLEGION PLC
SCHEDULE 4
RECONCILIATION OF CASH PROVIDED BY
OPERATING ACTIVITIES TO AVAILABLE CASH FLOW AND NET EARNINGS TO
ADJUSTED EBITDA
(In millions)
Three months ended March
31,
2020
2019
Net cash provided by (used in) operating
activities
$
30.8
$
(12.6
)
Capital expenditures
(11.8
)
(12.3
)
Available cash flow
$
19.0
$
(24.9
)
Three months ended March
31,
2020
2019
Net earnings (GAAP)
$
0.5
$
80.3
Provision for income taxes
11.5
15.1
Interest expense
12.9
13.7
Depreciation and amortization
18.9
19.7
EBITDA
43.8
128.8
Other expense (income), net
4.0
(1.1
)
Impairment of goodwill and
indefinite-lived trade names
96.3
—
Acquisition and integration costs and
restructuring charges
3.0
4.1
Adjusted EBITDA
$
147.1
$
131.8
ALLEGION PLC
SCHEDULE 5
RECONCILIATION OF GAAP REVENUE GROWTH
TO NON-GAAP ORGANIC REVENUE GROWTH BY REGION
Three months ended March
31,
2020
2019
Americas
Revenue growth (GAAP)
7.7
%
8.2
%
Acquisitions and divestitures
0.4
%
(0.9
)%
Currency translation effects
0.1
%
0.3
%
Organic growth (non-GAAP)
8.2
%
7.6
%
EMEIA
Revenue growth (GAAP)
(9.1
)%
(4.9
)%
Acquisitions and divestitures
0.4
%
(0.9
)%
Currency translation effects
2.5
%
7.5
%
Organic growth (non-GAAP)
(6.2
)%
1.7
%
Asia Pacific
Revenue growth (GAAP)
(11.1
)%
55.3
%
Acquisitions
—
%
(63.2
)%
Currency translation effects
6.2
%
5.7
%
Organic growth (non-GAAP)
(4.9
)%
(2.2
)%
Total
Revenue growth (GAAP)
3.0
%
6.8
%
Acquisitions and divestitures
0.4
%
(3.3
)%
Currency translation effects
0.9
%
2.3
%
Organic growth (non-GAAP)
4.3
%
5.8
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200423005242/en/
Media Contact: Whitney Moorman – Reputation Management
Leader 317-810-3241 Whitney.Moorman@allegion.com
Analyst Contact: Tom Martineau – Vice President,
Treasurer and Investor Relations 317-810-3759
Tom.Martineau@allegion.com
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