filings.toolsItem 1. Financial Statements
93K characters. Original on sec.gov ·
Item 1. Financial Statements
Allegion plc
Condensed and Consolidated Statements of Comprehensive Income
(Unaudited)
| Three months ended | Nine months ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| In millions, except per share amounts | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net revenues | $ | 1,172.6 | $ | 1,070.2 | $ | 3,357.7 | $ | 3,034.1 | |||||||||||||||
| Cost of goods sold | 624.4 | 580.4 | 1,837.5 | 1,655.3 | |||||||||||||||||||
| Selling and administrative expenses | 263.6 | 256.0 | 785.6 | 728.9 | |||||||||||||||||||
| Operating income | 284.6 | 233.8 | 734.6 | 649.9 | |||||||||||||||||||
| Interest expense | 24.2 | 26.6 | 73.2 | 75.9 | |||||||||||||||||||
| Other income, net | (7.4) | (1.7) | (5.8) | (10.5) | |||||||||||||||||||
| Earnings before income taxes | 267.8 | 208.9 | 667.2 | 584.5 | |||||||||||||||||||
| Provision for income taxes | 46.9 | 20.5 | 123.6 | 88.2 | |||||||||||||||||||
| Net earnings | $ | 220.9 | $ | 188.4 | $ | 543.6 | $ | 496.3 | |||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic net earnings | $ | 2.60 | $ | 2.19 | $ | 6.36 | $ | 5.76 | |||||||||||||||
| Diluted net earnings | $ | 2.59 | $ | 2.18 | $ | 6.33 | $ | 5.73 | |||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic | 84.8 | 85.9 | 85.5 | 86.1 | |||||||||||||||||||
| Diluted | 85.2 | 86.5 | 85.9 | 86.6 | |||||||||||||||||||
| Total comprehensive income | $ | 213.3 | $ | 178.3 | $ | 507.4 | $ | 613.5 |
See accompanying notes to condensed and consolidated financial statements.
Allegion plc
Condensed and Consolidated Balance Sheets
(Unaudited)
| In millions, except share amounts | September 30, 2026 | December 31, 2025 | |||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 388.1 | $ | 356.2 | |||||||
| Accounts and notes receivable, net | 551.6 | 437.7 | |||||||||
| Inventories | 539.4 | 519.0 | |||||||||
| Other current assets | 83.9 | 78.9 | |||||||||
| Total current assets | 1,563.0 | 1,391.8 | |||||||||
| Property, plant and equipment, net | 457.2 | 444.6 | |||||||||
| Goodwill | 1,926.1 | 1,912.4 | |||||||||
| Intangible assets, net | 798.5 | 826.0 | |||||||||
| Other noncurrent assets | 722.1 | 648.9 | |||||||||
| Total assets | $ | 5,466.9 | $ | 5,223.7 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 283.2 | $ | 244.8 | |||||||
| Accrued expenses and other current liabilities | 539.5 | 510.4 | |||||||||
| Short-term borrowings and current maturities of long-term debt | 0.3 | 0.2 | |||||||||
| Total current liabilities | 823.0 | 755.4 | |||||||||
| Long-term debt | 2,031.7 | 1,979.9 | |||||||||
| Other noncurrent liabilities | 439.8 | 420.8 | |||||||||
| Total liabilities | 3,294.5 | 3,156.1 | |||||||||
| Equity: | |||||||||||
| Ordinary shares, $0.01 par value (84,320,027 and 86,066,997 shares issued and outstanding at September 30, 2026 and December 31, 2025, respectively) | 0.8 | 0.9 | |||||||||
| Capital in excess of par value | — | 34.2 | |||||||||
| Retained earnings | 2,413.4 | 2,238.1 | |||||||||
| Accumulated other comprehensive loss | (241.8) | (205.6) | |||||||||
| Total equity | 2,172.4 | 2,067.6 | |||||||||
| Total liabilities and equity | $ | 5,466.9 | $ | 5,223.7 |
See accompanying notes to condensed and consolidated financial statements.
Allegion plc
Condensed and Consolidated Statements of Cash Flows
(Unaudited)
| Nine months ended | |||||||||||
| September 30, | |||||||||||
| In millions | 2026 | 2025 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings | $ | 543.6 | $ | 496.3 | |||||||
| Adjustments to arrive at net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 107.4 | 98.6 | |||||||||
| Changes in assets and liabilities and other non-cash items | (47.0) | (51.2) | |||||||||
| Net cash provided by operating activities | 604.0 | 543.7 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (64.6) | (58.5) | |||||||||
| Acquisition of businesses, net of cash acquired | (74.7) | (594.0) | |||||||||
| Other investing activities, net | (38.9) | 3.2 | |||||||||
| Net cash used in investing activities | (178.2) | (649.3) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Debt repayments | — | (15.7) | |||||||||
| Proceeds from Revolving Facility | 289.4 | 300.0 | |||||||||
| Repayments of Revolving Facility | (239.0) | (201.0) | |||||||||
| Net proceeds from debt | 50.4 | 83.3 | |||||||||
| Dividends paid to ordinary shareholders | (140.2) | (131.4) | |||||||||
| Repurchase of ordinary shares | (280.3) | (80.0) | |||||||||
| Other financing activities, net | (17.9) | 12.9 | |||||||||
| Net cash used in financing activities | (388.0) | (115.2) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (5.9) | 19.7 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 31.9 | (201.1) | |||||||||
| Cash and cash equivalents - beginning of period | 356.2 | 503.8 | |||||||||
| Cash and cash equivalents - end of period | $ | 388.1 | $ | 302.7 |
See accompanying notes to condensed and consolidated financial statements.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying Condensed and Consolidated Financial Statements of Allegion plc, an Irish public limited company, and its consolidated subsidiaries (“Allegion” or the “Company”), reflect the consolidated operations of the Company and have been prepared in accordance with United States (“U.S.”) Securities and Exchange Commission (“SEC”) interim reporting requirements. Accordingly, the accompanying Condensed and Consolidated Financial Statements do not include all disclosures required by accounting principles generally accepted in the U.S. (“GAAP”) for full financial statements and should be read in conjunction with the Consolidated Financial Statements included in the Allegion Annual Report on Form 10-K for the year ended December 31, 2025. In the opinion of management, the accompanying Condensed and Consolidated Financial Statements contain all adjustments, which include normal recurring adjustments, necessary to state fairly the consolidated unaudited results for the interim periods presented.
NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires disaggregated disclosures of certain categories of expenses that are included in expense line items on the face of the consolidated statements of comprehensive income. This guidance will be effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. This ASU will be applied prospectively and will result in additional required disclosures in the Company’s Consolidated Financial Statements once adopted.
In September 2025, the FASB issued ASU No. 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software”, which removes references to prescriptive and sequential software development stages, and requires entities to start capitalizing software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. This guidance will be effective for annual and interim periods beginning after December 15, 2027. This ASU is to be applied prospectively, but retrospective application is permitted. This ASU is not expected to have a material impact to the Company’s Consolidated Financial Statements.
