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 June 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

_______________________________ 

ALLEGION PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

_______________________________

Ireland	98-1108930
(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) (1) 2546200

(Registrant’s telephone number, including area code)

_______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of exchange on which registered
Ordinary shares, par value $0.01 per share	ALLE	New York Stock Exchange
3.500% Senior Notes due 2029	ALLE 3 ½	New 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 filer	☒	Accelerated 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 July 25, 2022 was 87,838,044.

ALLEGION PLC

FORM 10-Q

INDEX

PART I - FINANCIAL INFORMATION		1
Item 1 -	Financial Statements	1
	Condensed and Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021 (Unaudited)	1
	Condensed and Consolidated Balance Sheets at June 30, 2022 and December 31, 2021 (Unaudited)	2
	Condensed and Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (Unaudited)	3
	Notes to Condensed and Consolidated Financial Statements (Unaudited)	4
Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3 -	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4 -	Controls and Procedures	30
PART II - OTHER INFORMATION		31
Item 1 -	Legal Proceedings	31
Item 1A -	Risk Factors	31
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 6 -	Exhibits	32
SIGNATURES		33

PART I-FINANCIAL INFORMATION

Item 1 – Financial Statements

Allegion plc

Condensed and Consolidated Statements of Comprehensive Income

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
In millions, except per share amounts	2022		2021		2022		2021
Net revenues	$	773.1	$	746.9	$	1,496.7	$	1,441.2
Cost of goods sold	458.1		426.4		893.0		823.3
Selling and administrative expenses	167.9		175.1		339.6		341.2
Operating income	147.1		145.4		264.1		276.7
Interest expense	17.2		12.4		29.1		24.7
Other income, net	(3.4)		(3.2)		(5.6)		(6.7)
Earnings before income taxes	133.3		136.2		240.6		258.7
Provision for income taxes	18.1		17.4		32.3		31.7
Net earnings	115.2		118.8		208.3		227.0
Less: Net earnings attributable to noncontrolling interests	0.1		0.1		0.2		0.3
Net earnings attributable to Allegion plc	$	115.1	$	118.7	$	208.1	$	226.7
Earnings per share attributable to Allegion plc ordinary shareholders:
Basic net earnings	$	1.31	$	1.32	$	2.36	$	2.51
Diluted net earnings	$	1.30	$	1.31	$	2.35	$	2.49
Weighted-average shares outstanding:
Basic	87.9		90.0		88.0		90.4
Diluted	88.2		90.6		88.4		90.9
Total comprehensive income	$	65.4	$	129.3	$	137.5	$	205.5
Less: Total comprehensive (loss) income attributable to noncontrolling interests	(0.5)		0.2		(0.4)		0.4
Total comprehensive income attributable to Allegion plc	$	65.9	$	129.1	$	137.9	$	205.1

See accompanying notes to condensed and consolidated financial statements.

1

Allegion plc

Condensed and Consolidated Balance Sheets

(Unaudited)

In millions, except share amounts	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	919.6	$	397.9
Accounts and notes receivable, net	333.3		283.3
Inventories	428.4		380.4
Other current assets	71.7		56.0
Total current assets	1,753.0		1,117.6
Property, plant and equipment, net	278.0		283.7
Goodwill	781.0		803.8
Intangible assets, net	412.1		447.5
Other noncurrent assets	429.6		398.4
Total assets	$	3,653.7	$	3,051.0
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	278.4	$	259.1
Accrued expenses and other current liabilities	319.4		329.5
Short-term borrowings and current maturities of long-term debt	12.6		12.6
Total current liabilities	610.4		601.2
Long-term debt	2,018.1		1,429.5
Other noncurrent liabilities	245.5		257.9
Total liabilities	2,874.0		2,288.6
Equity:
Allegion plc shareholders’ equity:
Ordinary shares, $0.01 par value (87,836,213 and 88,215,625 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively)	0.9		0.9
Capital in excess of par value	5.4		—
Retained earnings	1,035.2		952.6
Accumulated other comprehensive loss	(264.6)		(194.4)
Total Allegion plc shareholders’ equity	776.9		759.1
Noncontrolling interests	2.8		3.3
Total equity	779.7		762.4
Total liabilities and equity	$	3,653.7	$	3,051.0

See accompanying notes to condensed and consolidated financial statements.

2

Allegion plc

Condensed and Consolidated Statements of Cash Flows

(Unaudited)

	Six months ended
	June 30,
In millions	2022		2021
Cash flows from operating activities:
Net earnings	$	208.3	$	227.0
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization	40.1		41.9
Changes in assets and liabilities and other non-cash items	(139.3)		(1.4)
Net cash provided by operating activities	109.1		267.5
Cash flows from investing activities:
Capital expenditures	(24.6)		(17.9)
Other investing activities, net	0.7		(0.8)
Net cash used in investing activities	(23.9)		(18.7)
Cash flows from financing activities:
Debt repayments, net	(6.3)		(0.1)
Proceeds from issuance of senior notes	600.0		—
Net proceeds from (repayments of) debt	593.7		(0.1)
Debt financing costs	(9.1)		—
Dividends paid to ordinary shareholders	(71.5)		(64.6)
Repurchase of ordinary shares	(61.0)		(199.8)
Other financing activities, net	(3.7)		(0.6)
Net cash provided by (used in) financing activities	448.4		(265.1)
Effect of exchange rate changes on cash and cash equivalents	(11.9)		(3.9)
Net increase (decrease) in cash and cash equivalents	521.7		(20.2)
Cash and cash equivalents - beginning of period	397.9		480.4
Cash and cash equivalents - end of period	$	919.6	$	460.2

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, including the Access Technologies business acquisition (see Note 6).

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 millions	June 30, 2022		December 31, 2021
Raw materials	$	174.2	$	144.4
Work-in-process	48.3		42.2
Finished goods	205.9		193.8
Total	$	428.4	$	380.4

NOTE 4 - GOODWILL

The changes in the carrying amount of goodwill for the six months ended June 30, 2022, were as follows:

In millions	Allegion Americas		Allegion International		Total
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 translation	(0.1)		(22.7)		(22.8)
June 30, 2022 (net)	$	501.1	$	279.9	$	781.0

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:

	June 30, 2022						December 31, 2021
In millions	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Completed technologies/patents	$	56.9	$	(29.5)	$	27.4	$	57.9	$	(28.8)	$	29.1
Customer relationships	372.0		(141.5)		230.5		395.9		(141.6)		254.3
Trade names (finite-lived)	77.5		(54.1)		23.4		84.0		(56.9)		27.1
Other	45.7		(24.2)		21.5		45.8		(22.7)		23.1
Total finite-lived intangible assets	552.1		$	(249.3)	302.8		583.6		$	(250.0)	333.6
Trade names (indefinite-lived)	109.3				109.3		113.9				113.9
Total	$	661.4			$	412.1	$	697.5			$	447.5

Intangible asset amortization expense was $16.1 million and $15.9 million for the six months ended June 30, 2022 and 2021, respectively. Future estimated amortization expense on existing intangible assets (which does not include future estimated amortization expense related to the Access Technologies business acquisition) in each of the next five years amounts to approximately $31.5 million for full year 2022, $30.4 million for 2023, $30.1 million for 2024, $28.7 million for 2025 and $25.6 million for 2026.

NOTE 6 - ACQUISITIONS

On July 5, 2022, the Company, through its subsidiaries, completed the previously announced 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 closing purchase price for the acquisition was $923.1 million, inclusive of the previously announced purchase price of $900.0 million, in addition to customary working capital adjustments and the settlement of certain operating liabilities at closing. The Company used the net proceeds from the issuance of the 5.411% Senior Notes due 2032 (the “5.411% Senior Notes”), together with borrowings under the 2021 Revolving Facility, to finance the acquisition.

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. The Access Technologies business generated approximately $340 million in Net revenues in 2021. 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 will be integrated into the Allegion Americas segment.

During the three and six months ended June 30, 2022, the Company incurred $4.0 million and $8.8 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 currently anticipates additional acquisition and integration expenses in the second half of 2022 related to the Access Technologies business acquisition of approximately $20 million.

5

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 7 - DEBT AND CREDIT FACILITIES

Long-term debt and other borrowings consisted of the following:

In millions	June 30, 2022		December 31, 2021
2021 Term Facility	$	243.7	$	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
5.411% Senior Notes due 2032	600.0		—
Other debt	0.3		0.3
Total borrowings outstanding	2,044.0		1,450.3
Discounts and debt issuance costs, net	(13.3)		(8.2)
Total debt	2,030.7		1,442.1
Less current portion of long-term debt	12.6		12.6
Total long-term debt	$	2,018.1	$	1,429.5

Unsecured Credit Facilities

As of June 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 $243.7 million was outstanding at June 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 $6.3 million of principal on its 2021 Term Facility during the six months ended June 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. At June 30, 2022, there were no borrowings outstanding on the 2021 Revolving Facility, and the Company had $7.6 million of letters of credit outstanding. However, 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. 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 June 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 2.726%. 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 June 30, 2022, the Company was in compliance with all covenants.

Senior Notes

On June 22, 2022, Allegion US Hold Co issued $600.0 million aggregate principal amount of its 5.411% Senior Notes. 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 three and six months ended June 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.

6

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of June 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 8 - FINANCIAL INSTRUMENTS

Currency Hedging Instruments

The gross notional amount of the Company’s currency derivatives was $189.0 million and $164.9 million at June 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, nor the balances included in Accumulated other comprehensive loss were material as of June 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 income (loss) during the three or six months ended June 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 June 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 9 - LEASES

Total rental expense for the six months ended June 30, 2022 and 2021, was $21.5 million and $22.0 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 $3.5 million for each of the six months ended June 30, 2022 and 2021. No material lease costs have been capitalized on the Condensed and Consolidated Balance Sheets as of June 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:

		June 30, 2022								December 31, 2021
In millions	Balance Sheet classification	Real estate			Equipment			Total		Real estate			Equipment			Total
ROU asset	Other noncurrent assets	$	69.3		$	27.9		$	97.2	$	58.2		$	31.7		$	89.9
Lease liability - current	Accrued expenses and other current liabilities	15.8			12.7			28.5		15.5			13.6			29.1
Lease liability - noncurrent	Other noncurrent liabilities	56.2			15.2			71.4		45.1			18.2			63.3
Other information:
Weighted-average remaining term (years)		6.2			2.6					6.5			2.8
Weighted-average discount rate		3.1		%	2.0		%			3.4		%	2.1		%

7

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table summarizes additional information related to the Company’s leases for the six months ended June 30:

	2022						2021
In millions	Real estate		Equipment		Total		Real estate		Equipment		Total
Cash paid for amounts included in the measurement of lease liabilities	$	9.8	$	8.2	$	18.0	$	10.0	$	8.5	$	18.5
ROU assets obtained in exchange for new lease liabilities	22.9		3.9		26.8		4.0		4.6		8.6

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 June 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 June 30, 2022, are as follows:

In millions	Remainder of 2022		2023		2024		2025		2026		Thereafter		Total
Real estate leases	$	8.9	$	17.1	$	13.7	$	11.9	$	8.9	$	19.7	$	80.2
Equipment leases	7.0		11.0		6.9		3.1		0.5		0.1		28.6
Total	$	15.9	$	28.1	$	20.6	$	15.0	$	9.4	$	19.8	$	108.8

The difference between the total undiscounted minimum lease payments and the combined current and noncurrent lease liabilities as of June 30, 2022, is due to imputed interest of $8.9 million.

NOTE 10 - 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 six months ended June 30 were as follows:

	U.S.
	Three months ended				Six months ended
In millions	2022		2021		2022		2021
Service cost	$	1.4	$	1.7	$	2.9	$	3.4
Interest cost	2.0		1.7		4.0		3.4
Expected return on plan assets	(3.4)		(3.4)		(6.8)		(6.9)
Administrative costs and other	0.3		0.3		0.6		0.6
Net amortization of:
Prior service costs	0.1		—		0.1		0.1
Plan net actuarial losses	0.2		0.9		0.5		1.8
Net periodic pension benefit cost	$	0.6	$	1.2	$	1.3	$	2.4

8

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Non-U.S.
	Three months ended				Six months ended
In millions	2022		2021		2022		2021
Service cost	$	0.4	$	0.5	$	0.7	$	1.1
Interest cost	1.8		1.2		3.6		2.5
Expected return on plan assets	(3.9)		(3.4)		(7.8)		(6.9)
Administrative costs and other	0.3		0.5		0.8		1.0
Net amortization of:
Prior service costs	0.1		0.1		0.1		0.1
Plan net actuarial losses	0.2		0.3		0.4		0.7
Net periodic pension benefit income	$	(1.1)	$	(0.8)	$	(2.2)	$	(1.5)

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 six months ended June 30, 2022 and 2021. Contributions of approximately $5 million are expected during the remainder of 2022.

NOTE 11 - 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.

9

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Assets and liabilities measured at fair value at June 30, 2022, were as follows:

	Fair value measurements						Total fair value
In millions	Quoted 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	$	—	$	19.9	$	—	$	19.9
Total asset recurring fair value measurements	$	—	$	19.9	$	—	$	19.9
Liabilities:
Deferred compensation and other retirement plans	$	—	$	19.9	$	—	$	19.9
Total liability recurring fair value measurements	$	—	$	19.9	$	—	$	19.9
Financial instruments not carried at fair value
Total debt	$	—	$	1,949.6	$	—	$	1,949.6
Total financial instruments not carried at fair value	$	—	$	1,949.6	$	—	$	1,949.6

Assets and liabilities measured at fair value at December 31, 2021, were as follows:

	Fair value measurements						Total fair value
In millions	Quoted 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 June 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 June 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.

10

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 12 - EQUITY

The changes in the components of Equity for the six months ended June 30, 2022, were as follows:

			Allegion plc shareholders' equity
			Ordinary shares
In millions, except per share amounts	Total equity		Amount		Shares	Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss		Noncontrolling interests
Balance at December 31, 2021	$	762.4	$	0.9	88.2	$	—	$	952.6	$	(194.4)	$	3.3
Net earnings	93.1		—		—	—		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 activity	7.5		—		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
Net earnings	115.2		—		—	—		115.1		—		0.1
Other comprehensive loss, net	(49.8)		—		—	—		—		(49.2)		(0.6)
Share-based compensation activity	5.4		—		—	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, 2022	$	779.7	$	0.9	87.8	$	5.4	$	1,035.2	$	(264.6)	$	2.8

The changes in the components of Equity for the six months ended June 30, 2021, were as follows:

			Allegion plc shareholders' equity
			Ordinary shares
In millions, except per share amounts	Total equity		Amount		Shares	Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss		Noncontrolling interests
Balance at December 31, 2020	$	832.6	$	0.9	91.2	$	—	$	985.6	$	(157.1)	$	3.2
Net earnings	108.2		—		—	—		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 activity	4.4		—		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
Net earnings	118.8		—		—	—		118.7		—		0.1
Other comprehensive income, net	10.5		—		—	—		—		10.4		0.1
Repurchase of ordinary shares	(50.1)		—		(0.4)	(9.7)		(40.4)		—		—
Share-based compensation activity	9.7		—		0.2	9.7		—		—		—
Dividends to noncontrolling interests	(0.1)		—		—	—		—		—		(0.1)
Dividends to ordinary shareholders ($0.36 per share)	(32.4)		—		—	—		(32.4)		—		—
Balance at June 30, 2021	$	787.4	$	0.9	89.8	$	—	$	961.8	$	(178.7)	$	3.4

11

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 six months ended June 30, 2022 and 2021, the Company paid $61.0 million and $199.8 million, respectively, to repurchase the ordinary shares reflected in the tables above on the open market under the 2020 Share Repurchase Authorization. As of June 30, 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 six months ended June 30, 2022, were as follows:

In millions	Cash flow hedges		Pension and OPEB items		Foreign currency items		Total
December 31, 2021	$	0.9	$	(96.0)	$	(99.3)	$	(194.4)
Other comprehensive income (loss) before reclassifications	6.7		5.7		(83.8)		(71.4)
Amounts reclassified from accumulated other comprehensive loss(a)	—		0.9		—		0.9
Tax (expense) benefit	(0.1)		0.4		—		0.3
June 30, 2022	$	7.5	$	(89.0)	$	(183.1)	$	(264.6)

The changes in Accumulated other comprehensive loss for the six months ended June 30, 2021, were as follows:

In millions	Cash flow hedges		Pension and OPEB items		Foreign currency items		Total
December 31, 2020	$	(0.9)	$	(120.3)	$	(35.9)	$	(157.1)
Other comprehensive income (loss) before reclassifications	2.4		(0.5)		(24.4)		(22.5)
Amounts reclassified from accumulated other comprehensive loss(a)	(1.2)		2.5		—		1.3
Tax expense	(0.3)		(0.1)		—		(0.4)
June 30, 2021	$	—	$	(118.4)	$	(60.3)	$	(178.7)

(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 13 - 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 and six months ended June 30: