[July 30, 2014]

Allegion Reports Second Quarter 2014 Financial Results; Updates Full-Year 2014 EPS Outlook

Allegion plc (NYSE: ALLE), a leading global provider of security products and solutions, today reported second quarter 2014 net revenues of $531.5 million, up 0.5 percent compared to the prior year, and net earnings of $51.6 million, or $0.53 per share from continuing operations. This compares with net earnings of $61.1 million, or $0.64 per share from continuing operations for the 2013 second quarter.

Second quarter net revenues increased 4.0 percent on an adjusted basis (up 2.9 percent on an organic basis). The increase in revenues is due to strong residential volume and modest commercial volume growth compensating for unfavorable timing of Asia Pacific system integration projects. Adjusted net earnings were $59.8 million, or $0.61 per share from continuing operations, down $0.03 from the prior year. Included in these results, the Asia Pacific region reflected a $2.5 million bad debt adjustment in the quarter, or unfavorable $0.02 per share. Removing this adjustment, operational improvements and a lower tax rate mostly offset higher interest expense and incremental investment.

Second quarter operating margin was 16.9 percent (19.1 percent on an adjusted basis). Operating margin in the second quarter of 2013 was 18.9 percent (19.6 percent on an adjusted basis). Adjusted operating margin was down year-over-year as increased investments, inflation and the one-time bad debt adjustment in Asia Pacific were partially offset by favorable price, currency exchange, and productivity.

"While our second quarter margins were down year-over-year, I am pleased with the results given modest commercial growth," said David D. Petratis, chairman, president and chief executive officer. "Residential volumes and the impact of our EMEIA recovery efforts are compensating for continued softness in non-residential institutional markets. We are now forecasting slower than expected recovery of the institutional markets in 2014."

The Company also reported negative $8.1 million or negative $0.08 per share in the second quarter from discontinued operations. This compares with 2013 discontinued operations of negative $0.8 million, or negative $0.01 per share. The discontinued operations are inclusive of a $6.6 million impairment charge related to the announced divestiture of the United Kingdom (UK) Door businesses.

"This transaction enables us to simplify our offering and focus upon strategic products that can be leveraged across the EMEIA region," said Petratis. "This is an important piece of our ongoing transformation of the portfolio to improve profitability and return on invested capital."

*Adjustments to GAAP revenue, operating income, operating margin, EBITDA, EBITDA margin, earnings from continuing operations and diluted earnings per share (EPS) from continuing operations consist of items such as the impact of change in order flow through the Company's consolidated joint venture in Asia, restructuring charges, and one-time separation costs related to the spin-off from Ingersoll Rand to better illustrate year over year performance. Please see the disclosure below and the supplemental schedules attached to this earnings release for additional information regarding these adjustments.

Additional Items

Interest expense for the second quarter of 2014 was $12.0 million higher than the prior period due to the additional indebtedness incurred as a result of the spin-off from Ingersoll Rand. The Company's effective tax rate for the second quarter of 2014 was 29.5 percent. The comparable effective tax rate for the second quarter of 2013 was 36.9 percent.

EMEIA Restructuring

In the second quarter of 2014, management committed to a plan to restructure the EMEIA segment to improve efficiencies and regional cost structure. In conjunction with this plan, the Company incurred severance and other restructuring charges of $4.4 million for the three and six months ended June 30, 2014 of which $1.0 million is recorded in Cost of goods sold and $3.4 million is recorded in Selling and administrative expenses.

Cash Flow and Liquidity

Year-to-date 2014 available cash flow was $39.4 million, down $12.9 million versus prior year. The year-over-year decrease in available cash flow reflects increased investment in capital projects. The Company ended second quarter 2014 with cash of $193.2 million and total debt of $1,287.6 million. The Company did not have any borrowings outstanding under its $500 million revolving credit facility at June 30, 2014.

Share Repurchase

During the second quarter of 2014, the Company repurchased approximately 0.6 million shares with an average price paid per share of $50.14 for approximately $30.3 million related to the $200 million share repurchase program approved by the Company's board of directors in February, 2014.

Outlook

Allegion continues to forecast full-year revenues to increase 3.5 to 4.5 percent versus prior year on an adjusted basis. The Company is raising the lower end of adjusted EPS guidance, and holding the high-end with an updated range of $2.30 to $2.40. Restructuring and spin costs are expected to be in the range of $0.25 to $0.30 per share. Including these costs, EPS for 2014 continuing operations are expected to be in the range of $2.00 to $2.15. The forecast includes a full year tax assumption of approximately 30 percent for continuing operations. The updated forecast assumes the official exchange rate for the Venezuelan bolivar and does not take into consideration the impact of a potential currency devaluation in Venezuela. The Company continues to target available cash flow that approximates net earnings from continuing operations.

Conference Call Information

On Thursday, July 31, David D. Petratis, chairman, president and chief executive officer, and Patrick Shannon, senior vice president and chief financial officer, will conduct a conference call for analysts and investors, beginning at 8:00 a.m. E.T., to review the Company's results.

A real-time, listen-only webcast of the conference call will be broadcast live over the Internet. Individuals wishing to listen can access the call through the Company's website at http://investor.allegion.com.

About Allegion

Allegion (NYSE: ALLE) creates peace of mind by pioneering safety and security. As a $2 billion provider of security solutions for homes and businesses, Allegion employs more than 8,000 people and sells products in more than 120 countries across the world. Allegion comprises 27 global brands, including strategic brands CISA®, Interflex®, LCN®, Schlage® and Von Duprin®.

For more, visit http://www.allegion.com.

Non-GAAP Measures

The Company has presented revenue, operating income, operating margin, EBITDA, EBITDA margin, earnings from continuing operations, and diluted earnings per share (EPS) from continuing operations on both a U.S. GAAP basis and on an adjusted basis because the Company's management believes it may assist investors in evaluating the Company's on-going operations as a standalone company. The Company believes these non-GAAP disclosures provide important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. Investors should not consider these non-GAAP measures as alternatives to the related GAAP measures. A reconciliation of the non-GAAP measures used to their most directly comparable GAAP measure is presented as a supplemental schedule to this earnings release.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's 2014 financial performance, the Company's growth strategy, the Company's capital allocation strategy, the Company's Europe, Middle East, India and Africa (EMEIA) strategy and the performance of the markets in which the Company operates. These forward-looking statements are based on the Company's current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Further information on these factors and other risks that may affect the Company's business is included in filings it makes with the Securities and Exchange Commission from time to time, including its Form 10-K for the year ended December 31, 2013, Form 10-Q for the quarter ended March 31, 2014 and Form 10-Q for the quarter ended June 30, 2014. The Company assumes no obligations to update these forward looking statements.

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