In December 2025, the FASB issued ASU No. 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements”, which creates a comprehensive list of interim disclosure requirements, clarifies the scope and applicability of those interim disclosure requirements, and adds a principle requiring disclosure of material events and transactions that have occurred since the Company’s most recently filed Annual Report on Form 10-K that have not otherwise been disclosed. This guidance will be effective for interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact of this ASU on its Condensed and Consolidated Financial Statements.
NOTE 3 - ACQUISITIONS
2026
The following are acquisitions made in 2026:
DCI
On March 2, 2026, the Company, through its subsidiaries, acquired 100% of Door Components, Inc. (“DCI”), a manufacturer of custom, quick ship hollow metal doors and frames for industrial, commercial and institutional markets based in the United States. DCI is reported in the Company’s Allegion Americas segment. The purchase consideration, net of cash acquired, was approximately $69.3 million. This acquisition was accounted for as a business combination and was funded with available cash on hand and borrowings under the Revolving Facility.
Overly
On October 2, 2026, the Company, through its subsidiaries, acquired 100% of Overly Door Company (“Overly”), a manufacturer of custom and pre-engineered doors for acoustic, blast, bullet-resistant and vault security based in the United States. Overly will be reported in the Company’s Allegion Americas segment. The purchase consideration was approximately $88.7 million. This acquisition was funded with available cash on hand and borrowings under the Revolving Facility.
As the initial accounting for the Overly acquisition is incomplete, the Company has not provided the aggregate preliminary purchase price allocation for these 2026 acquisitions.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2025
The following are acquisitions made during the nine months ended September 30, 2025:
Next Door
On February 4, 2025, the Company, through its subsidiaries, acquired Next Door Company (“Next Door”), a global provider of security products and solutions based in the United States. Next Door is reported in the Company’s Allegion Americas segment.
Lemaar
On March 1, 2025, the Company, through its subsidiaries, acquired Lemaar Pty Ltd (“Lemaar”), a global provider of security products and solutions based in Australia. Lemaar is reported in the Company’s Allegion International segment.
Trimco
On April 2, 2025, the Company, through its subsidiaries, acquired 100% of Trimco Hardware ("Trimco"), a manufacturer of high-performance and custom-designed architectural hardware primarily sold for commercial and institutional markets based in the United States. Trimco is reported in the Company's Allegion Americas segment.
Novas
On June 2, 2025, the Company, through its subsidiaries, acquired 100% of Nova Hardware Pty Ltd ("Novas"), an architectural door hardware company based in Australia. Novas is reported in the Company's Allegion International segment.
ELATEC
On July 1, 2025, the Company, through its subsidiaries, acquired 100% of ELATEC, including Elatec GmbH and other group entities ("ELATEC"). ELATEC is a manufacturer of security and access technology based in Germany. This acquisition helps the Company expand its global electronics portfolio in attractive end markets while also increasing strategic relationships with channel partners. The purchase price of the acquisition was €327.9 million (approximately $386.5 million). The Company used cash on hand and borrowings under the Revolving Facility to finance the acquisition. ELATEC is reported in the Company's Allegion International segment.
Gatewise
On July 2, 2025, the Company, through its subsidiaries, acquired 100% of Gatewise Inc. (“Gatewise"), a provider of smart access control solutions in the U.S. multifamily marketplace based in the United States. Gatewise is reported in the Company's Allegion Americas segment.
Waitwhile
On July 7, 2025, the Company, through its subsidiaries, acquired 100% of Waitwhile Inc. (“Waitwhile"), a software-as-a-service provider that specializes in cloud-based appointment scheduling and queue management based in the United States. Waitwhile is reported in the Company's Allegion Americas segment.
UAP
On August 1, 2025, the Company, through its subsidiaries, acquired 100% of UAP Group Limited (“UAP"), a security solutions provider based in the United Kingdom. UAP is reported in the Company's Allegion International segment.
Brisant
On August 12, 2025, the Company, through its subsidiaries, acquired 100% of Brisant Secure Limited (“Brisant"), a security hardware provider based in the United Kingdom. Brisant is reported in the Company's Allegion International segment.
The aggregate purchase consideration for these 2025 acquisitions, net of cash acquired, was approximately $623.8 million. This includes an acquisition-date fair value of $30.3 million for earnout contingent consideration, a portion of which has been settled, while the remainder becomes payable at certain dates through 2028 if certain conditions are achieved. These acquisitions were accounted for as business combinations and were funded with available cash on hand and borrowings under the Revolving Facility.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table summarizes the allocation of the aggregate purchase consideration for these 2025 acquisitions, which includes cash consideration and the estimated fair value of contingent consideration, to assets acquired and liabilities assumed as of the acquisition dates:
| In millions | |||||
| Net working capital | $ | 36.1 | |||
| Property, plant and equipment and other noncurrent assets | 25.3 | ||||
| Goodwill | 374.6 | ||||
| Intangible assets | 279.4 | ||||
| Deferred tax liabilities related to acquired intangible assets | (70.6) | ||||
| Other noncurrent liabilities | (21.0) | ||||
| Total net assets acquired and liabilities assumed | $ | 623.8 |
Intangible assets recognized as of the acquisition dates were comprised of the following:
| In millions | Value (in millions) | Weighted average useful life (in years) | ||||||||||||
| Completed technologies/patents | $ | 40.0 | 11 | |||||||||||
| Customer relationships | 191.8 | 20 | ||||||||||||
| Trade names (finite-lived) | 47.6 | 14 | ||||||||||||
Goodwill results from several factors including Allegion-specific synergies that were excluded from the cash flow projections used in the valuation of intangible assets and intangible assets that do not qualify for separate recognition. The majority of the goodwill related to these acquisitions is not expected to be deductible for tax purposes.
The following unaudited pro forma financial information for the three and nine months ended September 30, 2025 reflects the consolidated results of operations of the Company as if these acquisitions had taken place on January 1, 2024:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| In millions | 2025 | 2025 | |||||||||||||||||||||
| Net revenues | $ | 1,077.3 | $ | 3,120.6 | |||||||||||||||||||
| Net earnings | 193.7 | 499.5 |
The unaudited pro forma financial information is presented for informational purposes only and is not intended to be indicative of results of operations that would have occurred had the pro forma events taken place on the date indicated or the future consolidated results of operations of the combined company. The unaudited pro forma financial information does not reflect any synergies or other strategic benefits as a result of the acquisitions. The unaudited pro forma financial information is required under GAAP, and has been calculated after applying the Company's accounting policies and adjusting the historical financial results to reflect additional items directly attributable to the acquisitions that would have been incurred assuming the acquisitions had occurred on January 1, 2024, including amortization of acquired intangible assets, interest costs for debt to fund the acquisitions, and acquisition and integration costs.
The following financial information reflects the Net revenues and Earnings before income taxes generated by the businesses since the acquisition dates included within the Company's Condensed and Consolidated Statements of Comprehensive Income:
| In millions | Three months ended September 30, 2025 | Nine months ended September 30, 2025 | |||||||||||||||
| Net revenues | $ | 38.0 | $ | 47.6 | |||||||||||||
| Earnings before income taxes | 2.3 | 3.7 |
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4 - INVENTORIES
Inventories are stated at the lower of cost and net realizable value using the first-in, first-out (FIFO) method. The major classes of inventories were as follows:
| In millions | September 30, 2026 | December 31, 2025 | |||||||||
| Raw materials | $ | 253.1 | $ | 237.9 | |||||||
| Work-in-process | 56.4 | 55.1 | |||||||||
| Finished goods | 229.9 | 226.0 | |||||||||
| Total | $ | 539.4 | $ | 519.0 |
NOTE 5 - GOODWILL
The changes in the carrying amount of goodwill for the nine months ended September 30, 2026, were as follows:
| In millions | Allegion Americas | Allegion International | Total**(a)** | ||||||||||||||
| December 31, 2025 | $ | 1,281.1 | $ | 631.3 | $ | 1,912.4 | |||||||||||
| Acquisitions and adjustments | 36.5 | 0.6 | 37.1 | ||||||||||||||
| Currency translation | (5.0) | (18.4) | (23.4) | ||||||||||||||
| September 30, 2026 | $ | 1,312.6 | $ | 613.5 | $ | 1,926.1 |
(a) Accumulated impairment for the International segment was $573.6 million as of September 30, 2026 and December 31, 2025. There is no accumulated impairment for the Americas segment.
There was no impairment of goodwill for the nine months ended September 30, 2026 and 2025.
NOTE 6 - INTANGIBLE ASSETS
The gross amount of the Company’s intangible assets and related accumulated amortization were as follows:
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| In millions | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | ||||||||||||||||||||||||||||||||
| Completed technologies/patents | $ | 119.3 | $ | (57.1) | $ | 62.2 | $ | 121.2 | $ | (52.1) | $ | 69.1 | ||||||||||||||||||||||||||
| Customer relationships | 787.4 | (277.3) | 510.1 | 776.3 | (254.2) | 522.1 | ||||||||||||||||||||||||||||||||
| Trade names (finite-lived) | 213.7 | (132.6) | 81.1 | 210.8 | (119.6) | 91.2 | ||||||||||||||||||||||||||||||||
| Other | 84.7 | (45.3) | 39.4 | 78.4 | (42.0) | 36.4 | ||||||||||||||||||||||||||||||||
| Total finite-lived intangible assets | 1,205.1 | $ | (512.3) | 692.8 | 1,186.7 | $ | (467.9) | 718.8 | ||||||||||||||||||||||||||||||
| Trade names (indefinite-lived) | 105.7 | 105.7 | 107.2 | 107.2 | ||||||||||||||||||||||||||||||||||
| Total | $ | 1,310.8 | $ | 798.5 | $ | 1,293.9 | $ | 826.0 |
Intangible asset amortization expense was $55.9 million and $53.0 million for the nine months ended September 30, 2026 and 2025, respectively. Future estimated amortization expense on existing intangible assets in each of the next five years amounts to approximately $75.2 million for full year 2026, $68.5 million for 2027, $59.2 million for 2028, $56.3 million for 2029 and $45.8 million for 2030.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 7 - DEBT AND CREDIT FACILITIES
Long-term debt and other borrowings consisted of the following:
| In millions | September 30, 2026 | December 31, 2025 | |||||||||
| Revolving Facility | $ | 240.9 | $ | 190.6 | |||||||
| 3.550% Senior Notes due 2027 | 400.0 | 400.0 | |||||||||
| 3.500% Senior Notes due 2029 | 400.0 | 400.0 | |||||||||
| 5.411% Senior Notes due 2032 | 600.0 | 600.0 | |||||||||
| 5.600% Senior Notes due 2034 | 400.0 | 400.0 | |||||||||
| Other debt | 0.3 | 0.2 | |||||||||
| Total borrowings outstanding | 2,041.2 | 1,990.8 | |||||||||
| Discounts and debt issuance costs, net | (9.2) | (10.7) | |||||||||
| Total debt | 2,032.0 | 1,980.1 | |||||||||
| Less current portion of long-term debt | 0.3 | 0.2 | |||||||||
| Total long-term debt | $ | 2,031.7 | $ | 1,979.9 |
Unsecured Credit Facilities
The Company has an unsecured revolving credit facility (the “Revolving Facility”) that matures on May 20, 2030, and provides aggregate commitments of up to $1.0 billion, which includes up to $100.0 million for the issuance of letters of credit. As of September 30, 2026, the Company had outstanding borrowings of $240.9 million and letters of credit of $25.3 million. On October 1, 2026, the Company borrowed an additional $40.0 million on the Revolving Facility which was used for the acquisition of Overly. The Revolving Facility is unconditionally guaranteed jointly and severally on an unsecured basis by Allegion plc, Allegion US Holding Company Inc. (“Allegion US Hold Co”), the Company’s wholly-owned subsidiary, and Allegion (Ireland) Finance Designated Activity Company (“Allegion Ireland DAC”), the Company’s wholly-owned subsidiary.
Borrowings under the Revolving Facility are due upon its maturity but may be repaid at any time without premium or penalty, and amounts repaid may be reborrowed. The Company pays certain fees with respect to the Revolving Facility, including an unused commitment fee on the undrawn portion of between 0.080% and 0.200% per year depending on the Company’s credit ratings, as well as certain other fees.
Outstanding borrowings under the Revolving Facility accrue interest, at the option of the Company, equal to either: (i) a Secured Overnight Financing Rate (“SOFR”) rate plus an applicable margin or (ii) a base rate (as defined in the credit agreement) plus the applicable margin. The applicable margin ranges from 0.875% to 1.375% depending on the Company’s credit ratings. At September 30, 2026, the Company’s outstanding borrowings under the Revolving Facility accrued interest at SOFR plus a margin of 1.125%, resulting in an interest rate of 4.939%. The Revolving Facility also contains negative and affirmative covenants and events of default that, among other things, limit or restrict the Company’s ability to enter into certain transactions. In addition, the Revolving Facility requires the Company to comply with a maximum leverage ratio as defined in the credit agreement. As of September 30, 2026, the Company was in compliance with all applicable covenants under the credit agreement.
Senior Notes
As of September 30, 2026, Allegion US Hold Co has $400.0 million outstanding of its 3.550% Senior Notes due 2027 (the “3.550% Senior Notes”), $600.0 million outstanding of its 5.411% Senior Notes due 2032 (the “5.411% Senior Notes”) and $400.0 million outstanding of its 5.600% Senior Notes due 2034 (the “5.600% Senior Notes”), and Allegion plc has $400.0 million outstanding of its 3.500% Senior Notes due 2029 (the “3.500% Senior Notes,” and all four senior notes collectively, the “Senior Notes”). The 3.550% Senior Notes and 3.500% Senior Notes both require semi-annual interest payments on April 1 and October 1 of each year and mature on October 1, 2027 and October 1, 2029, respectively. The 5.411% Senior Notes require semi-annual interest payments on January 1 and July 1 of each year and mature on July 1, 2032. The 5.600% Senior Notes require semi-annual interest payments on May 29 and November 29 of each year and mature on May 29, 2034.
The 3.550% Senior Notes, 5.411% Senior Notes and 5.600% Senior Notes are senior unsecured obligations of Allegion US Hold Co and rank equally with all of Allegion US Hold Co’s existing and future senior unsecured and unsubordinated indebtedness. The guarantee of the 3.550% Senior Notes, 5.411% Senior Notes and 5.600% Senior Notes is the senior unsecured obligation of Allegion plc and ranks equally with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness. The 3.500% Senior Notes are senior unsecured obligations of Allegion plc, are guaranteed by
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Allegion US Hold Co and rank equally with all of the Company’s existing and future senior unsecured indebtedness. As of September 30, 2026, the Company was in compliance with all applicable covenants under the Senior Notes.
NOTE 8 - FINANCIAL INSTRUMENTS
Currency Hedging Instruments
The Company uses foreign currency forward and cross-currency swap contracts to manage the risks associated with currency exchange rate exposures.
In the second quarter of 2026, the Company entered into cross-currency swaps with gross notional amounts totaling $100.0 million maturing in July 2032. These instruments were designated as a net investment hedge of a Euro functional currency denominated subsidiary. Periodic swap interest accruals are recognized in Net earnings and changes in the fair value of the swaps are recorded in Accumulated other comprehensive loss as a component of Currency translation. The Company determined the hedge to be effective at inception of the hedge relationship and assesses effectiveness quarterly by ensuring the net investment in the associated Euro functional currency denominated subsidiaries is greater than the derivative notional amount.
Net investment hedges are used to hedge the foreign currency risk of net investments in foreign operations. Cash flows upon settlement of a net investment hedge and for periodic interest received or paid are classified as investing activities in the Condensed and Consolidated Statements of Cash Flows. Recognition in earnings of amounts previously recognized in Accumulated other comprehensive loss is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. In the event of a complete or substantially complete liquidation of the net investment, cash flows from net investment hedges are classified as investing activities in the Condensed and Consolidated Statements of Cash Flows.
The gross notional amount of the Company’s currency derivatives was $350.9 million and $320.1 million at September 30, 2026 and December 31, 2025, respectively. Neither the fair values of currency derivatives, which are determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily observable (Level 2 inputs under the fair value hierarchy described in Note 11), nor the balances included in Accumulated other comprehensive loss were material as of September 30, 2026 or December 31, 2025. Currency derivatives did not have a material impact to Net earnings, Other comprehensive income, or the Condensed and Consolidated Statements of Cash Flows during the nine months ended September 30, 2026 and 2025, nor is the amount to be reclassified into Net earnings over the next 12 months expected to be material. At September 30, 2026, the maximum term of the Company’s foreign currency forward contracts was less than one year, and the term of the Company’s cross-currency swaps was six years.
Concentration of Credit Risk
The counterparties to the Company’s forward contracts and cross-currency swaps consist of several investment grade major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, the credit ratings and the concentration of risk in these financial institutions are monitored on a continuous basis, and therefore, the Company believes they present no significant credit risk to the Company.
NOTE 9 - LEASES
Rental expense for the three months ended September 30, 2026 and 2025, was $19.4 million and $18.3 million, respectively, and rental expense for the nine months ended September 30, 2026 and 2025, was $56.9 million and $51.5 million, respectively. Rental expense is classified within Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. Rental expense related to short-term leases, variable lease payments or other leases or lease components not included within the right of use (“ROU”) asset or lease liability totaled $4.5 million and $4.8 million for the three months ended September 30, 2026 and 2025 and $11.9 million and $12.3 million for the nine months ended September 30, 2026 and 2025. No material lease costs have been capitalized on the Condensed and Consolidated Balance Sheets as of September 30, 2026 or December 31, 2025.
The Company assesses the specific terms and conditions of each lease to determine the appropriate classification as either an operating or finance lease and the lease term. Substantially all of the Company’s leases for which the Company is a lessee are classified as operating leases.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
As a lessee, the Company categorizes its leases into two general categories: real estate leases and equipment leases. Amounts included within the Condensed and Consolidated Balance Sheets related to the Company’s ROU asset and lease liability for both real estate and equipment leases were as follows:
| September 30, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
| In millions | Balance Sheet classification | Real estate | Equipment | Total | Real estate | Equipment | Total | ||||||||||||||||||||||||||||||||||
| ROU asset | Other noncurrent assets | $ | 128.5 | $ | 59.2 | $ | 187.7 | $ | 116.5 | $ | 49.9 | $ | 166.4 | ||||||||||||||||||||||||||||
| Lease liability - current | Accrued expenses and other current liabilities | 24.9 | 24.5 | 49.4 | 22.5 | 19.2 | 41.7 | ||||||||||||||||||||||||||||||||||
| Lease liability - noncurrent | Other noncurrent liabilities | 108.6 | 34.4 | 143.0 | 98.0 | 30.5 | 128.5 | ||||||||||||||||||||||||||||||||||
| Other information: | |||||||||||||||||||||||||||||||||||||||||
| Weighted-average remaining term (years) | 10.0 | 2.8 | 10.9 | 3.0 | |||||||||||||||||||||||||||||||||||||
| Weighted-average discount rate | 5.3 | % | 5.5 | % | 5.3 | % | 5.9 | % |
The following table summarizes additional information related to the Company’s leases for the nine months ended September 30:
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| In millions | Real estate | Equipment | Total | Real estate | Equipment | Total | ||||||||||||||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | 23.1 | $ | 21.9 | $ | 45.0 | $ | 20.4 | $ | 18.8 | $ | 39.2 | ||||||||||||||||||||||||||
| ROU assets obtained in exchange for new lease liabilities | 24.1 | 18.8 | 42.9 | 14.3 | 12.4 | 26.7 |
Future Repayments
Scheduled minimum lease payments required under non-cancelable operating leases for both the real estate and equipment lease portfolios for the remainder of 2026 and for each of the years thereafter as of September 30, 2026, are as follows:
| In millions | Remainder of 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | |||||||||||||||||||||||||||||||||||||
| Real estate leases | $ | 7.9 | $ | 30.8 | $ | 23.2 | $ | 18.2 | $ | 13.9 | $ | 81.4 | $ | 175.4 | ||||||||||||||||||||||||||||||
| Equipment leases | 7.2 | 25.6 | 18.9 | 7.8 | 2.6 | 1.2 | 63.3 | |||||||||||||||||||||||||||||||||||||
| Total | $ | 15.1 | $ | 56.4 | $ | 42.1 | $ | 26.0 | $ | 16.5 | $ | 82.6 | $ | 238.7 |
The difference between the total undiscounted minimum lease payments and the combined current and noncurrent lease liabilities as of September 30, 2026, is due to imputed interest of $46.3 million.
NOTE 10 - DEFINED BENEFIT PLANS
The Company sponsors several U.S. and non-U.S. defined benefit pension plans for eligible employees and retirees and also maintains other supplemental plans for officers and other key employees.
On May 31, 2026, the Company transferred obligations of $19.7 million from a U.S. defined benefit pension plan to a third-party insurance company by purchasing a group annuity contract using an equivalent amount of plan assets. The transaction did not have a material impact on the funded status of the pension plan. As a result of the transaction, the Company recorded a $3.7 million settlement charge, which was reflected as a component of Other income, net. The plan’s assets and liabilities were remeasured as of the settlement date, resulting in a remaining projected benefit obligation of $195.9 million, and fair value of plan assets of $207.1 million. The discount rate used to determine the projected benefit obligation at the settlement date was 5.55%, compared to 5.37% as of December 31, 2025. The expected long-term return on plan assets remained 6.50%.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The components of the Company’s Net periodic pension benefit cost (income) for the three and nine months ended September 30 were as follows:
| U.S. | |||||||||||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||||||||
| In millions | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Service cost | $ | 0.2 | $ | 0.2 | $ | 0.6 | $ | 0.6 | |||||||||||||||
| Interest cost | 2.5 | 2.9 | 7.8 | 8.6 | |||||||||||||||||||
| Expected return on plan assets | (3.2) | (3.8) | (10.2) | (11.4) | |||||||||||||||||||
| Settlement charge | — | — | 3.7 | — | |||||||||||||||||||
| Administrative costs and other | 0.3 | 0.3 | 1.0 | 0.8 | |||||||||||||||||||
| Amortization of: | |||||||||||||||||||||||
| Net prior service costs | — | — | — | 0.1 | |||||||||||||||||||
| Plan net actuarial losses | 0.2 | 0.3 | 0.8 | 0.9 | |||||||||||||||||||
| Net periodic benefit cost (income) | $ | — | $ | (0.1) | $ | 3.7 | $ | (0.4) |
| Non-U.S. | |||||||||||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||||||||
| In millions | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Service cost | $ | 0.6 | $ | 0.5 | $ | 1.7 | $ | 1.5 | |||||||||||||||
| Interest cost | 3.1 | 3.0 | 9.3 | 9.1 | |||||||||||||||||||
| Expected return on plan assets | (4.1) | (4.1) | (12.5) | (12.3) | |||||||||||||||||||
| Administrative costs and other | 0.6 | 0.5 | 1.9 | 1.5 | |||||||||||||||||||
| Amortization of: | |||||||||||||||||||||||
| Plan net actuarial losses | 0.9 | 0.9 | 2.6 | 2.7 | |||||||||||||||||||
| Net periodic benefit cost | $ | 1.1 | $ | 0.8 | $ | 3.0 | $ | 2.5 |
Service cost is recorded in Cost of goods sold and Selling and administrative expenses, while the remaining components of Net periodic pension benefit cost (income) are recorded in Other income, net within the Condensed and Consolidated Statements of Comprehensive Income. Employer contributions to the plans were not material during the nine months ended September 30, 2026 or 2025, and are not expected to be material for the remainder of 2026.
NOTE 11 - FAIR VALUE MEASUREMENTS
Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurements are based on a framework that utilizes the inputs market participants use to determine the fair value of an asset or liability and establishes a fair value hierarchy to prioritize those inputs. The fair value hierarchy is comprised of three levels that are described below:
-
Level 1 – Inputs based on quoted prices in active markets for identical assets or liabilities.
-
Level 2 – Inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
-
Level 3 – Unobservable inputs based on little or no market activity and that are significant to the fair value of the assets and liabilities.
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability based on the best information available under the circumstances. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Assets and liabilities measured at fair value as of September 30, 2026, were as follows:
| Fair value measurements | Total fair value | ||||||||||||||||||||||
| In millions | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||||||||||
| Recurring fair value measurements | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Investments | $ | — | $ | 16.9 | $ | — | $ | 16.9 | |||||||||||||||
| Total asset recurring fair value measurements | $ | — | $ | 16.9 | $ | — | $ | 16.9 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Deferred compensation and other retirement plans | $ | — | $ | 17.1 | $ | — | $ | 17.1 | |||||||||||||||
| Total liability recurring fair value measurements | $ | — | $ | 17.1 | $ | — | $ | 17.1 | |||||||||||||||
| Financial instruments not carried at fair value | |||||||||||||||||||||||
| Total debt | $ | — | $ | 1,981.5 | $ | — | $ | 1,981.5 | |||||||||||||||
| Total financial instruments not carried at fair value | $ | — | $ | 1,981.5 | $ | — | $ | 1,981.5 |
Assets and liabilities measured at fair value as of December 31, 2025, were as follows:
| Fair value measurements | Total fair value | ||||||||||||||||||||||
| In millions | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||||||||||
| Recurring fair value measurements | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Investments | $ | — | $ | 17.4 | $ | — | $ | 17.4 | |||||||||||||||
| Total asset recurring fair value measurements | $ | — | $ | 17.4 | $ | — | $ | 17.4 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Deferred compensation and other retirement plans | $ | — | $ | 18.1 | $ | — | $ | 18.1 | |||||||||||||||
| Total liability recurring fair value measurements | $ | — | $ | 18.1 | $ | — | $ | 18.1 | |||||||||||||||
| Financial instruments not carried at fair value | |||||||||||||||||||||||
| Total debt | $ | — | $ | 2,021.1 | $ | — | $ | 2,021.1 | |||||||||||||||
| Total financial instruments not carried at fair value | $ | — | $ | 2,021.1 | $ | — | $ | 2,021.1 |
The Company determines the fair value of its financial assets and liabilities using the following methodologies:
-
Investments – These instruments include equity mutual funds and corporate bond funds. The fair value is obtained based on observable market prices quoted on public exchanges for similar instruments.
-
Deferred compensation and other retirement plans – These include obligations related to deferred compensation and other retirement plans adjusted for market performance. The fair value is obtained based on observable market prices quoted on public exchanges for similar instruments.
-
Debt – These instruments are recorded at cost and include the Revolving Facility and Senior Notes maturing through 2034. The fair value of these debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments.
The methodologies used by the Company to determine the fair value of its financial assets and liabilities as of September 30, 2026, are the same as those used as of December 31, 2025. The carrying values of Cash and cash equivalents, Accounts and notes receivable, net, Accounts payable and Accrued expenses and other current liabilities are a reasonable estimate of their fair value due to the short-term nature of these instruments.
