Allegion, a global provider of security products and solutions, reported fourth quarter 2013 net revenues of $550.6 million, up 0.8% compared to the prior year, and EPS from continuing operations of $0.10 per share.
* Fourth quarter 2013 revenue of $550.6 million, up 0.8% compared to 2012 (up 4.5% on an adjusted basis*)
* Fourth quarter 2013 earnings per share (EPS) from continuing operations of $0.10 ($0.58 on an adjusted basis*) compared to $0.62 in the prior year
* Full year 2013 revenue of $2.1 billion, increased 2.3% compared to prior year (up 3.7% on an adjusted basis*)
* Full year 2013 EPS from continuing operations of $0.33 ($2.13 on an adjusted basis*) compared to $2.32 in the prior year ($2.38 on an adjusted basis*)
* Full year 2013 available cash flow of $203.7 million
Allegion, a global provider of security products and solutions, reported fourth quarter 2013 net revenues of $550.6 million, up 0.8% compared to the prior year, and EPS from continuing operations of $0.10 per share.
Excluding the impact of one-time separation costs and other special items, adjusted net revenues increased 4.5% and adjusted EPS from continuing operations were $0.58 per share. For the fourth quarter of 2013, operating margin was 16.3% (17.4% on an adjusted basis). Operating margin in the fourth quarter of 2012 was 18.2% (18.9% on an adjusted basis). The decrease in adjusted operating margin from the fourth quarter of 2012 was primarily due to increased investments associated with new product development and channel and business mix.
Allegion's commercial and residential security businesses were spun off from Ingersoll-Rand plc on December 1, 2013. Allegion achieved solid operating performance in 2013, despite significant organizational change during the year, and is well-positioned for growth in 2014. U.S. institutional construction is expected to continue its recovery and continued improvement in residential market construction and strong performance in multi-family sector are anticipated. Since the completion of the spin-off, Allegion has begun to implement its growth initiatives by pursuing strategic expansion opportunities, including its recent acquisition of Schlage Lock de Colombia and fostering organic growth of its market-leading brands.
*Adjustments to GAAP revenue, operating margin, net earnings and EPS from continuing operations include items such as the impact of change in order flow through the Company's consolidated joint venture in Asia, restructuring charges, non-cash goodwill impairment charges, one-time separation costs related to the spin-off from Ingersoll Rand, gain on property sale in China and discrete tax items 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 adjusted revenue, operating margin, EBITDA, net earnings and EPS from continuing operations.
Full Year Results
For the full year 2013, net revenues were $2,093.5 million, an increase of 2.3% compared to the prior year (3.7% on an adjusted basis). Net earnings from continuing operations for the full year 2013 were $31.8 million, or $0.33 per share, compared to $222.3 million, or $2.32 per share, for the prior year. Adjusted net earnings from continuing operations were $205.0 million, or $2.13 per share for the year ended December 31, 2013, compared to adjusted net earnings from continuing operations of $228.0 million, or $2.38 per share for the prior year. Adjusted net earnings and adjusted EPS were lower compared to the prior year primarily due to higher interest expense, a higher effective tax rate, increased investment spending and an unfavorable impact of foreign currency exchange rates.
David D. Petratis, chairman, president and chief executive officer, said, “Allegion's operating performance was solid in a year of large change as we became a stand-alone public company, with adjusted revenue growth of 3.7%, adjusted operating margin of 17.8% and more than $400 million in adjusted EBITDA. We invested in our brands and grew our core business, continued our focus on operational excellence and developed new products in both our existing mechanical and new electronic product categories. We have come out of the spin-off with a good foundation to deliver sustainable value for our shareholders and will continue to realize strategic opportunities that further unlock our potential.”
2014 Outlook
For the full year 2014, the Company expects adjusted EPS from continuing operations of $2.25 to $2.40 per share and reported EPS from continuing operations of $1.95 to $2.15. This guidance assumes full-year revenue growth of 0.9% to 1.9%, adjusted revenue growth of 3.5% to 4.5%, and restructuring and spin-off costs of $0.25 to $0.30 per share, net of tax. This guidance includes additional interest expense of $0.27 per share, net of tax, representing the full year impact of the additional indebtedness associated with the spin-off from Ingersoll Rand and assumes an effective tax rate of approximately 31%. The Company's 2014 guidance assumes the current exchange rate for the Venezuelan bolivar and does not take into consideration the impact of a potential currency devaluation in Venezuela. The Company also anticipates to generate available cash flow that approximates net earnings from continuing operations.
“Allegion's solid operational performance last year positions us well for 2014. We possess a strong portfolio of security brands and products and are building momentum as U.S. institutional construction shows early encouraging signs of recovery. We continue to invest in opportunities to diversify our security solutions business outside the U.S., where we see growth opportunities. In Europe, we have a clear vision for achieving solid profitability and improving operating margins in a continually challenging economic market by reducing barriers that separate us from our customers,” Petratis added.