Allegion (ALLE) 10-K risk factor changes: FY2019 vs FY2018

[removed: Risks] [added: Risks] Related to Our [removed: Business][added: Business]

[removed: Our] [added: Our] global operations subject us to economic [removed: risks.][added: risks.]

Our global operations depend on products manufactured, purchased and sold in the U.S. and internationally, including in Australia, China, [removed: Colombia,] Europe, Korea, Mexico, New [removed: Zealand, Turkey] [added: Zealand] and the United Arab Emirates.

| • | [removed: difficulty] [added: Difficulty] in enforcing agreements, collecting receivables and protecting assets through non-U.S. legal systems; [added: and] |

| • | [removed: political] [added: Political] unrest, national and international conflict, including war, [added: border closures,] civil disturbances and terrorist [removed: acts; and] [added: acts.] |

[removed: Our] [added: Our] business relies on the institutional, commercial and residential construction and remodeling [removed: markets.][added: markets.]

[removed: Increased] [added: Increased] competition, including from [removed: technical] [added: technological] developments, could adversely affect our [removed: business.][added: business.]

If we are unable to anticipate evolving trends in the market or the timing and scale of our competitors’ activities and initiatives, [added: including increased competition from private label brands,] the demand for our products and services could be negatively impacted.

[removed: Our success depends, in part, upon the research,] development and implementation of new technologies and products including obtaining, maintaining and enforcing necessary intellectual property protections.

Securing and maintaining key partnerships and alliances, recruiting and retaining highly skilled and qualified employee talent and having access to technologies, services, intellectual property and solutions developed by others [added: will play a significant role in our ability to effectively compete.]

[removed: Our] [added: Our] growth is dependent, in part, on the development, commercialization and acceptance of new products and [removed: services.][added: services.]

[removed: Changes] [added: Changes] in customer [added: and consumer] preferences and the inability to maintain beneficial relationships with large customers could adversely affect our [removed: business.][added: business.]

[removed: Our] [added: Our] brands are important assets of our businesses, and violation of our trademark rights by imitators could negatively impact revenues and brand [removed: reputation.][added: reputation.]

[removed: Currency] [added: Currency] exchange rate fluctuations may adversely affect our [removed: results.][added: results.]

Approximately 30% of our [removed: 2018] [added: 2019] Net revenues were derived outside the U.S., and we expect sales to non-U.S. customers to continue to represent a significant portion of our consolidated Net revenues.

These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our operating [removed: results.][added: and financial results.]

We cannot provide assurance that we will identify or successfully complete [removed: transactions] [added: acquisitions] with suitable [removed: acquisition] candidates in the future, nor can we provide assurance that completed acquisitions will be [removed: successful.][added: successful, including efficient integration and creation of synergies.]

Some of the businesses we may seek to acquire [removed: or invest in] may be marginally profitable or unprofitable.

[added: We] may not be successful in this regard and we may encounter other difficulties in integrating acquired businesses into our existing operations.

Acquisitions [removed: and investments] may involve significant cash expenditures, debt incurrence, operating losses and expenses.

Acquisitions [added: also] involve numerous other risks, including:

[removed: We] [added: We] may pursue business opportunities that diverge from core [removed: business.][added: business.]

[removed: Our] [added: Our] enterprise excellence efforts may not achieve the improvements we [removed: expect.][added: expect.]

[removed: Our periodic] [added: Our] restructuring plans may not be [removed: successful.][added: successful.]

[removed: Material] [added: Material] adverse legal judgments, fines, penalties or settlements could adversely affect our [removed: business.][added: business.]

Our business may be adversely affected by the outcome of these proceedings and other contingencies (including, without [added: limitation, environmental, product liability, antitrust, intellectual property, data protection, privacy and labor and employment matters) that cannot be predicted with certainty.]

[removed: Allegations] [added: Allegations] that we have infringed the intellectual property rights of third parties could negatively affect [removed: us.][added: us.]

In general, if it is determined that one or more of our technologies, products or services infringes the intellectual property rights owned by others, we may be required to cease marketing those [added: products or] services, to obtain licenses from the holders of the intellectual property at a material cost or to take other actions to avoid infringing such intellectual property rights.

[removed: Our] [added: Our] reputation, ability to do business and results of operations could be impaired by [added: adverse publicity or] improper conduct by any of our employees, agents or business [removed: partners.][added: partners.]

[removed: Disruptions] [added: Disruptions] in our global supply chain, including product manufacturing and logistical services provided by outsourcing partners, may negatively impact our [removed: business.][added: business.]

[removed: We] [added: We] may be subject to risks relating to our information technology and operational technology [removed: systems.][added: systems.]

[removed: We] [added: We] currently rely on third-party vendors for many of the critical elements of our global information and operational technology infrastructure and their failure to provide effective support for such infrastructure could negatively impact our business and financial [removed: results.][added: results.]

[removed: Disruptions] [added: Disruptions] or breaches of our information systems could adversely affect [removed: us.][added: us.]

Our daily business operations also require us to [added: collect and/or] retain sensitive data such as intellectual property, proprietary business information and data related to customers, [added: employees,] suppliers and business partners within our networking infrastructure including data from individuals subject to the European Union's General Data Protection [removed: Regulation.][added: Regulation, that is subject to privacy and security laws, regulations and/or customer-imposed controls.]

[removed: The] [added: Despite our efforts to protect such data, the] loss or breach of such [removed: information] [added: data] due to various causes including [added: material security breaches,] catastrophic events, [added: extreme weather,] natural disasters, power outages, system failures, computer viruses, improper data [removed: handling] [added: handling, programming errors, unauthorized access] and employee error or malfeasance could result in wide reaching negative impacts to our business, and as such, the ongoing maintenance and security of this information is pertinent to the success of our business operations and our strategic goals.

[removed: Commodity] [added: Commodity] shortages, price increases and higher energy prices could negatively affect our financial [removed: results.][added: results.]

[removed: We] [added: We] may be required to recognize impairment charges for our goodwill, indefinite-lived intangible assets and other long-lived [removed: assets.][added: assets.]

At December 31, [removed: 2018,] [added: 2019,] the net carrying value of our goodwill and other indefinite-lived intangible assets totaled approximately [removed: $883.0] [added: $873.3] million and [removed: $130.6] [added: $123.0] million, respectively.

[removed: Disruptions] [added: Significant disruptions] to our business, end market conditions and protracted economic weakness, unexpected significant declines in operating results of reporting units, divestitures and market capitalization declines may result in [removed: additional] [added: recognition of impairment] charges [removed: for] [added: to] goodwill [removed: and] [added: or result in the impairment of our indefinite-lived intangible assets or] other [removed: asset impairments.][added: long-lived assets.]

Specifically, an unanticipated deterioration in Net revenues [removed: and] [added: and/or] operating margins generated by our EMEIA and/or Asia Pacific segments could trigger future [removed: impairment] [added: impairments] in those segments.

| • | Economic downturns and social and political instability, including uncertainties and financial, legal, tax and trade implications of the implementation of the United Kingdom’s withdrawal of its membership from the European Union (commonly known as “Brexit”); |

Further, in a number of our product offerings, we compete with our retail customers who use their own private labels.

Our success depends, in part, upon the research,

We also sell our products through various trade channels, including traditional retail and e-commerce channels.

If we or our major customers are not successful in navigating the shifting consumer preferences to distribution channels such as e-commerce, our expected future revenues may be negatively impacted.

Our business and innovation strategies include making acquisitions of, and investments in, external companies.

Further, as part of Allegion’s innovation strategy, from time to time we invest in start-up companies and/or development stage technology or other companies.

In evaluating these opportunities, we follow a structured evaluation process that considers factors such as potential financial returns, new expertise in emerging technology and business benefits.

Despite our best efforts to calculate potential return and risk, some or all of these companies we invest in may be unprofitable at the time of, and subsequent to, our investment.

We may lose money in these investments, including the potential for future impairment charges on the investments, and the anticipated benefits of the technology and business relationships may be less than expected.

Further, adverse publicity, whether or not justified, or allegations of product or service quality issues, even if false or unfounded, could damage our reputation and negatively affect our sales.

The effects of global climate change or other unexpected events, including global health crises, may disrupt our operations and have a negative impact on our business.

The effects of global climate change, such as extreme weather conditions and natural disasters occurring more frequently or with more intense effects, or the occurrence of unexpected events, including wildfires, tornadoes, hurricanes, earthquakes, floods, tsunamis and other severe hazards or global health crises, such as the outbreak of Ebola or the Coronavirus, or other rapid outbreak and spread of a communicable disease or virus, in the countries where we operate or sell products and provide services, could adversely affect our operations and financial performance.

Extreme weather, natural disasters, power outages or other unexpected events could disrupt our operations by impacting the availability and cost of materials needed for manufacturing, causing physical damage and partial or complete closure of our manufacturing sites or distribution centers, loss of human capital, temporary or long-term disruption in the supply of products and services and disruption in our ability to deliver products and services to customers.

These events and disruptions could also increase insurance and other operating costs, including impacting our decisions regarding construction of new facilities to select areas less prone to climate change risks and natural disasters, which could result in indirect financial risks passed through the supply chain or other price modifications to our products and services.

In addition, we operate in an environment where there are different and potentially conflicting data privacy laws and regulations in effect or expected to go into effect in the future, including regulations related to devices connected through the IoT, in the various jurisdictions in which we operate, and we must understand and comply with such laws and regulations while ensuring our data is secure.

Any charges relating to such impairments could have a material adverse impact on our results of operations in the periods recognized.

Transfer pricing regulations generally require that, for tax purposes, transactions between us and

Additionally, the regulator that oversees LIBOR has announced that it cannot guarantee LIBOR's availability after 2021.

In the event LIBOR is discontinued, replaced, significantly changed or ceases to be recognized as an acceptable benchmark, there may be uncertainty or differences in the calculation of our applicable interest rate or required payment amounts for our Credit Facilities.

This could also require different hedging strategies and require renegotiation of our existing Credit Facilities.

While we do not currently anticipate the transition from LIBOR and the risks thereto to have a material adverse effect on us, it remains uncertain at this time.

If the Directors' authority to issue ordinary shares is not renewed, then we may be limited in our ability to use our shares, for example, as consideration for acquisitions.

| • | economic downturns and social and political instability. |

will play a significant role in our ability to effectively compete.

Our business strategy includes making acquisitions and investments that complement our existing business.

We

limitation, environmental, product liability, intellectual property, data protection and labor and employment matters) that cannot be predicted with certainty.

If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other indefinite-lived intangible assets and the fair value of the goodwill or other indefinite-lived intangible assets in the period the determination is made.

We have significant intangible assets, including goodwill with an indefinite life, which are susceptible to valuation adjustments as a result of changes in such factors and conditions.

The basis of the fair value for our impairment assessments is determined by projecting future cash flows using assumptions concerning future operating performance and economic conditions that may differ from actual cash flows.

Financial and credit market volatility directly impacts our fair value measurement through our weighted-average cost of capital that we use to determine our discount rate and through our stock price that we use to determine our market capitalization.

Although our last analysis regarding the fair values of the goodwill and indefinite-lived intangible assets for our reporting units indicates that they exceed their respective carrying values, materially different assumptions regarding the future performance of our businesses or significant declines in our stock price could result in goodwill and intangible asset impairment losses.

While we currently believe that our projected results will not result in future impairment, a deterioration in results or other factors could trigger a future impairment.