The Company also had investments in debt and equity securities without readily determinable fair values of $130.6 million and $66.8 million as of September 30, 2026 and December 31, 2025, respectively, which are classified as Other noncurrent assets within the Condensed and Consolidated Balance Sheets. In the third quarter of 2026, the Company made an additional $40.0 million investment in Ambient.ai, an agentic physical security company.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 12 - EQUITY
The changes in the components of Equity for the nine months ended September 30, 2026, were as follows:
| Allegion plc shareholders’ equity | |||||||||||||||||||||||||||||||||||||||||
| Ordinary shares | |||||||||||||||||||||||||||||||||||||||||
| In millions, except per share amounts | Total equity | Amount | Shares | Capital in excess of par value | Retained earnings | Accumulated other comprehensive loss | |||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | 2,067.6 | $ | 0.9 | 86.1 | $ | 34.2 | $ | 2,238.1 | $ | (205.6) | ||||||||||||||||||||||||||||||
| Net earnings | 138.1 | — | — | — | 138.1 | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net | (21.9) | — | — | — | — | (21.9) | |||||||||||||||||||||||||||||||||||
| Repurchase of ordinary shares | (40.6) | — | (0.3) | (39.6) | (1.0) | — | |||||||||||||||||||||||||||||||||||
| Share-based compensation activity | 5.4 | — | 0.1 | 5.4 | — | — | |||||||||||||||||||||||||||||||||||
| Dividends to ordinary shareholders ($0.55 per share) | (47.4) | — | — | — | (47.4) | — | |||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | 2,101.2 | 0.9 | 85.9 | — | 2,327.8 | (227.5) | |||||||||||||||||||||||||||||||||||
| Net earnings | 184.6 | — | — | — | 184.6 | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net | (6.7) | — | — | — | — | (6.7) | |||||||||||||||||||||||||||||||||||
| Repurchase of ordinary shares | (120.0) | — | (0.9) | (6.3) | (113.7) | — | |||||||||||||||||||||||||||||||||||
| Share-based compensation activity | 6.3 | — | 0.1 | 6.3 | — | — | |||||||||||||||||||||||||||||||||||
| Dividends to ordinary shareholders ($0.55 per share) | (46.8) | — | — | — | (46.8) | — | |||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | 2,118.6 | 0.9 | 85.1 | — | 2,351.9 | (234.2) | |||||||||||||||||||||||||||||||||||
| Net earnings | 220.9 | — | — | — | 220.9 | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net | (7.6) | — | — | — | — | (7.6) | |||||||||||||||||||||||||||||||||||
| Repurchase of ordinary shares | (119.8) | (0.1) | (0.8) | (6.8) | (112.9) | — | |||||||||||||||||||||||||||||||||||
| Share-based compensation activity | 6.8 | — | — | 6.8 | — | — | |||||||||||||||||||||||||||||||||||
| Dividends to ordinary shareholders ($0.55 per share) | (46.5) | — | — | — | (46.5) | — | |||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | 2,172.4 | $ | 0.8 | 84.3 | $ | — | $ | 2,413.4 | $ | (241.8) |
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The changes in the components of Equity for the nine months ended September 30, 2025, were as follows:
| Allegion plc shareholders’ equity | |||||||||||||||||||||||||||||||||||||||||
| Ordinary shares | |||||||||||||||||||||||||||||||||||||||||
| In millions, except per share amounts | Total equity | Amount | Shares | Capital in excess of par value | Retained earnings | Accumulated other comprehensive loss | |||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 1,500.7 | $ | 0.9 | 86.3 | $ | — | $ | 1,831.4 | $ | (331.6) | ||||||||||||||||||||||||||||||
| Net earnings | 148.2 | — | — | — | 148.2 | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive income, net | 36.6 | — | — | — | — | 36.6 | |||||||||||||||||||||||||||||||||||
| Repurchase of ordinary shares | (40.0) | — | (0.3) | (5.4) | (34.6) | — | |||||||||||||||||||||||||||||||||||
| Share-based compensation activity | 5.4 | — | 0.1 | 5.4 | — | — | |||||||||||||||||||||||||||||||||||
| Dividends to ordinary shareholders ($0.51 per share) | (44.0) | — | — | — | (44.0) | — | |||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | 1,606.9 | 0.9 | 86.1 | — | 1,901.0 | (295.0) | |||||||||||||||||||||||||||||||||||
| Net earnings | 159.7 | — | — | — | 159.7 | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive income, net | 90.7 | — | — | — | — | 90.7 | |||||||||||||||||||||||||||||||||||
| Repurchase of ordinary shares | (40.0) | — | (0.3) | (13.0) | (27.0) | — | |||||||||||||||||||||||||||||||||||
| Share-based compensation activity | 13.0 | — | — | 13.0 | — | — | |||||||||||||||||||||||||||||||||||
| Dividends to ordinary shareholders ($0.51 per share) | (43.8) | — | — | — | (43.8) | — | |||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | 1,786.5 | 0.9 | 85.8 | — | 1,989.9 | (204.3) | |||||||||||||||||||||||||||||||||||
| Net earnings | 188.4 | — | — | — | 188.4 | — | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net | (10.1) | — | — | — | — | (10.1) | |||||||||||||||||||||||||||||||||||
| Share-based compensation activity | 25.6 | — | 0.2 | 25.6 | — | — | |||||||||||||||||||||||||||||||||||
| Dividends to ordinary shareholders ($0.51 per share) | (43.8) | — | — | — | (43.8) | — | |||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | 1,946.6 | $ | 0.9 | 86.0 | $ | 25.6 | $ | 2,134.5 | $ | (214.4) |
In April 2026, the Company’s Board of Directors (the “Board”) reauthorized the Company’s existing share repurchase program and, as a result, authorized the repurchase of up to, and including, $500.0 million of the Company’s ordinary shares (the “Share Repurchase Authorization”). During the nine months ended September 30, 2026, the Company repurchased $280.3 million of ordinary shares on the open market under the Share Repurchase Authorization.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Accumulated Other Comprehensive Loss
The changes in Accumulated other comprehensive loss for the nine months ended September 30, 2026, were as follows:
| In millions | Cash flow hedges | Defined benefit items | Foreign currency items | Total | ||||||||||||||||||||||
| Balance at December 31, 2025 | $ | 4.5 | $ | (124.9) | $ | (85.2) | $ | (205.6) | ||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 1.2 | 3.3 | (45.6) | (41.1) | ||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss(a) | — | 1.7 | — | 1.7 | ||||||||||||||||||||||
| Settlements recognized | — | 3.7 | — | 3.7 | ||||||||||||||||||||||
| Tax expense | (0.4) | (0.1) | — | (0.5) | ||||||||||||||||||||||
| Balance at September 30, 2026 | $ | 5.3 | $ | (116.3) | $ | (130.8) | $ | (241.8) |
The changes in Accumulated other comprehensive loss for the nine months ended September 30, 2025, were as follows:
| In millions | Cash flow hedges | Defined benefit items | Foreign currency items | Total | ||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 6.9 | $ | (123.1) | $ | (215.4) | $ | (331.6) | ||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | (1.7) | (4.7) | 122.1 | 115.7 | ||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss(a) | (0.5) | 3.4 | — | 2.9 | ||||||||||||||||||||||
| Tax benefit (expense) | 0.4 | (1.8) | — | (1.4) | ||||||||||||||||||||||
| Balance at September 30, 2025 | $ | 5.1 | $ | (126.2) | $ | (93.3) | $ | (214.4) |
(a) Amounts reclassified from Accumulated other comprehensive loss and recognized into Net earnings related to cash flow hedges are recorded in Cost of goods sold and Interest expense. Amounts reclassified from Accumulated other comprehensive loss and recognized into Net earnings related to defined benefit plan items are recorded in Other income, net.
NOTE 13 - SHARE-BASED COMPENSATION
The Company’s share-based compensation plans include programs for stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”). Share-based compensation expense is included in Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. The following table summarizes the share-based compensation expense recognized for the three and nine months ended September 30:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| In millions | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Stock options | $ | 1.2 | $ | 1.1 | $ | 4.6 | $ | 4.5 | |||||||||||||||
| RSUs | 3.0 | 2.9 | 13.0 | 11.5 | |||||||||||||||||||
| PSUs | 2.4 | 2.7 | 6.5 | 7.5 | |||||||||||||||||||
| Pre-tax expense | 6.6 | 6.7 | 24.1 | 23.5 | |||||||||||||||||||
| Tax benefit | (0.6) | (0.6) | (2.4) | (2.6) | |||||||||||||||||||
| After-tax expense | $ | 6.0 | $ | 6.1 | $ | 21.7 | $ | 20.9 |
Stock Options / RSUs
Eligible participants may receive (i) stock options, (ii) RSUs or (iii) a combination of both stock options and RSUs. Grants issued during the nine months ended September 30 were as follows:
| 2026 | 2025 | ||||||||||||||||||||||
| Number granted | Weighted- average fair value per award | Number granted | Weighted- average fair value per award | ||||||||||||||||||||
| Stock options | 108,951 | $ | 42.88 | 144,504 | $ | 37.72 | |||||||||||||||||
| RSUs | 91,632 | $ | 158.88 | 97,353 | $ | 129.47 |
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The weighted-average fair value of the stock options granted is determined using the Black-Scholes option-pricing model. The following weighted-average assumptions were used during the nine months ended September 30:
| 2026 | 2025 | ||||||||||
| Dividend yield | 1.35 | % | 1.61 | % | |||||||
| Volatility | 25.89 | % | 29.89 | % | |||||||
| Risk-free rate of return | 3.65 | % | 4.31 | % | |||||||
| Expected life (years) | 5.3 | 5.4 |
Volatility is based on the Company’s historic volatility. The risk-free rate of return is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the award is granted with a maturity equal to the expected term of the award. The expected life of the Company’s stock option awards is derived from historical data, based on the past exercise activity and post-vest cancellation activity of the Company’s stock option program and represents the period of time that awards are expected to be outstanding.
Performance Stock
During the nine months ended September 30, 2026, the Company granted PSUs with a maximum award level of approximately 0.1 million shares. In February 2024, 2025 and 2026, the Company’s Compensation and Human Capital Committee granted PSUs that were earned based 50% upon a performance condition, measured at each reporting period by earnings per share (“EPS”) performance in relation to pre-established targets for each performance period set by the Compensation and Human Capital Committee of the Board, and 50% upon a market condition, measured by the Company’s relative total shareholder return against a 50/50 blend of the S&P 400 Capital Goods Index and the S&P 500 Capital Goods Index over a three-year performance period. The fair values of the market condition are estimated using a Monte Carlo Simulation approach in a risk-neutral framework to model future stock price movements based upon historical volatility, risk-free rates of return and a correlation matrix.
NOTE 14 - RESTRUCTURING ACTIVITIES
During the nine months ended September 30, 2026, the Company recorded $13.8 million of expenses associated with restructuring activities, which are included within Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. The Company anticipates additional future restructuring charges related to certain of the restructuring actions initiated during the nine months ended September 30, 2026. These restructuring activities primarily relate to workforce reductions intended to optimize and simplify operations and cost structure in the Allegion International and Allegion Americas segments.
The changes in the restructuring reserve during the nine months ended September 30, 2026, were as follows:
| In millions | Total | ||||
| December 31, 2025 | $ | 1.9 | |||
| Additions, net of reversals | 13.8 | ||||
| Cash payments | (9.6) | ||||
| September 30, 2026 | $ | 6.1 |
The restructuring reserve is included in Accrued expenses and other current liabilities within the Condensed and Consolidated Balance Sheets. The majority of the costs accrued as of September 30, 2026, are expected to be paid within one year.
The Company also incurred, and expects to incur, other non-qualified restructuring charges related to these restructuring actions initiated, which represent costs that are directly attributable to restructuring activities but that do not fall into the severance, exit or disposal category. These costs were not material during the three and nine months ended September 30, 2026. Non-qualified restructuring charges are included within Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. The majority of restructuring charges incurred over the remainder of 2026 will result in cash expenditures.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 15 - OTHER INCOME, N****ET
The components of Other income, net for the three and nine months ended September 30 were as follows:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| In millions | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Interest income | $ | (3.7) | $ | (2.5) | $ | (6.6) | $ | (10.3) | |||||||||||||||
| Foreign currency exchange loss | 0.6 | 1.2 | 2.1 | 2.7 | |||||||||||||||||||
| Net periodic pension and postretirement benefit cost (income), less service cost | 0.3 | (0.1) | 4.4 | — | |||||||||||||||||||
| Other | (4.6) | (0.3) | (5.7) | (2.9) | |||||||||||||||||||
| Other income, net | $ | (7.4) | $ | (1.7) | $ | (5.8) | $ | (10.5) |
NOTE 16 - INCOME TAXES
The effective income tax rates for the three months ended September 30, 2026 and 2025, were 17.5% and 9.8%, respectively. The effective income tax rates for the nine months ended September 30, 2026 and 2025, were 18.5% and 15.1%, respectively. The increase in the effective income tax rate compared to 2025 is primarily due to favorable discrete charges in the prior year and the unfavorable mix of income earned in higher tax jurisdictions.
NOTE 17 - EARNINGS PER SHARE (“EPS”)
Basic EPS is calculated by dividing Net earnings by the weighted-average number of ordinary shares outstanding for the applicable period. Diluted EPS is calculated after adjusting the denominator of the basic EPS calculation for the effect of all potentially dilutive ordinary shares, which in the Company’s case includes shares issuable under share-based compensation plans.
The following table summarizes the weighted-average number of ordinary shares outstanding for basic and diluted EPS calculations for the three and nine months ended September 30:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| In millions | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Weighted-average number of basic shares | 84.8 | 85.9 | 85.5 | 86.1 | |||||||||||||||||||
| Shares issuable under share-based compensation plans | 0.4 | 0.6 | 0.4 | 0.5 | |||||||||||||||||||
| Weighted-average number of diluted shares | 85.2 | 86.5 | 85.9 | 86.6 |
At September 30, 2026 and 2025, 0.2 million shares issuable under share-based compensation plans were excluded from the computation of weighted-average diluted shares outstanding because the effect of including these shares would have been anti-dilutive.
NOTE 18 - NET REVENUES
The following tables show the Company’s Net revenues related to both tangible product sales and services and software for the three and nine months ended September 30, 2026 and 2025, respectively, disaggregated by business segment:
| Three months ended September 30, 2026 | Nine months ended September 30, 2026 | ||||||||||||||||||||||||||||||||||
| In millions | Allegion Americas | Allegion International | Total | Allegion Americas | Allegion International | Total | |||||||||||||||||||||||||||||
| Net revenues | |||||||||||||||||||||||||||||||||||
| Products | $ | 896.2 | $ | 202.6 | $ | 1,098.8 | $ | 2,526.4 | $ | 614.6 | $ | 3,141.0 | |||||||||||||||||||||||
| Services and software | 46.2 | 27.6 | 73.8 | 144.5 | 72.2 | 216.7 | |||||||||||||||||||||||||||||
| Total Net revenues | $ | 942.4 | $ | 230.2 | $ | 1,172.6 | $ | 2,670.9 | $ | 686.8 | $ | 3,357.7 |
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| Three months ended September 30, 2025 | Nine months ended September 30, 2025 | ||||||||||||||||||||||||||||||||||
| In millions | Allegion Americas | Allegion International | Total | Allegion Americas | Allegion International | Total | |||||||||||||||||||||||||||||
| Net revenues | |||||||||||||||||||||||||||||||||||
| Products | $ | 806.2 | $ | 203.6 | $ | 1,009.8 | $ | 2,305.3 | $ | 546.0 | $ | 2,851.3 | |||||||||||||||||||||||
| Services and software | 37.8 | 22.6 | 60.4 | 118.0 | 64.8 | 182.8 | |||||||||||||||||||||||||||||
| Total Net revenues | $ | 844.0 | $ | 226.2 | $ | 1,070.2 | $ | 2,423.3 | $ | 610.8 | $ | 3,034.1 |
Net revenues are shown by tangible product sales and services and software, as contract terms, conditions and economic factors affecting the nature, amount, timing and uncertainty around revenue recognition and cash flows are substantially similar within each of these two principal revenue streams.
As of September 30, 2026 and December 31, 2025, contract assets related to the Company’s right to consideration for work completed but not billed were not material. The Company does not have any material costs to obtain or fulfill a contract that are capitalized on its Condensed and Consolidated Balance Sheets. During the three and nine months ended September 30, 2026 and 2025, no adjustments related to performance obligations satisfied in previous periods were recorded.
As of September 30, 2026 and December 31, 2025, contract liabilities related to revenues allocated to remaining performance obligations totaled $52.4 million and $41.2 million, respectively, and are classified as Accrued expenses and other current liabilities and Other noncurrent liabilities within the Condensed and Consolidated Balance Sheets. The Company’s total current contract liabilities related to revenues as of September 30, 2026 and December 31, 2025 totaled $44.8 million and $36.0 million, respectively, and the remainder was classified as noncurrent.
NOTE 19 - COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation, claims and administrative proceedings, including those related to environmental and product warranty matters, and the Company also has certain contractual obligations requiring minimum purchases. Amounts recorded for identified contingent liabilities are estimates, which are reviewed periodically and adjusted to reflect additional information when it becomes available. Subject to the uncertainties inherent in estimating future costs for contingent liabilities, except as expressly set forth in this note, management believes that any liability which may result from these legal matters would not have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.
Environmental Matters
As of September 30, 2026 and December 31, 2025, the Company had reserves for environmental matters of $19.5 million and $22.7 million, respectively. The total reserve at September 30, 2026 and December 31, 2025, included $8.0 million and $9.3 million, respectively, related to remediation of sites previously disposed by the Company. Environmental reserves are classified as Accrued expenses and other current liabilities or Other noncurrent liabilities within the Condensed and Consolidated Balance Sheets based on the timing of their expected future payment. The Company’s total current environmental reserve at September 30, 2026 and December 31, 2025, was $3.0 million and $6.0 million, respectively, and the remainder was classified as noncurrent. Expenses related to environmental remediation were not material during the nine months ended September 30, 2026 or 2025. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future environmental remediation is uncertain.
Warranty Liability
The changes in the standard product warranty liability for the nine months ended September 30 were as follows:
| In millions | 2026 | 2025 | |||||||||
| Balance at beginning of period | $ | 26.2 | $ | 22.8 | |||||||
| Reductions for payments | (10.2) | (8.8) | |||||||||
| Accruals for warranties issued during the current period | 9.1 | 8.8 | |||||||||
| Acquisitions | 0.3 | 1.7 | |||||||||
| Currency translation | (0.1) | 0.6 | |||||||||
| Balance at end of period | $ | 25.3 | $ | 25.1 |
Standard product warranty liabilities are classified as either Accrued expenses and other current liabilities or Other noncurrent liabilities within the Condensed and Consolidated Balance Sheets based on the timing of the expected future payments.
ALLEGION PLC
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Contractual Obligations
As of September 30, 2026, the Company has arrangements with certain software and information technology service providers that require future minimum purchases of $61.8 million over the remainder of 2026 through 2030.
NOTE 20 - BUSINESS SEGMENT INFORMATION
The Company classifies its business into the following two reportable segments based on industry and market focus: Allegion Americas and Allegion International. The Company largely evaluates performance based on Segment operating income and Segment operating margins. The Company’s chief operating decision maker (the “CODM”) is its chief executive officer, who uses segment operating income as the measure of profit or loss to evaluate the financial performance of the business and as the basis for resource allocation, performance reviews and compensation. For these reasons, the Company believes that Segment operating income represents the most relevant measure of segment profit or loss. The Company’s CODM may exclude certain charges or gains, such as corporate charges and other special charges, from Operating income to arrive at a Segment operating income that is a more meaningful measure of profit or loss upon which to base operating decisions.
A summary of operations by reportable segment for the three and nine months ended September 30 was as follows:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| In millions | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Allegion Americas | |||||||||||||||||||||||
| Net revenues | $ | 942.4 | $ | 844.0 | $ | 2,670.9 | $ | 2,423.3 | |||||||||||||||
| Cost of goods sold | 494.0 | 456.0 | 1,440.7 | 1,309.2 | |||||||||||||||||||
| Selling and administrative expenses | 153.8 | 145.6 | 453.7 | 423.7 | |||||||||||||||||||
| Segment operating income | $ | 294.6 | $ | 242.4 | $ | 776.5 | $ | 690.4 | |||||||||||||||
| Depreciation and amortization | $ | 20.8 | $ | 20.4 | $ | 61.6 | $ | 59.2 | |||||||||||||||
| Allegion International | |||||||||||||||||||||||
| Net revenues | $ | 230.2 | $ | 226.2 | $ | 686.8 | $ | 610.8 | |||||||||||||||
| Cost of goods sold | 130.4 | 124.4 | 396.8 | 346.1 | |||||||||||||||||||
| Selling and administrative expenses | 82.6 | 82.1 | 249.7 | 217.6 | |||||||||||||||||||
| Segment operating income | $ | 17.2 | $ | 19.7 | $ | 40.3 | $ | 47.1 | |||||||||||||||
| Depreciation and amortization | $ | 14.3 | $ | 15.0 | $ | 43.1 | $ | 36.2 | |||||||||||||||
| Reconciliation to earnings before income taxes | |||||||||||||||||||||||
| Segment operating income from reportable segments | $ | 311.8 | $ | 262.1 | $ | 816.8 | $ | 737.5 | |||||||||||||||
| Unallocated corporate expense | 27.2 | 28.3 | 82.2 | 87.6 | |||||||||||||||||||
| Interest expense | 24.2 | 26.6 | 73.2 | 75.9 | |||||||||||||||||||
| Other income, net | (7.4) | (1.7) | (5.8) | (10.5) | |||||||||||||||||||
| Total earnings before income taxes | $ | 267.8 | $ | 208.9 | $ | 667.2 | $ | 584.5 |
Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations