UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

_______________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35971

_______________________________

ALLEGION PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

_______________________________


Ireland			98-1108930
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

Block D

Iveagh Court

Harcourt Road

Dublin 2, D02 VH94, Ireland

(Address of principal executive offices, including zip code)

+(353) (1) 2546200

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol	Name of exchange on which registered
Ordinary shares, par value $0.01 per share	ALLE	New York Stock Exchange
3.500% Senior Notes due 2029	ALLE 3 ½	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Table of Contents

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of ordinary shares outstanding of Allegion plc as of October ~~18, 2021~~24, 2022 was ~~89,695,862.~~87,844,822.

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ALLEGION PLC

FORM 10-Q

INDEX



PART I - FINANCIAL INFORMATION		1

Item 1 -	Financial Statements	1

	Condensed and Consolidated Statements of Comprehensive Income for the three and nine months ended September 30 ~~30,~~, 2022 and 2021 ~~and 2020~~ (Unaudited)	1

	Condensed and Consolidated Balance Sheets at ~~September~~Sep tember 30, ~~2021~~2022 and December 31, ~~2020~~2021 (Unaudited)	2

	Condensed and Consolidated Statements of Cash Flows for the n ~~ine~~nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	3

	Notes to Condensed and Consolidated Financial Statements (Unaudited)	4

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2219

Item 3 -	Quantitative and Qualitative Disclosures about Market Risk	3633

Item 4 -	Controls and Procedures	3633

PART II - OTHER INFORMATION		3834

Item 1 -	Legal Proceedings	3834

Item 1A -	Risk Factors	3834

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	3834

Item 6 -	Exhibits	3935

SIGNATURES		4036

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PART I-FINANCIAL INFORMATION

Item 1 – Financial Statements

Allegion plc

Condensed and Consolidated Statements of Comprehensive Income

(Unaudited)


		Three months ended				Nine months ended					Three months ended				Nine months ended
		September 30,				September 30,					September 30,				September 30,
In millions, except per share amounts	In millions, except per share amounts	2021		2020		2021		2020		In millions, except per share amounts	2022		2021		2022		2021
Net revenues	Net revenues	$	717.0	$	728.4	$	2,158.2	$	1,992.6	Net revenues	$	913.7	$	717.0	$	2,410.4	$	2,158.2
Cost of goods sold	Cost of goods sold	416.5		409.2		1,239.8		1,133.7		Cost of goods sold	545.7		416.5		1,438.7		1,239.8
Selling and administrative expenses	Selling and administrative expenses	162.1		156.2		503.3		474.2		Selling and administrative expenses	205.1		162.1		544.7		503.3
Impairment of goodwill and intangible assets		—		2.6		—		98.9
Operating income	Operating income	138.4		160.4		415.1		285.8		Operating income	162.9		138.4		427.0		415.1
Interest expense	Interest expense	12.3		12.9		37.0		38.8		Interest expense	23.1		12.3		52.2		37.0

Loss on divestitures										Loss on divestitures	7.6		—		7.6		—
Other income, net	Other income, net	(14.7)		(12.2)		(21.4)		(12.6)		Other income, net	(1.5)		(14.7)		(7.1)		(21.4)
Earnings before income taxes	Earnings before income taxes	140.8		159.7		399.5		259.6		Earnings before income taxes	133.7		140.8		374.3		399.5
(Benefit from) provision for income taxes		(2.8)		12.8		28.9		38.5
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	19.1		(2.8)		51.4		28.9
Net earnings	Net earnings	143.6		146.9		370.6		221.1		Net earnings	114.6		143.6		322.9		370.6
Less: Net earnings attributable to noncontrolling interests	Less: Net earnings attributable to noncontrolling interests	0.1		—		0.4		0.1		Less: Net earnings attributable to noncontrolling interests	—		0.1		0.2		0.4
Net earnings attributable to Allegion plc	Net earnings attributable to Allegion plc	$	143.5	$	146.9	$	370.2	$	221.0	Net earnings attributable to Allegion plc	$	114.6	$	143.5	$	322.7	$	370.2
Earnings per share attributable to Allegion plc ordinary shareholders:	Earnings per share attributable to Allegion plc ordinary shareholders:									Earnings per share attributable to Allegion plc ordinary shareholders:
Basic net earnings	Basic net earnings	$	1.60	$	1.59	$	4.11	$	2.39	Basic net earnings	$	1.30	$	1.60	$	3.67	$	4.11
Diluted net earnings	Diluted net earnings	$	1.59	$	1.58	$	4.08	$	2.38	Diluted net earnings	$	1.30	$	1.59	$	3.65	$	4.08
Weighted-average shares outstanding:	Weighted-average shares outstanding:									Weighted-average shares outstanding:
Basic	Basic	89.7		92.3		90.1		92.4		Basic	87.9		89.7		88.0		90.1
Diluted	Diluted	90.3		92.7		90.7		92.9		Diluted	88.2		90.3		88.4		90.7

Total comprehensive income	Total comprehensive income	$	121.2	$	171.4	$	326.7	$	232.8	Total comprehensive income	$	46.3	$	121.2	$	183.8	$	326.7
Less: Total comprehensive income attributable to noncontrolling interests		—		0.3		0.4		—
Less: Total comprehensive (loss) income attributable to noncontrolling interests										Less: Total comprehensive (loss) income attributable to noncontrolling interests	(0.4)		—		(0.8)		0.4
Total comprehensive income attributable to Allegion plc	Total comprehensive income attributable to Allegion plc	$	121.2	$	171.1	$	326.3	$	232.8	Total comprehensive income attributable to Allegion plc	$	46.7	$	121.2	$	184.6	$	326.3

See accompanying notes to condensed and consolidated financial statements.

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Allegion plc

Condensed and Consolidated Balance Sheets

(Unaudited)


In millions, except share amounts	In millions, except share amounts	September 30, 2021		December 31, 2020		In millions, except share amounts	September 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	503.9	$	480.4	Cash and cash equivalents	$	282.2	$	397.9

Accounts and notes receivable, net	Accounts and notes receivable, net	307.4		321.8		Accounts and notes receivable, net	422.5		283.3
Inventories	Inventories	345.7		283.1		Inventories	477.9		380.4
Other current assets	Other current assets	45.4		53.9		Other current assets	53.3		56.0
Assets held for sale		—		5.8

Total current assets	Total current assets	1,202.4		1,145.0		Total current assets	1,235.9		1,117.6
Property, plant and equipment, net	Property, plant and equipment, net	278.6		294.9		Property, plant and equipment, net	290.7		283.7
Goodwill	Goodwill	808.7		819.0		Goodwill	1,373.5		803.8
Intangible assets, net	Intangible assets, net	459.8		487.1		Intangible assets, net	599.7		447.5
Other noncurrent assets	Other noncurrent assets	367.2		323.4		Other noncurrent assets	443.5		398.4
Total assets	Total assets	$	3,116.7	$	3,069.4	Total assets	$	3,943.3	$	3,051.0
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	212.4	$	220.4	Accounts payable	$	266.4	$	259.1
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	343.1		293.7		Accrued expenses and other current liabilities	410.2		329.5
Short-term borrowings and current maturities of long-term debt	Short-term borrowings and current maturities of long-term debt	238.4		0.2		Short-term borrowings and current maturities of long-term debt	12.6		12.6
Liabilities held for sale		—		7.2

Total current liabilities	Total current liabilities	793.9		521.5		Total current liabilities	689.2		601.2
Long-term debt	Long-term debt	1,192.5		1,429.4		Long-term debt	2,214.5		1,429.5
Other noncurrent liabilities	Other noncurrent liabilities	262.7		285.9		Other noncurrent liabilities	246.0		257.9
Total liabilities	Total liabilities	2,249.1		2,236.8		Total liabilities	3,149.7		2,288.6
Equity:	Equity:					Equity:
Allegion plc shareholders’ equity:	Allegion plc shareholders’ equity:					Allegion plc shareholders’ equity:
Ordinary shares, $0.01 par value (89,695,508 and 91,212,741 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively)		0.9		0.9
Ordinary shares, $0.01 par value (87,844,572 and 88,215,625 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)						Ordinary shares, $0.01 par value (87,844,572 and 88,215,625 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)	0.9		0.9
Capital in excess of par value	Capital in excess of par value	2.8		—		Capital in excess of par value	9.2		—
Retained earnings	Retained earnings	1,061.5		985.6		Retained earnings	1,113.7		952.6
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(201.0)		(157.1)		Accumulated other comprehensive loss	(332.5)		(194.4)
Total Allegion plc shareholders’ equity	Total Allegion plc shareholders’ equity	864.2		829.4		Total Allegion plc shareholders’ equity	791.3		759.1
Noncontrolling interests	Noncontrolling interests	3.4		3.2		Noncontrolling interests	2.3		3.3
Total equity	Total equity	867.6		832.6		Total equity	793.6		762.4
Total liabilities and equity	Total liabilities and equity	$	3,116.7	$	3,069.4	Total liabilities and equity	$	3,943.3	$	3,051.0

See accompanying notes to condensed and consolidated financial statements.

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Allegion plc

Condensed and Consolidated Statements of Cash Flows

(Unaudited)


		Nine months ended					Nine months ended
		September 30,					September 30,
In millions	In millions	2021		2020		In millions	2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	370.6	$	221.1	Net earnings	$	322.9	$	370.6
Adjustments to arrive at net cash provided by operating activities:	Adjustments to arrive at net cash provided by operating activities:					Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	62.0		60.3		Depreciation and amortization	69.6		62.0
Impairment of goodwill and intangible assets		—		98.9

Loss on divestitures						Loss on divestitures	7.1		—
Changes in assets and liabilities and other non-cash items	Changes in assets and liabilities and other non-cash items	(76.2)		(90.9)		Changes in assets and liabilities and other non-cash items	(132.5)		(76.2)
Net cash provided by operating activities	Net cash provided by operating activities	356.4		289.4		Net cash provided by operating activities	267.1		356.4
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(28.7)		(33.3)		Capital expenditures	(41.5)		(28.7)
Acquisition of and equity investments in businesses, net of cash acquired	Acquisition of and equity investments in businesses, net of cash acquired	(6.5)		—		Acquisition of and equity investments in businesses, net of cash acquired	(923.1)		(6.5)
Proceeds from sale of equity method investment	Proceeds from sale of equity method investment	7.6		—		Proceeds from sale of equity method investment	—		7.6
Other investing activities, net	Other investing activities, net	12.7		(6.0)		Other investing activities, net	(1.3)		12.7
Net cash used in investing activities	Net cash used in investing activities	(14.9)		(39.3)		Net cash used in investing activities	(965.9)		(14.9)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Debt repayments, net						Debt repayments, net	(9.4)		(0.1)
Proceeds from revolving facility						Proceeds from revolving facility	340.0		—
Repayments of revolving facility						Repayments of revolving facility	(141.0)		—
Proceeds from issuance of senior notes						Proceeds from issuance of senior notes	600.0		—

Debt repayments, net		(0.1)		(0.1)

Net proceeds from (repayments of) debt						Net proceeds from (repayments of) debt	789.6		(0.1)
Debt financing costs						Debt financing costs	(10.2)		—

Dividends paid to ordinary shareholders	Dividends paid to ordinary shareholders	(96.9)		(88.3)		Dividends paid to ordinary shareholders	(107.9)		(96.9)

Repurchase of ordinary shares	Repurchase of ordinary shares	(212.7)		(94.1)		Repurchase of ordinary shares	(61.0)		(212.7)
Other financing activities, net	Other financing activities, net	0.4		3.2		Other financing activities, net	(4.4)		0.4
Net cash used in financing activities		(309.3)		(179.3)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(8.7)		1.3
Net increase in cash, cash equivalents and restricted cash		23.5		72.1
Cash, cash equivalents and restricted cash - beginning of period		480.4		358.7
Cash, cash equivalents and restricted cash - end of period		$	503.9	$	430.8
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	606.1		(309.3)
Effect of exchange rate changes on cash and cash equivalents						Effect of exchange rate changes on cash and cash equivalents	(23.0)		(8.7)
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(115.7)		23.5
Cash and cash equivalents - beginning of period						Cash and cash equivalents - beginning of period	397.9		480.4
Cash and cash equivalents - end of period						Cash and cash equivalents - end of period	$	282.2	$	503.9

See accompanying notes to condensed and consolidated financial statements.

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ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying Condensed and Consolidated Financial Statements of Allegion plc, an Irish public limited company, and its consolidated subsidiaries ("Allegion" or "the Company"), reflect the consolidated operations of the Company and have been prepared in accordance with United States ("U.S.") Securities and Exchange Commission ("SEC") interim reporting requirements. Accordingly, the accompanying Condensed and Consolidated Financial Statements do not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for full financial statements and should be read in conjunction with the Consolidated Financial Statements included in the Allegion Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. In the opinion of management, the accompanying Condensed and Consolidated Financial Statements contain all adjustments, which include normal recurring adjustments, necessary to state fairly the consolidated unaudited results for the interim periods presented.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements:

In ~~December 2019,~~October 2021, the FASB issued ASU ~~2019-12, "Income Taxes~~No. 2021-08, "Business Combinations (Topic ~~740)~~805): ~~Simplifying the~~ Accounting for ~~Income Taxes.~~Contract Assets and Contract Liabilities from Contracts with Customers." ~~The~~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 ~~was intended to simplify~~will result in the ~~accounting for income taxes~~acquirer recognizing contract assets and contract liabilities at the same amounts recorded by ~~removing certain exceptions and~~the acquiree. Historically, such amounts were recognized by ~~updating accounting requirements around franchise taxes, goodwill recognized for tax purposes,~~ the ~~allocation of current and deferred tax expense among legal entities, among other minor changes.~~acquirer at fair value in purchase accounting. This ASU ~~became~~is effective for fiscal years beginning after December 15, ~~2020, and~~2022, including interim periods within those ~~annual periods. Accordingly, the~~fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. The Company ~~adopted~~elected to early adopt ASU ~~2019-12~~2021-08 on January 1, ~~2021,~~2022, and as such, applied this new guidance to the ~~adoption~~Access Technologies business combination (see Note 3), which did not ~~have~~result in a material impact to the Condensed and Consolidated Financial ~~Statements.~~

~~In January 2020,~~Statements for the ~~FASB issued ASU 2020-01, "Investments—Equity Securities (Topic 321), Investments—Equity Method~~three and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815." The amendments in ASU 2020-01 clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting. This ASU became effective for fiscal years beginning after December 15, 2020, and interim periods within those annual periods. Accordingly, the Company adopted ASU 2020-01 on January 1, 2021, and the adoption did not have a material impact to the Condensed and Consolidated Financial Statements.

~~Recently Issued Accounting Pronouncements~~

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU, along with related updates, provides temporary optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions if certain criteria are met in order to ease the potential accounting and financial reporting burden associated with the expected market transition away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The ASU is currently effective and may be applied prospectively at any point through December 31, 2022 at the Company’s option. The Company is assessing what impact, if adopted, ASU 2020-04 would have on the Condensed and Consolidated Financial Statements.nine months ended September 30, 2022.

NOTE 3 - ACQUISITIONS

On July 5, 2022, the Company, through its subsidiaries, completed the acquisition of Stanley Access Technologies LLC and assets related to the automatic entrance solutions business from Stanley Black & Decker, Inc. (the "Access Technologies business"). The total preliminary cash consideration paid for the acquisition was $923.1 million, and the acquisition was accounted for as a business combination.

The Access Technologies business is a leading manufacturer, installer and service provider of automatic doors in North America, primarily in the U.S. and Canada. Its diversified customer base centers on non-residential settings, including retail, healthcare, education, commercial offices, hospitality and government. This acquisition helps the Company create a more comprehensive portfolio of access solutions, with the addition of automated entrances. Additionally, the Access Technologies business adds an expansive service and support network throughout the U.S. and Canada, broadening the Company's solutions to national, regional and local customers and complementing the Company's existing strengths in these non-residential markets. The Access Technologies business has been integrated into the Allegion Americas segment.

The following table summarizes the preliminary allocation of the purchase price to assets acquired and liabilities assumed as of the acquisition date:

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


In millions
Accounts receivable, net	$	78.2
Inventories	50.3
Other current assets	0.3
Property, plant and equipment	15.2
Goodwill	616.0
Intangible assets	222.5
Other noncurrent assets	13.7
Accounts payable	(22.4)
Accrued expenses and other current liabilities	(43.1)
Other noncurrent liabilities	(7.6)
Total net assets acquired and liabilities assumed	$	923.1

The valuation of assets acquired and liabilities assumed has not yet been finalized as of September 30, 2022. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for acquired tangible and intangible assets, goodwill and income tax assets and liabilities, among other items. The completion of the valuation will occur no later than one year from the acquisition date. Intangible assets recognized as of the acquisition date were comprised of the following:


In millions	Value (in millions)		Useful life (in years)
Completed technologies/patents	$	6.2	5
Customer relationships	137.4		23
Trade names (finite-lived)	56.8		5
Backlog revenue	22.1		2

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, such as an assembled workforce. Goodwill resulting from this acquisition is expected to be deductible for tax purposes.

The following unaudited pro forma financial information for the three and nine months ended September 30, 2022 and 2021, reflects the consolidated results of operations of the Company as if this acquisition had taken place on January 1, 2021:


	Three months ended				Nine months ended
In millions	2022		2021		2022		2021
Net revenues	$	913.7	$	802.7	$	2,587.5	$	2,407.6
Net earnings attributable to Allegion plc	135.5		140.7		340.1		330.2

The unaudited pro forma financial information is presented for informational purposes only and does not purport 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 has been calculated after applying the Company's accounting policies and adjusting the historical financial results to reflect additional items directly attributable to the acquisition that would have been incurred assuming the acquisition had occurred on January 1, 2021. Adjustments to historical financial information for the three and nine months ended September 30 include:


	Three months ended				Nine months ended
In millions	2022		2021		2022		2021
Intangible asset amortization expense, net of tax	$	1.7	$	(5.0)	$	(10.1)	$	(18.3)
Interest expense, net of tax	1.6		(6.2)		(10.7)		(21.4)
Acquisition and integration costs, net of tax	13.5		—		19.4		(19.4)
Inventory fair value step-up amortization, net of tax	4.1		—		4.1		(4.1)

The following financial information reflects the Net revenues and Loss before income taxes generated by the Access Technologies business since the acquisition date included within the Company's Condensed and Consolidated Statements of Comprehensive Income:

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


In millions	Three and nine months ended September 30, 2022
Net revenues	$	88.7
Loss before income taxes	(3.3)

Intangible asset amortization of $9.0 million and amortization of $5.5 million related to a fair value of inventory step-up are included in the Loss before income taxes amount presented above, while acquisition and integration related expenses and Interest expense related to acquisition financing, are excluded from this amount. During the three and nine months ended September 30, 2022, the Company incurred $18.6 million and $27.4 million, respectively, of acquisition and integration related expenses, which are included in Selling and administrative expenses in the Condensed and Consolidated Statements of Comprehensive Income. The Company anticipates future integration expenses related to the Access Technologies business acquisition in the fourth quarter of 2022, which are not expected to exceed $5 million.

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	In millions	September 30, 2021		December 31, 2020		In millions	September 30, 2022		December 31, 2021
Raw materials	Raw materials	$	131.9	$	114.0	Raw materials	$	193.1	$	144.4
Work-in-process	Work-in-process	42.4		42.3		Work-in-process	44.9		42.2
Finished goods	Finished goods	171.4		126.8		Finished goods	239.9		193.8
Total	Total	$	345.7	$	283.1	Total	$	477.9	$	380.4

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

NOTE 45 - GOODWILL

The changes in the carrying amount of goodwill for the nine months ended September 30, ~~2021,~~2022, were as follows:


In millions	In millions	Allegion Americas		Allegion International		Total		In millions	Allegion Americas		Allegion International		Total
December 31, 2020 (gross)		$	501.1	$	891.5	$	1,392.6
December 31, 2021 (gross)								December 31, 2021 (gross)	$	501.2	$	876.2	$	1,377.4
Accumulated impairment	Accumulated impairment	—		(573.6)		(573.6)		Accumulated impairment	—		(573.6)		(573.6)
December 31, 2020 (net)		501.1		317.9		819.0
December 31, 2021 (net)								December 31, 2021 (net)	501.2		302.6		803.8
Acquisitions and adjustments	Acquisitions and adjustments	0.1		4.6		4.7		Acquisitions and adjustments	616.0		—		616.0

Currency translation	Currency translation	—		(15.0)		(15.0)		Currency translation	(6.1)		(40.2)		(46.3)
September 30, 2021 (net)		$	501.2	$	307.5	$	808.7
September 30, 2022 (net)								September 30, 2022 (net)	$	1,111.1	$	262.4	$	1,373.5

As a result of the global economic disruption and uncertainty due to the COVID-19 pandemic arising during the first quarter of 2020, the Company concluded a triggering event had occurred as of March 31, 2020, and performed interim impairment tests on the goodwill balances, at that time, of its previous EMEA and Asia Pacific reporting units (which were combined to form the new Allegion International segment effective January 1, 2021). The results of the interim impairment testing indicated that the estimated fair value of the former Asia Pacific reporting unit was less than its carrying value. Consequently, a goodwill impairment charge of $88.1 million was recorded, which is included in Impairment of goodwill and intangible assets in the Condensed and Consolidated Statement of Comprehensive Income for the nine months ended September 30, 2020.

NOTE 56 - INTANGIBLE ASSETS

The gross amount of the Company’s intangible assets and related accumulated amortization were as follows:


		September 30, 2021						December 31, 2020							September 30, 2022						December 31, 2021
In millions	In millions	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount		In millions	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Completed technologies/patents	Completed technologies/patents	$	58.3	$	(27.9)	$	30.4	$	59.9	$	(25.1)	$	34.8	Completed technologies/patents	$	60.7	$	(29.0)	$	31.7	$	57.9	$	(28.8)	$	29.1
Customer relationships	Customer relationships	401.0		(138.6)		262.4		415.5		(130.2)		285.3		Customer relationships	488.9		(139.3)		349.6		395.9		(141.6)		254.3
Trade names (finite-lived)	Trade names (finite-lived)	85.5		(57.1)		28.4		90.2		(57.4)		32.8		Trade names (finite-lived)	128.9		(54.1)		74.8		84.0		(56.9)		27.1
Other	Other	44.9		(21.2)		23.7		27.0		(11.1)		15.9		Other	66.8		(28.9)		37.9		45.8		(22.7)		23.1
Total finite-lived intangible assets	Total finite-lived intangible assets	589.7		$	(244.8)	344.9		592.6		$	(223.8)	368.8		Total finite-lived intangible assets	745.3		$	(251.3)	494.0		583.6		$	(250.0)	333.6
Trade names (indefinite-lived)	Trade names (indefinite-lived)	114.9				114.9		118.3				118.3		Trade names (indefinite-lived)	105.7				105.7		113.9				113.9
Total	Total	$	704.6			$	459.8	$	710.9			$	487.1	Total	$	851.0			$	599.7	$	697.5			$	447.5

Intangible asset amortization expense was ~~$25.2~~$32.6 million and ~~$23.2~~$25.2 million for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. Intangible asset amortization expense for the nine months ended September 30, 2022, included $9.0 million related to intangible assets acquired as part of the recent Access Technologies business acquisition.

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Future estimated amortization expense on existing intangible assets in each of the next five years amounts to approximately ~~$32.1~~$44.5 million for full year ~~2021, $27.8 million for~~ 2022, ~~$27.6~~$56.4 million for 2023, ~~$27.6~~$51.7 million for 2024, ~~and $26.7~~$46.1 million for ~~2025.~~

~~As a result of the global economic disruption~~2025 and uncertainty due to the COVID-19 pandemic arising during the first quarter of 2020, the Company concluded a triggering event had occurred as of March 31, 2020, and performed interim impairment testing on certain indefinite-lived trade names. Based on these tests, it was determined that three of the Company's indefinite-lived trade names were impaired, and impairment charges of $8.2$43.1 million ~~were recorded, which are included in Impairment of goodwill and intangible assets in the Condensed and Consolidated Statement of Comprehensive Income~~ for ~~the nine months ended September 30, 2020.~~

During the three months ended September 30, 2020, a subsidiary in the former Asia Pacific segment experienced supply chain disruptions, which reduced one of its brand's expected future cash flows. As a result, an impairment charge of $2.6 million was recorded, which is included in Impairment of goodwill and intangible assets in the Condensed and Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2020.

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~NOTE 6 - ACQUISITIONS~~

In July 2021, the Company acquired, through its subsidiaries, 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. Neither the assets acquired from Astrum Benelux nor the acquisition of WorkforceIT had a material impact on the Condensed and Consolidated Financial Statements for the three or nine months ended September 30, 2021. Both WorkforceIT and the assets acquired from Astrum Benelux have been accounted for as a business combination and have been integrated into the Allegion International segment.2026.

NOTE 7 - DIVESTITURES

In September 2022, the Company sold Milre Systek Co. Ltd. ("Milre") in South Korea for an immaterial amount. As ~~previously disclosed, during the fourth quarter of 2020, the net assets~~a result of the ~~Company's Qatar Metal Industries ("QMI") business, met~~sale, the ~~criteria to be classified as held for sale, and accordingly, were written down to fair value, resulting in~~Company recorded a Loss on ~~assets held for sale in the fourth quarter of 2020 of $37.9 million.~~

~~On February 28, 2021, the Company completed its~~ divestiture of ~~QMI. The completion~~$7.6 million, of which $1.6 million related to the reclassification of accumulated foreign currency translation adjustments to earnings upon sale. This divestiture ~~did~~is not expected to have a material impact toon the ~~Condensed and Consolidated Financial Statements for the nine months ended September 30, 2021.~~Company's future results of operations or cash flows.

NOTE 8 - DEBT AND CREDIT FACILITIES

Long-term debt and other borrowings consisted of the following:
In millions September 30,
2021 December 31,
2020
Term Facility $ 238.8 $ 238.8
Revolving Facility — —
3.200% Senior Notes due 2024 400.0 400.0
3.550% Senior Notes due 2027 400.0 400.0
3.500% Senior Notes due 2029 400.0 400.0
Other debt 0.4 0.6
Total borrowings outstanding 1,439.2 1,439.4
Discounts and debt issuance costs, net (8.3) (9.8)
Total debt 1,430.9 1,429.6
Less current portion of long-term debt 238.4 0.2
Total long-term debt $ 1,192.5 $ 1,429.4


In millions	September 30, 2022		December 31, 2021
2021 Term Facility	$	240.6	$	250.0
2021 Revolving Facility	199.0		—
3.200% Senior Notes due 2024	400.0		400.0
3.550% Senior Notes due 2027	400.0		400.0
3.500% Senior Notes due 2029	400.0		400.0
5.411% Senior Notes due 2032	600.0		—
Other debt	0.2		0.3
Total borrowings outstanding	2,239.8		1,450.3
Discounts and debt issuance costs, net	(12.7)		(8.2)
Total debt	2,227.1		1,442.1
Less current portion of long-term debt	12.6		12.6
Total long-term debt	$	2,214.5	$	1,429.5

Unsecured Credit Facilities

As of September 30, ~~2021,~~2022, the Company has an unsecured Credit Agreement in place, consisting of a ~~$700.0~~$250.0 million term loan facility (the ~~“Term~~“2021 Term Facility”), of which ~~$238.8~~$240.6 million iswas outstanding at September 30, ~~2021,~~2022, and a $500.0 million revolving credit facility (the ~~“Revolving~~“2021 Revolving Facility” and, together with the 2021 Term Facility, the ~~“Credit~~“2021 Credit Facilities”). The 2021 Credit Facilities mature on ~~September 12, 2022,~~November 18, 2026, and are unconditionally guaranteed jointly and severally on an unsecured basis by ~~the Company~~Allegion plc and Allegion US Holding Company Inc. ("Allegion US Hold Co"), the Company’s wholly-owned subsidiary. ~~Principal amounts repaid on the~~The 2021 Term Facility ~~may not be reborrowed, and the Company has satisfied its obligation to make~~will amortize in quarterly installments onat the ~~Term Facility up to the maturity date,~~following rates: 1.25% per quarter starting March 31, 2022 through March 31, 2025, 2.5% per quarter starting June 30, 2025 through September 30, 2026, with the ~~remaining outstanding~~ balance due on November 18, 2026. The Company repaid $9.4 million of principal on its 2021 Term Facility during the nine months ended September ~~12,~~30, 2022.

The 2021 Revolving Facility provides aggregate commitments of up to $500.0 million, which includes up to $100.0 million for the issuance of letters of credit. ~~At September 30,~~On July 1, 2022, the Company borrowed $340.0 million on the 2021 ~~there were no~~Revolving Facility to partially fund the acquisition of the Access Technologies business. The Company has subsequently made $141.0 million in repayments, resulting in $199.0 million of borrowings outstanding on the 2021 Revolving Facility ~~and the~~as of September 30, 2022. The Company also had ~~$14.1~~$7.6 million of letters of credit outstanding. Commitments under the 2021 Revolving Facility may be reduced at any time without premium or penalty, and amounts repaid may be reborrowed.

Outstanding borrowings under the 2021 Credit Facilities accrue interest, at the option of the Company, of (i) a ~~LIBOR~~Bloomberg Short-Term Bank Yield Index ("BSBY") rate plus the applicable margin or (ii) a base rate plus the applicable margin. The applicable margin ranges from ~~1.125%~~0.875% to ~~1.500%~~1.375% depending on the Company’s credit ratings. At September 30, ~~2021,~~2022, the Company's outstanding borrowings under the 2021 Credit

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Facilities accrue interest at ~~LIBOR~~BSBY plus a margin of ~~1.250%~~1.125%, resulting in an interest rate of ~~1.34%~~4.241%. The 2021 Credit Facilities also contain negative and affirmative covenants and events of default that, among other things, limit or restrict the Company’s ability to enter into certain transactions. In addition, the 2021 Credit Facilities require the Company to comply with a maximum leverage ratio ~~and a minimum interest expense coverage ratio,~~ as defined within the agreement. As of September 30, ~~2021,~~2022, the Company was in compliance with all covenants.

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Senior Notes

On June 22, 2022, Allegion US Hold Co issued $600.0 million aggregate principal amount of its 5.411% Senior Notes due 2032 (the “5.411% Senior Notes”) to partially fund the acquisition of the Access Technologies business, in addition to the $340.0 million drawn on the 2021 Revolving Facility, as discussed above. The 5.411% Senior Notes require semi-annual interest payments on January 1 and July 1, beginning January 1, 2023, and will mature on July 1, 2032. The Company incurred and deferred $5.9 million of discounts and financing costs associated with the 5.411% Senior Notes, which will be amortized to Interest expense over their 10-year term, as well as $4.3 million of third party financing costs that were recorded within Interest expense on the Condensed and Consolidated Statement of Income for the nine months ended September 30, 2022. The 5.411% Senior Notes are senior unsecured obligations of Allegion US Hold Co and rank equally with all of Allegion US Hold Co’s existing and future senior unsecured and unsubordinated indebtedness. The guarantee of the 5.411% Senior Notes is the senior unsecured obligation of Allegion plc and ranks equally with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness.

As of September 30, ~~2021,~~2022, Allegion US Hold Co also has $400.0 million outstanding of its 3.200% Senior Notes due 2024 (the “3.200% Senior Notes”) and $400.0 million outstanding of its 3.550% Senior Notes due 2027 (the “3.550% Senior Notes”), while Allegion plc has $400.0 million outstanding of its 3.500% Senior Notes due 2029 (the “3.500% Senior Notes”, and all four senior notes collectively, the “Senior Notes”). The 3.200% Senior Notes, 3.550% Senior Notes and 3.500% Senior Notes ~~(collectively, the "Senior Notes")~~ all require semi-annual interest payments on April 1 and October 1 of each year and will mature on October 1, 2024, October 1, 2027 and October 1, 2029, respectively. The 3.200% Senior Notes and the 3.550% Senior Notes are senior unsecured obligations of Allegion US Hold Co and rank equally with all of Allegion US Hold Co’s existing and future senior unsecured and unsubordinated indebtedness. The guarantee of the 3.200% Senior Notes and the 3.550% Senior Notes is the senior unsecured obligation of ~~the Company~~Allegion plc and ranks equally with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness. The 3.500% Senior Notes are senior unsecured obligations of Allegion plc, are guaranteed by Allegion US Hold Co and rank equally with all of the Company’s existing and future senior unsecured indebtedness.

NOTE 9 - FINANCIAL INSTRUMENTS

In the normal course of business, the Company uses various financial instruments, including derivative instruments, to manage the risks associated with interest and currency rate exposures. These financial instruments are not used for trading or speculative purposes. When a derivative contract is entered into, the Company designates the derivative instrument as a cash flow hedge of a forecasted transaction, a cash flow hedge of a recognized asset or liability or as an undesignated derivative. The Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.

The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be an effective hedge, the fair market value changes of the instrument are recorded to Accumulated other comprehensive loss and subsequently reclassified to Net earnings when the hedged transaction affects earnings, while changes in the fair market value of derivatives not deemed to be an effective hedge are recorded in Net earnings in the period of change. The fair market value of derivative instruments is determined through market-based valuations and may not be representative of the actual gains or losses that will be recorded when these instruments mature due to future fluctuations in the markets in which they are traded. If the hedging relationship ceases to be effective subsequent to inception, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument will be recorded in Net earnings.

Currency Hedging Instruments

The gross notional amount of the Company’s currency derivatives was ~~$181.6~~$168.1 million and ~~$218.9~~$164.9 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~The~~Neither the fair values of currency derivatives, ~~included within~~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 ~~Condensed and Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 were not material,~~fair value hierarchy described in Note 12), nor ~~were either~~ the balances included in Accumulated other comprehensive loss were material as of September 30, 2022 and December 31, 2021. Currency derivatives designated as cash flow hedges did not have a material impact to either Net earnings or Other comprehensive loss during the three or nine months ended September 30, 2022 and 2021, nor is the amount ~~expected~~ to be reclassified into Net earnings over the next twelve months ~~related~~expected to ~~currency derivatives designated as cash flow hedges,~~be material, although the actual amounts that will be reclassified to Net earnings may vary as a result of future changes in market conditions.

~~The amounts associated with currency derivatives designated as hedges affecting Net earnings and Accumulated other comprehensive loss for the three months ended September 30 were as follows:~~

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Amount of gain recognized in Accumulated other comprehensive loss Location of (loss) gain recognized
in Net earnings Amount of (loss) gain reclassified from Accumulated other comprehensive loss and
recognized into Net earnings
In millions 2021 2020 2021 2020
Currency derivatives $ 0.4 $ 0.9 Cost of goods sold $ (1.0) $ 1.7

~~The amounts associated with currency derivatives designated as hedges affecting Net earnings and Accumulated other comprehensive loss for the~~ ~~nine~~ ~~months ended September 30 were as follows:~~

Amount of gain recognized in Accumulated other comprehensive loss Location of gain recognized
in Net earnings Amount of gain reclassified from Accumulated other comprehensive loss and
recognized into Net earnings
In millions 2021 2020 2021 2020
Currency derivatives $ 2.8 $ 3.9 Cost of goods sold $ 0.2 $ 3.8

Gains and losses associated with the Company’s non-designated currency derivatives, which are offset by changes in the fair value of the underlying transactions, are included within Other income, net in the Condensed and Consolidated Statements of Comprehensive Income. At September 30, ~~2021,~~2022, the maximum term of the Company’s currency derivatives, both those that are designated as cash flow hedges and those that are not, was less than one year.

Concentration of Credit Risk

The counterparties to the Company’s forward contracts consist of a number of investment grade major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, the credit ratings and the concentration of risk in these financial institutions are monitored on a continuous basis and present no significant credit risk to the Company.

NOTE 10 - LEASES

The Company records a right-of-use ("ROU") asset and lease liability for substantially all leases for which it is a lessee, in accordance with ASC 842. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys a right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration. The Company has no significant lease agreements in place for which the Company is a lessor, and substantially all of the Company’s leases for which the Company is a lessee are classified as operating leases. Total rental expense for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ was ~~$33.6~~$34.9 million and ~~$32.5~~$33.6 million, respectively, and is classified within Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. Rental expense related to short-term leases, variable lease payments or other leases or lease components not included within the ROU asset or lease liability totaled ~~$6.0~~$7.0 million and ~~$7.1~~$6.0 million, respectively, for the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. No material lease costs have been capitalized on the Condensed and Consolidated Balance Sheets as of September 30, ~~2021~~2022 or December 31, ~~2020.~~

If at lease commencement date, a lease has a term of less than 12 months and does not include a purchase option that is reasonably certain to be exercised, the Company does not include the lease as part of its ROU asset or lease liability. If the Company enters into a large number of leases in the same month with the same terms and conditions, these are considered a group (portfolio), assuming the lease model under this approach does not materially differ from applying ASC 842 to each individual lease. When available, the Company will utilize the rate implicit in the lease as the discount rate to determine the lease liability. However, as this rate is not available for most leases, the Company will use its incremental borrowing rate as the discount rate, which is the rate at inception of the lease the Company would hypothetically incur to borrow over a similar term the funds needed to purchase the leased asset.

2021.

As a lessee, the Company categorizes its leases into two general categories: real estate leases and equipment leases.

The Company’s real estate leases include leased production and assembly facilities, warehouses and distribution centers, office space and to a lesser degree, employee housing. The terms and conditions of real estate leases can vary significantly from lease

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

to lease. The Company has assessed the specific terms and conditions of each real estate lease to determine the amount of the lease payments and the length of the lease term, which includes the minimum period over which lease payments are required plus any renewal options that are both within the Company’s control to exercise and reasonably certain of being exercised upon lease commencement. The Company assesses all relevant factors to determine if sufficient incentives exist as of lease commencement to conclude whether or not renewal is reasonably certain. There are no material residual value guarantees provided by the Company nor any restrictions or covenants imposed by the real estate leases to which the Company is a party. In determining the lease liability, the Company utilizes its incremental borrowing rate for debt instruments with terms approximating the weighted-average term for its real estate leases to discount the future lease payments over the lease term to present value. The Company does incur variable lease payments for certain of its real estate leases, such as reimbursements of property taxes, maintenance and other operational costs to the lessor. In general, these variable lease payments are not captured as part of the lease liability or ROU asset, but rather are expensed as incurred.

The Company’s equipment leases include vehicles, material handling equipment, other machinery and equipment utilized in the Company’s production and assembly facilities, warehouses and distribution centers, laptops and other IT equipment, and other miscellaneous leased equipment. Most of the equipment leases are for terms ranging from two to five years, although terms and conditions can vary from lease to lease. The Company applies similar estimates and judgments to its equipment lease portfolio in determining the lease payments and lease term as it does to its real estate lease portfolio. There are no material residual value guarantees provided by the Company nor any restrictions or covenants imposed by the equipment leases to which the Company is a party. In determining the lease liability, the Company utilizes its incremental borrowing rate for debt instruments with terms approximating the weighted-average term for its equipment leases to discount the future lease payments over the lease term to present value. The Company does not typically incur variable lease payments related to its equipment leases.

Amounts included within the Condensed and Consolidated Balance Sheets related to the Company’s ROU asset and lease liability were as follows:

September 30, 2021 December 31, 2020
In millions Balance Sheet classification Real estate Equipment Total Real estate Equipment Total
ROU asset Other noncurrent assets $ 58.1 $ 31.7 $ 89.8 $ 59.5 $ 32.5 $ 92.0
Lease liability - current Accrued expenses and other current liabilities 14.4 13.4 27.8 14.7 12.9 27.6
Lease liability - noncurrent Other noncurrent liabilities 45.5 18.4 63.9 46.5 19.8 66.3
Other information:
Weighted-average remaining term (years) 6.8 2.8 7.0 3.2
Weighted-average discount rate 3.6 % 2.2 % 3.9 % 2.7 %

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


		September 30, 2022								December 31, 2021
In millions	Balance Sheet classification	Real estate			Equipment			Total		Real estate			Equipment			Total
ROU asset	Other noncurrent assets	$	70.9		$	28.4		$	99.3	$	58.2		$	31.7		$	89.9
Lease liability - current	Accrued expenses and other current liabilities	17.5			13.4			30.9		15.5			13.6			29.1
Lease liability - noncurrent	Other noncurrent liabilities	56.6			15.0			71.6		45.1			18.2			63.3

Other information:
Weighted-average remaining term (years)		5.9			2.5					6.5			2.8
Weighted-average discount rate		3.4		%	1.9		%			3.4		%	2.1		%

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


		2021						2020							2022						2021
In millions	In millions	Real estate		Equipment		Total		Real estate		Equipment		Total		In millions	Real estate		Equipment		Total		Real estate		Equipment		Total
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities	$	14.7	$	12.9	$	27.6	$	14.4	$	11.0	$	25.4	Cash paid for amounts included in the measurement of lease liabilities	$	15.3	$	12.6	$	27.9	$	14.7	$	12.9	$	27.6
ROU assets obtained in exchange for new lease liabilities	ROU assets obtained in exchange for new lease liabilities	12.0		8.8		20.8		18.3		18.3		36.6		ROU assets obtained in exchange for new lease liabilities	31.3		8.6		39.9		12.0		8.8		20.8

The Company frequently enters into both real estate and equipment leases in the normal course of business. While there have been lease agreements entered into that have not yet commenced as of September 30, ~~2021,~~2022, none of these leases provide new rights or obligations to the Company that are material individually or in the aggregate.

Future Repayments

Scheduled minimum lease payments required under non-cancellable operating leases for both the real estate and equipment lease portfolios for the remainder of ~~2021~~2022 and for each of the years thereafter as of September 30, ~~2021,~~2022, are as follows:

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~


In millions	In millions	Remainder of 2021		2022		2023		2024		2025		Thereafter		Total		In millions	Remainder of 2022		2023		2024		2025		2026		Thereafter		Total
Real estate leases	Real estate leases	$	4.1	$	15.9	$	11.7	$	8.7	$	7.4	$	20.5	$	68.3	Real estate leases	$	4.9	$	19.3	$	15.4	$	13.0	$	9.9	$	20.0	$	82.5
Equipment leases	Equipment leases	3.9		13.0		8.8		4.7		2.1		0.2		32.7		Equipment leases	3.9		12.9		7.9		3.6		0.6		0.1		29.0
Total	Total	$	8.0	$	28.9	$	20.5	$	13.4	$	9.5	$	20.7	$	101.0	Total	$	8.8	$	32.2	$	23.3	$	16.6	$	10.5	$	20.1	$	111.5

The difference between the total undiscounted minimum lease payments and the combined current and noncurrent lease liabilities as of September 30, ~~2021,~~2022, is due to imputed interest of ~~$9.3~~$9.0 million.

NOTE 11 - DEFINED BENEFIT PLANS

The Company sponsors several U.S. and non-U.S. defined benefit pension plans to eligible employees and retirees. The noncontributory defined benefit pension plans covering non-collectively bargained U.S. employees provide benefits on an average pay formula while most plans for collectively bargained U.S. employees provide benefits on a flat dollar benefit formula. The non-U.S. pension plans generally provide benefits based on earnings and years of service. The Company also maintains other supplemental plans for officers and other key employees.

The components of the Company’s Net periodic pension benefit cost (income) for the three and nine months ended September 30 were as follows:

U.S.
Three months ended Nine months ended
In millions 2021 2020 2021 2020
Service cost $ 1.6 $ 1.2 $ 5.0 $ 5.0
Interest cost 1.7 2.3 5.1 7.2
Expected return on plan assets (3.6) (3.5) (10.5) (10.8)
Administrative costs and other 0.3 0.2 0.9 1.1
Net amortization of:
Prior service costs 0.1 0.1 0.2 0.2
Plan net actuarial losses 0.8 0.7 2.6 2.7
Net periodic pension benefit cost $ 0.9 $ 1.0 $ 3.3 $ 5.4

ALLEGION PLC

Non-U.S.
Three months ended Nine months ended
In millions 2021 2020 2021 2020
Service cost $ 0.6 $ 0.5 $ 1.7 $ 1.5
Interest cost 1.3 1.7 3.8 5.1
Expected return on plan assets (3.4) (3.3) (10.3) (9.8)
Administrative costs and other 0.4 0.4 1.4 1.1
Net amortization of:
Prior service costs — 0.1 0.1 0.1
Plan net actuarial losses 0.4 0.3 1.1 1.0
Net periodic pension benefit income $ (0.7) $ (0.3) $ (2.2) $ (1.0)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	U.S.
	Three months ended				Nine months ended
In millions	2022		2021		2022		2021
Service cost	$	1.7	$	1.6	$	4.6	$	5.0
Interest cost	2.1		1.7		6.1		5.1
Expected return on plan assets	(3.3)		(3.6)		(10.1)		(10.5)
Administrative costs and other	0.2		0.3		0.8		0.9
Net amortization of:
Prior service costs	—		0.1		0.1		0.2
Plan net actuarial losses	0.3		0.8		0.8		2.6
Net periodic pension benefit cost	$	1.0	$	0.9	$	2.3	$	3.3


	Non-U.S.
	Three months ended				Nine months ended
In millions	2022		2021		2022		2021
Service cost	$	0.4	$	0.6	$	1.1	$	1.7
Interest cost	1.8		1.3		5.4		3.8
Expected return on plan assets	(3.9)		(3.4)		(11.7)		(10.3)
Administrative costs and other	0.4		0.4		1.2		1.4
Net amortization of:
Prior service costs	—		—		0.1		0.1
Plan net actuarial losses	0.2		0.4		0.6		1.1

Net periodic pension benefit income	$	(1.1)	$	(0.7)	$	(3.3)	$	(2.2)

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.

~~The Company made employer~~ Employer contributions ~~of $7.7 million and $7.0 million~~were not material during the nine months ended September 30, ~~2021~~2022 and ~~2020, respectively, to its defined benefit pension plans.~~2021. Contributions of approximately $4$5 million are ~~expected~~expected during the remainder of ~~2021.~~2022.

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

NOTE 12 - 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.

~~Assets and liabilities measured at fair value at September 30, 2021, were as follows:~~
Fair value measurements Total
fair value
In millions Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3)
Recurring fair value measurements
Assets:
Investments $ — $ 23.5 $ — $ 23.5
Derivative instruments — 1.3 — 1.3
Total asset recurring fair value measurements $ — $ 24.8 $ — $ 24.8
Liabilities:
Derivative instruments $ — $ 1.1 $ — $ 1.1
Deferred compensation and other retirement plans — 24.8 — 24.8
Total liability recurring fair value measurements $ — $ 25.9 $ — $ 25.9
Financial instruments not carried at fair value
Total debt $ — $ 1,525.6 $ — $ 1,525.6
Total financial instruments not carried at fair value $ — $ 1,525.6 $ — $ 1,525.6

1110

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Assets and liabilities measured at fair value at ~~December 31, 2020,~~September 30, 2022, were as follows:


		Fair value measurements						Total fair value			Fair value measurements						Total fair value
In millions	In millions	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)				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	Recurring fair value measurements									Recurring fair value measurements
Assets:	Assets:									Assets:
Investments	Investments	$	—	$	23.5	$	—	$	23.5	Investments	$	—	$	19.1	$	—	$	19.1
Derivative instruments		—		1.6		—		1.6

Total asset recurring fair value measurements	Total asset recurring fair value measurements	$	—	$	25.1	$	—	$	25.1	Total asset recurring fair value measurements	$	—	$	19.1	$	—	$	19.1
Liabilities:	Liabilities:									Liabilities:
Derivative instruments		$	—	$	3.4	$	—	$	3.4

Deferred compensation and other retirement plans	Deferred compensation and other retirement plans	—		25.1		—		25.1		Deferred compensation and other retirement plans	$	—	$	19.2	$	—	$	19.2
Total liability recurring fair value measurements	Total liability recurring fair value measurements	$	—	$	28.5	$	—	$	28.5	Total liability recurring fair value measurements	$	—	$	19.2	$	—	$	19.2
Financial instruments not carried at fair value	Financial instruments not carried at fair value									Financial instruments not carried at fair value
Total debt	Total debt	$	—	$	1,541.4	$	—	$	1,541.4	Total debt	$	—	$	2,064.2	$	—	$	2,064.2
Total financial instruments not carried at fair value	Total financial instruments not carried at fair value	$	—	$	1,541.4	$	—	$	1,541.4	Total financial instruments not carried at fair value	$	—	$	2,064.2	$	—	$	2,064.2

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


	Fair value measurements						Total fair value
In millions	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Recurring fair value measurements
Assets:
Investments	$	—	$	24.5	$	—	$	24.5

Total asset recurring fair value measurements	$	—	$	24.5	$	—	$	24.5
Liabilities:

Deferred compensation and other retirement plans	$	—	$	25.9	$	—	$	25.9
Total liability recurring fair value measurements	$	—	$	25.9	$	—	$	25.9
Financial instruments not carried at fair value
Total debt	$	—	$	1,510.4	$	—	$	1,510.4
Total financial instruments not carried at fair value	$	—	$	1,510.4	$	—	$	1,510.4

The Company determines the fair value of its financial assets and liabilities using the following methodologies:

•Investments – These instruments include equity mutual funds and corporate bond funds. The fair value is obtained based on observable market prices quoted on public exchanges for similar instruments.

•~~Derivative instruments~~ – These instruments include foreign currency contracts for non-functional currency balance sheet exposures, including both those that are and are not designated as cash flow hedges. The fair value of the foreign currency contracts is determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily accessible and observable.

•Deferred compensation and other retirement plans – These include obligations related to deferred compensation and other retirement plans adjusted for market performance. The fair value is obtained based on observable market prices quoted on public exchanges for similar instruments.

•Debt – These instruments are recorded at cost and include senior notes maturing through ~~2029.~~2032. The fair value of ~~the long-term~~these debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments.

The methodologies used by the Company to determine the fair value of its financial assets and liabilities at September 30, 2022, are the same as those used at December 31, 2021. The carrying values of Cash and cash equivalents, Accounts and notes receivable, net, Accounts payable and Accrued expenses and other current liabilities are a reasonable estimate of their fair value due to the short-term nature of these instruments.

The Company also had investments in debt and equity securities without readily determinable fair values of ~~$12.4~~$41.6 million and ~~$13.7~~$35.8 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which are classified as Other noncurrent assets within the Condensed and Consolidated Balance Sheets. These investments are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer and are qualitatively assessed for impairment indicators at each reporting period. These investments are considered to be nonrecurring fair value measurements, and thus, are not included in the fair value tables above.

~~The methodologies used by the Company to determine the fair value of its financial assets and liabilities at September 30, 2021, are the same as those used at December 31, 2020.~~

1211

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 13 - EQUITY

The changes in the components of Equity for the nine months ended September 30, ~~2021,~~2022, were as follows:

Allegion plc shareholders' equity
Ordinary shares
In millions Total equity Amount Shares Capital in excess of par value Retained earnings Accumulated other comprehensive loss Noncontrolling
interests
Balance at December 31, 2020 $ 832.6 $ 0.9 91.2 $ — $ 985.6 $ (157.1) $ 3.2
Net earnings 108.2 — — — 108.0 — 0.2
Other comprehensive loss, net (32.0) — — — — (32.0) —
Repurchase of ordinary shares (149.7) — (1.3) (4.4) (145.3) — —
Share-based compensation activity 4.4 — 0.1 4.4 — — —
Dividends to ordinary shareholders ($0.36 per share) (32.5) — — — (32.5) — —
Other — — — — 0.1 — (0.1)
Balance at March 31, 2021 731.0 0.9 90.0 — 915.9 (189.1) 3.3
Net earnings 118.8 — — — 118.7 — 0.1
Other comprehensive income, net 10.5 — — — — 10.4 0.1
Repurchase of ordinary shares (50.1) — (0.4) (9.7) (40.4) — —
Share-based compensation activity 9.7 — 0.2 9.7 — — —
Dividends to noncontrolling interests (0.1) — — — — — (0.1)
Dividends to ordinary shareholders ($0.36 per share) (32.4) — — — (32.4) — —
Balance at June 30, 2021 787.4 0.9 89.8 — 961.8 (178.7) 3.4
Net earnings 143.6 — — — 143.5 — 0.1
Other comprehensive loss, net (22.4) — — — — (22.3) (0.1)
Repurchase of ordinary shares (12.9) — (0.1) (1.4) (11.5) — —
Share-based compensation activity 4.2 — — 4.2 — — —
Dividends to ordinary shareholders ($0.36 per share) (32.3) — — — (32.3) — —
Balance at September 30, 2021 $ 867.6 $ 0.9 89.7 $ 2.8 $ 1,061.5 $ (201.0) $ 3.4


			Allegion plc shareholders' equity
			Ordinary shares
In millions, except per share amounts	Total equity		Amount		Shares	Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss		Noncontrolling interests
Balance at December 31, 2021	$	762.4	$	0.9	88.2	$	—	$	952.6	$	(194.4)	$	3.3
Net earnings	93.1		—		—	—		93.0		—		0.1



Other comprehensive loss, net	(21.0)		—		—	—		—		(21.0)		—
Repurchase of ordinary shares	(61.0)		—		(0.5)	(7.5)		(53.5)		—		—
Share-based compensation activity	7.5		—		0.1	7.5		—		—		—


Dividends to ordinary shareholders ($0.41 per share)	(36.0)		—		—	—		(36.0)		—		—

Balance at March 31, 2022	745.0		0.9		87.8	—		956.1		(215.4)		3.4
Net earnings	115.2		—		—	—		115.1		—		0.1



Other comprehensive loss, net	(49.8)		—		—	—		—		(49.2)		(0.6)

Share-based compensation activity	5.4		—		—	5.4		—		—		—

Dividends to noncontrolling interests	(0.1)		—		—	—		—		—		(0.1)
Dividends to ordinary shareholders ($0.41 per share)	(36.0)		—		—	—		(36.0)		—		—

Balance at June 30, 2022	779.7		0.9		87.8	5.4		1,035.2		(264.6)		2.8
Net earnings	114.6		—		—	—		114.6		—		—



Other comprehensive loss, net	(68.3)		—		—	—		—		(67.9)		(0.4)

Share-based compensation activity	3.8		—		—	3.8		—		—		—

Dividends to noncontrolling interests	(0.1)		—		—	—		—		—		(0.1)
Dividends to ordinary shareholders ($0.41 per share)	(36.1)		—		—	—		(36.1)		—		—

Balance at September 30, 2022	$	793.6	$	0.9	87.8	$	9.2	$	1,113.7	$	(332.5)	$	2.3

1312

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, ~~2020,~~2021, were as follows:


				Allegion plc shareholders' equity														Allegion plc shareholders' equity
				Ordinary shares														Ordinary shares
In millions		Total equity		Amount		Shares	Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss		Noncontrolling interests
Balance at December 31, 2019		$	760.4	$	0.9	92.7	$	—	$	975.1	$	(218.6)	$	3.0
Cumulative effect of adoption of ASC 326, Financial Instruments – Credit Losses		(2.2)		—		—	—		(2.2)		—		—
In millions, except per share amounts															In millions, except per share amounts	Total equity		Amount		Shares	Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss		Noncontrolling interests
Balance at December 31, 2020															Balance at December 31, 2020	$	832.6	$	0.9	91.2	$	—	$	985.6	$	(157.1)	$	3.2
Net earnings	Net earnings	0.5		—		—	—		0.4		—		0.1		Net earnings	108.2		—		—	—		108.0		—		0.2

Other comprehensive loss, net	Other comprehensive loss, net	(33.4)		—		—	—		—		(32.8)		(0.6)		Other comprehensive loss, net	(32.0)		—		—	—		—		(32.0)		—
Repurchase of ordinary shares	Repurchase of ordinary shares	(94.1)		—		(0.9)	(12.2)		(81.9)		—		—		Repurchase of ordinary shares	(149.7)		—		(1.3)	(4.4)		(145.3)		—		—
Share-based compensation activity	Share-based compensation activity	12.2		—		0.4	12.2		—		—		—		Share-based compensation activity	4.4		—		0.1	4.4		—		—		—

Dividends to ordinary shareholders ($0.32 per share)		(29.6)		—		—	—		(29.6)		—		—

Balance at March 31, 2020		613.8		0.9		92.2	—		861.8		(251.4)		2.5
Dividends to ordinary shareholders ($0.36 per share)															Dividends to ordinary shareholders ($0.36 per share)	(32.5)		—		—	—		(32.5)		—		—
Other															Other	—		—		—	—		0.1		—		(0.1)
Balance at March 31, 2021															Balance at March 31, 2021	731.0		0.9		90.0	—		915.9		(189.1)		3.3
Net earnings	Net earnings	73.7		—		—	—		73.7		—		—		Net earnings	118.8		—		—	—		118.7		—		0.1

Other comprehensive income, net	Other comprehensive income, net	20.6		—		—	—		—		20.4		0.2		Other comprehensive income, net	10.5		—		—	—		—		10.4		0.1

Repurchase of ordinary shares															Repurchase of ordinary shares	(50.1)		—		(0.4)	(9.7)		(40.4)		—		—
Share-based compensation activity	Share-based compensation activity	1.6		—		—	1.6		—		—		—		Share-based compensation activity	9.7		—		0.2	9.7		—		—		—
Dividends to noncontrolling interests	Dividends to noncontrolling interests	(0.2)		—		—	—		—		—		(0.2)		Dividends to noncontrolling interests	(0.1)		—		—	—		—		—		(0.1)
Dividends to ordinary shareholders ($0.32 per share)		(29.5)		—		—	—		(29.5)		—		—
Dividends to ordinary shareholders ($0.36 per share)															Dividends to ordinary shareholders ($0.36 per share)	(32.4)		—		—	—		(32.4)		—		—

Balance at June 30, 2020		680.0		0.9		92.2	1.6		906.0		(231.0)		2.5
Balance at June 30, 2021															Balance at June 30, 2021	787.4		0.9		89.8	—		961.8		(178.7)		3.4
Net earnings	Net earnings	146.9		—		—	—		146.9		—		—		Net earnings	143.6		—		—	—		143.5		—		0.1

Other comprehensive income, net		24.5		—		—	—		—		24.2		0.3

Other comprehensive loss, net															Other comprehensive loss, net	(22.4)		—		—	—		—		(22.3)		(0.1)
Repurchase of ordinary shares															Repurchase of ordinary shares	(12.9)		—		(0.1)	(1.4)		(11.5)		—		—
Share-based compensation activity	Share-based compensation activity	5.2		—		0.1	5.2		—		—		—		Share-based compensation activity	4.2		—		—	4.2		—		—		—

Dividends to ordinary shareholders ($0.32 per share)		(29.5)		—		—	—		(29.5)		—		—
Dividends to ordinary shareholders ($0.36 per share)															Dividends to ordinary shareholders ($0.36 per share)	(32.3)		—		—	—		(32.3)		—		—

Balance at September 30, 2020		$	827.1	$	0.9	92.3	$	6.8	$	1,023.4	$	(206.8)	$	2.8
Balance at September 30, 2021															Balance at September 30, 2021	$	867.6	$	0.9	89.7	$	2.8	$	1,061.5	$	(201.0)	$	3.4

In February ~~2017, the Company’s Board of Directors approved a share repurchase authorization of up to $500 million of the Company’s ordinary shares (the "2017 Share Repurchase Authorization"). On February 6,~~ 2020, the Company’s Board of Directors approved a ~~new~~ share repurchase authorization of up to, and including, $800 million of the Company’s ordinary shares (the "2020 Share Repurchase Authorization")~~, replacing the existing 2017 Share Repurchase Authorization.~~. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company paid ~~$212.7~~$61.0 million and ~~$94.1~~$212.7 million, respectively, to repurchase the ordinary shares reflected in the tables above on the open market under ~~these share repurchase authorizations.~~the 2020 Share Repurchase Authorization. As of September 30, ~~2021,~~2022, the Company has approximately ~~$401.4~~$140.5 million still available to be repurchased under the 2020 Share Repurchase Authorization.

Accumulated Other Comprehensive Loss

The changes in Accumulated other comprehensive loss for the nine months ended September 30, 2022, were as follows:


In millions	Cash flow hedges		Pension and OPEB items		Foreign currency items		Total
December 31, 2021	$	0.9	$	(96.0)	$	(99.3)	$	(194.4)
Other comprehensive income (loss) before reclassifications	8.8		10.0		(159.8)		(141.0)
Amounts reclassified from accumulated other comprehensive loss(a)	(0.1)		1.3		1.6		2.8
Tax (expense) benefit	(0.6)		0.7		—		0.1
September 30, 2022	$	9.0	$	(84.0)	$	(257.5)	$	(332.5)

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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


In millions	Cash flow hedges		Pension and OPEB items		Foreign currency items		Total
December 31, 2020	$	(0.9)	$	(120.3)	$	(35.9)	$	(157.1)
Other comprehensive income (loss) before reclassifications	2.8		1.5		(50.8)		(46.5)
Amounts reclassified from accumulated other comprehensive loss(a)	(0.2)		3.5		—		3.3
Tax expense	(0.7)		—		—		(0.7)
September 30, 2021	$	1.0	$	(115.3)	$	(86.7)	$	(201.0)

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~The changes in Accumulated other comprehensive loss for the nine months ended September 30, 2020, were as follows:~~

In millions Cash flow hedges Pension and OPEB items Foreign currency items Total
December 31, 2019 $ 0.5 $ (126.2) $ (92.9) $ (218.6)
Other comprehensive income before reclassifications 3.7 1.6 21.3 26.6
Amounts reclassified from accumulated other comprehensive loss(a)
(4.3) 3.8 (14.0) (14.5)
Tax benefit (expense) 0.2 (0.5) — (0.3)
September 30, 2020 $ 0.1 $ (121.3) $ (85.6) $ (206.8)

(a) Amounts reclassified from Accumulated other comprehensive loss and recognized into Net earnings related to cash flow hedges are recorded in Cost of goods sold and Interest expense. Amounts reclassified from Accumulated other comprehensive loss and recognized into Net earnings related to pension and postretirement benefits other than pensions ("OPEB") items are recorded in Other income, net. Amounts reclassified from Accumulated other comprehensive loss and recognized into Net earnings related to foreign currency items are recorded in ~~Other income, net.~~Loss on divestitures.

NOTE 14 - SHARE-BASED COMPENSATION

The Company records share-based compensation awards using a fair value method and recognizes compensation expense for an amount equal to the fair value of the share-based payment issued in its financial statements. The Company’s share-based compensation plans include programs for stock options, restricted stock units ("RSUs"), performance stock units ("PSUs") and deferred compensation.

~~Compensation Expense~~

Share-based compensation expense is included in Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income. The following table summarizes the expenses recognized for the three and nine months ended September 30:

Three months ended Nine months ended
In millions 2021 2020 2021 2020
Stock options $ 0.5 $ 0.4 $ 3.7 $ 3.4
RSUs 2.2 2.0 10.1 9.6
PSUs 0.5 2.6 4.4 3.0
Deferred compensation (0.1) 1.0 1.3 1.2
Pre-tax expense 3.1 6.0 19.5 17.2
Tax benefit(a)
(0.4) (0.8) (2.4) (2.2)
After-tax expense $ 2.7 $ 5.2 $ 17.1 $ 15.0

~~(a) Tax benefit reflected in the table above does not include the excess benefit from exercises and vesting of share based compensation of $0.2 million~~ ~~during the three months ended September 30, 2021,~~ ~~and $1.5 million~~ ~~and $4.0 million during the nine months ended September 30, 2021 and 2020, respectively.~~


	Three months ended				Nine months ended
In millions	2022		2021		2022		2021
Stock options	$	0.4	$	0.5	$	3.8	$	3.7
RSUs	2.2		2.2		11.7		10.1
PSUs	1.5		0.5		4.5		4.4
Deferred compensation	(0.5)		(0.1)		(3.6)		1.3
Pre-tax expense	3.6		3.1		16.4		19.5
Tax benefit	(0.4)		(0.4)		(1.3)		(2.4)
After-tax expense	$	3.2	$	2.7	$	15.1	$	17.1

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:

2021 2020
Number
granted Weighted-
average fair
value per award Number
granted Weighted-
average fair
value per award
Stock options 179,743 $ 24.99 161,600 $ 25.62
RSUs 130,126 $ 112.21 81,053 $ 125.13

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~


	2022			2021
	Number granted	Weighted- average fair value per award		Number granted	Weighted- average fair value per award
Stock options	234,809	$	28.24	179,743	$	24.99
RSUs	176,003	$	112.07	130,126	$	112.21

The fair value of each of the Company’s stock option and RSU awards is expensed on a straight-line basis over the required service period, which is generally the three-year vesting period. However, for stock options and RSUs granted to retirement eligible employees, the Company recognizes expense for the fair value at the grant date.

~~The average~~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:


		2021		2020			2022		2021
Dividend yield	Dividend yield	1.32	%	0.99	%	Dividend yield	1.46	%	1.32	%
Volatility	Volatility	27.14	%	20.70	%	Volatility	27.12	%	27.14	%
Risk-free rate of return	Risk-free rate of return	0.75	%	1.41	%	Risk-free rate of return	2.13	%	0.75	%
Expected life (years)	Expected life (years)	6.0		6.0		Expected life (years)	6.0		6.0

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 the simplified approach based on the weighted-average time to vest and the remaining contractual term and represents the period of time that awards are expected to be outstanding.

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Performance Stock

The Company has a Performance Stock Program ("PSP") for key employees which provides awards in the form of PSUs based on performance against pre-established objectives. The annual target award level is expressed as a number of the Company’s ordinary shares. All PSUs are settled in the form of ordinary shares unless deferred. During the nine months ended September 30, ~~2021,~~2022, the Company granted PSUs with a maximum award level of approximately 0.1 million shares.

In February ~~2019,~~ 2020, 2021 and ~~2021,~~2022, the Company’s Compensation 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 set by the Compensation Committee, and 50% upon a market condition, measured by the Company’s relative total shareholder return ~~("TSR")~~ against the S&P 400 Capital Goods Index over a three-year performance period. The fair values of the market conditions 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 correlation matrix.

Deferred Compensation

Prior to 2019, the Company allowed key employees to defer a portion of their eligible granted PSUs and/or compensation into a number of investment choices including its ordinary share equivalents. Any amounts invested in ordinary share equivalents will be settled in ordinary shares of the Company at the time of distribution.

NOTE 15 - RESTRUCTURING ACTIVITIES

During the ~~three~~nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded ~~$0.6~~$3.1 million and ~~$5.9~~$3.8 million, respectively, of expenses associated with restructuring activities. During the nine months ended September 30, 2021 and 2020, the Company recorded $3.8 million and $22.4 million, respectively, of expenses associated with restructuring activities. Restructuring activities, in both 2021 and 2020 were primarily associated with the Allegion International segment and related to workforce reductions intended to optimize and simplify operations and cost structure, although approximately $7 million of the restructuring charges incurred during the nine months ended September 30, 2020 related to the Allegion Americas segment and Corporate. Restructuring charges for both the three and nine month periods ended September 30, 2021 and 2020, respectively,which are ~~primarily~~ included within Cost of goods sold and Selling and administrative expenses within the Condensed and Consolidated Statements of Comprehensive Income.

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

The changes in the restructuring reserve during the nine months ended September 30, ~~2021,~~2022, were as follows:


In millions	Total
December 31, ~~2020~~2021	$	~~5.3~~0.4
Additions, net of reversals	~~3.3~~3.1
Cash payments	~~(7.8)~~(3.2)
Currency translation	(0.1)
September 30, ~~2021~~2022	$	~~0.7~~0.2

~~The majority of the costs accrued as of September 30, 2021, are expected to be paid within one year.~~

The Company also incurred other non-qualified restructuring charges of ~~$0.4 million and $0.9~~$1.6 million during the nine months ended September 30, ~~2021 and 2020, respectively, in conjunction with restructuring plans,~~2022, which represent costs that are directly attributable to restructuring activities, but that do not fall into the severance, exit or disposal category. These expenses are included in Cost of goods sold ~~and Selling and administrative expenses~~ within the Condensed and Consolidated Statements of Comprehensive Income.

NOTE 16 - OTHER INCOME, NET

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 2021 2020 2021 2020
Interest income $ (0.3) $ (0.2) $ (0.4) $ (0.8)
Foreign currency exchange loss 0.8 0.2 2.0 1.0
(Earnings and gains from the sale of) losses from equity method investments (6.3) 0.1 (6.0) 0.6
Net periodic pension and postretirement benefit income, less service cost (2.1) (1.0) (6.0) (2.0)
Other (6.8) (11.3) (11.0) (11.4)
Other income, net $ (14.7) $ (12.2) $ (21.4) $ (12.6)


	Three months ended				Nine months ended
In millions	2022		2021		2022		2021
Interest income	$	(0.4)	$	(0.3)	$	(0.6)	$	(0.4)
Foreign currency exchange loss	—		0.8		1.9		2.0
Earnings from equity method investments, net	—		(6.3)		(0.6)		(6.0)
Net periodic pension and postretirement benefit income, less service cost	(2.1)		(2.1)		(7.1)		(6.0)
Other	1.0		(6.8)		(0.7)		(11.0)
Other income, net	$	(1.5)	$	(14.7)	$	(7.1)	$	(21.4)

Other income, net for the three and nine months ended September 30, 2021, included a gain of $6.4 million from the sale of the Company's interest in an equity method ~~investment in Nuki Home Solutions GmbH,~~affiliate, which is included within ~~(Earnings and gains from the sale of) losses~~Earnings from equity method investments, ~~in the table above.~~

~~Other income,~~ net for the three and nine months ended September 30, 2020, included a gain of $14.0 million related to the reclassification to earnings of accumulated foreign currency translation adjustments upon the liquidation of a legal entity in our former EMEA segment. This gain is included within Other in the table above.

NOTE 17 - INCOME TAXES

The effective income tax rates for the three months ended September 30, 2022 and 2021, were 14.3% and ~~2020, were~~ (2.0)% ~~and 8.0%~~, respectively. The ~~decrease~~increase in the effective tax rate compared to ~~2020~~2021 is primarily due to the favorable ~~settlements~~resolutions of uncertain tax positions ~~a current quarter benefit related to~~and other discrete tax benefits in 2021 that have not recurred in 2022, changes in jurisdictional tax rates, the mix of income earned in ~~lower~~higher tax rate jurisdictions and the unfavorable tax impact ~~recognized in 2020 related to~~from the ~~recording~~divestiture of ~~valuation allowances.~~Milre.

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The effective income tax rates for the nine months ended September 30, 2022 and 2021, were 13.7% and ~~2020, were~~ 7.2% ~~and 14.8%~~, respectively. The ~~decrease~~increase in the effective tax rate compared to ~~2020~~2021 is primarily due to the ~~unfavorable tax impact recognized in 2020 related to goodwill and intangible asset impairment charges,~~ favorable ~~settlements~~resolutions of uncertain tax positions and other discrete tax benefits in 2021 that have not recurred in 2022, changes in jurisdictional tax rates, the mix of income earned in higher tax rate jurisdictions and the unfavorable tax impact ~~recognized in 2020 related to~~from the ~~recording~~divestiture of ~~valuation allowances, which were partially offset by an unfavorable year-over-year change in share-based compensation deductions.~~Milre.

NOTE 18 - EARNINGS PER SHARE (EPS)

Basic EPS is calculated by dividing Net earnings attributable to Allegion plc 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

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

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			Three months ended		Nine months ended
In millions	In millions	2021	2020	2021	2020	In millions	2022	2021	2022	2021
Weighted-average number of basic shares	Weighted-average number of basic shares	89.7	92.3	90.1	92.4	Weighted-average number of basic shares	87.9	89.7	88.0	90.1
Shares issuable under share-based compensation plans	Shares issuable under share-based compensation plans	0.6	0.4	0.6	0.5	Shares issuable under share-based compensation plans	0.3	0.6	0.4	0.6
Weighted-average number of diluted shares	Weighted-average number of diluted shares	90.3	92.7	90.7	92.9	Weighted-average number of diluted shares	88.2	90.3	88.4	90.7

At September 30, ~~2021, 0.1~~2022, 0.5 million stock options were excluded from the computation of weighted-average diluted shares outstanding because the effect of including these shares would have been anti-dilutive.

NOTE 19 - NET REVENUES

Net revenues are recognized based on the satisfaction of performance obligations under the terms of a contract. 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. The Company has two principal revenue streams, tangible product sales and services. Approximately 99% of consolidated Net revenues involve contracts with a single performance obligation, which is the transfer of control of a product or bundle of products to a customer. Transfer of control typically occurs when goods are shipped from the Company’s facilities or at other predetermined control transfer points (for instance, destination terms). Net revenues are measured as the amount of consideration expected to be received in exchange for transferring control of the products and takes into account variable consideration, such as sales incentive programs including discounts and volume rebates. The existence of these programs does not preclude revenue recognition but does require the Company’s best estimate of the variable consideration to be made based on expected activity, as these items are reserved for as a deduction to Net revenues over time based on the Company’s historical rates of providing these incentives and annual forecasted sales volumes. The Company also offers a standard warranty with most product sales, and the value of such warranty is included in the contractual price. The corresponding expense of the warranty obligation is accrued as a liability (see Note 21).

The Company’s remaining Net revenues involve services, including installation and consulting. Unlike the single performance obligation to ship a product or bundle of products, revenue recognition related to services is delayed until the service performance obligations are satisfied. In some instances, customer acceptance provisions are included in sales arrangements to give the buyer the ability to ensure the service meets the criteria established in the order. In these instances, revenue recognition is deferred until the performance obligations are satisfied, which could include acceptance terms specified in the arrangement being fulfilled through customer acceptance or a demonstration that established criteria have been satisfied. During the nine months ended September 30, 2021 and 2020, no adjustments were recorded related to performance obligations satisfied in previous periods.

The Company applies the practical expedients allowed under ASC 606, "Revenue from Contracts with Customers", to omit the disclosure of remaining performance obligations for contracts with an original expected duration of one year or less and for contracts where the Company has the right to invoice for performance completed to date. The transaction price is not adjusted for the effects of a significant financing component, as the time period between control transfer of goods and services is less than one year. Sales, value-added and other similar taxes collected by the Company are excluded from Net revenues. The Company has also elected to account for shipping and handling activities that occur after control of the related goods transfers as fulfillment activities instead of performance obligations. These activities are included in Cost of goods sold in the Condensed and Consolidated Statements of Comprehensive Income. The Company’s payment terms are generally consistent with the industries in which its businesses operate.

The following tables show the Company’s Net revenues related to both tangible product sales and services for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, disaggregated by business segment. Net revenues are shown by tangible product sales and services, 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:

~~ALLEGION PLC~~


	Three months ended September 30, 2022						Nine months ended September 30, 2022
In millions	Allegion Americas		Allegion International		Total		Allegion Americas		Allegion International		Total
Net revenues
Products	$	714.6	$	156.8	$	871.4	$	1,834.0	$	519.5	$	2,353.5
Services	32.6		9.7		42.3		33.7		23.2		56.9
Total Net revenues	$	747.2	$	166.5	$	913.7	$	1,867.7	$	542.7	$	2,410.4

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~


	Three months ended September 30, 2021						Nine months ended September 30, 2021
In millions	Allegion Americas		Allegion International		Total		Allegion Americas		Allegion International		Total
Net revenues
Products	$	524.1	$	185.5	$	709.6	$	1,571.2	$	563.9	$	2,135.1
Services	0.3		7.1		7.4		1.5		21.6		23.1
Total Net revenues	$	524.4	$	192.6	$	717.0	$	1,572.7	$	585.5	$	2,158.2

~~(Unaudited)~~

Three months ended September 30, 2021 Nine months ended September 30, 2021
In millions Allegion Americas Allegion International Total Allegion Americas Allegion International Consolidated
Net revenues
Products $ 524.1 $ 185.5 $ 709.6 $ 1,571.2 $ 563.9 $ 2,135.1
Services 0.3 7.1 7.4 1.5 21.6 23.1
Total Net revenues $ 524.4 $ 192.6 $ 717.0 $ 1,572.7 $ 585.5 $ 2,158.2

Three months ended September 30, 2020 Nine months ended September 30, 2020
In millions Allegion Americas Allegion International Total Allegion Americas Allegion International Consolidated
Net revenues
Products $ 539.1 $ 182.4 $ 721.5 $ 1,495.5 $ 477.5 $ 1,973.0
Services — 6.9 6.9 — 19.6 19.6
Total Net revenues $ 539.1 $ 189.3 $ 728.4 $ 1,495.5 $ 497.1 $ 1,992.6
Historically, approximately 99% of the Company's consolidated Net revenues have involved contracts with a single performance obligation, the transfer of control of a product or bundle of products to a customer. However, the percentage of Net revenues from services is expected to increase with the recent acquisition of the Access Technologies business.

As of September 30, ~~2021,~~2022, neither the contract assets related to the Company’s right to consideration for work completed but not billed, nor the contract liabilities associated with contract revenue were material. As a practical expedient, the Company recognizes incremental costs of obtaining a contract, if any, as an expense when incurred if the amortization period of the asset would have been one year or less. The Company does not have any costs to obtain or fulfill a contract that are ~~capitalized.~~capitalized on its Condensed and Consolidated Balance Sheets. During the three and nine months ended September 30, 2022 and 2021, no adjustments related to performance obligations satisfied in previous periods were recorded.

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 20 - BUSINESS SEGMENT INFORMATION

The Company classifies its business into the following 2two 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. Segment operating income is the measure of profit and loss that the Company’s chief operating decision maker uses 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 and loss. The Company’s chief operating decision maker 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 and loss upon which to base operating decisions. The Company defines Segment operating margin as Segment operating income ~~(loss)~~ as a percentage of the segment’s Net revenues.

As previously announced, effective January 1, 2021, the Company combined its previous operations in Europe, the Middle East and Africa ("EMEA") and Asia Pacific into a new segment named Allegion International, in addition to renaming its Americas segment "Allegion Americas". Business segment information for EMEA and Asia Pacific for the three and nine months ended September 30, 2020, has been combined in the table below to reflect this change in reportable segments.

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

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					Three months ended				Nine months ended
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Net revenues	Net revenues									Net revenues
Allegion Americas	Allegion Americas	$	524.4	$	539.1	$	1,572.7	$	1,495.5	Allegion Americas	$	747.2	$	524.4	$	1,867.7	$	1,572.7
Allegion International	Allegion International	192.6		189.3		585.5		497.1		Allegion International	166.5		192.6		542.7		585.5
Total	Total	$	717.0	$	728.4	$	2,158.2	$	1,992.6	Total	$	913.7	$	717.0	$	2,410.4	$	2,158.2
Segment operating income (loss)
Segment operating income										Segment operating income
Allegion Americas	Allegion Americas	$	133.7	$	165.0	$	419.5	$	432.4	Allegion Americas	$	178.4	$	133.7	$	455.9	$	419.5
Allegion International	Allegion International	20.5		13.2		54.0		(92.8)		Allegion International	14.9		20.5		45.9		54.0
Total	Total	154.2		178.2		473.5		339.6		Total	193.3		154.2		501.8		473.5
Reconciliation to Operating income	Reconciliation to Operating income									Reconciliation to Operating income
Unallocated corporate expense	Unallocated corporate expense	(15.8)		(17.8)		(58.4)		(53.8)		Unallocated corporate expense	(30.4)		(15.8)		(74.8)		(58.4)
Operating income	Operating income	138.4		160.4		415.1		285.8		Operating income	162.9		138.4		427.0		415.1
Reconciliation to earnings before income taxes	Reconciliation to earnings before income taxes									Reconciliation to earnings before income taxes
Interest expense	Interest expense	12.3		12.9		37.0		38.8		Interest expense	23.1		12.3		52.2		37.0
Loss on divestitures										Loss on divestitures	7.6		—		7.6		—
Other income, net	Other income, net	(14.7)		(12.2)		(21.4)		(12.6)		Other income, net	(1.5)		(14.7)		(7.1)		(21.4)
Earnings before income taxes	Earnings before income taxes	$	140.8	$	159.7	$	399.5	$	259.6	Earnings before income taxes	$	133.7	$	140.8	$	374.3	$	399.5

NOTE 21 - COMMITMENTS AND CONTINGENCIES

The Company is involved in various litigation, claims and administrative proceedings, including those related to environmental and product warranty matters. 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

The Company is dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the Company is currently engaged in site investigations and remediation activities to address environmental cleanup from past operations at current and former production facilities. The Company regularly evaluates its remediation programs and considers alternative remediation methods that are in addition to, or in replacement of, those currently utilized by the Company based upon enhanced technology and regulatory changes. Changes to the Company’s remediation programs may result in increased expenses and increased environmental reserves.

The Company is sometimes a party to environmental lawsuits and claims and has received notices of potential violations of environmental laws and regulations from the U.S. Environmental Protection Agency and similar state authorities. It has also been identified as a potentially responsible party ("PRP") for cleanup costs associated with off-site waste disposal at federal Superfund and state remediation sites for past operations. For all such sites, there are other PRPs and, in most instances, the Company’s involvement is minimal.

In estimating its liability, the Company has assumed it will not bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based on the Company's understanding of the parties’ financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future.

During the nine months ended September 30, 2021 and 2020, the Company incurred $0.9 million and $1.8 million, respectively, of expenses for environmental remediation at sites presently or formerly owned or leased by the Company. Environmental

~~ALLEGION PLC~~

~~NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~remediation costs are recorded in Costs of goods sold within the Condensed and Consolidated Statements of Comprehensive Income.~~

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company has recorded reserves for environmental matters of ~~$17.1~~$24.2 million and ~~$21.1~~$16.4 million, respectively. The total reserve at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, included ~~$4.5~~$14.0 million and ~~$4.4~~$4.3 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, ~~2021~~2022 and December 31, ~~2020,~~2021, was $~~3.9~~$4.1 million and ~~$6.1~~$3.7 million, respectively, and the remainder is classified as noncurrent. During the nine months ended September 30, 2022 and 2021, the Company incurred $2.9 million and $0.9 million, respectively, of expenses for environmental remediation at sites presently or formerly owned or leased by the Company. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.

ALLEGION PLC

NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Warranty Liability

Standard product warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience. The Company assesses the adequacy of its liabilities and will make adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available. The changes in the standard product warranty liability for the nine months ended September 30 were as follows:


In millions	In millions	2021		2020		In millions	2022		2021
Balance at beginning of period	Balance at beginning of period	$	16.5	$	15.9	Balance at beginning of period	$	17.7	$	16.5
Reductions for payments	Reductions for payments	(7.5)		(5.3)		Reductions for payments	(6.9)		(7.5)
Accruals for warranties issued during the current period	Accruals for warranties issued during the current period	9.1		6.2		Accruals for warranties issued during the current period	6.4		9.1
Changes to accruals related to preexisting warranties		—		(0.3)

Acquisitions						Acquisitions	1.7		—
Currency translation	Currency translation	(0.2)		0.1		Currency translation	(1.0)		(0.2)
Balance at end of period	Balance at end of period	$	17.9	$	16.6	Balance at end of period	$	17.9	$	17.9

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.

2118

Table of Contents

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that may cause a difference include, but are not limited to, those discussed under Part I, Item 1A – Risk Factors in the Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. The following section is qualified in its entirety by the more detailed information, including our Condensed and Consolidated Financial Statements and the notes thereto, which appears elsewhere in this Quarterly Report.

Overview

Organization

Allegion plc and its consolidated subsidiaries ("Allegion," "the Company", "we," "our," or "us") is a leading global provider of security products and solutions operating in two segments: Allegion Americas and Allegion International. We sell a wide range of security products and solutions for end-users in commercial, institutional and residential facilities worldwide, including the education, healthcare, government, hospitality, commercial office and single and multi-family residential markets. Our leading brands include CISA®, Interflex®, LCN®, Schlage®, SimonsVoss® and Von Duprin®.

Recent Developments

~~COVID-19 Pandemic and~~ Industry Trends and Outlook

~~The COVID-19 pandemic and uneven economic recovery continue to create volatility in~~Throughout the ~~global economy and on our business. During the third quarter of 2021,~~current year, we ~~continued to see~~have seen strong ~~and accelerating~~ demand for our products and services, particularly non-residential products in ~~most~~our Allegion Americas segment. Our ability to meet this elevated level of customer demand improved throughout the ~~markets we serve. However,~~year, due in part to our previous actions to mitigate industry-wide supply-chain challenges (particularly shortages of electronic components), as well as improving availability of non-electronic parts and materials.

Additionally, in an effort to combat the persistent, elevated levels of inflation, we have ~~also experienced an acceleration~~implemented a series of ~~several macroeconomic~~pricing initiatives across our global businesses. These initiatives have resulted in strong pricing momentum which we expect to continue to contribute to revenue growth and offset the impact of inflation throughout the remainder of 2022.

In spite of these positive factors, supply chain challenges inaround the ~~current quarter that have~~availability of electronic parts and components persist, and continue to negatively ~~impacted~~impact our ability to meet ~~this robust~~the elevated levels of demand ~~such as supply chain disruptions and delays; shortages~~for our connected electronic security products. Labor availability also continues to impact our operational efficiency. Additionally, we have experienced a further softening of demand throughout many of the Eurozone economies, impacting several of our businesses in materials including reductions in allocations of electronic components and other parts from key suppliers; labor shortages; and increased commodity, material component, packaging, freight and labor inflation. These challenges have also created inefficiencies, including periodic production interruptions, that have negatively impacted our productivity and margin performance during the quarter. While these challenges are impacting all our global businesses, to date they have had a more pronounced impact on our Allegion ~~Americas operating~~International segment.

While we currently anticipate these industry-wide challenges to continue beyond 2021, we are rapidly adapting to navigate these challenges, and we expect to be well-positioned to convert demand to revenue once conditions normalize. We remain focused on providing exceptional service and innovation to our ~~customers; implementing~~customers. We are beginning to realize the benefits from the measures we have taken to mitigate operational and distribution inefficiencies, ~~and reduce backlogs,~~ such as ~~aligning resources to re-engineer~~re-engineering product designs and configurations to accept alternate electronic components and developing alternate sources of ~~supply; implementing pricing initiatives~~supply. We continue to ~~address rising production, material and freight costs; and investing~~invest in business initiatives to drive future ~~growth. We~~growth and add value through seamless access and will continue to explore various options to control costs and enhance financial performance while minimizing disruption to customers and ~~the~~our overall ~~business; however, the full impacts of the~~business.

The on-going COVID-19 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 stemming from the uneven economic recovery~~uncertainties noted above will likely continue to ~~impact~~affect us in numerous and evolving ~~ways~~ways. The full impact of these uncertainties on our business will continue to depend on future developments 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~~These uncertainties and ~~duration of the pandemic, the emergence of future variant strains of the COVID-19 virus which may be more contagious~~their potential 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. The challenges and uncertainties related to the COVID-19 pandemic and its potentialheightened impact on our business, results of operations, financial condition and cash flows, as well as other challenges and uncertainties that could affect our businesses are described further under Part I, Item 1A. "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~Acquisitions~~

~~In July 2021, we acquired certain assets of Astrum Benelux B.V. ("Astrum Benelux") as well as 100%~~Acquisition of the ~~equity~~Access Technologies business

On July 5, 2022, we completed the acquisition of ~~WorkforceIT B.V. in~~ the ~~Netherlands ("WorkforceIT"), both~~Access Technologies business for a closing purchase price of ~~which were previously held~~$923.1 million. This acquisition was financed by the net proceeds from the issuance of our 5.411% Senior Notes, together with borrowings under ~~common control~~our 2021 Revolving Facility and ~~offer workforce management technology products and solutions in the Benelux region of Europe. Both WorkforceIT and the assets acquired from Astrum Benelux have~~cash on hand. The Access Technologies business has been integrated into our Allegion ~~International~~Americas segment.

The Access Technologies business is a leading manufacturer, installer and service provider of automatic doors in North America, primarily in the U.S. and Canada. Its diversified customer base centers on non-residential settings, including retail, healthcare, education, commercial offices, hospitality and government. This acquisition helps us create a more comprehensive portfolio of access solutions, with the addition of automated entrances. Additionally, the Access Technologies business adds an expansive service and support network throughout the U.S. and Canada, broadening our solutions to national, regional and local customers, and complementing our existing strengths in these non-residential markets. The Access Technologies business generated $88.7 million in Net revenues during the third quarter.

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Divestiture of Milre

~~QMI Divestiture~~

In September 2022, we sold Milre Systek Co. Ltd. ("Milre") in South Korea for an immaterial amount. As ~~previously disclosed, during~~a result of the ~~fourth quarter~~sale, we recorded a net loss on divestiture of 2020, the net assets of our 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 the fourth quarter of 2020 of $37.9$7.6 million.

On February 28, 2021, we completed our divestiture of QMI. The impacts of this divestiture on our results of operations for the three and six months ended September 30, 2021 are reflected in the discussions below.

~~2021~~2022 Dividends and Share Repurchases

During the nine months ended September 30, ~~2021,~~2022, we paid dividends of ~~$1.08~~$1.23 per ordinary share to shareholders and repurchased approximately ~~1.8~~0.5 million shares for ~~$212.7~~$61.0 million.

Results of Operations – Three months ended September 30


In millions, except per share amounts	In millions, except per share amounts	2021		% of revenues		2020		% of revenues		In millions, except per share amounts	2022		% of revenues		2021		% of revenues
Net revenues	Net revenues	$	717.0			$	728.4			Net revenues	$	913.7			$	717.0
Cost of goods sold	Cost of goods sold	416.5		58.1	%	409.2		56.2	%	Cost of goods sold	545.7		59.7	%	416.5		58.1	%
Selling and administrative expenses	Selling and administrative expenses	162.1		22.6	%	156.2		21.4	%	Selling and administrative expenses	205.1		22.4	%	162.1		22.6	%
Impairment of goodwill and intangible assets		—		—	%	2.6		0.4	%

Operating income	Operating income	138.4		19.3	%	160.4		22.0	%	Operating income	162.9		17.8	%	138.4		19.3	%
Interest expense	Interest expense	12.3				12.9				Interest expense	23.1				12.3

Loss on divestitures										Loss on divestitures	7.6				—
Other income, net	Other income, net	(14.7)				(12.2)				Other income, net	(1.5)				(14.7)
Earnings before income taxes	Earnings before income taxes	140.8				159.7				Earnings before income taxes	133.7				140.8
(Benefit from) provision for income taxes		(2.8)				12.8
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	19.1				(2.8)
Net earnings	Net earnings	143.6				146.9				Net earnings	114.6				143.6
Less: Net earnings attributable to noncontrolling interests	Less: Net earnings attributable to noncontrolling interests	0.1				—				Less: Net earnings attributable to noncontrolling interests	—				0.1
Net earnings attributable to Allegion plc	Net earnings attributable to Allegion plc	$	143.5			$	146.9			Net earnings attributable to Allegion plc	$	114.6			$	143.5

Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders:	Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders:	$	1.59			$	1.58			Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders:	$	1.30			$	1.59

The discussions that follow describe the significant factors contributing to the changes in our results of operations for the periods presented and form the basis used by management to evaluate the financial performance of the business.

Net Revenues

Net revenues for the three months ended September 30, ~~2021, decreased~~2022, increased by ~~1.6%~~27.4%, or ~~$11.4~~$196.7 million, compared with the same period in ~~2020,~~2021, due to the following:


Pricing	~~1.4~~12.6	%
Volume	~~(3.0)~~6.0	%
Acquisitions / divestitures	~~(0.6)~~12.4	%
Currency exchange rates	~~0.6~~ (3.6)	%
Total	~~(1.6)~~27.4	%

The ~~decrease~~increase in Net revenues was ~~principally due to~~driven by improved pricing across our major businesses, our recently acquired Access Technologies business and higher volumes in our Allegion Americas segment. These increases were partially offset by unfavorable foreign currency exchange rate movements and lower volumes in our Allegion Americas segment, resulting from the supply chain disruptions and delays and shortages in materials, components and labor discussed above. Also contributing to the decrease in Net revenues was the divestiture of our QMI business in February 2021. These decreases were partially offset by improved pricing and the impact of foreign currency exchange rate movements.International segment.

Pricing includes increases or decreases of price, including discounts, surcharges and/or other sales deductions, on our existing products and services. As discussed above, the pricing initiatives we have implemented in response to the persistent, elevated levels of inflation continue to be a key driver in the overall increase in Net revenues. Volume includes increases or decreases of revenue due to changes in unit volume of existing products and services, as well as new products and services.

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Operating Income/Margin

Operating income for the three months ended September 30, ~~2021, decreased $22.0~~2022, increased $24.5 million compared to the same period in ~~2020.~~2021. Operating margin, which we define as Operating income as a percentage of total Net revenues, for the three months ended September 30, ~~2021,~~2022, decreased to ~~19.3%~~17.8% from ~~22.0%~~19.3% for the same period in ~~2020,~~2021, due to the following:

In millions Operating Income Operating Margin
September 30, 2020 $ 160.4 22.0 %
Inflation in excess of pricing and productivity (11.2) (1.9) %
Volume / product mix (10.5) (0.8) %
Restructuring / acquisition expenses 1.7 0.2 %
Currency exchange rates 0.4 — %
Investment spending (6.5) (0.9) %
Acquisitions / divestitures 1.5 0.4 %
Impairment of intangible assets 2.6 0.3 %
September 30, 2021 $ 138.4 19.3 %

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In millions	Operating Income		Operating Margin
September 30, 2021	$	138.4	19.3	%
Pricing and productivity in excess of inflation	25.5		1.1	%
Volume / product mix	24.5		2.2	%
Restructuring / acquisition expenses	(23.8)		(3.2)	%
Currency exchange rates	(6.5)		(0.1)	%
Investment spending	(2.3)		(0.3)	%
Acquisitions / divestitures	7.1		(1.2)	%
September 30, 2022	$	162.9	17.8	%

The ~~decrease~~increase in Operating income was ~~primarily due to~~driven by pricing improvements in excess of inflation and productivity, ~~challenges in excess of pricing improvements, unfavorable~~favorable volume/product mix and ~~increased investment spending.~~the contribution to operating income from our recently acquired Access Technologies business. These ~~decreases~~increases were partially offset by a year-over-year ~~decrease~~increase in restructuring and acquisition expenses, unfavorable foreign currency exchange rate movements ~~the impact of our QMI divestiture~~ and ~~a prior year intangible asset impairment charge that did not recur in the current year.~~increased investment spending.

The decrease in Operating margin was primarily due to ~~inflation~~a year-over-year increase in restructuring and ~~productivity challenges in excess of pricing improvements,~~acquisition expenses, unfavorable ~~volume/product mix and~~foreign currency exchange rate movements, increased investment ~~spending.~~spending and the impact to operating margin from our recently acquired Access Technologies business. These decreases were partially offset by ~~a year-over-year decrease in restructuring and acquisition expenses, the impact of our QMI divestiture and a prior year intangible asset impairment charge that did not recur in the current year.~~

~~Inflation~~pricing improvements in excess of ~~pricing~~inflation and productivity and favorable volume/product mix.

Pricing and productivity in excess of inflation includes the impact to both Operating income and Operating margin from pricing, as defined above, in addition to productivity and inflation. Productivity represents improvements in unit costs of materials, cost reductions related to improvements to our manufacturing design and processes and reductions in selling and administrative expenses due to productivity projects. Inflation includes both unit costs for the current period compared to the average actual cost for the prior period, multiplied by current year volumes, and current period costs of ongoing selling and administrative functions compared byto the same ongoing expenses in the prior period. Expenses related to increased head count for strategic initiatives, new facilities or other significant spending for strategic initiatives or new product and channel development, are captured in Investment spending in the table above. Inflation in excess of pricing and productivity in the third quarter of 2021 reflects the impacts of the increased commodity, material component, packaging, freight and labor inflation, as well as the inefficiencies caused by more acute supply chain challenges and shortages of materials, components and labor discussed above.

Volume/product mix represents the impact to both Operating income and Operating margin due to increases or decreases of revenue due to changes in unit volume, including new products and services, including the effect of changes in the mix of products and services sold on Cost of goods sold.

Interest Expense

Interest expense for the three months ended September 30, ~~2021, decreased $0.6~~2022, increased $10.8 million compared with the same period in ~~2020,~~2021, primarily due to interest on our 5.411% Senior Notes and our 2021 Revolving Facility. The recent rise in interest rates has also contributed to a ~~lower~~higher weighted-average interest rate on our variable rate outstanding indebtedness.

Loss on Divestiture

~~Table~~As discussed above, in September 2022, we sold Milre for an immaterial amount, resulting in a net loss of ~~Contents~~

$7.6 million.

Other Income, Net

The components of Other income, net for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, were as follows:


In millions	In millions	2021		2020		In millions	2022		2021
Interest income	Interest income	$	(0.3)	$	(0.2)	Interest income	$	(0.4)	$	(0.3)
Foreign currency exchange loss	Foreign currency exchange loss	0.8		0.2		Foreign currency exchange loss	—		0.8
(Earnings and gains from the sale of) losses from equity method investments		(6.3)		0.1
Earnings from equity method investments, net						Earnings from equity method investments, net	—		(6.3)
Net periodic pension and postretirement benefit income, less service cost	Net periodic pension and postretirement benefit income, less service cost	(2.1)		(1.0)		Net periodic pension and postretirement benefit income, less service cost	(2.1)		(2.1)
Other	Other	(6.8)		(11.3)		Other	1.0		(6.8)
Other income, net	Other income, net	$	(14.7)	$	(12.2)	Other income, net	$	(1.5)	$	(14.7)

Other income, net for the three months ended September 30, ~~2021, included~~2022 decreased $13.2 million compared with the same period in 2021. This decrease is due to a prior year gain of $6.4 million from the sale of ~~the~~ our interest in an equity method ~~investment in Nuki Home Solutions GmbH ("Nuki"), which is included within (Earnings and gains from the sale of) losses from equity method investments and $6.8 million of~~affiliate, as well as other investment gains and income ~~which are included in Other in the table above.~~

~~Other income, net for~~of $6.8 million during the three months ended September 30, 2020, included a gain of $14.0 million related to the reclassification to earnings of accumulated foreign currency translation adjustments upon the liquidation of a legal entity in our former EMEA segment,2021, which ~~is included within Other~~did not recur in the ~~table above.~~

~~(Benefit from) Provision for Income Taxes~~current year.

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Provision for (benefit from) Income Taxes

Milre.

Results of Operations – Nine months ended September 30


In millions, except per share amounts	In millions, except per share amounts	2021		% of revenues		2020		% of revenues		In millions, except per share amounts	2022		% of revenues		2021		% of revenues
Net revenues	Net revenues	$	2,158.2			$	1,992.6			Net revenues	$	2,410.4			$	2,158.2
Cost of goods sold	Cost of goods sold	1,239.8		57.4	%	1,133.7		56.9	%	Cost of goods sold	1,438.7		59.7	%	1,239.8		57.4	%
Selling and administrative expenses	Selling and administrative expenses	503.3		23.3	%	474.2		23.8	%	Selling and administrative expenses	544.7		22.6	%	503.3		23.3	%
Impairment of goodwill and intangible assets		—		—	%	98.9		5.0	%

Operating income	Operating income	415.1		19.2	%	285.8		14.3	%	Operating income	427.0		17.7	%	415.1		19.2	%
Interest expense	Interest expense	37.0				38.8				Interest expense	52.2				37.0

Loss on divestitures										Loss on divestitures	7.6				—
Other income, net	Other income, net	(21.4)				(12.6)				Other income, net	(7.1)				(21.4)
Earnings before income taxes	Earnings before income taxes	399.5				259.6				Earnings before income taxes	374.3				399.5
Provision for income taxes	Provision for income taxes	28.9				38.5				Provision for income taxes	51.4				28.9
Net earnings	Net earnings	370.6				221.1				Net earnings	322.9				370.6
Less: Net earnings attributable to noncontrolling interests	Less: Net earnings attributable to noncontrolling interests	0.4				0.1				Less: Net earnings attributable to noncontrolling interests	0.2				0.4
Net earnings attributable to Allegion plc	Net earnings attributable to Allegion plc	$	370.2			$	221.0			Net earnings attributable to Allegion plc	$	322.7			$	370.2

Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders:	Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders:	$	4.08			$	2.38			Diluted net earnings per ordinary share attributable to Allegion plc ordinary shareholders:	$	3.65			$	4.08

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Net revenues

Net revenues for the nine months ended September 30, ~~2021,~~2022, increased by ~~8.3%~~11.7%, or ~~$165.6~~$252.2 million, compared with the same period in ~~2020,~~2021, due to the following:


Pricing	~~1.4~~9.0	%
Volume	~~5.2~~1.5	%
Acquisitions / divestitures	~~(0.6)~~4.1	%
Currency exchange rates	~~2.3~~ (2.9)	%
Total	~~8.3~~11.7	%

The increase in Net revenues was ~~principally~~ driven by improved pricing across all our major businesses, our recently acquired Access Technologies business and higher volumes ~~particularly during the second quarter given the impact of the comparison to the muted demand and temporary plant shut-downs we experienced~~ in ~~the second quarter of 2020 due to the COVID-19 pandemic. Improved pricing and the impact of~~our Allegion Americas segment. These increases were partially offset by unfavorable foreign currency exchange rate movements ~~also contributed to the increase~~and lower volumes in ~~Net revenues. These increases were slightly offset by the divestiture of~~ our ~~QMI business in February 2021.~~Allegion International segment.

Operating Income/Margin

Operating income for the nine months ended September 30, ~~2021,~~2022, increased ~~$129.3~~$11.9 million compared to the same period in ~~2020,~~2021, and Operating margin for the nine months ended September 30, ~~2021, increased~~2022, decreased to ~~19.2%~~17.7% from ~~14.3%~~19.2% for the same period in ~~2020,~~2021, due to the following:

In millions Operating Income Operating Margin
September 30, 2020 $ 285.8 14.3 %
Inflation in excess of pricing and productivity (11.2) (0.9) %
Volume / product mix 27.8 0.3 %
Restructuring / acquisition expenses 15.8 0.8 %
Currency exchange rates 8.6 0.1 %
Investment spending (13.6) (0.7) %
Acquisitions / divestitures 3.0 0.3 %
Impairment of goodwill and intangible assets 98.9 5.0 %
September 30, 2021 $ 415.1 19.2 %

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In millions	Operating Income		Operating Margin
September 30, 2021	$	415.1	19.2	%
Pricing and productivity in excess of inflation	38.8		0.1	%
Volume / product mix	24.3		0.8	%
Restructuring / acquisition expenses	(33.6)		(1.5)	%
Currency exchange rates	(14.5)		(0.1)	%
Investment spending	(11.7)		(0.5)	%
Acquisitions / divestitures	8.6		(0.3)	%

September 30, 2022	$	427.0	17.7	%

The ~~increases~~increase in Operating income was driven by pricing improvements in excess of inflation and ~~Operating margin were primarily due to the prior year goodwill and intangible asset impairment charges, which did not recur in the current year,~~productivity, favorable volume/product mix and the contribution to operating income from our recently acquired Access Technologies business and divestiture of QMI. These increases were partially offset by a year-over-year ~~decrease~~increase in restructuring and acquisition ~~expenses. Also contributing to the increases were~~expenses, unfavorable foreign currency exchange rate movements and increased investment spending.

The decrease in Operating margin was primarily due to a year-over-year increase in restructuring and acquisition expenses, unfavorable foreign currency exchange rate movements, increased investment spending and the impact to operating margin from our recently acquired Access Technologies business and divestiture of ~~our QMI divestiture.~~QMI. These ~~increases~~decreases were partially offset by ~~inflation~~pricing improvements in excess of ~~pricing~~inflation and productivity ~~improvements~~ and ~~increased investment spending.~~favorable volume/product mix.

Interest Expense

Interest expense for the nine months ended September 30, ~~2021, decreased $1.8~~2022, increased $15.2 million compared with the same period in ~~2020,~~2021, primarily due to interest on our 5.411% Senior Notes and our 2021 Revolving Facility, as well as the $4.3 million of third party costs related to the financing of the recently acquired Access Technologies business. The recent rise in interest rates has also contributed to a ~~lower~~higher weighted-average interest rate on our variable rate outstanding indebtedness.

Loss on Divestiture

~~Table~~As discussed above, in September 2022, we sold Milre for an immaterial amount, resulting in a net loss of ~~Contents~~

$7.6 million.

Other Income, Net

The components of Other income, net for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, were as follows:


In millions	In millions	2021		2020		In millions	2022		2021
Interest income	Interest income	$	(0.4)	$	(0.8)	Interest income	$	(0.6)	$	(0.4)
Foreign currency exchange loss	Foreign currency exchange loss	2.0		1.0		Foreign currency exchange loss	1.9		2.0
(Earnings and gains from the sale of) losses from equity method investments		(6.0)		0.6
Earnings from equity method investments, net						Earnings from equity method investments, net	(0.6)		(6.0)
Net periodic pension and postretirement benefit income, less service cost	Net periodic pension and postretirement benefit income, less service cost	(6.0)		(2.0)		Net periodic pension and postretirement benefit income, less service cost	(7.1)		(6.0)
Other	Other	(11.0)		(11.4)		Other	(0.7)		(11.0)
Other income, net	Other income, net	$	(21.4)	$	(12.6)	Other income, net	$	(7.1)	$	(21.4)

~~For~~Other income, net for the nine months ended September 30, ~~2021, Other income, net increased $8.8~~2022 decreased $14.3 million compared with the same period in ~~2020, primarily~~2021, due to decreased investment gains and income, ~~in 2021, which are reflected in Other in the table above, increased Net periodic pension and postretirement benefit income, less service cost~~ and the gain of $6.4 million onfrom the sale of our interest in an equity method ~~investment in Nuki, which exceeded~~affiliate during the prior year, ~~impact of a $14.0 million gain related to~~which did not recur in the ~~reclassification to earnings of accumulated foreign currency translation adjustments upon the liquidation of a legal entity in our former EMEA segment.~~

current year.

Provision for Income Taxes

Review of Business Segments

We operate in and report financial results for two segments: Allegion Americas and Allegion International. These segments represent the level at which our chief operating decision maker reviews our financial performance and makes operating decisions.

Segment operating income is the measure of profit and loss that our chief operating decision maker uses to evaluate the financial performance of the business and as the basis for resource allocation, performance reviews and compensation. For these

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reasons, we believe that Segment operating income represents the most relevant measure of Segment profit and loss. Our chief operating decision maker may exclude certain charges or gains, such as corporate charges and other special charges, to arrive at a Segment operating income that is a more meaningful measure of profit and loss upon which to base our operating decisions. We define Segment operating margin as Segment operating income ~~(loss)~~ as a percentage of the segment’s Net revenues.

The segment discussions that follow describe the significant factors contributing to the changes in results for each segment included in Net earnings. As previously announced, effective January 1, 2021, we combined our previous operations in EMEA and Asia Pacific into a new segment named Allegion International, in addition to renaming our Americas segment "Allegion Americas". Business segment information for EMEA and Asia Pacific for the three and nine months ended September 30, 2020, has been combined in the segment results of operations presented below to reflect this change in reportable segments.

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Segment Results of Operations - For the three and nine months ended September 30

In millions 2021 2020 % Change 2021 2020 % Change
Net revenues
Allegion Americas $ 524.4 $ 539.1 (2.7) % $ 1,572.7 $ 1,495.5 5.2 %
Allegion International 192.6 189.3 1.7 % 585.5 497.1 17.8 %
Total $ 717.0 $ 728.4 $ 2,158.2 $ 1,992.6
Segment operating income (loss)
Allegion Americas $ 133.7 $ 165.0 (19.0) % $ 419.5 $ 432.4 (3.0) %
Allegion International 20.5 13.2 55.3 % 54.0 (92.8) 158.2 %
Total $ 154.2 $ 178.2 $ 473.5 $ 339.6
Segment operating margin
Allegion Americas 25.5 % 30.6 % 26.7 % 28.9 %
Allegion International 10.6 % 7.0 % 9.2 % (18.7) %


	Three months ended								Nine months ended
In millions	2022			2021			% Change		2022			2021			% Change
Net revenues
Allegion Americas	$	747.2		$	524.4		42.5	%	$	1,867.7		$	1,572.7		18.8	%
Allegion International	166.5			192.6			(13.6)	%	542.7			585.5			(7.3)	%
Total	$	913.7		$	717.0				$	2,410.4		$	2,158.2

Segment operating income
Allegion Americas	$	178.4		$	133.7		33.4	%	$	455.9		$	419.5		8.7	%
Allegion International	14.9			20.5			(27.3)	%	45.9			54.0			(15.0)	%
Total	$	193.3		$	154.2				$	501.8		$	473.5

Segment operating margin
Allegion Americas	23.9		%	25.5		%			24.4		%	26.7		%
Allegion International	8.9		%	10.6		%			8.5		%	9.2		%

Allegion Americas

Our Allegion Americas segment is a leading provider of security products and solutions throughout North ~~America, Central America, the Caribbean and South~~ America. The segment sells a broad range of products and solutions including locks, locksets, portable locks, key systems, door closers, exit devices, doors, ~~and~~ door systems, electronic products, ~~and~~ access control systems, and entrance solutions (with our recent acquisition of the Access Technologies business) to ~~end-users~~customers in commercial, institutional and residential facilities, including the education, healthcare, government, hospitality, commercial office and single and multi-family residential markets. This segment’s primary brands are LCN, Schlage, Steelcraft, Technical Glass Products ("TGP") and Von Duprin.

Net Revenues

Net revenues for the three months ended September 30, ~~2021, decreased~~2022, increased by ~~2.7%~~42.5%, or ~~$14.7~~$222.8 million, compared to the same period in ~~2020,~~2021, due to the following:


Pricing	~~1.5~~14.7	%
Volume	~~(4.5)~~11.1	%
Acquisitions	16.9	%
Currency exchange rates	~~0.3~~ (0.2)	%
Total	~~(2.7)~~42.5	%

The ~~decrease~~increase in Net revenues was driven by ~~lower~~significantly improved pricing, higher volumes ~~resulting from~~for both our residential and non-residential products and services and the ~~supply chain disruptions and delays and shortages~~impact of ~~materials, components and labor discussed above. This decrease was~~our recently acquired Access Technologies business. These increases were partially offset by ~~improved pricing and the impact of~~unfavorable foreign currency exchange rate movements.

Net revenues from non-residential products (excluding Net revenues from our recently acquired Access Technologies business) for the three months ended September 30, ~~2021, decreased~~2022, increased by ~~a low single-digits~~nearly thirty percent compared to the same period in the prior ~~year. While we continued to see~~year, driven by substantially improved pricing and higher volumes. Continued strong demand ~~for~~and improvements around the availability of materials and components, driven in part by our ~~non-residential products during~~previous actions to mitigate these supply-chain challenges, helped drive the ~~current quarter, the persistent and widespread supply chain challenges and shortages~~increase in ~~material, components (including electronic components) and labor discussed above have led~~volumes compared to the ~~current quarter Net revenues decline. Further,~~same period in the ~~combination of these factors have also culminated in our highest non-residential product backlog to date as a company.~~prior year.

Net revenues from residential products for the three months ended September 30, ~~2021, decreased~~2022, increased by a ~~high single digits~~mid-teens percent compared to the same period in the prior year. This ~~decrease~~increase was ~~primarily~~ driven by ~~supply chain challenges~~substantially improved pricing and shortages in labor, material and components, particularly electronic components, in addition to the comparative impact to the third quarter of 2020, which saw a strong rebound in demand after a muted second quarter due to the COVID-19 pandemic. Nonetheless,higher volumes. Although we continue to ~~see strong~~face challenges around the supply of electronic components and have also seen a softening in market demand for ~~our~~ residential products, ~~due~~we expect our pricing initiative to ~~a sustained level~~continue contributing to revenue growth for the remainder of ~~DIY home projects and a robust residential housing construction market.~~the year.

~~Additionally, growth~~

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Growth in electronic security products and solutions ~~has become an increased~~is a metric that is actively monitored by management and a focus of our investors. Electronic products encompass both residential and non-residential ~~products,~~solutions and include all electrified product categories including, but not limited to, electronic locks, access controls and electrified exit ~~devices.~~devices and door controls. For the

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three months ended September 30, ~~2021,~~2022, Net revenues from the sale of electronic products in the Allegion Americas segment ~~decreased~~(excluding Net revenues from our recently acquired Access Technologies business) increased by ~~a high single digits~~nearly thirty percent compared to the same period in the prior year. ~~As previously disclosed, a surge in global demand for~~While we continue to experience delays and shortages of electronic components ~~has led~~from key suppliers, we expect continued growth in Net revenues from the sale of electronic products for the remainder of the year, given the combination of our pricing initiatives and the comparable impact to the fourth quarter of 2021, when the supply chain challenges and ~~component~~ shortages ~~which further accelerated during the third quarter. This has led to a reduction in the allocations~~ of ~~electronic~~materials and components we receive from key suppliers, periodic production interruptions and delays in our ability to meet the elevated level of demand for our electronic products during the current quarter. While considered temporary, we expect these challenges around the availability of electronic components to continue beyond 2021. As a result, we are actively implementing measures to mitigate the operational and distribution inefficiencies these component shortages and other challenges are creating, such as re-engineering product designs and configurations and developing alternate sources of supply.negatively impacted revenue.

Net revenues for the nine months ended September 30, ~~2021,~~2022, increased by ~~5.2%~~18.8%, or ~~$77.2~~$295.0 million, compared to the same period in ~~2020,~~2021, due to the following:


Pricing	~~1.5~~10.3	%
Volume	~~3.2~~3.0	%
Acquisitions	5.6	%
Currency exchange rates	~~0.5~~ (0.1)	%
Total	~~5.2~~18.8	%

The increase in Net revenues was ~~principally~~ driven by significantly improved pricing and higher volumes ~~particularly during the second quarter given~~for our non-residential products, as well as the impact of ~~the comparison to the muted demand and temporary plant shut-downs we experienced in the second quarter of 2020 due to the COVID-19 pandemic. Improved pricing and the impact of~~our recently acquired Access Technologies business. These increases were partially offset by unfavorable foreign currency exchange rate movements ~~also contributed to the increase in Net revenues.~~and lower volumes for our residential products.

Net revenues from non-residential products (excluding Net revenues from our recently acquired Access Technologies business) for the nine months ended September 30, ~~2021, decreased~~2022, increased by ~~a low-single digits~~approximately twenty percent compared to the same period in the prior year, ~~while~~driven by improved pricing and higher volumes. Net revenues from residential products for the nine months ended September 30, ~~2021, increased~~2022, decreased by ~~greater than twenty~~a low single digits percent compared to the same period in the prior year, driven ~~principally~~ by ~~higher~~lower volumes, ~~in the second quarter of the current year.~~which were partially offset by increased pricing. Net revenues from the sale of electronic products ~~in the Allegion Americas segment~~ for the nine months ended September 30, ~~2021, increased~~2022, were up by a ~~mid-single~~high single digits percent compared to the same period in the prior year.

Operating income/margin

Segment operating income for the three months ended September 30, ~~2021, decreased $31.3~~2022, increased $44.7 million compared to the same period in ~~2020,~~2021, and Segment operating margin for the three months ended September 30, ~~2021,~~2022, decreased to ~~25.5%~~23.9% from ~~30.6%~~25.5%, due to the following:


In millions	In millions	Operating Income		Operating Margin		In millions	Operating Income		Operating Margin
September 30, 2020		$	165.0	30.6	%
Inflation in excess of pricing and productivity		(15.6)		(3.4)	%
September 30, 2021						September 30, 2021	$	133.7	25.5	%
Pricing and productivity in excess of inflation						Pricing and productivity in excess of inflation	24.2		1.0	%
Volume / product mix	Volume / product mix	(11.3)		(0.8)	%	Volume / product mix	30.8		2.9	%
Currency exchange rates	Currency exchange rates	(0.4)		(0.2)	%	Currency exchange rates	(0.6)		—	%
Investment spending	Investment spending	(5.6)		(1.0)	%	Investment spending	(0.7)		(0.1)	%

Restructuring / acquisition expenses		1.6		0.3	%
September 30, 2021		$	133.7	25.5	%
Acquisitions						Acquisitions	6.8		(2.5)	%
Acquisition expenses						Acquisition expenses	(15.8)		(2.9)	%
September 30, 2022						September 30, 2022	$	178.4	23.9	%

The ~~decreases~~increase in Segment operating income ~~and Segment operating margin were~~was primarily driven by pricing improvements in excess of inflation and productivity, ~~challenges in excess of pricing improvements, unfavorable~~favorable volume/product mix ~~increased investment spending~~ and the contribution to operating income from our recently acquired Access Technologies business. These increases were partially offset by a year-over-year increase in acquisition and integration expenses, unfavorable foreign currency exchange rate ~~movements.~~movements and increased investment spending.

The decrease in Segment operating margin was primarily due to a year-over-year increase in acquisition and integration expenses, the impact to operating margin from our recently acquired Access Technologies business and increased investment spending. These decreases were partially offset by ~~a year-over-year decrease in restructuring and acquisition expenses. Inflation~~pricing improvements in excess of ~~pricing~~inflation and productivity ~~reflects the impacts of the increased commodity, material component, packaging, freight~~ and ~~labor inflation, as well as the inefficiencies caused by more acute supply chain challenges and shortages of materials, components and labor discussed above.~~favorable volume/product mix.

Segment operating income for the nine months ended September 30, ~~2021, decreased $12.9~~2022, increased $36.4 million compared to the same period in ~~2020,~~2021, and Segment operating margin for the nine months ended September 30, ~~2021,~~2022, decreased to ~~26.7%~~24.4% from ~~28.9%~~26.7%, due to the following:

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In millions	In millions	Operating Income		Operating Margin		In millions	Operating Income		Operating Margin
September 30, 2020		$	432.4	28.9	%
Inflation in excess of pricing and productivity		(13.6)		(1.4)	%
September 30, 2021						September 30, 2021	$	419.5	26.7	%
Pricing and productivity in excess of inflation						Pricing and productivity in excess of inflation	22.7		(1.1)	%
Volume / product mix	Volume / product mix	3.9		(0.6)	%	Volume / product mix	31.4		1.2	%
Currency exchange rates	Currency exchange rates	1.4		—	%	Currency exchange rates	(1.4)		—	%
Investment spending	Investment spending	(9.3)		(0.6)	%	Investment spending	(7.5)		(0.4)	%

Acquisitions						Acquisitions	6.8		(1.0)	%
Restructuring / acquisition expenses	Restructuring / acquisition expenses	4.7		0.4	%	Restructuring / acquisition expenses	(15.6)		(1.0)	%
September 30, 2021		$	419.5	26.7	%
September 30, 2022						September 30, 2022	$	455.9	24.4	%

The ~~decrease~~increase in Segment operating income was primarily driven by ~~inflation~~pricing improvements in excess of ~~pricing~~inflation and productivity, ~~improvements~~favorable volume/product mix and ~~increased investment spending.~~the contribution to operating income from our recently acquired Access Technologies business. These ~~decreases~~increases were partially offset by ~~the impacts of volume/product mix,~~a year-over-year increase in restructuring and acquisition expenses, unfavorable foreign currency exchange rate movements and ~~a year-over-year decrease in restructuring and acquisition expenses.~~increased investment spending.

The decrease in Segment operating margin was primarily ~~driven by inflation~~due to a year-over-year increase in ~~excess of pricing~~restructuring and ~~productivity improvements,~~acquisition expenses, the impact to operating margin from our recently acquired Access Technologies business, increased investment spending and the dilutive impact ~~of product mix, which exceeded~~to operating margin from inflation and productivity exceeding the ~~benefits~~benefit to operating margin from ~~higher volumes.~~pricing improvements. These decreases were partially offset by ~~the year-over-year decrease in restructuring and acquisition expenses.~~favorable volume/product mix.

Allegion International

Our Allegion International segment provides security products, services and solutions primarily throughout Europe, Asia and Oceania. The segment offers end-users a broad range of products, services and solutions including locks, locksets, portable locks, key systems, door closers, exit devices, doors and door systems, electronic products and access control systems, as well as time and attendance and workforce productivity solutions. This segment’s primary brands are AXA, Bricard, Briton, CISA, Gainsborough, Interflex and SimonsVoss.

Net Revenues

Net revenues for the three months ended September 30, ~~2021, increased~~2022, decreased by ~~1.7%~~13.6%, or ~~$3.3~~$26.1 million, compared to the same period in ~~2020,~~2021, due to the following:


Pricing	~~1.2~~6.9	%
Volume	~~1.3~~ (7.7)	%
~~Acquisitions / divestitures~~	~~(2.4)~~		%
Currency exchange rates	~~1.6~~ (12.8)	%
Total	~~1.7~~ (13.6)	%

The ~~increase~~decrease in Net revenues was driven by ~~higher~~lower volumes ~~improved pricing~~ and unfavorable foreign currency exchange rate ~~movements.~~movements due to the significant strengthening of the U.S. dollar relative to most of the currencies in which we do business throughout our Allegion International segment. Also, as discussed above, softening demand throughout much of the Eurozone has impacted several of our businesses in the segment, resulting in lower volumes. These ~~increases~~decreases were partially offset by ~~the divestiture of our QMI business in February 2021.~~

improved pricing.

Net revenues for the nine months ended September 30, ~~2021, increased~~2022, decreased by ~~17.8%~~7.3%, or ~~$88.4~~$42.8 million, compared to the same period in ~~2020,~~2021, due to the following:


Pricing	~~0.9~~5.6	%
Volume	~~11.4~~ (2.7)	%
Acquisitions / divestitures	~~(2.3)~~(0.1)	%
Currency exchange rates	~~7.8~~ (10.1)	%
Total	~~17.8~~ (7.3)	%

The ~~increase~~decrease in Net revenues was ~~principally~~primarily driven by ~~higher volumes and~~unfavorable foreign currency exchange rate movements, ~~in addition to improved pricing.~~lower volumes and the divestitures of QMI and Milre. These ~~increases~~decreases were partially offset by ~~the divestiture of our QMI business.~~improved pricing.

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Operating ~~income (loss)/~~income/margin

Segment operating income for the three months ended September 30, ~~2021,~~ ~~increased $7.3~~2022, decreased $5.6 million compared to the same period in ~~2020,~~2021, and Segment operating margin for the three months ended September 30, ~~2021, increased~~2022, decreased to ~~10.6%~~8.9% from ~~7.0%~~10.6%, due to the following:

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In millions	In millions	Operating Income		Operating Margin		In millions	Operating Income		Operating Margin
September 30, 2020		$	13.2	7.0	%
Inflation in excess of pricing and productivity		(1.3)		(0.8)	%
September 30, 2021						September 30, 2021	$	20.5	10.6	%
Pricing and productivity in excess of inflation						Pricing and productivity in excess of inflation	7.5		3.0	%
Volume / product mix	Volume / product mix	0.7		0.2	%	Volume / product mix	(6.3)		(2.6)	%
Currency exchange rates	Currency exchange rates	0.9		0.2	%	Currency exchange rates	(5.8)		(1.8)	%
Investment spending	Investment spending	(0.8)		(0.4)	%	Investment spending	(1.5)		(0.7)	%
Acquisitions / divestitures	Acquisitions / divestitures	1.5		1.1	%	Acquisitions / divestitures	0.3		0.2	%
Restructuring expenses		3.7		2.0	%
Impairment of intangible assets		2.6		1.3	%
September 30, 2021		$	20.5	10.6	%
Restructuring / acquisition expenses						Restructuring / acquisition expenses	0.2		0.2	%

September 30, 2022						September 30, 2022	$	14.9	8.9	%

The ~~increases~~decreases in Segment operating income and Segment operating margin were primarily ~~due to favorable~~driven by unfavorable volume/product mix, unfavorable foreign currency exchange rate movements and increased investment spending. These decreases were partially offset by pricing and productivity improvements in excess of inflation, a year-over-year decrease in restructuring and acquisition expenses ~~foreign currency exchange rate movements,~~and the beneficial impact of a prior year acquisition and the divestiture of our QMI business in February 2021 and a prior year intangible asset impairment charge that did not recur in the current year. These increases were partially offset by inflation in excess of pricing and productivity improvements and increased investment spending.Milre.

Segment operating income ~~(loss)~~ for the nine months ended September 30, ~~2021,~~ ~~was favorable $146.8~~2022, decreased $8.1 million compared to the same period in ~~2020,~~2021, and Segment operating margin for the nine months ended September 30, ~~2021, improved~~2022, decreased to ~~9.2%~~8.5% from ~~(18.7)%~~9.2%, due to the following:


In millions	In millions	Operating Income (Loss)		Operating Margin		In millions	Operating Income		Operating Margin
September 30, 2020		$	(92.8)	(18.7)	%
September 30, 2021						September 30, 2021	$	54.0	9.2	%
Pricing and productivity in excess of inflation	Pricing and productivity in excess of inflation	2.6		0.5	%	Pricing and productivity in excess of inflation	15.9		2.1	%
Volume / product mix	Volume / product mix	23.9		3.8	%	Volume / product mix	(7.1)		(0.9)	%
Currency exchange rates	Currency exchange rates	7.2		0.9	%	Currency exchange rates	(13.1)		(1.4)	%
Investment spending	Investment spending	(1.2)		(0.3)	%	Investment spending	(4.2)		(0.6)	%
Acquisitions / divestitures	Acquisitions / divestitures	3.0		0.7	%	Acquisitions / divestitures	1.8		0.3	%
Restructuring expenses		12.4		2.4	%
Impairment of goodwill and intangible assets		98.9		19.9	%
September 30, 2021		$	54.0	9.2	%
Restructuring / acquisition expenses						Restructuring / acquisition expenses	(1.4)		(0.2)	%

September 30, 2022						September 30, 2022	$	45.9	8.5	%

The ~~improvements~~decreases in Segment operating income ~~(loss)~~ and Segment operating margin were primarily ~~due to the prior year goodwill and intangible asset impairment charges, which did not recur in the current year, favorable~~driven by unfavorable volume/product mix, unfavorable foreign currency exchange rate movements, increased investment spending and a year-over-year ~~decrease~~increase in restructuring and acquisition expenses. ~~Also contributing to the improvements~~These decreases were partially offset by pricing and productivity improvements in excess of inflation ~~foreign currency exchange rate movements~~ and the beneficial impact of a prior year acquisition and the ~~divestiture~~divestitures of ~~our~~ QMI ~~business. These improvements were slightly offset by increased investment spending.~~and Milre.

Liquidity and Capital Resources

Liquidity Outlook, Sources and ~~uses of liquidity~~

Uses

Our primary source of liquidity is cash provided by operating activities. Cash provided by operating activities is used to invest in new product development and fund capital expenditures and working capital ~~requirements~~requirements. Our ability to generate cash from our operating activities, our unused availability under our 2021 Revolving Facility and ~~is expected~~our access to ~~be adequate to service any future debt, pay any declared dividends~~the capital and ~~potentially fund acquisitions and share repurchases. Our ability~~credit markets enable us to fund these capital needs, depends on our ongoing ability to generate cash provided by operating activities and to access our borrowing facilities (including unused availability under our Revolving Facility) and capital markets.

~~As of~~ ~~September 30, 2021,~~ ~~we maintain cash and cash equivalents of $503.9 million, have no required principal payments on~~execute our long-term ~~debt until September 2022,~~growth strategies and ~~have unused availability of $485.9 million under~~return value to our ~~Revolving Facility.~~shareholders. Further, our business operates with strong operating cash flows, low leverage and low capital intensity, providing financial ~~flexibility. We believe that future cash provided by operating activities, availability under our Revolving Facility,~~flexibility, including sufficient access to ~~funds~~credit markets.

While the financing of our acquisition of the Access Technologies business has increased our leverage, we remain comfortably within all our financial covenants. Further, we do not believe this acquisition or the related financing will diminish our sound financial position or our ability to meet our short-term financing needs. Short-term financing needs primarily consist of working capital requirements, restructuring initiatives, capital spending, dividend payments and principal and interest payments on ~~hand~~our long-term debt. Long-term financing needs depend largely on potential growth opportunities, including potential acquisitions, repayment or refinancing of our long-term obligations and ~~capital markets, as well as other~~repurchases of our ordinary shares. Further, of our total outstanding indebtedness at September 30, 2022, approximately 80% incurs fixed-rate interest and is therefore not exposed to the risk of rising variable interest rates.

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~~potential measures within~~Based upon our ~~control will provide adequate resources~~operations, existing cash balances and unused availability under our 2021 Revolving Facility, as of September 30, 2022, we expect cash flows from operations to ~~fund our operating and financing needs and~~be sufficient to maintain a sound financial position and ~~liquidity.~~

liquidity and to meet our financing needs for at least the next 12 months. Further, we do not anticipate any covenant compliance challenges with any of our outstanding indebtedness for at least the next 12 months. We also believe the availability under our 2021 Credit Facilities and access to credit and capital markets are sufficient to achieve our longer-term strategic plans.

The following table reflects the major categories of cash flows for the nine months ended September 30. For additional details, see the Condensed and Consolidated Statements of Cash Flows in the Condensed and Consolidated Financial Statements.


In millions	In millions	2021		2020		In millions	2022		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	356.4	$	289.4	Net cash provided by operating activities	$	267.1	$	356.4
Net cash used in investing activities	Net cash used in investing activities	(14.9)		(39.3)		Net cash used in investing activities	(965.9)		(14.9)
Net cash used in financing activities		(309.3)		(179.3)
Net cash provided by (used) in financing activities						Net cash provided by (used) in financing activities	606.1		(309.3)

Operating ~~Activities~~

Activities:

Net cash provided by operating activities during the nine months ended September 30, ~~2021, increased $67.0~~2022, decreased $89.3 million compared to the same period in ~~2020,~~2021, primarily driven by ~~increased Net earnings and improvements~~changes in working ~~capital.~~capital and decreased Net earnings.

Investing ~~Activities~~

Activities:

Net cash used in investing activities during the nine months ended September 30, ~~2021, decreased $24.4~~2022, increased $951.0 million compared to the same period in ~~2020,~~2021, primarily due to ~~cash proceeds from the sales~~$923.1 million of ~~our equity method investment in Nuki and other investments, as well as a decrease in capital expenditures. Partially offsetting these decreases was an increase due to~~ cash paid for ~~our~~the acquisition of ~~Workforce IT and~~ the ~~assets acquired from Astrum Benelux.~~Access Technologies business.

Financing ~~Activities~~

Activities:

Net cash ~~used in financing~~provided by (used in) financing activities during the nine months ended September 30, ~~2021, increased $130.0~~2022, fluctuated $915.4 million compared to the same period in ~~2020,~~2021, primarily due to ~~an increase~~the issuance of ~~$118.6 million in~~our 5.411% Senior Notes and draw on our 2021 Revolving Facility to finance the acquisition of the Access Technologies business. Additionally, cash used to repurchase ~~shares.~~

shares was $151.7 million lower in 2022 compared to the same period in 2021.

Capitalization

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


In millions	In millions	September 30, 2021		December 31, 2020		In millions	September 30, 2022		December 31, 2021
Term Facility		$	238.8	$	238.8
Revolving Facility		—		—
2021 Term Facility						2021 Term Facility	$	240.6	$	250.0
2021 Revolving Facility						2021 Revolving Facility	199.0		—
3.200% Senior Notes due 2024	3.200% Senior Notes due 2024	400.0		400.0		3.200% Senior Notes due 2024	400.0		400.0
3.550% Senior Notes due 2027	3.550% Senior Notes due 2027	400.0		400.0		3.550% Senior Notes due 2027	400.0		400.0
3.500% Senior Notes due 2029	3.500% Senior Notes due 2029	400.0		400.0		3.500% Senior Notes due 2029	400.0		400.0
5.411% Senior Notes due 2032						5.411% Senior Notes due 2032	600.0		—
Other debt	Other debt	0.4		0.6		Other debt	0.2		0.3
Total borrowings outstanding	Total borrowings outstanding	1,439.2		1,439.4		Total borrowings outstanding	2,239.8		1,450.3
Discounts and debt issuance costs, net	Discounts and debt issuance costs, net	(8.3)		(9.8)		Discounts and debt issuance costs, net	(12.7)		(8.2)
Total debt	Total debt	1,430.9		1,429.6		Total debt	2,227.1		1,442.1
Less current portion of long-term debt	Less current portion of long-term debt	238.4		0.2		Less current portion of long-term debt	12.6		12.6
Total long-term debt	Total long-term debt	$	1,192.5	$	1,429.4	Total long-term debt	$	2,214.5	$	1,429.5

As of September 30, ~~2021,~~2022, we have an unsecured Credit Agreement in place, consisting of a ~~$700.0~~$250.0 million term loan facility (the ~~“Term~~“2021 Term Facility”), of which ~~$238.8~~$240.6 million is outstanding at September 30, ~~2021,~~2022, and a $500.0 million revolving credit facility (the ~~“Revolving~~“2021 Revolving Facility” and, together with the 2021 Term Facility, the ~~“Credit~~“2021 Credit Facilities”). The 2021 Credit Facilities mature on November 18, 2026. The 2021 Term Facility will amortize in quarterly installments at the following rates: 1.25% per quarter starting March 31, 2022 through March 31, 2025, 2.5% per quarter starting June 30, 2025 through September ~~12, 2022.~~30, 2026, with the balance due on November 18, 2026. Principal amounts repaid on the Term Facility may not be ~~reborrowed, and we have satisfied our obligation to make quarterly installments on the Term Facility up to the maturity date, with the remaining outstanding balance due on September 12, 2022.~~

reborrowed.

The 2021 Revolving Facility provides aggregate commitments of up to $500.0 million, which includes up to $100.0 million for the issuance of letters of credit. AtOn July 1, 2022, we borrowed $340.0 million on the 2021 Revolving Facility to partially fund the acquisition of the Access Technologies business. We subsequently made $141.0 million in repayments, resulting in $199.0 million borrowings outstanding as of September 30, ~~2021, there were no borrowings outstanding on the Revolving Facility,~~2022, and we

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had ~~$14.1~~$7.6 million of letters of credit outstanding. Commitments under the 2021 Revolving Facility may be reduced at any time without premium or penalty, and amounts repaid may be reborrowed.

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Outstanding borrowings under the 2021 Credit Facilities accrue interest at our option of (i) a ~~LIBOR~~Bloomberg Short-Term Bank Yield Index ("BSBY") rate plus the applicable margin or (ii) a base rate plus the applicable margin. The applicable margin ranges from ~~1.125%~~0.875% to ~~1.500%~~1.375% depending on our credit ratings. At September 30, ~~2021,~~2022, outstanding borrowings under the 2021 Credit Facilities accrue interest at ~~LIBOR~~BSBY plus a margin of ~~1.250%~~1.125%, resulting in an interest rate of ~~1.34%~~4.241%. The 2021 Credit Facilities also contain negative and affirmative covenants and events of default that, among other things, limit or restrict our ability to enter into certain transactions. In addition, the 2021 Credit Facilities require us to comply with a maximum leverage ratio ~~and a minimum interest expense coverage ratio,~~ as defined within the agreement. As of September 30, ~~2021,~~2022, we were in compliance with all covenants.

On June 22, 2022, Allegion US Hold Co issued $600.0 million aggregate principal amount of its 5.411% Senior Notes due 2032 (the “5.411% Senior Notes”). The 5.411% Senior Notes require semi-annual interest payments on January 1 and July 1, beginning January 1, 2023, and will mature on July 1, 2032. We incurred and deferred $5.9 million of discounts and financing costs associated with the 5.411% Senior Notes, which will be amortized to Interest expense over their 10-year term, as well as $4.3 million of third party financing costs that were recorded within Interest expense on the Condensed and Consolidated Statement of Income for the nine months ended September 30, 2022.

As of September 30, ~~2021, we~~2022, Allegion US Hold Co also ~~have~~has $400.0 million outstanding of its 3.200% Senior Notes due 2024 (the ~~"3.200%~~“3.200% Senior ~~Notes"~~Notes”), and $400.0 million outstanding of its 3.550% Senior Notes due 2027 (the ~~"3.550%~~“3.550% Senior ~~Notes"~~Notes”) ~~and~~, while Allegion plc has $400.0 million outstanding of its 3.500% Senior Notes due 2029 (the ~~"3.500%~~“3.500% Senior ~~Notes"~~Notes”, and all ~~three~~four senior notes collectively, the ~~"Senior Notes"~~“Senior Notes”). The 3.200% Senior Notes, 3.550% Senior Notes and 3.500% Senior Notes all require semi-annual interest payments on April 1 and October 1 of each year and will mature on October 1, 2024, October 1, 2027 and October 1, 2029, respectively.

Historically, the majority of our earnings were considered to be permanently reinvested in jurisdictions where we have made, and intend to continue to make, substantial investments to support the ongoing development and growth of our global operations. At September 30, ~~2021,~~2022, we analyzed our working capital requirements and the potential tax liabilities that would be incurred if certain subsidiaries made distributions and concluded that no material changes to our historic permanent reinvestment assertions are required.

Defined Benefit Plans

Our investment objective in managing defined benefit plan assets is to ensure that all present and future benefit obligations are met as they come due. We seek to achieve this goal while trying to mitigate volatility in plan funded status, contributions and expense by better matching the characteristics of the plan assets to that of the plan liabilities. Global asset allocation decisions are based on a dynamic approach whereby a plan’s allocation to fixed income assets increases as the funded status increases. We monitor plan funded status, asset allocation and the impact of market conditions on our defined benefit plans regularly in addition to investment manager performance. For further details on pension plan activity, see Note 1110 to the Condensed and Consolidated Financial Statements.

For a further discussion of Liquidity and Capital Resources, refer to Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

2021.

Guarantor Financial Information

~~Allegion US Holding Company Inc. ("~~Allegion US Hold ~~Co")~~Co is the issuer of the 3.200% Senior Notes, 3.550% Senior Notes, and ~~3.550%~~5.411% Senior Notes and is the guarantor of the 3.500% Senior Notes. Allegion plc (the “Parent”) is the issuer of the 3.500% Senior Notes and is the guarantor of the 3.200% Senior Notes, 3.550% Senior Notes, and ~~3.550%~~5.411% Senior Notes. Allegion US Hold Co is directly or indirectly 100% owned by the Parent and each of the guarantees of Allegion US Hold Co and the Parent is full and unconditional and joint and several.

The 3.200% Senior Notes, 3.550% Senior Notes, and ~~the 3.550%~~5.411% Senior Notes are senior unsecured obligations of Allegion US Hold Co and rank equally with all of Allegion US Hold Co’s existing and future senior unsecured and unsubordinated indebtedness. The guarantee of the 3.200% Senior Notes, 3.550% Senior Notes, and ~~the 3.550%~~5.411% Senior Notes is the senior unsecured obligation of the Parent and ranks equally with all of ~~Allegion plc’s~~the Parent’s existing and future senior unsecured and unsubordinated indebtedness. The 3.500% Senior Notes are senior unsecured obligations of the Parent ~~are guaranteed by Allegion US Hold Co~~ and rank equally with all of ~~Allegion plc’s~~the Parent’s existing and future senior unsecured and unsubordinated indebtedness.

The guarantee of the 3.500% Senior Notes is the senior unsecured obligation of Allegion US Hold Co and ranks equally with all of Allegion US Hold Co's existing and future senior unsecured and unsubordinated indebtedness.

Each guarantee is effectively subordinated to any secured indebtedness of the Guarantor to the extent of the value of the assets securing such indebtedness. The Senior Notes are structurally subordinated to indebtedness and other liabilities of the subsidiaries of the Guarantor, none of which guarantee the notes. The obligations of the Guarantor under its Guarantee are limited as necessary to prevent such Guarantee from constituting a fraudulent conveyance under applicable law and, therefore, are limited to the amount that the Guarantor could guarantee without such Guarantee constituting a fraudulent conveyance; this

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limitation, however, may not be effective to prevent such Guarantee from constituting a fraudulent conveyance. If the Guarantee was rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the Guarantor, and, depending on the amount of such indebtedness, the Guarantor’s liability on its

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Guarantee could be reduced to zero. In such an event, the notes would be structurally subordinated to the indebtedness and other liabilities of the Guarantor.

For further details, terms and conditions of the Senior Notes refer to the Company’s ~~Form~~Forms 8-K filed October 2, 2017, ~~and Form 8-K filed~~ September 27, ~~2019.~~

2019, and June 22, 2022.

The following tables present the summarized financial information specified in Rule 1-02(bb)(1) of Regulation S-X for each issuer and guarantor. The summarized financial information has been prepared in accordance with Rule 13-01 of Regulation S-X.

Selected Condensed Statement of Comprehensive Income Information

Nine months ended September 30, 2021 Year ended December 31, 2020
In millions Allegion plc Allegion US
Hold Co Allegion plc Allegion US
Hold Co
Net revenues $ — $ — $ — $ —
Gross profit — — — —
Operating loss (5.3) (0.4) (7.5) (0.2)
Equity earnings in affiliates, net of tax 396.2 111.5 358.8 216.5
Transactions with related parties and subsidiaries(a)
(5.8) (63.6) (15.3) (39.3)
Net earnings 370.2 47.0 314.3 164.7
Net earnings attributable to the entity 370.2 47.0 314.3 164.7


	Nine months ended September 30, 2022				Year ended December 31, 2021
In millions	Allegion plc		Allegion US Hold Co		Allegion plc		Allegion US Hold Co
Net revenues	$	—	$	—	$	—	$	—
Gross profit	—		—		—		—
Operating loss	(5.2)		(14.4)		(6.6)		(0.5)
Equity earnings in affiliates, net of tax	353.8		126.9		521.6		173.6
Transactions with related parties and subsidiaries(a)	(10.5)		(61.3)		(12.5)		(85.0)
Net earnings	322.7		43.1		483.0		87.1
Net earnings attributable to the entity	322.7		43.1		483.0		87.1

(a) Transactions with related parties and subsidiaries include intercompany interest and fees.

Selected Condensed Balance Sheet Information


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
In millions	In millions	Allegion plc		Allegion US Hold Co		Allegion plc		Allegion US Hold Co		In millions	Allegion plc		Allegion US Hold Co		Allegion plc		Allegion US Hold Co
Current assets:	Current assets:									Current assets:
Amounts due from related parties and subsidiaries	Amounts due from related parties and subsidiaries	$	—	$	713.4	$	—	$	20.0	Amounts due from related parties and subsidiaries	$	—	$	314.0	$	0.6	$	753.7
Total current assets	Total current assets	20.6		750.0		19.0		38.7		Total current assets	10.2		344.2		60.8		785.5
Noncurrent assets:	Noncurrent assets:									Noncurrent assets:
Amounts due from related parties and subsidiaries	Amounts due from related parties and subsidiaries	—		1,240.9		—		1,644.2		Amounts due from related parties and subsidiaries	—		1,647.8		—		1,240.9
Total noncurrent assets	Total noncurrent assets	1,792.7		1,324.8		1,793.3		1,671.8		Total noncurrent assets	1,792.6		1,710.3		1,793.1		1,292.7
Current liabilities:	Current liabilities:									Current liabilities:
Amounts due to related parties and subsidiaries	Amounts due to related parties and subsidiaries	$	33.0	$	233.4	$	197.5	$	183.9	Amounts due to related parties and subsidiaries	$	75.2	$	273.0	$	62.8	$	233.9
Total current liabilities	Total current liabilities	282.1		247.5		204.4		190.7		Total current liabilities	98.1		296.7		82.6		241.3
Noncurrent liabilities:	Noncurrent liabilities:									Noncurrent liabilities:
Amounts due to related parties and subsidiaries	Amounts due to related parties and subsidiaries	516.4		2,624.3		507.3		2,463.9		Amounts due to related parties and subsidiaries	576.4		2,694.5		761.8		2,660.5
Total noncurrent liabilities	Total noncurrent liabilities	914.0		3,427.7		1,143.2		3,267.3		Total noncurrent liabilities	1,201.8		4,260.9		1,396.5		3,466.9

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Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our Condensed and Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with those accounting principles requires management to use judgments in making estimates and assumptions based on the relevant information available at the end of each period. These estimates and assumptions have a significant effect on reported amounts of assets and liabilities, revenue and expenses, as well as the disclosure of contingent assets and liabilities because they result primarily from the need to make estimates and assumptions on matters that are inherently uncertain. Actual results may differ from estimates.

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Management believes there have been no significant changes during the nine months ended September 30, ~~2021,~~2022, to the items we disclosed as our critical accounting policies in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Recent Accounting Pronouncements

See Note 2 to our Condensed and Consolidated Financial Statements for a discussion of recently issued and adopted accounting pronouncements.

Forward-Looking Statements

Certain statements in this report, other than purely historical information, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “forecast,” “outlook,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” or the negative thereof or variations thereon or similar expressions generally intended to identify forward-looking statements.

Forward-looking statements may relate to such matters as: statements regarding the continued impacts of the global COVID-19 pandemic, supply chain constraints, electronic component and labor shortages, inflation, rising freight and material costs, impacts of Russia's invasion of Ukraine, including further supply chain disruptions and the increased risk of cyber-attacks in connection with such invasion, 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. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on our forward-looking statements. You are advised to review any further disclosures we make on related subjects in materials we file with or furnish to the SEC. Forward-looking statements speak only as of the date they are made and are not guarantees of future performance. They are subject to future events, risks and uncertainties - many of which are beyond our control - as well as potentially inaccurate assumptions, that could cause actual results to differ materially from our expectations and projections. We do not undertake to update any forward-looking statements.

Factors that might affect our forward-looking statements include, among other things:

•adverse impacts to our ~~normal~~ business operations due to the global COVID-19 ~~pandemic;~~pandemic and our ability to predict the full extent of such impacts;

•competitive factors in the industry in which we compete, including technological developments and increased competition from private label brands;

•the development, commercialization and acceptance of new products and services that meet the varied and evolving needs of our customers;

•the demand for our products and services, including changes in customer and consumer preferences, and our ability to maintain beneficial relationships with large customers;

•our products or solutions fail to meet certification and specification requirements, are defective or otherwise fall short of customers’ needs and expectations;

•the ability to complete and integrate any acquisitions and/or losses related to our investments in external companies;

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•business opportunities that diverge from our core business;

•our ability to operate efficiently and productively;

•our ability to effectively manage and implement restructuring initiatives ~~and~~or other organizational changes;

•disruptions in our global supply chain, including supply chain constraints, electronic component and labor shortages, inflation and product manufacturing and logistical services provided by supplier partners;

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

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•our ability to manage risks related to our information technology and operational technology systems and cybersecurity, including implementation of new processes that may cause disruptions and be more difficult, costly or time consuming than expected;

•our reliance on third-party vendors for many of the critical elements of our global information and operational technology infrastructure and their failure to provide effective support for such infrastructure;

•disruption and breaches of our information systems;

•ability to recruit and retain a highly qualified and diverse workforce;

•disruptions in our global supply chain, including supply chain constraints, electronic component and labor shortages and product manufacturing and logistical services provided by our supplier partners;

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

•economic, political and business conditions in the markets in which we operate, including changes to trade agreements, sanctions, import and export regulations and custom duties;

•conditions of the institutional, commercial and residential construction and remodeling markets, including the impact of work-from-home trends;

•fluctuations in currency exchange rates;

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

•potential ~~further~~ impairment of our goodwill, indefinite-lived intangible assets and/or our long-lived assets;

•interest rate fluctuations and other changes in borrowing costs, in addition to risks associated with our outstanding and future indebtedness;

•the impact our outstanding indebtedness may have on our business and operations and other capital market conditions, including availability of funding sources and currency exchange rate fluctuations;

•risks related to corporate social responsibility and reputational matters;

•the ability to protect our brand reputation and trademarks;

•the outcome of any litigation, governmental investigations or proceedings;

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

•adverse publicity or improper conduct by any of our employees, agents or business partners;

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

•uncertainty and inherent subjectivity related to transfer pricing regulations;

•changes in tax requirements, including tax rate changes, the adoption of new tax legislation or exposure to additional tax liabilities and revised tax law interpretations; and

•risks related to our incorporation in Ireland, including the possible effects on us of future legislation or interpretations in the U.S. that may limit or eliminate potential U.S. tax benefits resulting from our incorporation in a non-U.S. jurisdiction, such as Ireland, or deny U.S. government contracts to us based upon our incorporation in such non-U.S. jurisdiction.

Some of the significant risks and uncertainties that could cause actual results to differ materially from our expectations and projections are described more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. There may also be other factors that have not been anticipated or that are not described in our periodic filings with the SEC, generally because we did not believe them to be significant at the time, which could cause results to differ materially from our expectations.

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Item 3 – Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in our exposure to market risk during the third quarter of ~~2021.~~2022. For a discussion of the Company’s exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 4 – Controls and Procedures

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of

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September 30, ~~2021,~~2022, that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this Quarterly Report on Form 10-Q has been recorded, processed, summarized and reported when required and the information is 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.

There have not been any changes in the Company’s internal control over financial reporting that occurred during the third quarter of ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

In the normal course of business, we are involved in a variety of lawsuits, claims and legal proceedings, including commercial and contract disputes, labor and employment matters, product liability claims, environmental liabilities, antitrust and trade regulation matters, intellectual property disputes and tax-related matters. In our opinion, pending legal matters are not expected to have a material adverse impact on our results of operations, financial condition, liquidity or cash flows.

Item 1A – Risk Factors

There have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the period ended December 31, ~~2020.~~2021. For a further discussion of our Risk Factors, refer to the “Risk Factors” discussion contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Period Total number of shares purchased (000s) Average price paid per share Total number of shares purchased as part of Authorization (000s) Approximate dollar value of shares still available to be purchased under the Authorization (000s)
July 1 - July 31 94 $ 138.31 94 $ 401,445
August 1 - August 31 — — — 401,445
September 1 - September 30 — — — 401,445
Total 94 $ 138.31 94 $ 401,445


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






July 1 - July 31	—	$	—	—	$	140,454
August 1 - August 31	—	—		—	140,454
September 1 - September 30	—	—		—	140,454
Total	—	$	—	—	$	140,454

On February 6, 2020, our Board of Directors approved a share repurchase authorization of up to, and including, $800 million of the Company’s ordinary shares (the "2020 Share Repurchase Authorization"). The 2020 Share Repurchase Authorization does not have a prescribed expiration date. Based on market conditions, share repurchases are made from time to time in the open market at the discretion of management.

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Item 6 – Exhibits

(a) Exhibits

Exhibit No.

Description

Method of Filing

3.1

Amended and restated Memorandum and Articles of Association of Allegion plc.

Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on June 13, 2016 (File No. 001-35971).

10.1

John H. Stone Restricted Stock Unit Award Agreement dated August 1, 2022.*

Filed herewith.

10.2

John H. Stone Stock Option Award Agreement dated August 1, 2022.*

Filed herewith.

31.1

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.

31.2

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.

32.1

Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Furnished herewith.

101.INS

XBRL Instance Document.

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

101.SCH

XBRL Taxonomy Extension Schema Document.

Filed herewith.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Filed herewith.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

Filed herewith.

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document.

Filed herewith.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

Filed herewith.

104

Cover Page Interactive Data File.

Formatted as Inline XBRL and contained in Exhibit 101.

* Compensatory plan or arrangement.

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ALLEGION PLC

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		ALLEGION PLC (Registrant)

Date:	October ~~21, 2021~~27, 2022	/s/ ~~Patrick S. Shannon~~Michael J. Wagnes
		~~Patrick S. Shannon,~~Michael J. Wagnes, Senior Vice President and Chief Financial Officer Principal Financial Officer

Date:	October ~~21, 2021~~27, 2022	/s/ ~~Douglas P. Ranck~~Nickolas A. Musial
		~~Douglas P. Ranck,~~Nickolas A. Musial, Vice President, Controller and Chief Accounting Officer Principal Accounting Officer

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	Amount of gain recognized in Accumulated other comprehensive loss				Location of (loss) gain recognized in Net earnings	Amount of (loss) gain reclassified from Accumulated other comprehensive loss and recognized into Net earnings
In millions	2021		2020			2021		2020
Currency derivatives	$	0.4	$	0.9	Cost of goods sold	$	(1.0)	$	1.7


	Amount of gain recognized in Accumulated other comprehensive loss				Location of gain recognized in Net earnings	Amount of gain reclassified from Accumulated other comprehensive loss and recognized into Net earnings
In millions	2021		2020			2021		2020
Currency derivatives	$	2.8	$	3.9	Cost of goods sold	$	0.2	$	3.8


	Three months ended September 30, 2020						Nine months ended September 30, 2020
In millions	Allegion Americas		Allegion International		Total		Allegion Americas		Allegion International		Consolidated
Net revenues
Products	$	539.1	$	182.4	$	721.5	$	1,495.5	$	477.5	$	1,973.0
Services	—		6.9		6.9		—		19.6		19.6
Total Net revenues	$	539.1	$	189.3	$	728.4	$	1,495.5	$	497.1	$	1,992.6


	Nine months ended September 30, 2021				Year ended December 31, 2020
In millions	Allegion plc		Allegion US Hold Co		Allegion plc		Allegion US Hold Co
Net revenues	$	—	$	—	$	—	$	—
Gross profit	—		—		—		—
Operating loss	(5.3)		(0.4)		(7.5)		(0.2)
Equity earnings in affiliates, net of tax	396.2		111.5		358.8		216.5
Transactions with related parties and subsidiaries(a)	(5.8)		(63.6)		(15.3)		(39.3)
Net earnings	370.2		47.0		314.3		164.7
Net earnings attributable to the entity	370.2		47.0		314.3		164.7