Allegion (ALLE) 10-K risk factor changes: FY2021 vs FY2020

Our [removed: normal] business operations have been, and are expected to continue to be, adversely impacted by the global COVID-19 [removed: pandemic.][added: pandemic.]

The COVID-19 [removed: outbreak, which was declared by the WHO as a] pandemic [removed: in March 2020,] and preventative measures taken to contain [added: the spread of COVID-19] or mitigate this pandemic have caused, and are continuing to cause, business slowdowns or shutdowns in various [removed: regions] [added: countries] around the world.

[removed: Actions] [added: Numerous actions] taken to help limit the spread of COVID-19, such as [removed: general] [added: stay-at-home orders, quarantines, increased border controls and closures, business shutdowns, and other] public health [removed: decrees or other] [added: and] government mandates [removed: to] [added: that] restrict business activities and [removed: travel, avoid large gatherings or to self-quarantine,] [added: travel] have [removed: impacted] [added: impacted,] and will likely continue to impact our ability to carry out business as usual, including the temporary suspension of some of our operations, shortages in materials, [removed: reduction] [added: parts and components, fluctuations] in customer demand, [removed: increased absenteeism,] costs associated with operational changes and an extended period of remote work arrangements for some of our employees which could increase cybersecurity risks and other operational risks.

Conversely, as [added: some] governments ease their restrictions and social interactions increase prior to the [removed: development and] [added: widespread global] distribution [added: and adoption] of [removed: an] effective [removed: vaccine] [added: vaccines] or treatments for COVID-19, [added: and as the COVID-19 virus mutates into more contagious or severe variants,] preventative and precautionary measures may not be sufficient to mitigate the risk of increased infection and could result in increased illness among our employees, business partners and others, and lead to further business interruption.

In addition, [added: our operations, as well as] a significant number of our customers, suppliers, vendors and other business partners have [removed: been] [added: been, and continue to be,] adversely affected by the COVID-19 pandemic.

Despite our [added: best] efforts to manage and mitigate [removed: these impacts] [added: the negative effects of the COVID-19 pandemic] to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of this pandemic, [removed: third-party actions taken to contain its spread and mitigate its public health effects,] the [removed: development, distribution and acceptance of an effective vaccine and the pace of global economic recovery following containment of the spread.]

Further, [added: to the extent] our management is focused on mitigating the impacts of [added: the] COVID-19 [added: pandemic] which has required, and will continue to require, a large investment of time and resources, [removed: which may divert] [added: our] attention and resources [added: may be diverted] from other business matters.

The loss or material reduction of business, [added: either due to a reduction in demand from one or more of our significant customers, or our inability to timely meet] the [added: elevated level of customer demand for various reasons, the] lack of success of sales initiatives or changes in customer preferences or loyalties for our products related to any such significant customer could have a material adverse impact on our business.

Additionally, as end-users have continued to adopt newer technologies in their facilities and homes, accelerated by the increasing adoption of IoT technologies, [removed: growth] [added: our industry is seeing a shift] in [removed: sales of electronic] [added: demand from mechanical] security products [removed: and solutions are expected] to [removed: outperform growth in sales of mechanical] [added: electronic] security [removed: products.][added: products and solutions, including connected devices.]

Electronic security products and solutions are increasingly more sophisticated and technologically complex than the mechanical security products we [removed: sell,] [added: sell] and have an increased risk of [removed: design] [added: design, cybersecurity] or manufacturing defects, which could lead to product liability claims, recalls, product replacements or modifications, write-offs [added: of inventory or other assets and significant warranty and other expenses.]

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

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

[added: Among other negative effects,] our investment in new business opportunities may exceed the returns we realize.

If we are unable to successfully manage and implement [removed: these] [added: restructuring] and other organizational changes, we may not achieve or sustain the expected growth or cost savings benefits of these activities or do so within the expected timeframe.

These effects could recur in connection with future acquisitions and other organizational changes and our [removed: Net revenues and other] results of operations could be negatively affected.

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

We procure certain products, [added: including raw materials and other commodities, including steel, zinc, brass and other non-ferrous metals, as well as parts,] components [added: (including electronic components)] and logistical services from supplier partners located throughout the world.

If we are unable to effectively manage these relationships, or if these third parties experience delays, disruptions, [added: shortages of materials, labor, electronic and other components,] capacity constraints, regulatory issues or quality control problems in their [removed: operations] [added: operations, freight delays and other supply chain constraints and disruptions,] or otherwise fail to meet our future requirements for timely delivery, our ability to ship and deliver certain of our products to our customers could be impaired and our business could be harmed.

In particular, the ultimate extent of the impact of any epidemic, pandemic or other global health crisis on our business, financial condition and results of operations will depend on future developments which are highly uncertain and cannot be predicted, [added: including new information that may emerge concerning the duration and severity of such epidemic, pandemic or other global health crisis, actions taken to contain or prevent their further spread and the pace of global economic recovery following containment of the spread.]

There is no assurance that [removed: any] newly implemented IT Systems will improve our current systems, improve our operations or yield the expected returns on the investments.

In addition, the implementation of new IT Systems may [added: be more difficult, costly or time consuming than expected and] cause disruptions in our operations and, if not properly implemented and maintained, negatively impact our business.

We currently rely on third-party [removed: vendors] [added: service providers] 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 results.

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 IoT, in the [removed: various jurisdictions in which we operate, and we must understand and comply with such laws and regulations while ensuring our data is secure.]

We must therefore continue to effectively recruit, retain and motivate [removed: key management, sales and other] highly qualified, skilled and diverse personnel to maintain our current business and support our projected growth.

A shortage of these [removed: key] employees for various reasons, including [added: intense competition for skilled employees, labor shortages, increased labor costs, candidates’ preference to work remotely,] changes in laws and policies regarding immigration and work authorizations in jurisdictions where we have operations, [removed: might] [added: or any government or public health mandates, such as vaccine mandates, that may result in workforce attrition and difficulty with recruiting, may] jeopardize our ability to grow and expand our business.

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

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

These risks could increase our cost of doing business in the U.S. and internationally, increase our counterparty risk, disrupt our operations, disrupt the ability of suppliers and customers to fulfill their obligations, increase our effective tax rate, increase the cost of our products, limit our ability to sell products in certain markets, reduce our operating margin, reduce cash [removed: flow and] [added: flows and/or] negatively impact our ability to compete.

[removed: See "Management’s] [added: Management’s] Discussion and Analysis of Financial Condition and Results of Operations [removed: -] [added: –] Quantitative and Qualitative [removed: Disclosure] [added: Disclosures] About Market Risk."

Approximately 30% of our [removed: 2020] [added: 2021] 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.

We do not hedge against all [removed: of] our currency exposure and therefore, our business will continue to be susceptible to currency fluctuations.

We do not currently use financial derivatives to hedge against [removed: this volatility;] [added: volatility in commodity prices;] however, we utilize firm purchase [removed: commitments] [added: commitments, where possible,] to [added: help] mitigate risk.

The pricing of some [removed: commodities] [added: materials, parts and components] we use is based on market prices.

At December 31, [removed: 2020,] [added: 2021,] the net carrying value of our goodwill and other indefinite-lived intangible assets totaled approximately [removed: $819.0] [added: $803.8] million and [removed: $118.3] [added: $113.9] million, respectively.

Limitations on the ability of customers, suppliers or financial counterparties to access credit could lead to insolvencies of key suppliers and customers, limit or prevent [added: customers from obtaining credit to finance purchases of our products and services and cause delays in the delivery of key products from suppliers.]

We have approximately [removed: $1.4] [added: $1.45] billion of outstanding indebtedness at December 31, [removed: 2020.][added: 2021.]

In addition, we have a senior unsecured revolving credit facility (the [removed: "Revolving] [added: "2021 Revolving] Facility") that permits borrowings of up to an additional $500 million.

Additionally, at December 31, [removed: 2020,] [added: 2021,] our borrowings included a variable rate term loan facility [removed: indexed to LIBOR] (the [removed: "Term] [added: "2021 Term] Facility", and together with the [added: 2021] Revolving Facility, the [removed: "Credit] [added: "2021 Credit] Facilities") with an outstanding balance of [removed: $238.8] [added: $250] million, which exposes us to variable interest rate risk.

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 under our [added: 2021] Revolving Facility.

If [removed: LIBOR or other applicable] [added: variable] base rates under our [added: 2021] Credit Facilities increase in the future, our Interest expense could increase.

We are unable to predict the full extent to which the pandemic and related impacts, including macroeconomic impacts and the pace of global economic recovery, will continue to adversely impact our business, results of operations and financial condition.

In particular, shortages in commodities and materials, including shortages and reductions in allocations of electronic and other components from key suppliers, labor shortages and elevated levels of employee absenteeism, freight delays and other supply chain constraints and disruptions have significantly delayed or disrupted, and may continue to adversely impact, both our suppliers’ and our ability to manufacture and deliver products to our customers.

We have also experienced a significant increase in commodity, parts and material component inflation in 2021, as well as inflation in other costs, such as packaging, freight, labor and energy prices.

Continued supply chain disruptions and delays, as well as continued heightened inflation, could lead to continued periodic production interruptions and other inefficiencies that could negatively impact our productivity, margin performance and our results of operations.

Further, we have experienced increased labor shortages at some of our production and distribution facilities.

While we have historically experienced some level of ordinary course turnover of employees, the COVID-19 pandemic and resulting impacts have exacerbated labor shortages and increased employee turnover.

A number of factors have had and may continue to have adverse effects on the labor force available to us, including reduced employment pools, increased competition for manufacturing employees, any unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices and immigration.

It is also uncertain to what extent any COVID-19 vaccine mandates, if imposed or implemented, may result in further workforce attrition.

Labor shortages and increased turnover rates within our Company have led to and could in the future lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees and could negatively affect our ability to efficiently operate our production facilities or otherwise operate at full capacity.

An overall or prolonged labor shortage, lack of skilled labor, increased turnover or labor cost inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

emergence and spread of more contagious or severe variants of the COVID-19 virus, the continuing prevalence of severe, unconstrained or escalating rates of infection in certain countries and regions, the availability, adoption and efficacy of treatments and vaccines, future actions taken by public health and governmental authorities, including any unintended consequences of such actions, and the pace of global economic recovery.

Further, there may be difficulties in evaluating potential acquisitions, including the possibility that our due diligence may not reveal or fully assess valuation issues, potential liabilities or other acquisition risks.

subsequent to, our investment.

Further, while we maintain insurance coverage that may, subject to policy terms and exclusions, cover certain aspects of our cyber risks, such insurance coverage may be insufficient to cover our losses or all types of claims that may arise in the continually evolving area of cyber risk.

various jurisdictions in which we operate, and we must understand and comply with such laws and regulations while ensuring our data is secure.

Our ability to successfully grow and expand our business is dependent upon our ability to recruit and retain a workforce with the skills necessary to develop, manufacture and deliver the products and services desired by our customers.

We need highly skilled and qualified personnel in multiple areas, including engineering, sales, manufacturing, information technology, cybersecurity, business development, strategy and management.

Additionally, because not all of our supply arrangements provide for guaranteed supply and some key parts and components may be available only from a single supplier or a limited group of suppliers, we are also subject to supply and pricing risks, which could negatively impact our margin performance and results of operations.

Increased prices and inflation could negatively impact our margin performance and our financial results.

Increased inflation, including rising prices for raw materials, parts and components, freight, packaging, labor and energy increases the costs to manufacture and distribute our products and services, and we may be unable to pass these costs on to our customers.

Additionally, we are exposed to fluctuations in other costs such as packaging, freight, labor and energy prices.

If inflation in these costs increases beyond our ability to control for them through measures such as implementing operating efficiencies, we

may not be able to increase prices to sufficiently offset the effect of various cost increases without negatively impacting customer demand, thereby negatively impacting our margin performance and results of operations.

- Economic downturns;

- Social and political instability, civil strife and other geographical uncertainty;

- Difficulty in transporting materials, components and products.

See "Part II, Item 7A.

While we cannot predict the impact that this pandemic will continue to have on our customers, suppliers, vendors and other business partners and each of their financial conditions, any material adverse effects on these parties could adversely impact us.

The global economic uncertainty due to this pandemic has also negatively impacted, and may continue to adversely affect, our results of operations and financial condition.

For example, this pandemic has led to changes in commercial real estate occupancy, increases in work-from-home arrangements, constraints on government and institutional budgets and an uncertain business climate, which have all contributed to declines and delays in new construction and renovation activity during 2020, including in many of the commercial and institutional construction markets we serve.

These challenges may be significant and continue beyond the COVID-19 pandemic, and the rate and sustainability of future growth remains uncertain, as the long-term impacts of the pandemic and related market disruption are not yet known.

Additionally, as a result of the global economic disruption and uncertainty due to the COVID-19 pandemic, interim impairment tests were performed on select goodwill and indefinite-lived trade name assets in the first quarter of 2020, resulting in impairment charges of approximately $96.3 million.

If the on-going economic impact of the COVID-19 pandemic proves to be more severe than estimated, the economic recovery takes longer to materialize or does not materialize as strongly as anticipated, this could result in further impairment charges in the future.

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of inventory or other assets and significant warranty and other expenses.

Among other negative effects,

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For example, we recently announced that effective January 1, 2021, our EMEA and Asia Pacific operating segments would be combined to form the new Allegion International segment.

The loss or disruption of such manufacturing and supply arrangements could interrupt product supply and, if not effectively managed and remedied, have an adverse impact on our business.

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including new information that may emerge concerning the duration and severity of such epidemic, pandemic or other global health crisis, actions taken to contain or prevent their further spread and the pace of global economic recovery following containment of the spread.

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Our ability to successfully grow and expand our business depends on the contributions and abilities of our employees and key management, including, for example, the ability of our sales force to adapt to any changes made in the sales organization and achieve adequate customer coverage.

- Economic downturns and social and political instability;

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Commodity shortages, price increases and higher energy prices could negatively affect our financial results.

We rely on suppliers to secure commodities, including steel, zinc, brass and other non-ferrous metals, required for the manufacture of our products.

A disruption of deliveries from our suppliers or decreased availability of commodities could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs.

We believe that available sources of supply will generally be sufficient for our needs for the foreseeable future.

Nonetheless, the unavailability of some commodities could have a material adverse impact on our business.

Volatility in the prices of these commodities could increase the costs of our products and services, and we may not be able to pass on these costs to our customers.

Additionally, we are exposed to fluctuations in energy prices due to the instability of current market prices.

Higher energy costs increase our operating costs and the cost of shipping our products and supplying services to our customers around the world.

Consequently, sharp price increases, the imposition of taxes or an interruption of supply could cause us to lose the ability to effectively manage the risk of rising energy prices and may have an adverse impact on our results of operations and cash flows.

Specifically, an unanticipated deterioration in Net revenues and/or operating margins generated by our newly created Allegion International segment could trigger future impairments.

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customers from obtaining credit to finance purchases of our products and services and cause delays in the delivery of key products from suppliers.

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.

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releases of, or exposures to, hazardous substances, may exceed our estimates.

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be approved.

We are a leading global provider of security products and solutions operating in [removed: three geographic regions: Americas, EMEA] [added: two segments: Allegion Americas] and [removed: Asia Pacific.][added: Allegion International.]

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

The challenges and uncertainties related to the COVID-19 pandemic and its potential impact on our business, results of operations, financial condition and cash flows, as well as [removed: a number of] other challenges and uncertainties that could affect our businesses are described further under [removed: Part] [added: "Part] I, Item 1A.

[removed: 2020] [added: 2021] and [removed: 2019] [added: 2020] Significant Events

Yonomi has been integrated into our [added: Allegion] Americas segment.

[removed: Impairment] [added: 2020 Impairment] of Goodwill and Intangible Assets

As a result of the global economic disruption and uncertainty due to the COVID-19 pandemic, we performed interim impairment tests on the goodwill balances of our [added: former] EMEA and Asia Pacific reporting units, as well as on certain indefinite-lived trade name assets in these two regions, during the first quarter of 2020.

[removed: As discussed in Notes 5 and 6 to the Consolidated Financial Statements, the] [added: The] results of these interim impairment tests indicated that the estimated fair value of our [added: former] Asia Pacific reporting unit and three indefinite-lived trade names were impaired.

Consequently, goodwill and intangible asset impairment charges totaling $96.3 million were [removed: recorded.][added: recorded during the first quarter of 2020.]

Further [added: intangible asset] impairment charges [added: of $5.4 million] were recorded in [added: 2020 in] our [added: former] Asia Pacific [removed: segment during the year ended December 31, 2020, including $2.6 million related] [added: segment, relating] to supply chain disruptions that reduced a brand's expected future cash flows and [removed: $2.8 million related to] declines in volumes and pricing pressure for a separate subsidiary in the region.

[removed: Loss] [added: | Loss] on [removed: Assets Held] [added: assets held] for [removed: Sale][added: sale | | | | | | — | | | | | | — | | % | | | | 37.9 | | | | | | 1.4 | | % | | | | | | | | | | | | |]

[removed: 2020] [added: 2021] Dividends and Share Repurchases

We paid quarterly dividends of [removed: $0.32] [added: $0.36] per ordinary share to shareholders on record as of March 17, [removed: 2020,] [added: 2021,] June 16, [removed: 2020,] [added: 2021,] September 16, [removed: 2020,] [added: 2021,] and December [removed: 16, 2020.][added: 20, 2021.]

We paid a total of [removed: $117.3] [added: $129.0] million in cash for dividends to ordinary shareholders and repurchased approximately [removed: 1.9] [added: 3.3] million shares for approximately [removed: $208.8] [added: $412.8] million during the year ended December 31, [removed: 2020.][added: 2021.]

[removed: Other Financing Activities][added: Financing activities]

[removed: Effective] [added: As previously announced, effective] January 1, 2021, we [removed: have] combined our [added: previous operations in] EMEA and Asia Pacific [removed: operations] into a new segment named Allegion International, in addition to renaming our Americas segment "Allegion Americas".

| Dollar amounts in millions, except per share amounts | | | | | | [removed: 2020] [added: 2021] | | | | | | % of Net revenues | | | | | | [removed: 2019] [added: 2020] | | | | | | % of Net revenues | | | | | | | | | | | | | | |

| Net revenues | | | | | | $ | [removed: 2,719.9] [added: 2,867.4] | | | | | | | | | | | $ | [removed: 2,854.0] [added: 2,719.9] | | | | | | | | | | | | | | | | | | | |

| Cost of goods sold | | | | | | [removed: 1,541.1] [added: 1,662.5] | | | | | | [removed: 56.7] [added: 58.0] | | % | | | | [removed: 1,601.7] [added: 1,541.1] | | | | | | [removed: 56.1] [added: 56.7] | | % | | | | | | | | | | | | |

| Selling and administrative expenses | | | | | | [removed: 635.7] [added: 674.7] | | | | | | [removed: 23.4] [added: 23.5] | | % | | | | [removed: 681.3] [added: 635.7] | | | | | | [removed: 23.9] [added: 23.4] | | % | | | | | | | | | | | | |

| Impairment of goodwill and intangible assets | | | | | | [removed: 101.7] [added: —] | | | | | | [removed: 3.7] [added: —] | | % | | | | [removed: 5.9] [added: 101.7] | | | | | | [removed: 0.2] [added: 3.7] | | % | | | | | | | | | | | | |

| Loss on assets held for sale | | | [removed: | | |] 37.9 | | | | | | 1.4 | | % | [removed: | | | — | | | | | | — | | % | | | | | | | | | | | | |]

| Operating income | | | | | | [removed: 403.5] [added: 530.2] | | | | | | [removed: 14.8] [added: 18.5] | | % | | | | [removed: 565.1] [added: 403.5] | | | | | | [removed: 19.8] [added: 14.8] | | % | | | | | | | | | | | | |

| Interest expense | | | | | | [removed: 51.1] [added: 50.2] | | | | | | | | | | | | [removed: 56.0] [added: 51.1] | | | | | | | | | | | | | | | | | | | | |

| Other [removed: (income) expense,] [added: income,] net | | | | | | [removed: (13.0)] [added: (44.0)] | | | | | | | | | | | | [removed: 3.8] [added: (13.0)] | | | | | | | | | | | | | | | | | | | | |

| Earnings before income taxes | | | | | | [removed: 365.4] [added: 524.0] | | | | | | | | | | | | [removed: 475.2] [added: 365.4] | | | | | | | | | | | | | | | | | | | | |

| Provision for income taxes | | | | | | [removed: 50.9] [added: 40.7] | | | | | | | | | | | | [removed: 73.1] [added: 50.9] | | | | | | | | | | | | | | | | | | | | |

| Net earnings | | | | | | [removed: 314.5] [added: 483.3] | | | | | | | | | | | | [removed: 402.1] [added: 314.5] | | | | | | | | | | | | | | | | | | | | |

| Less: Net earnings attributable to noncontrolling interests | | | | | | [removed: 0.2] [added: 0.3] | | | | | | | | | | | | [removed: 0.3] [added: 0.2] | | | | | | | | | | | | | | | | | | | | |

| Net earnings attributable to Allegion plc | | | | | | $ | [removed: 314.3] [added: 483.0] | | | | | | | | | | | $ | [removed: 401.8] [added: 314.3] | | | | | | | | | | | | | | | | | | | |

| Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders: | | | | | | $ | [removed: 3.39] [added: 5.34] | | | | | | | | | | | $ | [removed: 4.26] [added: 3.39] | | | | | | | | | | | | | | | | | | | |

For a discussion of our results of operations for the year ended December 31, [removed: 2019,] [added: 2020,] compared to the year ended December 31, [removed: 2018,] [added: 2019,] see “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our [removed: 2019] [added: 2020] Annual Report on Form 10-K filed with the SEC on February [removed: 18, 2020.][added: 16, 2021.]

Net revenues for the year ended December 31, [removed: 2020, decreased] [added: 2021, increased] by [removed: 4.7%,] [added: 5.4%,] or [removed: $134.1] [added: $147.5] million, compared to the same period in [removed: 2019,] [added: 2020,] due to the following:

| [removed: Divestitures] [added: Acquisitions/ divestitures] | | | [removed: (0.3)] [added: 4.4] | | [added: | | | | 0.3 | |] % |

These decreases were [removed: slightly] [added: partially] offset by [removed: improved pricing] [added: a year-over-year decrease in restructuring] and [added: acquisition expenses and] the impact of foreign currency exchange rate movements.

For the year ended December 31, [removed: 2020,] [added: 2021,] Cost of goods sold as a percentage of Net revenues increased to [removed: 56.7%] [added: 58.0%] from [removed: 56.1%,] [added: 56.7%,] due to the following:

| Inflation in excess of pricing and productivity | | | [removed: 0.2] [added: 1.2] | | % |

| Volume / product mix | | | [removed: 0.8] [added: 0.7] | | % |

| [removed: Divestitures] [added: Acquisitions / divestitures] | | | (0.1) | | % |

COVID-19 Pandemic and Industry Trends and Outlook

The COVID-19 pandemic and uneven economic recovery continue to create volatility in the global economy and on our business.

Throughout 2021, we experienced strong and accelerating demand for our products and services in most of the markets we serve.

However, especially in the second half of the year, we also experienced an acceleration of several macroeconomic challenges that have negatively impacted our ability to meet this robust demand, such as supply chain disruptions and delays; shortages in materials, including reductions in allocations of electronic components and other parts from key suppliers; labor shortages and elevated levels of employee absenteeism due to the on-going COVID-19 pandemic; and increased commodity, material component, packaging, freight and labor inflation.

These challenges have also created both operational and logistical inefficiencies, which have led to periodic production interruptions and an increased level of inventory, which have negatively impacted our productivity, margin performance, working capital and cash flows.

While these challenges are impacting all our global businesses, they had a more pronounced impact on our Allegion Americas operating segment in 2021.

We currently anticipate these challenges to continue in 2022 and are rapidly adapting to navigate them, expecting to be well-positioned to convert demand to revenue as conditions normalize.

We remain focused on providing exceptional service to our customers; implementing measures to mitigate operational and distribution inefficiencies and reduce our record high level of backlogs, such as aligning resources to re-engineer product designs and configurations to accept alternate electronic components and developing alternate sources of supply; implementing pricing initiatives to address rising production, material, freight and labor costs; and investing in business initiatives to drive future growth.

We will continue to explore various options to control costs and enhance financial performance, while minimizing disruption to customers and the overall business; however, the full impacts of the pandemic and the on-going macroeconomic challenges on our business, results of operations, financial condition and cash flows remain uncertain.

The pandemic and related macroeconomic challenges noted above will likely continue to impact us in numerous and evolving ways that we may not be able to accurately predict.

The full impact of the pandemic will continue to depend on future developments such as the continued spread and duration of the pandemic, the emergence of future variant strains of the COVID-19 virus which may be more contagious or severe, the availability and distribution of effective medical treatments and vaccines, vaccination rates, as well as any government-imposed restrictions or mandates.

Further, any new or strengthened government-imposed restrictions or mandates on the conduct of business and travel could adversely impact our ability to carry out business as usual in certain markets.

Risk Factors".

On November 18, 2021, we entered into a new $750.0 million unsecured credit agreement, consisting of the $250.0 million 2021 Term Facility and the $500.0 million 2021 Revolving Facility.

The initial proceeds of $250.0 million from the 2021 Term Facility were primarily used to repay in full our previously outstanding unsecured Term Facility.

All obligations under the previously outstanding Credit Agreement were satisfied, all commitments thereunder were terminated and all guarantees that had been granted in connection therewith were released.

In July 2021, we acquired certain assets of Astrum Benelux B.V. ("Astrum Benelux") and 100% of the equity of WorkforceIT B.V. in the Netherlands ("WorkforceIT"), both of which were previously held under common control and offer workforce management technology products and solutions in the Benelux region of Europe.

Both Workforce IT and the assets acquired from Astrum Benelux have been integrated into our Allegion International segment.

QMI Divestiture

On February 28, 2021, we completed our divestiture of QMI.

The impacts of this divestiture on our results of operations for the year ended December 31, 2021, are reflected in the discussions below.

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

| Pricing | | | 1.8 | | % |

| Volume | | | 2.7 | | % |

| Acquisitions / divestitures | | | (0.5) | | % |

| Total | | | 5.4 | | % |

The increase in Net revenues was principally driven by higher volumes, improved pricing and the impact of foreign currency exchange rate movements.

These increases were slightly offset by the divestiture of our QMI business in February 2021.

The increase in sales volumes for the year was principally realized during the second quarter, given the muted demand and temporary plant shut-downs we experienced in the second quarter of 2020 due to the COVID-19 pandemic.

However, in addition to the comparative impact of the rebound in demand in the third and fourth quarters of 2020, the supply chain disruptions and delays and shortages in materials, components and labor discussed above resulted in lower volumes during the second half of 2021 within the Allegion Americas segment.

While these challenges are expected to continue into 2022, given the current elevated demand we are experiencing, we expect volume growth to resume as conditions improve.

| Total | | | 1.3 | | % |

Inflation in excess of pricing and productivity reflects the impacts of increased commodity, material component, packaging, freight and labor inflation, as well as inefficiencies caused by the global supply chain challenges and shortages of materials, components and labor, as discussed above.

| Total | | | 0.1 | | % |

These increases were partially offset by favorable volume leverage, a year-over-year decrease in restructuring and acquisition expenses and the beneficial impact of our QMI divestiture on current year operations.

Inflation in excess of productivity reflects increases to variable compensation and a return to a more normalized level of other discretionary business spending that was reduced or delayed in the prior year as a result of the COVID-19 pandemic.

The increased investment spending similarly reflects a return to a full-year focus of investing in business initiatives to drive future growth and realize our vision of seamless access with a focus on software and connected products.

The increase also reflects that certain of these investments were temporarily frozen or delayed in 2020 due to the economic uncertainty surrounding the COVID-19 pandemic.

| Investment spending | | | (19.4) | | | | | | (0.7) | | % |

| December 31, 2021 | | | $ | 530.2 | | | | | 18.5 | | % |

COVID-19 Pandemic

In March 2020, a global pandemic was declared by the WHO related to COVID-19.

The impacts of the COVID-19 pandemic negatively affected the global economy, disrupted supply chains and created significant volatility and disruption in financial markets.

The outbreak and spread of COVID-19 also resulted in a substantial curtailment of business activities worldwide, including the major geographic markets we serve.

As part of the efforts to contain the spread of COVID-19, federal, state and local governments have imposed various restrictions on the conduct of business and travel, such as stay-at-home orders, travel restrictions and quarantines.

These measures, as well as changes in employee health and safety concerns and consumer spending patterns, trends and preferences, have led to widespread business closures and lower demand for our products, with the most pronounced negative impacts of these measures on our results of operations occurring during the second quarter of 2020.

Further, changes in commercial real estate occupancy, constraints on government and institutional budgets and the uncertain business climate have led to declines and delays in new construction activity and discretionary projects, including in many of the commercial and institutional construction markets we serve.

As the pandemic and resulting economic challenges have adversely impacted, and will likely continue to adversely impact us, we continue to closely monitor their effects on all aspects of our business and the markets in which we operate.

Throughout the pandemic, our primary focus has been, and continues to be, the health and safety of employees, our business continuity plan, meeting the evolving needs of our customers and the well-being of the many communities around the world in which we operate.

During the early months of the pandemic, we experienced temporary production shut-downs due either to government mandate or to help ensure employee safety, most notably in Italy and the Baja region of Mexico.

However, the vast majority of our manufacturing facilities have remained open and operational throughout 2020, in part due to the numerous health and safety measures we adopted to promote the health and safety of our workforce and because many of our global operations have been deemed essential businesses.

All of our global production and assembly facilities were operational as of December 31, 2020, and while we currently expect they will remain operational for the foreseeable future, such expectation is dependent upon future governmental actions, demand for our products, the stability of our global supply chain and our ability to continue to operate in a safe manner.

We remain focused on business continuity and ensuring our facilities remain operational where safe and appropriate to do so.

We will also continue to serve our customers when needed through our channel partners or inventory on hand.

To the extent any additional temporary closures or adjustments to production are necessary, such measures will be implemented in a way that allows us to resume operations in an efficient and safe manner, while also minimizing disruption to customers and our overall business, including prudent measures to mitigate, to the extent possible, any financial impacts, although any additional local orders or decrees resulting in new temporary shut-downs will drive further unfavorable impacts to our operations, ability to serve our customers and potentially, our financial position and liquidity.

The pandemic will likely continue to impact us in numerous and evolving ways that we may not be able to accurately predict; however, we will continue to closely monitor its impact on our business, employees, customers, suppliers, distribution channels and other business partners, and we believe that our actions taken to date, our financial flexibility and potential measures within our control will allow us to maintain a sound financial position and provide for adequate resources to fund our ongoing operating and financing needs.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

Additionally, as a response to the COVID-19 pandemic, on March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted and signed into law, which included measures to assist companies in response to the COVID-19 pandemic.

One measure allowed companies to defer the remittance of the employer portion of the social security tax through December 31, 2020, with half the amount deferred required to be paid by December 31, 2021, and the other half by December 31, 2022.

Through December 31, 2020, we have elected to defer approximately $13 million under this provision, which is classified in Accrued expenses and other current liabilities and Other noncurrent liabilities within our Consolidated Balance Sheet.

A second measure of the CARES Act raised the limit on business interest deductions from 30% to 50% of adjusted taxable income for tax years 2019 and 2020.

This increased interest limitation resulted in approximately $20 million of reduced cash tax payments in 2020.

Each of these two measures has resulted in a benefit to our cash flows from operations for the year ended December 31, 2020; however, neither measure is expected to materially impact our effective tax rate, and no income tax effects have been recorded during the year ended December 31, 2020.

"Risk Factors."

The assets and liabilities of our QMI business met the criteria to be classified as held for sale as of December 31, 2020.

Accordingly, QMI's net assets, which primarily included working capital and long-lived assets, were written down to fair value, estimated based on expected sales proceeds, less cost to sell, resulting in a Loss on assets held for sale of $37.9 million.

Turkey and Colombia Divestitures

In 2019, we closed our production facility in Turkey to help streamline our footprint in EMEA and subsequently sold certain of the production assets, which represented a business, 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 the reclassification of $25.0 million of accumulated foreign currency translation adjustments to earnings upon sale.

We also sold our interests in our Colombia operations in 2019 for a nominal amount, recording a net loss on divestiture of $5.9 million, of which $1.2 million related to the reclassification of accumulated foreign currency translation adjustments to earnings upon sale.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

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.

Subsequent Event

The new Allegion International segment has been created to drive speed and efficiency, simplify our operating segments and optimize our non-U.S. operations.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

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

| | | | | | |

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

Derivative instruments utilized [removed: by us] in our hedging activities are viewed as risk management tools, involve little complexity and are not used for trading or speculative purposes.

Based on the firmly committed currency derivative instruments in place at December 31, [removed: 2020,] [added: 2021,] 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: $16.9] [added: $9.4] million.

We do not have committed commodity derivative instruments in place at December 31, [removed: 2020.][added: 2021.]

Outstanding borrowings under our [added: 2021] Credit Facilities accrue interest at our option of (i) a [removed: LIBOR] [added: BSBY] rate plus the applicable margin or (ii) a base rate plus the applicable margin.

The applicable margin ranges from [removed: 1.125%] [added: 0.875%] to [removed: 1.500%] [added: 1.375%] depending on our credit ratings.

At December 31, [removed: 2020,] [added: 2021,] the outstanding borrowings of [removed: $238.8] [added: $250.0] million under the [added: 2021] Term Facility accrue interest at [removed: LIBOR] [added: BSBY] plus a margin of [removed: 1.250%.][added: 1.125%.]

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 currently have unused availability of [removed: $485.0] [added: $491.3] million under our [added: 2021] Revolving Facility as of December 31, [removed: 2020.][added: 2021.]

If [removed: LIBOR] [added: our BSBY] or other applicable base rates of our [added: 2021] Credit Facilities increase in the future, our Interest expense could increase.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

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

We offer an extensive and versatile portfolio of [removed: mechanical and electronic] security [added: and access control] products and solutions across a range of market-leading brands.

| Electronic security products | | | [removed: Electronic, biometric and mobile] [added: Software-enabled] access control systems | | |

Most buildings have multiple door openings, each serving its own purpose and requiring different specific [removed: access-control] [added: access control] solutions.

- Our consultative approach and expertise, which enables us to develop the most efficient and appropriate building security and [removed: access-control] [added: access control] specifications to fulfill the unique needs of our end-users and their partners, including architects, contractors, homebuilders and engineers;

We believe LCN, Schlage and Von Duprin hold the No. 1 [added: or No. 2] position in their primary product categories in North America while CISA, Interflex and SimonsVoss hold the No. 1 or No. 2 position in their primary product categories in certain European markets.

During the year ended December 31, [removed: 2020,] [added: 2021,] we generated Net revenues of [removed: $2,719.9] [added: $2,867.4] million and Operating income of [removed: $403.5] [added: $530.2] million.

For example, in 2018, we announced the formation of Allegion Ventures, a corporate venture fund [removed: that invests] [added: with an initial allocation of $50 million to invest] in and [removed: helps] [added: help] accelerate the growth of companies that have [removed: innovative] [added: innovative, digital-first] technologies and products such as touchless access and workspace monitoring solutions that complement our core business solutions.

| Bike Lighting and Portable Locking Solutions | | | | | | AXA, Kryptonite, Trelock | | | | | | [removed: 2018/2019] [added: 2019/2020/2021] | | | | | | Innovation in bike safety [removed: including rechargeable lights and expanded lines of folding locks] from each of our Global Portable Security brands (AXA, Kryptonite, Trelock); and [added: new] ergonomic cable and chain locks [removed: and expanded track-and-trace services] (AXA). | | |

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

[removed: As] [added: Further, we also expect continued growth in connected security products and solutions as] end-users continue to adopt newer technologies, including IoT, in their facilities and single and multi-family [removed: homes, growth in electronic security products and solutions is expected to outperform growth in mechanical security products and solutions.][added: homes.]

We [removed: also] expect the security products industry will continue to benefit from favorable trends such as increased concerns about safety and security, new attention on touchless solutions that help promote a healthy environment and technology-driven innovation that enables seamless access and a better user experience as people and assets traverse multiple locations and facilities.

We offer an extensive and versatile portfolio of [removed: mechanical and electronic] security [added: and access control] products and solutions across a range of market-leading brands:

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

Through [added: a few of] our [added: businesses, such as] Interflex and [removed: API Locksmiths businesses and] [added: our] Global Portable Security brands, we also provide products and services directly to end-users.

Our 10 largest customers represented approximately [removed: 24%] [added: 25%] of our total Net revenues in [removed: 2020.][added: 2021.]

No single customer represented 10% or more of our total Net revenues in [removed: 2020.][added: 2021.]

For example, we are members of Builders Hardware Manufacturers Association (BHMA), [added: Connectivity Standards Alliance,] Construction Specification Institute, Door and Hardware Institute (DHI), FiRa Consortium, [removed: Internet of Things Consortium (IoTC),] [added: Partner Alliance for Safer Schools (PASS),] Physical Security Interoperability Alliance (PSIA), Security Industry Association, Security Technology Alliance, [added: Z-Wave Alliance, The European Federation of Associations of Locks and Builders Hardware Manufacturers (ARGE),] ASSOFERMA (Italy), BHE (Germany) and UNIQ (France).

We operate [removed: 30] [added: 29] principal production and assembly facilities – [removed: 15 in Americas, 9] [added: 14] in [removed: EMEA] [added: our Allegion Americas segment] and [removed: 6] [added: 15] in [removed: Asia Pacific.][added: our Allegion International segment.]

We own [removed: 16] [added: 15] of these facilities and lease the others.

Much of our U.S. based residential portfolio is manufactured in the Baja region of Mexico under the Maquiladora, Manufacturing and Export Services Industry ("IMMEX") [removed: program (formerly known as the maquiladora program).][added: program.]

Our global and regional commodity teams work with production leadership, product management and materials management teams to [removed: ensure adequate] [added: procure] materials [removed: are available] for production.

We purchase a wide range of raw materials, including steel, zinc, brass and other non-ferrous metals, [added: as well as other parts and components, such as electronic components,] to support our production facilities.

[removed: We consider our CISA, Interflex, LCN, Schlage,] SimonsVoss, Von Duprin and other associated trademarks to be among our most valuable assets, and we have registered these trademarks in a number of countries.

We operate through a broad network of sales offices, engineering centers, [removed: 30] [added: 29] principal production and assembly facilities and several distribution centers throughout the world.

