Security-products maker Allegion Plc recorded a $96.3 million impairment charge related to COVID-19 uncertainty last quarter, which took a big bite out of the company’s profit even though revenue was up.
Dublin-based Allegion’s North American operations are based in Carmel. The company sells locks and other security and door products under such brands as Von Duprin, Schlage and CISA.
On Thursday, the company reported a first-quarter profit of $400,000, or zero cents per share, compared with a profit of $80.2 million, or 84 cents per share, during the same period of the previous year.
The company said results included $96.3 million in goodwill and trade-name impairments for the company’s non-U.S. operations, primarily related to COVID-19 and its expected future impacts.
Excluding both the $96.3 million in impairments and another $3 million in restructuring charges, acquisition and integration expenses, Allegion said, its first-quarter profit would have been $97.4 million, or $1.04 per share. Its adjusted profit for the year-ago period would have been $83.5 million, or 88 cents per share.
First quarter revenue was $674.7 million, up 3% from the year-ago period.
Sales varied widely in the various regions of the world where Allegion does business. First-quarter revenue grew 7.7% in the Americas, while dropping 9.1% in Europe, the Middle East, India, and Africa, which the company reports as a single region it calls EMEIA. Sales in the Asia Pacific region dropped 11.1%.
The company’s adjusted profit and sales performance exceeded analysts’ expectations. A consensus of analysts surveyed by Zacks had expected profit of 91 cents per share and revenue of $670 million.
“Leading into the COVID-19 pandemic, the business, particularly in the Americas, was performing very well,” CEO David Petratis said in a written statement. “The organic growth and adjusted margin expansion we experienced in the first quarter reflect Allegion’s solid underlying fundamentals, which include the strength and adaptability of our supply chain and our legacy brands. Those fundamentals will serve us well as the global pandemic subsides.”
Petratis said Allegion expects that the pandemic “will cause near-term negative financial impacts to revenue, income and cash flow.”
In response, he said, Allegion is reducing its discretionary spending, eliminating non-essential investment spending, implementing a hiring freeze and temporarily suspending share repurchases to help mitigate the impact of COVID-19.
Earlier this month, Allegion also announced a restructuring of its non-U.S. operations that will cut costs and streamline the company. These actions are expected to result in $30 million to $35 million in restructuring costs, including employee-termination benefits, contract-termination costs and other expenses, with all of the actions to be complete by the end of 2021. None of these actions will affect Allegion’s Indianapolis-area operations, the company said.
Shares of Allegion were trading at $93.60 each late Thursday morning, up 63 cents from Wednesday’s close. The company’s stock has traded between $77.37 and $139.24 per share over the past 12 months.