Allegion Reports Fourth-Quarter, Full-Year 2020 Financial Results, Provides 2021 Outlook
February 16, 2021 at 05:30 AM EST
Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported fourth-quarter 2020 net revenues of $727.3 million and net earnings of $93.3 million, or $1.01 per share. Excluding charges related to restructuring, impairments, loss on assets held for sale and acquisition costs, adjusted net earnings were $137.1 million, or $1.49 per share, up 16.4 percent when compared with fourth-quarter 2019 adjusted EPS of $1.28. Reported net earnings for fourth-quarter 2020 include a $0.41 per share charge for assets held for sale related to our QMI business. Reported net earnings for fourth-quarter 2019 include a $0.34 per share charge for losses related to the divestiture of the company’s business operations in Colombia and Turkey.
Fourth-quarter 2020 net revenues increased 1.1 percent when compared to the prior-year period (down 0.6 percent on an organic basis). The organic revenue decrease was driven by the Americas and Asia-Pacific regions, offset by solid performance in EMEA. Reported revenues reflect benefits from foreign currency that more than offset the organic revenue decline.
The Americas segment revenues decreased 1 percent (down 0.7 percent on an organic basis), as the residential business experienced mid-twenties percent growth while non-residential was down, as expected, low-double digits percent.
The EMEA segment revenues increased 10.5 percent (up 3.1 percent on an organic basis), reflecting favorable currency as well as good growth in the SimonsVoss, Interflex and Global Portable Security businesses.
The Asia-Pacific segment revenues decreased 6.4 percent (down 11.9 percent on an organic basis). The revenue change in the quarter was the result of weakness in Korea partially offset by favorable currency impacts.
“The continued rebound in EMEA, growth in the Americas residential business and the ongoing cost mitigation actions taken throughout the entire company helped Allegion deliver strong margin expansion in the fourth quarter, despite the COVID-19 pandemic’s effects on our markets and the global economy,” said David D. Petratis, Allegion chairman, president and CEO.
Fourth-quarter 2020 operating income was $117.7 million, a decrease of $25.6 million or 17.9 percent compared to 2019. Fourth-quarter 2020 operating income includes a $37.9 million loss on assets held for sale related to our QMI business. Adjusted operating income in fourth-quarter 2020 was $163.5 million, an increase of $12.5 million or 8.3 percent compared to 2019.
Fourth-quarter 2020 operating margin was 16.2 percent, compared with 19.9 percent in 2019. The adjusted operating margin in fourth-quarter 2020 was 22.5 percent, compared with 21 percent in 2019. The 150-basis-point increase in adjusted operating margin is attributable to strong performance in the EMEA and Asia-Pacific regions, along with reductions in corporate spending that offset non-residential weakness experienced in the Americas region.
Full-year 2020 net revenues of $2.72 billion decreased 4.7 percent, when compared with the prior year (down 4.8 percent on an organic basis). The revenue declines were primarily driven by pressures related to the COVID-19 pandemic.
Full-year 2020 net earnings were $314.3 million or $3.39 per share, compared with $401.8 million or $4.26 per share for the prior year. Full-year 2020 adjusted net earnings were $474.1 million or $5.11 per share, compared with $460.8 million or $4.89 per share in 2019. Reported EPS for 2020 includes $1.07 per share for charges related to goodwill and intangible asset impairment, as well as a $0.41 per share charge for assets held for sale related to our QMI business. Reported EPS for 2019 includes a $0.34 per share charge related to the divestiture of the company’s business operations in Colombia and Turkey.
Full-year 2020 operating margin was 14.8 percent, compared with 19.8 percent in 2019. The adjusted operating margin for full-year 2020 was 21 percent, compared with 20.8 percent in 2019.
“I am extremely proud of how the Allegion team pulled together and performed this year given the very difficult circumstances our operations and our people faced alongside our global communities,” Petratis added. “We finished the year with increased adjusted earnings per share and available cash flow, and we delivered those metrics against COVID-19 headwinds. In addition, we drove actions to keep our employees safe, maintained a very strong balance sheet in 2020 and continue to invest strategically to position the company for long-term success.”
Interest expense for fourth-quarter 2020 was $12.3 million, down from $13.3 million for fourth-quarter 2019.
Other income net for fourth-quarter 2020 was $0.4 million, compared to other expense net of $2.2 million in the same period of 2019.
The company’s effective tax rate for fourth-quarter 2020 was 11.7 percent, compared with 17.4 percent in 2019. The company’s adjusted effective tax rate for fourth-quarter 2020 was 9.5 percent, compared with 12.8 percent in 2019.
Cash Flow and Liquidity
Available cash flow for 2020 was $443.2 million, an increase of $20.6 million versus the prior year. The company ended 2020 with cash and cash equivalents of $480.4 million, as well as total debt of $1,429.6 million.
Share Repurchase and Dividends
During fourth-quarter 2020, the company repurchased approximately 1.1 million shares for approximately $114.7 million under its previously authorized share-repurchase program approved by the company's board of directors in February 2020. For the year, the company repurchased approximately 2 million shares for approximately $208.8 million. As announced on Feb. 5, 2021, Allegion’s board of directors declared a quarterly dividend of $0.36 per ordinary share of the company, an increase of 13 percent over the prior dividend. The dividend is payable March 31, 2021, to shareholders of record on March 17, 2021.
Company Change in Operating Segments
As reported on Dec. 8, 2020, Allegion has changed its operating segments from three (Americas, EMEA and Asia Pacific) to two, Allegion Americas and Allegion International, effective Jan. 1, 2021. The Allegion International segment combines the former EMEA and Asia-Pacific regions. All future reporting and outlooks will be made in the framework of the new structure.
The company expects full-year 2021 revenues to decrease 0.5 to 1.5 percent on a reported basis and decrease 1.5 to 2.5 percent organically, when compared with 2020, after excluding the expected impacts of acquisitions, divestitures and foreign currency movements. The company expects organic growth in its Allegion Americas residential and Allegion International businesses, offset by continued headwinds in Allegion Americas non-residential.
Full-year 2021 reported EPS is expected to be in the range of $4.55 to $4.75, or $4.70 to $4.85 on an adjusted basis. Adjustments to 2021 EPS include estimated impacts of $0.10 to $0.15 per share for restructuring costs. The outlook includes incremental investment of approximately $0.10 per share; assumes a full-year adjusted effective tax rate of approximately 12 percent; and assumes an average diluted share count for the full year of approximately 91 million shares.
The company is targeting full-year available cash flow of approximately $400 to $420 million.
“Allegion’s future has never been brighter,” Petratis said. “The long-term fundamentals for seamless and digital solutions are sound, and we continue to invest in our future. The capability of our employees, the legacy of our innovation, and the continued execution of a balanced capital allocation strategy will position Allegion stronger exiting the pandemic than when we entered.”
Conference Call Information
On Tuesday, Feb. 16, 2021, 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.
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 $2.7 billion in revenue in 2020, and its security products are sold around the world.
For more, visit www.allegion.com.
This news release also includes adjusted non-GAAP financial information which should be considered supplemental to, not a substitute for or superior to, the financial measure calculated in accordance with GAAP. 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.
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