Our active properties represent approximately 6.3 million square feet, of which approximately [removed: 37%] [added: 40%] is leased.

| Production and Assembly Facilities | | | | | | | | | [removed: | | | | | |]

| Blue Ash, Ohio | | | | | | [removed: Clamecy, France | | | | | |] Auckland, New Zealand | | |

| Irving, Texas | | | | | | [removed: Renchen,] [added: Durchhausen,] Germany | | | [removed: | | | | | |]

| [removed: Mississauga, Ontario] | | | | | | Zawiercie, Poland | | | [removed: | | | | | |]

| Perrysburg, Ohio | | | | | | [removed: | | | | | |] [added: Jinshan, China] | | |

| Princeton, Illinois | | | | | | [removed: | | | | | |] [added: Monsampolo, Italy] | | |

| Security, Colorado | | | | | | [removed: | | | | | |] [added: Osterfeld, Germany] | | |

| Snoqualmie, Washington | | | | | | [removed: | | | | | |] [added: Renchen, Germany] | | |

| Tecate, Mexico | | | | | | [removed: | | | | | |] [added: Sydney, Australia] | | |

| Tijuana, Mexico | | | | | | [removed: | | | | | |] [added: Veenendaal, Netherlands] | | |

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

[removed: We organize our resources] [added: Our] regionally [removed: to] [added: located resources] leverage expertise in local standards and configurations [added: and apply those to adapt products] for the benefit of our customers.

Because more construction and do-it-yourself projects occur during the second and third calendar quarters [removed: of each year] in the Northern Hemisphere, our security product sales related to those projects are typically higher in those quarters than in the first and fourth [removed: calendar] quarters.

However, certain other businesses typically experience higher sales in the fourth [removed: calendar] quarter due to project timing.

We operate in and report financial results for two segments: Allegion Americas and Allegion International, the latter of which provides security products, services and solutions primarily throughout Europe, Asia and Oceania.

Building on this success, in December 2021, Allegion Ventures announced a second fund with an additional allocation of $100 million to focus on investing in technologies like artificial intelligence, machine learning and cybersecurity.

| Residential Locks, Cylinders and Levers | | | | | | Schlage, Gainsborough, CISA | | | | | | 2019/2020/ 2021 | | | | | | Schlage Primus® RP patented, restricted key systems, allowing the widely used, historic Schlage Obverse keyway family a path to Primus levels of security with patent coverage to 2029. Next generation smart lock (Schlage Encode) is joined by one in Australia (Gainsborough Freestyle Trilock), which has passage, privacy or dead lock modes that can be operated using the built-in keypad, a key override or through the mobile app and offers integrations with Amazon Alexa and Google Assistant. The optional WiFi bridge can be used to program and operate the lock from anywhere in the world. New flat key European cylinders for multiple entrance buildings (CISA Asix P8) and high security connected solutions (CISA Domo Connexa). | | |

| Commercial Locks, Cylinders, Levers and Electronic Access Platforms | | | | | | Schlage, SimonsVoss, CISA | | | | | | 2019/2020/2021 | | | | | | Release of mobile-enabled versions of locks, readers and controllers (Schlage NDE, LE, MTB and CTE), mobile credentials, Bluetooth Low Energy ("BLE") and RFID technology and integrations between electronic locks and exit devices (Schlage, CISA). RC reader controller combines powerful ISONAS PureIP technology together with intelligent hardware (Schlage Mobile Access Solutions). New Digital Cylinder AX (SimonsVoss) supports active transponders, Mifare badges and BLE, a further step towards digitizing the door through the keyhole. Mortice self-locking system with a mono-point motorized lock variant (CISA) and new platformed, modular replacement of cylindrical locks (Schlage ALX). New multipoint exit mortice self-locking system for panic exit doors with narrow profile (CISA). Enhanced access control solutions for low-to-medium complexity applications offers a complete portfolio of IP and mobile-enabled devices across a variety of popular applications and openings (Schlage, ISONAS, Locknetics, Von Duprin, and Falcon). | | |

| Exit Devices and Closers | | | | | | LCN | | | | | | 2020/2021 | | | | | | New low-energy automatic operator (LCN 6400 Compact series), retrofit solution with actuators reduces the cost and complexity of touchless access and ADA accessibility, converting the popular LCN 4040XP mechanical closer and powered by a simple wall plug or an external power supply. Follows the introduction of a range of touchless solutions, including automatic operators, actuators and wireless transmitters. | | |

| Doors and Door Systems | | | | | | TGP | | | | | | 2021 | | | | | | North America's first fire-rated Full-Lite Door System, certified to meet forced entry standards (TGP ASTM E2395). | | |

| Software, Mobile and Web Applications | | | | | | Schlage, CISA, Gainsborough | | | | | | 2019/2020/2021 | | | | | | Mobile apps for iOS and Android phones (Schlage, CISA, Gainsborough) lock, unlock, issue mobile keys and give status checks. Schlage Mobile Student ID allows university students, faculty and staff to add student ID cards to Apple Wallet or Google Pay for door access, payments, attendance tracking and ticketing). App and mobile solution (CISA Smart Access) allows guests to use their smartphone like a room key and also start a WhatsApp chat with the front desk with a single click, creating guest experiences beyond security and safety. Cloud access management software (CISA AERO) expands with a new open software interface for property management systems. | | |

During 2021, especially in the second half of the year, we experienced an acceleration of several macroeconomic challenges, including supply chain disruptions and delays; shortages in materials, including reductions in allocations of electronic components and other parts from key suppliers; and increased material and other inflation.

These trends had a negative impact on our results of operations in 2021, and while we currently anticipate these challenges to continue in 2022, we are rapidly adapting to navigate these challenges.

See "Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a more detailed discussion of these trends and challenges.

We consider our CISA, Interflex, LCN, Schlage,

| | | | | | | | | |

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

| Allegion Americas | | | | | | Allegion International | | |

| Chino, California | | | | | | Brooklyn, Australia | | |

| Ensenada, Mexico | | | | | | Blackburn, Australia | | |

| Everett, Washington | | | | | | Bucheon, South Korea | | |

| Indianapolis, Indiana | | | | | | Clamecy, France | | |

| McKenzie, Tennessee | | | | | | Faenza, Italy | | |

| Mississauga, Ontario | | | | | | Feuquieres, France | | |

| 2021 | | | | | | 24% | | | | | | 26% | | | | | | 25% | | | | | | 25% | | |

Our employer brand strength creates a differentiated employee experience that attracts and retains the right talent for Allegion, both now and in the future.

Talent attraction efforts are focused on our unique employee value proposition and highlight a culture that reflects our core values and business objectives.

In the U.S., we also host an annual Manufacturing Day event at several of our production and assembly facilities.

Talent attraction efforts go beyond emerging talent strategies to span core capabilities that enable the business to run, grow and transform.

We use a variety of recruitment tactics to ensure a strong base of labor for manufacturing operations and to build the base of talent with these capabilities.

Throughout the process, there is a focus on driving a technology-enabled seamless experience for internal and external candidates and hiring managers throughout the recruitment cycle.

These talent attraction efforts are complemented with a total reward framework, internal learning and development paths and career growth opportunities to secure Allegion as an employer of choice, where people want to come work, stay and thrive.

The combined efforts of Allegion’s Inclusion and Diversity Steering Committee, our Executive Leadership Team ("ELT") and, as of June 2021, a new employee-led Inclusion Council, are driving expectations and accountability while creating role models and change champions.

Our engagement, inclusion and diversity strategy has three core pillars:

- *Learn & listen deeply:* Learn to recognize biases and mitigate them.

Seek to first understand the other person's perspective rather than respond or act;

- *Unite widely:* Create a workplace where all employees feel welcomed, respected and valued, enabling customers to more easily connect with our brands through our people; and

- *Take action:* Identify the unique things that impact our organization, our communities and our industry.

During 2021, we focused on four action priorities: establish the Inclusion Council; charter and expand employee resource groups; review business policies, processes and practices; and launch the Supplier Diversity Program.

In 2021, Allegion was named the winner of the Jackson Lewis Diversity, Equity and Inclusion Champion, on the merits of our company’s proactive and intentional global efforts throughout 2021.

equality, justice and address systemic bias.

We continue to adapt to changing health conditions at a local level and support a wide range of health and safety measures, including reduced density, remote and hybrid work options for appropriate roles, cleaning and hygiene protocols, visitor management and mask-wearing.

We also encourage preventative measures, including COVID-19 and influenza vaccines and booster shots.

We operate in three geographic regions: Americas; Europe, Middle East and Africa ("EMEA"); and Asia Pacific.

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[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

Since its formation, Allegion Ventures has invested nearly $15 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.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

| Residential Locks, Cylinders and Levers | | | | | | Schlage, Gainsborough, CISA | | | | | | 2018/2019/ 2020 | | | | | | Next-generation Schlage smart locks include the first WiFi enabled deadbolt to work with Key by Amazon and Ring devices with built-in connectivity (Schlage Encode); Z-wave smart deadbolt and Zigbee-certified model compatible with Amazon Key and Ring devices (Schlage Connect); fire-rated smart lock for Australia and New Zealand paired with a mobile app (Schlage Omnia Breeze) for convenient access and security that meets current fire and accessibility requirements. Next generation Gainsborough Freestyle Trilock features three-in-one functionality: passage, privacy or dead lock mode; and can be operated using the built-in keypad, a key override or through the mobile app. In conjunction with the optional WiFi bridge, the lock can be programmed and operated from anywhere in the world. First CISA motorized lock solution for high security connected smart doors (Domo Connexa), manageable in proximity and remotely using a mobile app. | | |

| Commercial Locks, Cylinders, Levers and Electronic Access Platforms | | | | | | Schlage, SimonsVoss, CISA | | | | | | 2018/2019/ 2020 | | | | | | Enhancements to our comprehensive portfolio of globally available mechanical, wired electrified and wireless electronic solutions provide a common aesthetic and consistent user experience throughout a building; firmware releases added functionality and USB communication mode for readers (Schlage). Mobile-enabled versions of locks, readers and controllers (Schlage NDE, LE, MTB and CTE), mobile credentials, Bluetooth Low Energy and RFID technology and integrations between electronic locks and exit devices (Schlage, CISA). SimonsVoss offers new option for wireless online connections to a virtual network (SmartHandle AX, SmartIntego) and a retrofit, no-drill locking option for lockers and furniture in schools, hospitals and industry facilities that integrates into the existing SimonsVoss digital eco-system for offline and online access (SmartLocker). Expanded radio network technology to include European frequency band 868MHz and 920MHz technology. Mortice self-locking system with a mono-point motorized lock variant (CISA) and new platformed, modular replacement of cylindrical locks (Schlage ALX). | | |

| Exit Devices and Closers | | | | | | Von Duprin, Falcon, LCN, CISA | | | | | | 2018/2019/2020 | | | | | | Award-winning and cost-effective retrofit exit device that allows for remote undogging and monitoring with partner software (Von Duprin); new fire-rated retrofit series (Falcon); and quiet exit solutions (Von Duprin). Range of touchless solutions, including automatic operators, actuators and wireless transmitters (LCN) and a range of asymmetric rack-and-pinion door closers and an entry-level, high-efficiency option (CISA). | | |

| Doors and Door Systems | | | | | | TGP, AD Systems | | | | | | 2019 | | | | | | First to the market surface mounted, top-hung single-leaf, sliding flush wood doors that achieve a 45-minute UL 10B fire rating (FireSlide). 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). | | |

| Software, Mobile and Web Applications | | | | | | Allegion (Overtur, ENGAGE), Schlage, Gainsborough, Interflex, ISONAS | | | | | | 2018/2019/2020 | | | | | | Cloud-based suite of tools for project teams to collaborate on specifications and the security design of doors and openings (Overtur). Multiple enhancements to the user experience include simplified account and site set-up and gateway site survey (ENGAGE) and mobile apps for iOS and Android phones (Schlage, CISA, Gainsborough) to lock, unlock, issue mobile keys and status check. Schlage Mobile Student ID allows university students, faculty and staff to add student ID cards to their Apple Wallet or Google Pay for door access, payments, attendance tracking and ticketing. Visitor management modules and managed service featuring a cloud-based solution of time recording (Interflex); cloud-hosted access control platform with real time events, alerting and user-initiated door control (ISONAS). | | |

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[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

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

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

| Americas | | | | | | EMEA | | | | | | Asia Pacific | | |

| Boulder, Colorado | | | | | | Durchhausen, Germany | | | | | | Brooklyn, Australia | | |

| Chino, California | | | | | | Faenza, Italy | | | | | | Bucheon, South Korea | | |

| Ensenada, Mexico | | | | | | Feuquieres, France | | | | | | Jinshan, China | | |

| Everett, Washington | | | | | | Monsampolo, Italy | | | | | | Melbourne, Australia | | |

| Indianapolis, Indiana | | | | | | Osterfeld, Germany | | | | | | Sydney, Australia | | |

| McKenzie, Tennessee | | | | | | Veenendaal, Netherlands | | | | | | | | |

This is not anticipated to be a long-term trend in the seasonality of our businesses.

| 2018 | | | | | | 22% | | | | | | 26% | | | | | | 26% | | | | | | 26% | | |

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

In recruiting for open positions, we participate in community job fairs and outreach to secondary schools, technical training programs, colleges and universities; promote open positions through internal and external recruiters, on websites and through social media; and encourage Company employees to refer talent.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

Recognizing the growing number of people facing food insecurity in the wake of the COVID-19 pandemic, we supplemented on-going food drives at local sites with a one-time $500,000 gift to support communities in need in the fourth quarter of 2020.

