Allegion Reports Second-Quarter 2020 Financial Results

Allegion plc (the “Company”), a leading global provider of security products and solutions, today reported second-quarter 2020 net revenues of $589.5 million and net earnings of $73.7 million, or $0.80 per share. Excluding charges related to restructuring, adjusted net earnings were $85.1 million, or $0.92 per share, down 27 percent when compared with second-quarter 2019 adjusted EPS of $1.26.

Second-quarter 2020 net revenues decreased 19.4 percent when compared to the prior-year period (down 18.5 percent on an organic basis). Organic revenue declines were precipitous across all regions as the COVID-19 pandemic forced government-mandated shutdowns around the globe. Reported revenues also reflect unfavorable impacts from foreign currency and divestitures.

Second-quarter 2020 operating income was $96.5 million, a decrease of $49.2 million or 33.8 percent compared to 2019. The decrease is related to reduced volume, driven by COVID-19, and restructuring charges taken during the quarter. Adjusted operating income in second-quarter 2020 was $111.2 million, representing a decrease of $46.1 million or 29.3 percent compared to 2019.

Second-quarter 2020 operating margin was 16.4 percent, compared with 19.9 percent in 2019. The adjusted operating margin in second-quarter 2020 was 18.9 percent, compared with 21.5 percent in 2019. The 260-basis-point decrease in adjusted operating margin is driven primarily by COVID-19 related volume impacts in all regions.

“I’m pleased with our operational performance in difficult circumstances and a challenging market,” Chairman, President and CEO David D. Petratis said. “Early on, we took necessary and prudent actions to reduce spending, secure our supply chain, protect liquidity, as well as keep our people safe and our operations running wherever possible. Our markets and business performance showed continuous improvement throughout the quarter.”

The Americas segment revenues decreased 18.5 percent (down 18.1 percent on an organic basis), driven by economic pressure related to COVID-19. Americas non-residential business declined mid-teens, and residential realized a mid-twenties revenue decline in the quarter. The Americas also experienced electronics revenue decline in the low twenties during the quarter.

The EMEA segment revenues were down 21.9 percent (down 20.4 percent on an organic basis), reflecting COVID-19 impacts experienced in the quarter. Effects from the Turkey divestiture last year and unfavorable foreign currency also contributed to the total revenue decline.

The Asia-Pacific segment revenues decreased 22.1 percent (down 18 percent on an organic basis). The revenue decline in the quarter was driven by COVID-19 impacts, weakness in China residential and Australian markets, as well as unfavorable foreign currency effects.

Restructuring

During the quarter, the company incurred restructuring expenses of $14.7 million across all regions and its corporate entity. These charges are primarily related to workforce reductions, intended to optimize and simplify operations and cost structure, but also include charges related to the prior-year closure of the company’s production facility in Turkey.

Additional Items

Interest expense for second-quarter 2020 was $13 million, down from $13.4 million for second-quarter 2019.

Other income net for second-quarter 2020 was $4.4 million, compared to other expense net of $0.7 million in the same period of 2019.

The company’s effective tax rate for second-quarter 2020 was 16.2 percent, compared with 16.9 percent in 2019. The company’s adjusted effective tax rate for second-quarter 2020 was 17.1 percent, compared with 16.7 percent in 2019.

Cash Flow and Liquidity

Year-to-date 2020 available cash flow was $103.6 million, an increase of $25.9 million versus the prior year. The year-over-year increase in available cash flow is due to improvements in net working capital along with lower capital expenditures offsetting lower net earnings.

The company ended second-quarter 2020 with cash and cash equivalents of $302.4 million, as well as $483.7 million of availability under its revolving credit facility.

2020 Outlook

The company is re-issuing outlooks for 2020 for revenue, EPS and available cash flow. All the following estimates assume no further disruptions related to COVID-19.

The company’s total revenue outlook is now projected to be down 9 to 10 percent, and organic revenue is estimated to be down 8 to 9 percent compared to 2019. All regions are now projected to experience organic revenue declines, with Americas down 7.5 to 8.5 percent, EMEA down 9 to 10 percent and Asia Pacific down 10.5 to 12.5 percent.

The company’s EPS outlook now stands at $2.70 to $2.95 with an adjusted EPS outlook of $4.15 to $4.30. Adjustments to 2020 EPS include the non-cash charges related to goodwill and indefinite-lived trade name impairments experienced in the first quarter along with estimated impacts for restructuring costs. The outlook assumes investment spend at approximately $0.05 per share; a full-year adjusted effective tax rate of approximately 13.5 to 14.5 percent; and an average diluted share count for the full year of approximately 93 million shares.

The company’s full-year available cash flow outlook is now projected to be approximately $350 to $370 million.

“We are positioned well for long-term resiliency, with solid underlying fundamentals and the ability to press forward on our vision of seamless access and a safer world,” Petratis added. “Moving into the second half of 2020, we will focus on our strategy, our people and our business execution. We’ll continue to be very disciplined in addressing our expenses, adapting to demand and managing our cash flow and liquidity.”

For the full second quarter results, click here.

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 institutions. Allegion had $2.9 billion in revenue in 2019, and sells products in almost 130 countries. For more, visit www.allegion.com.

Contact:

Tom Martineau – Vice President, Treasurer & Investor Relations – tom.martineau@allegion.com – (317) 810-3759

Source: Allegion plc