A substantial portion of our cash flows from operations is

At December 31, 2018, our $1.5 billion of aggregate debt outstanding includes $656 million of floating-rate term loans and $800 million of fixed-rate senior notes.

We have the ability to incur up to $500 million of additional floating-rate debt under our senior unsecured revolving credit facility.

A 100 basis-point increase in LIBOR would have resulted in incremental 2018 interest expense of approximately $4.3 million.

Risks Relating to the Spin-off

In connection with the Spin-off, Ingersoll Rand indemnified us for certain liabilities and we indemnified Ingersoll Rand for certain liabilities.

If we are required to act on these indemnities to Ingersoll Rand, we may need to divert cash to meet those obligations and our financial results could be negatively impacted.

The Ingersoll Rand indemnity may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and Ingersoll Rand may not be able to satisfy its indemnification obligations in the future.

Pursuant to the Separation and Distribution Agreement, the Employee Matters Agreement and the Tax Matters Agreement with Ingersoll Rand, Ingersoll Rand agreed to indemnify us for certain liabilities, and we agreed to indemnify Ingersoll Rand for certain liabilities, in each case for uncapped amounts.

Such indemnities may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature of the Spin-off.

Third parties could also seek to hold us responsible for any of the liabilities that Ingersoll Rand retained.

Further, the indemnity from Ingersoll Rand may not be sufficient to protect us against the full amount of such liabilities, and Ingersoll Rand may not be able to fully satisfy its indemnification obligations.

Moreover, even if we ultimately succeed in recovering from Ingersoll Rand any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves.

If the distribution or certain internal transactions undertaken in anticipation of the Spin-off are determined to be taxable for U.S. federal income tax purposes, we, our shareholders that are subject to U.S. federal income tax and/or Ingersoll Rand could incur significant U.S. federal income tax liabilities and, in certain circumstances, we could be required to indemnify Ingersoll Rand for material taxes pursuant to indemnification obligations under the Tax Matters Agreement.

Ingersoll Rand has received an IRS ruling substantially to the effect that, among other things, the distribution of our ordinary shares, together with certain related transactions, qualify under Sections 355 and 368(a) of the Internal Revenue Code ("the Code"), with the result that Ingersoll Rand and Ingersoll Rand’s shareholders will not recognize any taxable income, gain or loss for U.S. federal income tax purposes as a result of the Spin-off, except to the extent of cash received in lieu of fractional shares (the "IRS Ruling").

The IRS Ruling also provided that certain internal transactions undertaken in anticipation of the distribution qualify for favorable treatment under the Code.

In addition to obtaining the IRS Ruling, Ingersoll Rand received opinions from the law firm of Simpson Thacher & Bartlett LLP substantially to the effect that certain requirements, including certain requirements that the IRS did not rule on, necessary to obtain tax-free treatment have been satisfied, such that the distribution for U.S. federal income tax purposes and certain other matters relating to the distribution, including certain internal transactions undertaken in anticipation of the distribution, received tax-free treatment under Section 355 of the Code.

The receipt and effectiveness of the IRS Ruling and the opinions were conditions to the distribution that were satisfied or waived by Ingersoll Rand.

The IRS Ruling and the opinions rely on certain facts and assumptions and certain representations and undertakings from us and Ingersoll Rand regarding the past and future conduct of our respective businesses and other matters.

Notwithstanding the IRS Ruling and the opinions, the IRS could determine on audit that the distribution or the internal transactions should be treated as taxable transactions if it determines that any of these facts, assumptions, representations or undertakings is not correct or has been violated, or that the distribution or the internal transactions should be taxable for other reasons, including as a result of significant changes in shares or asset ownership after the distribution.

A legal opinion represents the tax adviser’s best legal judgment, is not binding on the IRS or the courts, and

the IRS or the courts may not agree with the opinion.

In addition, the opinion will be based on then current law, and cannot be relied upon if current law changes with retroactive effect.

If the distribution is determined to be taxable, the distribution could be treated as a taxable dividend or capital gain for U.S. federal income tax purposes, and our shareholders could incur significant U.S. federal income tax liabilities.

In addition, we or Ingersoll Rand could incur significant U.S. federal income tax liabilities if it is ultimately determined that certain internal transactions undertaken in anticipation of the distribution are taxable.

In addition, under the terms of the Tax Matters Agreement, in the event the distribution or the internal transactions were determined to be taxable as a result of actions taken after the distribution by us or Ingersoll Rand, the party responsible for such failure would be responsible for all taxes imposed on us or Ingersoll Rand as a result thereof.

If such failure is not the result of actions taken after the distribution by us or Ingersoll Rand, then we would be responsible for any taxes imposed on us or Ingersoll Rand as a result of such determination.

Such tax amounts could be significant.

If the distribution is determined to be taxable for Irish tax purposes, significant Irish tax liabilities may arise.

[removed: The] [added: *The] following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties.

The following section is qualified in its entirety by the more detailed information, including our consolidated financial statements and the notes thereto, which appears elsewhere in this Annual [removed: Report.][added: Report.*]

[removed: Overview][added: Overview]

[removed: Organization][added: Organization]

We sell a wide range of security products and solutions for end-users in commercial, institutional and residential markets worldwide, including the education, healthcare, government, [added: hospitality,] commercial office and single and multi-family residential markets.

[removed: Trends] [added: Trends] and Economic [removed: Events][added: Events]

In recent years, growth in electronic security products and solutions continues to outperform mechanical products, and we expect growth in the global electronic [added: security] product [added: and solution] categories we serve to continue to outperform growth in mechanical [removed: products,] [added: products and solutions,] as end-users adopt newer technologies in their facilities and homes.

The economic conditions discussed above and a number of other challenges and uncertainties that could affect our [removed: business] [added: businesses] are described under Part I, Item 1A, "Risk Factors."

[removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] Significant [removed: Events][added: Events]

[removed: Acquisitions][added: Acquisitions]

We completed six business acquisitions in [removed: 2018 and one business acquisition in 2017:][added: 2018:]

| [removed: Business] [added: Business] | | [removed: Date] [added: Date] |

The incremental impact of [removed: the 2018] [added: these] acquisitions for the twelve months ended December 31, 2018 was an increase in Net revenues of approximately $160.2 million and an increase [removed: to] [added: in] Operating income of approximately $2.8 million.

During the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] we incurred [removed: $10.0] [added: $2.0] million and [removed: $4.7] [added: $10.0] million of acquisition and integration related expenses, respectively.

We paid quarterly dividends of [removed: $0.21] [added: $0.27] per ordinary share to shareholders on record as of March 15, [removed: 2018,] [added: 2019,] June [removed: 15, 2018,] [added: 14, 2019,] September [removed: 17, 2018,] [added: 16, 2019,] and December 17, [removed: 2018.][added: 2019.]

We paid a total of [removed: $79.4] [added: $100.6] million in cash for dividends to ordinary shareholders during the year ended December 31, [removed: 2018.][added: 2019.]

We also incurred [removed: other] [added: $4.3 million of] non-qualified restructuring [removed: charges of $1.6 million and $1.5 million for the years ended December 31, 2018 and 2017, respectively, related to] [added: expenses during 2019, which represent] costs [added: that were] directly attributable to [removed: restructuring activities] [added: the closure,] but that [removed: do] [added: did] not fall into the severance, exit or disposal category.

[removed: Financing activities][added: Financing activities]

[removed: In 2017,] [added: As of December 31, 2019,] we [removed: entered into a new $1.2 billion] [added: have an] unsecured [removed: credit agreement (the "Credit Agreement"),] [added: Credit Agreement in place,] consisting of a $700.0 million term loan facility (the “Term [removed: Facility”)] [added: Facility”), of which $238.8 million is outstanding at December 31, 2019,] and a $500.0 million revolving credit facility (the “Revolving [removed: Facility”, and] [added: Facility” and,] together with the Term Facility, the “Credit [removed: Facilities”), and repaid in full our previously outstanding secured credit facility, the Second Amended and Restated Credit Agreement, dated as of September 30, 2015.][added: Facilities”).]

[removed: Also in 2017,] [added: As of December 31, 2019,] we [removed: issued] [added: also have] $400.0 million [added: outstanding] of 3.200% Senior Notes due 2024 (the “3.200% Senior Notes”) and $400.0 million [added: outstanding] of 3.550% Senior Notes due 2027 (the “3.550% Senior [removed: Notes” and, together with the 3.200% Senior Notes, the “Notes”).][added: Notes”).]

[removed: Results] [added: Results] of Operations - For the years ended December [removed: 31][added: 31]

| [removed: Dollar] [added: Dollar] amounts in millions, except per share [removed: amounts] [added: amounts] | | [removed: 2018] [added: 2019] | | | | [removed: %] [added: %] of [removed: Net Revenues] [added: NetRevenues] | | | [removed: 2017] [added: 2018] | | | | [removed: %] [added: %] of [removed: Net Revenues] [added: NetRevenues] | | | [removed: 2016] [added: 2017] | | | | [removed: %] [added: %] of [removed: Net Revenues] [added: NetRevenues] | |

| Net revenues | | $ | [removed: 2,731.7] [added: 2,854.0] | | | | | | $ | [removed: 2,408.2] [added: 2,731.7] | | | | | | $ | [removed: 2,238.0] [added: 2,408.2] | | | | |

| Cost of goods sold | | [removed: 1,558.4] [added: 1,601.7] | | | | [removed: 57.0] [added: 56.1] | % | | [removed: 1,335.3] [added: 1,558.4] | | | | [removed: 55.4] [added: 57.0] | % | | [removed: 1,248.3] [added: 1,335.3] | | | | [removed: 55.8] [added: 55.4] | % |

| Selling and administrative expenses | | [removed: 647.5] [added: 687.2] | | | | [removed: 23.7] [added: 24.1] | % | | [removed: 580.4] [added: 647.5] | | | | [removed: 24.1] [added: 23.7] | % | | [removed: 555.4] [added: 580.4] | | | | [removed: 24.8] [added: 24.1] | % |

| Operating income | | [removed: 525.8] [added: 565.1] | | | | [removed: 19.2] [added: 19.8] | % | | [removed: 492.5] [added: 525.8] | | | | [removed: 20.5] [added: 19.2] | % | | [removed: 434.3] [added: 492.5] | | | | [removed: 19.4] [added: 20.5] | % |

| Interest expense | | [removed: 54.0] [added: 56.0] | | | | | | | [removed: 105.7] [added: 54.0] | | | | | | | [removed: 64.3] [added: 105.7] | | | | | |

[removed: | Loss] [added: Loss] on [removed: divestitures | | — | | | | | | | — | | | | | | | 84.4 | | | | | |][added: Divestitures]

| Other [removed: income,] [added: expense (income),] net | | [removed: (3.4] [added: 3.8] | | [removed: )] | | | | | [removed: (8.9] [added: (3.4] | | ) | | | | | [removed: (9.4] [added: (8.9] | | ) | | | |

| Earnings before income taxes | | 475.2 | | | | | | | [removed: 395.7] [added: 475.2] | | | | | | | [removed: 295.0] [added: 395.7] | | | | | |

| Provision for income taxes | | [removed: 39.8] [added: 73.1] | | | | | | | [removed: 119.0] [added: 39.8] | | | | | | | [removed: 63.8] [added: 119.0] | | | | | |

| Net earnings | | [removed: 435.4] [added: 402.1] | | | | | | | [removed: 276.7] [added: 435.4] | | | | | | | [removed: 231.2] [added: 276.7] | | | | | |

| Less: Net earnings attributable to noncontrolling interests | | [removed: 0.5] [added: 0.3] | | | | | | | [removed: 3.4] [added: 0.5] | | | | | | | [removed: 2.1] [added: 3.4] | | | | | |

| Net earnings attributable to Allegion plc | | $ | [removed: 434.9] [added: 401.8] | | | | | | $ | [removed: 273.3] [added: 434.9] | | | | | | $ | [removed: 229.1] [added: 273.3] | | | | |

| Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders: | | $ | [removed: 4.54] [added: 4.26] | | | | | | $ | [removed: 2.85] [added: 4.54] | | | | | | $ | [removed: 2.36] [added: 2.85] | | | | |

[removed: Net Revenues][added: Net Revenues]

Net revenues for the year ended December 31, [removed: 2018] [added: 2018,] increased by 13.4%, or $323.5 million, compared to the same period in 2017 due to the following:

Net revenues for the year ended December 31, [removed: 2017] [added: 2018,] increased by [removed: 7.6%,] [added: 12.5%,] or [removed: $170.2] [added: $221.1] million, compared to the same period in [removed: 2016] [added: 2017,] due to the following:

| Currency exchange rates | [removed: 0.5] [added: (1.4] | [removed: %] [added: )%] |

The increase in Net revenues was primarily driven by higher [removed: volumes and] [added: volumes,] improved pricing [removed: in all segments,] [added: and] incremental Net revenues from [removed: acquisitions and favorable foreign currency exchange rate movements relative to] the [removed: U.S. Dollar.][added: acquisitions, less divestitures, discussed above.]

Turkey Restructuring and Divestiture

In June 2019, the Company closed its production facility in Turkey to help streamline our footprint in EMEIA.

Associated with this closure, we have incurred approximately $8.4 million of qualified restructuring expenses during 2019, which primarily relate to severance and other employee separation costs.

During the fourth quarter of 2019, we sold certain of the former production assets of our Turkey facility for total proceeds of approximately $4.1 million.

The Company recorded a loss on divestiture of $24.2 million ($25.5 million, net of tax), primarily driven by $25.0 million of cumulative currency translation adjustments previously deferred in equity that were reclassified into earnings upon sale.

Colombia Divestiture

During the fourth quarter of 2019, the Company sold its interests in its Colombia operations.

As a result of the sale, the Company recorded a net loss on divestiture of $5.9 million, of which $1.2 million relates to cumulative currency translation adjustments previously deferred in equity that were reclassified into earnings upon sale.

Total cash paid for these acquisitions was approximately $373 million (net of cash acquired), including $4.6 million during the year ended December 31, 2019.

2019 Dividends

During the year ended December 31, 2019, the Company paid $226.0 million to repurchase 2.3 million ordinary shares on the open market under our 2017 Share Repurchase Authorization.

Additionally, in 2019, we issued $400.0 million of 3.500% Senior Notes due 2029 (the "3.500% Senior Notes").

Net proceeds from the issuance of the 3.500% Senior Notes, along with cash on hand, were utilized to make a $400.0 million principal payment to partially pay down the Company's outstanding term loan facility (the "Term Facility") balance.

As a result of this payment, we have satisfied our obligation to make quarterly installments on the Term Facility up to its maturity date, with the remaining outstanding balance of $238.8 million due on September 12, 2022.

| Loss on divestitures | | 30.1 | | | | | | | — | | | | | | | — | | | | | |

| Volume | 2.8 | % |

| Total | 4.5 | % |

These increases were partially offset by unfavorable foreign currency exchange rate movements.

| Total | (0.9 | )% |

This decrease was partially offset by the impact of volume/product mix, the impact of the acquisitions and divestitures discussed above, unfavorable foreign currency exchange rate movements and increased restructuring and acquisition costs.

| Impairment of trade names | 0.2 | % |

These increases were partially offset by favorable leverage due to increased volume and foreign currency exchange rate movements.

| Acquisitions / divestitures | (0.2 | | ) | | (0.2 | )% |

| Impairment of trade names | (5.9 | | ) | | (0.2 | )% |

| December 31, 2019 | $ | 565.1 | | | 19.8 | % |

Operating income increased due to pricing and productivity in excess of inflation and favorable volume/product mix.

These increases were partially offset by unfavorable foreign currency exchange rate movements, the impact of acquisitions and divestitures, increased investment spending, higher restructuring and acquisition costs and trade name impairment charges recorded during 2019.

Operating margin increased primarily due to pricing and productivity in excess of inflation and favorable volume/product mix.

| In millions | Operating Income | | | | Operating Margin | |

| December 31, 2018 | $ | 525.8 | | | 19.2 | % |

Interest expense for the year ended December 31, 2019, increased $2.0 million compared to the same period of 2018, primarily due to a $2.7 million charge related to the write-off of previously deferred financing costs related to our Term Facility.

This charge was recognized in conjunction with a $400.0 million principal payment to partially pay down the outstanding Term Facility balance in 2019.

During the year ended December 31, 2019, we recorded a Loss on divestitures of $30.1 million related to the divestitures of our business operations in Colombia and Turkey.

In June 2019, we closed our production facility in Turkey and subsequently sold certain of the production assets thereof for total proceeds of approximately $4.1 million.

We recorded a loss on divestiture of $24.2 million ($25.5 million, net of tax), primarily driven by $25.0 million of cumulative currency translation adjustments previously deferred in equity that were reclassified to earnings upon sale.

Additionally, during the fourth quarter of 2019, we sold our interests in our Colombia operations for an immaterial amount.

As a result of the sale, we recorded a net loss on divestiture of $5.9 million, of which $1.2 million relates to cumulative currency translation adjustments previously deferred in equity that were reclassified to earnings upon sale.

Neither of these divestitures is expected to have a material impact on our future results of operations or cash flows.

For the year ended December 31, 2019, Other expense (income), net was unfavorable $7.2 million compared to 2018, due primarily to an unfavorable change in Net periodic pension and postretirement benefit cost (income), less service cost, of $9.6 million.

This increase in expense was partially offset by investment income of $3.1 million during 2019, which is included within Other in the table above.

Our recent acquisitions have been made to capitalize on this trend.

| Republic Doors & Frames, LLC ("Republic") | | January 2017 |

Republic provides hollow metal doors and frames throughout the U.S. and in select non-U.S. markets, complementing our Steelcraft® brand and core business in the Americas segment.

Republic has been integrated into our Americas segment.

TGP provides fire-rated architectural glass and framing solutions for commercial buildings, as well as non-fire rated architectural glass and framing, including channel glass systems and curtain walls throughout the U.S., Canada and select markets in the Middle East.

TGP has been integrated into our Americas and EMEIA segments.

We acquired 100% of the machinery, equipment and intellectual property of a division of Hammond.

The assets acquired have been integrated into our existing production facilities and are specific to our Schlage-branded products.

QMI specializes in fire rated and non-fire rated steel and wooden doors, acoustic doors, wooden cabinets and access panels in the Middle East and Africa.

QMI has been integrated into our EMEIA segment.

AD Systems designs and manufactures high-performance interior and storefront door systems, specializing in sliding and acoustic solutions for the U.S. market.

AD Systems' portfolio includes sliding and swinging doors, perimeter frames, door hardware, gasketing, seals and sidelite panels.

AD Systems has been integrated into our Americas segment.

Door and Access Systems, based in Australia, includes the brands Gainsborough Hardware, the market-leading residential door hardware brand in Australia, and API Locksmiths, which serves the Australian market with its keying, installation and access control services.

Door and Access Systems has been integrated into our Asia Pacific segment.

ISONAS designs and manufactures edge-computing technology that produces Power over Ethernet access control solutions for non-residential end-markets in the U.S. ISONAS has been integrated into our Americas segment.

The incremental impact of acquisitions for the twelve months ended December 31, 2017 was an increase in Net revenues of approximately $32.3 million and a decrease to Operating income of approximately $0.6 million.

2018 Dividends

Restructuring charges

We incurred charges of $4.9 million and $12.3 million for the years ended December 31, 2018 and 2017, respectively, in conjunction with ongoing restructuring actions.

We used a portion of the net proceeds from the Notes to redeem in full our previously outstanding $300.0 million Senior Notes due 2021 and $300.0 million Senior Notes due 2023.

| Pricing | 1.6 | % |

| Volume | 3.9 | % |

| Acquisitions | 1.4 | % |

| Total | 7.6 | % |

| Acquisitions | 0.5 | % |

| Environmental remediation charge | (0.7 | )% |

| Total | (0.7 | )% |

| December 31, 2017 | $ | 492.5 | | | 20.5 | % |

| December 31, 2016 | $ | 434.3 | | | 19.4 | % |

| Investment spending | (15.4 | | ) | | (0.7 | )% |

| Environmental remediation charge | 15.0 | | | | 0.7 | % |

Operating income and Operating margin both increased due to favorable volume/product mix in all segments, pricing improvements and productivity in excess of inflation, favorable foreign currency exchange rate movements and lower environmental remediation charges in 2017 due to a charge in 2016 for a change in approach for environmental remediation related to two sites in the Americas.

Interest expense increased primarily due to $44.7 million of costs associated with the refinancing of our Credit Facilities, issuance of our

3.200% and 3.550% Senior Notes and redemption of our previously outstanding Senior notes due 2021 and 2023 in the third and fourth quarters of 2017, as discussed above.

This decrease was due to gains from the sale of marketable securities of $12.4 million in 2016, which did not recur in 2017.

This decrease is partially offset by the cumulative $5.4 million gain from the sale of iDevices, LLC and the gains of $7.3 million related to legal entity liquidations in our Asia Pacific region discussed above, as well as decreased Net periodic pension and postretirement benefit cost, less service cost in 2017 compared to 2016.

The effective income tax rate for the year ended December 31, 2016 was negatively impacted by $84.4 million (before and after tax) of charges related to the divestiture of our Systems Integration business in China during 2015.

| December 31, 2017 | $ | 508.5 | | | 28.8 | % |

2017 vs 2016

[removed: Foreign] [added: Foreign] Currency [removed: Exposures][added: Exposures]

Based on the firmly committed currency derivative instruments in place at December 31, [removed: 2018,] [added: 2019,] a hypothetical change in fair value of those derivative instruments assuming a 10% adverse change in exchange rates would result in an additional unrealized loss of approximately [removed: $6.8] [added: $12.7] million.

[removed: Commodity] [added: Commodity] Price [removed: Exposures][added: Exposures]

We do not have committed commodity derivative instruments in place at December 31, [removed: 2018.][added: 2019.]

[removed: Interest] [added: Interest] Rate [removed: Exposure][added: Exposure]

Outstanding borrowings under [removed: the] [added: our] Credit Facilities accrue interest at [removed: the] [added: our] option of [removed: the Company of] (i) a LIBOR rate plus the applicable margin or (ii) a base rate plus the applicable margin.

The applicable margin ranges from 1.125% to 1.500% depending on [removed: the Company's] [added: our] credit ratings.

At December 31, [removed: 2018,] [added: 2019,] the outstanding borrowings [added: of $238.8 million] under the Term Facility accrue interest at LIBOR plus a margin of 1.250%.

To manage [removed: the Company's] [added: our] exposure to fluctuations in LIBOR rates, [removed: the Company has] [added: we have] interest rate swaps to fix the interest rate for [removed: $250.0] [added: $200.0] million of the outstanding [removed: borrowings.][added: borrowings, which expire in September 2020.]

We are also exposed to the risk of rising interest rates to the extent that we fund our operations with short-term or variable-rate borrowings, as we have the ability to incur up to $500 million of additional variable-rate debt under our Revolving Facility.

If LIBOR or other applicable base rates of our Credit Facilities increase in the future, our Interest expense could increase.

These swaps expire in September 2020.

A 100 basis-point increase in LIBOR would have resulted in incremental 2018 interest expense of approximately $4.3 million.

If the base interest rate in our credit facilities increases in the future, our floating-rate debt could have a material effect on our interest expense.

[removed: Overview][added: Overview]

Allegion plc ("Allegion," "we," "us" or "the Company") is a leading global provider of security products and solutions that [removed: keep] [added: keeps] people [removed: safe,] [added: and assets safe and] secure [added: in the places where they reside, work] and [removed: productive.][added: thrive.]

| [removed: Allegion] [added: Allegion] Principal [removed: Products] [added: Products] | |

Moreover, [added: with the increasing adoption of the Internet of Things ("IoT"),] security products are increasingly linked electronically, integrated into software and popular consumer technology platforms and controlled with mobile applications, creating additional functionality and complexity.

| • | [removed: heightened] [added: Heightened] awareness of security [added: and privacy] requirements; |

| [removed: Allegion Brands] [added: Allegion Brands] | | | |

[removed: |  | | | |][added: ]

| [removed: ] [added: ] | | | |

We sell a wide range of security [removed: products] and [added: access control] solutions for end-users in commercial, institutional and residential facilities worldwide, including the education, healthcare, government, hospitality, commercial office and single and multi-family residential markets.

[removed: For] [added: During] the year ended December 31, [removed: 2018,] [added: 2019,] we generated Net revenues of [removed: $2,731.7] [added: $2,854.0] million and [removed: operating] [added: Operating] income of [removed: $525.8] [added: $565.1] million.

[removed: ][added: |  | | | |]

[removed: History] [added: History] and [removed: Developments][added: Developments]

| [removed: Product] [added: Product] | | [removed: Brands] [added: Brands] | | [removed: Year] [added: Year] | | [removed: Innovation] [added: Innovation] |

| Residential Locks, Cylinders and Levers | | [removed: Schlage (Touch, Connect, Sense, Control, Encode, Custom, SEL, Q6, X7),] [added: Schlage,] Bricard, Milre | | [removed: 2016/2017/ 2018] [added: 2017/2018/ 2019] | | [removed: Updates to single and multi-family residential electronic locking platforms that provide for keyless entry (Touch); connected locking (Connect); integration with the Internet of Things (IoT), Apple HomeKit, Amazon Alexa, Google Assistant and Android platforms (Sense); multi-family interconnected locking (Control); next-generation] [added: Next-generation Schlage] smart [removed: lock that is] [added: locks including] the [removed: first-ever] [added: first] WiFi enabled deadbolt to work with Key by Amazon and Ring devices with built-in connectivity [removed: (Encode); and] [added: (Schlage Encode);] 4-in-1 lock with fingerprint sensors, smart card, code access or a physical key [removed: (SEL).] [added: (SEL); Z-wave smart deadbolt and Zigbee-certified model compatible with Amazon Key and Ring devices (Schlage Connect).] Expanded handlesets for Schlage’s new universal functionality solution that allows homeowners to change from a doorknob to a lever and convert a non-locking door to lockable in minutes [removed: (Custom)] [added: (Schlage Custom)] and expanded ranges of cylinders and new aluminum trims for DIY customers (Bricard). [removed: Continual technology upgrades include Z-Wave Plus and Zigbee Certified to improve battery life and range, improve the user experience and enable partnerships with leading providers like Key by Amazon (Connect). New residential] [added: Residential] e-locks [removed: for] [added: in] Asia Pacific [removed: and] [added: with] improved biometric sensors, new designs and push-pull electronic locks with Bluetooth modules (Q6, X7, Milre). [added: Asia-Pacific Schlage series with new lever designs and finishes (Medio and Form); new mechanism for faster door hardware installation (QuickFix); and door and window hardware for aluminum joinery (Schlage Kanso).] |

| Commercial Locks, Cylinders, Levers and Electronic Access Platforms | | [removed: Schlage (AD, CO, LE, NDE, S-series), Bricard, Briton,] [added: Schlage, CISA,] SimonsVoss, [removed: CISA] [added: Bricard] | | [removed: 2016/2017/ 2018] [added: 2017/2018/ 2019] | | Enhancements to [removed: the] [added: our] comprehensive portfolio of globally available mechanical, wired electrified and wireless electronic solutions [removed: to give] [added: provide] a common aesthetic and consistent user experience throughout a [removed: building; wireless locks can be managed with Allegion’s ENGAGE web and mobile apps or with Software Alliance Member systems (AD, CO, LE, NDE). New rim and mortice locks for Southeast Asia (S-series), expanded cylinders for the European locksmith channel and multipoint mortise locks (Bricard), new stainless-steel trims (Bricard, Briton) and enhancements to the electronic Smart Handle (SimonsVoss).] [added: building (Schlage).] Firmware releases for [removed: the] U.S. channel-partner readers to give new functionality and USB communication mode for readers (Schlage). Mobile credentials, new Bluetooth Low Energy and RFID technology and integrations between electronic locks and exit devices (CISA). [added: New rim and mortice locks for Southeast Asia (S-series) and expanded cylinders for the European locksmith channel. Multipoint mortise locks and a new offering for two-door leaves (Bricard); multipoint self-locking system with remote-open capability and the highest European-standard security grade (CISA). New enhancements to the electronic Smart Handle (SimonsVoss).] |

| Exit Devices and Closers | | Von Duprin, Falcon, CISA | | [removed: 2018] [added: 2018/2019] | | New award-winning and cost-effective retrofit exit device that allows for remote undogging and monitoring with partner software (Von [removed: Duprin). New] [added: Duprin); new] fire-rated retrofit series [removed: (Falcon),] [added: (Falcon); and] quiet exit solutions (Von [removed: Duprin) and a new] [added: Duprin). New] range of asymmetric rack-and-pinion door closers [added: and an entry-level high-efficiency option] (CISA). |

| Bike Lighting and Portable Locking Solutions | | AXA, Kryptonite, Trelock | | [removed: 2017/2018] [added: 2017/2018/2019] | | Broad range of innovation in bike safety from each of our Global Portable Security brands (AXA, Kryptonite and Trelock), ranging from compact dynamo [removed: lights] and e-bike lights to USB, battery powered and rechargeable lights. [removed: New and expanded] [added: Expanded] lines of folding locks, integrated [removed: chains and] [added: chains,] ring locks and applications for bikes and motorcycles (AXA, Kryptonite, [removed: Trelock)] [added: Trelock); new ergonomic cable] and [added: chain locks and] expanded track-and-trace services (AXA). |

| Software, Mobile and Web Applications | | Allegion (Overtur, ENGAGE), [removed: Interflex] [added: Schlage, Briton, Interflex, ISONAS] | | [removed: 2018] [added: 2018/2019] | | [removed: Introduction of a new cloud-based] [added: Cloud-based] suite of tools for project teams to collaborate on specifications and the security design of doors and openings, which provides a centralized place to capture and maintain door hardware requirements and decisions with easy options to push information back to the design tools (Overtur). Multiple enhancements to the user experience include biometric login for the mobile app, simplified account and site set-up and gateway site survey [removed: (ENGAGE).] [added: (ENGAGE) and mobile apps (Briton and Schlage) let users lock, unlock, issue mobile keys, check status and more.] New modules for visitor management, encouraging self-service and Microsoft Outlook functionality [removed: (Interflex).] [added: and managed service featuring a cloud-based solution of time recording (Interflex); updated cloud-hosted access control platform with real time events, alerting, and user-initiated door control (ISONAS).] |

In addition, in 2018 we announced the formation of Allegion Ventures, a corporate venture fund that [removed: aims to supplement Allegion innovation by investing] [added: invests] in [added: and helps accelerate the growth of companies that have] innovative technologies and [removed: companies.][added: products.]

[removed: Industry] [added: Industry] and [removed: Competition][added: Competition]

The global markets we serve encompass [removed: commercial, institutional] [added: institutional, commercial] and residential construction [added: and remodeling] markets throughout North America, EMEIA and Asia Pacific.

In recent years, as end-users adopt newer technologies in their facilities and single and multi-family homes, [added: including IoT,] growth in electronic security products and solutions continues to outperform growth in mechanical security products and solutions.

We expect the security products industry will [added: continue to] benefit from favorable long-term demographic trends such as continued urbanization of the global population, increased concerns about safety and security and technology-driven innovation.

Our success depends on a variety of factors, including brand and reputation, product breadth, [added: innovation,] integration with popular technology platforms, quality and delivery capabilities, price and service capabilities.

Although price often serves as an important customer decision [removed: criterion,] [added: point,] we also compete based on the breadth and quality of our products and solutions, our ability to custom-configure solutions to meet individual end-user requirements and our global supply chain.

[removed: Products] [added: Products] and [removed: Services][added: Services]

| • | [removed: Locks,] [added: *Locks,] locksets, portable locks and key systems and [removed: services:] [added: services*:] A broad array of cylindrical and mortise door locksets, security levers and master key systems that are used to protect and control access and a range of portable security products, including bicycle, small vehicle and travel locks. We also offer locksmith services in select locations; |

| • | [removed: Door] [added: *Door] closers, controls and exit [removed: devices:] [added: devices*:] An extensive portfolio of life-safety products generally installed on fire doors and facility entrances and exits. Door [added: controls include both mechanical door] closers [removed: are devices that automatically close doors after they are opened. Exit devices are generally horizontal attachments to doors] and [removed: enable] [added: automatic door operators. Exit devices, also known as panic hardware, provide] rapid [removed: egress;] [added: egress to allow building occupants to exit safely in an emergency;] |

| • | [removed: Electronic] [added: *Electronic] security products and access control [removed: systems:] [added: systems*:] A broad range of electrified locks, access control systems, key card and reader systems and accessories, including [removed: Internet of Things (IoT),] [added: IoT,] Bluetooth Low Energy (BLE), Power over Ethernet and cloud-based solutions; |

| • | [removed: Time,] [added: *Time,] attendance and workforce productivity [removed: systems:] [added: systems*:] Products and services designed to help business customers manage and monitor workforce access control parameters, attendance and employee scheduling. We offer ongoing aftermarket services in addition to design and installation offerings; |

| • | [removed: Doors] [added: *Doors] and door [removed: systems:] [added: systems*:] A portfolio of hollow metal, glass, wood and specialty doors and door systems; and |

| • | [removed: Other accessories:] [added: *Other accessories*:] A variety of additional security and product components, including hinges, door [removed: levers,] [added: pulls,] door stops, bike lights, louvers, weather stripping, thresholds and other accessories, as well as certain bathroom fittings and accessibility aids. |

[removed: Customers][added: Customers]

Our 10 largest customers represented approximately [removed: 25%] [added: 23%] of our total Net revenues in [removed: 2018.][added: 2019.]

No single customer represented 10% or more of our total Net revenues in [removed: 2018.][added: 2019.]

[removed: Sales] [added: Sales] and [removed: Marketing][added: Marketing]

For example, we are members of Builders Hardware Manufacturers Association (BHMA), [added: Construction Specification Institute, FiRa Consortium, Internet of Things Consortium (IoTC), Physical] Security [added: Interoperability Alliance (PSIA), Security] Industry Association, [removed: Smart Card] [added: Security Technology] Alliance, [removed: American Society of Healthcare Engineering, American Institute of Architects, Construction Specification Institute,] ASSOFERMA (Italy), BHE (Germany) and UNIQ (France).

[removed: Production] [added: Production] and [removed: Distribution][added: Distribution]

We operate [removed: 34] [added: 32] production and assembly facilities, including [removed: 16] [added: 15] in Americas, [removed: 12] [added: 11] in EMEIA and 6 in Asia Pacific.

We own [removed: 17] [added: 16] of these facilities and lease the others.

We create peace of mind by pioneering safety and security with a vision of seamless access and a safer world.

Since its formation, Allegion Ventures has invested nearly $10 million in several early-stage companies that share our pioneering vision and seek to find smart and innovative solutions that help keep people and assets safe and secure in the places where they reside, work and thrive.

| Doors and Door Closers | | TGP, AD Systems | | 2019 | | First to the market surface mounted, top-hung single-leaf door that offers clean, modern aesthetic of sliding flush wood doors that achieve a 45-minute UL 10B fire rating (FireSlide). New fire-rated and impact safety-rated glass doors with a heat resistive perimeter frame, which features nearly colorless transitions between adjoining pieces of low-iron glass, eliminating the need for colored internal glass unit spacers or vertical frame mullions (Fireframes ClearView). |

We are committed to investing in our research and development capabilities with a focus on technology innovations that will deliver growth through the introduction of new products and solutions.

In addition, we invest in initiatives that continuously drive improvements in product cost, quality, safety and sustainability.

We organize our resources regionally to leverage expertise in local standards and configurations for the benefit of our customers.

Further, we operate a global engineering design and technology center in Bangalore, India, to augment and support the regional engineering teams.

| 2019 | 23% | 26% | 26% | 25% |

We believe in fundamental standards that support our commitment to our employees, including a commitment to safe and healthy workspaces, respect for diversity and competitive wages and benefits.

We are also committed to creating and maintaining a diverse and inclusive environment.

As an equal employment opportunity and affirmative action employer, we are fully committed to our equal employment opportunity policy and will not discriminate based on race, sex, color, national origin, creed, religion, pregnancy, age, disability, military status, protected veteran status, sexual orientation, gender identity, genetic information, marital status or

any legally protected status.

We are dedicated to fulfilling this commitment as it relates to decisions regarding all employment actions at all levels of employment.

Environmental Matters

For a further discussion of our potential environmental liabilities, see Note 21 to the Consolidated Financial Statements.

We make the world safer as a company of experts, securing the places where people thrive, and we create peace of mind by pioneering safety and security.

| | |

| --- | --- |

In 2018, product innovation spanned:

| • | Improvements to the user experience, product design and ergonomics; |

| • | New technology solutions, software, mobile applications and integration with leading platforms; and |

| • | Improved locks and lights for portable security. |

| Chino, California | | Duzce, Turkey | | Jinshan, China |

We are committed to investing in highly productive research and development capabilities, particularly in electro-mechanical systems.

We concentrate on developing technology innovations that will deliver growth through the introduction of new products and solutions, as well as driving continuous improvements in product cost, quality, safety and sustainability.

We are organized on a regional basis to leverage expertise in local standards and configurations.

In addition to regional engineering centers in each geographic region, we also operate a global engineering design center in Bangalore, India.

| 2016 | 22% | 26% | 26% | 26% |

Environmental Regulation

We incurred $2.4 million, $3.2 million and $23.3 million of expenses during the years ended December 31, 2018, 2017 and 2016, respectively, for environmental remediation at sites presently or formerly owned or leased by us.

As of December 31, 2018 and 2017, we have recorded reserves for environmental matters of $22.6 million and $28.9 million, respectively.

Of these amounts $6.3 million and $8.9 million, respectively, relate to remediation of sites previously disposed by us.

Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.

[removed: UNITED STATES SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: X] [added: ☒] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

| [removed: —] [added: ☐] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

[removed: Commission] [added: Commission] File [removed: No. 001-35971][added: No. 001-35971]

[removed: ][added: ]

[removed: ALLEGION] [added: ALLEGION] PUBLIC LIMITED [removed: COMPANY][added: COMPANY]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Ireland] [added: Ireland] | | [removed: 98-1108930] [added: 98-1108930] |

| [removed: (State] [added: *(State] or other jurisdiction of incorporation or [removed: organization)] [added: organization)*] | | [removed: (I.R.S. Employer Identification No.)] [added: *(I.R.S. Employer* *Identification No.)*] |

[removed: Block D][added: Block D]

[removed: Iveagh Court][added: Iveagh Court]

[removed: Harcourt Road][added: Harcourt Road]

[removed: Dublin 2, Ireland][added: Dublin 2, Ireland]

[removed: (Address] [added: (Address] of principal executive [removed: offices)][added: offices, including zip code)]

[removed: Registrant’s] [added: (Registrant’s] telephone number, including area [removed: code: +(353) (1) 2546200][added: code)]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [added: Trading symbols] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| Ordinary [removed: Shares,] [added: shares, par value $0.01 per share] | [added: ALLE] | New York Stock Exchange |

[removed: YES x NO ¨][added: Yes ☐ No ☒]

| Large accelerated filer | [removed: x] [added: ☒] | Accelerated filer | [removed: ¨] [added: ☐] |

| Non-accelerated filer | [removed: ¨] [added: ☐] | Smaller reporting company | [removed: ¨] [added: ☐] |

| | | Emerging growth company | [removed: ¨] [added: ☐] |

The aggregate market value of ordinary shares held by non-affiliates on June 30, [removed: 2018] [added: 2019] was approximately [removed: $7.3] [added: $10.3] billion based on the closing price of such stock on the New York Stock Exchange.

The number of ordinary shares outstanding [added: of Allegion plc] as of February [removed: 14, 2019] [added: 13, 2020] was [removed: 94,458,335.][added: 92,600,522.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s definitive proxy statement to be filed within 120 days of the close of the registrant’s fiscal year in connection with the registrant’s Annual General Meeting of Shareholders to be held June [removed: 5, 2019] [added: 4, 2020] (the "Proxy Statement") are incorporated by reference into Part II and Part III of this Form 10-K.

[removed: ALLEGION PLC][added: ALLEGION PLC]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| [removed: Part I] [added: Part I] | Item 1. | [removed: [Business](#s0258D51C850D590DA60100286E70445A)] [added: [Business](#s7600EE63EDF95202B04B8DEBB68B6C4D)] | [removed: [4](#s0258D51C850D590DA60100286E70445A)] [added: [4](#s7600EE63EDF95202B04B8DEBB68B6C4D)] |

| | Item 1A. | [Risk [removed: Factors](#s8C136B813E2C5C28B6892F0BCEB85A10)] [added: Factors](#s06AD9F2F061A54849BB5E5E795DA0A27)] | [removed: [13](#s8C136B813E2C5C28B6892F0BCEB85A10)] [added: [13](#s06AD9F2F061A54849BB5E5E795DA0A27)] |

| | Item 1B. | [Unresolved Staff [removed: Comments](#s89C7D3E59B49587F992BF836E1C60F0C)] [added: Comments](#sC85BF16E413E5682A0665B15D48F993E)] | [removed: [24](#s89C7D3E59B49587F992BF836E1C60F0C)] [added: [22](#sC85BF16E413E5682A0665B15D48F993E)] |

| | Item 2. | [removed: [Properties](#sA9F1BEDF602A5D1FAE23D24E1ACD082B)] [added: [Properties](#s006E352E52985B0086823D25A3B10719)] | [removed: [24](#sA9F1BEDF602A5D1FAE23D24E1ACD082B)] [added: [22](#s006E352E52985B0086823D25A3B10719)] |

| | Item 3. | [Legal [removed: Proceedings](#sE4DBA0F03BB3539497436EA36EC2E7ED)] [added: Proceedings](#s11A7D75CC12C5015B3D6E4BD14234D34)] | [removed: [24](#sE4DBA0F03BB3539497436EA36EC2E7ED)] [added: [23](#s11A7D75CC12C5015B3D6E4BD14234D34)] |

| | Item 4. | [Mine Safety [removed: Disclosures](#s6508912DE2C5541380439635D93AE817)] [added: Disclosures](#sEF2D0DFD4B7155A799DCE62F060E26DD)] | [removed: [24](#s6508912DE2C5541380439635D93AE817)] [added: [23](#sEF2D0DFD4B7155A799DCE62F060E26DD)] |

| [removed: Part II] [added: Part II] | Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s1F898A5FAB08502B922D8053E24B9370)] [added: Securities](#s6A2E9566AA555E76B4B24632A00042E4)] | [removed: [26](#s1F898A5FAB08502B922D8053E24B9370)] [added: [24](#s6A2E9566AA555E76B4B24632A00042E4)] |

| | Item 6. | [Selected Financial [removed: Data](#sED2DE7D6C0E558EA92E717466EAAB919)] [added: Data](#s4602483CCACC5435A67FA58F01FF004F)] | [removed: [28](#sED2DE7D6C0E558EA92E717466EAAB919)] [added: [26](#s4602483CCACC5435A67FA58F01FF004F)] |

| | Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s85B3A1CE5C2C5A26BBC66267AE861247)] [added: Operations](#sFE0207A2FC125454899FDE31315077A4)] | [removed: [29](#s85B3A1CE5C2C5A26BBC66267AE861247)] [added: [27](#sFE0207A2FC125454899FDE31315077A4)] |

| | Item 7A. | [Quantitative and Qualitative Disclosure About Market [removed: Risk](#s413528ED5AB45248A3DE4BA9B5745151)] [added: Risk](#sE1F1DBBD91DF58EC878894BA9096B6FE)] | [removed: [47](#s413528ED5AB45248A3DE4BA9B5745151)] [added: [45](#sE1F1DBBD91DF58EC878894BA9096B6FE)] |

UNITED STATES

+(353) (1) 2546200

| 3.500% Senior Notes due 2029 | ALLE 3 ½ | New York Stock Exchange |

Form 10-K

For the Fiscal Year Ended December 31, 2019

| | [Signatures](#sDFCCA3DE4C1B583199357730ABA9123B) | | [54](#sDFCCA3DE4C1B583199357730ABA9123B) |

| • | conditions of the institutional, commercial and residential construction and remodeling markets; |

| • | the ability to protect our brand reputation and trademarks; |

| • | business opportunities that diverge from core business; |

| • | the results of our restructuring plans; |

| • | claims of infringement of intellectual property rights by third parties; |

| • | the effects of global climate change or other unexpected events, including global health crises, that may disrupt our operations; |

| • | disruption and breaches of our information systems; |

| • | changes to, or changes in interpretations of, current laws and regulations; |

| | |

| --- | --- |

| • | uncertainty and inherent subjectivity related to transfer pricing regulations; |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

10-K 1 alle10k12312018doc.htm 10-K DATED FEBRUARY 19, 2019

| Par Value $0.01 per Share | | |

YES ¨ NO x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

| | [Signatures](#sF1954E0778715CD0BC9B3CF08203D213) | | [58](#sF1954E0778715CD0BC9B3CF08203D213) |

| • | the ability to protect and use intellectual property; |

| • | results of investments made to complement our existing businesses and our pursuit of business opportunities that may diverge from our core businesses; |

| • | changes to trade agreements, sanctions, import and export regulations and custom duties; |

| • | risks related to our spin-off from Ingersoll Rand plc; |

| • | the impact our outstanding indebtedness may have on our business and operations. |

We operate through a broad network of sales offices, engineering centers, [removed: 34] [added: 32] production and assembly facilities and several distribution centers throughout the world.

Our active properties represent about [removed: 6.9] [added: 6.6] million square feet, of which approximately [removed: 37%] [added: 39%] is leased.

The following is a list of executive officers of the Company as of February [removed: 19, 2019.][added: 18, 2020.]

[removed: David] [added: *David] D.

[removed: Petratis,] [added: Petratis*,] age [removed: 61,] [added: 62,] has served as our Chairman, President and Chief Executive Officer since 2013.

[removed: Patrick] [added: *Patrick] S.

[removed: Shannon,] [added: Shannon*,] age [removed: 56,] [added: 57,] has served as our Senior Vice President and Chief Financial Officer since 2013.

[removed: Jeffrey] [added: *Jeffrey] N.

[removed: Braun,] [added: Braun*,] age [removed: 59,] [added: 60,] has served as our Senior Vice [removed: President,] [added: President and] General Counsel [removed: and Chief Compliance Officer] since 2014, and Secretary since 2018.

[removed: Timothy] [added: *Timothy] P.

[removed: Eckersley,] [added: Eckersley*,] age [removed: 57,] [added: 58,] has served as our Senior Vice President [removed: and President] - Americas since 2013.

[removed: Tracy] [added: *Tracy] L.

[removed: Kemp,] [added: Kemp*,] age [removed: 50,] [added: 51,] has served as our Senior Vice President [removed: and] [added: -] Chief [removed: Information] [added: Customer and Digital] Officer since [removed: 2015.][added: 2019.]

Ms. Kemp served as our [added: Senior] Vice President and Chief Information Officer from [removed: 2013] [added: 2015] to [removed: 2015.][added: 2019.]

[removed: Shelley] [added: *Shelley] A.

[removed: Meador,] [added: Meador*,] age [removed: 47,] [added: 48,] has served as our Senior Vice President [removed: and Chief] [added: -] Human Resources [removed: Officer] [added: and Communications] since 2016.

[removed: Lucia] [added: *Lucia] Veiga [removed: Moretti,] [added: Moretti*,] age [removed: 54,] [added: 55,] has served as our Senior Vice President [removed: and President] - EMEIA since 2014.

[removed: Chris] [added: *Chris] E.

[removed: Muhlenkamp,] [added: Muhlenkamp,*] age [removed: 61,] [added: 62,] has served as our Senior Vice President - Global Operations and Integrated Supply Chain since 2014.

[removed: Douglas] [added: *Douglas] P.

[removed: Ranck,] [added: Ranck*,] age [removed: 60,] [added: 61,] has served as our Vice President, Controller and Chief Accounting Officer since 2013.

[removed: Vincent Wenos,] [added: *Vincent Wenos,*] age [removed: 52,] [added: 53,] has served as our [added: Senior] Vice President - [removed: Global] [added: Chief] Technology [removed: and Engineering] [added: Officer] since [removed: 2018.][added: 2019.]

Mr. Wenos served as [added: our Vice President - Global Technology and Engineering from 2018 to 2019 and served as] both our Vice President - Americas Engineering and Vice President - Global Mechanical Products from 2016 to 2018.

[added: Mr. Wenos] previously served as Vice President - Global Product Development and Technology at Stanley Black & Decker, Inc. (a global diversified consumer and industrial products company).

[removed: Jeffrey] [added: *Jeffrey] M.

[removed: Wood,] [added: Wood*,] age [removed: 48,] [added: 49,] has served as our Senior Vice President [removed: and President] - Asia Pacific since 2017.

All above-listed officers except for [removed: Ms. Moretti and] Mr. Wenos have been employed by the Company for more than the past five years.

[removed: PART II][added: PART II]

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

*Robert C.

Martens*, age 49, has served as our Senior Vice President - Chief Innovation and Design Officer since December 2019 and Futurist and President of Allegion Ventures since 2017.

Mr. Martens served as Futurist of the Americas region and Director of Connectivity Platforms from 2014 to 2017.

EXECUTIVE OFFICERS OF THE REGISTRANT

Mr. Braun served as our Deputy General Counsel and Chief Compliance Officer from 2013 to 2014.

Previously, Ms. Moretti served as Senior Vice President and President, Delphi Product and Service Solutions for Delphi Automotive (a supplier of automotive technologies) from 2011 to 2014.

Mr. Muhlenkamp served as our Vice President - Global Operations and Integrated Supply Chain from 2013 to 2014.

Mr. Wenos

[removed: ISSUER] [added: ISSUER] PURCHASES OF EQUITY [removed: SECURITIES][added: SECURITIES]

As of February [removed: 14, 2019,] [added: 13, 2020,] the number of record holders of ordinary shares was [removed: 2,648.][added: 2,430.]

[removed: Dividend Policy][added: Dividend Policy]

Our Board of Directors declared dividends of [removed: $0.21] [added: $0.27] per ordinary share on February [removed: 8, 2018,] [added: 6, 2019,] April [removed: 5, 2018,] [added: 4, 2019,] September [removed: 6, 2018] [added: 5, 2019] and December [removed: 6, 2018.][added: 5, 2019.]

On February [removed: 5, 2019,] [added: 6, 2020,] our Board of Directors declared a dividend of [removed: $0.27] [added: $0.32] per ordinary share payable March [removed: 29, 2019.][added: 31, 2020.]

We paid a total of [removed: $79.4] [added: $100.6] million in cash for dividends to ordinary shareholders during the year ended December 31, [removed: 2018.][added: 2019.]

In February 2017, our Board of Directors approved a [removed: new stock] [added: share] repurchase authorization of up to $500 million of the Company's ordinary shares [removed: ("2017] [added: (the "2017] Share Repurchase Authorization").

The [removed: 2017] [added: 2020] Share Repurchase Authorization does not have a prescribed expiration date.

[removed: Performance Graph][added: Performance Graph]

The annual changes for the [added: five-year] period shown [removed: December 1, 2013 (when our ordinary shares began trading) to December 31, 2018 in the graph on this page] [added: below] are based on the assumption that $100 had been invested in Allegion plc ordinary shares, the Standard & Poor’s 500 Stock Index ("S&P 500") and the Standard & Poor's 400 Capital Goods Index ("S&P 400 Capital Goods") on December [removed: 1, 2013,] [added: 31, 2014,] and that all quarterly dividends were reinvested.

The total cumulative dollar returns shown on the graph represent the value that such investments would have had on December 31, [removed: 2018.][added: 2019.]

[removed: ][added: ]

| | | [removed: December 1, 2013 | | December] [added: December] 31, [removed: 2013] [added: 2014] | | [removed: December] [added: December] 31, [removed: 2014] [added: 2015] | | [removed: December] [added: December] 31, [removed: 2015] [added: 2016] | | [removed: December] [added: December] 31, [removed: 2016] [added: 2017] | | [removed: December] [added: December] 31, [removed: 2017] [added: 2018] | | [removed: December] [added: December] 31, [removed: 2018] [added: 2019] |

Issuer Purchases of Equity Securities

| Period | | Total number of shares purchased (000s) | | | Average price paid per share | | | | Total number of shares purchased as part of the 2017 Share Repurchase Authorization (000s) | | | Approximate dollar value of shares still available to be purchased under the 2017 Share Repurchase Authorization (000s) | | |

| October 1 - October 31 | | 154 | | | $ | 104.52 | | | 154 | | | $ | 176,916 | |

| November 1 - November 30 | | 117 | | | 117.36 | | | | 117 | | | 163,143 | | |

| December 1 - December 31 | | 133 | | | 123.08 | | | | 133 | | | 146,746 | | |

| Total | | 404 | | | $ | 114.37 | | | 404 | | | $ | 146,746 | |

Based on market conditions, share repurchases are made from time to time in the open market at the discretion of management.

On February 6, 2020, the Company's Board of Directors approved a new share repurchase authorization of up to, and including, $800 million of the Company's ordinary shares (the "2020 Share Repurchase Authorization"), replacing the existing 2017 Share Repurchase Authorization.

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| Allegion plc | | 100.00 | | 119.64 | | 117.00 | | 146.62 | | 148.35 | | 234.22 |

| S&P 500 | | 100.00 | | 101.38 | | 113.51 | | 138.29 | | 132.23 | | 173.86 |

| S&P 400 Capital Goods | | 100.00 | | 94.49 | | 124.67 | | 155.45 | | 133.67 | | 177.45 |

We paid a total of $67.3 million to repurchase 0.9 million ordinary shares during the year ended December 31, 2018 and $60.0 million to repurchase 0.8 million ordinary shares during the year ended December 31, 2017.

At December 31, 2018, we have approximately $372.7 million available under the 2017 Share Repurchase Authorization.

| Allegion plc | | 100.00 | | 102.20 | | 129.03 | | 154.37 | | 150.97 | | 189.19 | | 191.42 |

| S&P 500 | | 100.00 | | 102.53 | | 116.57 | | 118.18 | | 132.31 | | 161.20 | | 154.13 |

| S&P 400 Capital Goods | | 100.00 | | 104.58 | | 104.84 | | 99.07 | | 130.70 | | 162.97 | | 140.14 |

| [removed: As] [added: As] of and for the years ended December [removed: 31,] [added: 31,] | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | |

| Net revenues | | $ | [removed: 2,731.7] [added: 2,854.0] | | | $ | [removed: 2,408.2] [added: 2,731.7] | | | $ | [removed: 2,238.0] [added: 2,408.2] | | | $ | [removed: 2,068.1] [added: 2,238.0] | | | $ | [removed: 2,118.3] [added: 2,068.1] | | |

| Continuing operations | | [removed: 434.9] [added: 401.8] | | | (a) | [removed: 273.3] [added: 434.9] | | | (b) | [removed: 229.1] [added: 273.3] | | | (c) | [removed: 154.3] [added: 229.1] | | | (d) | [removed: 186.3] [added: 154.3] | | | (e) |

| Discontinued operations | | — | | | | — | | | | — | | | | [removed: (0.4] [added: —] | | [removed: )] | | [removed: (11.1] [added: (0.4] | | ) | |

| Total assets | | [removed: 2,810.2] [added: 2,967.2] | | | | [removed: 2,542.0] [added: 2,810.2] | | | | [removed: 2,247.4] [added: 2,542.0] | | | | [removed: 2,263.0] [added: 2,247.4] | | | | [removed: 2,015.9] [added: 2,263.0] | | | |

| Total debt | | [removed: 1,444.8] [added: 1,427.7] | | | | [removed: 1,477.3] [added: 1,444.8] | | | | [removed: 1,463.8] [added: 1,477.3] | | | | [removed: 1,523.1] [added: 1,463.8] | | | | [removed: 1,264.6] [added: 1,523.1] | | | |

| Total Allegion plc shareholders’ equity [removed: (deficit)] | | [removed: 651.0] [added: 757.4] | | | | [removed: 401.6] [added: 651.0] | | | | [removed: 113.3] [added: 401.6] | | | | [removed: 25.6] [added: 113.3] | | | | [removed: (4.8] [added: 25.6] | | [removed: )] | |