These health and safety measures include, but are not limited to:

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

- Work-from-home arrangements for employees, where possible;

- Continuous safe hygiene education in accordance with evolving guidelines;

- Regular communication updates to leadership and team members;

- Aggressive and regular deep cleaning and disinfecting schedules;

- Social distancing measures, such as signage and physical barriers or reconfigurations of workspaces;

- Reduced density measures, such as staggering work shifts and breaks;

- Mask use requirements and expectations at our facilities;

- Temperature and health screenings prior to entering facilities;

- Increased available supplies for employees, like masks, cleaning solutions, hand sanitizers, thermometers and gloves; and

For the fiscal year ended December 31, [removed: 2020][added: 2021]

[added: Indicate by check mark whether] the [added: registrant has filed a report on and attestation to its management’s assessment of the] effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. [added: 7262(b)) by the registered public accounting firm that prepared or issued its audit report.]

The aggregate market value of ordinary shares held by non-affiliates on June 30, [removed: 2020] [added: 2021] was approximately [removed: $9.4] [added: $12.5] billion based on the closing price of such stock on the New York Stock Exchange.

The number of ordinary shares outstanding of Allegion plc as of February [removed: 11, 2021] [added: 10, 2022] was [removed: 90,732,297.][added: 88,230,442.]

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: 3, 2021] [added: 2, 2022] (the "Proxy Statement") are incorporated by reference into Part II and Part III of this Form 10-K as described herein.

For the Fiscal Year Ended December 31, [removed: 2020][added: 2021]

| Part I | | | Item 1. | | | [removed: [Business](#id905981cbc9343d5aac81ea1e75f9719_16)] [added: [Business](#i42dbe9d853384615ac6fc384cf0f23cd_16)] | | | [removed: [4](#id905981cbc9343d5aac81ea1e75f9719_16)] [added: [4](#i42dbe9d853384615ac6fc384cf0f23cd_16)] | | |

| | | | Item 1A. | | | [Risk [removed: Factors](#id905981cbc9343d5aac81ea1e75f9719_19)] [added: Factors](#i42dbe9d853384615ac6fc384cf0f23cd_19)] | | | [removed: [16](#id905981cbc9343d5aac81ea1e75f9719_19)] [added: [16](#i42dbe9d853384615ac6fc384cf0f23cd_19)] | | |

| | | | Item 1B. | | | [Unresolved Staff [removed: Comments](#id905981cbc9343d5aac81ea1e75f9719_22)] [added: Comments](#i42dbe9d853384615ac6fc384cf0f23cd_22)] | | | [removed: [27](#id905981cbc9343d5aac81ea1e75f9719_22)] [added: [27](#i42dbe9d853384615ac6fc384cf0f23cd_22)] | | |

| | | | Item 2. | | | [removed: [Properties](#id905981cbc9343d5aac81ea1e75f9719_25)] [added: [Properties](#i42dbe9d853384615ac6fc384cf0f23cd_25)] | | | [removed: [27](#id905981cbc9343d5aac81ea1e75f9719_25)] [added: [27](#i42dbe9d853384615ac6fc384cf0f23cd_25)] | | |

| | | | Item 3. | | | [Legal [removed: Proceedings](#id905981cbc9343d5aac81ea1e75f9719_28)] [added: Proceedings](#i42dbe9d853384615ac6fc384cf0f23cd_28)] | | | [removed: [27](#id905981cbc9343d5aac81ea1e75f9719_28)] [added: [27](#i42dbe9d853384615ac6fc384cf0f23cd_28)] | | |

| | | | Item 4. | | | [Mine Safety [removed: Disclosures](#id905981cbc9343d5aac81ea1e75f9719_31)] [added: Disclosures](#i42dbe9d853384615ac6fc384cf0f23cd_31)] | | | [removed: [27](#id905981cbc9343d5aac81ea1e75f9719_31)] [added: [27](#i42dbe9d853384615ac6fc384cf0f23cd_31)] | | |

| Part II | | | Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#id905981cbc9343d5aac81ea1e75f9719_37)] [added: Securities](#i42dbe9d853384615ac6fc384cf0f23cd_37)] | | | [removed: [29](#id905981cbc9343d5aac81ea1e75f9719_37)] [added: [29](#i42dbe9d853384615ac6fc384cf0f23cd_37)] | | |

| | | | Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#id905981cbc9343d5aac81ea1e75f9719_43)] [added: Operations](#i42dbe9d853384615ac6fc384cf0f23cd_43)] | | | [removed: [32](#id905981cbc9343d5aac81ea1e75f9719_43)] [added: [31](#i42dbe9d853384615ac6fc384cf0f23cd_43)] | | |

| | | | Item 7A. | | | [Quantitative and Qualitative [removed: Disclosure](#id905981cbc9343d5aac81ea1e75f9719_55)[s](#id905981cbc9343d5aac81ea1e75f9719_55) [About] [added: Disclosures About] Market [removed: Risk](#id905981cbc9343d5aac81ea1e75f9719_55)] [added: Risk](#i42dbe9d853384615ac6fc384cf0f23cd_58)] | | | [removed: [48](#id905981cbc9343d5aac81ea1e75f9719_55)] [added: [45](#i42dbe9d853384615ac6fc384cf0f23cd_58)] | | |

| | | | Item 8. | | | [Financial Statements and Supplementary [removed: Data](#id905981cbc9343d5aac81ea1e75f9719_58)] [added: Data](#i42dbe9d853384615ac6fc384cf0f23cd_61)] | | | [removed: [49](#id905981cbc9343d5aac81ea1e75f9719_58)] [added: [46](#i42dbe9d853384615ac6fc384cf0f23cd_61)] | | |

| | | | Item 9. | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#id905981cbc9343d5aac81ea1e75f9719_61)] [added: Disclosure](#i42dbe9d853384615ac6fc384cf0f23cd_64)] | | | [removed: [50](#id905981cbc9343d5aac81ea1e75f9719_61)] [added: [46](#i42dbe9d853384615ac6fc384cf0f23cd_64)] | | |

| | | | Item 9A. | | | [Controls and [removed: Procedures](#id905981cbc9343d5aac81ea1e75f9719_64)] [added: Procedures](#i42dbe9d853384615ac6fc384cf0f23cd_67)] | | | [removed: [50](#id905981cbc9343d5aac81ea1e75f9719_64)] [added: [46](#i42dbe9d853384615ac6fc384cf0f23cd_67)] | | |

| | | | Item 9B. | | | [Other [removed: Information](#id905981cbc9343d5aac81ea1e75f9719_67)] [added: Information](#i42dbe9d853384615ac6fc384cf0f23cd_70)] | | | [removed: [50](#id905981cbc9343d5aac81ea1e75f9719_67)] [added: [47](#i42dbe9d853384615ac6fc384cf0f23cd_70)] | | |

| Part III | | | Item 10. | | | [Directors, Executive Officers and Corporate [removed: Governance](#id905981cbc9343d5aac81ea1e75f9719_73)] [added: Governance](#i42dbe9d853384615ac6fc384cf0f23cd_76)] | | | [removed: [51](#id905981cbc9343d5aac81ea1e75f9719_73)] [added: [48](#i42dbe9d853384615ac6fc384cf0f23cd_76)] | | |

| | | | Item 11. | | | [Executive [removed: Compensation](#id905981cbc9343d5aac81ea1e75f9719_76)] [added: Compensation](#i42dbe9d853384615ac6fc384cf0f23cd_79)] | | | [removed: [51](#id905981cbc9343d5aac81ea1e75f9719_76)] [added: [48](#i42dbe9d853384615ac6fc384cf0f23cd_79)] | | |

| | | | Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#id905981cbc9343d5aac81ea1e75f9719_79)] [added: Matters](#i42dbe9d853384615ac6fc384cf0f23cd_82)] | | | [removed: [51](#id905981cbc9343d5aac81ea1e75f9719_79)] [added: [48](#i42dbe9d853384615ac6fc384cf0f23cd_82)] | | |

| | | | Item 13. | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#id905981cbc9343d5aac81ea1e75f9719_82)] [added: Independence](#i42dbe9d853384615ac6fc384cf0f23cd_85)] | | | [removed: [51](#id905981cbc9343d5aac81ea1e75f9719_82)] [added: [48](#i42dbe9d853384615ac6fc384cf0f23cd_85)] | | |

| | | | Item 14. | | | [Principal Accountant Fees and [removed: Services](#id905981cbc9343d5aac81ea1e75f9719_85)] [added: Services](#i42dbe9d853384615ac6fc384cf0f23cd_88)] | | | [removed: [51](#id905981cbc9343d5aac81ea1e75f9719_85)] [added: [48](#i42dbe9d853384615ac6fc384cf0f23cd_88)] | | |

| Part IV | | | Item 15. | | | [removed: [Exhibits, Financial] [added: [Exhibits](#i42dbe9d853384615ac6fc384cf0f23cd_94) [and](#i42dbe9d853384615ac6fc384cf0f23cd_94) [Financial] Statement [removed: Schedules](#id905981cbc9343d5aac81ea1e75f9719_91)] [added: Schedules](#i42dbe9d853384615ac6fc384cf0f23cd_94)] | | | [removed: [52](#id905981cbc9343d5aac81ea1e75f9719_91)] [added: [49](#i42dbe9d853384615ac6fc384cf0f23cd_94)] | | |

| | | | Item 16. | | | [Form 10-K [removed: Summary](#id905981cbc9343d5aac81ea1e75f9719_97)] [added: Summary](#i42dbe9d853384615ac6fc384cf0f23cd_100)] | | | [removed: [56](#id905981cbc9343d5aac81ea1e75f9719_97)] [added: [53](#i42dbe9d853384615ac6fc384cf0f23cd_100)] | | |

Forward-looking statements may relate to such matters as: statements regarding the [removed: potential] [added: continued] impacts of the global COVID-19 pandemic, [added: supply chain constraints, electronic component and labor shortages, inflation, rising freight and material costs,] projections of revenue, margins, expenses, tax provisions, earnings, cash flows, benefit obligations, dividends, share purchases or other financial items; any statements of the plans, strategies and objectives of management for future operations, including those relating to any statements concerning expected development, performance or market share relating to our products and services; any statements regarding future economic conditions or our performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.

You are advised to review any further disclosures we make on related subjects in materials we file with or furnish to the United States Securities and Exchange Commission [removed: (SEC).][added: ("SEC").]

- adverse impacts to our [removed: normal] business operations due to the global COVID-19 [removed: pandemic;][added: pandemic and our ability to predict the full extent of such impacts;]

- our ability to effectively manage and implement restructuring initiatives [removed: and] [added: or] other organizational changes;

- disruptions in our global supply chain, including [added: supply chain constraints, electronic component and labor shortages and] product manufacturing and logistical services provided by [added: our] supplier partners;

- potential [removed: further] impairment of our goodwill, indefinite-lived intangible assets and/or our long-lived assets;

| | | | Item 6. | | | [\[Reserved\]](#i42dbe9d853384615ac6fc384cf0f23cd_40) | | | [30](#i42dbe9d853384615ac6fc384cf0f23cd_40) | | |

| | | | Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i42dbe9d853384615ac6fc384cf0f23cd_1615) | | | [47](#i42dbe9d853384615ac6fc384cf0f23cd_1615) | | |

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

| | | | [Signatures](#i42dbe9d853384615ac6fc384cf0f23cd_103) | | | | | | [54](#i42dbe9d853384615ac6fc384cf0f23cd_103) | | |

- availability of and increased inflation impacting the prices of raw materials, parts and components, freight, packaging, labor and energy;

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of

7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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| | | | Item 6. | | | [Selected Financial Data](#id905981cbc9343d5aac81ea1e75f9719_40) | | | [31](#id905981cbc9343d5aac81ea1e75f9719_40) | | |

| | | | [Signatures](#id905981cbc9343d5aac81ea1e75f9719_100) | | | | | | [57](#id905981cbc9343d5aac81ea1e75f9719_100) | | |

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

- availability of and fluctuations in the prices of key commodities and the impact of higher energy prices;

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

We operate through a broad network of sales offices, engineering centers, [removed: 30] [added: 29 principal] production and assembly facilities and several distribution centers throughout the world.

Our active properties represent about 6.3 million square feet, of which approximately [removed: 37%] [added: 40%] is leased.

We own [removed: 16] [added: 15] of our production and assembly facilities, with the remainder under long-term lease arrangements.

The following is a list of executive officers of the Company as of February [removed: 16, 2021.][added: 15, 2022.]

Petratis*, age [removed: 63,] [added: 64,] has served as our Chairman, President and Chief Executive Officer since 2013.

Shannon*, age [removed: 58,] [added: 59,] has served as our Senior Vice President and Chief Financial Officer since 2013.

Braun*, age [removed: 61,] [added: 62,] has served as our Senior Vice President and General Counsel since 2014.

Eckersley*, age [removed: 59,] [added: 60,] has served as our Senior Vice President – Allegion International since 2021.

Farrer,* age [removed: 58,] [added: 59,] has served as our [added: Senior] Vice President – Global Operations and Integrated Supply Chain since [removed: October 2020.][added: June 2021.]

Kemp*, age [removed: 52,] [added: 53,] has served as our Senior Vice President – Chief Information and Digital Officer since [removed: December] 2020.

Martens*, age [removed: 50,] [added: 51,] has served as our Senior Vice President – Chief Innovation and Design Officer since 2019 and Futurist and President of Allegion Ventures since 2017.

[removed: Meador*,] [added: Wenos,*] age [removed: 49,] [added: 55,] has served as our Senior Vice President – [removed: Human Resources and Communications] [added: Chief Technology Officer] since [removed: 2016.][added: 2019.]

Ranck*, age [removed: 62,] [added: 63,] has served as our Vice President, Controller and Chief Accounting Officer since 2013.

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

Ms. Farrer served as our Vice President – Global Operations and Integrated Supply Chain from October 2020 to June 2021.

*Vincent M.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

*Shelley A.

Ms. Meador served as our Vice President – Tax from 2013 to 2016.

*Luis J.

Orbegoso*, age 50, has served as our Senior Vice President – Allegion Americas since February 2021.

Mr. Orbegoso previously served as President and Chief Operating Officer at American Residential Services (ARS, a residential HVAC and plumbing company) from 2017 to 2020 and as President, ADT Business at ADT Corporation (currently ADT Inc., a leading provider of security, automation and smart home solutions) from 2013-2016.

*Vincent Wenos,* age 54, has served as our Senior Vice President – Chief Technology Officer since 2019.

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

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As of February [removed: 11, 2021,] [added: 10, 2022,] the number of record holders of ordinary shares was [removed: 2,301.][added: 2,176.]

Our Board of Directors declared dividends of [removed: $0.32] [added: $0.36] per ordinary share on February [removed: 6, 2020,] [added: 5, 2021,] April 8, [removed: 2020,] [added: 2021,] September 1, [removed: 2020] [added: 2021] and December [removed: 2, 2020.][added: 10, 2021.]

On February [removed: 5, 2021,] [added: 4, 2022,] our Board of Directors declared a dividend of [removed: $0.36] [added: $0.41] per ordinary share payable March 31, [removed: 2021.][added: 2022.]

We paid a total of [removed: $117.3] [added: $129.0] million in cash for dividends to ordinary shareholders during the year ended December 31, [removed: 2020.][added: 2021.]

Distributable reserves, broadly, means the accumulated realized profits of Allegion plc (ALLE-Ireland) and are unrelated to any [removed: U.S.] GAAP reporting amount (e.g. retained earnings).

As of December 31, [removed: 2020,] [added: 2021,] we had distributable reserves of [removed: $3.8] [added: $3.7] billion.

| Period | | | | | | Total number of shares purchased (000s) | | | | | | Average price paid per share | | | | | | Total number of shares purchased as part of the [added: 2020 Share Repurchase] Authorization (000s) | | | | | | Approximate dollar value of shares still available to be purchased under the 2020 Share Repurchase Authorization (000s) | | |

In February [removed: 2017,] [added: 2020,] our Board of Directors approved a [removed: stock] [added: share] repurchase authorization of up [removed: to $500] [added: to, and including, $800] million of the Company’s ordinary shares (the [removed: "2017] [added: "2020] Share Repurchase Authorization").

The annual changes for the five-year period shown 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 31, [removed: 2015,] [added: 2016,] 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: 2020.][added: 2021.]

| | | | [removed: | | |] December 31, [removed: 2015 | | | | | | December 31,] 2016 | | | [removed: | | |] December 31, 2017 | | | [removed: | | |] December 31, 2018 | | | [removed: | | |] December 31, 2019 | | | [removed: | | |] December 31, 2020 | | | [removed: | | |] [added: December 31, 2021] | | |

| October 1 - October 31 | | | | | | 152 | | | | | | $ | 131.43 | | | | | 152 | | | | | | $ | 381,427 | |

| November 1 - November 30 | | | | | | 796 | | | | | | 132.26 | | | | | | 796 | | | | | | 276,085 | | |

| December 1 - December 31 | | | | | | 580 | | | | | | 128.80 | | | | | | 580 | | | | | | 201,435 | | |

| Total | | | | | | 1,528 | | | | | | $ | 130.85 | | | | | 1,528 | | | | | | $ | 201,435 | |

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

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

| Allegion plc | | | 100.00 | | | 125.31 | | | 126.79 | | | 200.18 | | | 189.39 | | | 217.90 | | |

| S&P 500 | | | 100.00 | | | 121.83 | | | 116.49 | | | 153.17 | | | 181.35 | | | 233.42 | | |

| S&P 400 Capital Goods | | | 100.00 | | | 124.69 | | | 107.22 | | | 142.34 | | | 170.58 | | | 217.78 | | |

| October 1 - October 31 | | | | | | 382 | | | | | | $ | 102.51 | | | | | 382 | | | | | | $ | 689,782 | |

| November 1 - November 30 | | | | | | 313 | | | | | | 108.09 | | | | | | 313 | | | | | | 655,907 | | |

| December 1 - December 31 | | | | | | 370 | | | | | | 112.81 | | | | | | 370 | | | | | | 614,192 | | |

| Total | | | | | | 1,065 | | | | | | $ | 107.73 | | | | | 1,065 | | | | | | $ | 614,192 | |

On February 6, 2020, our 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.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

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

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

| Allegion plc | | | | | | 100.00 | | | | | | 97.80 | | | | | | 122.55 | | | | | | 124.00 | | | | | | 195.77 | | | | | | 185.22 | | | | | | | | |

| S&P 500 | | | | | | 100.00 | | | | | | 111.96 | | | | | | 136.40 | | | | | | 130.42 | | | | | | 171.49 | | | | | | 203.04 | | | | | | | | |

| S&P 400 Capital Goods | | | | | | 100.00 | | | | | | 131.93 | | | | | | 164.51 | | | | | | 141.46 | | | | | | 187.79 | | | | | | 225.05 | | | | | | | | |

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

In millions, except per share amounts:

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

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

| As of and for the years ended December 31, | | | | | | 2020 | | | | | | 2019 | | | | | | 2018 | | | | | | 2017 | | | | | | 2016 | | | | | |

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

| Net revenues | | | | | | $ | 2,719.9 | | | | | $ | 2,854.0 | | | | | $ | 2,731.7 | | | | | $ | 2,408.2 | | | | | $ | 2,238.0 | | | | |

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

| Net earnings attributable to Allegion plc ordinary shareholders | | | | | | 314.3 | | | (a) | | | 401.8 | | | (b) | | | 434.9 | | | (c) | | | 273.3 | | | (d) | | | 229.1 | | | (e) | | |

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

| Total assets | | | | | | 3,069.4 | | | | | | 2,967.2 | | | | | | 2,810.2 | | | | | | 2,542.0 | | | | | | 2,247.4 | | | | | |

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

| Total debt | | | | | | 1,429.6 | | | | | | 1,427.7 | | | | | | 1,444.8 | | | | | | 1,477.3 | | | | | | 1,463.8 | | | | | |

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

| Total Allegion plc shareholders’ equity | | | | | | 829.4 | | | | | | 757.4 | | | | | | 651.0 | | | | | | 401.6 | | | | | | 113.3 | | | | | |

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

| Earnings per share attributable to Allegion plc ordinary shareholders: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Basic: | | | | | | $ | 3.41 | | | | | $ | 4.29 | | | | | $ | 4.58 | | | | | $ | 2.87 | | | | | $ | 2.39 | | | | |

| Diluted: | | | | | | $ | 3.39 | | | | | $ | 4.26 | | | | | $ | 4.54 | | | | | $ | 2.85 | | | | | $ | 2.36 | | | | |

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

| Dividends declared per ordinary share | | | | | | $ | 1.28 | | | | | $ | 1.08 | | | | | $ | 0.84 | | | | | $ | 0.64 | | | | | $ | 0.48 | | | | |

(a)Net earnings for the year ended December 31, 2020, includes goodwill and intangible asset impairment charges of $99.0 million (net of tax), predominantly related to the economic challenges stemming from the ongoing COVID-19 pandemic and the expected impacts on the future cash flows in our EMEA and Asia Pacific segments, as well as a $37.9 million loss on assets held for sale at December 31, 2020 related to our Qatar Metal Industries ("QMI") business.

(b)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.

(c)Net earnings for the year ended December 31, 2018, includes a $21.9 million tax benefit related to an adjustment to the provisional amounts previously recognized related to the enactment of the 2017 U.S. Tax Cuts and Jobs Act (the "Tax Reform Act").

(d)Net earnings for the year ended December 31, 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 Tax Reform Act.

(e)Net earnings for the year ended December 31, 2016, includes $84.4 million of losses related to our previously divested Systems Integration business.

(1) The Company has not restated 2016 - 2017 for the impact of the adoption of ASC Topic 606, "Revenue from Contracts with Customers" ("ASC 606") as of January 1, 2018, nor has the Company restated the Total assets for 2016 - 2018 for the impact of the adoption of ASC Topic 842, "Leases" as of January 1, 2019.

The impact of excluding these standards in prior period presentation is not material.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

(a)The following Consolidated Financial Statements and Financial Statement Schedule and the report thereon of PricewaterhouseCoopers LLP dated February [removed: 16, 2021,] [added: 15, 2022,] are presented following Item 16 of this Annual Report on Form 10-K.

Report of independent registered public accounting firm [added: (PCAOB ID 238)]

Consolidated Statements of Comprehensive Income for the years ended December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018][added: 2019]

Consolidated Balance Sheets at December 31, [removed: 2020] [added: 2021] and [removed: 2019][added: 2020]

For the years ended December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018:][added: 2019:]

Schedule II – Valuation and Qualifying Accounts for the years ended December 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018][added: 2019]

(b)The unaudited selected quarterly financial data for the two years ended December 31, is as follows:

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

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

| In millions, except per share amounts | | | | | | 2020 | | | | | | | | | | | | | | | | | | | | |

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

| Net revenues | | | | | | $ | 674.7 | | | | | $ | 589.5 | | | | | $ | 728.4 | | | | | $ | 727.3 | |

| Cost of goods sold | | | | | | 381.6 | | | | | | 342.9 | | | | | | 409.2 | | | | | | 407.4 | | |

| Operating income | | | | | | 28.9 | | | | | | 96.5 | | | | | | 160.4 | | | | | | 117.7 | | |

| Net earnings | | | | | | 0.5 | | | | | | 73.7 | | | | | | 146.9 | | | | | | 93.4 | | |

| Net earnings attributable to Allegion plc | | | | | | 0.4 | | | | | | 73.7 | | | | | | 146.9 | | | | | | 93.3 | | |

| Earnings per share attributable to Allegion plc ordinary shareholders: | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Basic | | | | | | $ | — | | | | | $ | 0.80 | | | | | $ | 1.59 | | | | | $ | 1.02 | |

| Diluted | | | | | | $ | — | | | | | $ | 0.80 | | | | | $ | 1.58 | | | | | $ | 1.01 | |

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

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

| | | | | | | 2019 | | | | | | | | | | | | | | | | | | | | |

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

| 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 | | |

| Earnings per share attributable to Allegion plc ordinary shareholders: | | | | | | | | | | | | | | | | | | | | | | | | | | |

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

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

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

Net earnings from the first quarter of 2020 includes a goodwill and intangible asset impairment charge of $94.3 million (net of tax).

Net earnings from the fourth quarter of 2020 includes a $37.9 million loss on assets held for sale at December 31, 2020, related to our QMI business.

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.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of December 31, [removed: 2020,] [added: 2021,] 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.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, [removed: 2020.][added: 2021.]

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

We concluded that our internal control over financial reporting was effective as of December 31, [removed: 2020.][added: 2021.]

There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended December 31, [removed: 2020] [added: 2021] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Commission (COSO) in *Internal Control-Integrated Framework (2013)*.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

PART III

Not applicable.

PART III

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

| [removed: [10.3](http://www.sec.gov/Archives/edgar/data/1579241/000119312517286345/d399218dex101.htm)] [added: [10.3](https://www.sec.gov/Archives/edgar/data/1579241/000119312521333834/d187030dex101.htm)] | | | | | | Credit Agreement, dated as of [removed: September 12, 2017.] [added: November 18, 2021.] | | | | | | Incorporated by reference to Exhibit 10.1 of the Company's Form 8-K filed [removed: September 15, 2017] [added: November 18, 2021] (File No. 001-35971). | | |

| [removed: [10.15](http://www.sec.gov/Archives/edgar/data/1579241/000157924116000056/exhibit101luciamorettioffe.htm)] [added: [10.1](http://www.sec.gov/Archives/edgar/data/1579241/000157924117000009/exhibit10150jeffreybraunof.htm)[5](http://www.sec.gov/Archives/edgar/data/1579241/000157924117000009/exhibit10150jeffreybraunof.htm)] | | | | | | [removed: Lucia V. Moretti,] [added: Jeffrey N. Braun] Offer Letter, dated [removed: February 19,] [added: June 13,] 2014. * | | | | | | Incorporated by reference to Exhibit [removed: 10.1] [added: 10.15] of the Company's Form 10-K filed with the SEC on February [removed: 26, 2016] [added: 17, 2017] (File No. 001-35971). | | |

| [removed: [10.16](http://www.sec.gov/Archives/edgar/data/1579241/000157924117000009/exhibit10150jeffreybraunof.htm)] [added: [10.36](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000025/exhibit101-offerletter.htm)] | | | | | | [removed: Jeffrey N. Braun] [added: Timothy P. Eckersley] Offer Letter, dated [removed: June 13, 2014.] [added: March 3, 2021.] * | | | | | | Incorporated by reference to Exhibit [removed: 10.15] [added: 10.1] of the [removed: Company's] [added: Company’s] Form [removed: 10-K] [added: 8-K] filed with the SEC on [removed: February 17, 2017] [added: March 10, 2021] (File No. 001-35971). | | |

| [removed: [10.17](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1021formofallegionplcdeed.htm)] [added: [10.1](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1021formofallegionplcdeed.htm)[6](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1021formofallegionplcdeed.htm)] | | | | | | Form of Allegion plc Deed Poll Indemnity. | | | | | | Incorporated by reference to Exhibit 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). | | |

| [removed: [10.18](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1022formofallegionusholdi.htm)] [added: [10.1](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1022formofallegionusholdi.htm)[7](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1022formofallegionusholdi.htm)] | | | | | | Form of Allegion US Holding Company, Inc. Deed Poll Indemnity. | | | | | | Incorporated by reference to Exhibit 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: [10.19](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1023formofallegionirishho.htm)] [added: [10.1](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1023formofallegionirishho.htm)[8](http://www.sec.gov/Archives/edgar/data/1579241/000157924113000015/a1023formofallegionirishho.htm)] | | | | | | Form of Allegion Irish Holding Company Limited Deed Poll Indemnity. | | | | | | Incorporated by reference to Exhibit 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: [10.20](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit101annualincentivep.htm)] [added: [10.](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit101annualincentivep.htm)[19](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit101annualincentivep.htm)] | | | | | | Annual Incentive Plan. * | | | | | | Incorporated by reference to Exhibit 10.1 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: [10.2](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit102changeinctrlseve.htm)[0](http://www.sec.gov/Archives/edgar/data/1579241/000157924114000007/exhibit102changeinctrlseve.htm)] | | | | | | Change in Control Severance Plan. * | | | | | | Incorporated by reference to Exhibit 10.2 of the Company's Form 10-K filed with the SEC on March 10, 2014 (File No. 001-35971). | | |

| [removed: [10.22](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1022formofrestricte.htm)] [added: [10.21](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1021formofspecialgl.htm)] | | | | | | Form of [added: Special Global] Restricted Stock Unit Award Agreement. * | | | | | | Filed herewith. | | |

| [removed: [10.23](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1023formofstockopti.htm)] [added: [10.32](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1032formof2022globa.htm)] | | | | | | Form of [added: 2022 Global] Stock Option Award Agreement. * | | | | | | Filed herewith. | | |

| [removed: [10.24](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1024formofperforman.htm)] [added: [10.33](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1033formof2022globa.htm)] | | | | | | Form of [added: 2022 Global] Performance Stock Unit Award Agreement. * | | | | | | Filed herewith. | | |

| [removed: [10.25](http://www.sec.gov/Archives/edgar/data/1579241/000157924116000052/allegionspecialrsuagreement.htm)] [added: [10.25](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit1022formofrestr.htm)] | | | | | | Form of [removed: Special] [added: 2020 Global] Restricted Stock Unit Award Agreement. * | | | | | | Incorporated by reference to Exhibit [removed: 10.4] [added: 10.22] of the Company's Form [removed: 8-K] [added: 10-K] filed with the SEC on February [removed: 9, 2016] [added: 18, 2020] (File No. 001-35971). | | |

| [removed: [10.26](http://www.sec.gov/Archives/edgar/data/1579241/000157924115000013/exhibit101formofnon-employ.htm)] [added: [10.34](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 of the Company's Form 10-Q filed with the SEC on April 30, 2015 (File No. 001-35971). | | |

| [removed: [10.27](http://www.sec.gov/Archives/edgar/data/1579241/000157924115000033/exhibit101simonsvosssharep.htm)] [added: [10.35](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 of the Company's Form 10-Q filed with the SEC on July 30, 2015 (File No. 001-35971). | | |

| [removed: [10.28](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1028offerlettercmuh.htm)] [added: [10.](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1040-luisorbegosoof.htm)[40](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1040-luisorbegosoof.htm)] | | | | | | [removed: Chris E. Muhlenkamp] [added: Luis Orbegoso] Offer Letter, dated [removed: September 8, 2020.] [added: January 29, 2021.] * | | | | | | Filed herewith. | | |

| [removed: [10.29](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1029rsuawardagreeme.htm)] [added: [10.4](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1041-luisorbegosore.htm)[1](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1041-luisorbegosore.htm)] | | | | | | [removed: Chris E. Muhlenkamp] [added: Luis Orbegoso] Restricted Stock Unit Award Agreement, dated February [removed: 20, 2020.] [added: 18, 2021.] * | | | | | | Filed herewith. | | |

| [removed: [10.](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000008/exhibit101-separationagree.htm)[30](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000008/exhibit101-separationagree.htm)] [added: [10.37](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000025/exhibit102-retentionagreem.htm)] | | | | | | [removed: Lucia V. Moretti Separation] [added: Timothy P. Eckersley Retention] Agreement, dated [removed: December 31, 2020.] [added: March 3, 2021.] * | | | | | | Incorporated by reference to Exhibit [removed: 10.1] [added: 10.2] of the Company’s Form 8-K filed with the SEC on [removed: January 6,] [added: March 10,] 2021 (File No. 001-35971). | | |

| [removed: [21.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit2112020subsidiaries.htm)] [added: [21.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit211-subsidiarieslis.htm)] | | | | | | List of subsidiaries of Allegion plc. | | | | | | Filed herewith. | | |

| [removed: [23.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit2312020consentofind.htm)] [added: [23.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit2312021consentofind.htm)] | | | | | | Consent of Independent Registered Public Accounting Firm. | | | | | | Filed herewith. | | |

| [removed: [31.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit3112020ceocertifica.htm)] [added: [31.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit3112021ceocertifica.htm)] | | | | | | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | Filed herewith. | | |

| [removed: [31.2](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit3122020cfocertifica.htm)] [added: [31.2](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit3122021cfocertifica.htm)] | | | | | | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | Filed herewith. | | |

| [removed: [32.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit3212020ceocfo906cer.htm)] [added: [32.1](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit3212021ceocfo906cer.htm)] | | | | | | Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | Furnished herewith. | | |

| [10.22](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit1022formofrestricte.htm) | | | | | | Form of 2019 Global Restricted Stock Unit Award Agreement. * | | | | | | Incorporated by reference to Exhibit 10.22 of the Company's Form 10-K filed with the SEC on February 19, 2019 (File No. 001-35971). | | |

| [10.23](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit1023formofstockopti.htm) | | | | | | Form of 2019 Global Stock Option Award Agreement. * | | | | | | Incorporated by reference to Exhibit 10.23 of the Company's Form 10-K filed with the SEC on February 19, 2019 (File No. 001-35971). | | |

| [10.24](https://www.sec.gov/Archives/edgar/data/1579241/000157924119000006/exhibit1024formofperforman.htm) | | | | | | Form of 2019 Global Performance Stock Unit Award Agreement. * | | | | | | Incorporated by reference to Exhibit 10.24 of the Company's Form 10-K filed with the SEC on February 19, 2019 (File No. 001-35971). | | |

| [10.26](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit1023formofstock.htm) | | | | | | Form of 2020 Global Stock Option Award Agreement. * | | | | | | Incorporated by reference to Exhibit 10.23 of the Company's Form 10-K filed with the SEC on February 18, 2020 (File No. 001-35971). | | |

| [10.27](https://www.sec.gov/Archives/edgar/data/1579241/000157924120000013/exhibit1024formofperfo.htm) | | | | | | Form of 2020 Global Performance Stock Unit Award Agreement. * | | | | | | Incorporated by reference to Exhibit 10.24 of the Company's Form 10-K filed with the SEC on February 18, 2020 (File No. 001-35971). | | |

| [10.2](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1022formofrestricte.htm)[8](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1022formofrestricte.htm) | | | | | | Form of 2021 Global Restricted Stock Unit Award Agreement. * | | | | | | Incorporated by reference to Exhibit 10.22 of the Company's Form 10-K filed with the SEC on February 16, 2021 (File No. 001-35971). | | |

| [10.2](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1023formofstockopti.htm)[9](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1023formofstockopti.htm) | | | | | | Form of 2021 Global Stock Option Award Agreement. * | | | | | | Incorporated by reference to Exhibit 10.23 of the Company's Form 10-K filed with the SEC on February 16, 2021 (File No. 001-35971). | | |

| [10.](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1024formofperforman.htm)[30](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000020/exhibit1024formofperforman.htm) | | | | | | Form of 2021 Global Performance Stock Unit Award Agreement. * | | | | | | Incorporated by reference to Exhibit 10.24 of the Company's Form 10-K filed with the SEC on February 16, 2021 (File No. 001-35971). | | |

| [10.31](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1031formof2022globa.htm) | | | | | | Form of 2022 Global Restricted Stock Unit Award Agreement. * | | | | | | Filed herewith. | | |

| [10.38](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000043/ex106eckersleyrsuawardagre.htm) | | | | | | Timothy P. Eckersley Restricted Stock Unit Award Agreement, dated March 10, 2021. * | | | | | | Incorporated by reference to Exhibit 10.6 of the Company's Form 10-Q filed with the SEC on April 22, 2021 (File No. 001-35971). | | |

| [10.39](https://www.sec.gov/Archives/edgar/data/1579241/000157924121000043/ex107eckersleypsuawardagre.htm) | | | | | | Timothy P. Eckersley Performance Stock Unit Award Agreement, dated March 10, 2021. * | | | | | | Incorporated by reference to Exhibit 10.7 of the Company's Form 10-Q filed with the SEC on April 22, 2021 (File No. 001-35971). | | |

| [10.4](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1042-luisorbegosose.htm)[2](https://www.sec.gov/Archives/edgar/data/1579241/000157924122000019/exhibit1042-luisorbegosose.htm) | | | | | | Luis Orbegoso Separation Agreement, dated December 31, 2021. * | | | | | | Filed herewith. | | |

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[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

| Date: | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ David D. Petratis | | | | | | Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Patrick S. Shannon | | | | | | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Douglas P. Ranck | | | | | | Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer) | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Kirk S. Hachigian | | | | | | Director | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Steven C. Mizell | | | | | | Director | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Nicole Parent Haughey | | | | | | Director | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Dean I. Schaffer | | | | | | Director | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Charles L. Szews | | | | | | Director | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Dev Vardhan | | | | | | Director | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| /s/ Martin E. Welch III | | | | | | Director | | | | | | February [removed: 16, 2021] [added: 15, 2022] | | |

| [Report of Independent Registered Public Accounting [removed: Firm](#id905981cbc9343d5aac81ea1e75f9719_106)] [added: Firm](#i42dbe9d853384615ac6fc384cf0f23cd_109)] | | | [removed: F-[1](#id905981cbc9343d5aac81ea1e75f9719_106)] [added: F-[1](#i42dbe9d853384615ac6fc384cf0f23cd_109)] | | |

| [Consolidated Statements of Comprehensive [removed: Income](#id905981cbc9343d5aac81ea1e75f9719_109)] [added: Income](#i42dbe9d853384615ac6fc384cf0f23cd_112)] | | | [removed: F-[3](#id905981cbc9343d5aac81ea1e75f9719_109)] [added: F-[3](#i42dbe9d853384615ac6fc384cf0f23cd_112)] | | |

| [Consolidated Balance [removed: Sheets](#id905981cbc9343d5aac81ea1e75f9719_112)] [added: Sheets](#i42dbe9d853384615ac6fc384cf0f23cd_115)] | | | [removed: F-[4](#id905981cbc9343d5aac81ea1e75f9719_112)] [added: F-[4](#i42dbe9d853384615ac6fc384cf0f23cd_115)] | | |

| [Consolidated Statements of [removed: Equity](#id905981cbc9343d5aac81ea1e75f9719_115)] [added: Equity](#i42dbe9d853384615ac6fc384cf0f23cd_118)] | | | [removed: F-[5](#id905981cbc9343d5aac81ea1e75f9719_115)] [added: F-[5](#i42dbe9d853384615ac6fc384cf0f23cd_118)] | | |

| [Consolidated Statements of Cash [removed: Flows](#id905981cbc9343d5aac81ea1e75f9719_118)] [added: Flows](#i42dbe9d853384615ac6fc384cf0f23cd_121)] | | | [removed: F-[6](#id905981cbc9343d5aac81ea1e75f9719_118)] [added: F-[6](#i42dbe9d853384615ac6fc384cf0f23cd_121)] | | |

| [Notes to Consolidated Financial [removed: Statements](#id905981cbc9343d5aac81ea1e75f9719_121)] [added: Statements](#i42dbe9d853384615ac6fc384cf0f23cd_124)] | | | [removed: F-[7](#id905981cbc9343d5aac81ea1e75f9719_121)] [added: F-[7](#i42dbe9d853384615ac6fc384cf0f23cd_124)] | | |

| [Financial Statement Schedule: Schedule II – Valuation and Qualifying Accounts for the years ended December 31, [removed: 20](#id905981cbc9343d5aac81ea1e75f9719_205)[20](#id905981cbc9343d5aac81ea1e75f9719_205)[, 201](#id905981cbc9343d5aac81ea1e75f9719_205)[9](#id905981cbc9343d5aac81ea1e75f9719_205)] [added: 202](#i42dbe9d853384615ac6fc384cf0f23cd_196)[1](#i42dbe9d853384615ac6fc384cf0f23cd_196)[, 20](#i42dbe9d853384615ac6fc384cf0f23cd_196)[20](#i42dbe9d853384615ac6fc384cf0f23cd_196)] [and [removed: 20](#id905981cbc9343d5aac81ea1e75f9719_205)[18](#id905981cbc9343d5aac81ea1e75f9719_205)] [added: 20](#i42dbe9d853384615ac6fc384cf0f23cd_196)[19](#i42dbe9d853384615ac6fc384cf0f23cd_196)] | | | [removed: F-[40](#id905981cbc9343d5aac81ea1e75f9719_205)] [added: F-[37](#i42dbe9d853384615ac6fc384cf0f23cd_196)] | | |

To the Board of Directors and Shareholders of Allegion [removed: plc][added: Public Limited Company]

We have audited the accompanying consolidated balance sheets of Allegion plc and its subsidiaries (the “Company”) as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the related consolidated statements of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, [removed: 2020,] [added: 2021,] including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2020] [added: 2021] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2020,] [added: 2021,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was [removed: $819.0] [added: $803.8] million as of December 31, [removed: 2020,] [added: 2021,] and the goodwill associated with the [removed: EMEA and Asia Pacific] [added: Allegion International] reporting [removed: units] [added: unit] was [removed: $309.9 million and $8.0 million, respectively.][added: $302.6 million.]

The results of the [added: interim] impairment testing indicated that the estimated fair value of the [added: former] Asia Pacific reporting unit was less than its carrying [removed: value, and as such, the Company recorded an impairment of $88.1 million.][added: value.]

[removed: Goodwill] [added: As disclosed by management, goodwill] is tested annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the reporting unit is more likely than not less than the carrying amount of the reporting unit.

For the annual impairment [removed: analyses,] [added: analysis,] the estimated fair [removed: values] [added: value] of the [removed: EMEA and Asia Pacific] [added: Allegion International] reporting [removed: units were] [added: unit was] based on two valuation techniques, a discounted cash flow model [added: (income approach)] and a market multiple of earnings (market approach), with each method being weighted in the calculation.

[removed: As disclosed by management, the] [added: The] income approach relies on management’s estimates of revenue growth rates, [removed: terminal growth rates,] margin assumptions, and discount rates.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of [removed: EMEA and Asia Pacific] [added: the Allegion International] reporting [removed: units] [added: unit] is a critical audit matter are (i) the significant judgment by management when developing the fair value [removed: measurements] of the reporting [removed: units;] [added: unit;] (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, [removed: terminal growth rates, margin assumptions,] discount rates, peer group determination, and [added: selected] market [removed: multiple selections;] [added: multiples;] and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the [removed: Company’s EMEA and Asia Pacific] [added: Allegion International] reporting [removed: units.][added: unit.]

These procedures also included, among others (i) testing management’s process for developing the fair value [removed: measurements] [added: estimate] of the [added: Allegion International] reporting [removed: units;] [added: unit;] (ii) evaluating the appropriateness of the [removed: discounted cash flow] [added: income] and market [removed: multiple of earnings models;] [added: approaches;] (iii) testing the completeness and accuracy of underlying data used in the [removed: models;] [added: approaches;] and (iv) evaluating the reasonableness of [added: the] significant assumptions used by management related to revenue growth [removed: rates, terminal growth rates, margin assumptions,] [added: rates and] discount [removed: rates,] [added: rates in the income approach, and the] peer group [removed: determination,] [added: determination] and [added: selected] market [removed: multiple selections.][added: multiples in the market approach.]

Evaluating management’s assumptions related to revenue growth rates [removed: and margin assumptions] involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting [removed: units,] [added: unit,] (ii) the consistency with external market and industry data, and (iii) whether [removed: these assumptions were] [added: the assumption was] consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s [removed: discounted cash flow] [added: income] and market [removed: multiple models,] [added: approaches,] and [removed: management’s significant assumptions related to terminal growth rates,] [added: the] discount rates, [removed: selected] peer [removed: group,] [added: group determination,] and [added: selected] market [removed: multiples.][added: multiples assumptions.]

| For the years ended December 31, | | | | | | [removed: 2020] [added: 2021] | | | | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | |

| Net revenues | | | | | | $ | [removed: 2,719.9] [added: 2,867.4] | | | | | $ | [removed: 2,854.0] [added: 2,719.9] | | | | | $ | [removed: 2,731.7] [added: 2,854.0] | |

| Cost of goods sold | | | | | | [removed: 1,541.1] [added: 1,662.5] | | | | | | [removed: 1,601.7] [added: 1,541.1] | | | | | | [removed: 1,558.4] [added: 1,601.7] | | |

| Selling and administrative expenses | | | | | | [removed: 635.7] [added: 674.7] | | | | | | [removed: 681.3] [added: 635.7] | | | | | | [removed: 647.5] [added: 681.3] | | |

| Impairment of goodwill and intangible assets | | | | | | [removed: 101.7] [added: —] | | | | | | [removed: 5.9] [added: 101.7] | | | | | | [removed: —] [added: 5.9] | | |

| Loss on assets held for sale | | | | | | [removed: 37.9] [added: —] | | | | | | [removed: —] [added: 37.9] | | | | | | — | | |

| Operating income | | | | | | [removed: 403.5] [added: 530.2] | | | | | | [removed: 565.1] [added: 403.5] | | | | | | [removed: 525.8] [added: 565.1] | | |

| /s/ Lauren B. Peters | | | | | | Director | | | | | | February 15, 2022 | | |

| (Lauren B. Peters) | | | | | | | | | | | | | | |

*Goodwill Impairment Assessment - Allegion International Reporting Unit*

February 15, 2022

| Net earnings | | | | | | 483.3 | | | | | | — | | | | | | — | | | | | | — | | | | | | 483.0 | | | | | | — | | | | | | 0.3 | | |

| Repurchase of ordinary shares | | | | | | (412.8) | | | | | | — | | | | | | (3.3) | | | | | | (25.8) | | | | | | (387.0) | | | | | | — | | | | | | — | | |

| Balance at December 31, 2021 | | | | | | $ | 762.4 | | | | | $ | 0.9 | | | | | 88.2 | | | | | | $ | — | | | | | $ | 952.6 | | | | | $ | (194.4) | | | | | $ | 3.3 | |

| Unrealized (gains) losses on investments, net | | | | | | (25.6) | | | | | | 2.0 | | | | | | (3.1) | | |

| Other items | | | | | | 7.9 | | | | | | (6.4) | | | | | | (0.5) | | |

| Proceeds from sale of equity method investment | | | | | | 7.6 | | | | | | — | | | | | | — | | |

| Proceeds from issuance of 2021 Term Facility | | | | | | 250.0 | | | | | | — | | | | | | — | | |

| Payments of short-term borrowings and long-term debt, net | | | | | | (238.9) | | | | | | (0.2) | | | | | | (417.9) | | |

Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency.

reasonably certain.

Business Combinations: The fair value of consideration paid in a business combination is allocated to the tangible and identifiable intangible assets acquired, liabilities assumed and goodwill.

Acquired intangible assets primarily include indefinite-lived trade names, customer relationships and completed technologies.

The accounting for business combinations involves a considerable amount of judgment and estimation, including the fair value of acquired intangible assets involving projections of future revenues and cash flows that are either discounted at an estimated discount rate or measured at an estimated royalty rate; fair value of other acquired assets and assumed liabilities, including potential contingencies; and the useful lives of the acquired assets.

As a result, in the case of significant acquisitions, the Company normally obtains the assistance of a third-party valuation specialist in estimating fair values of acquired tangible and intangible assets and assumed liabilities.

An income approach or market approach (or both) is utilized in accordance with accepted valuation models for significant acquired assets to determine fair value.

that realizing these benefits is considered in its judgment to be more likely than not.

replacement of, those currently utilized by the Company based upon enhanced technology and regulatory changes.

undesignated derivative.

In October 2021, the FASB issued ASU No. 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." This ASU requires contract assets and contract liabilities (e.g. deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers".

Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

Historically, such amounts were recognized by the acquirer at fair value in purchase accounting.

Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued.

The Company elected to early adopt ASU 2021-08 on January 1, 2022, and will apply to all business combinations consummated subsequent to this date.

| December 31, 2019 (gross) | | | $ | 485.0 | | | | | $ | 873.8 | | | | | $ | 1,358.8 | |

| Acquisitions and adjustments | | | 0.1 | | | | | | 4.6 | | | | | | 4.7 | | |

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

| December 31, 2021 (net) | | | $ | 501.2 | | | | | $ | 302.6 | | | | | $ | 803.8 | |

Consequently, a goodwill impairment charge of $88.1 million was recorded, which is included in Impairment of goodwill and intangible assets in the Consolidated Statement of Comprehensive Income for the year ended December 31, 2020.

Intangible asset impairment charges are included in Impairment of goodwill and intangible assets in the Consolidated Statements of Comprehensive Income.

In July 2021, the Company acquired, through its subsidiaries, certain assets of Astrum Benelux B.V. ("Astum Benelux") and 100% of the equity of WorkforceIT B.V. in the Netherlands ("WorkforeceIT"), both of which were previously held under common control and offer workforce management technology products and solutions in the Benelux region of Europe.

Neither the assets from Astrum Benelux nor the acquisition of WorkforceIT had a material impact on the Consolidated Financial Statements.

Both Workforce IT and the assets acquired from Astrum Benelux were accounted for as a business combination and have been integrated into the Allegion International segment.

As previously disclosed, during the fourth quarter of 2020, the net assets of the Company's Qatar Metal Industries ("QMI") business, met the criteria to be classified as held for sale, and accordingly, were written down to fair value, resulting in a Loss on assets held for sale in 2020 of $37.9 million.

On February 28, 2021, the Company completed its divestiture of QMI.

The completion of the divestiture did not have a material impact to the Consolidated Financial Statements for the year ended December 31, 2021.

| 2021 Term Facility | | | $ | 250.0 | | | | | $ | — | |

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

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[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

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[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

*Change in Accounting Principle*

As discussed in Note 11 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

[Table of](#id905981cbc9343d5aac81ea1e75f9719_7) [Contents](#id905981cbc9343d5aac81ea1e75f9719_7)

*Goodwill Impairment Assessments - EMEA and Asia Pacific Reporting Units*

As of March 31, 2020, management identified a triggering event for the EMEA and Asia Pacific reporting units, and as a result, performed interim goodwill impairment analyses.

For the impairment analyses performed as of March 31, 2020, the estimated fair values of the EMEA and Asia Pacific reporting units were based on a discounted cash flow model (income approach).

February 16, 2021

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| Restricted cash | | | | | | — | | | | | | 3.4 | | |

| Balance at December 31, 2017 | | | | | | $ | 405.5 | | | | | $ | 1.0 | | | | | 95.1 | | | | | | $ | 9.1 | | | | | $ | 544.4 | | | | | $ | (152.9) | | | | | $ | 3.9 | |

| Net earnings | | | | | | 435.4 | | | | | | — | | | | | | — | | | | | | — | | | | | | 434.9 | | | | | | — | | | | | | 0.5 | | |

| Repurchase of ordinary shares | | | | | | (67.3) | | | | | | (0.1) | | | | | | (0.9) | | | | | | (31.5) | | | | | | (35.7) | | | | | | — | | | | | | — | | |

| Reclassification due to adoption of ASU 2018-02 (see Note 14) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 9.7 | | | | | | (9.7) | | | | | | — | | |

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| Other items | | | | | | (4.4) | | | | | | (3.6) | | | | | | (8.0) | | |

| Purchase of other investments | | | | | | (3.0) | | | | | | — | | | | | | (14.3) | | |

| Short-term repayments, net | | | | | | (0.1) | | | | | | (0.2) | | | | | | (0.6) | | |

| Proceeds from Revolving facility | | | | | | — | | | | | | — | | | | | | 115.0 | | |

| Payments of long-term debt | | | | | | (0.1) | | | | | | (417.7) | | | | | | (35.5) | | |

Certain prior-period amounts have been reclassified to conform to the current year presentation.

When available, the rate implicit in the lease is utilized as the discount rate to determine the lease liability.

If this rate is unavailable, the Company utilizes its incremental borrowing rate as the discount rate, which is the rate at inception of the lease that would hypothetically be incurred to borrow over a similar term the funds needed to purchase the leased asset.

Refer to Note 11 for further details on the Company's lease accounting policies.

Given the high degree of market volatility and lack of reliable market data that existed as of March 31, 2020, the Company determined a discounted cash flow model (income approach) provided the best approximation of fair value of these reporting units for the purpose of performing these interim tests.

This was a change in estimate, as historically the determination of reporting unit fair values has been estimated based on both an income and a market approach, as discussed above, with each method being weighted in the calculation.

As markets stabilized throughout the year, the Company reverted to utilizing both an income and market approach while performing its annual impairment test in the fourth quarter.

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Standard product warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience.

A performance obligation is a promise in a contract to transfer control of a distinct product or to provide a service, or a bundle of products or services, to a customer.