10-Q 1 alle-20220331.htm 10-Q FOR THE PERIOD ENDED MARCH 31, 2022 alle-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
_______________________________
FORM 10-Q
_______________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 001-35971
_______________________________ 
alle-20220331_g1.jpg
ALLEGION PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
_______________________________
Ireland98-1108930
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
Block D
Iveagh Court
Harcourt Road
Dublin 2, D02 VH94, Ireland
(Address of principal executive offices, including zip code)
+(353) (12546200
(Registrant’s telephone number, including area code)
_______________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of exchange on which registered
Ordinary shares, par value $0.01 per shareALLENew York Stock Exchange
3.500% Senior Notes due 2029ALLE 3 ½New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x   No  ¨



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes     No  
The number of ordinary shares outstanding of Allegion plc as of April 21, 2022 was 87,804,920.


ALLEGION PLC
FORM 10-Q
INDEX
Item 1 -
Item 2 -
Item 3 -
Item 4 -
Item 1 -
Item 1A -
Item 2 -
Item 6 -



PART I-FINANCIAL INFORMATION

Item 1 – Financial Statements

Allegion plc
Condensed and Consolidated Statements of Comprehensive Income
(Unaudited)
Three months ended
 March 31,
In millions, except per share amounts20222021
Net revenues$723.6 $694.3 
Cost of goods sold434.9 396.9 
Selling and administrative expenses171.7 166.1 
Operating income117.0 131.3 
Interest expense11.9 12.3 
Other income, net(2.2)(3.5)
Earnings before income taxes107.3 122.5 
Provision for income taxes14.2 14.3 
Net earnings93.1 108.2 
Less: Net earnings attributable to noncontrolling interests0.1 0.2 
Net earnings attributable to Allegion plc$93.0 $108.0 
Earnings per share attributable to Allegion plc ordinary shareholders:
Basic net earnings$1.05 $1.19 
Diluted net earnings $1.05 $1.18 
Weighted-average shares outstanding:
Basic88.2 90.7 
Diluted88.6 91.2 
Total comprehensive income$72.1 $76.2 
Less: Total comprehensive income attributable to noncontrolling interests0.1 0.2 
Total comprehensive income attributable to Allegion plc$72.0 $76.0 
See accompanying notes to condensed and consolidated financial statements.
1

Allegion plc
Condensed and Consolidated Balance Sheets
(Unaudited)
In millions, except share amountsMarch 31,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$305.1 $397.9 
Accounts and notes receivable, net324.3 283.3 
Inventories402.9 380.4 
Other current assets45.0 56.0 
Total current assets1,077.3 1,117.6 
Property, plant and equipment, net280.8 283.7 
Goodwill796.4 803.8 
Intangible assets, net434.0 447.5 
Other noncurrent assets419.1 398.4 
Total assets$3,007.6 $3,051.0 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$258.4 $259.1 
Accrued expenses and other current liabilities310.5 329.5 
Short-term borrowings and current maturities of long-term debt12.6 12.6 
Total current liabilities581.5 601.2 
Long-term debt1,426.8 1,429.5 
Other noncurrent liabilities254.3 257.9 
Total liabilities2,262.6 2,288.6 
Equity:
Allegion plc shareholders’ equity:
Ordinary shares, $0.01 par value (87,801,145 and 88,215,625 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively)
0.9 0.9 
Capital in excess of par value  
Retained earnings956.1 952.6 
Accumulated other comprehensive loss(215.4)(194.4)
Total Allegion plc shareholders’ equity741.6 759.1 
Noncontrolling interests3.4 3.3 
Total equity745.0 762.4 
Total liabilities and equity$3,007.6 $3,051.0 
See accompanying notes to condensed and consolidated financial statements.

2

Allegion plc
Condensed and Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
 March 31,
In millions20222021
Cash flows from operating activities:
Net earnings$93.1 $108.2 
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization20.4 21.4 
Changes in assets and liabilities and other non-cash items(93.0)(17.8)
Net cash provided by operating activities20.5 111.8 
Cash flows from investing activities:
Capital expenditures(8.7)(6.3)
Other investing activities, net2.4 1.7 
Net cash used in investing activities(6.3)(4.6)
Cash flows from financing activities:
 Debt repayments, net(3.1) 
Dividends paid to ordinary shareholders(35.8)(32.5)
Repurchase of ordinary shares(61.0)(149.7)
Other financing activities, net(5.0)(5.0)
Net cash used in financing activities(104.9)(187.2)
Effect of exchange rate changes on cash and cash equivalents(2.1)(6.1)
Net decrease in cash and cash equivalents(92.8)(86.1)
Cash and cash equivalents - beginning of period397.9 480.4 
Cash and cash equivalents - end of period$305.1 $394.3 
See accompanying notes to condensed and consolidated financial statements.

3

ALLEGION PLC
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 ("U.S.") 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, 2021. 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 October 2021, the FASB issued ASU No. 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." This ASU requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers". Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in purchase accounting. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company elected to early adopt ASU 2021-08 on January 1, 2022, and will apply this new guidance to all business combinations consummated subsequent to this date.

NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost and net realizable value using the first-in, first-out (FIFO) method.
The major classes of inventories were as follows:
In millionsMarch 31,
2022
December 31,
2021
Raw materials$166.2 $144.4 
Work-in-process46.2 42.2 
Finished goods190.5 193.8 
Total$402.9 $380.4 

NOTE 4 - GOODWILL
The changes in the carrying amount of goodwill for the three months ended March 31, 2022, were as follows:
In millionsAllegion AmericasAllegion InternationalTotal
December 31, 2021 (gross)$501.2 $876.2 $1,377.4 
Accumulated impairment (573.6)(573.6)
December 31, 2021 (net)501.2 302.6 803.8 
Currency translation0.1 (7.5)(7.4)
March 31, 2022 (net)$501.3 $295.1 $796.4 

4

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 5 - INTANGIBLE ASSETS
The gross amount of the Company’s intangible assets and related accumulated amortization were as follows:
March 31, 2022December 31, 2021
In millionsGross carrying amountAccumulated amortizationNet carrying amountGross carrying amountAccumulated amortizationNet carrying amount
Completed technologies/patents$57.2 $(29.5)$27.7 $57.9 $(28.8)$29.1 
Customer relationships389.4 (143.7)245.7 395.9 (141.6)254.3 
Trade names (finite-lived)81.8 (56.2)25.6 84.0 (56.9)27.1 
Other46.1 (23.6)22.5 45.8 (22.7)23.1 
Total finite-lived intangible assets574.5 $(253.0)321.5 583.6 $(250.0)333.6 
Trade names (indefinite-lived)112.5 112.5 113.9 113.9 
Total$687.0 $434.0 $697.5 $447.5 
Intangible asset amortization expense was $8.2 million and $8.1 million for the three months ended March 31, 2022 and 2021, respectively. Future estimated amortization expense on existing intangible assets in each of the next five years amounts to approximately $32.2 million for full year 2022, $31.8 million for 2023, $31.5 million for 2024, $30.1 million for 2025 and $26.8 million for 2026.

NOTE 6 - DEBT AND CREDIT FACILITIES
Long-term debt and other borrowings consisted of the following:
In millionsMarch 31,
2022
December 31,
2021
2021 Term Facility$246.9 $250.0 
2021 Revolving Facility  
3.200% Senior Notes due 2024
400.0 400.0 
3.550% Senior Notes due 2027
400.0 400.0 
3.500% Senior Notes due 2029
400.0 400.0 
Other debt0.3 0.3 
Total borrowings outstanding1,447.2 1,450.3 
Discounts and debt issuance costs, net(7.8)(8.2)
Total debt1,439.4 1,442.1 
Less current portion of long-term debt12.6 12.6 
Total long-term debt$1,426.8 $1,429.5 
Unsecured Credit Facilities
As of March 31, 2022, the Company has an unsecured Credit Agreement in place, consisting of a $250.0 million term loan facility (the “2021 Term Facility”), of which $246.9 million was outstanding at March 31, 2022, and a $500.0 million revolving credit facility (the “2021 Revolving Facility” and, together with the 2021 Term Facility, the “2021 Credit Facilities”). The 2021 Credit Facilities mature on November 18, 2026, and are unconditionally guaranteed jointly and severally on an unsecured basis by the Company and Allegion US Holding Company Inc. ("Allegion US Hold Co"), the Company’s wholly-owned subsidiary. The 2021 Term Facility will amortize in quarterly installments at the following rates: 1.25% per quarter starting March 31, 2022 through March 31, 2025, 2.5% per quarter starting June 30, 2025 through September 30, 2026, with the balance due on November 18, 2026. The Company repaid $3.1 million of principal on its 2021 Term Facility during the three months ended March 31, 2022.
The 2021 Revolving Facility provides aggregate commitments of up to $500.0 million, which includes up to $100.0 million for the issuance of letters of credit. At March 31, 2022, there were no borrowings outstanding on the 2021 Revolving Facility, and the Company had $7.5 million of letters of credit outstanding. Commitments under the 2021 Revolving Facility may be reduced at any time without premium or penalty, and amounts repaid may be reborrowed.
Outstanding borrowings under the 2021 Credit Facilities accrue interest, at the option of the Company, of (i) a Bloomberg Short-Term Bank Yield Index ("BSBY") rate plus the applicable margin or (ii) a base rate plus the applicable margin. The
5

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
applicable margin ranges from 0.875% to 1.375% depending on the Company’s credit ratings. At March 31, 2022, the Company's outstanding borrowings under the 2021 Credit Facilities accrue interest at BSBY plus a margin of 1.125%, resulting in an interest rate of 1.493%. The 2021 Credit Facilities also contain negative and affirmative covenants and events of default that, among other things, limit or restrict the Company’s ability to enter into certain transactions. In addition, the 2021 Credit Facilities require the Company to comply with a maximum leverage ratio as defined within the agreement. As of March 31, 2022, the Company was in compliance with all covenants.
Senior Notes
As of March 31, 2022, Allegion US Hold Co has $400.0 million outstanding of its 3.200% Senior Notes due 2024 (the “3.200% Senior Notes”) and $400.0 million outstanding of its 3.550% Senior Notes due 2027 (the “3.550% Senior Notes”), while Allegion plc has $400.0 million outstanding of its 3.500% Senior Notes due 2029 (the “3.500% Senior Notes”). The 3.200% Senior Notes, 3.550% Senior Notes and 3.500% Senior Notes (collectively, the "Senior Notes") all require semi-annual interest payments on April 1 and October 1 of each year and will mature on October 1, 2024, October 1, 2027, and October 1, 2029, respectively. The 3.200% Senior Notes and the 3.550% Senior Notes are senior unsecured obligations of Allegion US Hold Co and rank equally with all of Allegion US Hold Co’s existing and future senior unsecured and unsubordinated indebtedness. The guarantee of the 3.200% Senior Notes and the 3.550% Senior Notes is the senior unsecured obligation of the Company and ranks equally with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness. The 3.500% Senior Notes are senior unsecured obligations of Allegion plc, are guaranteed by Allegion US Hold Co and rank equally with all of the Company’s existing and future senior unsecured indebtedness.

NOTE 7 - FINANCIAL INSTRUMENTS
Currency Hedging Instruments
The gross notional amount of the Company’s currency derivatives was $169.7 million and $164.9 million at March 31, 2022 and December 31, 2021, respectively. Neither the fair values of currency derivatives, which are determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily observable, nor the balances included in Accumulated other comprehensive loss were material as of March 31, 2022 and December 31, 2021. Currency derivatives designated as cash flow hedges did not have a material impact to either Net earnings or Other comprehensive income (loss) during the three months ended March 31, 2022 and 2021, nor is the amount to be reclassified into Net earnings over the next twelve months expected to be material, although the actual amounts that will be reclassified to Net earnings may vary as a result of future changes in market conditions. At March 31, 2022, the maximum term of the Company’s currency derivatives, both those that are designated as cash flow hedges and those that are not, was less than one year.
Concentration of Credit Risk
The counterparties to the Company’s forward contracts 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 8 - LEASES
Total rental expense for the three months ended March 31, 2022 and 2021, was $10.7 million and $11.1 million, respectively, and is classified within Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. Rental expense related to short-term leases, variable lease payments or other leases or lease components not included within the ROU asset or lease liability totaled $1.6 million and $2.0 million, respectively, for the three months ended March 31, 2022 and 2021. No material lease costs have been capitalized on the Condensed and Consolidated Balance Sheets as of March 31, 2022 or December 31, 2021.

As a lessee, the Company categorizes its leases into two general categories: real estate leases and equipment leases.

6

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Amounts included within the Condensed and Consolidated Balance Sheets related to the Company’s ROU asset and lease liability were as follows:
March 31, 2022December 31, 2021
In millionsBalance Sheet classificationReal estateEquipmentTotalReal estateEquipmentTotal
ROU assetOther noncurrent assets$71.1 $29.8 $100.9 $58.2 $31.7 $89.9 
Lease liability - currentAccrued expenses and other current liabilities15.9 13.2 29.1 15.5 13.6 29.1 
Lease liability - noncurrentOther noncurrent liabilities57.7 16.6 74.3 45.1 18.2 63.3 
Other information:
Weighted-average remaining term (years)6.42.76.52.8
Weighted-average discount rate3.2 %2.0 %3.4 %2.1 %
The following table summarizes additional information related to the Company’s leases for the three months ended March 31:
20222021
In millionsReal estateEquipmentTotalReal estateEquipmentTotal
Cash paid for amounts included in the measurement of lease liabilities$4.9 $4.2 $9.1 $4.9 $4.2 $9.1 
ROU assets obtained in exchange for new lease liabilities18.8 1.4 20.2 3.0 2.4 5.4 
The Company frequently enters into both real estate and equipment leases in the normal course of business. While there have been lease agreements entered into that have not yet commenced as of March 31, 2022, none of these leases provide new rights or obligations to the Company that are material individually or in the aggregate.
Future Repayments
Scheduled minimum lease payments required under non-cancellable operating leases for both the real estate and equipment lease portfolios for the remainder of 2022 and for each of the years thereafter as of March 31, 2022, are as follows:
In millionsRemainder of 20222023202420252026ThereafterTotal
Real estate leases$13.5 $16.6 $13.1 $11.3 $8.3 $19.5 $82.3 
Equipment leases10.6 10.4 6.3 2.8 0.4 0.1 30.6 
Total$24.1 $27.0 $19.4 $14.1 $8.7 $19.6 $112.9 
The difference between the total undiscounted minimum lease payments and the combined current and noncurrent lease liabilities as of March 31, 2022, is due to imputed interest of $9.5 million.

NOTE 9 - DEFINED BENEFIT PLANS
The Company sponsors several U.S. and non-U.S. defined benefit pension plans to eligible employees and retirees. 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 other supplemental plans for officers and other key employees.


7

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The components of the Company’s Net periodic pension benefit cost (income) for the three months ended March 31 were as follows:
U.S.
In millions20222021
Service cost$1.5 $1.7 
Interest cost2.0 1.7 
Expected return on plan assets(3.4)(3.5)
Administrative costs and other0.3 0.3 
Net amortization of:
Prior service costs 0.1 
Plan net actuarial losses0.3 0.9 
Net periodic pension benefit cost$0.7 $1.2 
Non-U.S.
In millions20222021
Service cost$0.3 $0.6 
Interest cost1.8 1.3 
Expected return on plan assets(3.9)(3.5)
Administrative costs and other0.5 0.5 
Net amortization of:
Plan net actuarial losses0.2 0.4 
Net periodic pension benefit income$(1.1)$(0.7)
Service cost is recorded in Cost of goods sold and Selling and administrative expenses, while the remaining components of Net periodic pension benefit cost (income) are recorded in Other income, net within the Condensed and Consolidated Statements of Comprehensive Income. Employer contributions were not material during the three months ended March 31, 2022 and 2021. Contributions of approximately $5 million are expected during the remainder of 2022.