| Continuing operations | | $ | [removed: 4.58] [added: 4.29] | | | $ | [removed: 2.87] [added: 4.58] | | | $ | [removed: 2.39] [added: 2.87] | | | $ | [removed: 1.61] [added: 2.39] | | | $ | [removed: 1.94] [added: 1.61] | | |

| Discontinued operations | | — | | | | — | | | | — | | | | [removed: (0.01] [added: —] | | [removed: )] | | [removed: (0.12] [added: (0.01] | | ) | |

| Continuing operations | | $ | [removed: 4.54] [added: 4.26] | | | $ | [removed: 2.85] [added: 4.54] | | | $ | [removed: 2.36] [added: 2.85] | | | $ | [removed: 1.59] [added: 2.36] | | | $ | [removed: 1.92] [added: 1.59] | | |

| Discontinued operations | | — | | | | — | | | | — | | | | — | | | | [removed: (0.12] [added: —] | | [removed: )] | |

| Dividends declared per ordinary share | | $ | [removed: 0.84] [added: 1.08] | | | $ | [removed: 0.64] [added: 0.84] | | | $ | [removed: 0.48] [added: 0.64] | | | $ | [removed: 0.40] [added: 0.48] | | | $ | [removed: 0.32] [added: 0.40] | | |

| [removed: (a)] [added: (b)] | Net earnings for the year ended December 31, [removed: 2018] [added: 2018,] includes a $21.9 million tax benefit related to an adjustment to the provisional amounts previously recognized related to the enactment of the [removed: U.S.] Tax Reform Act. |

| [removed: (b)] [added: (c)] | Net earnings for the year ended December 31, [removed: 2017] [added: 2017,] includes $44.7 million of costs related to the refinancing of our credit facilities and senior notes and a net tax charge of $53.5 million related to the [removed: U.S.] Tax Reform Act. |

| [removed: (c)] [added: (d)] | Net earnings for the year ended December 31, [removed: 2016] [added: 2016,] includes $84.4 million of losses related to our previously divested Systems Integration business. |

| [removed: (d)] [added: (e)] | Net earnings from continuing operations for the year ended December 31, [removed: 2015] [added: 2015,] includes $104.2 million of losses related to the divestitures of our Venezuelan operations and our majority stake in our Systems Integration business. |

[removed: (1)] The Company has [added: also] not restated [removed: 2014] [added: the Total assets for 2015] - [removed: 2017] [added: 2018] for the impact of the adoption of ASC [removed: 606] [added: Topic 842, "Leases"] as of January 1, [removed: 2018.][added: 2019.]

| (a) | Net earnings for the year ended December 31, 2019, includes a $31.4 million (net of tax) loss related to the divestitures of our business operations in Colombia and Turkey. |

(1) The Company has not restated 2015 - 2017 for the impact of the adoption of ASC Topic 606, "Revenue from Contracts with Customers" ("ASC 606") as of January 1, 2018, nor 2015 for the impact of the adoption of ASU 2016-09, "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" in the fourth quarter of 2016.

| (e) | Net earnings from continuing operations for the year ended December 31, 2014 includes an after-tax, non-cash inventory impairment charge of $18.7 million and a $9.1 million after-tax, non-cash charge related to the devaluation of the Venezuelan bolivar. |

The Company has also not restated 2015 or 2014 for the impact of the adoption of ASU 2016-09 in the fourth quarter of 2016, nor 2014 for the impact of the adoption of ASU 2015-17 and ASU 2015-03 as of December 31, 2015.

| (a) | The following Consolidated Financial Statements and Financial Statement Schedule and the report thereon of PricewaterhouseCoopers LLP dated February [removed: 19, 2019,] [added: 18, 2020,] are presented following Item 16 of this Annual Report on Form 10-K. |

Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016][added: 2017]

Consolidated Balance Sheets at December 31, [removed: 2018] [added: 2019] and [removed: 2017][added: 2018]

For the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016:][added: 2017:]

Schedule II – Valuation and Qualifying Accounts for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016][added: 2017]

| [removed: In] [added: In] millions, except per share [removed: amounts] [added: amounts] | | [removed: 2018] [added: 2019] | | | | | | | | | | | | | | |

| | | [removed: First Quarter] [added: First Quarter] | | | | [removed: Second Quarter] [added: Second Quarter] | | | | [removed: Third Quarter] [added: Third Quarter] | | | | [removed: Fourth Quarter] [added: Fourth Quarter] | | |

Net earnings from the fourth quarter of 2018 includes a net tax benefit of $18.6 million related to an adjustment to the provisional accounting related to the [removed: U.S.] Tax Reform Act.

| Net revenues | | $ | 655.0 | | | $ | 731.2 | | | $ | 748.3 | | | $ | 719.5 | |

| Cost of goods sold | | 378.1 | | | | 410.5 | | | | 412.8 | | | | 400.3 | | |

| Operating income | | 108.0 | | | | 145.7 | | | | 168.1 | | | | 143.3 | | |

| Net earnings | | 80.3 | | | | 109.4 | | | | 131.7 | | | | 80.7 | | |

| Net earnings attributable to Allegion plc | | 80.2 | | | | 109.3 | | | | 131.6 | | | | 80.7 | | |

| Basic | | $ | 0.85 | | | $ | 1.17 | | | $ | 1.41 | | | $ | 0.87 | |

| Diluted | | $ | 0.84 | | | $ | 1.16 | | | $ | 1.40 | | | $ | 0.86 | |

| | | 2018 | | | | | | | | | | | | | | |

| | | First Quarter | | | | Second Quarter | | | | Third Quarter | | | | Fourth Quarter | | |

Net earnings from the fourth quarter of 2019 includes a $31.4 million (net of tax) loss on the divestitures of our business operations in Colombia and Turkey.

| | | 2017 | | | | | | | | | | | | | | |

| Net revenues | | $ | 548.8 | | | $ | 627.0 | | | $ | 609.4 | | | $ | 623.0 | |

| Cost of goods sold | | 307.6 | | | | 345.7 | | | | 335.0 | | | | 347.0 | | |

| Operating income | | 99.5 | | | | 135.0 | | | | 127.1 | | | | 130.9 | | |

| Net earnings | | 68.7 | | | | 105.8 | | | | 90.1 | | | | 12.1 | | |

| Net earnings attributable to Allegion plc | | 68.4 | | | | 105.5 | | | | 89.8 | | | | 9.6 | | |

| Basic | | $ | 0.72 | | | $ | 1.11 | | | $ | 0.95 | | | $ | 0.10 | |

| Diluted | | $ | 0.71 | | | $ | 1.10 | | | $ | 0.94 | | | $ | 0.10 | |

Net earnings from the fourth quarter of 2017 includes a $41.3 million charge related to the refinancing of our senior notes and a net tax charge of $53.5 million related to the U.S. Tax Reform Act.

[removed: DISCLOSURE][added: DISCLOSURE]

| [removed: (a)] [added: (a)] | [removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures] [added: Procedures] |

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of December 31, [removed: 2018,] [added: 2019,] that the Company's disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act has been recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and that such information has been accumulated and communicated to the Company's management including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

| [removed: (b)] [added: (b)] | [removed: Management's] [added: Management's] Report on Internal Control Over Financial [removed: Reporting] [added: Reporting] |

Management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2018.][added: 2019.]

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in [removed: Internal] [added: *Internal] Control-Integrated Framework [removed: (2013).][added: (2013)*.]

We concluded that our internal control over financial reporting was effective as of December 31, [removed: 2018.][added: 2019.]

| [removed: (c)] [added: (c)] | [removed: Changes] [added: Changes] in Internal Control Over Financial [removed: Reporting] [added: Reporting] |

There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, [removed: 2018] [added: 2019] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company did implement changes to internal controls due to the adoption of ASC 842 effective January 1, 2019.

These changes include implementing a new lease accounting system and processes to evaluate and account for contracts under the new accounting standard.

There were no significant changes to the Company's internal control over financial reporting due to the adoption of this new standard.

As discussed in Item 7, we have completed six business acquisitions during 2018.

Because they were acquired by us in 2018, we have excluded these businesses, AD Systems, Door and Access Systems, Hammond, Isonas, QMI and TGP, from our assessment of internal control over financial reporting as of December 31, 2018.

These entities are wholly-owned subsidiaries whose total assets and total revenues represent approximately 3% and 6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2018.

We are currently integrating these entities into our compliance programs and internal control processes.

[removed: PART III][added: PART III]

The information regarding our executive officers is included in Part I under the caption "Executive Officers of [added: the] Registrant."

Election of Directors", [removed: "Section] [added: "Delinquent Section] 16(a) [removed: Beneficial Ownership Reporting Compliance"] [added: Reports"] and "Corporate Governance" in our Proxy Statement.

[removed: STOCKHOLDER MATTERS][added: STOCKHOLDER MATTERS]

[removed: PART IV][added: PART IV]

[removed: ALLEGION PLC][added: ALLEGION PLC]

[removed: INDEX] [added: INDEX] TO [removed: EXHIBITS][added: EXHIBITS]

[removed: (Item 15(a))][added: (Item 15(a))]

[removed: Description][added: Description]

| [removed: Exhibit Number] [added: Exhibit Number] | | [removed: Exhibit Description] [added: Exhibit Description] | | [removed: Method] [added: Method] of [removed: Filing] [added: Filing] |

| [2.1](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000031/exhibit21sda.htm) | | Separation and Distribution Agreement between Ingersoll-Rand plc and Allegion plc, dated November 29, 2013. | | Incorporated by reference to Exhibit 2.1 [removed: to] [added: of] the Company’s Form 8-K filed with the SEC on December 2, 2013 (File No. 001-35971). |

| [3.1](http://www.sec.gov/Archives/edgar/data/1579241/000157924116000072/amendedandrestatedmemorand.htm) | | Amended and Restated Memorandum and Articles of Association of Allegion plc. | | Incorporated by reference to Exhibit 3.1 [removed: to] [added: of] the Company’s Form 8-K filed with the SEC on June 13, 2016 (File No. 001-35971). |

| [4.1](http://www.sec.gov/Archives/edgar/data/1579241/000119312517300970/d461934dex41.htm) | | Indenture, dated as of October 2, 2017, among Allegion US Holding Company Inc., Allegion plc and Wells Fargo Bank, National Association. | | Incorporated by reference to Exhibit 4.1 of [removed: Allegion plc's Current Report on] [added: the Company's] Form 8-K filed October 2, 2017. |

| [4.2](http://www.sec.gov/Archives/edgar/data/1579241/000119312517300970/d461934dex42.htm) | | First Supplemental Indenture, dated as of October 2, 2017, among Allegion US Holding Company Inc., Allegion plc and Wells Fargo Bank, National Association. | | Incorporated by reference to Exhibit 4.2 of [removed: Allegion plc's Current Report on] [added: the Company's] Form 8-K filed October 2, 2017. |

| [4.3](http://www.sec.gov/Archives/edgar/data/1579241/000119312517300970/d461934dex42.htm) | | Form of Global Note representing the 3.200% Senior Notes due 2024. | | Incorporated by reference to Exhibit 4.3 of [removed: Allegion plc's Current Report on] [added: the Company's] Form 8-K filed October 2, 2017 (included in Exhibit 4.2). |

| [4.4](http://www.sec.gov/Archives/edgar/data/1579241/000119312517300970/d461934dex44.htm) | | Second Supplemental Indenture, dated as of October 2, 2017, among Allegion US Holding Company Inc., Allegion plc and Wells Fargo Bank, National Association. | | Incorporated by reference to Exhibit 4.4 of [removed: Allegion plc's Current Report on] [added: the Company's] Form 8-K filed October 2, 2017. |

| [4.5](http://www.sec.gov/Archives/edgar/data/1579241/000119312517300970/d461934dex44.htm) | | Form of Global Note representing the 3.550% Senior Notes due 2027. | | Incorporated by reference to Exhibit 4.5 of [removed: Allegion plc's Current Report on] [added: the Company's] Form 8-K filed October 2, 2017 (included in Exhibit 4.4). |

| [removed: [10.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit101formofseparation.htm)] [added: [10.1](http://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit101formofseparation.htm)] | | Form of Separation Agreement and Release. * | | [removed: Filed herewith.] [added: Incorporated by reference to Exhibit 10.1 of the Company’s Form 10-K filed with the SEC on February 19, 2019 (File No. 001-35971).] |

| [10.2](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000031/exhibit101taxmattersagreem.htm) | | Tax Matters Agreement between Ingersoll-Rand plc and Allegion plc. | | Incorporated by reference to Exhibit 10.1 [removed: to] [added: of] the Company’s Form 8-K filed with the SEC on December 2, 2013 (File No. 001-35971). |

| [10.3](http://www.sec.gov/Archives/edgar/data/1579241/000119312517286345/d399218dex101.htm) | | Credit Agreement, dated as of September 12, 2017. | | Incorporated by reference to Exhibit 10.1 of [removed: Allegion plc's Current Report on] [added: the Company's] Form 8-K filed September 15, 2017. |

| [10.4](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000031/exhibit102employeemattersa.htm) | | Employee Matters Agreement between Ingersoll-Rand plc and Allegion plc. | | Incorporated by reference to Exhibit 10.2 [removed: to] [added: of] the Company’s Form 8-K filed with the SEC on December 2, 2013 (File No. 001-35971). |

| [10.5](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a105allegion2013incentives.htm) | | 2013 Incentive Stock Plan. * | | Incorporated by reference to Exhibit 10.5 [removed: to] [added: of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [10.6](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a106executivedeferredcompe.htm) | | Executive Deferred Compensation Plan. * | | Incorporated by reference to Exhibit 10.6 [removed: to] [added: of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [removed: [10.7](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a107supplementalemployeesa.htm)] [added: [10.10](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1010supplementalpensionpl.htm)] | | Supplemental [removed: Employee Savings] [added: Pension] Plan. * | | Incorporated by reference to Exhibit [removed: 10.7 to] [added: 10.10 of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [10.8](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a108electedofficerssupplem.htm) | | Elected Officer Supplemental Program. * | | Incorporated by reference to Exhibit 10.8 [removed: to] [added: of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [10.9](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a109keymanagementsupplemen.htm) | | Key Management Supplemental Program. * | | Incorporated by reference to Exhibit 10.9 [removed: to] [added: of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [removed: [10.10](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1010supplementalpensionpl.htm)] [added: [10.11](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1011seniorexecutiveperfor.htm)] | | [removed: Supplemental Pension] [added: Senior Executive Performance] Plan. * | | Incorporated by reference to Exhibit [removed: 10.10 to] [added: 10.11 of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [removed: [10.11](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1011seniorexecutiveperfor.htm)] [added: [10.17](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1021formofallegionplcdeed.htm)] | | [removed: Senior Executive Performance Plan. *] [added: Form of Allegion plc Deed Poll Indemnity.] | | Incorporated by reference to Exhibit [removed: 10.11 to] [added: 10.21 of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [10.12](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1014petratisofferletter.htm) | | David D. Petratis Offer Letter, dated June 19, 2013. * | | Incorporated by reference to Exhibit 10.14 [removed: to] [added: of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [10.13](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1015shannonofferletter.htm) | | Patrick S. Shannon Offer Letter, dated April 9, 2013. * | | Incorporated by reference to Exhibit 10.15 [removed: to] [added: of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [10.14](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000019/a1016eckersleyofferletter.htm) | | Timothy P. Eckersley Offer Letter, dated October 3, 2013. * | | Incorporated by reference to Exhibit 10.16 [removed: to] [added: of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [10.15](http://www.sec.gov/Archives/edgar/data/1579241/000157924116000056/exhibit101luciamorettioffe.htm) | | Lucia V. Moretti, Offer Letter, dated February 19, 2014. * | | Incorporated by reference to Exhibit 10.1 [removed: to] [added: of] the Company's Form 10-K filed with the SEC on February 26, 2016 (File No. 001-35971). |

| [10.16](http://www.sec.gov/Archives/edgar/data/1579241/000157924117000009/exhibit10150jeffreybraunof.htm) | | Jeffrey N. Braun Offer Letter, dated June 13, 2014. * | | Incorporated by reference to Exhibit 10.15 [removed: to] [added: of] the Company's Form 10-K filed with the SEC on February 17, 2017 (File No. 001-35971). |

| [removed: [10.17](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1021formofallegionplcdeed.htm)] [added: [10.18](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1022formofallegionusholdi.htm)] | | Form of Allegion [removed: plc] [added: US Holding Company, Inc.] Deed Poll Indemnity. | | Incorporated by reference to Exhibit [removed: 10.21 to] [added: 10.22 of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [removed: [10.18](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1022formofallegionusholdi.htm)] [added: [10.19](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1023formofallegionirishho.htm)] | | Form of Allegion [removed: US] [added: Irish] Holding [removed: Company, Inc.] [added: Company Limited] Deed Poll Indemnity. | | Incorporated by reference to Exhibit [removed: 10.22 to] [added: 10.23 of] the Company’s Registration Statement on Form 10 filed with the SEC on June 17, 2013, as amended (File No. 001-35971). |

| [removed: [10.19](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1023formofallegionirishho.htm)] [added: [10.20](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit101annualincentivep.htm)] | | [removed: Form of Allegion Irish Holding Company Limited Deed Poll Indemnity.] [added: Annual Incentive Plan. *] | | Incorporated by reference to Exhibit [removed: 10.23 to] [added: 10.1 of] the [removed: Company’s Registration Statement on] [added: Company's] Form [removed: 10] [added: 10-K] filed with the SEC on [removed: June 17, 2013, as amended] [added: March 10, 2014] (File No. 001-35971). |

| [removed: [10.20](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit101annualincentivep.htm)] [added: [10.21](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit102changeinctrlseve.htm)] | | [removed: Annual Incentive] [added: Change in Control Severance] Plan. * | | Incorporated by reference to Exhibit [removed: 10.1 to] [added: 10.2 of] the Company's Form 10-K filed with the SEC on March 10, 2014 (File No. 001-35971). |

| [removed: [10.21](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit102changeinctrlseve.htm)] [added: [10.25](http://www.sec.gov/Archives/edgar/data/1579241/000157924116000052/allegionspecialrsuagreement.htm)] | | [removed: Change in Control Severance Plan.] [added: Form of Special Restricted Stock Unit Award Agreement.] * | | Incorporated by reference to Exhibit [removed: 10.2 to] [added: 10.4 of] the Company's Form [removed: 10-K] [added: 8-K] filed with the SEC on [removed: March 10, 2014] [added: February 9, 2016] (File No. 001-35971). |

| [removed: [10.22](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit1022formofrestricte.htm)] [added: [10.22](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit1022formofrestr.htm)] | | Form of Restricted Stock Unit Award Agreement. * | | Filed herewith. |

| [removed: [10.23](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit1023formofstockopti.htm)] [added: [10.23](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit1023formofstock.htm)] | | Form of Stock Option Award Agreement. * | | Filed herewith. |

| [removed: [10.24](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit1024formofperforman.htm)] [added: [10.24](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit1024formofperfo.htm)] | | Form of Performance [removed: Share] [added: Stock] Unit Award Agreement. * | | Filed herewith. |

| [removed: [10.25](http://www.sec.gov/Archives/edgar/data/1579241/000157924116000052/allegionspecialrsuagreement.htm)] [added: [10.26](http://www.sec.gov/Archives/edgar/data/1579241/000157924115000013/exhibit101formofnon-employ.htm)] | | Form of [removed: Special] [added: Non-Employee Director] Restricted Stock Unit Award Agreement. * | | Incorporated by reference to Exhibit [removed: 10.4 to] [added: 10.1 of] the Company's Form [removed: 8-K] [added: 10-Q] filed with the SEC on [removed: February 9, 2016] [added: April 30, 2015] (File No. 001-35971). |

| [10.27](http://www.sec.gov/Archives/edgar/data/1579241/000157924115000033/exhibit101simonsvosssharep.htm) | | Share Purchase Agreement dated June 26, 2015 between SimonsVoss Luxco S.à r.l., SimonsVoss Co-Invest GmbH & Co. KG, Mr Frank Rövekamp and Allegion Luxembourg Holding & Financing S.à r.l. | | Incorporated by reference to Exhibit 10.1 [removed: to] [added: of] the Company's Form 10-Q filed with the SEC on July 30, 2015 (File No. 001-35971). |

| [removed: [21.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit2112018subsidiaries.htm)] [added: [21.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit2112019subsidia.htm)] | | List of subsidiaries of Allegion plc. | | Filed herewith. |

| [removed: [23.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit2312018consentofind.htm)] [added: [23.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit2312019consento.htm)] | | Consent of Independent Registered Public Accounting Firm. | | Filed herewith. |

| [4.6](http://www.sec.gov/Archives/edgar/data/1579241/000119312519257441/d794750dex42.htm) | | Third Supplemental Indenture, dated as of September 27, 2019, among Allegion plc, Allegion US Holding Company Inc. and Wells Fargo Bank, National Association. | | Incorporated by reference to Exhibit 4.2 of the Company’s Form 8-K filed September 27, 2019. |

| [4.7](http://www.sec.gov/Archives/edgar/data/1579241/000119312519257441/d794750dex42.htm) | | Form of Global Note representing the 3.500% Senior Notes due 2029. | | Incorporated by reference to Exhibit 4.3 of the Company's Form 8-K filed September 27, 2019 (included in Exhibit 4.2). |

| [4.8](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit48descriptionof.htm) | | Description of the Registrant’s Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. | | Filed herewith. |

| [10.7](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit107supplemental.htm) | | Supplemental Employee Savings Plan. * | | Filed herewith. |

| | | | | |

| 101.INS | | XBRL Instance Document. | | The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |

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| 101.SCH | | XBRL Taxonomy Extension Schema Document. | | Filed herewith. |

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| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. | | Filed herewith. |

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| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. | | Filed herewith. |

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| 101.LAB | | XBRL Taxonomy Extension Labels Linkbase Document. | | Filed herewith. |

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| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. | | Filed herewith. |

| --- | --- | --- | --- | --- |

| [10.26](http://www.sec.gov/Archives/edgar/data/1579241/000157924115000013/exhibit101formofnon-employ.htm) | | Form of Non-Employee Director Restricted Stock Unit Award Agreement. * | | Incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q filed with the SEC on April 30, 2015 (File No. 001-35971). |

| 101 | | The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Comprehensive Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Statements of Equity and (v) Notes to Consolidated Financial Statements. | | Filed herewith. |

[removed: SIGNATURES][added: SIGNATURES]

[removed: ALLEGION PLC][added: ALLEGION PLC]

| Date: | | February [removed: 19, 2019] [added: 18, 2020] |