10-Q 1 alle-20220930.htm 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2022 alle-20220930
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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 September 30, 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-20220930_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 October 24, 2022 was 87,844,822.


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 endedNine months ended
 September 30,September 30,
In millions, except per share amounts2022202120222021
Net revenues$913.7 $717.0 $2,410.4 $2,158.2 
Cost of goods sold545.7 416.5 1,438.7 1,239.8 
Selling and administrative expenses205.1 162.1 544.7 503.3 
Operating income162.9 138.4 427.0 415.1 
Interest expense23.1 12.3 52.2 37.0 
Loss on divestitures7.6  7.6  
Other income, net(1.5)(14.7)(7.1)(21.4)
Earnings before income taxes133.7 140.8 374.3 399.5 
Provision for (benefit from) income taxes19.1 (2.8)51.4 28.9 
Net earnings114.6 143.6 322.9 370.6 
Less: Net earnings attributable to noncontrolling interests 0.1 0.2 0.4 
Net earnings attributable to Allegion plc$114.6 $143.5 $322.7 $370.2 
Earnings per share attributable to Allegion plc ordinary shareholders:
Basic net earnings$1.30 $1.60 $3.67 $4.11 
Diluted net earnings $1.30 $1.59 $3.65 $4.08 
Weighted-average shares outstanding:
Basic87.9 89.7 88.0 90.1 
Diluted88.2 90.3 88.4 90.7 
Total comprehensive income$46.3 $121.2 $183.8 $326.7 
Less: Total comprehensive (loss) income attributable to noncontrolling interests(0.4) (0.8)0.4 
Total comprehensive income attributable to Allegion plc$46.7 $121.2 $184.6 $326.3 
See accompanying notes to condensed and consolidated financial statements.
1

Allegion plc
Condensed and Consolidated Balance Sheets
(Unaudited)
In millions, except share amountsSeptember 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$282.2 $397.9 
Accounts and notes receivable, net422.5 283.3 
Inventories477.9 380.4 
Other current assets53.3 56.0 
Total current assets1,235.9 1,117.6 
Property, plant and equipment, net290.7 283.7 
Goodwill1,373.5 803.8 
Intangible assets, net599.7 447.5 
Other noncurrent assets443.5 398.4 
Total assets$3,943.3 $3,051.0 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$266.4 $259.1 
Accrued expenses and other current liabilities410.2 329.5 
Short-term borrowings and current maturities of long-term debt12.6 12.6 
Total current liabilities689.2 601.2 
Long-term debt2,214.5 1,429.5 
Other noncurrent liabilities246.0 257.9 
Total liabilities3,149.7 2,288.6 
Equity:
Allegion plc shareholders’ equity:
Ordinary shares, $0.01 par value (87,844,572 and 88,215,625 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)
0.9 0.9 
Capital in excess of par value9.2  
Retained earnings1,113.7 952.6 
Accumulated other comprehensive loss(332.5)(194.4)
Total Allegion plc shareholders’ equity791.3 759.1 
Noncontrolling interests2.3 3.3 
Total equity793.6 762.4 
Total liabilities and equity$3,943.3 $3,051.0 
See accompanying notes to condensed and consolidated financial statements.

2

Allegion plc
Condensed and Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
 September 30,
In millions20222021
Cash flows from operating activities:
Net earnings$322.9 $370.6 
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization69.6 62.0 
Loss on divestitures7.1  
Changes in assets and liabilities and other non-cash items(132.5)(76.2)
Net cash provided by operating activities267.1 356.4 
Cash flows from investing activities:
Capital expenditures(41.5)(28.7)
Acquisition of and equity investments in businesses, net of cash acquired(923.1)(6.5)
Proceeds from sale of equity method investment 7.6 
Other investing activities, net(1.3)12.7 
Net cash used in investing activities(965.9)(14.9)
Cash flows from financing activities:
Debt repayments, net(9.4)(0.1)
Proceeds from revolving facility340.0  
Repayments of revolving facility(141.0) 
Proceeds from issuance of senior notes600.0  
      Net proceeds from (repayments of) debt789.6 (0.1)
Debt financing costs(10.2) 
Dividends paid to ordinary shareholders(107.9)(96.9)
Repurchase of ordinary shares(61.0)(212.7)
Other financing activities, net(4.4)0.4 
Net cash provided by (used in) financing activities606.1 (309.3)
Effect of exchange rate changes on cash and cash equivalents(23.0)(8.7)
Net (decrease) increase in cash and cash equivalents(115.7)23.5 
Cash and cash equivalents - beginning of period397.9 480.4 
Cash and cash equivalents - end of period$282.2 $503.9 
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 as such, applied this new guidance to the Access Technologies business combination (see Note 3), which did not result in a material impact to the Condensed and Consolidated Financial Statements for the three and nine months ended September 30, 2022.

NOTE 3 - ACQUISITIONS
On July 5, 2022, the Company, through its subsidiaries, completed the acquisition of Stanley Access Technologies LLC and assets related to the automatic entrance solutions business from Stanley Black & Decker, Inc. (the "Access Technologies business"). The total preliminary cash consideration paid for the acquisition was $923.1 million, and the acquisition was accounted for as a business combination.
The Access Technologies business is a leading manufacturer, installer and service provider of automatic doors in North America, primarily in the U.S. and Canada. Its diversified customer base centers on non-residential settings, including retail, healthcare, education, commercial offices, hospitality and government. This acquisition helps the Company create a more comprehensive portfolio of access solutions, with the addition of automated entrances. Additionally, the Access Technologies business adds an expansive service and support network throughout the U.S. and Canada, broadening the Company's solutions to national, regional and local customers and complementing the Company's existing strengths in these non-residential markets. The Access Technologies business has been integrated into the Allegion Americas segment.
The following table summarizes the preliminary allocation of the purchase price to assets acquired and liabilities assumed as of the acquisition date:
4

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In millions
Accounts receivable, net$78.2 
Inventories50.3 
Other current assets0.3 
Property, plant and equipment15.2 
Goodwill616.0 
Intangible assets222.5 
Other noncurrent assets13.7 
Accounts payable(22.4)
Accrued expenses and other current liabilities(43.1)
Other noncurrent liabilities(7.6)
Total net assets acquired and liabilities assumed$923.1 
The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2022. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for acquired tangible and intangible assets, goodwill and income tax assets and liabilities, among other items. The completion of the valuation will occur no later than one year from the acquisition date. Intangible assets recognized as of the acquisition date were comprised of the following:
In millionsValue (in millions)Useful life (in years)
Completed technologies/patents$6.2 5
Customer relationships137.4 23
Trade names (finite-lived)56.8 5
Backlog revenue22.1 2
Goodwill results from several factors, including Allegion-specific synergies that were excluded from the cash flow projections used in the valuation of intangible assets and intangible assets that do not qualify for separate recognition, such as an assembled workforce. Goodwill resulting from this acquisition is expected to be deductible for tax purposes.
The following unaudited pro forma financial information for the three and nine months ended September 30, 2022 and 2021, reflects the consolidated results of operations of the Company as if this acquisition had taken place on January 1, 2021:
Three months endedNine months ended
In millions2022202120222021
Net revenues$913.7 $802.7 $2,587.5 $2,407.6 
Net earnings attributable to Allegion plc135.5 140.7 340.1 330.2 
The unaudited pro forma financial information is presented for informational purposes only and does not purport to be indicative of results of operations that would have occurred had the pro forma events taken place on the date indicated or the future consolidated results of operations of the combined company. The unaudited pro forma financial information has been calculated after applying the Company's accounting policies and adjusting the historical financial results to reflect additional items directly attributable to the acquisition that would have been incurred assuming the acquisition had occurred on January 1, 2021. Adjustments to historical financial information for the three and nine months ended September 30 include:
Three months endedNine months ended
In millions2022202120222021
Intangible asset amortization expense, net of tax$1.7 $(5.0)$(10.1)$(18.3)
Interest expense, net of tax1.6 (6.2)(10.7)(21.4)
Acquisition and integration costs, net of tax13.5  19.4 (19.4)
Inventory fair value step-up amortization, net of tax4.1  4.1 (4.1)
The following financial information reflects the Net revenues and Loss before income taxes generated by the Access Technologies business since the acquisition date included within the Company's Condensed and Consolidated Statements of Comprehensive Income:
5

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In millionsThree and nine months ended September 30, 2022
Net revenues$88.7 
Loss before income taxes(3.3)
Intangible asset amortization of $9.0 million and amortization of $5.5 million related to a fair value of inventory step-up are included in the Loss before income taxes amount presented above, while acquisition and integration related expenses and Interest expense related to acquisition financing, are excluded from this amount. During the three and nine months ended September 30, 2022, the Company incurred $18.6 million and $27.4 million, respectively, of acquisition and integration related expenses, which are included in Selling and administrative expenses in the Condensed and Consolidated Statements of Comprehensive Income. The Company anticipates future integration expenses related to the Access Technologies business acquisition in the fourth quarter of 2022, which are not expected to exceed $5 million.

NOTE 4 - 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 millionsSeptember 30,
2022
December 31,
2021
Raw materials$193.1 $144.4 
Work-in-process44.9 42.2 
Finished goods239.9 193.8 
Total$477.9 $380.4 

NOTE 5 - GOODWILL
The changes in the carrying amount of goodwill for the nine months ended September 30, 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 
Acquisitions and adjustments616.0  616.0 
Currency translation(6.1)(40.2)(46.3)
September 30, 2022 (net)$1,111.1 $262.4 $1,373.5 

NOTE 6 - INTANGIBLE ASSETS
The gross amount of the Company’s intangible assets and related accumulated amortization were as follows:
September 30, 2022December 31, 2021
In millionsGross carrying amountAccumulated amortizationNet carrying amountGross carrying amountAccumulated amortizationNet carrying amount
Completed technologies/patents$60.7 $(29.0)$31.7 $57.9 $(28.8)$29.1 
Customer relationships488.9 (139.3)349.6 395.9 (141.6)254.3 
Trade names (finite-lived)128.9 (54.1)74.8 84.0 (56.9)27.1 
Other66.8 (28.9)37.9 45.8 (22.7)23.1 
Total finite-lived intangible assets745.3 $(251.3)494.0 583.6 $(250.0)333.6 
Trade names (indefinite-lived)105.7 105.7 113.9 113.9 
Total$851.0 $599.7 $697.5 $447.5 
Intangible asset amortization expense was $32.6 million and $25.2 million for the nine months ended September 30, 2022 and 2021, respectively. Intangible asset amortization expense for the nine months ended September 30, 2022, included $9.0 million related to intangible assets acquired as part of the recent Access Technologies business acquisition.
6

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Future estimated amortization expense on existing intangible assets in each of the next five years amounts to approximately $44.5 million for full year 2022, $56.4 million for 2023, $51.7 million for 2024, $46.1 million for 2025 and $43.1 million for 2026.

NOTE 7 - DIVESTITURES
In September 2022, the Company sold Milre Systek Co. Ltd. ("Milre") in South Korea for an immaterial amount. As a result of the sale, the Company recorded a Loss on divestiture of $7.6 million, of which $1.6 million related to the reclassification of accumulated foreign currency translation adjustments to earnings upon sale. This divestiture is not expected to have a material impact on the Company's future results of operations or cash flows.

NOTE 8 - DEBT AND CREDIT FACILITIES
Long-term debt and other borrowings consisted of the following:
In millionsSeptember 30,
2022
December 31,
2021
2021 Term Facility$240.6 $250.0 
2021 Revolving Facility199.0  
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 
5.411% Senior Notes due 2032
600.0  
Other debt0.2 0.3 
Total borrowings outstanding2,239.8 1,450.3 
Discounts and debt issuance costs, net(12.7)(8.2)
Total debt2,227.1 1,442.1 
Less current portion of long-term debt12.6 12.6 
Total long-term debt$2,214.5 $1,429.5 
Unsecured Credit Facilities
As of September 30, 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 $240.6 million was outstanding at September 30, 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 Allegion plc 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 $9.4 million of principal on its 2021 Term Facility during the nine months ended September 30, 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. On July 1, 2022, the Company borrowed $340.0 million on the 2021 Revolving Facility to partially fund the acquisition of the Access Technologies business. The Company has subsequently made $141.0 million in repayments, resulting in $199.0 million of borrowings outstanding on the 2021 Revolving Facility as of September 30, 2022. The Company also had $7.6 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 applicable margin ranges from 0.875% to 1.375% depending on the Company’s credit ratings. At September 30, 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 4.241%. 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 September 30, 2022, the Company was in compliance with all covenants.

7

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Senior Notes
On June 22, 2022, Allegion US Hold Co issued $600.0 million aggregate principal amount of its 5.411% Senior Notes due 2032 (the “5.411% Senior Notes”) to partially fund the acquisition of the Access Technologies business, in addition to the $340.0 million drawn on the 2021 Revolving Facility, as discussed above. The 5.411% Senior Notes require semi-annual interest payments on January 1 and July 1, beginning January 1, 2023, and will mature on July 1, 2032. The Company incurred and deferred $5.9 million of discounts and financing costs associated with the 5.411% Senior Notes, which will be amortized to Interest expense over their 10-year term, as well as $4.3 million of third party financing costs that were recorded within Interest expense on the Condensed and Consolidated Statement of Income for the nine months ended September 30, 2022. The 5.411% 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 5.411% Senior Notes is the senior unsecured obligation of Allegion plc and ranks equally with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness.
As of September 30, 2022, Allegion US Hold Co also 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”, and all four senior notes collectively, the “Senior Notes”). The 3.200% Senior Notes, 3.550% Senior Notes and 3.500% 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 Allegion plc 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 9 - FINANCIAL INSTRUMENTS
Currency Hedging Instruments
The gross notional amount of the Company’s currency derivatives was $168.1 million and $164.9 million at September 30, 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 (Level 2 inputs under the fair value hierarchy described in Note 12), nor the balances included in Accumulated other comprehensive loss were material as of September 30, 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 loss during the three or nine months ended September 30, 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 September 30, 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 10 - LEASES
Total rental expense for the nine months ended September 30, 2022 and 2021, was $34.9 million and $33.6 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 $7.0 million and $6.0 million, respectively, for the nine months ended September 30, 2022 and 2021. No material lease costs have been capitalized on the Condensed and Consolidated Balance Sheets as of September 30, 2022 or December 31, 2021.
As a lessee, the Company categorizes its leases into two general categories: real estate leases and equipment leases.
Amounts included within the Condensed and Consolidated Balance Sheets related to the Company’s ROU asset and lease liability were as follows:
8

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
September 30, 2022December 31, 2021
In millionsBalance Sheet classificationReal estateEquipmentTotalReal estateEquipmentTotal
ROU assetOther noncurrent assets$70.9 $28.4 $99.3 $58.2 $31.7 $89.9 
Lease liability - currentAccrued expenses and other current liabilities17.5 13.4 30.9 15.5 13.6 29.1 
Lease liability - noncurrentOther noncurrent liabilities56.6 15.0 71.6 45.1 18.2 63.3 
Other information:
Weighted-average remaining term (years)5.92.56.52.8
Weighted-average discount rate3.4 %1.9 %3.4 %2.1 %

The following table summarizes additional information related to the Company’s leases for the nine months ended September 30:
20222021
In millionsReal estateEquipmentTotalReal estateEquipmentTotal
Cash paid for amounts included in the measurement of lease liabilities$15.3 $12.6 $27.9 $14.7 $12.9 $27.6 
ROU assets obtained in exchange for new lease liabilities31.3 8.6 39.9 12.0 8.8 20.8 
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 September 30, 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 September 30, 2022, are as follows:
In millionsRemainder of 20222023202420252026ThereafterTotal
Real estate leases$4.9 $19.3 $15.4 $13.0 $9.9 $20.0 $82.5 
Equipment leases3.9 12.9 7.9 3.6 0.6 0.1 29.0 
Total$8.8 $32.2 $23.3 $16.6 $10.5 $20.1 $111.5 
The difference between the total undiscounted minimum lease payments and the combined current and noncurrent lease liabilities as of September 30, 2022, is due to imputed interest of $9.0 million.

NOTE 11 - 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.
The components of the Company’s Net periodic pension benefit cost (income) for the three and nine months ended September 30 were as follows:
9

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
U.S.
Three months endedNine months ended
In millions2022202120222021
Service cost$1.7 $1.6 $4.6 $5.0 
Interest cost2.1 1.7 6.1 5.1 
Expected return on plan assets(3.3)(3.6)(10.1)(10.5)
Administrative costs and other0.2 0.3 0.8 0.9 
Net amortization of:
Prior service costs 0.1 0.1 0.2 
Plan net actuarial losses0.3 0.8 0.8 2.6 
Net periodic pension benefit cost$1.0 $0.9 $2.3 $3.3 
Non-U.S.
Three months endedNine months ended
In millions2022202120222021
Service cost$0.4 $0.6 $1.1 $1.7 
Interest cost1.8 1.3 5.4 3.8 
Expected return on plan assets(3.9)(3.4)(11.7)(10.3)
Administrative costs and other0.4 0.4 1.2 1.4 
Net amortization of:
Prior service costs  0.1 0.1 
Plan net actuarial losses0.2 0.4 0.6 1.1 
Net periodic pension benefit income$(1.1)$(0.7)$(3.3)$(2.2)
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 nine months ended September 30, 2022 and 2021. Contributions of approximately $5 million are expected during the remainder of 2022.

NOTE 12 - 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.
10

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Assets and liabilities measured at fair value at September 30, 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$ $19.1 $ $19.1 
       Total asset recurring fair value measurements$ $19.1 $ $19.1 
Liabilities:
Deferred compensation and other retirement plans$ $19.2 $ $19.2 
Total liability recurring fair value measurements$ $19.2 $ $19.2 
Financial instruments not carried at fair value
Total debt$ $2,064.2 $ $2,064.2 
Total financial instruments not carried at fair value$ $2,064.2 $ $2,064.2 
Assets and liabilities measured at fair value at December 31, 2021, were as follows:
 Fair value measurementsTotal
fair value
In millionsQuoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)
Recurring fair value measurements
Assets:
Investments$ $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 2032. 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 September 30, 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 $41.6 million and $35.8 million as of September 30, 2022 and December 31, 2021, respectively, 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.

11

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 13 - EQUITY

The changes in the components of Equity for the nine months ended September 30, 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, 2022745.0 0.9 87.8  956.1 (215.4)3.4 
Net earnings115.2 — — — 115.1 — 0.1 
Other comprehensive loss, net(49.8)— — — — (49.2)(0.6)
Share-based compensation activity5.4   5.4 — — — 
Dividends to noncontrolling interests(0.1)— — — — — (0.1)
Dividends to ordinary shareholders ($0.41 per share)
(36.0)— — — (36.0)— — 
Balance at June 30, 2022779.7 0.9 87.8 5.4 1,035.2 (264.6)2.8 
Net earnings114.6 — — — 114.6 —  
Other comprehensive loss, net(68.3)— — — — (67.9)(0.4)
Share-based compensation activity3.8   3.8 — — — 
Dividends to noncontrolling interests(0.1)— — — — — (0.1)
Dividends to ordinary shareholders ($0.41 per share)
(36.1)— — — (36.1)— — 
Balance at September 30, 2022$793.6 $0.9 87.8 $9.2 $1,113.7 $(332.5)$2.3 
12

ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The changes in the components of Equity for the nine months ended September 30, 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$