NOTE 10 - FAIR VALUE MEASUREMENTS
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.
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.
8

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Assets and liabilities measured at fair value at March 31, 2022, were as follows:
 Fair value measurementsTotal
fair value
In millionsQuoted 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:
Investments$ $22.5 $ $22.5 
       Total asset recurring fair value measurements$ $22.5 $ $22.5 
Liabilities:
Deferred compensation and other retirement plans$ $22.7 $ $22.7 
Total liability recurring fair value measurements$ $22.7 $ $22.7 
Financial instruments not carried at fair value
Total debt$ $1,418.6 $ $1,418.6 
Total financial instruments not carried at fair value$ $1,418.6 $ $1,418.6 
Assets and liabilities measured at fair value at December 31, 2021, were as follows:
 Fair value measurementsTotal
fair value
In millionsQuoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)
Recurring fair value measurements
Assets:
Investments$ $24.5 $ $24.5 
Total asset recurring fair value measurements$ $24.5 $ $24.5 
Liabilities:
Deferred compensation and other retirement plans$ $25.9 $ $25.9 
Total liability recurring fair value measurements$ $25.9 $ $25.9 
Financial instruments not carried at fair value
Total debt$ $1,510.4 $ $1,510.4 
Total financial instruments not carried at fair value$ $1,510.4 $ $1,510.4 
The Company determines the fair value of its financial assets and liabilities using the following methodologies:
Investments – These instruments include equity mutual funds and corporate bond funds. The fair value is obtained based on observable market prices quoted on public exchanges for similar instruments.
Deferred compensation and other retirement plans – These include obligations related to deferred compensation and other retirement plans adjusted for market performance. The fair value is obtained based on observable market prices quoted on public exchanges for similar instruments.
Debt – These instruments are recorded at cost and include senior notes maturing through 2029. The fair value of these debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments.
The methodologies used by the Company to determine the fair value of its financial assets and liabilities at March 31, 2022, are the same as those used at December 31, 2021. The carrying values of Cash and cash equivalents, Accounts and notes receivable, net, Accounts payable and Accrued expenses and other current liabilities are a reasonable estimate of their fair value due to the short-term nature of these instruments.
The Company also had investments in debt and equity securities without readily determinable fair values of $35.8 million as of both March 31, 2022 and December 31, 2021, which are classified as Other noncurrent assets within the Condensed and Consolidated Balance Sheets. These investments are considered to be nonrecurring fair value measurements, and thus, are not included in the fair value tables above.

9

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 11 - EQUITY
The changes in the components of Equity for the three months ended March 31, 2022, were as follows:
Allegion plc shareholders' equity
Ordinary shares
In millions, except per share amountsTotal equityAmountSharesCapital in excess of par valueRetained earningsAccumulated other comprehensive lossNoncontrolling
interests
Balance at December 31, 2021$762.4 $0.9 88.2 $ $952.6 $(194.4)$3.3 
Net earnings93.1 — — — 93.0 — 0.1 
Other comprehensive loss, net (21.0)— — — — (21.0) 
Repurchase of ordinary shares(61.0) (0.5)(7.5)(53.5)— — 
Share-based compensation activity7.5  0.1 7.5 — — — 
Dividends to ordinary shareholders ($0.41 per share)
(36.0)— — — (36.0)— — 
Balance at March 31, 2022$745.0 $0.9 87.8 $ $956.1 $(215.4)$3.4 
The changes in the components of Equity for the three months ended March 31, 2021, were as follows:
Allegion plc shareholders' equity
Ordinary shares
In millions, except per share amountsTotal equityAmountSharesCapital in excess of par valueRetained earningsAccumulated other comprehensive lossNoncontrolling
interests
Balance at December 31, 2020$832.6 $0.9 91.2 $ $985.6 $(157.1)$3.2 
Net earnings108.2 — — — 108.0 — 0.2 
Other comprehensive loss, net (32.0)— — — — (32.0) 
Repurchase of ordinary shares(149.7) (1.3)(4.4)(145.3)— — 
Share-based compensation activity4.4  0.1 4.4 — — — 
Dividends to ordinary shareholders ($0.36 per share)
(32.5)— — — (32.5)— — 
Other — — — 0.1 — (0.1)
Balance at March 31, 2021$731.0 $0.9 90.0 $ $915.9 $(189.1)$3.3 
In February 2020, the Company’s Board of Directors approved a share repurchase authorization of up to, and including, $800 million of the Company’s ordinary shares (the "2020 Share Repurchase Authorization"). During the three months ended March 31, 2022 and 2021, the Company paid $61.0 million and $149.7 million, respectively, to repurchase the ordinary shares reflected in the tables above on the open market under the 2020 Share Repurchase Authorization. As of March 31, 2022, the Company has approximately $140.5 million still available to be repurchased under the 2020 Share Repurchase Authorization.

Accumulated Other Comprehensive Loss
The changes in Accumulated other comprehensive loss for the three months ended March 31, 2022, were as follows:
In millionsCash flow hedgesPension and OPEB itemsForeign currency itemsTotal
December 31, 2021$0.9 $(96.0)$(99.3)$(194.4)
Other comprehensive (loss) income before reclassifications(0.3)2.3 (22.5)(20.5)
Amounts reclassified from accumulated other comprehensive loss(a)
(0.4)(0.4) (0.8)
Tax benefit0.2 0.1  0.3 
March 31, 2022$0.4 $(94.0)$(121.8)$(215.4)
10

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The changes in Accumulated other comprehensive loss for the three months ended March 31, 2021, were as follows:
In millionsCash flow hedgesPension and OPEB itemsForeign currency itemsTotal
December 31, 2020$(0.9)$(120.3)$(35.9)$(157.1)
Other comprehensive income (loss) before reclassifications0.7 (0.1)(33.3)(32.7)
Amounts reclassified from accumulated other comprehensive loss(a)
(0.3)1.2  0.9 
Tax expense(0.1)(0.1) (0.2)
March 31, 2021$(0.6)$(119.3)$(69.2)$(189.1)
(a)    Amounts reclassified from Accumulated other comprehensive loss and recognized into Net earnings related to cash flow hedges are recorded in Cost of goods sold and Interest expense. Amounts reclassified from Accumulated other comprehensive loss and recognized into Net earnings related to pension and postretirement benefits other than pensions ("OPEB") items are recorded in Other income, net.

NOTE 12 - SHARE-BASED COMPENSATION
The Company’s share-based compensation plans include programs for stock options, restricted stock units ("RSUs"), performance stock units ("PSUs") and deferred compensation. Share-based compensation expense is included in Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. The following table summarizes the expenses recognized for the three months ended March 31:
In millions20222021
Stock options$2.9 $2.8 
RSUs7.3 5.6 
PSUs1.6 1.3 
Deferred compensation(1.1)0.4 
Pre-tax expense10.7 10.1 
Tax benefit(0.9)(1.1)
After-tax expense$9.8 $9.0 
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:
 20222021
 Number
granted
Weighted-
average fair
value per award
Number
granted
Weighted-
average fair
value per award
Stock options157,880 $28.59 179,743 $24.99 
RSUs101,609 $115.33 117,864 $109.49 
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:
20222021
Dividend yield1.42 %1.32 %
Volatility27.05 %27.14 %
Risk-free rate of return1.89 %0.75 %
Expected life (years)6.06.0
Volatility is based on the Company’s historic volatility. 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 term of the award. 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.

11

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Performance Stock
During the three months ended March 31, 2022, the Company granted PSUs with a maximum award level of approximately 0.1 million shares. In February 2020, 2021 and 2022, the Company’s Compensation Committee granted PSUs that were earned based 50% upon a performance condition, measured at each reporting period by earnings per share ("EPS") performance in relation to pre-established targets set by the Compensation Committee, and 50% upon a market condition, measured by the Company’s relative total shareholder return against the S&P 400 Capital Goods Index over a three-year performance period. The fair values of the market conditions are estimated using a Monte Carlo Simulation approach in a risk-neutral framework to model future stock price movements based upon historical volatility, risk-free rates of return and correlation matrix.
Deferred Compensation
Prior to 2019, the Company allowed key employees to defer a portion of their eligible granted PSUs and/or 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 13 - RESTRUCTURING ACTIVITIES
During the three months ended March 31, 2022 and 2021, the Company recorded $0.2 million and $2.7 million, respectively, of expenses associated with restructuring activities, which are included within Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income.

The changes in the restructuring reserve during the three months ended March 31, 2022, were as follows:
In millionsTotal
December 31, 2021$0.4 
Additions, net of reversals0.2 
Cash payments(0.5)
March 31, 2022$0.1 
The Company also incurred other non-qualified restructuring charges of $0.5 million during the three months ended March 31, 2022, which represent costs that are directly attributable to restructuring activities, but that do not fall into the severance, exit or disposal category. These expenses are included in Cost of goods sold within the Condensed and Consolidated Statements of Comprehensive Income.

NOTE 14 - OTHER INCOME, NET
The components of Other income, net for the three months ended March 31 were as follows:
In millions20222021
Interest income$(0.1)$ 
Foreign currency exchange loss1.0 0.4 
(Earnings) losses from equity method investments, net(0.1)0.7 
Net periodic pension and postretirement benefit income, less service cost(2.6)(1.9)
Other(0.4)(2.7)
Other income, net$(2.2)$(3.5)

NOTE 15 - INCOME TAXES
The effective income tax rates for the three months ended March 31, 2022 and 2021, were 13.2% and 11.7%, respectively. The increase in the effective tax rate compared to 2021 is primarily due to the unfavorable mix of income earned in higher tax rate jurisdictions, which is partially offset by the favorable year-over-year change in the amounts recognized for uncertain tax positions.

NOTE 16 - 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
12

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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 EPS calculations for the three months ended March 31:
In millions20222021
Weighted-average number of basic shares88.2 90.7 
Shares issuable under share-based compensation plans0.4 0.5 
Weighted-average number of diluted shares88.6 91.2 
At March 31, 2022, 0.3 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 17 - NET REVENUES
The following tables show the Company’s Net revenues related to both tangible product sales and services for the three months ended March 31, 2022 and 2021, respectively, disaggregated by business segment. Net revenues are shown by tangible product sales and services, as contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty around revenue recognition and cash flows are substantially similar within each of these two principal revenue streams:
Three months ended March 31, 2022
In millionsAllegion AmericasAllegion InternationalConsolidated
Net revenues
Products$527.7 $188.8 $716.5 
Services0.5 6.6 7.1 
Total Net revenues$528.2 $195.4 $723.6 
Three months ended March 31, 2021
In millionsAllegion AmericasAllegion InternationalConsolidated
Net revenues
Products$498.2 $189.1 $687.3 
Services0.7 6.3 7.0 
Total Net revenues$498.9 $195.4 $694.3 
As of March 31, 2022, neither the contract assets related to the Company’s right to consideration for work completed but not billed, nor the contract liabilities associated with contract revenue were material. The Company does not have any costs to obtain or fulfill a contract that are capitalized on its Condensed and Consolidated Balance Sheets. During the three months ended March 31, 2022 and 2021, no adjustments related to performance obligations satisfied in previous periods were recorded.

NOTE 18 - BUSINESS SEGMENT INFORMATION
The Company classifies its business into the following two reportable segments based on industry and market focus: Allegion Americas and Allegion International. The Company largely evaluates performance based on Segment operating income and Segment operating margins. 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 operating decisions. The Company defines Segment operating margin as Segment operating income as a percentage of the segment’s Net revenues.
13

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:
In millions20222021
Net revenues
Allegion Americas$528.2 $498.9 
Allegion International195.4 195.4 
     Total$723.6 $694.3 
Segment operating income
Allegion Americas$123.9 $135.4 
Allegion International19.6 15.4 
Total143.5 150.8 
Reconciliation to Operating income
Unallocated corporate expense(26.5)(19.5)
Operating income117.0 131.3 
Reconciliation to earnings before income taxes
Interest expense11.9 12.3 
Other income, net(2.2)(3.5)
Earnings before income taxes$107.3 $122.5 

NOTE 19 - COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation, 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
As of March 31, 2022 and December 31, 2021, the Company has recorded reserves for environmental matters of $15.4 million and $16.4 million, respectively. The total reserve at March 31, 2022 and December 31, 2021, included $3.6 million and $4.3 million, respectively, related to remediation of sites previously disposed by the Company. Environmental reserves are classified as Accrued expenses and other current liabilities or Other noncurrent liabilities within the Condensed and Consolidated Balance Sheets based on the timing of their expected future payment. The Company’s total current environmental reserve at March 31, 2022 and December 31, 2021, was $3.1 million and $3.7 million, respectively, and the remainder is classified as noncurrent. Expenses related to environmental remediation were not material during either the three months ended March 31, 2022 or 2021. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.
Warranty Liability
The changes in the standard product warranty liability for the three months ended March 31 were as follows: