Allegion Annual Report 2016

FY2016 Annual Report · Allegion

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2016 Annual Report
2016 Annual Report

April 21, 2017

Dear Shareholders,

The Allegion team delivered a strong year in 2016.

Our people drove industry-leading organic growth, and expanded adjusted operating margins in all
business regions. We significantly increased our cash flow while providing excellent shareholder
returns since our spin-off. In fact, 2016 was our most profitable year as a stand-alone company. I’m
proud of our accomplishments, and even more excited about the future. Our industry is on the cusp
of major technical changes including new levels of connectivity and convenience. Allegion is at the
forefront of delivering forward-thinking solutions that link function, safety and design, in order to
keep people, places, and their property secure.

Allegion is a leader in electro-mechanical convergence and innovation, which we believe will drive
growth globally for the security industry in the coming years. We complement mechanical security
with electronic solutions, creating an optimized balance that helps customers address their unique
security needs, codes and cost constraints, while also gaining the benefits of technology. One
measure of the success of this strategy is our vitality index, which is an indicator of Allegion’s
capability to generate revenue from new product innovations. Since 2013, Allegion’s vitality index
has tripled, and we have a goal to hit more than 25 percent by 2019. Electronics and connected
solutions are a growing part of our portfolio that are demanded by a connected world.

Allegion’s key strategies
Allegion’s key strategies

Allegion’s board of directors and management team refreshed our overall business strategy in
2016. Key observations reflect continued industry consolidation, the electro-mechanical
convergence, the importance of enterprise excellence, and the critical requirement of disciplined
capital deployment. Allegion’s performance since its creation has been noteworthy; we
believe our vision, purpose, values and strategic growth pillars are sound. Disciplined capital
deployment is demanded by our shareholders and top of mind for our team.

Keys to the future
Keys to the future

Looking ahead, I am optimistic.

Fundamentally, overall market conditions remain favorable, and provide opportunities for Allegion
solutions around the globe. We see new infrastructure investments in core markets. Institutional
demand is strong, both for new construction and retrofit. Our renowned product portfolio and new
products, guided by specifying teams, position us for growth. Residential housing construction
continues to expand and consumer confidence is positive.

A disciplined and focused approach to key vertical market segments allows us to make targeted
investments that drive long-term organic growth and profitability. Allegion has gained market share,
and we expect this trend to continue. And with more than a billion secured door openings in the

world, Allegion is positioned to leverage the electro-mechanical convergence for decades to come.
world, Allegion is positioned to leverage the electro-mechanical convergence for decades to come.
world, Allegion is positioned to leverage the electro-mechanical convergence for decades to come.
Our expertise and focus in the complex security market give us a significant competitive
Our expertise and focus in the complex security market give us a significant competitive
Our expertise and focus in the complex security market give us a significant competitive
advantage.
advantage.
advantage.

A track record of success, positive end markets, technological trends and a great team give us
A track record of success, positive end markets, technological trends and a great team give us
A track record of success, positive end markets, technological trends and a great team give us
confidence in our future.
confidence in our future.
confidence in our future.

Team of experts
Team of experts
Team of experts
Team of experts

Our high levels of execution and performance are driven by our most important assets – our people,
Our high levels of execution and performance are driven by our most important assets – our people,
Our high levels of execution and performance are driven by our most important assets – our people,
coupled with a management system that drives continuous improvement. We have a strong team
coupled with a management system that drives continuous improvement. We have a strong team
coupled with a management system that drives continuous improvement. We have a strong team
of experts who are committed to our vision to make the world safer, securing the places where
of experts who are committed to our vision to make the world safer, securing the places where
of experts who are committed to our vision to make the world safer, securing the places where
people thrive. Our operating system helps us plan for results and holds our team accountable for
people thrive. Our operating system helps us plan for results and holds our team accountable for
people thrive. Our operating system helps us plan for results and holds our team accountable for
delivery of our long-term strategy, investments, quality, customer satisfaction, and employee
delivery of our long-term strategy, investments, quality, customer satisfaction, and employee
delivery of our long-term strategy, investments, quality, customer satisfaction, and employee
engagement. Our people are a highly focused team driving a great business.
engagement. Our people are a highly focused team driving a great business.
engagement. Our people are a highly focused team driving a great business.

Employee engagement and employee safety are high priorities. We measure employee
Employee engagement and employee safety are high priorities. We measure employee
Employee engagement and employee safety are high priorities. We measure employee
engagement globally and report our results to the Allegion board of directors. For the third year,
engagement globally and report our results to the Allegion board of directors. For the third year,
engagement globally and report our results to the Allegion board of directors. For the third year,
Allegion increased the engagement of our workforce. We also continue to have an exceptional
Allegion increased the engagement of our workforce. We also continue to have an exceptional
Allegion increased the engagement of our workforce. We also continue to have an exceptional
occupational safety record and are a safety leader in our industry. Our team’s engagement,
occupational safety record and are a safety leader in our industry. Our team’s engagement,
occupational safety record and are a safety leader in our industry. Our team’s engagement,
commitment to safety, and sense of responsibility to our global communities are the foundations of
commitment to safety, and sense of responsibility to our global communities are the foundations of
commitment to safety, and sense of responsibility to our global communities are the foundations of
our culture.
our culture.
our culture.

What’s next? The future is bright at Allegion!
What’s next? The future is bright at Allegion!
What’s next? The future is bright at Allegion!
What’s next? The future is bright at Allegion!

We live in an uncertain world. The safety and security of people and property are top concerns of
We live in an uncertain world. The safety and security of people and property are top concerns of
We live in an uncertain world. The safety and security of people and property are top concerns of
our customers, and leading economies are demanding investment—all of which provide Allegion
our customers, and leading economies are demanding investment—all of which provide Allegion
our customers, and leading economies are demanding investment—all of which provide Allegion
with opportunities. Our 2016 results delivered growth in organic revenue, adjusted operating
with opportunities. Our 2016 results delivered growth in organic revenue, adjusted operating
with opportunities. Our 2016 results delivered growth in organic revenue, adjusted operating
margins, shareholder value and the vitality index, as well as significant cash flow; these results
margins, shareholder value and the vitality index, as well as significant cash flow; these results
margins, shareholder value and the vitality index, as well as significant cash flow; these results
show our potential in the years ahead. The ability to perform above the market, while making
show our potential in the years ahead. The ability to perform above the market, while making
show our potential in the years ahead. The ability to perform above the market, while making
significant investments in our business, demonstrates that Allegion’s disciplined approach to long-
significant investments in our business, demonstrates that Allegion’s disciplined approach to long-
significant investments in our business, demonstrates that Allegion’s disciplined approach to long-
term growth and shareholder value is working.
term growth and shareholder value is working.
term growth and shareholder value is working.

I love the business and believe in our people. Our culture is developing and strong. Our strategy is
I love the business and believe in our people. Our culture is developing and strong. Our strategy is
I love the business and believe in our people. Our culture is developing and strong. Our strategy is
clear; we are focused and committed to profitable growth and shareholder returns. Our future is
clear; we are focused and committed to profitable growth and shareholder returns. Our future is
clear; we are focused and committed to profitable growth and shareholder returns. Our future is
bright, and I firmly believe our best is yet to come. Thank you to our board and the global Allegion
bright, and I firmly believe our best is yet to come. Thank you to our board and the global Allegion
bright, and I firmly believe our best is yet to come. Thank you to our board and the global Allegion
team for their commitment to excellence.
team for their commitment to excellence.
team for their commitment to excellence.

My best,
My best,
My best,

Dave Petratis, Chairman, President and CEO
Dave Petratis, Chairman, President and CEO
Dave Petratis, Chairman, President and CEO

Allegion plc
Allegion plc
Allegion plc

Countries where
we work

9,500+

Employees

~130

Countries where our
products are sold

$2.2
Billion

2016
annual
revenue

10,000+

Channel partners
worldwide

25+

Global brands

600+

Global active
patents

We are many.
We are one.
We are Allegion.

5 G

h
t
w
o
r

s
r
a

l
l
i

Expand in
core markets

Around the globe, our people are
trusted experts in security products
that are used for new construction,
renovation and smart home solutions.
Allegion’s leadership in these areas,
as well as specification, is a key factor
driving our above-market growth in
the security industry.

In 2016, our investments spanned
both our electronic and mechanical
product lines, allowing Allegion
to not only create new, innovative
products, but also make continual
improvements to proven solutions.

By challenging the status quo,
Allegion is creating further
competitive differentiation and
added customer value. Our teams
are addressing the customer
experience and driving growth in
distinct channels through market
segmentation, as well as the
specified portion of our business.

With these activities and others, we
led the security industry in overall
organic growth. In the Americas,
a combination of innovation,
channel-based initiatives and a
segmented approach is driving
new opportunities. In Asia Pacific,
we benefited from our portfolio
transformation and large-scale
projects. EMEIA saw expansion in its
commercial segments like hospitality,
and investments in technology and
demand creation have strengthened
the business.

Leader in

IoTInternet of Things

Innovation in
existing & new
product categories

Our employees value curiosity,
making innovation central to our
efforts to secure the places where
people live, work and thrive.

As a true pioneer in the security
industry, Allegion leads in electro-
mechanical convergence, embraces
open protocols and spearheads the
adoption of connected security in
the Internet of Things (IoT) across
global markets.

In 2016, we innovated in both
mechanical and electronic product
categories, optimizing the balance
of our customers’ physical security
needs and unique applications
that are secure, cost-effective and
convenient to use. Globally, we
launched more than 20 products,
including innovations to commercial
exit devices as well as new residential
and multi-family electronic locks.

As a result of our focus on innovation
and investing in new product
development, we increased our
vitality index from single digits in
2014 to high teens in 2016, and have a
goal of more than 25 percent in 2019.
Allegion now holds more than 600
global patents.

Vitality Index

2014

2016

2019
Target

4 | Allegion 2016 Annual Report

Single DigitsHigh Teens25%+Opportunistic
acquisitions

Enterprise
excellence

Growth in
emerging markets

Allegion continuously evaluates
opportunities to enhance the
strategic core of our business,
grow in regions where we have a
foothold and expand the technology
and products we offer. We have a
disciplined approach to evaluate how
candidates strategically align with
our overall business objectives and
offer opportunities for success
and profitability.

With nine acquisitions since we
became a stand-alone company,
we’ve strengthened our electronics
portfolio and created segmented
growth opportunities for our portable
security brands. Acquisitions play an
important role in driving long-term
growth and expanding our regional
market leadership positions – and
contributed to 2016 being our most
profitable year to-date.

Early investments in innovative
brands are also driving organic
growth for Allegion and helping our
team of experts meet ever-growing
customer needs.

SimonsVoss® continues to be a
technology leader in the rapidly
growing market for digital locking
and access control systems.

Milre® is pushing the boundaries
of innovation, and has launched
11 products since it was acquired.

Zero International® is leveraging
synergies with our other businesses,
leading to new capabilities and
increased specification in 2016.

At Allegion, continuous business
improvement is a priority. Whether it’s
enhancing the customer experience,
making processes more efficient or
leading the industry in workplace
safety, our people take pride in driving
enterprise excellence globally.

Allegion is taking the strategic
actions necessary to add value for
our customers and achieve profitable
growth in emerging markets,
including investing in localized
products and supply
chain capabilities.

Regions and corporate functions are
equally focused on customers. In the
Americas and corporate functions,
value-stream analysis is driving
productivity. EMEIA continues its
business transformation with an
increased emphasis on end users.
This allows the region to better
understand, meet and anticipate
customer needs as well as become
trusted advisors across a growing
number of vertical markets.

Allegion is prioritizing manufacturing
excellence and the implementation
of new operating systems in our
facilities. We know that to continue
delivering best-in-class products and
solutions, we must evolve. Our teams
embraced changes to our legacy
systems and the benefits for our
customer experience.

“Be safe, be healthy” is ingrained
in our workplace culture. Yet again,
Allegion leads its peers in safety
results, including a 15-percent
improvement in our Total Recordable
Incident/Injury Rate (TRIR) for 2016.

In 2016, Asia Pacific saw growth
and solid margin expansion from
exiting unprofitable businesses and
focusing on key vertical markets.
Growth in countries like China is
benefiting from innovation in the
electro-mechanical convergence.

As a result of advancements
we’ve made to our specification
capabilities and tools used in the
Middle East, our business in the
region has a growing project pipeline
within our target markets. Our team
in the Middle East can now market
and specify the full Allegion portfolio
of products and services to create
tailored solutions that meet the
needs of our customers, serving as a
model for geographic expansion.

In Latin America, we are investing
to fuel organic growth. In 2016,
this included strengthening our
position in Mexico, creating an export
market in Colombia and expanding
distribution capabilities in Chile.

$64M

net incremental
increase in 2016
revenues due to
acquisitions &
divestitures

3-year

28%
TRIR

improvement

Localized
product &
supply chain

Allegion 2016 Annual Report | 5

Financials

At a glance
Grew above-market
Increased EPS
Strong cash flow

YEAR ENDED DECEMBER 31, 2016

YEAR ENDED DECEMBER 31, 2015

Reported

Adjustments

Adjusted
(non-GAAP)

Reported

Adjustments

Adjusted
(non-GAAP)

Net revenues

$ 2,238.0

–

2,238.0

$ 2,068.1

–

$ 2,068.1

Operating income
Operating margin

Earnings before income taxes
Provision for income taxes
Effective income tax rate
Earnings from continuing operations

425.5

19.0%

295.0
63.8

21.6%

231.2

13.51

97.92
3.1 3
3.2%

94.8

439.0

19.6%

358.6

17.3%

38.11

392.9
66.9

17.0%

326.0

209.3
54.6
26.1%

154.7

145.12
2.83
1.9%

142.3

Non-controlling interest

2.1

–

2.1

0.4

2.64

396.7

19.2%

354.4
57.4
16.2%

297.0

3.0

Net earnings from continuing
operations attributable to
Allegion plc

Diluted earnings per ordinary
share attributable to Allegion plc
shareholders:

229.1

94.8

323.9

154.3

139.7

294.0

2.36 $

0.98

3.34

1.59

1.44

3.03

1 Adjustments to operating income for the year ended December 31, 2016 consist
of $13.5 million of restructuring charges and merger and acquisition expenses.

3 Adjustments to the provision for income taxes for the year ended December 31,

2016 consist of $3.1 million of tax expense related to the excluded items

Adjustments to operating income for the year ended December 31, 2015 consist of

discussed above. Adjustments to the provision for income taxes for the year ended

a $4.2 million non-cash impairment charge to write inventory in Venezuela down to

December 31, 2015 consist of $2.8 million of tax expense related to the excluded

the lower of cost or market and $33.9 million of restructuring charges, merger and

items discussed above.

acquisition expenses and other expenses.

4 Adjustments to non-controlling interest for the year ended December 31, 2015

2 Adjustments to earnings before taxes for the year ended December 31, 2016 consist

consist of the portions of adjustments (1) through (3) that are not attributable to

of the adjustments to operating income discussed above and $84.4 million of

Allegion plc shareholders.

losses related to the divestiture of the Company’s systems integration business in

China. Adjustments to earnings before taxes for the year ended December 31, 2015

consist of the adjustments to operating income discussed above, a $2.8 million

charge to devalue the Company’s Venezuelan bolivar-denominated net monetary

assets and $104.2 million of losses related to the divestitures of the Company’s

operations in Venezuela and systems integration business in China.

6 | Allegion 2016 Annual Report

Organic
growth
+5.8%

Adjusted EPS
increased
10.2%

(42.5)

Cash flow

Year ended December 31

(in millions)

> Capital expenditures

> Available cash flow

2016

$335.0

$377.5 net cash
from operating activities
of continuing operations

(35.2)

2015

$222.2

$257.4 net cash
from operating activities
of continuing operations

Reconciliation of GAAP to non-GAAP earnings from continuing operations (in millions, except per share data)

The Company presents operating income, operating margin, earnings from

The Company defines the presented non-GAAP measures as follows:

continuing operations, diluted earnings per share (EPS) from continuing operations,

Adjustments to revenue, operating income, operating margin, earnings from

on both a U.S. GAAP basis and on an adjusted basis, organic revenue growth on a

continuing operations, EPS from continuing operations, and EBITDA include

U.S. GAAP basis, and also presents adjusted EBITDA and adjusted EBITDA margin.

items that are considered to be unusual or infrequent in nature such as goodwill

The Company presents these measures because management believes they provide

impairment charges, restructuring charges, asset impairments, merger and

useful perspective of the Company’s underlying business results, trends and a more

acquisitions costs, charges related to the devaluation of the Venezuelan bolivar

comparable measure of period-over-period results. These measures are also used to

and charges related to the divestiture of businesses

evaluate senior management and are a factor in determining at-risk compensation.

Organic revenue growth is defined as U.S. GAAP revenue growth excluding the

Investors should not consider non-GAAP measures as alternatives to the related

impact of divestitures, acquisitions and currency effects

GAAP measures.

Available cash flow is defined as U.S. GAAP net cash from operating activities of

continuing operations less capital expenditures.

These non-GAAP measures may not be defined and calculated the same as similar measures used by other companies.

Allegion 2016 Annual Report | 7

Board of Directors

Committees
of the Board

Audit & Finance

M. Welch, Chair
M. Chesser
C. Cico
K. Hachigian
D. Schaffer

Compensation

D. Schaffer, Chair
M. Chesser
C. Cico
K. Hachigian
M. Welch

Corporate Governance
& Nominating

K. Hachigian, Chair
M. Chesser
C. Cico
D. Schaffer
M. Welch

David Petratis

Chairman, President
and Chief Executive Officer

Kirk S. Hachigian

Lead Director (Allegion);
Non-Executive Chairman,
JELD-WEN, Inc.

Carla Cico

Michael J. Chesser

Former Chief Executive Officer,
Rivoli S.p.A

Former Chairman and
Chief Executive Officer,
Great Plains Energy Incorporated

Dean I. Schaffer

Martin E. Welch III

Former Partner, Ernst & Young LLP

Former Executive Vice
President and Chief Financial
Officer, Visteon Corporation

8 | Allegion 2016 Annual Report

Executive Leadership Team

Pictured from left to right:

Top row: Tracy Kemp, Chris Muhlenkamp, Jeff Wood, Tim Eckersley, Jeff Braun
Bottom row: Patrick Shannon, Shelley Meador, David Petratis, Lúcia Veiga Moretti, Todd Graves

David Petratis
Chairman, President & Chief Executive Officer

Shelley Meador
Senior Vice President, Human Resources & Communications

Jeff Braun
Senior Vice President, General Counsel

Lúcia Veiga Moretti
Senior Vice President, President of EMEIA

Tim Eckersley
Senior Vice President, President of the Americas

Todd Graves
Senior Vice President, Engineering & Technology

Tracy Kemp
Senior Vice President, Chief Information Officer

Chris Muhlenkamp
Senior Vice President, Global Operations & Integrated
Supply Chain

Patrick Shannon
Senior Vice President, Chief Financial Officer

Jeff Wood
Senior Vice President, President of Asia Pacific

Allegion 2016 Annual Report | 9

Where we are

Americas

Regional office

Carmel, IN

EMEIA

Corporate headquarters

Dublin, IRL

Regional office

Faenza, ITL

Manufacturing facilities

Blue Ash, OH

Bogota, COL

Clamency, FRA

Faenza, ITL

Indianapolis, IN

Ensenada, MEX

McKenzie, TN

Tecate, MEX

Princeton, IL

Tijuana, MEX

Security, CO

Feuquiéres, FRA

Monsampolo, ITL

Durchhausen, GER

Veenedaal, NLA

Osterfeld, GER

Muenster, GER

Renchen, GER

Siewierz, POL

Duzce, TUR

Regional office

Shanghai, CHN

Manufacturing facilities

Melbourne, AUS

Auckland, NZL

Sydney, AUS

Bucheon, SKO

Jinshan, CHN

Asia Pacific

10 | Allegion 2016 Annual Report

Environment, health, safety
& sustainability statement

At Allegion, we are pioneering safety by protecting people where they live and work and safeguarding

our environment at the same time. We promote the health and safety of our employees, customers and

local community members worldwide through our commitment to conducting business in a safe and

environmentally responsible manner. Our company regularly monitors its operations to ensure they are

adhering to environmental standards and regulatory changes. We also believe in advancing sustainable

business practices by setting strong safety standards and improving the environment, while operating in

accordance with the following principles:

Continual improvement in Environmental, Health and Safety (EHS) performance, with the goals of

reducing the usage of natural resources, minimizing waste, decreasing pollution and preventing workplace

accidents and injuries;

Periodic, formal evaluation of our EHS compliance;

Integrity and personal accountability;

Integration of sound environmental, health, safety and sustainability strategies into all business functions;

Designing, operating and maintaining our facilities with the objective of minimizing negative

environmental impacts;

Responsible use of materials, including, where feasible, the recycling and reuse of materials; and

Sensitivity to community concerns about environmental, health and safety issues.

The application of these principles has positively impacted Allegion’s safety and environmental performance.

Safety and environmental kaizens are held to drive continuous improvement globally with a focus of

identifying, eliminating and reducing hazards and waste. In 2016, we focused on sustainability, electrical,

machine guarding and ergonomics kaizens. This resulted in year-over-year improvements including: a

3-percent reduction in total waste to landfill, a 15-percent improvement in the Total Recordable Incident/Injury

Rate and zero unpermitted environmental discharges globally.

The majority of our manufacturing facilities are registered to the ISO 14001 and ISO 18001 standards, and we

will continue to include new acquisitions into these ISO programs. In 2016, we successfully registered one

facility with the new ISO 14001 standard while creating a template for further registrations.

As a global company, we are taking the initiative to offer environmentally friendly products to better

support our communities’ sustainability needs. In an effort to understand the impact of our products on

the environment, Allegion participates in the Leadership in Energy and Environmental Design rating system,

among other sustainability initiatives. We also continue to publish Environmental Product Declarations on our

portfolio of products.

At Allegion, we value the importance of a cleaner world, and we are committed to being a responsible member

of our global communities.

KRYPTONITE, LCN, LEGGE, MILRE, NORMBAU, PEGASYS, REPUBLIC, SCHLAGE, SEGUREX, SIMONSVOSS, STEELCRAFT, TRELOCK, VON DUPRIN, XCEEDID, and ZERO are the property of

Allegion. All other brand names, product names or trademarks are the property of their respective owners.

Allegion 2016 Annual Report | 11

Allegion is pioneering
safety & security

Every day, we put principles into practice. Doing so
makes us a stronger company — and better place to work.

Vision

Purpose

We make the world safer

We create peace of mind

as a company of experts, securing the

by pioneering safety and security

places where people thrive

Values

Serve others,
not yourself

Be curious
beyond
the obvious

Enjoy what you
do and celebrate
who we are

Be empowered
and accountable

Do the
right thing

This is your
business,
run with It

Be safe,
be healthy

Have a passion
for excellence

Allegion’s story in six words from our employees
“Surprisingly, locks
are unlocking my
opportunities.”

“Dream yesterday.
Invent today.
Release tomorrow.”

“Empowered people
forge a great company.”

Steve | Security, Colorado

Saranhya | Bangalore, India

Carlos | Erlangen, Germany

“So much depends
on the orange.”

“Easy to use,
hard to beat.”

“Take the hard out
of hardware.”

Luca | Faenza, Italy

Rick | Carmel, Indiana

Sam | Melbourne, Australia

12 | Allegion 2016 Annual Report

Allegion &

the community

Thousands of
volunteer hours for
Habitat for Humanity

Employee and
company
donations

Mentoring
students from
around the world

Allegion 2016 Annual Report | 13

Live. Work.
Visit. Protect.

At home &
on-the-move

Residential

Multi-family

Portable security

At work

In your community

Commercial offices and facilities

Education

Government institutions

Energy facilities

Transportation

Community buildings
and recreation centers

Hospitality

Health care facilities

Locks, keys

& levers

Portable
& out of home

Mechanical locks, master key

Portable and action sports locks

systems, mechanical levers and

and security, action sports lights

handles, padlocks

Electronic access
& monitoring
Electronic and connected locks,

access management cards, keypads,

credentials, readers, software, services

Exits, openers,
closers & accessories

Other door
hardware

Accessibility
& wellness

Latches, door openers and closers,

Weather stripping, threshold

Safety and comfort solutions,

doors, exit devices, other door

solutions, hinges, lites, louvers

bath hardware, accessibility aids,

hardware and accessories

quiet solutions

14 | Allegion 2016 Annual Report

Our brands

Allegion 2016 Annual Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)

—

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

For the fiscal year ended December 31, 2016
or

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

For the transition period from to

Commission File No. 001-35971

ALLEGION PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)

Ireland

(State or other jurisdiction of incorporation or
organization)

98-1108930

(I.R.S. Employer
Identification No.)

Block D
Iveagh Court
Harcourt Road
Dublin 2, Ireland
(Address of principal executive offices)
Registrant’s telephone number, including area code: +(353) (1) 2546200
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Ordinary Shares,
Par Value $0.01 per Share
5.875% Senior Notes due 2023

Name of each exchange on which registered
New York Stock Exchange

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES X
NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES NO X

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 and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post such files).
YES X NO

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

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

Large accelerated filer X
Non-accelerated filer ___
(Do not check if a smaller reporting company)

Accelerated filer
Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES NO X
The aggregate market value of ordinary shares held by nonaffiliates on June 30, 2016 was approximately $6.7 billion based on
the closing price of such stock on the New York Stock Exchange.

The number of ordinary shares outstanding as of February 13, 2017 was 95,471,511.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed within 120 days of the close of the registrant’s fiscal year in
connection with the registrant’s Annual General Meeting of Shareholders to be held June 7, 2017 (the "Proxy Statement") are
incorporated by reference into Part II and Part III of this Form 10-K.

ALLEGION PLC

Form 10-K
For the Fiscal Year Ended December 31, 2016

TABLE OF CONTENTS

Part I

Item 1.

Business

Item 1A.

Risk Factors

Item 1B.

Unresolved Staff Comments

Item 2.

Item 3.

Item 4.

Item 5.

Part II

Properties

Legal Proceedings

Mine Safety Disclosures

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities

Item 6.

Selected Financial Data

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of
Operations

Item 7A.

Quantitative and Qualitative Disclosure About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

Item 9A.

Controls and Procedures

Item 9B.

Other Information

Part III

Item 10.

Directors, Executive Officers and Corporate Governance

Item 11.

Executive Compensation

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Item 14.

Principal Accountant Fees and Services

Part IV

Item 15.

Exhibits and Financial Statement Schedules

Item 16.

Form 10-K Summary

Signatures

Page

CAUTIONARY STATEMENT FOR 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," "plan," "may," "should," "will," "would," "will be," "will
continue," "will likely result," or the negative thereof or variations thereon or similar terminology generally intended to identify
forward-looking statements.

Forward-looking statements may relate to such matters as 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:

•

economic, political and business conditions in the markets in which we operate;

the demand for our products and services;

competitive factors in the industry in which we compete;

the ability to protect and use intellectual property;

fluctuations in currency exchange rates;

the ability to complete and integrate any acquisitions;

our ability to operate efficiently and productively;

our ability to manage risks related to our information technology;

changes in tax requirements (including tax rate changes, new tax laws and revised tax law interpretations);

the outcome of any litigation, governmental investigations or proceedings;

interest rate fluctuations and other changes in borrowing costs;

other capital market conditions, including availability of funding sources and currency exchange rate fluctuations;

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;

the possible effects on us of future legislation 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; and

•

the impact our substantial leverage may have on our business and operations.

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 Item 1A "Risk Factors." You should read that information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this report and our Consolidated Financial
Statements and related notes in Item 8 of this report. We note such information for investors as permitted by the Private Securities
Litigation Reform Act of 1995.

Item 1. BUSINESS

Overview

PART I

Allegion plc ("Allegion," "we," "us" or "the Company") is a leading global provider of security products and solutions that keep
people safe, secure and productive. We make the world safer as a company of experts, securing the places where people thrive,
and we create peace of mind by pioneering safety and security. We offer an extensive and versatile portfolio of mechanical and
electronic security products across a range of market-leading brands. Our experts across the globe deliver high-quality security
products, services and systems, and we use our deep expertise to serve as trusted partners to end-users who seek customized
solutions to their security needs.

Door closers and controls

Electronic security products

Exit devices

Allegion Principal Products

Door and door frames (steel)

Electronic and biometric access control systems

Locks, locksets, portable locks and key systems

Time, attendance and workforce productivity systems

Other accessories

Access control security products and solutions are critical elements in every building and home. Most door openings are custom-
configured to maximize a room’s particular form and function while also meeting local and national building and safety code
requirements and end-user security needs. Most buildings have multiple door openings, each serving its own purpose and requiring
different specific access-control solutions. Each door must fit exactly within its frame, be prepared precisely for its hinges,
synchronize with its specific lockset and corresponding latch and align with a specific key to secure the door. Moreover, security
products are increasingly linked electronically, creating additional functionality and complexity.

We believe our ability to deliver a wide range of solutions that can be custom-configured to meet end-users’ security needs is a
key driver of our success. We accomplish this with:

• Our extensive and versatile product portfolio, combined with our deep expertise, which enables us to deliver the right

products and solutions to meet diverse security and functional specifications;

• Our consultative approach and expertise, which enables us to develop the most efficient and appropriate building security
and access-control specifications to fulfill the unique needs of our end-users and their partners, including architects,
contractors, home-builders and engineers;

• Our access to and management of key channels in the market critical to delivering our products in an efficient and

consistent manner; and

• Our enterprise excellence capabilities, including our global manufacturing operations and agile supply chain, which
facilitate our ability to deliver specific product and system configurations to end-users worldwide, quickly and efficiently.

Based on third party sources, we estimate that the size of the global markets we serve was approximately $30 billion in revenue
in 2016 with compound annual growth of about 2 to 4% per year over the past four years. We believe that the security products
industry will benefit from several global macroeconomic and long-term demographic trends, including:

•
•
•
•
•

stabilization of construction markets in key North American markets;
the convergence of mechanical and electronic security products;
heightened awareness of security requirements;
increased global urbanization; and
the shift to a digital, interconnected environment.

We believe improving institutional and growth in commercial industrial markets and continued recovery in residential markets in
the United States and slight growth in Europe will offset unfavorable foreign currency exchange rates overseas. Additionally, we
expect growth in the global electronic product categories we serve to outperform the security products industry as end-users adopt
newer technologies in their facilities. Our acquisition of Simons Voss Technologies GmbH and Milre Systek Co, Ltd. in late 2015
were made to capitalize on this trend.

We operate in three geographic regions: Americas; Europe, Middle East, India and Africa ("EMEIA"); and Asia Pacific. We sell
We operate in three geographic regions: Americas; Europe, Middle East, India and Africa ("EMEIA"); and Asia Pacific. We sell
our products and solutions under the following brands:
our products and solutions under the following brands:

Product Category

Americas

EMEIA

Asia Pacific

Allegion brands
(listed for each region)

Product Category
Product Category

Allegion Brands
Allegion Brands
Allegion brands
(listed for each region)
(listed for each region)
(listed for each region)
Americas
Americas

Locks/Locksets/
Key Systems

EMEIA
EMEIA

Asia Pacific
Asia Pacific

Locks/Locksets/Portable Locks/Key Systems
Locks/Locksets/Portable Locks/Key Systems

Product Category

Americas

EMEIA

Asia Pacific

Locks/Locksets/
Key Systems

Locks/Locksets/
Portable Locks/
Key Systems

Door Closers and
Controls/Exit Devices

Door Closers and Controls/Exit Devices
Door Closers and Controls/Exit Devices
Door Closers and
Door Closers and Controls/
Controls/Exit Devices
Exit Devices

4
4

Allegion brands
(listed for each region)

Product Category

Electronic Products and Access Control Systems,
including Time, Attendance and Workforce
Productivity

Americas

EMEIA

Asia Pacific

Electronic Products
Electronic Products and
and Access Control Systems,
Access Control Systems,
including Time, Attendance
including Time, Attendance
and Workforce Productivity
and Workforce Productivity

Electronic Products and Access Control Systems,
including Time, Attendance and Workforce
Productivity

Product Category

Americas

EMEIA

Asia Pacific

Americas

EMEIA

Asia Pacific

Doors and Door Frames

Product Category

Doors and Door Frames
Doors and Door Frames

Other Accessories

We sell a wide range of security products and solutions for end-users in commercial, institutional and residential facilities worldwide,
including into the education, healthcare, government, hospitality, commercial office and single and multi-family residential markets.
Our corporate brands are CISA®, Interflex®, LCN®, Schlage®, SimonsVoss®, and Von Duprin®. We believe LCN, Schlage,
and Von Duprin hold the No. 1 position in their primary product categories in North America and CISA and Interflex hold the
No.1 or No. 2 position in their primary product categories in certain European markets.
We sell a wide range of security products and solutions for end-users in commercial, institutional and residential facilities worldwide,
including into the education, healthcare, government, hospitality, commercial office and single and multi-family residential markets.
For the year ended December 31, 2016, we generated revenues of $2,238.0 million and operating income of $425.5 million.
Our corporate brands are CISA®, Interflex®, LCN®, Schlage®, SimonsVoss®, and Von Duprin®. We believe LCN, Schlage,
and Von Duprin hold the No. 1 position in their primary product categories in North America and CISA and Interflex hold the
No.1 or No. 2 position in their primary product categories in certain European markets.

For the year ended December 31, 2016, we generated revenues of $2,238.0 million and operating income of $425.5 million.

Revenue By Geographic Destination

68%

19%

United States

Asia-Pacific

Western Europe

Other North & South America

E. Europe, Middle East, India & Africa

Locks / Locksets /
Portable Locks / Key
Systems

Electronic Products /
Access-Control
Systems

Door Closers /
Controls / Exit Devices

Other Accessories

Doors / Door Frames

Revenue by Product Category

Doors / Door
Frames: 6%

Other Accessories:
7%

Door Closers /
Controls / Exit
Devices: 27%

Electronic Products /
Access-Control
Systems: 20%

Locks / Locksets /
Portable Locks / Key
Systems: 40%

History and Developments
History and Developments
History and Developments

We were incorporated in Ireland on May 9, 2013, to hold the commercial and residential security businesses of Ingersoll Rand
We were incorporated in Ireland on May 9, 2013, to hold the commercial and residential security businesses of Ingersoll Rand
We were incorporated in Ireland on May 9, 2013, to hold the commercial and residential security businesses of Ingersoll Rand
plc ("Ingersoll Rand"). On December 1, 2013, we became a stand-alone public company after Ingersoll Rand completed the
plc ("Ingersoll Rand"). On December 1, 2013, we became a stand-alone public company after Ingersoll Rand completed the
plc ("Ingersoll Rand"). On December 1, 2013, we became a stand-alone public company after Ingersoll Rand completed the
separation of these businesses from the rest of Ingersoll Rand via the transfer of these businesses from Ingersoll Rand to us and
separation of these businesses from the rest of Ingersoll Rand via the transfer of these businesses from Ingersoll Rand to us and
separation of these businesses from the rest of Ingersoll Rand via the transfer of these businesses from Ingersoll Rand to us and
the issuance by us of ordinary shares directly to Ingersoll Rand’s shareholders (the "Spin-off"). Our security businesses have long
the issuance by us of ordinary shares directly to Ingersoll Rand’s shareholders (the "Spin-off"). Our security businesses have long
the issuance by us of ordinary shares directly to Ingersoll Rand’s shareholders (the "Spin-off"). Our security businesses have long
and distinguished operating histories. Several of our brands were established more than 75 years ago and many of our brands
and distinguished operating histories. Several of our brands were established more than 75 years ago and many of our brands
and distinguished operating histories. Several of our brands were established more than 75 years ago and many of our brands
originally created their categories:
originally created their categories:
originally created their categories:

Schlage, established in 1920, was awarded the first patents granted for the cylindrical lock and the push button lock;
Schlage, established in 1920, was awarded the first patents granted for the cylindrical lock and the push button lock;
Schlage, established in 1920, was awarded the first patents granted for the cylindrical lock and the push button lock;

(cid:127) Von Duprin, established in 1908, was awarded the first exit device patent;
(cid:127) Von Duprin, established in 1908, was awarded the first exit device patent;
(cid:127) Von Duprin, established in 1908, was awarded the first exit device patent;
(cid:127)
(cid:127)
(cid:127)
(cid:127) LCN, established in 1926, created the first door closer;
(cid:127) LCN, established in 1926, created the first door closer;
(cid:127) LCN, established in 1926, created the first door closer;
(cid:127) CISA, established in 1926, devised the first electronically controlled lock; and
(cid:127) CISA, established in 1926, devised the first electronically controlled lock; and
(cid:127) CISA, established in 1926, devised the first electronically controlled lock; and
SimonsVoss, established in 1995, created the first keyless digital transponder.
(cid:127)
SimonsVoss, established in 1995, created the first keyless digital transponder.
(cid:127)
SimonsVoss, established in 1995, created the first keyless digital transponder.
(cid:127)

We have built upon these founding legacies since our entry into the security products market through the acquisition of Schlage,
We have built upon these founding legacies since our entry into the security products market through the acquisition of Schlage,
We have built upon these founding legacies since our entry into the security products market through the acquisition of Schlage,
Von Duprin and LCN in 1974. Today, we continue to develop and introduce innovative and market-leading products. Recent
Von Duprin and LCN in 1974. Today, we continue to develop and introduce innovative and market-leading products. Recent
Von Duprin and LCN in 1974. Today, we continue to develop and introduce innovative and market-leading products. Recent
examples of successful product launches are illustrated in the table below:
examples of successful product launches are illustrated in the table below:
examples of successful product launches are illustrated in the table below:

Product launch
Product launch
Product launch

Year
Year
Year

Innovation
Innovation
Innovation

Cast Aluminum Series
Cast Aluminum Series
Cast Aluminum Series

2015
2015
2015

Cast Aluminum Series closers were specially designed to
Cast Aluminum Series closers were specially designed to
Cast Aluminum Series closers were specially designed to
deliver consistent, dependable, long-term performance while
deliver consistent, dependable, long-term performance while
deliver consistent, dependable, long-term performance while
offering high-quality, effective solutions
offering high-quality, effective solutions
offering high-quality, effective solutions

Schlage NDE Series
Schlage NDE Series
Schlage NDE Series
wireless commercial
wireless commercial
wireless commercial
lock
lock
lock

2014
2014
2014

Designed to be easy to install, connect, manage and use with
Designed to be easy to install, connect, manage and use with
Designed to be easy to install, connect, manage and use with
ENGAGE connectivity platform
ENGAGE connectivity platform
ENGAGE connectivity platform

Schlage Touch,
Schlage Touch,
Schlage Touch,
Connect, Sense,
Connect, Sense,
Connect, Sense,
Control
Control
Control

2014/2015
2014/2015
2014/2015
/2016
/2016
/2016

New single and multi family residential electronic locking
New single and multi family residential electronic locking
New single and multi family residential electronic locking
platforms that provide for keyless entry (Touch), connected
platforms that provide for keyless entry (Touch), connected
platforms that provide for keyless entry (Touch), connected
locking (Connect), integration with the Apple HomeKit
locking (Connect), integration with the Apple HomeKit
locking (Connect), integration with the Apple HomeKit
platform (Sense), and multi-family interconnect locking
platform (Sense), and multi-family interconnect locking
platform (Sense), and multi-family interconnect locking
(Control)
(Control)
(Control)

Mobile Key Platform
Mobile Key Platform
Mobile Key Platform

2016
2016
2016

Highly secure, offering facility managers and those in
Highly secure, offering facility managers and those in
Highly secure, offering facility managers and those in
charge of buildings sophisticated access control
charge of buildings sophisticated access control
charge of buildings sophisticated access control

Concealed Vertical
Concealed Vertical
Concealed Vertical
Cable System
Cable System
Cable System

AX Platform
AX Platform
AX Platform

2016
2016
2016

2014
2014
2014

Giving doors that require a vertical exit device the same
Giving doors that require a vertical exit device the same
Giving doors that require a vertical exit device the same
strength and security in a system that is easy to install and
strength and security in a system that is easy to install and
strength and security in a system that is easy to install and
maintain
maintain
maintain
The first exit device that meets California's stringent
The first exit device that meets California's stringent
The first exit device that meets California's stringent
maximum force requirements
maximum force requirements
maximum force requirements

Industry and Competition
Industry and Competition
Industry and Competition

Based on third party sources, we estimate that the size of the global markets we serve was approximately $30 billion in revenue
Based on third party sources, we estimate that the size of the global markets we serve was approximately $30 billion in revenue
Based on third party sources, we estimate that the size of the global markets we serve was approximately $30 billion in revenue
in 2016 with compound annual growth of about 2 to 4% per year over the past four years. This growth rate primarily reflects
in 2016 with compound annual growth of about 2 to 4% per year over the past four years. This growth rate primarily reflects
in 2016 with compound annual growth of about 2 to 4% per year over the past four years. This growth rate primarily reflects
cyclical challenges in the commercial, institutional and residential construction markets throughout North America and Europe
cyclical challenges in the commercial, institutional and residential construction markets throughout North America and Europe
cyclical challenges in the commercial, institutional and residential construction markets throughout North America and Europe
as certain developing economies experienced higher growth rates during this period. Additionally, growth in electronic security
as certain developing economies experienced higher growth rates during this period. Additionally, growth in electronic security
as certain developing economies experienced higher growth rates during this period. Additionally, growth in electronic security
products and solutions continues to outperform the industry as a whole as end-users adopt newer technologies in their facilities.
products and solutions continues to outperform the industry as a whole as end-users adopt newer technologies in their facilities.
products and solutions continues to outperform the industry as a whole as end-users adopt newer technologies in their facilities.
We expect the security products industry will benefit from favorable long-term demographic trends such as continued urbanization
We expect the security products industry will benefit from favorable long-term demographic trends such as continued urbanization
We expect the security products industry will benefit from favorable long-term demographic trends such as continued urbanization
of the global population, increased concerns about safety and security and technology-driven innovation.
of the global population, increased concerns about safety and security and technology-driven innovation.
of the global population, increased concerns about safety and security and technology-driven innovation.

The security products markets are highly competitive and fragmented throughout the world, with a number of large multi-national
The security products markets are highly competitive and fragmented throughout the world, with a number of large multi-national
The security products markets are highly competitive and fragmented throughout the world, with a number of large multi-national
companies and thousands of smaller regional and local companies. This high fragmentation primarily reflects local regulatory
companies and thousands of smaller regional and local companies. This high fragmentation primarily reflects local regulatory
companies and thousands of smaller regional and local companies. This high fragmentation primarily reflects local regulatory
requirements and highly variable end-user needs. We believe our principal global competitors are Assa Abloy AB and dorma
requirements and highly variable end-user needs. We believe our principal global competitors are Assa Abloy AB and dorma
requirements and highly variable end-user needs. We believe our principal global competitors are Assa Abloy AB and dorma
+kaba Group. We also face competition in various markets and product categories throughout the world, including from Spectrum
+kaba Group. We also face competition in various markets and product categories throughout the world, including from Spectrum
+kaba Group. We also face competition in various markets and product categories throughout the world, including from Spectrum

7
7
7

Brands Holdings, Inc. in the North American residential market. As we move into more technologically-advanced product
categories, we may also compete against smaller, more specialized competitors.

Our success depends on a variety of factors, including brand and reputation, product breadth, quality and delivery capabilities,
price and service capabilities. As many of our businesses sell through wholesale distribution, our success also depends on building
and partnering with a strong channel network. Although price often serves as an important customer decision criterion, we also
compete based on the breadth and quality of our products and solutions, our ability to custom-configure solutions to meet individual
end-user requirements and our global supply chain.

Our Reporting Segments

We manufacture and sell mechanical and electronic security products and solutions in approximately 130 countries. Approximately
96% of our 2016 revenues were to customers in the North America, Western Europe and the Asia-Pacific regions.

The following table presents the relative percentages of total segment revenue attributable to each reporting segment for each of
the last three fiscal years. See Note 22, "Business Segment Information," to our annual consolidated financial statements for
information regarding net revenues, operating income, and total assets by reportable segment:

Americas

EMEIA

Asia Pacific

For the Years Ended December 31,

2016

74%

21%

2015

75%

19%

2014

74%

18%

Our Americas segment provides security products and solutions in approximately 30 countries throughout North America, Central
America, the Caribbean and South America. The segment offers a broad range of products and solutions including locks, locksets,
portable locks, key systems, door closers, exit devices, doors and door frames, electronic product and access control systems to
end-users in the commercial, institutional and residential markets, including into the education, healthcare, government, commercial
office and single and multi-family residential markets. This segment’s primary brands are Schlage, Von Duprin and LCN.

Our EMEIA segment provides security products and solutions in approximately 85 countries throughout Europe, the Middle East,
India and Africa. The segment offers the same portfolio of products as the Americas segment, as well as time and attendance and
workforce productivity solutions. This segment’s primary brands are AXA, Bricard, CISA, Interflex and SimonsVoss. This segment
also resells North American Schlage, Von Duprin and LCN products, primarily in the Middle East.

Our Asia Pacific segment provides security products and solutions in approximately 15 countries throughout Asia Pacific. The
segment offers the same portfolio of products as the Americas segment. This segment’s primary brands are Milre, Schlage, CISA,
Von Duprin and LCN.

Products and Services

We offer an extensive and versatile portfolio of mechanical and electronic security products across a range of market-leading
brands:

•

Locks, locksets, portable locks and key systems: A broad array of cylindrical and mortise door locksets, security
levers, and master key systems that are used to protect and control access. We also offer a range of portable
security products, including bicycle, small vehicle and travel locks.

• Door closers and exit devices: An extensive portfolio of life-safety products generally installed on fire doors and
facility entrances and exits. Door closers are devices that automatically close doors after they are opened. Exit
devices are generally horizontal attachments to doors and enable rapid egress.

• Electronic Security Products and Access Control Systems: A broad range of electrified locks, access control

•

systems, biometric hand reader systems, key card and reader systems and accessories.
Time, Attendance and Workforce Productivity Systems: Products and services designed to help business customers
manage and monitor workforce access control parameters, attendance and employee scheduling. We offer ongoing
aftermarket services in addition to design and installation offerings.

• Doors and Door Frames: A portfolio of hollow metal doors and door frames. In select geographies, we also

provide installation and maintenance services.

• Other Accessories: A variety of additional security and product components, including hinges, door levers, door
stops, lites, louvers, weather stripping, thresholds, and other accessories, as well as certain bathroom fittings
products.

Customers

We sell most of our products and solutions through distribution and retail channels, ranging from specialty distribution to
wholesalers. We have built a network of channel partners that help our customers choose the right solution to meet their security
needs and help commercial and institutional end-users fulfill and install orders. We also sell through a variety of retail channels,
ranging from large do-it-yourself home improvement centers to small, specialty showroom outlets. We work with our retail partners
on developing marketing and merchandising strategies to maximize their sales per square foot of shelf space. Through our Interflex
business, we provide products and solutions directly to end-users.

Our 10 largest customers represented approximately 24% of our total revenues in 2016. No single customer represented 10% or
more of our total revenues in 2016.

Sales and Marketing

In markets where we sell through commercial and institutional distribution channels, we employ sales professionals around the
world who work with a combination of end-users, security professionals, architects, contractors, engineers and distribution partners
to develop specific custom-configured solutions for our end-users’ needs. Our field sales professionals are assisted by specification
writers who work with architects, engineers and consultants to help design door openings and security systems to meet end-users’
functional, aesthetic and regulatory requirements. Both groups are supported by dedicated customer care and technical sales-
support specialists worldwide. We also support our sales efforts with a variety of marketing efforts, including trade-specific
advertising, cooperative distributor merchandising, digital marketing, and marketing at a variety of industry trade shows.

In markets in which we sell through retail and home-builder distribution channels, we have teams of sales, merchandising and
marketing professionals who help drive brand and product awareness through our channel partners and to consumers. We utilize
a variety of advertising and marketing strategies, including traditional consumer media, retail merchandising, digital marketing,
retail promotions, and builder and consumer trade shows, to support these teams.

We also work actively with several industry bodies around the world to help promote effective and consistent safety and security
standards. For example, we are members of Builders Hardware Manufacturers Association (BHMA), Security Industry Association,
Smart Card Alliance, American Society of Healthcare Engineering, American Institute of Architects, Construction Specification
Institute, ASSOFERMA (Italy), BHE (Germany) and UNIQ (France). We also have established the Safety and Security Institute
in China, which helps to educate government officials, architects and builders and advocates for consistent building codes and
standards that address end-users’ safety and security.

Production and Distribution

We manufacture our products in our geographic markets around the world. We operate 26 production facilities, including ten in
the Americas region, eleven in EMEIA and five in Asia Pacific. We own 15 of these facilities and lease the others. Our strategy
is to produce in the region of use, wherever appropriate, to allow us to be closer to the end-user and increase efficiency and timely
product delivery. Much of our United States (U.S.) based residential portfolio is manufactured in the Baja of Mexico under a
NAFTA Maquiladora.

In managing our network of production facilities, we focus on eliminating excess capacity, reducing cycle time through productivity,
and harmonizing production practices and safety procedures.

We distribute our products through a broad network of channel partners. In addition, third-party logistics providers perform storage
and distribution services for us to support certain parts of our distribution network.

Raw Materials

We support our region-of-use production strategy with corresponding region-of-use supplier partners, where available. Our global
and regional commodity teams work with production leadership, product management and materials management teams to ensure
adequate materials are available for production.

We purchase a wide range of raw materials, including steel, zinc, brass and other non-ferrous metals, to support our production
facilities. Where appropriate, we may enter into fixed-cost contracts to lower overall costs. We do not believe the loss of any
particular supplier would be material to our business.

Intellectual Property

Intellectual property, inclusive of certain patents, trademarks, copyrights, know-how, trade secrets and other proprietary rights, is
important to our business. We create, protect and enforce our intellectual property investments in a variety of ways. We work
actively in the U.S. and internationally to try to ensure the protection and enforcement of our intellectual property rights. We use
trademarks on nearly all of our products and believe that such distinctive marks are an important factor in creating a market for
our goods, in identifying us and in distinguishing our products from others. We consider our Schlage, Von Duprin, CISA and other
associated trademarks to be among our most valuable assets, and we have registered these trademarks in a number of countries.
Although certain proprietary intellectual property rights are important to our success, we do not believe we are materially dependent
on any particular patent or license, or any particular group of patents or licenses.

Facilities

We operate through a broad network of sales offices, 26 production facilities and several distribution centers throughout the world.
Our active properties represent approximately 5.7 million square feet, of which approximately 44% is leased.

The following table shows the location of our worldwide production facilities:

Americas

Blue Ash, Ohio
Bogota, Colombia
Chino, California
Ensenada, Mexico
Indianapolis, Indiana
Princeton, Illinois
Security, Colorado
Tecate, Mexico
Tijuana, Mexico
McKenzie, Tennessee

Production Facilities
EMEIA

Clamecy, France
Durchhausen, Germany
Duzce, Turkey
Faenza, Italy
Feuquieres, France
Monsampolo, Italy
Muenster, Germany
Osterfeld, Germany
Renchen, Germany
Siewierz, Poland
Veenendaal, Netherlands

Asia Pacific
Auckland, New Zealand
Bucheon, South Korea
Jinshan, China
Melbourne, Australia
Sydney, Australia

Research and Development

We are committed to investing in highly productive research and development capabilities, particularly in electro-mechanical
systems. Our research and development ("R&D") expenditures were approximately $47.3 million, $45.2 million and $43.3 million
for the years ended December 31, 2016, 2015 and 2014, respectively.

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

We manage our R&D team as a global group with an emphasis on a global collaborative approach to identify and develop new
technologies and worldwide product platforms. We are organized on a regional basis to leverage expertise in local standards and
configurations. In addition to regional engineering centers in each geographic region, we also operate a global engineering center
of excellence in Bangalore, India.

Seasonality

Our business experiences seasonality that varies by product line. Because more construction and do-it-yourself projects occur
during the second and third calendar quarters of each year in the Northern Hemisphere, our security product sales, typically, are
higher in those quarters than in the first and fourth calendar quarters. However, our Interflex business typically experiences higher
sales in the fourth calendar quarter due to project timing. Revenue by quarter for the years ended December 31, 2016, 2015 and
2014 are as follows:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

2016

2015

2014

22%

26%

25%

26%

27%

Employees

As of December 31, 2016, we had more than 9,400 employees.

Environmental Regulation

We have a dedicated environmental program that is designed to reduce the utilization and generation of hazardous materials during
the manufacturing process as well as to remediate identified environmental concerns. As to the latter, we are 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.

We are sometimes a party to environmental lawsuits and claims and have received notices of potential violations of environmental
laws and regulations from the U.S. Environmental Protection Agency (the "EPA") and similar state authorities. We have 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 all such sites, there are other PRPs and, in most instances, our involvement is minimal.

In estimating our liability, we have assumed that we 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 our 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.

We incurred $23.3 million, $4.4 million, and $2.9 million of expenses during the years ended December 31, 2016, 2015, and 2014,
respectively, for environmental remediation at sites presently or formerly owned or leased by us. As of December 31, 2016 and
2015, we have recorded reserves for environmental matters of $30.6 million and $15.2 million. Of these amounts $9.6 million
and $2.8 million, respectively, relate to remediation of sites previously disposed by us. Given the evolving nature of environmental
laws, regulations and technology, the ultimate cost of future compliance is uncertain.

Available Information

We are required to file annual, quarterly, and current reports, proxy statements, and other documents with the U.S. Securities and
Exchange Commission ("SEC"). The public may read and copy any materials filed with the SEC at the SEC’s Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC. The public can obtain any
documents that are filed by us at http://www.sec.gov.

In addition, this Annual Report on Form 10-K, as well as future quarterly reports on Form 10-Q, current reports on Form 8-K and
any amendments to all of the foregoing reports, are made available free of charge on our Internet website (http://www.allegion.com)
as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The contents of our
website are not incorporated by reference in this report.

Item 1A. RISK FACTORS

You should carefully consider the risks below, together with all the other information included in this Form 10-K, in evaluating
us, our ordinary shares and our senior notes. If any of the risks below actually occurs, our business, financial conditions, results
of operations and cash flows could be materially and adversely affected. Any such adverse effect may cause the trading price of
our ordinary shares to decline, and as a result, you could lose all or part of your investment in us. Our business may also be
adversely affected by risks and uncertainties not known to us or risks that we currently believe to be immaterial.

Risks Related to Our Business

Our global operations subject us to economic risks.

We are incorporated in Ireland and operate in countries worldwide. Our global operations depend on products manufactured,
purchased and sold in the U.S. and internationally, including in Australia, China, Europe, Korea, Mexico, New Zealand and Turkey.
The political, economic and regulatory environments in which we operate are becoming increasingly volatile and uncertain.
Accordingly, we are subject to risks that are inherent in operating globally, including:

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changes in laws and regulations or imposition of currency restrictions and other restraints in various jurisdictions;
limitation of ownership rights, including expropriation of assets by a local government, and limitation on the ability
to repatriate earnings;
sovereign debt crises and currency instability in developed and developing countries;
changes in applicable tax regulations and interpretations;
imposition of burdensome tariffs and quotas;
difficulty in staffing and managing global operations;
difficulty in enforcing agreements, collecting receivables and protecting assets through non-U.S. legal systems;
national and international conflict, including war, civil disturbances and terrorist acts; and
economic downturns and social and political instability.

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

Our business relies on the commercial and residential construction and remodeling markets.

We primarily rely on the commercial and residential construction and remodeling markets, which are marked by cyclicality based
on overall economic conditions. Weakness or instability in these markets may cause current and potential customers to delay or
choose not to make purchases, which could negatively impact the demand for our products and services.

We operate in highly competitive markets.

The markets in which we operate include a large number of participants, including multi-national companies, regional companies
and small local companies. We primarily compete on the basis of quality, innovation, expertise, breadth of product offering and
price. We may be unable to effectively compete on all these bases. If we are unable to anticipate evolving trends in the market
or the timing and scale of our competitors’ activities and initiatives, the demand for our products and services could be negatively
impacted.

In addition, we compete in a market that is experiencing the convergence of the mechanical and electronic products. This may
lead to increased competition, including with companies with greater financial and other resources than we have, and may lead
to changes in customers' tastes and preferences. To remain competitive, we must develop new products and respond to new
technologies in a timely manner.

Our growth is dependent, in part, on the development, commercialization and acceptance of new products and services.

We must develop and commercialize new products and services in order to remain competitive in our current and future markets
and in order to continue to grow our business. We cannot provide any assurance that any new product or service will be successfully
commercialized in a timely manner, if ever, or, if commercialized, will result in returns greater than our investment. Investment
in a product or service could divert our attention and resources from other projects that become more commercially viable in the
market. We also cannot provide any assurance that any new product or service will be accepted by the market.

Changes in customer preferences and the inability to maintain beneficial relationships with large customers could adversely
affect our business.

We have significant customers, particularly major retailers, although no one customer represented 10% or more of our total revenues
in any of the past three fiscal years. The loss or material reduction of business, the lack of success of sales initiatives or changes
in customer preferences or loyalties for our products related to any such significant customer could have a material adverse impact
on our business. In addition, major customers who are volume purchasers are much larger than us and have strong bargaining
power with suppliers. This limits our ability to recover cost increases through higher selling prices. Furthermore, unanticipated
inventory adjustments by these customers can have a negative impact on sales.

Our brands are important assets of our businesses and violation of our trademark rights by imitators could negatively impact
revenues and brand reputation.

Our brands and trademarks enjoy a reputation for quality and value and are important to our success and competitive position.
Unauthorized use of our trademarks may not only erode sales of our products, but may also cause significant damage to our brand
name and reputation, interfere with relationships with our customers and increase litigation costs. There can be no assurance that
our on-going effort to protect our brand and trademark rights will prevent all violations.

Currency exchange rate fluctuations may adversely affect our results.

We are exposed to a variety of market risks, including the effects of changes in currency exchange rates. See "Management’s
Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosure About Market
Risk."

Approximately 30% of our 2016 net revenues were derived outside the U.S., and we expect sales to non-U.S. customers to continue
to represent a significant portion of our consolidated net revenues. Although we may enter into currency exchange contracts to
reduce our risk related to currency exchange fluctuations, changes in the relative fair values of currencies occur from time to time
and may, in some instances, have a material impact on our results of operations. Because we do not hedge against all of our currency
exposure our business will continue to be susceptible to currency fluctuations.

We also translate assets, liabilities, revenues and expenses denominated in non-U.S. dollar currencies into U.S. dollars for our
consolidated financial statements based on applicable exchange rates. Consequently, fluctuations in the value of the U.S. dollar
compared to other currencies will have a material impact on the value of these items in our consolidated financial statements, even
if their value has not changed in their original currency.

Our business strategy includes making acquisitions and investments that complement our existing business. These acquisitions
and investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.

We will continue to analyze and evaluate the acquisition of strategic businesses or product lines with the potential to strengthen
our industry position or enhance our existing set of products and services offerings. We cannot assure you that we will identify or
successfully complete transactions with suitable acquisition candidates in the future, nor can we assure you that completed
acquisitions will be successful.

Some of the businesses we may seek to acquire or invest in may be marginally profitable or unprofitable. For these businesses to
achieve acceptable levels of profitability, we must improve their management, operations, products and market penetration. We
may not be successful in this regard and we may encounter other difficulties in integrating acquired businesses into our existing
operations.

Acquisitions and investments may involve significant cash expenditures, debt incurrence, operating losses and expenses.
Acquisitions involve numerous other risks, including:

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diversion of management time and attention from daily operations;
difficulties integrating acquired businesses, technologies and personnel into our business;
difficulties realizing synergies expected to result from acquisitions;
difficulties in obtaining and verifying the financial statements and other business information of acquired businesses;
inability to obtain regulatory approvals and/or required financing on favorable terms;
potential loss of key employees, key contractual relationships or key customers of acquired companies or of us;
assumption of the liabilities and exposure to unforeseen liabilities of acquired companies;
dilution of interests of holders of our ordinary shares through the issuance of equity securities or equity-linked
securities; and
difficulty in integrating financial reporting systems and implementing controls, procedures and policies, including
disclosure controls and procedures and internal control over financial reporting, appropriate for public companies
of our size at companies that, prior the acquisition, had lacked such controls, procedures and policies.

We continually look to expand our services and products into international markets. As we expand into new international markets,
we will have only limited experience in marketing and operating services and products in such markets. In other instances, we
may rely on the efforts and abilities of foreign business partners in such markets. Certain international markets may be slower
than domestic markets in adopting our services and products, and our operations in international markets may not develop at a
rate that supports our level of investment. In addition to the risks outlined above, expansion into international markets may require
us to compete with local businesses with greater knowledge of the market, including the tastes and preferences of customers, and
businesses with dominant market shares.

It may be difficult for us to complete transactions quickly, integrate acquired operations efficiently into our current business
operations or effectively compete in new markets we enter. Any acquisitions or investments may ultimately harm our business or
financial condition, as such acquisitions may not be successful and may ultimately result in impairment charges.

We may pursue business opportunities that diverge from core business.

We may pursue business opportunities that diverge from our core business, including expanding our products or service offerings,
investing in new and unproven technologies, and forming new alliances with companies to distribute our products and services.
We can offer no assurance that any such business opportunities will prove to be successful. Among other negative effects, our
investment in new business opportunities may exceed the returns we realize. Additionally, any new investments could have higher
cost structures than our current business, which could reduce operating margins and require more working capital. In the event
that working capital requirements exceed operating cash flow, we may be required to draw on our revolving credit facility or
pursue other external financing, which may not be readily available.

Our enterprise excellence efforts may not achieve the improvements we expect.

We utilize a number of tools to improve operational efficiency and productivity. Implementation of new processes to our operations
could cause disruptions and there is no assurance that all of our planned enterprise excellence projects will be fully implemented,
or if implemented will realize the expected improvements.

Impact of United Kingdom exit from European Union.

In 2016, the United Kingdom ("UK") held a referendum in which voters approved an exit from the European Union ("EU"),
commonly referred to as "Brexit". There is substantial uncertainty surrounding the Brexit vote and any impact of Brexit depends
on the terms of the UK's withdrawal from the EU, which still need to be determined and could take several years to accomplish.
The UK's withdrawal from the EU could result in a global economic downturn, which could depress the demand for our products
and services. The UK also could lose access to the single EU market and to the global trade and tax deals negotiated by the EU
on behalf of its members, depressing trade between the UK and other countries, which would negatively impact our international
operations. Additionally, we may face new regulations regarding trade, security and employees, among others in the UK.
Compliance with such regulations could be costly, negatively impacting our business, results of operations and financial condition.

Our EMEIA restructuring plans may not be successful.

We have substantially completed a plan to restructure our EMEIA segment to improve efficiencies and regional cost
structure. If we are unable to successfully maintain our restructuring plan, we may not be able to improve profitability
or effectively compete in the region. In addition, the previously disclosed plan or any new restructuring plans could result in
significant restructuring charges and impairment charges.

Material adverse legal judgments, fines, penalties or settlements could adversely affect our business.

We are currently and may in the future become involved in legal proceedings and disputes incidental to the operation of our
business. Our business may be adversely affected by the outcome of these proceedings and other contingencies (including, without
limitation, environmental matters) that cannot be predicted with certainty. As required by U.S. generally accepted accounting
principles ("GAAP"), we establish reserves based on our assessment of contingencies. Subsequent developments in legal
proceedings and other contingencies may affect our assessment and estimates of the loss contingency recorded as a reserve and
we may be required to make additional material payments.

Allegations that we have infringed the intellectual property rights of third parties could negatively affect us.

We may be subject to claims of infringement of intellectual property rights by third parties. In particular, we often compete in
areas having extensive intellectual property rights owned by others and we have become subject to claims alleging infringement
of intellectual property rights of others. In general, if it is determined that one or more of our technologies, products or services
infringes the intellectual property rights owned by others, we may be required to cease marketing those services, to obtain licenses
from the holders of the intellectual property at a material cost or to take other actions to avoid infringing the intellectual property
rights. The litigation process is costly and subject to inherent uncertainties, and we may not prevail in litigation matters regardless
of the merits of our position. Adverse intellectual property litigation or claims of infringement against us may become extremely
disruptive if the plaintiffs succeed in blocking the trade of our products and services and may have a material adverse effect on
our business.

Our reputation, ability to do business and results of operations could be impaired by improper conduct by any of our employees,
agents or business partners.

We are subject to regulation under a variety of U.S. federal and state and non-U.S. laws, regulations and policies including laws
related to anti-corruption, export and import compliance, anti-trust and money laundering, due to our global operations. We cannot
provide assurance our internal controls will always protect us from the improper conduct of our employees, agents and business
partners. Any improper conduct could damage our reputation and subject us to, among other things, civil and criminal penalties,
material fines, equitable remedies (including profit disgorgement and injunctions on future conduct), securities litigation and a
general loss of investor confidence.

We may be subject to risks relating to our information technology systems.

We rely extensively on information technology systems to manage and operate our business. There can be no assurance that our
current information technology systems will function properly. We have invested and will continue to invest in improving our
information technology systems. Some of these investments are significant and impact many important operational processes and
procedures. There is no assurance that any newly implemented information technology systems will improve our current systems,
will improve our operations, or will yield the expected returns on the investments. In addition, the implementation of new
information technology systems may cause disruptions in our operations and, if not properly implemented, negatively impact our
business. If our information technology systems cease to function properly or if these systems do not provide the anticipated
benefits, our ability to manage our operations could be impaired.

We currently rely on a single vendor for many of the critical elements of our global information technology infrastructure and
its failure to provide effective support for such infrastructure could negatively impact our business and financial results.

We have outsourced many of the critical elements of our global information technology infrastructure to a third-party service
provider in order to achieve efficiencies. If the service provider does not perform or does not perform effectively, we may not be
able to achieve the expected efficiencies and may have to incur additional costs to address failures in providing service by the
service provider. Depending on the function involved, such non-performance, ineffective performance or failures of service may
lead to business disruptions, processing inefficiencies or security breaches.

Man-made problems such as cybersecurity attacks, computer viruses or terrorism may disrupt our operations and harm our
business, reputation and operating results

Despite our implementation of network security measures, our network and products may be vulnerable to cybersecurity attacks,
computer viruses, break-ins and similar disruptions. Cybersecurity attacks, in particular, are evolving and include, but are not
limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead
to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data. Any
such event could have a material adverse effect on our business, operating results and financial condition.

Our daily business operations require us to retain sensitive data such as intellectual property, proprietary business information and
data related to customers, suppliers and business partners within our networking infrastructure. The ongoing maintenance and
security of this information is pertinent to the success of our business operations and our strategic goals.

Our networking infrastructure and related assets may be subject to unauthorized access by hackers, employee errors, or other
unforeseen activities. Such issues could result in the disruption of business processes, network degradation and system downtime,
along with the potential that a third party will exploit our critical assets such as intellectual property, proprietary business information
and data related to our customers, suppliers and business partners. To the extent that such disruptions occur, they may cause delays
in the manufacture or shipment of our products and the cancellation of customer orders and, as a result, our business operating
results and financial condition could be materially and adversely affected resulting in a possible loss of business or brand reputation.

Commodity shortages and price increases could negatively affect our financial results.

We rely on suppliers to secure commodities, including steel, zinc, brass and other non-ferrous metals, required for the manufacture
of our products. A disruption of deliveries from our suppliers or decreased availability of commodities could have an adverse
effect on our ability to meet our commitments to customers or increase our operating costs. We believe that available sources of
supply will generally be sufficient for our needs for the foreseeable future. Nonetheless, the unavailability of some commodities
could have a material adverse impact on our business.

Volatility in the prices of these commodities could increase the costs of our products and services, and we may not be able to pass
on these costs to our customers. We do not currently use financial derivatives to hedge against this volatility, however, we utilize
firm purchase commitments to mitigate risk. The pricing of some commodities we use is based on market prices. To mitigate this
exposure, we may use annual price contracts to minimize the impact of inflation and to benefit from deflation.

We may be required to recognize impairment charges for our goodwill and other indefinite-lived intangible assets.

At December 31, 2016, the net carrying value of our goodwill and other indefinite-lived intangible assets totaled approximately
$716.8 million and $64.6 million. Pursuant to GAAP, we are required to annually assess our goodwill, indefinite-lived intangibles
and other long-lived assets to determine if they are impaired. In addition, interim reviews must be performed whenever events or
changes in circumstances indicate that impairment may have occurred. If the testing performed indicates that impairment has
occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill
or other intangible assets and the implied fair value of the goodwill or other intangible assets in the period the determination is
made. Disruptions to our business, end market conditions and protracted economic weakness, unexpected significant declines in
operating results of reporting units, divestitures and market capitalization declines may result in additional charges for goodwill
and other asset impairments. We have significant intangible assets, including goodwill with an indefinite life, which are susceptible
to valuation adjustments as a result of changes in such factors and conditions.

The basis of the fair value for our impairment assessments is determined by projecting future cash flows using assumptions
concerning future operating performance and economic conditions that may differ from actual cash flows. The financial and credit
market volatility directly impacts our fair value measurement through our weighted average cost of capital that we use to determine
our discount rate and through our stock price that we use to determine our market capitalization. Although our last analysis regarding
the fair values of the goodwill and indefinite-lived intangible assets for our reporting units indicates that they exceed their respective
carrying values, materially different assumptions regarding the future performance of our businesses or significant declines in our
stock price could result in additional goodwill and intangible impairment losses. Specifically, an unanticipated deterioration in
net revenues and operating margins generated by our EMEIA and/or Asia Pacific segments could trigger future impairment in
those segments. While we currently believe that our projected results will not result in future impairment, a deterioration in results
could trigger a future impairment.

Successful sales and marketing efforts depend on our ability to recruit and retain qualified employees.

Our ability to successfully grow our business depends on the contributions and abilities of key executives, our sales force and
other personnel, including the ability of our sales force to adapt to any changes made in the sales organization and achieve adequate
customer coverage. We must therefore continue to sufficiently recruit, retain and motivate management, sales and other personnel
to maintain our current business and support our projected growth. A shortage of these key employees might jeopardize our ability
to grow and expand our business.

Our operations are subject to regulatory risks.

Our U.S. and non-U.S. operations are subject to a number of laws and regulations, including fire and building codes and standards,
environmental and health and safety. We have incurred, and will be required to continue to incur, significant expenditures to comply
with these laws and regulations. Changes to, or changes in interpretations of, current laws and regulations could require us to
increase our compliance expenditures, cause us to significantly alter or discontinue offering existing products and services or cause
us to develop new products and services. Altering current products and services or developing new products and services to comply
with changes in the applicable laws and regulations could require significant research and development investments, increase the
cost of providing the products and services and adversely affect the demand for our products and services.

We may not have been, or we may not at all times be, in full compliance with these laws and regulations. In the event a regulatory
authority concludes that we are not or have not at all times been in full compliance with these laws, we could be fined, criminally
charged or otherwise sanctioned.

Certain environmental laws assess liability on current or previous owners of real property or operators of manufacturing facilities
for the costs of investigation, removal or remediation of hazardous substances or materials at such properties or at properties at
which parties have disposed of hazardous substances. Liability for investigative, removal and remedial costs under certain U.S.
federal and state laws and certain non-U.S. laws are retroactive, strict and joint and several. In addition to cleanup actions brought
by governmental authorities, private parties could bring personal injury or other claims due to the presence of, or exposure to,
hazardous substances. We have received notification from U.S. and non-U.S. governmental agencies, including the EPA and similar
state environmental agencies, that conditions at a number of current and formerly owned sites where we and others have disposed
of hazardous substances require investigation, cleanup and other possible remedial action. These agencies may require that we
reimburse the government for its costs incurred at these sites or otherwise pay for the costs of investigation and cleanup of these
sites, including by providing compensation for natural resource damage claims from such sites. For more information, see "Business
- Environmental Regulation."

While we have planned for future capital and operating expenditures to maintain compliance with environmental laws and have
accrued for costs related to current remedial efforts, our costs of compliance, or our liabilities arising from past or future releases
of, or exposures to, hazardous substances may exceed our estimates. We may also be subject to additional environmental claims
for personal injury or cost recovery actions for remediation of facilities in the future based on our past, present or future business
activities.

The capital and credit markets are important to our business.

Instability in U.S. and global capital and credit markets, including market disruptions, limited liquidity and interest rate volatility,
or reductions in the credit ratings assigned to us by independent ratings agencies could reduce our access to capital markets or
increase the cost of funding our short and long term credit requirements. In particular, if we are unable to access capital and credit
markets on terms that are acceptable to us, we may not be able to make certain investments or fully execute our business plans
and strategy.

Our suppliers and customers are also dependent upon the capital and credit markets. Limitations on the ability of customers,
suppliers or financial counterparties to access credit could lead to insolvencies of key suppliers and customers, limit or prevent
customers from obtaining credit to finance purchases of our products and services and cause delays in the delivery of key products
from suppliers.

As a global business, we have a relatively complex tax structure, and there is a risk that tax authorities will disagree with
our tax positions.

Since we conduct operations worldwide through our subsidiaries, we are subject to complex transfer pricing regulations in the
countries in which we operate. Transfer pricing regulations generally require that, for tax purposes, transactions between us and
our affiliates be priced on a basis that would be comparable to an arm's length transaction and that contemporaneous documentation
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be maintained to support the tax allocation. Although uniform transfer pricing standards are emerging in many of the countries in
which we operate, there is still a relatively high degree of uncertainty and inherent subjectivity in complying with these rules. To
the extent that any tax authority disagrees with our transfer pricing policies, we could become subject to significant tax liabilities
and penalties. Our tax returns are subject to review by taxing authorities in the jurisdictions in which we operate. Although we
believe that we have provided for all tax exposures, the ultimate outcome of a tax review could differ materially from our provisions.

Changes in our effective income tax rate may have an adverse effect on our results of operations.

We are subject to taxes in Ireland, the U.S. and numerous other jurisdictions. Due to economic and political conditions, tax rates
in various jurisdictions may be subject to significant change.

Our future effective tax rate may be adversely affected by a number of additional factors including:

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the jurisdictions in which profits are determined to be earned and taxed;
the resolution of issues arising from tax audits with various tax authorities;
changes in the enforcement environment;
changes in the valuation of our deferred tax assets and liabilities;
changes in jurisdictional mix of profits;
changes in tax laws or the interpretation of such tax laws and changes in generally accepted accounting principles;
changes in foreign tax rates or agreed upon foreign taxable base; and/or
the repatriation of earnings from outside Ireland for which we have not previously provided for taxes.

Risks Related to Our Indebtedness

Our substantial leverage could harm our business by limiting our available cash and our access to additional capital and, to
the extent of our variable rate indebtedness, exposing us to interest rate risk.

We have approximately $1.5 billion of outstanding indebtedness at December 31, 2016. In addition, we have a senior secured
revolving credit facility that permits borrowings of up to an additional $500 million. Volatility in the credit markets could adversely
impact our ability to obtain favorable terms on financing in the future. In addition, a substantial portion of our cash flows from
operations is dedicated to the payment of principal and interest on our indebtedness and will not be available for other purposes,
including our operations, capital expenditures, payment of dividends, share repurchase programs and future business opportunities.
We may be more vulnerable than a less leveraged company to a downturn in the general economic conditions or in our business,
or we may be unable to carry out capital spending that is important to our growth. We may be vulnerable to interest rate increases,
as certain of our borrowings, including those under our senior secured credit facilities, are at variable rates.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to
satisfy our obligations under our indebtedness, which actions may not be successful.

Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance,
which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond
our control. We may not be able to maintain a level of cash flow from operating activities sufficient to permit us to pay the principal
and interest on our indebtedness. For more information see "Management’s Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay
capital expenditures, reduce or eliminate the payment of dividends, sell assets, seek additional capital or seek to restructure or
refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt
service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might
be required to sell material assets or operations to attempt to meet our debt service and other obligations. The terms of the credit
agreement governing our senior secured credit facilities and the indentures governing our senior notes contain customary financial
covenants that may restrict our ability to use the proceeds from asset sales and therefore may not be adequate to meet any debt
service obligations then due.

Despite our levels of indebtedness, we may still be able to incur substantially more debt, which could further exacerbate the
risks associated with our substantial leverage.

We may be able to incur substantial additional indebtedness in the future. Although the terms of the credit agreement governing
our senior secured credit facilities and the indentures governing our senior notes contain customary restrictions on the incurrence
18

of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred
in compliance with these restrictions could be substantial. In addition, our senior secured revolving credit facility permits borrowings
of up to $500 million. If we incur additional debt above the levels we currently have, the risks associated with our leverage,
including those described above, would increase.

The terms of our debt covenants could limit how we conduct our business and our ability to raise additional funds.

The terms of the credit agreement governing our senior secured credit facilities and the indentures governing our senior notes may
restrict us from taking certain actions that we may think are in the best interests of our shareholders. A breach of the covenants or
restrictions could result in a default under the applicable indebtedness. As a result of these restrictions, we may be:

•
•
•
•

limited in how we conduct our business;
limited in our ability to pay dividends or make other distributions to our shareholders;
unable to raise additional debt or equity financing to operate during general economic or business downturns; or
unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our plans.

These covenants and restrictions could affect our ability to operate our business, and may limit our ability to react to market
conditions or take advantage of potential business opportunities as they arise. Additionally, our ability to comply with these
covenants may be affected by events beyond our control, including general economic and credit conditions and industry downturns,
and the other factors described in these "risk factors."

Our variable rate indebtedness may expose us to interest rate risk, which could cause our debt costs to increase significantly.

A portion of our borrowings at December 31, 2016 include a term loan with a variable rate of interest which exposes us to interest
rate risk. We are exposed to the risk of rising interest rates to the extent that we fund our operations with short-term or variable-
rate borrowings. At December 31, 2016, we have approximately $1.5 billion of aggregate debt outstanding, and this amount
includes $880 million of floating-rate term loans and $600 million of our fixed-rate senior notes. We have the ability to incur up
to $500 million of additional floating-rate debt under our senior secured revolving credit facility. We entered into forward starting
interest rate swaps for $275.0 million of our floating-rate term loans to manage our interest rate risk. A 100 basis point increase
in LIBOR would have resulted in incremental 2016 interest expense of approximately $6.2 million. If the LIBOR or other applicable
base rates under our senior secured credit facilities increase in the future then the floating-rate debt could have a material effect
on our interest expense.

Risks Relating to the Spin-off

In connection with the Spin-off, Ingersoll Rand indemnified us for certain liabilities and we indemnified Ingersoll Rand for
certain liabilities. If we are required to act on these indemnities to Ingersoll Rand, we may need to divert cash to meet those
obligations and our financial results could be negatively impacted. The Ingersoll Rand indemnity may not be sufficient to
insure us against the full amount of liabilities for which it will be allocated responsibility, and Ingersoll Rand may not be able
to satisfy its indemnification obligations in the future.

Pursuant to the Separation and Distribution Agreement, the Employee Matters Agreement and the Tax Matters Agreement with
Ingersoll Rand, Ingersoll Rand agreed to indemnify us for certain liabilities, and we agreed to indemnify Ingersoll Rand for certain
liabilities, in each case for uncapped amounts. Such indemnities may be significant and could negatively impact our business,
particularly indemnities relating to our actions that could impact the tax-free nature of the Spin-off. Third parties could also seek
to hold us responsible for any of the liabilities that Ingersoll Rand retained. Further, the indemnity from Ingersoll Rand may not
be sufficient to protect us against the full amount of such liabilities, and Ingersoll Rand may not be able to fully satisfy its
indemnification obligations. Moreover, even if we ultimately succeed in recovering from Ingersoll Rand any amounts for which
we are held liable, we may be temporarily required to bear these losses ourselves.

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

Ingersoll Rand has received an IRS ruling substantially to the effect that, among other things, the distribution of our ordinary
shares, together with certain related transactions, qualify under Sections 355 and 368(a) of the Internal Revenue Code ("the Code"),
19

with the result that Ingersoll Rand and Ingersoll Rand’s shareholders will not recognize any taxable income, gain or loss for U.S.
federal income tax purposes as a result of the Spin-off, except to the extent of cash received in lieu of fractional shares (the "IRS
Ruling"). The IRS Ruling also provided that certain internal transactions undertaken in anticipation of the distribution qualify for
favorable treatment under the Code. In addition to obtaining the IRS Ruling, Ingersoll Rand received opinions from the law firm
of Simpson Thacher & Bartlett LLP substantially to the effect that certain requirements, including certain requirements that the
IRS did not rule on, necessary to obtain tax-free treatment have been satisfied, such that the distribution for U.S. federal income
tax purposes and certain other matters relating to the distribution, including certain internal transactions undertaken in anticipation
of the distribution, received tax-free treatment under Section 355 of the Code. The receipt and effectiveness of the IRS Ruling
and the opinions were conditions to the distribution that were satisfied or waived by Ingersoll Rand. The IRS Ruling and the
opinions rely on certain facts and assumptions and certain representations and undertakings from us and Ingersoll Rand regarding
the past and future conduct of our respective businesses and other matters. Notwithstanding the IRS Ruling and the opinions, the
IRS could determine on audit that the distribution or the internal transactions should be treated as taxable transactions if it determines
that any of these facts, assumptions, representations or undertakings is not correct or has been violated, or that the distribution or
the internal transactions should be taxable for other reasons, including as a result of significant changes in shares or asset ownership
after the distribution. A legal opinion represents the tax adviser’s best legal judgment, is not binding on the IRS or the courts, and
the IRS or the courts may not agree with the opinion. In addition, the opinion will be based on then current law, and cannot be
relied upon if current law changes with retroactive effect. If the distribution is determined to be taxable, the distribution could be
treated as a taxable dividend or capital gain for U.S. federal income tax purposes, and our shareholders could incur significant
U.S. federal income tax liabilities. In addition, we or Ingersoll Rand could incur significant U.S. federal income tax liabilities if
it is ultimately determined that certain internal transactions undertaken in anticipation of the distribution are taxable.

In addition, under the terms of the Tax Matters Agreement, in the event the distribution or the internal transactions were determined
to be taxable as a result of actions taken after the distribution by us or Ingersoll Rand, the party responsible for such failure would
be responsible for all taxes imposed on us or Ingersoll Rand as a result thereof. If such failure is not the result of actions taken
after the distribution by us or Ingersoll Rand, then we would be responsible for any taxes imposed on us or Ingersoll Rand as a
result of such determination. Such tax amounts could be significant.

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

Ingersoll Rand has received an opinion of the Irish Revenue regarding the Irish tax consequences of the distribution to the effect
that certain reliefs and exemptions for corporate reorganizations apply. In addition to obtaining the opinion from Irish Revenue,
Ingersoll Rand received an opinion from the law firm of Arthur Cox confirming the applicability of the relevant exemptions and
reliefs to the distribution and that certain internal transactions will not trigger tax costs. These opinions rely on certain facts and
assumptions and certain representations and undertakings from us and Ingersoll Rand regarding the past and future conduct of
our respective businesses and other matters. Notwithstanding the opinions, Irish Revenue could determine on audit that the
distribution or the internal transactions do not qualify for the relevant exemptions or reliefs if it determines that any of these facts,
assumptions, representations or undertakings is not correct or has been violated. A legal opinion represents the tax adviser’s best
legal judgment, is not binding on Irish Revenue or the courts and Irish Revenue or the courts may not agree with the legal opinion.
In addition, the legal opinion was based on then current law, and cannot be relied upon if current law changes with retroactive
effect. If the distribution ultimately is determined not to fall within certain exemptions or reliefs, the distribution could result in
our shareholders having an Irish tax liability as a result of the distribution (if a shareholder is an Irish resident or holds shares in
Ingersoll Rand in an Irish branch or agency), or we or Ingersoll Rand could incur Irish tax liabilities.

In addition, under the terms of the Tax Matters Agreement, in the event the distribution does not qualify for certain reliefs or
exemptions, then we would be responsible for any taxes imposed on us or Ingersoll Rand as a result of such determination. Such
tax amounts could be significant.

Risks Related to Our Incorporation in Ireland

Irish law differs from the laws in effect in the United States and may afford less protection to holders of our securities.

The United States currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement of
judgments in civil and commercial matters. As such, there is some uncertainty as to whether the courts of Ireland would recognize
or enforce judgments of U.S. courts obtained against us or our directors or officers based on U.S. federal or state civil liability
laws, including the civil liability provisions of the U.S. federal or state securities laws, or hear actions against us or those persons
based on those laws.

As an Irish company, we are governed by the Irish Companies Act, which differs in some material respects from laws generally
applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer
20

transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to the
company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the
company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly, holders of
our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in
a jurisdiction of the United States.

In addition, Irish law allows shareholders to authorize share capital which then can be issued by a board of directors without
shareholder approval. Also, subject to specified exceptions, Irish law grants statutory preemptive rights to existing shareholders
to subscribe for new issuances of shares for cash. However, we have opted out of these preemption rights in our Articles of
Association as permitted under Irish company law. Irish law provides that this opt-out expires after five years unless renewed by
a special resolution of the shareholders. These authorizations must be renewed by the shareholders every five years and we cannot
guarantee that these authorizations will always be approved.

Changes in tax laws, regulations or treaties, changes in our status under the tax laws of many jurisdictions or adverse
determinations by taxing authorities could increase our tax burden or otherwise affect our financial condition or operating
results, as well as subject our shareholders to additional taxes.

The realization of any tax benefit related to our incorporation and tax residence in Ireland could be impacted by changes in tax
laws, tax treaties or tax regulations or the interpretation or enforcement thereof by the tax authorities of many jurisdictions. From
time to time, proposals have been made and/or legislation has been introduced to change the tax laws of various jurisdictions or
limit tax treaty benefits that if enacted could materially increase our tax burden and/or effective tax rate. For instance, recent U.S.
legislative proposals could modify or eliminate the tax deductibility of various currently deductible payments, which could
materially and adversely affect our effective tax rate and cash tax position. Moreover, other U.S. legislative proposals could have
a material adverse impact on us by overriding certain tax treaties and limiting the treaty benefits on certain payments by our U.S.
subsidiaries to our non-U.S. affiliates, which could increase our tax liability. We cannot predict the outcome of any specific
legislation in any jurisdiction.

While we monitor proposals that would materially impact our tax burden and/or effective tax rate and investigate our options, we
could still be subject to increased taxation on a going forward basis no matter what action we undertake if certain legislative
proposals are enacted, certain tax treaties are amended and/or our interpretation of applicable tax law is challenged and determined
to be incorrect. In particular, any changes and/or differing interpretations of applicable tax law that have the effect of disregarding
our incorporation in Ireland, limiting our ability to take advantage of tax treaties between jurisdictions, modifying or eliminating
the deductibility of various currently deductible payments, or increasing the tax burden of operating or being resident in a particular
country, could subject us to increased taxation.

Dividends received by our shareholders may be subject to Irish dividend withholding tax.

In certain circumstances, we are required to deduct Irish dividend withholding tax (currently at the rate of 20%) from dividends
paid to our shareholders. In the majority of cases, shareholders resident in the United States will not be subject to Irish withholding
tax, and shareholders resident in a number of other countries will not be subject to Irish withholding tax provided that they complete
certain Irish dividend withholding tax forms. However, some shareholders may be subject to withholding tax, which could
discourage the investment in our stock and adversely impact the price of our shares.

Dividends received by our shareholders could be subject to Irish income tax.

Dividends paid in respect of our shares generally are not subject to Irish income tax where the beneficial owner of these dividends
is exempt from Irish dividend withholding tax, unless the beneficial owner of the dividend has some connection with Ireland other
than his or her shareholding in Allegion.

Our shareholders who receive their dividends subject to Irish dividend withholding tax will generally have no further liability to
Irish income tax on the dividends unless the beneficial owner of the dividend has some connection with Ireland other than his or
her shareholding in Allegion.

Certain provisions in our Articles of Association, among other things, could prevent or delay an acquisition of us, which could
decrease the trading price of our ordinary shares.

Our Memorandum and Articles of Association contain provisions to deter takeover practices, inadequate takeover bids and
unsolicited offers. These provisions include, amongst others:

•

•
•

•

a provision of our Articles of Association which generally prohibits us from engaging in a business combination
with an interested shareholder (being (i) the beneficial owner of the relevant percentage of our voting shares or (ii)
an affiliate or associate of us that has at any time within the last five years been the beneficial owner of the relevant
percentage of our voting shares), subject to certain exceptions;
rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;
the right of our Board of Directors to issue preferred shares without shareholder approval in certain circumstances,
subject to applicable law; and
the ability of our Board of Directors to set the number of directors and to fill vacancies on our Board of Directors in
certain circumstances.

We believe these provisions will provide some protection to our shareholders from coercive or otherwise unfair takeover tactics.
These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may
be considered beneficial by some shareholders and could delay or prevent an acquisition that our Board of Directors determines
is in our best interests and our shareholders' best interests. These provisions may also prevent or discourage attempts to remove
and replace incumbent directors.

In addition, several mandatory provisions of Irish law could prevent or delay an acquisition of us. For example, Irish law does not
permit shareholders of an Irish public limited company to take action by written consent with less than unanimous consent. We
also will be subject to various provisions of Irish law relating to mandatory bids, voluntary bids, requirements to make a cash offer
and minimum price requirements, as well as substantial acquisition rules and rules requiring the disclosure of interests in our
shares in certain circumstances. Also, Irish companies, including us, may alter their Memorandum of Association and Articles of
Association only with the approval of at least 75% of the votes of the company’s shareholders cast in person or by proxy at a
general meeting of the company.

The agreements that we entered into with Ingersoll Rand in connection with the spin-off generally require Ingersoll Rand’s consent
to any assignment by us of our rights and obligations under the agreements. The consent and termination rights set forth in these
agreements might discourage, delay or prevent a change of control that shareholders may consider favorable.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

We operate through a broad network of sales offices, 26 production facilities and several distribution centers throughout the world.
Our active properties represent about 5.7 million square feet, of which approximately 44% is leased.

The majority of our plant facilities are owned by us with the remainder under long-term lease arrangements. We believe that our
plants have been well maintained, are generally in good condition and are suitable for the conduct of our business.

Item 3. 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, employment matters, product liability claims, environmental liabilities, 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.

Executive Officers of the Registrant

The following is a list of executive officers of the Company as of February 17, 2017.

David D. Petratis, age 59, is our Chairman, President and Chief Executive Officer. Mr. Petratis served as the Chairman, President
and Chief Executive Officer of Quanex Building Products Corporation (a manufacturer of engineered material and components
for the building products markets) from 2008 to July 2013.

Patrick S. Shannon, age 54, is our Senior Vice President and Chief Financial Officer. Mr. Shannon served as the Vice President
and Treasurer of Ingersoll-Rand plc (a global diversified company) from 2012 to October 2013. Mr. Shannon previously served
as Ingersoll Rand’s Vice President, Audit Services from 2010 to 2012.

Jeffrey N. Braun, age 57, is our Senior Vice President and General Counsel. Mr. Braun served as our Deputy General Counsel and
Chief Compliance Officer from September 2013 to June 2014. Mr. Braun previously served as General Counsel of General Motors
China, a subsidiary of General Motors Company (a global automotive company) from 2010 to 2013.

Timothy P. Eckersley, age 55, is our Senior Vice President - Americas. Mr. Eckersley served as Ingersoll Rand’s President, Security
Technologies - Americas from 2007 to November 2013.

Todd V. Graves, age 50, is our Senior Vice President - Engineering and Technology. Mr. Graves served as our Vice President -
Technology and Engineering from 2013 to January 2016. Mr. Graves served as Ingersoll Rand's Vice President - Technology and
Engineering, Security Technologies, from 2012 to 2013. He also served as Vice President of ClearEdge Power (a fuel cell
manufacturer) from 2011 to 2012.

Tracy L. Kemp, age 48, is our Senior Vice President and Chief Information Officer. Ms. Kemp served as our Vice President and
Chief Information Officer from 2013 to February 2015. Prior to that, Ms. Kemp served as Ingersoll Rand’s Vice President - Chief
Information Officer, Security Technologies and Residential Solutions sectors from 2011 to 2013.

Shelley A. Meador, age 45, is our Senior Vice President - Human Resources and Communications. Ms. Meador served as our Vice
President - Tax from 2013 to August 2016. Ms. Meador previously served as Vice President - Tax at Hillenbrand, Inc. from 2011
to 2013.

Lucia Veiga Moretti, age 52, is our Senior Vice President - EMEIA. Ms. Moretti previously served as Senior Vice President and
President, Delphi Product and Service Solutions for Delphi Automotive (a supplier of automotive technologies) from 2011 to
February 2014.

Chris E. Muhlenkamp, age 59, is our Senior Vice President - Global Operations and Integrated Supply Chain. Mr. Muhlenkamp
served as our Vice President - Global Operations and Integrated Supply Chain from 2013 to February 2014. Mr. Muhlenkamp
served as Ingersoll Rand's Vice President - Operations and Global Integrated Supply Chain, Security Technologies, from 2011 to
2013.

Douglas P. Ranck, age 58, is our Vice President and Controller. Mr. Ranck served as Ingersoll Rand’s Global Controller and
Financial Planning and Analysis Leader - Climate Solutions from 2008 to October 2013.

Jeffrey M. Wood, age 46, is our Senior Vice President - Asia Pacific. Mr. Wood previously served as our Vice President, Global
Supply Management from 2013 to January 2017. Mr. Wood also served as Senior Vice President, Supply Chain for the Buildings
division of Scheider Electric SE (a energy management and automation company) from 2011 to 2013.

No family relationship exists between any of the above-listed executive officers of the Company. All officers are elected to hold
office for one year or until their successors are elected and qualified.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Information regarding the principal market for our ordinary shares and related shareholder matters is as follows:

Our ordinary shares are traded on the NYSE under the symbol ALLE. As of February 13, 2017, the number of record holders of
ordinary shares was 3,247. The high and low sales price per share and the dividend declared per share for the following periods
were as follows:

2016
First quarter

Second quarter

Third quarter

Fourth quarter

2015

First quarter

Second quarter

Third quarter

Fourth quarter

High

Ordinary shares
Low

Dividend

65.40

52.95

69.69

73.49

69.95

High

61.91

63.18

64.68

63.08

65.83

61.47

Low

52.79

59.10

56.07

68.03

58.08

0.12

Dividend

0.10

Information regarding equity compensation plans required to be disclosed pursuant to this Item is incorporated by reference from
our Proxy Statement.

Dividend Policy

Our Board of Directors declared dividends of $0.12 per ordinary share on February 4, 2016, April 7, 2016, August 31, 2016 and
November 30, 2016. On February 2, 2017 our Board of Directors declared a dividend of $0.16 per ordinary share payable on
March 31, 2017. We paid a total of $46.0 million in cash for dividends to ordinary shareholders during the year ended December 31,
2016. Future dividends on our ordinary shares, if any, will be at the discretion of our Board of Directors and will depend on, among
other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors
that the Board of Directors may deem relevant, as well as our ability to pay dividends in compliance with the Irish Companies
Act. Under the Irish Companies Act, dividends and distributions may only be made from distributable reserves. Distributable
reserves, broadly, means the accumulated realized profits of Allegion plc (ALLE-Ireland). In addition, no distribution or dividend
may be made unless the net assets of ALLE-Ireland are equal to, or in excess of, the aggregate of ALLE-Ireland’s called up share
capital plus undistributable reserves and the distribution does not reduce ALLE-Ireland’s net assets below such aggregate.

Issuer Purchases of Equity Securities

In February 2014, our Board of Directors authorized the repurchase of up to $200 million of our ordinary shares. We paid a total
of $85.1 million to repurchase 1.3 million ordinary shares during the year ended December 31, 2016 and $30.0 million to repurchase
0.5 million ordinary shares during the year ended December 31, 2015. At December 31, 2016, we have approximately $34.9
million available under the authorized share repurchase plan.

On February 2, 2017, our Board of Directors approved a new stock repurchase authorization of up to $500 million of the Company's
ordinary shares. This new stock repurchase authorization replaces the program established in 2014.

Performance Graph

The annual changes for the period shown November 18, 2013 (when our ordinary shares began trading in the "when-issued"
market) to December 31, 2016 in the graph on this page are based on the assumption that $100 had been invested in Allegion plc
ordinary shares, the Standard & Poor’s 500 Stock Index ("S&P 500") and the Standard & Poor's 400 Capital Goods Index ("S&P
400 Capital Goods") on November 18, 2013, and that all quarterly dividends were reinvested. The total cumulative dollar returns
shown on the graph represent the value that such investments would have had on December 31, 2016.

Allegion plc

S&P 500

S&P 400 Capital Goods

November
18, 2013

December
31, 2013

December
31, 2014

December
31, 2015

December
31, 2016

100.00

91.16

103.44

105.46

115.11

117.59

105.72

137.71

119.22

99.90

134.67

133.48

131.80

Item 6. SELECTED FINANCIAL DATA (1)

In millions, except per share amounts:

At and for the years ended December 31,

2016

2015

2014

2013

2012

Net revenues

2,238.0

2,068.1

2,118.3

$ 2,069.6

$ 2,023.3

Net earnings (loss) attributable to Allegion plc
ordinary shareholders:

Continuing operations (e)

Discontinued operations

Total assets

Total debt

Total Allegion plc shareholders’ equity
(deficit)

Earnings (loss) per share attributable to
Allegion plc ordinary shareholders:

Basic:

Continuing operations

Discontinued operations

Diluted:

Continuing operations

Discontinued operations

Dividends declared per ordinary share

229.1 (a)

—

154.3 (b)
(0.4)

186.3 (c)
(11.1)

35.9 (d)
(3.6)

224.3
(4.2)

2,247.4

2,263.0

2,015.9

2,000.6

2,003.2

1,463.8

1,523.1

1,264.6

1,343.9

5.0

113.3

25.6

(4.8)

(66.1)

1,362.6

2.39

—

2.36

—

0.48

1.61
(0.01)

1.59

—

0.40

1.94
(0.12)

1.92
(0.12)

0.32

0.37
(0.03)

—

2.34
(0.04)

—

(a) Net earnings from continuing operations for the year ended December 31, 2016 includes $84.4 million of losses related

to our previously divested systems integration business.

(b) Net earnings from continuing operations for the year ended December 31, 2015 includes $104.2 million of losses related

to the divestitures of our Venezuelan operations and our majority stake in our systems integration business.

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

(d) Net earnings from continuing operations for the year ended December 31, 2013 includes an after-tax, non-cash goodwill
impairment charge of $131.2 million and $44.8 million of discrete tax adjustments consisting of $31.5 million of expense
related to valuation allowances on deferred tax assets that are no longer expected to be utilized and $13.3 million of net
tax expense resulting primarily from transactions occurring to effect the Spin-off.

(e) Net earnings from continuing operations includes $174.5 million and $176.7 million of centrally managed service costs

and corporate allocations from Ingersoll Rand for the years ended December 31, 2013 and 2012.

(1) The Company has not restated 2015, 2014, 2013, or 2012 for the impact of the adoption of ASU 2016-09 in the fourth quarter
of 2016. The Company has not restated 2014, 2013, and 2012 for the impact of the adoption of ASU 2015-17 as of December 31,
2015. The Company has not restated 2014, 2013, and 2012 for the impact of the adoption of ASU 2015-03 as of December 31,
2015. The impact of excluding the above standards in prior period presentation is not material.

Item 7. 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 might cause a difference include, but are not limited to, those discussed under Item 1A. Risk
Factors in this Annual Report on Form 10-K. The following section is qualified in its entirety by the more detailed information,
including our consolidated financial statements and the notes thereto, which appears elsewhere in this Annual Report.

Overview

Organization

We are a leading global provider of security products and solutions operating in three geographic regions: Americas; EMEIA; and
Asia Pacific. We sell a wide range of security products and solutions for end-users in commercial, institutional and residential
markets worldwide, including into the education, healthcare, government, commercial office and single and multi-family residential
markets. Our corporate brands include Schlage, Von Duprin, LCN, CISA, Interflex and SimonsVoss.

Trends and Economic Events

Current market conditions, including challenges in international markets, continue to impact our financial results. Uneven global
commercial new construction activity is negatively impacting our results, however U.S. residential and consumer markets have
begun to improve, and we are seeing improvements in the U.S. new builder and replacement markets.

We believe improving institutional and growth in commercial industrial markets and continued recovery in residential markets in
the United States and slight growth in Europe will offset unfavorable foreign currency exchange rates overseas. Additionally, we
expect growth in the global electronic product categories we serve to outperform the security products industry as end-users adopt
newer technologies in their facilities. Our acquisitions of Simons Voss Technologies GmbH and Milre Systek Co, Ltd. in late 2015
were made to capitalize on this trend.

The economic conditions discussed above and a number of other challenges and uncertainties that could affect our business are
described under "Risk Factors."

2016 and 2015 Significant Events

Acquisitions and Divestitures

In 2016, we completed one business acquisition. In 2015, we completed six acquisitions of, or investments in, businesses and two
divestitures:

Business

Acquisitions / Investments
Month
February 2015
April 2015
May 2015
July 2015
September 2015
September 2015
June 2016

iDevices
Zero
Brio
Milre
SimonsVoss
AXA
Trelock

Divestitures

Business

Venezuela
Systems integration

Month
August 2015
November 2015

The incremental impact of the acquisitions and divestitures for the twelve months ended December 31, 2016 was a net increase
in revenues of approximately $63.6 million and a net increase in operating income of approximately $7.3 million compared to the
same period in the prior year. The incremental impact of the acquisitions and divestitures for the twelve months ended December 31,
2015 was a net decrease in revenues of approximately $20.7 million and a net decrease in operating income of approximately
$12.1 million compared to the same period in the prior year.

Total consideration paid for the 2015 acquisitions was $511.3 million (net of cash acquired), paid through cash on hand and
borrowings under our Senior Secured Revolving Credit Facility ("Revolver").

For the year ended December 31, 2015, we incurred $17.9 million of costs related to these acquisitions.

2016 Dividends

We paid quarterly dividends of $0.12 per ordinary share to shareholders on March 31, 2016, June 30, 2016, September 30, 2016,
and December 30, 2016. We paid a total of $46.0 million in cash for dividends to ordinary shareholders during the year ended
December 31, 2016.

Restructuring charges

In the second quarter of 2015, management committed to a restructuring plan in Italy to improve our competitive position, ensure
long-term viability and enhance customer experience. In conjunction with this plan, we incurred severance and other restructuring
charges of $0.9 million and other charges of $0.5 million for the year ended December 31, 2016.

As part of other restructuring plans, the Company incurred $2.2 million of restructuring charges related to workforce reductions
and actions related to manufacturing foot print optimization primarily in the Americas segment.

Financing activities

In September 2015, we issued $300.0 million of Senior Notes due 2023 (the "2023 Senior Notes"). We used the net proceeds of
the offering to repay a portion of the borrowings under our Revolver that were used to fund the acquisitions of SimonsVoss and
AXA. The 2023 Senior Notes accrue interest at the rate of 5.875% per annum, payable semi-annually on March 15 and September
15 of each year, beginning March 15, 2016. The 2023 Senior Notes mature on September 15, 2023.

In September 2015, we completed the Second Amendment and Restatement Agreement to our Credit Agreement. The Second
Amendment and Restatement, among other things, reduced the applicable margin for LIBOR rate borrowings to range from 1.375%
to 1.875% (from 1.50% to 2.00%) and the applicable margin for base rate borrowings to range from 0.375% to 0.875% (from
0.50% to 1.00%) and extended the maturity date of the Revolver and the Term Loan Facility due in 2020 (the "Term Loan A
Facility") from October 15, 2019 to October 15, 2020.

Results of Operations - For the years ended December 31

Dollar amounts in millions, except per share
data

2016

Net revenues

Cost of goods sold
Selling and administrative expenses
Operating income
Interest expense

Loss on divestitures

Other expense (income), net
Earnings before income taxes

Provision for income taxes
Earnings from continuing operations

Discontinued operations, net of tax
Net earnings

Less: Net earnings (loss) attributable
to noncontrolling interests

Net earnings attributable to Allegion
plc

Diluted net earnings per ordinary
share attributable to Allegion plc
ordinary shareholders:
Continuing operations

Discontinued operations

Net earnings

2,238.0

1,252.7
559.8
425.5
64.3

84.4

(18.2)
295.0

63.8
231.2

—

231.2

2.1

229.1

2.36

—

2.36

% of

Revenues

56.0%

25.0%

19.0%

2015

2,068.1

1,199.0
510.5
358.6
52.9

% of

Revenues

58.0%

24.7%

17.3%

% of

Revenues

59.7%

24.9%

15.4%

2014

2,118.3

1,264.6
527.4
326.3
53.8

104.2
(7.8)
209.3

54.6
154.7
(0.4)
154.3

0.4

153.9

1.59

—

1.59

—
4.6
267.9

84.2
183.7
(11.1)
172.6

(2.6)

175.2

1.92
(0.12)
1.80

Net Revenues

Net revenues for the year ended December 31, 2016 increased by 8.2% or $169.9 million compared to the same period in 2015
due to the following:

Pricing

Volume

Acquisitions / divestitures

Currency exchange rates

Total

1.0 %

4.8 %

3.0 %

(0.6)%

8.2 %

The increase in net revenues was primarily driven by higher volumes and improved pricing in all segments and incremental revenue
from the acquisitions discussed above offset by unfavorable foreign currency exchange rate movements due to the strengthening
of the US dollar against currencies in EMEIA, primarily the British pound.

Net revenues for the year ended December 31, 2015 decreased by 2.4% (or $50.2 million) compared to the same period in 2014
due to the following:

Pricing
Volume
Acquisitions / divestitures
Currency exchange rates
Total

0.6 %
4.8 %
(1.0)%
(6.8)%
(2.4)%

The decrease in net revenues was primarily driven by unfavorable foreign currency exchange rate movements due to the
strengthening of the US dollar against currencies in Canada, EMEIA and Asia-Pacific, the devaluation of the Venezuelan bolivar
and the divestitures of our Venezuelan operations and our systems integration business in China. These decreases were partially
offset by higher volumes and improved pricing in our Americas and EMEIA segments and revenue from the acquisitions discussed
above.

Cost of Goods Sold

For the year ended December 31, 2016, cost of goods sold as a percentage of revenue decreased to 56.0% from 58.0% due to the
following:

Pricing and productivity in excess of inflation

Acquisitions / divestitures

Investment spending

Currency exchange rates

Non-cash inventory impairment

Environmental remediation charge

Restructuring / acquisition costs

Total

(1.3)%

(0.5)%

0.2 %

(0.3)%

(0.2)%

0.7 %

(0.6)%

(2.0)%

Costs of goods sold as a percentage of revenue for the year ended December 31, 2016 decreased primarily due to productivity
benefits in excess of inflation, the impact of the acquisitions discussed above, favorable foreign currency exchange rate movements
and decreased restructuring costs primarily in our EMEIA segment. These decreases were offset by increased investment spending
and a charge for a change in approach for environmental remediation related to two sites in the Americas.

For the year ended December 31, 2015, cost of goods sold as a percentage of revenue decreased to 58.0% from 59.7% due to the
following:

Pricing and productivity in excess of inflation

Acquisitions / divestitures

Investment spending

Currency exchange rates

Non-cash inventory impairment

Restructuring / spin costs / acquisition costs

Total

(1.1)%

(0.6)%

0.3 %

0.2 %

(1.4)%

0.9 %

(1.7)%

Costs of goods sold as a percentage of revenue for the year ended December 31, 2015 decreased primarily due to a $4.2 million
non-cash inventory impairment charge related to the devaluation of the Venezuelan bolivar in 2015 compared to a $33.3 million
charge in 2014, productivity benefits in excess of inflation and the divestitures of our Venezuelan operations and our systems
integration business in China. These decreases were offset by increased restructuring costs primarily in our EMEIA segment,
increased investment spending, the impact of the acquisitions discussed above and unfavorable foreign currency exchange rate
movements.

Selling and Administrative Expenses

For the year ended December 31, 2016, selling and administrative expenses as a percentage of revenue increased to 25.0% from
24.7% due to the following:

Other inflation in excess of productivity

Volume leverage

Acquisitions / divestitures

Investment spending

Restructuring / acquisition costs

Total

0.8 %

(1.2)%

0.7 %

0.4 %

(0.4)%

0.3 %

Selling and administrative expenses as a percentage of revenue for the year ended December 31, 2016 increased primarily due to
acquisitions, increased investment spending and inflation in excess of productivity. These increases were offset by favorable
leverage due to increased volume and lower restructuring and acquisition costs.

For the year ended December 31, 2015, selling and administrative expenses as a percentage of revenue decreased to 24.7% from
24.9% due to the following:

Other inflation in excess of productivity

Volume leverage

Acquisitions / divestitures

Investment spending

Currency exchange rates

Restructuring / spin costs / acquisition costs

Total

0.1 %

(1.2)%

1.0 %

0.7 %

0.2 %

(1.0)%

(0.2)%

Selling and administrative expenses as a percentage of revenue for the year ended December 31, 2015 improved primarily due to
favorable leverage due to increased volume, lower restructuring costs compared to the prior year and spin-related costs in the prior
year that did not recur in the current year. These decreases were offset by increased costs related to the acquisitions in the current
year, increased investment spending, unfavorable foreign currency exchange rate movements and other inflation in excess of
productivity.

Operating Income/Margin

Operating income for the year ended December 31, 2016 increased $66.9 million from the same period in 2015 and operating
margin increased to 19.0% from 17.3% for the same period in 2015 due to the following:

in millions

December 31, 2015

Pricing and productivity in excess of inflation

Volume/product mix

Non-cash inventory impairment

Currency exchange rates

Investment spending and other items

Acquisitions / divestitures

Environmental remediation charge

Restructuring / acquisition costs

December 31, 2016

Operating Income

Operating Margin

358.6

13.6

44.0

4.2

4.6
(12.3)
7.3
(15.0)
20.5

425.5

17.3 %

0.5 %

1.2 %

0.2 %

0.3 %

(0.6)%

(0.2)%

(0.7)%

1.0 %

19.0 %

Operating income increased primarily due to favorable volume/product mix in all of our segments, pricing improvements and
productivity in excess of inflation, lower restructuring and acquisition costs, the impact of acquisitions and divestitures, inventory
impairment charges in Venezuela in the prior year that did not occur in the current year and favorable foreign currency exchange
rate movements. These increases were partially offset by investment spending and a charge for a change in approach for
environmental remediation related to two sites in the Americas.

Operating margin increased primarily due to favorable volume/product mix in all of our segments, pricing improvements and
productivity in excess of inflation, lower restructuring and acquisition costs, inventory impairment charges in Venezuela in the
prior year and favorable foreign currency exchange rate movements. These increases were partially offset by investment spending,
the impact of acquisitions and divestitures, and a charge for a change in approach for environmental remediation related to two
sites in the Americas.

Operating income for the year ended December 31, 2015 increased $32.3 million and operating margin increased to 17.3%
from 15.4% for the same period in 2014 due to the following:

in millions

December 31, 2014

Pricing and productivity in excess of inflation

Volume/product mix

Non-cash inventory impairment

Currency exchange rates

Investment spending and other items

Acquisitions / divestitures

Restructuring / spin costs / acquisition costs

December 31, 2015

Operating Income

Operating Margin

326.3

22.2

40.1

29.1
(29.8)
(19.7)
(12.1)
2.5

358.6

15.4 %

1.0 %

1.1 %

1.4 %

(0.4)%

(0.9)%

(0.4)%

0.1 %

17.3 %

Operating income and operating margin increased primarily due to favorable volume/product mix primarily in our Americas
segment, lower inventory impairment charges in Venezuela in 2015, pricing improvements and productivity in excess of inflation,
the impact of acquisitions in 2015 and Spin-off related costs in 2014 that did not recur in 2015. These increases were partially
offset by unfavorable foreign currency exchange rate movements, the divestitures of our Venezuelan operations and our systems
integration business in China, increased investment spending primarily for new product development and channel development,
higher restructuring costs compared to 2014 and costs incurred related to acquisitions in 2015.

Interest Expense

Interest expense for the year ended December 31, 2016 increased $11.4 million compared to the same period in 2015. Interest
expense increased primarily due to increased debt balances from the issuance of the 2023 Senior Notes in September 2015.

Interest expense for the year ended December 31, 2015 decreased $0.9 million compared with the same period of 2014. Interest
expense in 2014 included a non-cash charge of approximately $4.5 million for the write-off of unamortized Term Loan B Facility
debt issuance costs. Excluding this charge, interest expense increased primarily due to issuing the 2023 Senior Notes, partially
offset by the impact of refinancing the Senior Secured Credit Facilities in the fourth quarter of 2014 and third quarter of 2015.

Loss on Divestitures

During the year ended December 31, 2016 we recorded an after tax charge of $84.4 million primarily due to the write-down of
the carrying value of consideration receivable related to the 2015 divestiture of our systems integration business in China.

During the year ended December 31, 2015 we entered into an agreement to sell a majority stake in our systems integration business
and recorded a pre-tax charge of $78.1 million ($82.4 million after tax charges) to write the carrying value of the assets and
liabilities down to their estimated fair value less costs to complete the transaction. Also during the year ended December 31, 2015
we sold our majority ownership in our Venezuelan operation to Venezuelan investors. As a result of the sale we recorded a non-
cash charge of $26.1 million, which primarily represents cumulative currency translation adjustments.

Other (income) expense, net

The components of Other expense, net, for the year ended December 31 were as follows:

In millions

Interest income

Exchange loss

Loss (earnings) from equity investments

Other

Other (income) expense, net

2016

2015

2014

(1.9) $
2.0
(3.6)
(14.7)
(18.2) $

(1.5) $
4.9

0.3
(11.5)
(7.8) $

(1.1)
7.6
(0.5)
(1.4)
4.6

For the year ended December 31, 2016, Other (income) expense, net increased by $10.4 million compared to the same period in
2015. During the year ended December 31, 2016 we recorded gains from the sale of marketable securities of $12.4 million, which
is included within Other in the table above. Additionally, earnings from equity method investments increased primarily due to a
gain recognized by an investment in 2016.

For the year ended December 31, 2015, Other (income) expense, net decreased by $12.4 million compared with the same period
in 2014. During the year ended December 31, 2015 we recorded gains from the sale of marketable securities of $11.0 million,
which is included within Other in the table above. These gains were partially offset by a $2.8 million loss related to the write down
of our Venezuelan bolivar-denominated net monetary assets to reflect the SIMADI rate recorded in the first quarter of 2015. This
loss is within Exchange loss in the table above. The remaining decrease in Other (income) expense, net was primarily due to
unfavorable currency impacts. These losses are within Exchange loss in the table above.

Provision for Income Taxes

For the year ended December 31, 2016, our effective tax rate decreased to 21.6% from 26.1% for the year ended December 31,
2015. The effective income tax rate for the year ended December 31, 2016 was negatively impacted by $84.4 million (before and
after tax) of charges related to the divestiture of our systems integration business in China during 2015. The effective income tax
rate for the year ended December 31, 2015 was negatively impacted by $111.3 million ($115.0 after tax) of charges related to the
divestiture of our systems integration business in China, the divestiture of our business in Venezuela and the devaluation of the
Venezuelan bolivar. Excluding these charges, the effective tax rate for the year ended December 31, 2016 increased primarily due
to increases in uncertain tax positions in 2016 that were partially offset by favorable changes in the mix of income earned in lower
rate jurisdictions and the continued execution of our tax strategies.

For the year ended December 31, 2015, our effective tax rate was 26.1% compared to 31.4% for the year ended December 31,
2014. The effective income tax rate for the year ended December 31, 2015 was negatively impacted by $111.3 million ($115.0
million after-tax) of charges related to the divestiture of our systems integration business in China, the divestiture of our business
in Venezuela and the devaluation of the Venezuelan bolivar. Excluding these charges, the effective tax rate for the year ended
December 31, 2015 decreased primarily due to favorable changes in the mix of income earned in lower rate jurisdictions, the
favorable resolution of uncertain tax positions in 2015 and the continued execution of our tax strategies.

Discontinued Operations

Discontinued operations recognized a loss of $0.4 million and $11.1 million for the years ended December 31, 2015 and 2014,
respectively. These losses were mainly related to the sale of the United Kingdom (UK) Door Business in the third quarter of 2014
in addition to non-cancelable lease expense and other miscellaneous expenses from previously sold businesses.

Review of Business Segments

We operate in and report financial results for three segments: Americas, EMEIA, and Asia Pacific. These segments represent the
level at which our chief operating decision maker reviews company 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 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, from Operating income
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 as a percentage of net revenues.

The segment discussions that follow describe the significant factors contributing to the changes in results for each segment included
in continuing operations.

Segment Results of Operations - For the years ended December 31

in millions

Net revenues

Americas

EMEIA

Asia Pacific

Total

Segment operating income (loss)

Americas

EMEIA

Asia Pacific

Total

Segment operating margin

Americas

EMEIA

Asia Pacific

Americas

2016

2015

% Change

2015

2014

% Change

$ 1,645.7

$1,558.4

485.9

106.4

386.3

123.4

5.6 %

25.8 %

(13.8)%

$1,558.4

$ 1,560.0

386.3

123.4

393.4

164.9

$ 2,238.0

$2,068.1

$ 2,118.3

448.1

$ 418.0

7.2 %

$ 418.0

387.3

35.9

6.1

8.6

(3.4)

317.4 %

279.4 %

8.6

(3.4)

4.9

2.3

490.1

$ 423.2

394.5

(0.1)%

(1.8)%

(25.2)%

7.9 %

75.5 %

(247.8)%

27.2%

7.4%

5.7%

26.8 %

2.2 %

(2.8)%

26.8 %

2.2 %

(2.8)%

24.8%

1.2%

1.4%

Our Americas segment is a leading provider of security products and solutions in approximately 30 countries 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 frames, electronic product and access control
systems to end-users in commercial, institutional and residential facilities, including into the education, healthcare, government,
commercial office and single and multi-family residential markets. This segment’s primary brands are Schlage, Von Duprin and
LCN.

2016 vs 2015
Net revenues

Net revenues for the year ended December 31, 2016 increased by 5.6% or $87.3 million compared to the same period in 2015 due
to the following:

Pricing

Volume

Acquisitions / divestitures

Currency exchange rates

Total

0.9 %

5.6 %

(0.6)%

(0.3)%

5.6 %

The increase in revenues was primarily due to higher volumes and improved pricing. Net revenues from non-residential products
for the year ended December 31, 2016 increased mid to high single digits compared to the same period in the prior year due to
market growth, product launches and channel initiatives. Net revenues from residential products for the year ended December 31,
2016 increased low single digits compared to the same period in the prior year primarily due to domestic market growth. These
increases were partially offset by unfavorable foreign currency exchange movements and prior year divestiture of our Venezuelan
operation.

Operating income/margin

Segment operating income for the year ended December 31, 2016 increased $30.1 million and segment operating margin increased
to 27.2% from 26.8% compared to the same period in 2015 due to the following:

in millions

December 31, 2015

Pricing and productivity in excess of inflation

Volume/product mix

Non-cash inventory impairment

Currency exchange rates

Investment spending

Acquisitions / divestitures

Environmental remediation charge

Restructuring / acquisition costs

December 31, 2016

Operating Income

Operating Margin

418.0

9.9

40.2

4.2

6.5
(6.4)
(7.4)
(15.0)
(1.9)
448.1

26.8 %

0.4 %

1.0 %

0.3 %

0.5 %

(0.4)%

(0.3)%

(1.0)%

(0.1)%

27.2 %

The increase was primarily due to favorable volume/product mix, inventory impairment charges year-over-year in Venezuela,
pricing improvements and productivity in excess of inflation and favorable foreign currency exchange rate movements. These
increases were partially offset by the divestiture of our Venezuelan operations, increased investment spending primarily for new
product development and channel development, restructuring and acquisition costs and a charge for a change in approach for
environmental remediation at two sites in the U.S.

2015 vs 2014
Net revenues

Net revenues for the year ended December 31, 2015 decreased by (0.1)% (or $(1.6) million) compared to the same period in 2014
due to the following:

Pricing

Volume

Acquisitions / divestitures

Currency exchange rates

Total

0.5 %

6.6 %

(2.2)%

(5.0)%

(0.1)%

The decrease in revenues was primarily due to unfavorable foreign currency exchange rate movements and the divestiture of our
Venezuelan operation, partially offset by higher volumes, improved pricing and revenue from acquisitions in the current year. Net
revenues from non-residential products for the year ended December 31, 2015 increased mid-single digits compared to the same
period in the prior year due to new market growth, product launches and channel initiatives. Net revenues from residential products
for the year ended December 31, 2015 increased upper single digits compared to the same period in the prior year primarily due
to domestic market growth.

Operating income/margin

Segment operating income for the year ended December 31, 2015 increased $30.7 million and segment operating margin increased
to 26.8% from 24.8% compared to the same period in 2014 due to the following:

in millions

December 31, 2014

Pricing and productivity in excess of inflation

Volume/product mix

Non-cash inventory impairment

Currency exchange rates

Investment spending

Acquisitions / divestitures

Restructuring / spin costs / acquisition costs

December 31, 2015

Operating Income

Operating Margin

387.3

9.1

40.8

29.1
(21.4)
(13.0)
(13.8)
(0.1)
418.0

24.8 %

0.4 %

0.9 %

1.9 %

(0.1)%

(0.8)%

(0.3)%

— %

26.8 %

The increase was primarily due to favorable volume/product mix, decreased inventory impairment charges in Venezuela in 2015
and pricing improvements and productivity in excess of inflation. These increases were partially offset by unfavorable foreign
currency exchange rate movements, the divestiture of our Venezuelan operations and increased investment spending primarily for
new product development and channel development.

EMEIA

Our EMEIA segment provides security products and solutions in approximately 85 countries throughout Europe, the Middle East,
India and Africa. 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 frames, electronic product and access control systems, as well as
time and attendance and workforce productivity solutions. This segment’s primary brands are AXA, Bricard, CISA, Interflex and
SimonsVoss. This segment also resells Schlage, Von Duprin and LCN products, primarily in the Middle East.

Effective September 1, 2014 we sold our United Kingdom (UK) Door businesses to an unrelated third party. Historical results
of the component have been reclassified to discontinued operations for all periods presented.

2016 vs 2015
Net revenues

Net revenues for the year ended December 31, 2016 increased by 25.8% or $99.6 million compared to the same period in 2015
due to the following:

Pricing
Volume

Acquisitions

Currency exchange rates

Total

1.2 %

1.0 %

25.4 %

(1.8)%

25.8 %

The increase in revenues was primarily due to the full-year impact of acquisitions made in 2015, slightly higher volumes and
improved pricing offset by unfavorable foreign currency exchange rate movements.

Operating income/margin

Segment operating income for the year ended December 31, 2016 increased $27.3 million and operating margin increased to 7.4%
from 2.2% compared to the same period in 2015 due to the following:

in millions

December 31, 2015

Pricing and productivity in excess of inflation

Volume/product mix

Currency exchange rates

Investment spending

Acquisitions

Restructuring / acquisition costs

December 31, 2016

Operating Income

Operating Margin

8.6

9.4

0.2
(1.9)
(2.2)
9.0

12.8

35.9

2.2 %

1.6 %

— %

(0.5)%

(0.6)%

1.4 %

3.3 %

7.4 %

The increase was primarily due to pricing improvements and productivity in excess of inflation, the impact of 2015 acquisitions,
slight improvement in volume/product mix and year-over-year change in restructuring and acquisition costs. These increases were
partially offset by unfavorable foreign currency exchange rate movements and increased investment spending.

2015 vs 2014
Net revenue

Net revenues for the year ended December 31, 2015 decreased by 1.8% (or $7.1 million) compared to the same period in 2014
due to following:

Pricing

Volume

Acquisitions / divestitures

Currency exchange rates

Total

1.1 %

0.3 %

11.8 %

(15.0)%

(1.8)%

The decrease in revenues was primarily due to unfavorable foreign currency exchange rate movements, partially offset by revenue
from acquisitions in the current year, improved pricing and slightly higher volumes.

Operating income/margin

Segment operating income for the year ended December 31, 2015 increased $3.7 million and operating margin increased to
2.2% from 1.2% compared to the same period in 2014 due to the following:

in millions

December 31, 2014

Pricing and productivity in excess of inflation

Volume/product mix

Currency exchange rates

Investment spending and other items

Acquisitions / divestitures

Restructuring / spin costs / acquisition costs

December 31, 2015

Operating Income

Operating Margin

4.9

16.3
(0.7)
(6.2)
(2.2)
7.1
(10.6)
8.6

1.2 %

4.5 %

(0.2)%

(1.6)%

(0.5)%

1.5 %

(2.7)%

2.2 %

The increase was primarily due to pricing improvements and productivity in excess of inflation and the impact of acquisitions in
the current year. These increases were partially offset by unfavorable foreign currency exchange rate movements, increased
investment spending, unfavorable volume/product mix and the year-over-year change in restructuring charges, acquisition expenses and separation
costs incurred in connection with the Spin-off.

Asia Pacific

Our Asia Pacific segment provides security products and solutions in approximately 14 countries throughout the Asia Pacific region. The segment
offers end-users a broad range of products, services and solutions including, locks, locksets, portable locks, key systems, door closers, exit
devices, electronic product and access control systems. This segment’s primary brands are Milre, Schlage, CISA, Von Duprin and LCN. We
divested our systems integration business in China in the fourth quarter of 2015.

2016 vs 2015
Net revenues

Net revenues for the year ended December 31, 2016 decreased by 13.8% (or $17.0 million) compared to the same period in 2015, due to the
following:

Pricing

Volume

Acquisitions / divestitures

Currency exchange rates

Total

0.4 %

7.1 %

(19.7)%

(1.6)%

(13.8)%

The decrease in revenues was primarily due to the divestiture of our systems integration business in China in 2015 and unfavorable foreign
currency exchange rate movements. These decreases were partially offset by higher volumes, acquisition revenue and slightly improved pricing
in our remaining business.

Operating income/margin

Segment operating income for the year ended December 31, 2016 increased $9.5 million and segment operating margin increased to 5.7% from
(2.8)% compared with the same period in 2015 due to the following:

in millions

December 31, 2015

Inflation in excess of pricing and productivity

Volume/product mix

Investment spending

Acquisitions / divestitures

Restructuring / acquisition costs

December 31, 2016

Operating Income

Operating Margin

(3.4)
(0.4)
3.5
(1.1)
5.6

1.9

6.1

(2.8)%

(0.1)%

2.8 %

(0.9)%

5.1 %

1.6 %

5.7 %

The increase was primarily related to improved volume/product mix, the divestiture of our systems integration business in China in 2015,
acquisitions discussed above and the year-over-year change in restructuring and acquisition costs. These increases were partially offset by
increased investment spending and inflation in excess of pricing and productivity.

2015 vs 2014
Net revenues

Net revenues for the year ended December 31, 2015 decreased by 25.2%, ($41.5 million) compared with the same period of 2014, which
primarily resulted from the following:

Pricing

Volume

Acquisitions / divestitures

Currency exchange rates

Total

0.2 %

(1.5)%

(19.6)%

(4.3)%

(25.2)%

The decrease in revenues was primarily due to the divestiture of our system integration business in China, unfavorable foreign
currency exchange rate movements, and lower volume partially offset by improved pricing and revenue from acquisitions. The
systems integration business in China historically generated the majority of its revenue in the fourth quarter and, as a result of the
sale in November 2015, revenue was lower by approximately $51.3 million compared to 2014. This decrease is reflected in the
Acquisitions / divestitures line above. The systems integration business in China also experienced a decline in revenue prior to

the sale compared to the prior year, which is reflected in the Volume line above. The decline in volume due to our systems integration
business in China was partially offset by increased volume in our remaining business.

Operating income/margin

Segment operating income for the year ended December 31, 2015 decreased $5.7 million and segment operating margin decreased
to (2.8)% from 1.4% compared with the same period in 2014 due to the following:

in millions

December 31, 2014

Pricing and productivity in excess of inflation

Adjustment to allowance for doubtful accounts

Currency exchange rates

Investment spending and other items

Acquisitions / divestitures

Restructuring / spin costs / acquisition costs

December 31, 2015

Operating Income

Operating Margin

2.3

2.4

1.2
(2.2)
(0.2)
(5.5)
(1.4)
(3.4)

1.4 %

1.2 %

0.7 %

(1.3)%

(0.1)%

(3.8)%

(0.9)%

(2.8)%

The decrease was primarily related to the divestiture of our systems integration business in China, unfavorable foreign currency
exchange rate movements and the year-over-year change in restructuring charges, acquisition expenses and separation costs incurred
in connection with the Spin-off . These decreases were partially offset by the impact of the acquisitions discussed above, pricing
improvements and productivity in excess of inflation. Additionally, operating income in 2014 included a $2.5 million charge to
increase the allowance for doubtful accounts compared to a $1.3 million charge in 2015.

Liquidity and Capital Resources

Sources and uses of liquidity

Our primary source of liquidity is cash provided by operating activities. Cash provided by operating activities is used to invest in
new product development, fund capital expenditures and fund working capital requirements and is expected to be adequate to
service any future debt, pay any declared dividends and potentially fund acquisitions and share repurchases. Our ability 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 Revolver) and capital markets. We believe that our future cash provided by
operating activities, availability under our Revolver and access to funds on hand and capital markets, will provide adequate
resources to fund our operating and financing needs.

The following table reflects the major categories of cash flows for the years ended December 31. For additional details, please
see the Consolidated Statements of Cash Flows in the Consolidated Financial Statements.

In millions

Cash provided by continuing operating activities

Cash used in investing activities

Cash provided by (used in) financing activities

Operating activities

2016

2015

2014

377.5
(64.0)
(196.0) $

257.4
(533.8)
195.0

259.0
(34.8)
(150.0)

Net cash provided by continuing operating activities for the year ended December 31, 2016 increased $120.1 million compared
to the same period in 2015. Operating cash flows for 2016 reflect higher earnings from continuing operations compared to the
same period in the prior year.

Net cash provided by continuing operating activities for the year ended December 31, 2015 decreased $1.6 million compared to
the same period in 2014. Operating cash flows for 2015 reflect lower earnings from continuing operations compared to the same
period in 2014 as well as increased use of working capital.

Investing activities

Net cash used in investing activities for the year ended December 31, 2016 decreased $469.8 million compared to the same period
in the prior year. During the year ended December 31, 2016, cash used for the acquisitions described above decreased $479.9
million compared to the same period in 2015. This was offset by an increase in capital expenditures of $7.3 million compared to
the same period in 2015.

Net cash used in investing activities for the year ended December 31, 2015 increased $499.0 million compared to the same period
in the prior year. During the year ended December 31, 2015, we paid $511.3 million of cash for the acquisitions described above.
This was offset by a decrease in capital expenditures and cash received from the sale of marketable securities.

Financing activities

Net cash used in financing activities for the year ended December 31, 2016 increased $391.0 million compared to the same period
in the prior year. Net repayments of debt totaled $64.4 million for the year ended December 31, 2016 primarily associated with
required amortization payments of our Term Loan A Facility and repayments of other borrowings. Proceeds from long-term debt
were $300.0 million for the year ended December 31, 2015. Cash used in other financing activities increased $48.3 million for
the year ended December 31, 2016 compared to the same period in the prior year primarily due to higher dividend payments and
increased repurchases of our ordinary shares partially offset by lower debt issuance costs, lower proceeds from shares issued under
incentive plans and a reduction in dividends paid to noncontrolling interests.

Net cash provided by financing activities for the year ended December 31, 2015 increased $345.0 million compared to the same
period in the prior year. We borrowed $400.0 million under the Revolver to partially finance the purchases of Simons Voss and
AXA in the third quarter of 2015. Proceeds from the issuance of our $300.0 million 2023 Senior Notes were used to repay a portion
of the borrowings under the Revolver and the remaining borrowings were repaid with cash on-hand by December 31, 2015. Net
repayments of other debt totaled $21.7 million for the year ended December 31, 2015 primarily associated with required
amortization payments of our Term Loan A facility. Cash used in other financing activities increased $11.3 million for the year
ended December 31, 2015 compared to the same period in the prior year primarily due to higher dividend payments and higher
debt issuance costs partially offset by lower repurchases of our ordinary shares.

Capitalization

Borrowings at December 31 consisted of the following:

In millions

Term Loan A Facility
5.75% Senior Notes due 2021

5.875% Senior Notes due 2023

Other debt, including capital leases, maturing in various amounts through 2024

Unamortized debt issuance costs, net

Total debt

Less current portion of long term debt

Total long-term debt

2016

2015

879.8

300.0

2.3
(18.3)
1,463.8

48.2

1,415.6

926.7

300.0

18.7
(22.3)
1,523.1

65.6

1,457.5

The Term Loan A Facility amortizes in quarterly installments, at the following rates per year: 5% in 2017, 5% in 2018, and 10%
in each year thereafter, with the final installment due on October 15, 2020. We repaid $46.9 million of principal on the Term Loan
A Facility for the year ended December 31, 2016. The 2021 Senior Notes are due in full on October 1, 2021 and the 2023 Senior
Notes are due in full on September 15, 2023.

We have a 5-year, $500.0 million revolving credit facility maturing on October 15, 2020. During August 2015, we borrowed $400.0
million under the Revolver and repaid the borrowed amount in full as of the year ended December 31, 2015. At December 31,
2016 and 2015, we did not have any borrowings outstanding under the Revolver. We had $21.7 million and $26.6 million of letters
of credit outstanding at December 31, 2016 and 2015, respectively, which reduce availability under the Revolver.

We are required to comply with certain covenants under our Senior Secured Credit Facility. We are required to comply with a
maximum leverage ratio of 4.00 to 1.00 based on a ratio of total consolidated indebtedness, net of unrestricted cash up to $150
million, to consolidated EBITDA. Additionally, we are required to have a minimum interest expense coverage ratio of 4.00 to
1.00 based on a ratio of consolidated EBITDA to consolidated interest expense, net of interest income. As of December 31, 2016,
we were in compliance with these covenants. The indentures to our senior notes and the senior secured credit facilities contain
affirmative and negative covenants that, among other things, limit or restrict our ability to enter into certain transactions. For
further details on these covenants, see Note 10 to the Consolidated Financial Statements.

The majority of our earnings are 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. Accordingly,
applicable income taxes have not been accrued on the portion of our earnings that is considered to be permanently reinvested. At
December 31, 2016, we had cash and cash equivalents of $312.4 million. Approximately 48% of our cash and cash equivalents
were located outside the U.S.

Pension 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, contribution 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 as the funded status increases. We monitor plan
funded status and asset allocation regularly in addition to investment manager performance.

We monitor the impact of market conditions on our defined benefit plans on a regular basis. At December 31, 2016, the funded
status of our qualified pension plan for U.S. employees increased to 73.6% from 70.9% at December 31, 2015 primarily due to
contributions made to the plan in the current year. In January 2017, subsequent to the Consolidated Balance Sheet date, we made
a discretionary $50.0 million contribution to the U.S. qualified defined benefit pension plan using cash on hand increasing the
funded status to 91.7% . The funded status for our non-U.S. pension plans increased to 92.9% at December 31, 2016 from 91.6%
at December 31, 2015. Funded status for all of our pension plans at December 31, 2016 increased to 83.3% from 81.7% at
December 31, 2015. After the discretionary $50.0 million contribution to the U.S. qualified defined benefit pension plan in January
2017, the funded status for all of our pension plans increased to approximately 90%. For further details on pension plan activity,
see Note 12 to the Consolidated Financial Statements.

Contractual Obligations

The following table summarizes our contractual cash obligations by required payment periods, in millions:

Long-term debt (including current
maturities)
Interest payments on long-term debt
Purchase obligations
Operating leases
Total contractual cash obligations

2017

2018-2019

2020-2021

Thereafter

Total

48.2

140.8

992.1

301.0

1,482.1

56.9
106.8
19.8
231.7 $

109.9
—
22.1
272.8

78.4
—
8.7
1,079.2

30.8
—
2.2
334.0

276.0
106.8
52.8
1,917.7

Future expected obligations under our pension and postretirement benefit plans, income taxes, environmental and product liability
matters have not been included in the contractual cash obligations table above.

Pensions

At December 31, 2016, we had net pension liabilities of $111.6 million, which consist of pension plan assets of $555.8 million
and pension plan obligations of $667.4 million. It is our objective to contribute to the pension plans to ensure adequate funds are
available in the plans to make benefit payments to plan participants and beneficiaries when required. In January 2017, subsequent
to the Consolidated Balance Sheet date, we made a discretionary $50.0 million contribution to the U.S. qualified defined benefit
pension plan using cash on hand. After the discretionary $50.0 million contribution to the U.S. qualified defined benefit pension
plan in January 2017, the funded status for all of our pension plans increased to approximately 90% from 83.3% at December 31,
2016. We currently project that an additional approximately $9.4 million will be contributed to our plans worldwide in 2017.
Because the timing and amounts of long-term funding requirements for pension obligations are uncertain, they have been excluded
from the preceding table. See Note 12 to the Consolidated Financial Statements for additional information.

Postretirement Benefits Other than Pensions

At December 31, 2016, we had postretirement benefit obligations of $9.7 million. We fund postretirement benefit costs principally
on a pay-as-you-go basis as medical costs are incurred by covered retiree populations. Benefit payments, which are net of expected
plan participant contributions and Medicare Part D subsidy, are expected to be approximately $0.9 million in 2017. Because the
timing and amounts of long-term funding requirements for postretirement obligations are uncertain, they have been excluded from
the preceding table. See Note 12 to the Consolidated Financial Statements for additional information.

Income Taxes

At December 31, 2016, we have total unrecognized tax benefits for uncertain tax positions of $32.0 million and $5.4 million of
related accrued interest and penalties, net of tax. The liability has been excluded from the preceding table as we are unable to
reasonably estimate the amount and period in which these liabilities might be paid. See Note 18 to the Consolidated Financial
Statements for additional information regarding matters relating to income taxes, including unrecognized tax benefits and tax
authority disputes.

Contingent Liabilities

We are involved in various litigations, claims and administrative proceedings, including those related to environmental, asbestos-
related, and product liability matters. We believe that these liabilities are subject to the uncertainties inherent in estimating future
costs for contingent liabilities, and will likely be resolved over an extended period of time. Because the timing and amounts of
potential future cash flows are uncertain, they have been excluded from the preceding table. See Note 21 to the Consolidated
Financial Statements for additional information.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our Consolidated Financial
Statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with those
accounting principles requires management to use judgment 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. If
updated information or actual amounts are different from previous estimates, the revisions are included in our results for the period
in which they become known.

The following is a summary of certain accounting estimates and assumptions made by management that we consider critical.

• Allowance for doubtful accounts – We have provided an allowance for doubtful accounts receivable, which represents our
best estimate of probable loss inherent in our accounts receivable portfolio. This estimate is based upon our policy, derived
from our knowledge of our end markets, customer base and products.

• Goodwill and indefinite-lived intangible assets – We have significant goodwill and indefinite-lived intangible assets on our
balance sheet related to acquisitions. Our goodwill and other indefinite-lived intangible assets are tested and reviewed
annually during the fourth quarter for impairment or when there is a significant change in events or circumstances that
indicate that the fair value of an asset is more likely than not less than the carrying amount of the asset.

Recoverability of goodwill is measured at the reporting unit level and begins with a qualitative assessment to determine if
it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining
whether it is necessary to perform the two-step goodwill impairment test prescribed by GAAP. For those reporting units
where it is required, the first step compares the carrying amount of the reporting unit to its estimated fair value. If the
estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the
second step of the impairment test is not necessary. To the extent that the carrying value of the reporting unit exceeds its
estimated fair value, a second step is performed, wherein the reporting unit’s carrying value of goodwill is compared to the
implied fair value of goodwill. To the extent that the carrying value exceeds the implied fair value, impairment exists and
must be recognized.

As quoted market prices are not available for our reporting units, the calculation of their estimated fair value in step one is
based on two valuation techniques, a discounted cash flow model (income approach) and a market adjusted multiple of
earnings and revenues (market approach), with each method being weighted in the calculation. The income approach relies
on the Company’s estimates of future cash flows and explicitly addresses factors such as timing, growth and margins, with
due consideration given to forecasting risk. The market approach reflects the market’s expectations for future growth and
risk, with adjustments to account for differences between the guideline publicly-traded companies and the subject reporting
units.

In step 2, the implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a
business combination. The estimated fair value of the reporting unit is allocated to all of the assets and liabilities of the
reporting unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business
combination and the fair value of the reporting unit, as determined in the first step of the goodwill impairment test, was the
price paid to acquire that reporting unit.

Recoverability of other intangible assets with indefinite useful lives is determined on a relief from royalty methodology
(income approach), which is based on the implied royalty paid, at an appropriate discount rate, to license the use of an asset
rather than owning the asset. The present value of the after-tax cost savings (i.e. royalty relief) indicates the estimated fair
value of the asset. Any excess of the carrying value over the estimated fair value is recognized as an impairment loss equal
to that excess.

The determination of the estimated fair value and the implied fair value of goodwill and other indefinite-lived intangible
assets requires us to make assumptions about estimated cash flows including profit margins, long-term forecasts, discount
rates and terminal growth rates. We developed these assumptions based on the market and geographic risks unique to each
reporting unit.

The estimated fair values for each of our reporting units exceeded their carrying values by more than 20% for the 2016
goodwill impairment test. Additionally, a 1% increase in the discount rate used or a 1% decrease in the terminal growth
rate would not result in any reporting unit failing step 1.

Assessing the fair value of goodwill includes, among other things, making key assumptions for estimating future cash flows
and appropriate market multiples. These assumptions are subject to a high degree of judgment and complexity. We make
every effort to estimate future cash flows as accurately as possible with the information available at the time the forecast
is developed. However, changes in assumptions and estimates may affect the estimated fair value of the reporting unit, and

could result in impairment charges in future periods. Factors that have the potential to create variances in the estimated fair
value of the reporting unit include but are not limited to the following:

• Decreases in estimated market sizes or market growth rates due to greater-than-expected declines in volumes,

pricing pressures or disruptive technology;

• Declines in our market share and penetration assumptions due to increased competition or an inability to develop

or launch new products;

• The impacts of the market volatility, including greater-than-expected declines in pricing, reductions in volumes,

or fluctuations in foreign exchange rates;

• The level of success of on-going and future research and development efforts, including those related to recent
acquisitions, and increases in the research and development costs necessary to obtain regulatory approvals and
launch new products;

• Increase in the price or decrease in the availability of key commodities and the impact of higher energy prices;

and

• Increases in our market-participant risk-adjusted weighted-average cost of capital;

Other Indefinite-lived intangible assets - We performed our annual indefinite-lived intangible impairment testing in 2016
and determined our indefinite-lived intangible assets were not impaired.

A significant increase in the discount rate, decrease in the long-term growth rate, decrease in the royalty rate or substantial
reductions in our end markets and volume assumptions could have a negative impact on the estimated fair values of any of
our trade names. The estimates of fair value are based on the best information available as of the date of the assessment,
which primarily incorporates management assumptions about expected future cash flows.

• Long-lived assets and finite-lived intangibles – Long-lived assets and finite-lived intangibles are reviewed for impairment
whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully
recoverable. Assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows can be
generated. Impairment in the carrying value of an asset could be recognized whenever anticipated future undiscounted cash
flows from an asset are less than its carrying value. The impairment is measured as the amount by which the carrying value
exceeds the fair value of the asset as determined by an estimate of discounted cash flows. We believe that our use of estimates
and assumptions are reasonable and comply with generally accepted accounting principles. Changes in business conditions
could potentially require future adjustments to these valuations.

• Loss contingencies – Liabilities are recorded for various contingencies arising in the normal course of business, including
litigation and administrative proceedings, environmental and asbestos matters and product liability, product warranty,
worker’s compensation and other claims. We have recorded reserves in the consolidated financial statements related to
these matters, which are developed using input derived from actuarial estimates and historical and anticipated experience
data depending on the nature of the reserve, and in certain instances with consultation of legal counsel, internal and external
consultants and engineers. Subject to the uncertainties inherent in estimating future costs for these types of liabilities, we
believe our estimated reserves are reasonable and do not believe the final determination of the liabilities with respect to
these matters would have a material effect on our financial condition, results of operations, liquidity or cash flows for any
year.

• Revenue recognition – Revenue is recognized and earned when all of the following criteria are satisfied: (a) persuasive
evidence of a sales arrangement exists; (b) the price is fixed or determinable; (c) collectability is reasonably assured; and
(d) delivery has occurred or service has been rendered. Delivery generally occurs when the title and the risks and rewards
of ownership have transferred to the customer. Both the persuasive evidence of a sales arrangement and fixed or determinable
price criteria are deemed to be satisfied upon receipt of an executed and legally binding sales agreement or contract that
clearly defines the terms and conditions of the transaction including the respective obligations of the parties. If the defined
terms and conditions allow variability in all or a component of the price, revenue is not recognized until such time that the
price becomes fixed or determinable. At the point of sale, we validate that existence of an enforceable claim that requires
payment within a reasonable amount of time and assesses the collectability of that claim. If collectability is not deemed to
be reasonably assured, then revenue recognition is deferred until such time that collectability becomes probable or cash is
received. Delivery is not considered to have occurred until the customer has taken title and assumed the risks and rewards
of ownership. Service and installation revenue are recognized when earned. In some instances, customer acceptance
provisions are included in sales arrangements to give the buyer the ability to ensure the delivered product or service meets
the criteria established in the order. In these instances, revenue recognition is deferred until the acceptance terms specified

in the arrangement are fulfilled through customer acceptance or a demonstration that established criteria have been satisfied.
If uncertainty exists about customer acceptance, revenue is not recognized until acceptance has occurred.

We offer various sales incentive programs to our customers, dealers, and distributors. Sales incentive programs do not
preclude revenue recognition, but do require an accrual for our best estimate of expected activity. Examples of the sales
incentives that are accrued for as a contra receivable and sales deduction at the point of sale include, but are not limited to,
discounts (i.e. net 30 type), coupons, and rebates where the customer does not have to provide any additional requirements
to receive the discount. Sales returns and customer disputes involving a question of quantity or price are also accounted for
as a reduction in revenue and a contra receivable. At December 31, 2016 and 2015, we had a customer claim accrual (contra
receivable) of $29.0 million and $24.5 million, respectively. All other incentives or incentive programs where the customer
is required to reach a certain sales level, remain a customer for a certain period, provide a rebate form or is subject to
additional requirements are accounted for as a reduction of revenue and establishment of a liability. At December 31, 2016
and 2015, we had a sales incentive accrual of $29.6 million and $26.6 million, respectively. Each of these accruals represents
our best estimate we expect to pay related to previously sold units based on historical claim experience. These estimates
are reviewed regularly for accuracy. If updated information or actual amounts are different from previous estimates, the
revisions are included in our results for the period in which they become known. Historically, the aggregate differences, if
any, between our estimates and actual amounts in any year have not had a material impact on our consolidated financial
statements.

•

Income taxes – Deferred tax assets and liabilities are determined based on temporary differences between financial reporting
and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences
are expected to reverse. We recognize future tax benefits, such as net operating losses and non-U.S. tax credits, to the extent
that realizing these benefits is considered in our judgment to be more likely than not. We regularly review the recoverability
of our deferred tax assets considering our historic profitability, projected future taxable income, timing of the reversals of
existing temporary differences and the feasibility of our tax planning strategies. Where appropriate, we record a valuation
allowance with respect to a future tax benefit.

The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant
facts and laws in the jurisdictions in which we operate. Future changes in applicable laws, projected levels of taxable income,
and tax planning could change the effective tax rate and tax balances recorded by us. In addition, tax authorities periodically
review income tax returns filed by us and can raise issues regarding our filing positions, timing and amount of income or
deductions, and the allocation of income among the jurisdictions in which we operate. A significant period of time may
elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with
respect to that return. We believe that we have adequately provided for any reasonably foreseeable resolution of these
matters. We will adjust our estimate if significant events so dictate. To the extent that the ultimate results differ from our
original or adjusted estimates, the effect will be recorded in the provision for income taxes in the period that the matter is
finally resolved.

• Employee benefit plans – We provide a range of benefits to eligible employees and retirees, including pensions,
postretirement and postemployment benefits. Determining the cost associated with such benefits is dependent on various
actuarial assumptions including discount rates, expected return on plan assets, compensation increases, employee mortality,
turnover rates and healthcare cost trend rates. Actuarial valuations are performed to determine expense in accordance with
GAAP. Actual results may differ from the actuarial assumptions and are generally accumulated and amortized into earnings
over future periods.

We review our actuarial assumptions at each measurement date and make modifications to the assumptions based on current
rates and trends, if appropriate. The discount rate, the rate of compensation increase and the expected long-term rates of
return on plan assets are determined as of each measurement date. A discount rate reflects a rate at which pension benefits
could be effectively settled. Discount rates for all plans are established using hypothetical yield curves based on the yields
of corporate bonds rated AA quality. Spot rates are developed from the yield curve and used to discount future benefit
payments. The rate of compensation increase is dependent on expected future compensation levels. The expected long-
term rate of return on plan assets reflects the average rate of returns expected on the funds invested or to be invested to
provide for the benefits included in the projected benefit obligation. The expected long-term rate of return on plan assets
is based on what is achievable given the plan’s investment policy, the types of assets held and the target asset allocation.
The expected long-term rate of return is determined as of each measurement date.

We believe that the assumptions utilized in recording our obligations under our plans are reasonable based on input from
our actuaries, outside investment advisors and information as to assumptions used by plan sponsors.

Changes in any of the assumptions can have an impact on the net periodic pension cost or postretirement benefit cost.
Estimated sensitivities to the expected 2016 net periodic pension cost of a 0.25% rate decline in the two basic assumptions

are as follows: the decline in the discount rate would increase expense by approximately $0.8 million and the decline in
the estimated return on assets would increase expense by approximately $0.6 million. A 1.0% increase in the healthcare
cost trend rate would have no impact on expense as we have capped the annual maximum amount we will pay for retiree
healthcare costs, therefore any additional costs would be assumed by the retiree.

• Business combinations – The fair value of the consideration paid in a business combination is allocated to tangible assets
and identifiable intangible assets, liabilities assumed and goodwill. The accounting for acquisitions involves a considerable
amount of judgment and estimate, including the fair value of acquired intangible assets involving projections of future
revenues and cash flows that are either discounted at an estimated discount rate or measured at an estimated royalty rate; fair
value of other acquired assets and assumed liabilities, including potential contingencies; and the useful lives of
the acquired assets. The assumptions used are determined at the time of the acquisition in accordance with accepted valuation
models. Projections are developed using internal forecasts, available industry and market data and estimates of long-term
growth rates. The impact of prior or future acquisitions on our financial condition or results of operations may be materially
impacted by the change in or initial selection of assumptions and estimates.

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements included in Item 15 herein for a discussion of recently issued and adopted
accounting pronouncements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to fluctuations in currency exchange rates, interest rates and commodity prices which could impact our results of
operations and financial condition.

Foreign Currency Exposures

We have operations throughout the world that manufacture and sell products in various international markets. As a result, we are
exposed to movements in exchange rates of various currencies against the U.S. dollar as well as against other currencies throughout
the world. We actively manage material currency exposures that are associated with purchases and sales and other assets and
liabilities at the legal entity level, however we do not hedge currency translation risk. We attempt to hedge exposures that cannot
be naturally offset to an insignificant amount with foreign currency derivatives. Derivative instruments utilized by us in our hedging
activities are viewed as risk management tools, involve little complexity and are not used for trading or speculative purposes. To
minimize the risk of counter party non-performance, derivative instrument agreements are made only through major financial
institutions with significant experience in such derivative instruments.

We evaluate our exposure to changes in currency exchange rates on our foreign currency derivatives using a sensitivity analysis.
The sensitivity analysis is a measurement of the potential loss in fair value based on a percentage change in exchange rates. Based
on the firmly committed currency derivative instruments in place at December 31, 2016, a hypothetical change in fair value of
those derivative instruments assuming a 10% adverse change in exchange rates would result in an additional unrealized loss of
approximately $12.1 million. This amount, when realized, would be partially offset by changes in the fair value of the underlying
transactions.

Commodity Price Exposures

We are exposed to volatility in the prices of commodities used in some of our products and we use fixed price contracts to manage
this exposure. We do not have committed commodity derivative instruments in place at December 31, 2016.

Interest Rate Exposure

Outstanding borrowings under our Senior Secured Credit Facilities accrue interest at variable rates and expose us to interest rate
risks. A 100 basis point increase in LIBOR would have resulted in incremental 2016 interest expense of approximately $6.2 million.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(a) The following Consolidated Financial Statements and Financial Statement Schedules and the report thereon of
PricewaterhouseCoopers LLP dated February 17, 2017, are presented following Item 15 of this Annual Report on Form 10-
K.

Consolidated Financial Statements:

Report of independent registered public accounting firm
Consolidated statements of comprehensive income for the years ended December 31, 2016, 2015 and 2014
Consolidated balance sheets at December 31, 2016 and 2015
For the years ended December 31, 2016, 2015 and 2014:

Consolidated statements of equity
Consolidated statements of cash flows
Notes to Consolidated Financial Statements

Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2016, 2015 and 2014

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

In millions, except per share amounts

2016

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Net revenues

Cost of goods sold

Operating income

Net earnings

Net earnings attributable to Allegion plc

Earnings per share attributable to Allegion plc ordinary
shareholders:

502.3

584.9

581.1

286.0

82.5

58.8

57.7

317.5

124.3

95.4

95.0

317.6

121.5

2.0

1.6

Basic

Diluted

0.60

0.99

0.98

0.02

569.7

331.6

97.2

75.0

74.8

0.78

0.77

In millions, except per share amounts

2015

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Net revenues
Cost of goods sold

Operating income

Net earnings (loss)

Net earnings (loss) attributable to Allegion plc

Earnings (loss) per share attributable to Allegion plc
ordinary shareholders:

458.7

519.5

544.5

271.6

71.0

43.7

45.4

297.7

95.7

65.0

63.9

304.5

110.4
(26.4)
(27.3)

Basic

Diluted

0.47

0.67

0.66

(0.28) $
(0.28) $

545.4

325.2

81.5

72.0

71.9

0.75

0.74

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company's management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of
the effectiveness of the Company's 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 Annual
Report on Form 10-K. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of
December 31, 2016, that the Company's disclosure controls and procedures were effective in ensuring that information required
to be disclosed by the Company in reports that it files or submits under the Exchange Act has been recorded, processed, summarized
and reported, within the time periods specified in the Commission's rules and forms, and that such information has been accumulated
and communicated to the Company's management including its Chief Executive Officer and Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure.

(b) Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined
under Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and
procedures that:

•

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the Company’s assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being
made only in accordance with authorizations of the Company’s management and directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework (2013). We concluded that our internal control over financial reporting was
effective as of December 31, 2016.

The effectiveness of our internal control over financial reporting has been audited by PricewaterhouseCoopers LLP, the independent
registered public accounting firm, as stated in their report herein.

There were no changes in the Company's internal control over financial reporting that occurred during the quarter ended
December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

Item 9B. OTHER INFORMATION

None.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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

The other information required by this item is incorporated herein by reference to the information contained under the headings
"Item 1. Election of Directors", "Section 16(a) Beneficial Ownership Reporting Compliance" and "Corporate Governance" in
Proxy Statement.

Item 11. EXECUTIVE COMPENSATION

The other information required by this item is incorporated herein by reference to the information contained under the headings
"Compensation Discussion and Analysis", "Executive Compensation" and "Compensation Committee Report" in our Proxy
Statement.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED

STOCKHOLDER MATTERS

The other information required by this item is incorporated herein by reference to the information contained under the headings
"Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" of our Proxy
Statement.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The other information required by this item is incorporated herein by reference to the information contained under the headings
"Corporate Governance" and "Certain Relationships and Related Person Transactions" of our Proxy Statement.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference to the information contained under the caption "Fees of
the Independent Auditors" in our Proxy Statement.

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

PART IV

(a) 1. and 2.

Financial statements and financial statement schedule
See Item 8.

Exhibits

The exhibits listed on the accompanying index to exhibits are filed as part of this Annual Report on
Form 10-K.

ALLEGION PLC
INDEX TO EXHIBITS
(Item 15(a))

Description

Pursuant to the rules and regulations of the SEC, we have filed certain agreements as exhibits to this Annual Report on Form 10-
K. These agreements may contain representations and warranties by the parties. These representations and warranties have been
made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made
to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in
such agreements and are subject to more recent developments, which may not be fully reflected in our public disclosure, (iii) may
reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what
may be viewed as material to investors. Accordingly, these representations and warranties may not describe our actual state of
affairs at the date hereof and should not be relied upon.

(a) Exhibits

Exhibit
Number

1.1

2.1

Exhibit Description

Method of Filing

Underwriting Agreement, dated as of September
11, 2015, among Allegion plc, the guarantors party
thereto and J.P. Morgan Securities LLC.
Separation and Distribution Agreement between
Ingersoll-Rand plc and Allegion plc, dated
November 29, 2013.

Incorporated by reference to Exhibit 1.1 to
the Company's Form 8-K filed with the SEC
on September 16, 2015 (File No. 001-35971).
Incorporated by reference to Exhibit 2.1 to
the Company’s Form 8-K filed with the SEC
on December 2, 2013 (File No. 001-35971).

4.1 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).

4.2

Certificate of Incorporation of Allegion plc

Incorporated by reference to Exhibit 3.2 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Indenture, dated as of October 4, 2013, among
Allegion plc, Allegion US Holding Company Inc.,
the subsidiary guarantors party thereto and Wells
Fargo Bank, National Association

Incorporated by reference to Exhibit 4.1 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

4.1

4.2

4.3

4.4

Exchange and Registration Rights Agreement,
dated as of October 4, 2013, among Allegion plc,
Allegion US Holding Company Inc., the
subsidiary guarantors party thereto and the
Representatives of the Initial Purchasers named
therein
Indenture, dated as of September 16, 2015, among
Allegion plc, the guarantors party thereto and
Wells Fargo Bank, National Association.
Form of Global Note representing the Notes
(included in Exhibit 4.1).

10.1 Tax Matters Agreement between Ingersoll-Rand

plc and Allegion plc

10.2 Employee Matters Agreement between Ingersoll-

Rand plc and Allegion plc

10.3

Guarantee and Collateral Agreement, among
Allegion plc, Allegion US Holding Company Inc.,
the restricted subsidiaries from time to time party
thereto and JPMorgan Chase Bank, N.A., as
administrative agent and collateral agent

Incorporated by reference to Exhibit 4.2 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 4.1 to
the Company's Form 8-K filed with the SEC
on September 16, 2015 (File No. 001-35971).
Incorporated by reference to Exhibit 4.2 to
the Company's Form 8-K filed with the SEC
on September 16, 2015 (File No. 001-35971).
Incorporated by reference to Exhibit 10.1 to
the Company’s Form 8-K filed with the SEC
on December 2, 2013 (File No. 001-35971).

Incorporated by reference to Exhibit 10.1 to
the Company’s Form 8-K filed with the SEC
on December 2, 2013 (File No. 001-35971).

Incorporated by reference to Exhibit 10.4 to
the Company’s Form 8-K/A filed with the
SEC on December 3, 2013 (File No.
001-35971).

10.4

2013 Incentive Stock Plan

10.5 Executive Deferred Compensation Plan

10.6

Supplemental Employee Savings Plan

10.7

Elected Officer Supplemental Program

10.8

Key Management Supplemental Program

10.9

Supplemental Pension Plan

10.10

Senior Executive Performance Plan

10.11

David D. Petratis Offer Letter, dated June 19,
2013

10.12

Patrick S. Shannon Offer Letter, dated April 9,
2013

10.13

Timothy P. Eckersley Offer Letter, dated October
3, 2013

10.14

Lucia V. Moretti, Offer Letter, dated February 19,
2014

Incorporated by reference to Exhibit 10.5 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.6 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).
Incorporated by reference to Exhibit 10.7 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.8 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.9 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.10 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.11 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.14 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.15 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.16 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.14 to
the Company's Form 10-K filed with the SEC
on February 26, 2016 (File No. 001-35971).

10.15

Jeffrey N. Braun Offer Letter, dated June 13, 2014

Filed herewith

10.16

Form of Allegion plc Deed Poll Indemnity

10.17

Form of Allegion US Holding Company, Inc.
Deed Poll Indemnity

Incorporated by reference to Exhibit 10.21 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.22 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

10.18

Form of Allegion Irish Holding Company Limited
Deed Poll Indemnity

10.19

Annual Incentive Plan

10.20

Change in Control Severance Plan

10.21

Second Amendment and Restated Agreement by
and among Allegion plc, as the Borrower, Allegion
US Holding Company, Inc., as the Co-Borrower,
the Lenders and Issuing Banks party thereto, and
JPMorgan Chase Bank, N.A., as Administrative
Agent, dated September 30, 2015

Incorporated by reference to Exhibit 10.23 to
the Company’s Registration Statement on
Form 10 filed with the SEC on June 17, 2013,
as amended (File No. 001-35971).

Incorporated by reference to Exhibit 10.33 to
the Company's Form 10-K filed with the SEC
on March 10, 2014 (File No. 001-35971).

Incorporated by reference to Exhibit 10.34 to
the Company's Form 10-K filed with the SEC
on March 10, 2014 (File No. 001-35971).

Incorporated by reference to Exhibit 10.1 to
the Company's Form 8-K filed with the SEC
on September 30, 2015 (File No. 001-35971).

10.22

Form of Restricted Stock Unit Award Agreement

Filed herewith

10.23

Form of Stock Option Award Agreement

Filed herewith

10.24

10.25

10.26

10.27

Form of Performance Share Unit Award
Agreement

Filed herewith

Form of Special Restricted Stock Unit Award
Agreement

Form of Non-Employee Director Restricted Stock
Unit Award Agreement

Share Purchase Agreement dated June 26, 2015
between SimonsVoss Luxco S.à r.l., SimonsVoss
Co-Invest GmbH & Co. KG, Mr Frank Rövekamp
and Allegion Luxembourg Holding & Financing
S.à r.l.

Incorporated by reference to Exhibit 10.4 to
the Company's Form 8-K filed with the SEC
on February 9, 2016 (File No. 001-35971).

Incorporated by reference to Exhibit 10.1 to
the Company's Form 8-K filed with the SEC
on February 9, 2016 (File No. 001-35971).

Incorporated by reference to Exhibit 10.1 to
the Company's Form 10-Q filed with the SEC
on July 30, 2015 (File No. 001-35971).

12.1

Ratio of Earnings to Fixed Charges

Filed herewith

21.1 List of subsidiaries of Allegion plc

23.1

31.1

31.2

32.1

Consent of Independent Registered Public
Accounting Firm

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.

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.

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

Filed herewith

Furnished herewith

101

The following materials from the Company’s
Annual Report on Form 10-K for the year ended
December 31, 2016, formatted in XBRL
(Extensible Business Reporting Language): (i) the
Consolidated Statements of Comprehensive
Income, (ii) the Consolidated Balance Sheets, (iii)
the Consolidated Statement of Cash Flows, (iv)
the Consolidated Statements of Equity and (v)
Notes to Consolidated Financial Statements.

Filed herewith

Item 16. FORM 10-K SUMMARY

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) 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.

SIGNATURES

ALLEGION PLC
(Registrant)

By:

/s/ David D. Petratis

David D. Petratis
Chief Executive Officer
February 17, 2017

Date:

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ David D. Petratis
(David D. Petratis)

/s/ Patrick S. Shannon
(Patrick S. Shannon)

/s/ Douglas P. Ranck
(Douglas P. Ranck)

/s/ Michael J. Chesser
(Michael J. Chesser)

/s/ Carla Cico
(Carla Cico)

/s/ Kirk S. Hachigian
(Kirk S. Hachigian)

/s/ Dean Schaffer

(Dean Schaffer)

/s/ Martin E. Welch III
(Martin E. Welch III)

Chairman of the Board, President and Chief
Executive Officer (Principal Executive
Officer)

February 17, 2017

Senior Vice President and Chief Financial
Officer (Principal Financial Officer)

February 17, 2017

Vice President and Controller (Principal
Accounting Officer)

February 17, 2017

Director

February 17, 2017

ALLEGION PLC
Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Comprehensive Income

Consolidated Balance Sheets

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Schedule II – Valuation and Qualifying Accounts

F-2

F-3

F-5

F-6

F-7

F-9

F-56

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Allegion plc:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of comprehensive
income, of equity and of cash flows present fairly, in all material respects, the financial position of Allegion plc and its
subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these
financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal
Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial
statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 17, 2017

F-2

Allegion plc
Allegion plc
Consolidated Statements of Comprehensive Income
Consolidated Statements of Comprehensive Income
In millions, except per share amounts
In millions, except per share amounts

For the years ended December 31,
Net revenues

Cost of goods sold

Selling and administrative expenses

Operating income

Interest expense

Loss on divestitures

Other (income) expense, net

Earnings before income taxes

Provision for income taxes

Earnings from continuing operations

Discontinued operations, net of tax

Net earnings

Less: Net earnings (loss) attributable to noncontrolling interests

Net earnings attributable to Allegion plc

Amounts attributable to Allegion plc ordinary shareholders:

Continuing operations

Discontinued operations

Net earnings

Earnings (loss) per share attributable to Allegion plc ordinary
shareholders:

Basic:

Continuing operations

Discontinued operations

Net earnings

Diluted:

Continuing operations

Discontinued operations

Net earnings

Dividends declared per ordinary share

2016

2015

2014

2,238.0

2,068.1

1,252.7

1,199.0

2,118.3

1,264.6

559.8

425.5

64.3

84.4
(18.2)
295.0

63.8

231.2

—

231.2

2.1

229.1

—

229.1

2.39

—

2.39

2.36

—

2.36

0.48

510.5

358.6

52.9

104.2
(7.8)
209.3

54.6

154.7
(0.4)
154.3

0.4

153.9

154.3
(0.4)
153.9

1.61
(0.01)
1.60

1.59

—

1.59

0.40

527.4

326.3

53.8

—

4.6

267.9

84.2

183.7
(11.1)
172.6
(2.6)
175.2

186.3
(11.1)
175.2

1.94
(0.12)
1.82

1.92
(0.12)
1.80

0.32

F-3

Allegion plc
Allegion plc
Consolidated Statements of Comprehensive Income (continued)
Consolidated Statements of Comprehensive Income - (Continued)
In millions, except per share amounts
In millions, except per share amounts

For the years ended December 31,
Net earnings

Other comprehensive income, net of tax

Currency translation

Cash flow hedges and marketable securities:

Unrealized net gains arising during period

Net gains reclassified into earnings

Tax expense

Total cash flow hedges and marketable securities, net of tax

Pension and OPEB adjustments:

Prior service gains (costs) for the period

Net actuarial gains (losses) for the period

Amortization reclassified into earnings

Settlements/curtailments reclassified to earnings

Currency translation and other

Tax benefit (expense)

Total pension and OPEB adjustments, net of tax

Other comprehensive loss, net of tax

Total comprehensive income, net of tax

Less: Total comprehensive income (loss) attributable to noncontrolling
interests

2016

2015

2014

231.2

154.3

172.6

(40.7)

(60.5)

(66.4)

9.7
(19.0)
(1.3)
(10.6)

—

3.1

6.0

0.3

14.4
(5.0)
18.8
(32.5)
198.7

1.7

15.8
(17.5)
—
(1.7)

(0.1)
(37.6)
5.4

1.1

5.0

3.0
(23.2)
(85.4)
68.9

(0.9)
69.8

2.0
(2.5)
(0.5)
(1.0)

0.3
(9.9)
4.3

—

4.8

15.7

15.2
(52.2)
120.4

(3.3)
123.7

Total comprehensive income attributable to Allegion plc

197.0

See accompanying notes to consolidated financial statements.

F-4

Allegion plc
Consolidated Balance Sheets
In millions, except share amounts

As of December 31,
ASSETS
Current assets:

Cash and cash equivalents

Accounts and notes receivable, net

Inventories

Current tax receivable

Other current assets

Assets held for sale

Total current assets

Property, plant and equipment, net

Goodwill

Intangible assets, net

Deferred and noncurrent income taxes

Other noncurrent assets

Total assets

LIABILITIES AND EQUITY
Current liabilities:

Accounts payable

Accrued compensation and benefits

Accrued expenses and other current liabilities

Current tax payable

Short-term borrowings and current maturities of long-term debt

Total current liabilities

Long-term debt

Postemployment and other benefit liabilities

Deferred and noncurrent income taxes

Other noncurrent liabilities

Total liabilities

Equity:

Allegion plc shareholders’ equity

Ordinary shares, $0.01 par value (95,273,927 and 95,991,259 shares issued and
outstanding at December 31, 2016 and 2015, respectively)
Capital in excess of par value

Retained earnings

Accumulated other comprehensive loss

Total Allegion plc shareholders’ equity

Noncontrolling interest

Total equity

Total liabilities and equity

See accompanying notes to consolidated financial statements.

F-5

2016

2015

312.4

260.0

220.6

11.9

22.2

2.2

829.3

226.6

716.8

357.4

72.3

45.0

199.7

303.4

204.1

10.5

17.4

—

735.1

224.8

714.1

372.4

91.9

124.7

2,247.4

2,263.0

179.9

81.0

117.8

2.7

48.2

429.6

1,415.6

134.5

118.7

32.6

175.1

72.4

124.9

9.1

65.6

447.1

1,457.5

145.4

120.0

63.3

2,131.0

2,233.3

1.0

—

376.6
(264.3)
113.3

3.1

116.4

1.0

24.4

232.4
(232.2)
25.6

4.1

29.7

2,247.4

2,263.0

Allegion plc
Consolidated Statements of Equity

In millions

Balance at December 31, 2013

Net earnings

Other comprehensive loss

Shares issued under incentive stock plans

Repurchase of ordinary shares

Share-based compensation

Dividends declared to noncontrolling interest

Cash dividends declared ($0.32 per share)

Other

Balance at December 31, 2014

Net earnings

Other comprehensive loss

Shares issued under incentive stock plans

Repurchase of ordinary shares

Share-based compensation

Acquisition/divestiture of noncontrolling interest

Dividends declared to noncontrolling interest

Cash dividends declared ($0.40 per share)

Balance at December 31, 2015

Net earnings

Other comprehensive loss

Shares issued under incentive stock plans

Repurchase of ordinary shares

Share-based compensation

Acquisition/divestiture of noncontrolling interest

Dividends declared to noncontrolling interest

Cash dividends declared ($0.48 per share)

Other

Balance at December 31, 2016

Allegion plc Shareholders' equity

Ordinary Shares

Total
equity
(deficit)

Amount

Capital in
excess of
par value

Retained
earnings

Accumulated
other
comprehensive
income (loss)

Non-
controlling
Interest

(35.0) $

1.0

96.0

28.5

1.1

(96.7) $

172.6

(52.2)

18.5

(50.3)

13.1

(4.5)

(30.7)

(13.0)

18.5

154.3

(85.4)

14.3

(30.0)

14.6

1.7

(20.0)

(38.3)

29.7

231.2

(32.5)

5.8

(85.1)

16.6

(0.4)

(2.7)

(46.0)

(0.2)

—

(1.0)

0.8

—

1.0

95.8

—

(0.5)

0.7

—

1.0

96.0

—

(1.3)

0.6

—

18.5

(48.8)

13.1

—

(11.3)

—

14.3

(4.5)

14.6

—

24.4

—

5.8

(46.4)

16.6

(0.4)

—

175.2

—

(1.5)

—

(30.7)

(1.7)

142.4

153.9

(0.1)

—

(25.5)

—

(38.3)

232.4

229.1

—

(38.7)

—

(46.0)

(0.2)

—

(51.5)

—

(148.2)

—

(84.0)

—

(232.2)

—

(32.1)

—

116.4

1.0

95.3

— $

376.6

(264.3) $

31.1

(2.6)

(0.7)

—

(4.5)

—

23.3

0.4

(1.3)

—

1.7

(20.0)

—

4.1

2.1

(0.4)

—

(2.7)

—

3.1

See accompanying notes to consolidated financial statements.

F-6

Allegion plc
Consolidated Statements of Cash Flows
In millions

For the years ended December 31,
Cash flows from operating activities:

Net earnings
Loss from discontinued operations, net of tax
Adjustments to arrive at net cash provided by operating activities:

2016

2015

2014

231.2
—

154.3
0.4

172.6
11.1

Write-off of debt issuance costs
Depreciation and amortization
Share based compensation
Excess tax benefit from share based awards
Loss on sale of business
Gain on sale of marketable securities
Loss on sale of property, plant and equipment
Equity earnings, net of dividends
Deferred income taxes
Other items
Changes in other assets and liabilities

(Increase) decrease in:

Accounts and notes receivable
Inventories
Other current and noncurrent assets

Increase (decrease) in:
Accounts payable
Other current and noncurrent liabilities

Net cash provided by continuing operating activities
Net cash used in discontinued operating activities

Net cash provided by operating activities

Cash flows from investing activities:

Capital expenditures
Restricted cash
Acquisition of businesses, net of cash acquired
Proceeds from sale of property, plant and equipment
Proceeds (payments) related to business dispositions
Proceeds from sale of marketable securities

Net cash used in investing activities

—
66.9
16.6
—
84.4
(12.4)
1.3
(3.2)
6.3
(7.7)

(19.8)
(15.6)
62.0

3.4
(35.9)
377.5
—
377.5

—
53.2
14.6
(3.3)
102.8
(11.0)
0.9
0.3
(2.0)
(11.3)

(13.5)
(5.8)
(5.0)

(14.7)
(2.5)
257.4
(0.4)
257.0

(42.5)
—
(31.4)
0.1
(4.3)
14.1
(64.0) $

(35.2)
—
(511.3)
0.3
0.1
12.3
(533.8) $

4.5
48.8
13.1
(4.5)
—
—
0.1
(0.5)
17.2
10.9

(8.0)
3.4
(24.2)

43.4
(28.9)
259.0
(3.1)
255.9

(51.5)
40.2
(25.2)
0.5
1.2
—
(34.8)

F-7

Allegion plc
Consolidated Statements of Cash Flows - (Continued)
In millions

For the years ended December 31,
Cash flows from financing activities:

Short-term borrowings, net
Proceeds from revolving credit facility
Proceeds from long-term debt
Payments of long-term debt

Net proceeds (repayments) of debt

Debt issuance costs
Excess tax benefit from share-based compensation
Dividends paid to ordinary shareholders
Dividends paid to noncontrolling interests
Repurchase of ordinary shares
Proceeds from shares issued under incentive plans
Other, net

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period
See accompanying notes to consolidated financial statements.

2016

2015

2014

(17.4) $
—
—
(47.0)
(64.4)
(0.3)
—
(46.0)
(2.7)
(85.1)
5.8
(3.3)
(196.0)
(4.8)
112.7
199.7
312.4

18.8
400.0
300.0
(440.5)
278.3
(9.0)
3.3
(38.3)
(20.0)
(30.0)
11.0
(0.3)
195.0
(9.0)
(90.8)
290.5
199.7

(22.0)
—
956.3
(1,012.3)
(78.0)
(5.8)
4.5
(30.0)
(4.5)
(50.3)
14.1
—
(150.0)
(8.0)
63.1
227.4
290.5

F-8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF COMPANY AND BASIS OF PRESENTATION

Allegion plc, an Irish public limited company, and its consolidated subsidiaries ("Allegion" or "the Company") are a leading global
company that creates peace of mind by pioneering safety and security. The Company offers an extensive and versatile portfolio
of mechanical and electronic security products across a range of market-leading brands including CISA®, Interflex®, LCN®,
Schlage® and Von Duprin®.

Basis of presentation: The Consolidated Financial Statements were prepared in accordance with generally accepted accounting
principles in the United States of America ("GAAP") as defined by the Financial Accounting Standards Board ("FASB") within
the FASB Accounting Standards Codification ("ASC").

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies used in the preparation of the accompanying Consolidated Financial Statements
follows:

Principles of Consolidation: The Consolidated Financial Statements include all majority-owned subsidiaries of the Company.
A noncontrolling interest in a subsidiary is considered an ownership interest in a majority-owned subsidiary that is not attributable
to the parent. The Company includes noncontrolling interest as a component of Total equity in the Consolidated Balance Sheet
and the Net earnings attributable to noncontrolling interests are presented as an adjustment from Net earnings used to arrive at
Net earnings attributable to Allegion in the Consolidated Statement of Comprehensive Income.

Partially-owned equity affiliates generally represent 20-50% ownership interests in investments and where we demonstrate
significant influence in investments, but do not have a controlling financial interest. Partially-owned equity affiliates are accounted
for under the equity method. The Company is also required to consolidate variable interest entities in which it bears a majority
of the risk to the entities’ potential losses or stands to gain from a majority of the entities’ expected returns. Transactions between
the Company and Ingersoll Rand and its affiliates are herein referred to as "related party" or "affiliated" transactions. The assets,
liabilities, results of operations and cash flows of all discontinued operations have been separately reported as discontinued
operations.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at
the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates
are based on several factors including the facts and circumstances available at the time the estimates are made, historical experience,
risk of loss, general economic conditions and trends, and the assessment of the probable future outcome. Some of the more
significant estimates include accounting for doubtful accounts, useful lives of property, plant and equipment and intangible assets,
purchase price allocations of acquired businesses, valuation of assets including goodwill and other intangible assets, product
warranties, sales allowances, pension plans, postretirement benefits other than pensions, taxes, environmental costs, product
liability and other contingencies. Actual results could differ from those estimates. Estimates and assumptions are reviewed
periodically, and the effects of changes, if any, are reflected in the Consolidated Statement of Comprehensive Income in the period
that they are determined.

Currency Translation: Assets and liabilities where the functional currency is not the U.S. dollar, have been translated at year-
end exchange rates, and income and expense accounts have been translated using average exchange rates throughout the year.
Adjustments resulting from the process of translating an entity’s financial statements into the U.S. dollar have been recorded in
the Equity section of the Consolidated Balance Sheet within Accumulated other comprehensive income (loss).

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand, demand deposits and all highly liquid investments
with original maturities at the time of purchase of three months or less.

Marketable Securities: The Company has classified its marketable securities as available-for-sale in accordance with GAAP.
Available-for-sale marketable securities are accounted for at fair value, with the unrealized gain or loss, less applicable deferred
income taxes, recorded within Accumulated other comprehensive income (loss). If any of the Company’s marketable securities
experience other than temporary declines in value as defined by GAAP, a loss is recorded in the Consolidated Statement of
Comprehensive Income in the period determined.

Inventories: Inventories are stated at the lower of cost or net realizable value using the first-in first-out (FIFO) method.

F-9

Allowance for Doubtful Accounts: The Company has provided an allowance for doubtful accounts reserve, which represents
the best estimate of probable loss inherent in the Company’s account receivables portfolio. Changes in the financial condition of
customers or other unanticipated events, which may affect their ability to make payments, could result in charges for additional
allowances exceeding the Company's estimates. The Company's estimates are influenced by the following considerations: a
continuing credit evaluation of our customers’ financial condition; trade accounts receivable aging; and historical loss experience.
The Company reserved $2.7 million and $3.8 million for doubtful accounts as of December 31, 2016 and 2015, respectively.

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Assets placed
in service are recorded at cost and depreciated using the straight-line method over the estimated useful life of the asset except for
leasehold improvements, which are depreciated over the shorter of their economic useful life or their lease term. The range of
useful lives used to depreciate property, plant and equipment is as follows:

Buildings
Machinery and equipment
Software

10
2
2

to
to
to

50 years
12 years
7 years

Repair and maintenance costs that do not extend the useful life of the asset are charged against earnings as incurred. Major
replacements and significant improvements that increase asset values and extend useful lives are capitalized.

The Company assesses the recoverability of the carrying value of its property, plant and equipment whenever events or changes
in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability is measured by a comparison
of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset. If the undiscounted
cash flows are less than the carrying amount of the asset, an impairment loss is recognized for the amount by which the carrying
value of the asset exceeds the fair value of the assets.

Goodwill and Intangible Assets: The Company records as goodwill the excess of the purchase price over the fair value of the
net assets acquired.

In accordance with GAAP, goodwill and other indefinite-lived intangible assets are tested and reviewed annually for impairment
during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of
the reporting unit is more likely than not less than the carrying amount of the reporting unit.

Recoverability of goodwill is measured at the reporting unit level and begins with a qualitative assessment to determine if it is
more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether
it is necessary to perform the two-step goodwill impairment test prescribed by GAAP. For those reporting units where it is required,
the first step compares the carrying amount of the reporting unit to its estimated fair value. If the estimated fair value of a reporting
unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not
necessary. To the extent that the carrying value of the reporting unit exceeds its estimated fair value, a second step is performed,
wherein the reporting unit's carrying value of goodwill is compared to the implied fair value of goodwill. To the extent that the
carrying value exceeds the implied fair value, impairment exists and must be recognized.

The calculation of estimated fair value is based on two valuation techniques, a discounted cash flow model (income approach)
and a market adjusted multiple of earnings and revenues (market approach), with each method being weighted in the calculation.
The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.
The estimated fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit (including any
unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the
reporting unit, as determined in the first step of the goodwill impairment test, was the price paid to acquire that reporting unit.

Recoverability of other intangible assets with indefinite useful lives (i.e. Trademarks) is determined on a relief from royalty
methodology (income approach), which is based on the implied royalty paid, at an appropriate discount rate, to license the use of
an asset rather than owning the asset. The present value of the after-tax cost savings (i.e. royalty relief) indicates the estimated
fair value of the asset. Any excess of the carrying value over the estimated fair value is recognized as an impairment loss equal to
that excess.

F-10

Intangible assets such as patents, customer-related intangible assets and other intangible assets with finite useful lives are amortized
on a straight-line basis over their estimated economic lives. The weighted-average useful lives approximate the following:

Customer relationships

Trademarks

Completed technology/patents

Other

25 years

10 years

25 years

Recoverability of intangible assets with finite useful lives is assessed in the same manner as property, plant and equipment as
described above.

Income Taxes: For purposes of the Company’s Consolidated Financial Statements for periods prior to the Spin-off, income tax
expense has been recorded as if the Company filed tax returns on a stand-alone basis separate from Ingersoll Rand. This separate
return methodology applies the accounting guidance for income taxes to the stand-alone financial statements as if the Company
was a stand-alone enterprise for the periods prior to the Spin-off. Therefore, cash tax payments and items of current and deferred
taxes may not be reflective of the Company’s actual tax balances prior to or subsequent to the Spin-off. Cash paid for income
taxes, net of refunds for the twelve months ended December 31, 2016 and 2015 was $10.4 million and $80.6 million, respectively.
The 2016 net cash income taxes paid includes a refund of $46.2 million received from the Canadian Tax Authorities.

The income tax accounts reflected in the Consolidated Balance Sheet as of December 31, 2016 and 2015 include income taxes
payable and deferred taxes allocated to the Company at the time of the Spin-off. The calculation of the Company’s income taxes
involves considerable judgment and the use of both estimates and allocations.

Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of
assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse.
The Company recognizes future tax benefits, such as net operating losses and tax credits, to the extent that realizing these benefits
is considered in its judgment to be more likely than not. The Company regularly reviews the recoverability of its deferred tax
assets considering its historic profitability, projected future taxable income, timing of the reversals of existing temporary differences
and the feasibility of its tax planning strategies. Where appropriate, the Company records a valuation allowance with respect to a
future tax benefit.

Product Warranties: 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.

Revenue Recognition: Revenue is recognized and earned when all of the following criteria are satisfied: (a) persuasive evidence
of a sales arrangement exists; (b) the price is fixed or determinable; (c) collectability is reasonably assured; and (d) delivery has
occurred or service has been rendered. Delivery generally occurs when the title and the risks and rewards of ownership have
transferred to the customer. Both the persuasive evidence of a sales arrangement and fixed or determinable price criteria are deemed
to be satisfied upon receipt of an executed and legally binding sales agreement or contract that clearly defines the terms and
conditions of the transaction including the respective obligations of the parties. If the defined terms and conditions allow variability
in all or a component of the price, revenue is not recognized until such time that the price becomes fixed or determinable. At the
point of sale, the Company validates the existence of an enforceable claim that requires payment within a reasonable amount of
time and assesses the collectability of that claim. If collectability is not deemed to be reasonably assured, then revenue recognition
is deferred until such time that collectability becomes probable or cash is received. Delivery is not considered to have occurred
until the customer has taken title and assumed the risks and rewards of ownership. Service and installation revenue are recognized
when earned. In some instances, customer acceptance provisions are included in sales arrangements to give the buyer the ability
to ensure the delivered product or service meets the criteria established in the order. In these instances, revenue recognition is
deferred until the acceptance terms specified in the arrangement are fulfilled through customer acceptance or a demonstration that
established criteria have been satisfied. If uncertainty exists about customer acceptance, revenue is not recognized until acceptance
has occurred.

The Company offers various sales incentive programs to our customers, dealers, and distributors. Sales incentive programs do not
preclude revenue recognition, but do require an accrual for the Company’s best estimate of expected activity. Examples of the
sales incentives that are accrued for as a contra receivable and sales deduction at the point of sale include, but are not limited to,
discounts (i.e. net 30 type), coupons, and rebates where the customer does not have to provide any additional requirements to
receive the discount. Sales returns and customer disputes involving a question of quantity or price are also accounted for as a

F-11

reduction in revenue and a contra receivable. At December 31, 2016 and 2015, the Company had a customer claim accrual (contra
receivable) of $29.0 million and $24.5 million, respectively. All other incentives or incentive programs where the customer is
required to reach a certain level of purchases, remain a customer for a certain period, provide a rebate form or is subject to additional
requirements are accounted for as a reduction of revenue and establishment of a liability. At December 31, 2016 and 2015, the
Company had a sales incentive accrual of $29.6 million and $26.6 million, respectively. Each of these accruals represents the
Company’s best estimate it expects to pay related to previously sold units based on historical claim experience. These estimates
are reviewed regularly for accuracy. If updated information or actual amounts are different from previous estimates, the revisions
are included in the Company’s results for the period in which they become known. Historically, the aggregate differences, if any,
between the Company’s estimates and actual amounts in any year have not had a material impact on the Consolidated Financial
Statements.

Environmental Costs: The Company is subject to laws and regulations relating to protecting the environment. Environmental
expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to existing conditions
caused by past operations, which do not contribute to current or future revenues, are expensed. Liabilities for remediation costs
are recorded when they are probable and can be reasonably estimated, generally no later than the completion of feasibility studies
or the Company’s commitment to a plan of action. The assessment of this liability, which is calculated based on existing technology,
does not reflect any offset for possible recoveries from insurance companies, and is not discounted. Refer to Note 21 for further
details of environmental matters.

Research and Development Costs: The Company conducts research and development activities for the purpose of developing
and improving new products and services. These expenditures are expensed when incurred. For the years ended December 31,
2016, 2015 and 2014, these expenditures amounted to approximately $47.3 million, $45.2 million and $43.3 million, respectively
and consist of salaries, wages, benefits, building costs and other overhead expenses.

Software Costs: The Company capitalizes certain qualified internal-use software costs during the application development stage
and subsequently amortizes those costs over the software's useful life, which ranges from 2 to 7 years.

Employee Benefit Plans: The Company provides a range of benefits, including pensions, postretirement and postemployment
benefits to eligible current and former employees. Determining the cost associated with such benefits is dependent on various
actuarial assumptions, including discount rates, expected return on plan assets, compensation increases, employee mortality,
turnover rates, and healthcare cost trend rates. Actuaries perform the required calculations to determine expense in accordance
with GAAP. Actual results may differ from the actuarial assumptions and are generally accumulated into Accumulated other
comprehensive income (loss) and amortized into Net earnings over future periods. The Company reviews its actuarial assumptions
at each measurement date and makes modifications to the assumptions based on current rates and trends, if appropriate. Refer to
Note 12 for further details on employee benefit plans.

Loss Contingencies: Liabilities are recorded for various contingencies arising in the normal course of business, including litigation
and administrative proceedings, environmental matters, product liability, product warranty, worker’s compensation and other
claims. The Company has recorded reserves in the financial statements related to these matters, which are developed using inputs
derived from actuarial estimates and historical and anticipated experience data depending on the nature of the reserve and, in
certain instances, with consultation of legal counsel, internal and external consultants and engineers. Subject to the uncertainties
inherent in estimating future costs for these types of liabilities, the Company believes its estimated reserves are reasonable and
does not believe the final determination of the liabilities with respect to these matters would have a material effect on the financial
condition, results of operations, liquidity or cash flows of the Company for any year. Refer to Note 21 for further details on loss
contingencies.

Derivative Instruments: The Company periodically enters into cash flow and other derivative transactions to specifically hedge
exposure to various risks related to currency and interest rates. The Company recognizes all derivatives on the Consolidated
Balance Sheet at their fair value as either assets or liabilities. For cash flow designated hedges, the effective portion of the changes
in fair value of the derivative contract are recorded in Accumulated other comprehensive income (loss), net of taxes, and are
recognized in Net earnings at the time earnings are affected by the hedged transaction. For other derivative transactions, the
changes in the fair value of the derivative contract are immediately recognized in Net earnings. Refer to Note 11 for further details
on derivative instruments.

F-12

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements:

In August 2014, the FASB issued ASU 2014-15, "Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern." ASU 2014-15 provides guidance on management’s responsibility in evaluating whether there is substantial doubt about
a company’s ability to continue as a going concern and to provide related footnote disclosures. The Company adopted the provisions
of ASU 2014-15 in the fourth quarter of 2016. The adoption of ASU 2014-15 did not have a material impact on the Company's
financial condition, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation
of Debt Issuance Costs." ASU 2015-03 amends existing guidance to require the presentation of debt issuance costs in the balance
sheet as a deduction from the carrying amount of the related debt liability instead of as an asset. The ASU is effective for annual
reporting periods beginning after December 15, 2015. As further reflected in Note 10 to the Consolidated Financial Statements,
we retrospectively adopted ASU 2015-03 in the first quarter of 2016. As a result of the adoption of ASU 2015-03, the Company
reclassified $22.3 million of unamortized debt issuance costs from Other noncurrent assets to Long term debt within its previously
reported consolidated balance sheet as of December 31, 2015.

In May 2015, the FASB issued ASU 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per
Share (or Its Equivalent)." ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for
which fair value is measured using the net asset value per share practical expedient and removes the requirement to make certain
disclosures for these investments. The ASU was effective for annual reporting periods beginning after December 15, 2015, however,
early adoption was permitted. The Company adopted the provisions of ASU 2015-07 on a retrospective basis at December 31,
2015.

In September 2015, the FASB issued ASU 2015-16, "Business Combinations (Topic 802): Simplifying the Accounting for
Measurement-Period Adjustments." ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are
identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the
issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in
a business combination. The ASU was effective for fiscal years, and interim periods within those years, beginning after December
15, 2015. During 2016, the Company made immaterial measurement-period adjustments related to business combinations from
2015 and 2016. The impact of ASU 2015-16 on these adjustments did not have a material impact on the consolidated financial
statements.

In November 2015, the FASB issued ASU 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes."
ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial
position. Prior to the issuance of the standard, entities were required to separate deferred income tax liabilities and assets into
current and noncurrent amounts in a classified statement of financial position. The ASU is effective for financial statements issued
for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15,
2018, however early adoption was permitted. The Company adopted the provisions of ASU 2015-17 on a prospective basis at
December 31, 2015.

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting." ASU 2016-09 changes how companies account for certain aspects of share-based payment
awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well
as classification in the statement of cash flows. The ASU is effective for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. The Company adopted ASU 2016-09 in the fourth quarter of 2016. As a result, during
the fourth quarter, the Company recognized a year-to-date 2016 excess tax benefit of $3.5 million against income tax expense
rather than additional paid-in capital.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than
Inventory." This update addresses the income tax consequences of intra-entity transfers of assets other than inventory. Current
GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold
to an outside party. In addition, interpretations of this guidance have developed in practice over the years for transfers of certain
intangible and tangible assets. The amendments in the update will require recognition of current and deferred income taxes resulting
from an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective for annual and
interim periods beginning after December 15, 2017. Early adoption is permitted in 2017 if adoption takes place during the first

F-13

interim reporting period. The Company elected to adopt early on January 1, 2017. The Company does not expect the adoption of
this guidance to have a material impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements:

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" (ASC 606). ASC 606 is a single,
comprehensive revenue recognition model for all contracts with customers. The model is based on changes in contract assets
(rights to receive consideration) and liabilities (obligations to provide a good or perform a service). Revenue is recognized based
on the satisfaction of performance obligations, which occurs when control of a good or service transfers to a customer. ASC 606
contains expanded disclosure requirements relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising
from contracts with customers. Entities may use a full retrospective approach or report the cumulative effect as of the date of
adoption ("modified retrospective method"). This guidance will be effective for the Company January 1, 2018. The FASB has also
issued the following standards which clarify ASU 2014-09 and have the same effective date as the original standard: ASU No.
2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients and ASU
2016-10 Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing. The Company has
completed a high-level assessment of the new standard’s impact and is currently performing a technical assessment of all customer
contracts. The Company will choose the modified retrospective method upon adoption in 2018. The adoption of the new standard
will not have a material impact on the consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." ASU 2015-11
changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value.
The standard defines net realizable value as estimated selling prices in the ordinary course of business less reasonably predictable
costs of completion, disposal and transportation. The ASU is effective for annual and interim reporting periods beginning after
December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The requirements of ASU
2015-11 are not expected to have a significant impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 requires the identification of arrangements
that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve month term, these
arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-
use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will
reflect lease expense for operating leases and amortization/interest expense for financing leases. The ASU is effective for annual
periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. ASU
2016-05 is required to be applied with a modified retrospective approach to each prior reporting period presented with various
optional practical expedients. The Company is assessing what impact ASU 2016-02 will have on the consolidated financial
statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments." The new guidance introduces an approach based on expected losses to estimate credit losses on certain
types of financial instruments. The ASU will be effective for fiscal years beginning after December 15, 2020, including interim
periods within those fiscal years. Early adoption is permitted. The Company is assessing what impact ASU 2016-13 will have
on the consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Clarification of Certain Cash Receipts
and Cash Payments." The objective of ASU 2016-15 is to eliminate the diversity in practice related to the classification of certain
cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues.
The ASU will be effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption
permitted. The amendments in this update will be applied retrospectively to all periods presented, unless deemed impracticable,
in which case, prospective application is permitted. The Company is assessing what impact ASU 2016-15 will have on the
consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, "Intangibles– Goodwill and Other (Topic 350): Simplifying the Accounting
for Goodwill Impairment". ASU 2017-04 removes Step 2 from the goodwill impairment test. The ASU will be effective for
fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests after January 1, 2017.
The Company is assessing what impact ASU 2017-04 will have on the consolidated financial statements.

F-14

NOTE 3 – MARKETABLE SECURITIES

At December 31, marketable securities included within Other noncurrent assets in the Consolidated Balance Sheets were as follows:

Amortized
cost or cost

2016

Unrealized
gains

Fair
value

Amortized
cost or cost

2015

Unrealized
gains

Fair
value

— $

1.2

13.0

14.2

In millions

Equity securities

NOTE 4 – INVENTORIES

At December 31, the major classes of inventory were as follows:

In millions

Raw materials

Work-in-process

Finished goods

Total

2016

2015

56.7

23.6

140.3

220.6

58.9

30.0

115.2

204.1

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) method.

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

At December 31, the major classes of property, plant and equipment were as follows:

In millions

Land

Buildings

Machinery and equipment

Software

Construction in progress

Accumulated depreciation

Total

2016

2015

14.5

127.6

353.6

126.5

18.2

640.4
(413.8)
226.6

14.5

125.9

340.1

101.9

34.1

616.5
(391.7)
224.8

Depreciation expense for the years ended December 31, 2016, 2015 and 2014 was $40.9 million, $36.4 million and $34.5 million,
which includes amounts for software amortization of $16.6 million, $14.4 million and $12.7 million.

F-15

NOTE 6 – GOODWILL

The Company records as goodwill the excess of the purchase price over the fair value of the net assets acquired. Once the final
valuation has been performed for each acquisition, adjustments may be recorded. The changes in the carrying amount of Goodwill
are as follows:

In millions

December 31, 2014 (gross)

Accumulated impairment *

December 31, 2014 (net)

Acquisitions

Write-off

Currency translation

December 31, 2015 (net)

Acquisitions

Currency translation

December 31, 2016 (net)

Americas

EMEIA

Asia Pacific

Total

364.8

—

364.8

9.2

(0.8)

(0.4)

372.8

—

0.1

372.9

533.0
(478.6)
54.4

219.3

—
(18.9)
254.8

12.5
(9.8)
257.5

72.1
(6.9)
65.2

27.9

—
(6.6)
86.5

3.3
(3.4)
86.4

969.9
(485.5)
484.4

256.4
(0.8)
(25.9)
714.1

15.8
(13.1)
716.8

* Accumulated impairment consists of charges of $137.6 million (EMEIA), $341.0 million (EMEIA) and $6.9 million (Asia
Pacific) recorded in 2013, 2008 and 2007, respectively, as a result of the Company's impairment testing.
As discussed in Note 9 - Divestitures in 2015 the assets of our systems integration business in China within the Asia Pacific
segment were reclassified to assets held for sale within the December 31, 2014 Consolidated Balance Sheet. Goodwill allocated
to this business was $21.6 million at December 31, 2014. In conjunction with determining the fair value of the assets held for sale,
the Company determined that the goodwill assigned to this business was impaired. As a result, approximately $21.0 million of
the $78.1 million pre-tax charge related to the divestiture recorded in 2015 related to the write-off of goodwill.

NOTE 7 – INTANGIBLE ASSETS

The following table sets forth the gross amount and related accumulated amortization of the Company’s intangible assets at
December 31:

In millions

Completed technologies/patents
Customer relationships
Trademarks (finite-lived)
Other
Total finite-lived intangible assets
Trademarks (indefinite-lived)
Total

Gross
carrying
amount

2016

Accumulated
amortization

Net
carrying
amount

Gross
carrying
amount

2015

Accumulated
amortization

Net
carrying
amount

48.0
278.9
78.5
11.0
416.4
64.6
481.0

(25.3) $
(51.6)
(37.3)
(9.4)
(123.6)

22.7
227.3
41.2
1.6
292.8
64.6
357.4

49.0
278.7
81.2
9.0
417.9
62.1
480.0

(23.1) $
(40.2)
(35.3)
(9.0)
(107.6)

25.9
238.5
45.9
—
310.3
62.1
372.4

The Company amortizes intangible assets with finite useful lives on a straight-line basis over their estimated economic lives in
accordance with GAAP. Indefinite-lived intangible assets are not subject to amortization, but instead, are tested for impairment
at least annually (more frequently if certain indicators are present).

Intangible asset amortization expense for 2016, 2015 and 2014 was $20.5 million, $11.9 million and $9.5 million, respectively.
Future estimated amortization expense on existing intangible assets in each of the next five years amounts to approximately $19.6
million for 2017, $19.6 million for 2018, $18.8 million for 2019, $18.8 million for 2020, and $18.8 million for 2021.

In accordance with the Company’s indefinite-lived intangible asset impairment testing policy outlined in Note 2, the Company
performed its annual impairment test in the fourth quarter of each year. In each year, the Company determined the fair value of
F-16

all indefinite-lived intangible assets exceeded their respective carrying values. Therefore, no impairment charges were recorded
during 2016, 2015 and 2014.

NOTE 8 - ACQUISITIONS

2016

In June 2016 the Company acquired 100% of Trelock GmbH, a portable safety and security provider, and certain affiliated
companies.

2015

In 2015, the Company completed one investment and five acquisitions:

Business
iDevices (investment)
Zero International Inc. ("Zero")
Brio (Division of RMD Industries Pty Ltd) ("Brio")
Milre Systek Co., Ltd ("Milre")
SimonsVoss Technologies GmbH ("SimonsVoss")
AXA Stenman Holding ("AXA")

Date
February 2015
April 2015
May 2015
July 2015
September 2015
September 2015

iDevices is a brand and development partner in the Internet of Things industry. The investment is accounted for using the equity
method.

Zero manufactures door and window products for commercial spaces and products include sealing systems, such as sound control,
fire and smoke protection, threshold applications, lites, door louvers, intumescent products, photo-luminescent and flood barrier
for doors.

Brio is a designer and manufacturer of sliding and folding door hardware for commercial and residential spaces in Australia, New
Zealand, the United Kingdom and the United States.

Milre is a leading security solutions manufacturer in South Korea, focused on producing high-quality and innovative electronic
door locks.

SimonsVoss was acquired for approximately $230.0 million. SimonsVoss, headquartered in Munich, Germany, is an electronic
lock company in the European electronic market segment. SimonsVoss generated sales of approximately $69.2 million in 2014.

AXA was acquired for approximately $208.0 million. AXA is a European residential and portable security provider headquartered
in Veenendaal, the Netherlands, with production facilities in the Netherlands, France and Poland. AXA manufactures and sells a
branded portfolio of portable locks and lights as well as a wide variety of window and door hardware. The products are sold
throughout Europe to bicycle manufacturers, retail distributors and property builders. AXA generated sales of approximately $79.8
million in 2014.

F-17

Total consideration paid for the acquisitions in 2015 was $511.3 million (net of cash acquired). The final allocation of the aggregate
purchase price to assets acquired and liabilities assumed for the acquisitions described above is as follows:

In millions

Accounts and notes receivable, net

Inventories

Other current assets

Property, plant and equipment, net

Goodwill

Intangible assets, net

Other noncurrent assets

Accounts payable

Accrued expenses and other current liabilities

Deferred tax liabilities and other noncurrent liabilities

23.3

34.8

4.2

27.2

257.5

273.8

12.5
(12.2)
(30.1)
(79.7)
511.3

Intangible assets are primarily comprised of acquired customer lists and completed technologies. 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 (i.e., assembled workforce). The majority of the goodwill
is not deductible for tax purposes. These acquisitions are accounted for as business combinations.

The acquisitions in 2015 contributed revenues of $74.5 million and earnings before tax of $2.2 million to the Company from
the acquisition dates to December 31, 2015.

The following unaudited pro forma financial information for the year ended December 31, 2015 reflects the consolidated
results of operations of the Company as if the acquisitions had taken place on January 1, 2014.

In millions, except per share amounts
Net revenues

Net earnings attributable to Allegion plc

Basic income per share

Diluted income per share

December 31,
2015

2,170.2

167.0

1.74

1.72

During the year ended December 31, 2015 the Company incurred $17.9 million of acquisition related costs. These expenses are
included in both Cost of goods sold and Selling and administrative expenses in the Consolidated Statement of Comprehensive
Income. For pro forma purposes, these expenses were assumed to have been incurred on January 1, 2014. Pro forma Net earnings
(loss) attributable to Allegion plc in the table above has been adjusted to reflect the costs in the assumed acquisition period.

The Company’s historical financial information was adjusted to give effect to the pro forma events that were directly attributable
to the acquisitions. This unaudited pro forma financial information has been 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 results of the acquired companies to reflect the additional amortization that would have been charged assuming the fair value
adjustments to intangible assets had been applied from January 1, 2014 with the consequential tax effects. Additionally, interest
related to the issuance of $300 million of senior notes and the borrowing of $100 million on the revolving facility has been included
in the pro forma results above as if the debt was outstanding as of January 1, 2014. For purposes of calculating interest on the
additional debt amounts, the Company has assumed the total amount is outstanding for all pro forma periods presented.

NOTE 9 - DIVESTITURES

As previously disclosed, the Company sold its majority ownership in its Venezuelan operation to Venezuelan investors. As a result
of the sale in the third quarter of 2015, the Company recorded a non-cash charge of $26.1 million, which primarily represents
F-18

cumulative currency translation adjustments that were previously deferred in equity and were reclassified to a loss in the
Consolidated Statement of Comprehensive Income upon sale.

As previously disclosed, the Company sold a majority stake of Bocom Wincent Technologies Co., Ltd. ("Systems Integration")
in the fourth quarter of 2015. Systems Integration operates a security system integration business exclusively in China and provides
services primarily to Chinese governments and government agencies. Under the terms of the transaction, the Company was to
receive consideration of up to $75 million based on the future cash collection performance of Systems Integration and additional
payments of approximately $8.3 million related to working capital transferred with the sale. Additionally, the Company has
retained 15% of the shares of Systems Integration.

During the twelve months ended December 31, 2015, and as a result of the sale, the Company recorded a non-cash, pre-tax charge
of $78.1 million ($82.4 million after tax charges) to write the carrying value of Systems Integration’s assets and liabilities down
to their estimated fair value less costs to complete the transaction. The charge was recorded as Loss on divestitures within the
Statement of Comprehensive Income.

As of December 31, 2015, the fair value of the consideration was $75.3 million, of which $51.2 million is classified in Accounts
and notes receivable, net and the remaining amount is classified within Other assets within the Consolidated Balance Sheet.

As part of the Company's quarterly assessment of the collectibility of the above amounts during the third quarter of 2016, the
receivable was considered impaired. It was determined during this evaluation that certain unfavorable events occurred related to
the Systems Integration business requiring an impairment of the original consideration and working capital transfer amounts that
were recorded at the time of the sale. Prior to the impairment, the receivable balance was $85.9 million. A charge of $81.4 million
(net of tax) was recorded, reducing the carrying value of the receivable to a fair value of $4.5 million as of September 30, 2016.
The fair value of the receivable was estimated by discounting the expected future cash flows. The assumptions used in this estimate
are considered unobservable inputs. Fair value measurements that utilize significant unobservable inputs are categorized as Level
3 measurements under the accounting guidance. Also during the third quarter of 2016, the Company accrued certain contractual
obligations of $3.0 million that were uncertain at the time of the sale.

The Company currently estimates the fair value of the consideration to be $3.1 million, which is classified within Other noncurrent
assets within the Consolidated Balance Sheet. The total charge recorded as Loss on divestitures within the Statement of
Comprehensive Income was $84.4 million for the twelve months ended December 31, 2016. The Company does not expect to
incur any material charges in future periods related to the Systems Integration business.

Net revenues and loss before income taxes related to the divestiture of Systems Integration for the year ended December 31
were as follows:

In millions

Net Revenues

Loss before income taxes

Twelve months ended

2016

2015

— $

38.5

(84.4) $

(63.4)

Net revenues and earnings for Systems Integration were historically weighted to the second half of the year, reflecting typical
seasonality of contract awards.

F-19

NOTE 10 – DEBT AND CREDIT FACILITIES

At December 31, long-term debt and other borrowings consisted of the following:

In millions

Term Loan A Facility

5.75% Senior Notes due 2021

5.875% Senior Notes due 2023

Other debt, including capital leases, maturing in various amounts through 2024
Unamortized debt issuance costs, net

Total debt

Less current portion of long term debt

Total long-term debt

Senior Secured Credit Facilities

2016

2015

879.8

300.0

2.3
(18.3)
1,463.8

48.2

1,415.6

926.7

300.0

18.7
(22.3)
1,523.1

65.6

1,457.5

The Company has credit facilities consisting of a $938.4 million Term Loan Facility due in 2020 (the "Term Loan A Facility")
and a $500.0 million Senior Secured Revolving Credit Facility (the "Revolver") maturing in 2020. The Company refers to these
credit facilities as its "Senior Secured Credit Facilities."

The applicable margin for LIBOR rate borrowings range from 1.375% to 1.875% and the applicable margin for base rate borrowings
range from 0.375% to 0.875% in each case depending on the corporate credit or family rating. The Revolver and the Term Loan
A Facility mature on October 15, 2020.

The Company repaid $46.9 million of principal on its Term Loan A Facility during the year ended December 31, 2016. Borrowings
outstanding under the Term Loan A Facility were $879.8 million on December 31, 2016. Allegion plc is the primary borrower
under the Senior Secured Credit Facilities.

Term Facilities. The Term Loan A Facility amortizes in quarterly installments at the following rates per year: 5% in 2017; 5% in
2018 and 10% in each year thereafter, with the final installment due on October 15, 2020.

Revolver. The Senior Secured Revolving Credit Facility permits borrowings of up to $500.0 million. The Revolver is comprised
of two tranches: a $400 million tranche available in U.S. Dollars and a multi-currency tranche capped at $100 million. The
Revolver also includes $100.0 million available for the issuance of letters of credit, however outstanding letters of credit reduce
availability under the Revolver. The Revolver matures and the commitments thereunder will terminate on October 15, 2020. The
Company pays certain fees with respect to the Revolver, including a commitment fee on the undrawn portion of the Revolver of
0.25% per year. At December 31, 2016, the Company did not have any borrowings outstanding under the Revolver and had $21.7
million of letters of credit outstanding.

Guarantees and Collateral. The indebtedness, obligations and liabilities under the Senior Secured Credit Facilities are
unconditionally guaranteed jointly and severally on a senior secured basis by certain of Allegion plc's subsidiaries, and will be
secured, subject to permitted liens and other exceptions and exclusions, by a first-priority lien on substantially all tangible and
intangible assets of the borrowers and each U.S. guarantor (including (i) a perfected pledge of all of the capital stock of the borrower
and each direct, wholly-owned material subsidiary held by the borrowers or any guarantor (subject to certain limitations with
respect to non U.S. subsidiaries) and (ii) perfected security interests in, and mortgages on, accounts, inventory, equipment, general
intangibles, commercial tort claims, investment property, intellectual property, material fee-owned real property, letter-of-credit
rights, intercompany notes and proceeds of the foregoing, except for certain excluded assets.

Mandatory Prepayments. In accordance with the Senior Secured Credit Facility, net cash proceeds of non-recourse asset sales and
proceeds received from certain additional indebtedness will require prepayment of the Term Loan A Facility with proceeds received.
In addition, starting with the year ended December 31, 2016 the Company may be required to apply between 0%-50% of its annual
excess cash flow (as defined in the Senior Secured Credit Facility) to the prepayment of the Senior Secured Credit Facility.
However, this percentage reduces to certain levels and eventually to zero upon achievement of certain leverage ratios. During the
year ended December 31, 2016, the Company was not required to make any prepayments on the Senior Secured Credit Facility.

F-20

Voluntary Prepayments. The Company may voluntarily prepay the outstanding Term Loan A Facility in whole or in part at any
time without premium or penalty. Optional prepayments of the Term Loan A Facility will be applied to the remaining installments
at the direction of the borrower.

Commitments under the Revolver may be reduced in whole or in part at any time without premium or penalty.

Covenants. The Senior Secured Credit Facility contains certain customary covenants that, among other things, limit or restrict
(subject to certain exceptions) the Company's ability to incur certain indebtedness, grant certain liens, make certain investments,
declare or pay certain dividends or redeem or repurchase capital stock.

In addition, the Senior Secured Credit Facility contains certain financial covenants, which include a maximum leverage ratio and
an interest expense coverage ratio. As of December 31, 2016, the Company is required to comply with a maximum leverage ratio
of 4.00 to 1.00 based on a ratio of total consolidated indebtedness, net of unrestricted cash up to $150 million, to consolidated
EBITDA. Additionally, the Company is required to have a minimum interest expense coverage ratio of 4.00 to 1.00 based on a
ratio of consolidated EBITDA to consolidated interest expense, net of interest income. As of December 31, 2016 the Company
was in compliance with all of these covenants.

Interest Rates and Fees. Outstanding borrowings under the Senior Secured Credit Facilities accrue interest, at the option of the
borrower, at a per annum rate of (i) LIBOR plus the applicable margin or (ii) a base rate plus the applicable margin. As of
December 31, 2016, the Company elected to borrow utilizing LIBOR. The applicable margin for borrowings under the Revolver
and the Term Loan A Facility is subject to a credit facility rating-based pricing grid with the LIBOR ranging from 1.375% to
1.875%. The margin for Term Loan A Facility borrowings was 1.375% as of December 31, 2016.

To manage the Company's exposure to fluctuations in LIBOR rates, the Company has forward starting interest rate swaps to fix
interest rate paid during the contract period for $525.0 million of the Company's variable rate Term Loan Facility. Swaps with
notional amounts totaling $275.0 million expire in September 2017 and swaps with notional amounts totaling $250.0 million
expire in December 2020.

Senior Notes

In October 2013, Allegion US Holding Company Inc., the Company's wholly-owned subsidiary ("Allegion US"), issued $300.0
million of 5.75% senior notes due 2021 (the "2021 Senior Notes"). The 2021 Senior Notes have been registered under the Securities
Act of 1933, as amended. The 2021 Senior Notes accrue interest at the rate of 5.75% per annum, payable semi-annually on April
1 and October 1 of each year. The 2021 Senior Notes mature on October 1, 2021. The terms of the indenture governing the 2021
Senior Notes (the "Indenture") provide that, among other things, the 2021 Senior Notes rank equally in right of payment to all of
Allegion US's and Allegion plc’s existing and future senior unsecured indebtedness and effectively junior to all of the issuer’s and
the guarantors’ existing and future secured indebtedness (including indebtedness with respect to the Senior Secured Credit Facility)
to the extent of the value of the assets securing such indebtedness. The 2021 Senior Notes are structurally subordinated to all of
the existing and future liabilities of the Company's subsidiaries that do not guarantee the 2021 Senior Notes. The net proceeds of
this indebtedness were distributed to Ingersoll Rand in connection with the Spin-off.

In September 2015, Allegion plc issued $300.0 million of 5.875% senior notes due 2023 (the "2023 Senior Notes"). The 2023
Senior Notes have been registered under the Securities Act of 1933, as amended. The 2023 Senior Notes accrue interest at the rate
of 5.875% per annum, payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2016. The 2023
Senior Notes mature on September 15, 2023. The 2023 Senior Notes are pursuant to an indenture (the "Second Indenture"), which
provides that, among other things, the 2023 Senior Notes rank equally in right of payment to all of Allegion plc’s existing and
future senior unsecured indebtedness and effectively junior to all of Allegion plc’s and the guarantors’ existing and future secured
indebtedness (including indebtedness with respect to the Senior Secured Credit Facility) to the extent of the value of the assets
securing such indebtedness. The 2023 Senior Notes are structurally subordinated to all of the existing and future liabilities of
Allegion plc’s subsidiaries that do not guarantee the 2023 Senior Notes. The Company used the net proceeds of the offering to
repay approximately $300.0 million under Allegion’s revolving credit facility.

Guarantees. Allegion plc and certain of its subsidiaries jointly and severally guarantee Allegion US’s obligations under the 2021
Senior Notes on a senior unsecured basis. Allegion US and certain of its subsidiaries jointly and severally guarantee Allegion plc's
obligations under the 2023 Senior Notes.

F-21

Covenants. The 2021 Senior Notes and the 2023 Senior Notes contain certain customary covenants that, among other things, limit
or restrict (subject to certain exceptions) the Company's ability to incur certain indebtedness, grant certain liens, make certain
investments, declare or pay certain dividends or redeem or repurchase capital stock.

At December 31, 2016, future retirements of the amounts outstanding under the Senior Secured Credit Facilities, the 2021 Senior
Notes and the 2023 Senior Notes are as follows:

In millions

2017

2018

2019

2020

2021

Thereafter

Total

46.9

93.9

692.1

300.0

1,479.8

At December 31, 2016, the weighted-average interest rate for borrowings was 2.5% under the Term Loan A Facility (including
the effect of interest rate swaps), 5.75% under the 2021 Senior Notes and 5.875% under the 2023 Senior Notes. Cash paid for
interest for the years ended December 31, 2016, 2015 and 2014 was $56.0 million, $39.0 million and $45.0 million respectively.

NOTE 11 – FINANCIAL INSTRUMENTS

In the normal course of business, the Company uses various financial instruments, including derivative instruments, to manage
the risks associated with currency rate exposures. These financial instruments are not used for trading or speculative purposes.

On the date 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 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.

The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions
are highly effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be a
highly effective hedge, the fair market value changes of the instrument are recorded to accumulated other comprehensive income
(AOCI).

Any ineffective portion of a derivative instrument’s change in fair value is recorded in Net earnings in the period of change. If the
hedging relationship ceases to be highly effective, 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 were $132.6 million and $269.4 million at December 31, 2016
and 2015. At December 31, 2016 and 2015, gains of $0.8 million and $1.7 million, net of tax, were included in Accumulated other
comprehensive loss related to the fair value of the Company’s currency derivatives designated as accounting hedges. The amount
expected to be reclassified into Net earnings over the next twelve months is a gain of $0.8 million. The actual amounts that will
be reclassified to Net earnings may vary from this amount as a result of changes in market conditions. Gains and losses associated
with the Company’s currency derivatives not designated as hedges are recorded in Net earnings as changes in fair value occur. At
December 31, 2016, the maximum term of the Company’s currency derivatives was less than one year.

F-22

Interest Rate Swaps

The Company has forward starting interest rate swaps to fix interest rate paid during the contract period for $525.0 million of the
Company's variable rate Term Loan Facility. Swaps with notional amounts totaling $275.0 million expire in September 2017 and
swaps with notional amounts totaling $250.0 million expire in December 2020. These interest rate swaps met the criteria to be
accounted for as cash flow hedges of variable rate interest payments. Consequently, the changes in fair value of the interest rate
swaps were recognized in Accumulated other comprehensive loss. At December 31, 2016, $2.6 million of gains were recorded in
Accumulated other comprehensive loss related to these interest rate swaps. At December 31, 2015, $1.2 million of losses were
recorded in Accumulated other comprehensive loss related to these interest rate swaps. The amount expected to be reclassified
into Net earnings over the next twelve months is a loss of $0.4 million. The actual amounts that will be reclassified to Net earnings
may vary from this amount as a result of changes in market conditions.

The fair values of derivative instruments included within the Consolidated Balance Sheets as of December 31 were as follows:

In millions

Derivatives designated as hedges:

Currency derivatives

Interest rate swaps

Derivatives not designated as hedges:

Currency derivatives

Total derivatives

Asset derivatives

Liability derivatives

2016

2015

2016

2015

0.7

4.6

0.3

5.6

1.8

—

1.0

2.8

0.1

0.4

0.2

0.7

—

1.2

4.5

5.7

Asset and liability currency derivatives included in the table above are recorded within Other current assets and Accrued expenses
and other current liabilities, respectively. Asset and liability interest rate swap derivatives included in the table above are recorded
within Other noncurrent assets and Other noncurrent liabilities.

The amounts associated with derivatives designated as hedges affecting Net earnings and Accumulated other comprehensive loss
for the years ended December 31 were as follows:

In millions

2016

2015

2014

Amount of gain (loss)
recognized in AOCI

Location of gain (loss)
reclassified from
AOCI and recognized
into Net earnings

Amount of gain (loss)
reclassified from AOCI and recognized
into Net earnings

2016

2015

2014

Currency derivatives

Interest rate swaps

Total

4.2

5.4

9.6

6.6

(0.3)

6.3

1.6 Cost of goods sold
Interest expense
(0.9)
0.7

5.4

—

5.4

6.5

—

6.5

2.5

—

2.5

The 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) expense, net in the Consolidated Statements of
Comprehensive Income.

Concentration of Credit Risk

The counterparties to the Company’s forward contracts and swaps 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 12 – PENSIONS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company sponsors several U.S. defined benefit and defined contribution plans covering substantially all of our U.S. employees.
Additionally, the Company has non-U.S. defined benefit and defined contribution plans covering eligible non-U.S. employees.
Postretirement benefits, other than pensions, provide healthcare benefits, and in some instances, life insurance benefits for certain
eligible employees.

F-23

Pension Plans

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
additional other supplemental plans for officers and other key employees.

The following table details information regarding the Company’s pension plans at December 31:

In millions

Change in benefit obligations:

U.S.

NON-U.S.

2016

2015

2016

2015

Benefit obligation at beginning of year

280.7

282.9

371.7

388.4

Service cost

Interest cost

Employee contributions

Amendments

Actuarial (gains) losses
Benefits paid

Currency translation

Curtailments and settlements

Other, including expenses paid

Benefit obligation at end of year

Change in plan assets:
Fair value at beginning of year

Actual return on assets

Company contributions

Employee contributions

Benefits paid

Currency translation

Settlements

Other, including expenses paid

Fair value of assets end of year

Funded status:
Plan assets less than the benefit obligations

Amounts included in the balance sheet:
Accrued compensation and benefits

Postemployment and other benefit liabilities

Net amount recognized

9.4

9.8

—

1.6
(12.6)
—

—
(2.0)
286.9

192.7

16.4

7.9

—
(12.6)
—

—
(2.0)
202.4

(84.5)

(0.1)
(84.4)
(84.5)

9.5

11.0

—

—
(6.1)
(14.3)
—

—
(2.3)
280.7

213.2
(6.3)
—

—
(11.9)
—

—
(2.3)
192.7

(88.0)

—
(88.0)
(88.0)

3.1

10.7

0.3

—

80.8
(18.7)
(63.5)
(1.8)
(2.1)
380.5

340.4

90.3

6.0

0.3
(18.7)
(61.0)
(1.8)
(2.1)
353.4

(27.1)

(1.5)
(25.6)
(27.1)

3.3

13.7

0.3

0.1

6.6
(15.0)
(22.2)
(1.2)
(2.3)
371.7

372.0
(0.9)
6.5

0.3
(15.0)
(19.0)
(1.2)
(2.3)
340.4

(31.3)

(1.0)
(30.3)
(31.3)

It is the Company’s objective to contribute to the pension plans to ensure adequate funds are available in the plans to make benefit
payments to plan participants and beneficiaries when required. However, certain plans are not funded due to either legal, accounting,
or tax requirements in certain jurisdictions. As of December 31, 2016, approximately 5% of our projected benefit obligation relates
to plans that are not funded of which the majority are Non-U.S. plans.

F-24

The pretax amounts recognized in Accumulated other comprehensive loss were as follows:

In millions

December 31, 2014

Current year changes recorded to Accumulated other comprehensive loss

Amortization reclassified to earnings

Settlements/curtailments reclassified to earnings

December 31, 2015

Current year changes recorded to Accumulated other comprehensive loss

Amortization reclassified to earnings

December 31, 2016

In millions

December 31, 2014

Current year changes recorded to Accumulated other comprehensive loss

Amortization reclassified to earnings

Settlements/curtailments reclassified to earnings

Currency translation and other

December 31, 2015

Current year changes recorded to Accumulated other comprehensive loss

Amortization reclassified to earnings

Settlements/curtailments reclassified to earnings

Currency translation and other

December 31, 2016

Weighted-average assumptions used:

Benefit obligations at December 31,

Discount rate:

U.S. plans

Non-U.S. plans

Rate of compensation increase:

U.S. plans

Non-U.S. plans

Prior service cost

U.S.

Net actuarial
losses

Total

(3.5) $
—

0.7

—
(2.8) $
—

0.7
(2.1) $

(82.9) $
(11.8)
4.9

0.9
(88.9) $
4.5

4.7
(79.7) $

(86.4)
(11.8)
5.6

0.9
(91.7)
4.5

5.4
(81.8)

Prior service cost

NON-U.S.

Net actuarial
losses

Total

0.1
(0.1)
—

—

— $

—

— $

(73.5) $
(25.3)
1.4

0.2

5.0
(92.2) $
(4.3)
2.2

0.3

14.4
(79.6) $

2016

2015

4.1%

2.6%

3.5%

3.2%

(73.4)
(25.4)
1.4

0.2

5.0
(92.2)
(4.3)
2.2

0.3

14.4
(79.6)

4.3%

3.6%

3.5%

2.9%

The accumulated benefit obligation for all U.S. defined benefit pension plans was $272.5 million and $265.5 million at December
31, 2016 and 2015. The accumulated benefit obligation for all Non-U.S. defined benefit pension plans was $371.9 million and
$363.8 million at December 31, 2016 and 2015.

Beginning in 2016, the Company elected to change the method used to estimate the service and interest cost components of net
periodic benefit cost to a full yield-curve approach. Historically, the Company estimated the service and interest cost components
using a single weighted-average discount rate, rounded to the nearest 25th basis point, derived from the yield curve used to measure
the benefit obligation at the beginning of the period. Under the new approach, the Company applied discounting using the applicable
spot rates derived from the yield curve to discount the cash flows used to measure the benefit obligation. These spot rates align
to each of the projected benefit obligations and service cost cash flows. This change was made to better align the projected benefit
cash flows and the corresponding yield curve spot rates to provide a better estimate of service and interest cost components of net

F-25

periodic benefit costs. This change was considered a change in estimate and was accounted for on a prospective basis beginning
January 1, 2016. This change did not have a material impact on 2016 pension expense.

Information regarding pension plans with accumulated benefit obligations more than plan assets were:

In millions

Projected benefit obligation

Accumulated benefit obligation

Fair value of plan assets

U.S.

NON-U.S.

2016

2015

2016

2015

286.9

272.5

202.4

280.7

265.5

192.7

30.2

25.9

6.8

14.7

16.2

15.6

22.8

18.6

371.7

363.8

340.4

NON-U.S.

16.0

16.5

17.2

17.8

99.2

U.S.

106.4

Future pension benefit payments are expected to be paid as follows:

In millions

2017

2018

2019

2020

2021

2022 - 2026

F-26

The components of the Company’s net periodic pension benefit costs for the years ended December 31 include the following:

In millions

Service cost

Interest cost

Expected return on plan assets

Net amortization of:

Prior service costs

Plan net actuarial losses

Net periodic pension benefit cost

Net curtailment and settlement losses

Net periodic pension benefit cost after net curtailment and settlement
losses

In millions

Service cost

Interest cost

Expected return on plan assets

Net amortization of:

Prior service costs

Plan net actuarial losses

Net periodic pension benefit cost

Net curtailment and settlement losses

2016

U.S.

2015

2014

9.4

9.5

9.8
(10.2)

0.7

4.7

14.4

—

11.0
(11.2)

0.7

4.9

14.9

0.9

14.4

15.8

2016

NON-U.S.

2015

3.1

3.3

10.7
(13.7)

13.7
(17.8)

2014

4.6

17.3
(17.3)

—

2.2

2.3

0.3

—

1.4

0.6

0.2

7.3

11.5
(11.2)

0.7

2.3

10.6

—

10.6

0.1

2.8

7.5

—

7.5

Net periodic pension benefit cost after net curtailment and settlement
losses

2.6

0.8

Pension expense for 2017 is projected to be approximately $11.9 million, utilizing the assumptions for calculating the pension
benefit obligations at the end of 2016. The amounts expected to be recognized in net periodic pension cost during the year ended
December 31, 2017 for prior service cost and plan net actuarial losses are $0.4 million and $6.3 million, respectively.

Weighted-average assumptions used:

Net periodic pension cost for the year ended December 31,

2016

2015

2014

Discount rate:
U.S. plans
Non-U.S. plans

Rate of compensation increase:

U.S. plans
Non-U.S. plans

Expected return on plan assets:

U.S. plans
Non-U.S. plans

4.3%
3.7%

3.5%
3.0%

5.5%
4.5%

4.0%
3.7%

3.5%
2.9%

5.5%
5.0%

5.0%
4.5%

3.5%
4.8%

5.5%
5.3%

The expected long-term rate of return on plan assets reflects the average rate of returns expected on the funds invested or to be
invested to provide for the benefits included in the projected benefit obligation. The expected long-term rate of return on plan
assets is based on what is achievable given the plan’s investment policy, the types of assets held and target asset allocations. The
expected long-term rate of return is determined as of the measurement date. Each plan is reviewed and its historical returns and
target asset allocations to determine the appropriate expected long-term rate of return on plan assets to be used.

F-27

The overall objective in managing defined benefit plan assets is to ensure that all present and future benefit obligations are met
as they come due. The goal is to achieve this while trying to mitigate volatility in plan funded status, contribution, and expense
by better matching the characteristics of the plan assets to that of the plan liabilities. Each plan’s funded status and asset allocation
is monitored regularly in addition to investment manager performance.

Effective December 31, 2015, the Company adopted new accounting guidance for investments that calculate net asset value
("NAV") per share (or its equivalent). As a result of the adoption of this new guidance, certain investments that are measured at
fair value using the net asset value per share (or its equivalent) as a practical expedient are not required to be classified in the fair
value hierarchy. At December 31, 2016 and 2015, the net asset values of these investments were $62.9 million and $56.5 million
and are included within the column Assets measured at NAV in the fair value tables below.

The fair values of the Company’s U.S. pension plan assets at December 31, 2016 by asset category are as follows:

In millions

Cash and cash equivalents

Equity mutual funds
Fixed income investments:

U.S. government and agency obligations
Corporate and non-U.S. bonds(a)

Total assets at fair value

Receivables and payables, net

Net assets available for benefits

Fair value measurements

Level 1

Level 2

Level 3

Assets
measured at
NAV

Total
fair value

— $

—

5.6

—

55.2

77.6

132.8

— $

—

— $

62.9

—

— $

138.4

— $

62.9

5.6

62.9

55.2

77.6

132.8

201.3

1.1

202.4

(a)

Includes state and municipal bonds.

The fair values of the Company’s U.S. pension plan assets at December 31, 2015 by asset category are as follows:

In millions

Cash and cash equivalents

Equity mutual funds
Fixed income investments:

U.S. government and agency obligations
Corporate and non-U.S. bonds(a)

Total assets at fair value

Receivables and payables, net

Net assets available for benefits

Fair value measurements

Level 1

Level 2

Level 3

Assets
measured at
NAV

Total
fair value

— $

—

2.7

—

49.2

82.6

131.8

— $

—

— $

56.5

—

— $

134.5

— $

56.5

2.7

56.5

49.2

82.6

131.8

191.0

1.7

192.7

(a)

Includes state and municipal bonds.

F-28

The Company determines the fair value of its US plan assets using the following methodologies:

• Cash, cash equivalents and short term investments –The investments are valued at the closing price or amount held on
deposit by the custodian bank or at fair value by discounting the related cash flows based on current yields of similar
instruments with comparable durations considering the credit-worthiness of the issuer. As these investments are not traded
on active markets, these investments are classified as Level 2.

• U.S. government and agency obligations – Quoted market prices are not available for these securities. Fair values are
estimated using pricing models and/or quoted prices of securities with similar characteristics or discounted cash flows.
Such securities are classified as Level 2.

• Corporate and Non-US bonds – Quoted market prices are not available for these securities. Fair values are estimated by
using pricing models and/or quoted prices of securities with similar characteristics or discounted cash flows. Such
securities are classified as Level 2.

The fair values of the Company’s Non-U.S. pension plan assets at December 31, 2016 by asset category are as follows:

In millions

Cash and cash equivalents

Equity mutual funds

Corporate and non-U.S. bonds
Real estate(a)
Other(b)
Total assets at fair value

Fair value measurements

Level 1

Level 2

Level 3

58.9

— $

—

107.2

110.8

9.7

64.1

58.9

291.8

—

0.7

2.0

2.7

Total
fair value

58.9

107.2

110.8

10.4

66.1

353.4

(a)

(b)

Includes several private equity funds that invest in real estate. It includes both direct investment funds and
funds-of-funds.
Primarily includes insurance contracts.

The fair values of the Company’s Non-U.S. pension plan assets at December 31, 2015 by asset category are as follows:

In millions

Cash and cash equivalents

Equity mutual funds
Corporate and non-U.S. bonds
Real estate(a)
Other(b)
Total assets at fair value

Fair value measurements

Level 1

Level 2

Level 3

20.2

— $

—

121.6

130.7

12.3

52.9

20.2

317.5

—

0.8

1.9

2.7

Total
fair value

20.2

121.6

130.7

13.1

54.8

340.4

(a)

(b)

Includes several private equity funds that invest in real estate. It includes both direct investment funds and
funds-of-funds.
Primarily includes insurance contracts.

Cash equivalents are valued using a market approach with inputs including quoted market prices for either identical or similar
instruments. Fixed income securities are valued through a market approach with inputs including, but not limited to, benchmark
yields, reported trades, broker quotes and issuer spreads. Equity funds are valued at their net asset value. Net asset values are
calculated by the investment manager or sponsor of the fund. Private real estate fund values are reported by the fund manager and
are based on valuation or appraisal of the underlying investments.

The Company made $7.9 million of contributions to the U.S. pension plan in 2016. The Company did not make any required or
discretionary contributions to the U.S. pension plans in 2015 or 2014. The Company made required and discretionary contributions
to its Non-U.S. pension plans of $6.0 million in 2016, $6.5 million in 2015, and $17.5 million in 2014.

F-29

In January 2017, subsequent to the Consolidated Balance Sheet date, the Company made a discretionary $50.0 million contribution
to the U.S. qualified defined benefit pension plan, not reflected in the tables above, using cash on hand. The Company currently
projects that an approximate $9.4 million will be contributed to its U.S and Non-U.S. plans in 2017 in addition to the amount in
January 2017. The Company’s policy allows it to fund an amount, which could be in excess of or less than the pension cost
expensed, subject to the limitations imposed by current tax regulations. The Company anticipates funding the plans in 2017 in
accordance with contributions required by funding regulations or the laws of each jurisdiction.

Most of the Company’s U.S. employees are covered by defined contribution plans. Employer contributions are determined based
on criteria specific to the individual plans and amounted to approximately $13.3 million, $12.1 million, and $10.2 million in 2016,
2015 and 2014. The Company’s contributions relating to non-U.S. defined contribution plans and other non-U.S. benefit plans
were $5.6 million, $6.2 million and $7.0 million in 2016, 2015 and 2014.

Deferred Compensation Plan

The Company maintains an Executive Deferred Compensation Plan ("EDCP"), which is an unfunded, nonqualified plan that
permits certain employees to defer receipt of up to 50% of their annual salary and up to 100% of their annual bonus awards,
performance share plan awards, and restricted stock units received upon commencement of employment. As of December 31,
2016 the deferred compensation liability balance was $16.8 million.

Postretirement Benefits Other Than Pensions

The Company sponsors a postretirement plan that provides for healthcare benefits, and in some instances, life insurance benefits
that cover certain eligible employees. The Company funds postretirement benefit obligations principally on a pay-as-you-go basis.
Generally, postretirement health benefits are contributory with contributions adjusted annually. Life insurance plans for retirees
are primarily noncontributory.

The following table details information regarding the Company’s postretirement plans at December 31:

In millions

Change in benefit obligations:

Benefit obligation at beginning of year

Service cost

Interest cost

Actuarial gains

Benefits paid, net of Medicare Part D subsidy

Benefit obligations at end of year

Funded status:

Plan assets less than benefit obligations

Amounts included in the balance sheet:

Accrued compensation and benefits

Postemployment and other benefit liabilities

Total

2016

2015

12.9

0.1

0.4
(2.9)
(0.8)
9.7

13.6

0.1

0.5
(0.3)
(1.0)
12.9

(9.7) $

(12.9)

(0.9)
(8.8)
(9.7) $

(1.1)
(11.8)
(12.9)

F-30

The pretax amounts recognized in Accumulated other comprehensive loss were as follows:

In millions

December 31, 2014

Current year changes recorded to Accumulated other comprehensive loss

Amortization reclassified to earnings

Balance at December 31, 2015

Current year changes recorded to Accumulated other comprehensive loss

Amortization reclassified to earnings

Balance at December 31, 2016

Prior service
gains

Net actuarial
losses

Total

5.5

—
(1.6)
3.9

—
(1.6)
2.3

(0.7) $
(0.5)
—
(1.2) $
2.9

—

1.7

The components of net periodic postretirement benefit cost (income) for the years ended December 31 were as follows:

In millions

Service cost

Interest cost

Net amortization of:

Prior service gains

Net periodic postretirement benefit income

2016

2015

2014

0.1

0.4

(1.6)
(1.1) $

0.1

0.5

(1.6)
(1.0) $

4.8
(0.5)
(1.6)
2.7

2.9
(1.6)
4.0

0.1

0.5

(1.6)
(1.0)

Postretirement income for 2017 is projected to be $1.4 million. Amounts expected to be recognized in net periodic postretirement
benefits cost in 2017 for prior service gains and plan net actuarial losses are $1.6 million and $0.1 million.

Assumptions:

2016

2015

2014

Weighted-average discount rate assumption to determine:

Benefit obligations at December 31

Net periodic benefit cost

Assumed health-care cost trend rates at December 31:

Current year medical inflation (a)

Ultimate inflation rate (a)

Year that the rate reaches the ultimate trend rate (a)

3.5%

—%

n/a

3.5%

—%

n/a

3.5%

4.0%

7.3%

5.0%

2021

(a) The current year medical inflation rate, ultimate inflation rate and year of ultimate trend rate is no longer applicable as

the Company has capped the annual maximum amount it will pay for retiree healthcare costs.

A 1% change in the medical trend rate assumed for postretirement benefits would have no effect on the postretirement benefit
obligation as the Company has capped the annual maximum amount it will pay for retiree healthcare costs, therefore any additional
costs would be assumed by the retiree.

Benefit payments for postretirement benefits, which are net of expected plan participant contributions and Medicare Part D subsidy,
are expected to be paid as follows:

In millions

2017

2018

2019

2020

2021

2022 - 2026

0.9

1.0

0.9

3.7

F-31

NOTE 13 – 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 December 31, 2016 are as follows:

In millions

Recurring fair value measurements
Assets:

Interest rate swap

Foreign currency contracts

Total asset recurring fair value measurements

Liabilities:

Foreign currency contracts

Interest rate swap

Deferred compensation plans

Total liability recurring fair value measurements

Financial instruments not carried at fair value:

Total debt

Total financial instruments not carried at fair value

Fair value measurements

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total
fair value

— $

—

— $

—

— $

4.6

1.0

5.6

0.3

0.4

16.8

17.5

— $ 1,510.6

— $

—

— $

—

— $

4.6

1.0

5.6

0.3

0.4

16.8

17.5

— $

1,510.6

F-32

Assets and liabilities measured at fair value at December 31, 2015 are as follows:

In millions

Recurring fair value measurements
Assets:

Marketable securities

Foreign currency contracts

Total asset recurring fair value measurements

Liabilities:

Foreign currency contracts

Interest rate swap
Deferred compensation plans

Total liability recurring fair value measurements

Financial instruments not carried at fair value:

Total debt

Total financial instruments not carried at fair value

Fair value measurements

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total
fair value

14.2

—

14.2

— $
—
—
— $

— $

2.8

4.5
1.2
15.5
21.2

— $ 1,556.6

— $

—

— $

— $
—
—
— $

14.2

2.8

17.0

4.5
1.2
15.5
21.2

— $

1,556.6

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

• Marketable securities – These securities include investments in publicly traded stock of non-U.S. companies held by
non-U.S. subsidiaries of the Company. The fair value is obtained for the securities based on observable market prices
quoted on public stock exchanges.

• Foreign currency contracts – These instruments include foreign currency contracts for non-functional currency balance
sheet exposures. The fair value of the foreign currency contracts are determined based on a pricing model that uses spot
rates and forward prices from actively quoted currency markets that are readily accessible and observable.

•

Interest rate swaps – These instruments include forward-starting interest rate swap contracts for $525.0 million of the
Company's variable rate debt. The fair value of the derivative instruments are determined based on quoted prices for the
Company's swaps, which are not considered an active market.

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

• Debt – These securities are recorded at cost and include senior notes maturing through 2023. The fair value of the long-
term debt instruments is obtained based on observable market prices quoted on public exchanges for similar instruments.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings are a reasonable
estimate of their fair value due to the short-term nature of these instruments.

The methodology used by the Company to determine the fair value of its financial assets and liabilities at December 31, 2016 are
the same as those used at December 31, 2015. There have been no significant transfers between Level 1 and Level 2 categories.

F-33

NOTE 14 – EQUITY

Ordinary Shares

The reconciliation of Ordinary shares is as follows:

In millions

December 31, 2015

Shares issued under incentive plans

Repurchase of ordinary shares

December 31, 2016

Total

96.0

0.6
(1.3)
95.3

Allegion had 400.0 million ordinary shares authorized and 10.0 million $0.001 par value preferred shares authorized (with none
outstanding) at December 31, 2016. During the year ended December 31, 2016, the Company paid $85.1 million to repurchase
1.3 million ordinary shares on the open market under a share repurchase authorization previously approved by its Board of Directors.

On February 2, 2017, the Company's Board of Directors approved a new stock repurchase authorization of up to $500 million of
the Company's ordinary shares. This new stock repurchase authorization replaces the authorization established in 2014.

Other Comprehensive Income (Loss)

The changes in Accumulated other comprehensive income (loss) are as follows:

In millions

December 31, 2013

Other comprehensive income (loss), net of tax

December 31, 2014

Other comprehensive loss, net of tax

December 31, 2015

Other comprehensive income (loss), net of tax
December 31, 2016

Cash flow
hedges and
marketable
securities

Pension and
OPEB Items

Foreign
Currency
Items

16.7
(1.0)
15.7
(1.7)
14.0
(10.6)
3.4

(131.3) $
15.2
(116.1) $
(23.2)
(139.3) $
18.8
(120.5) $

17.9
(65.7)
(47.8) $
(59.1)
(106.9) $
(40.3)
(147.2) $

Total

(96.7)
(51.5)
(148.2)
(84.0)
(232.2)
(32.1)
(264.3)

The amounts of Other comprehensive income (loss) attributable to noncontrolling interests are as follows:

In millions

Foreign currency items

Total other comprehensive loss attributable to noncontrolling interests

2016

2015

2014

(0.4) $
(0.4) $

(1.4) $
(1.4) $

(0.7)
(0.7)

Included in equity for the year ended December 31, 2014 were $13.0 million of adjustments related to the completion of the
allocation of taxable income and the completion of the allocation of tax basis in certain assets between Ingersoll Rand and Allegion
at the Spin-off.

NOTE 15 – 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.

Under the Company's incentive stock plan, the total number of ordinary shares authorized by the shareholders is 8.0 million, of
which 3.7 million remain available as of December 31, 2016 for future incentive awards.

F-34

Compensation Expense

Share-based compensation expense is included in Selling and administrative expenses. The following table summarizes the
expenses recognized for the years ended December 31:

In millions

Stock options

RSUs

PSUs

Deferred compensation

Pre-tax expense

Tax benefit

Total

Stock Options / RSUs

2016

2015

2014

4.1

7.7

4.8

0.8

17.4
(5.6)
11.8

3.7

5.8

5.0

0.3

14.8
(4.4)
10.4

3.3

6.0

3.9

0.8

14.0
(4.7)
9.3

Eligible participants may receive (i) stock options, (ii) RSUs or (iii) a combination of both stock options and RSUs. 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 3-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 fair value of the stock options granted for the year ended December 31, 2016 and 2015 was estimated to be $15.86
per share and $17.88 per share, respectively, using the Black-Scholes option-pricing model. The weighted average assumptions
used were the following:

Dividend yield

Volatility

Risk-free rate of return

Expected life

2016

2015

0.83%

28.85%

1.38%

0.69%

31.37%

1.78%

6.0 years

For grants issued on or after December 1, 2013, expected volatility is based on the weighted average of the implied volatility of
a group of the Company’s peers. 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. Historical peer data is used to estimate
forfeitures within the Company’s valuation model. The expected life of the Company’s stock option awards granted post separation
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.

F-35

Changes in options outstanding under the plans for the years ended December 31, 2016, 2015 and 2014 are as follows:

Shares
subject
to option

Weighted-
average
exercise price (a)

Aggregate
intrinsic
value (millions)

Weighted-
average
remaining life
(years)

December 31, 2013

2,482,056

Granted

Exercised

Canceled

December 31, 2014

Granted

Exercised

Canceled

December 31, 2015

Granted

Exercised

Canceled

Outstanding December 31, 2016

Exercisable December 31, 2016

188,817
(683,383)
(25,462)
1,962,028

220,679
(575,564)
(14,976)
1,592,167

231,521
(447,019)
(63,599)
1,313,070

929,677

25.21

54.07

24.18

43.89

28.11

57.85

22.98

47.28

33.91

57.91

26.04

53.40

39.87

32.64

31.7

29.2

5.5

4.4

(a) The weighted average exercise price of awards represents the exercise price of the awards on the grant date converted to

ordinary shares of the Company.

The following table summarizes information concerning currently outstanding and exercisable options:

Range of
exercise price

10.01 — $ 20.00

20.01 —

30.01 —

40.01 —

50.01 —

60.01 —

30.00

40.00

50.00

60.00

70.00

70.01 — $ 80.00

Options outstanding

Options exercisable

Number
outstanding at
December 31,
2016

Weighted-
average
remaining
life (years)

Weighted-
average
exercise
price

Number
outstanding at
December 31,
2016

Weighted-
average
remaining
life (years)

Weighted-
average
exercise
price

149,389

344,376

139,747

145,062

533,234

631

1,313,070

2.3

2.8

5.0

7.0

8.0

9.8

9.6

5.6

14.87

25.93

32.31

43.37

56.84

63.93

72.12

39.87

149,389

344,376

139,747

145,062

151,103

—

2.3

2.8

5.0

7.0

6.8

—

14.87

25.93

32.31

43.37

55.49

—

929,677

4.4

32.64

At December 31, 2016, there was $2.9 million of total unrecognized compensation cost from stock option arrangements
granted under the plan, which is primarily related to unvested shares of non-retirement eligible employees. The aggregate
intrinsic value of the Company's options exercised during the year ended December 31, 2016 and 2015 was $18.3 million and
$21.5 million, respectively. Generally, stock options expire ten years from their date of grant.

F-36

The following table summarizes RSU activity for the years ended December 31, 2016, 2015 and 2014:

Outstanding and unvested at December 31, 2013

Granted

Vested

Canceled

Outstanding and unvested at December 31, 2014

Granted

Vested

Canceled

Outstanding and unvested at December 31, 2015

Granted

Vested
Canceled

Outstanding and unvested at December 31, 2016

RSUs

378,217

101,654
(149,392)
(5,319)
325,160

121,153
(92,029)
(9,354)
344,930

123,299
(220,854)
(41,741)
205,634

Weighted-
average grant
date fair value (a)

33.59

54.29

28.68

43.66

42.15

59.69

36.63

49.32

49.59

59.49

45.83
52.40

58.99

(a) The weighted average grant date fair value for periods ending prior to December 1, 2013 represents the fair value of
awards granted with respect to Ingersoll Rand ordinary shares, prior to conversion to awards of the Company. The
weighted average grant date fair value of awards on or after December 1, 2013 represents the fair value of the awards on
the grant date converted to ordinary shares of the Company.

At December 31, 2016, there was $5.1 million of total unrecognized compensation cost from RSU arrangements granted under
the plan, which is related to unvested shares of non-retirement eligible employees.

Performance Shares

The Company has a Performance Share Program ("PSP") for key employees. The program provides awards in the form of
Performance Share Units ("PSU") 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.

In December 2013, the Company’s Compensation Committee granted PSUs that are earned based upon the Company’s total
shareholder return ("TSR") performance compared to the TSR of the companies currently comprising the S&P 400 Capital Goods
Index over the three-year performance period based on the change in the 30 day average price for the index from December 2013
to the 30 day average price for the index in December 2016. The fair value of the market condition is estimated using a Monte
Carlo simulation approach in a risk-neutral framework to model future stock price movements based upon the risk-free rate of
return, the volatility of each entity, and the pair-wise correlations between each entity.

Beginning with the 2014 grant year, PSUs are earned based upon a 50% performance condition, measured at each reporting period
by EPS performance in relation to pre-established targets set by the Compensation Committee, and upon a 50% market condition,
measured by the Company’s relative TSR against the S&P 400 Capital Goods Index over a three-year performance period based
on the change in the 30 day average price for the grant year index to the 30 day average price for the index over the 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 the risk-free rate of return, the volatility of each entity, and the pair-wise
correlations between each entity.

F-37

The following table summarizes PSU activity for the maximum number of shares that may be issued for the years ended
December 31, 2016, 2015 and 2014:

PSUs

Weighted-average grant
date fair value (a)

Outstanding and unvested at December 31, 2013

62,883

Granted

Forfeited

Outstanding and unvested at December 31, 2014

Granted

Vested

Forfeited

Outstanding and unvested at December 31, 2015

Granted

Vested

Forfeited

Outstanding and unvested at December 31, 2016

110,387
(12,138)
161,132

58,323
(17,327)
(85)
202,043

94,201
(64,979)
(21,661)
209,604

29.27

72.70

50.96

57.39

66.47

75.05

64.92

64.83

72.69

57.07

56.02

(a) The weighted average grant date fair value for periods ending prior to December 1, 2013 represents the fair value of

awards granted with respect to Ingersoll Rand ordinary shares, prior to conversion to awards of the Company. The
weighted average grant date fair value of awards on or after December 1, 2013 represents the fair value of the awards
on the grant date converted to ordinary shares of the Company.

At December 31, 2016, there was $4.6 million of total unrecognized compensation cost from the PSP based on current
performance, which is related to unvested shares. This compensation will be recognized over the required service period, which
is generally the three-year vesting period.

Deferred Compensation

The Company allows key employees to defer a portion of their eligible 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 16 – RESTRUCTURING

During 2016, 2015, and 2014, the Company incurred costs of $3.1 million, $15.1 million, and $7.1 million respectively, associated
with ongoing restructuring actions. These actions included workforce reductions as well as the closure and consolidation of
manufacturing facilities in an effort to increase efficiencies across multiple lines of business.

2015 Italy Restructuring Plan

In the second quarter of 2015, management committed to a restructuring plan in Italy. The plan aims to improve competitive
position, ensure long-term viability and enhance customer experience. Expenses incurred for this plan for the years ended
December 31 were as follows:

In millions

EMEIA

Total

Cost of goods sold

Selling and administrative expenses

Total

The above expenses primarily related to severance charges.

F-38

Twelve months ended

2016

2015

0.9

0.3

0.6

0.9

14.7

13.6

1.1

14.7

Other Restructuring Plans

Restructuring charges recorded during the years ended December 31 as part of other restructuring plans were as follows:

In millions

Americas

EMEIA

Asia Pacific

Total

Cost of goods sold

Selling and administrative expenses

Total

2016

2015

2014

2.0

—

0.2

2.2

0.6

1.6

2.2

— $

—

0.4

— $

0.4

0.1

7.0

—

7.1

1.4

5.7

7.1

The charges in 2016 primarily related to workforce reductions and actions related to manufacturing foot print optimization
primarily in the Americas segment. In 2015 and 2014 the charges primarily related to workforce reductions in an effort to
increase efficiencies across multiple lines of business.

The changes in the restructuring reserve during the years ended December 31, 2016 and 2015 were as follows:

In millions

December 31, 2014

Additions

Cash and non-cash uses

Currency translation

December 31, 2015

Additions

Cash and non-cash uses

Currency translation

December 31, 2016

Americas

EMEIA

Asia Pacific

Total

— $

1.9

— $

—

2.0
(1.7)
—

0.3

14.7
(6.0)
(0.6)
10.0

0.9
(7.5)
(0.2)
3.2

0.4
(0.2)
—

0.2

0.2
(0.4)
—

— $

1.9

15.1
(6.2)
(0.6)
10.2

3.1
(9.6)
(0.2)
3.5

The Company incurred other non-qualified restructuring charges of $6.4 million and $0.5 million during the years ended
December 31, 2016 and 2015, respectively, in conjunction with the other restructuring plans, which represent costs that are directly
attributable to restructuring activities, but do not fall into the severance, exit or disposal category.

The majority of the costs accrued as of December 31, 2016 will be paid within one year.

F-39

NOTE 17 – OTHER EXPENSE, NET

At December 31, the components of Other expense, net were as follows:

In millions

Interest income

Exchange loss

(Earnings) loss from equity investments

Other

Other (income) expense, net

2016

2015

2014

(1.9) $
2.0
(3.6)
(14.7)
(18.2) $

(1.5) $
4.9

0.3
(11.5)
(7.8) $

(1.1)
7.6
(0.5)
(1.4)
4.6

During the year ended December 31, 2016 the Company recorded gains from the sale of marketable securities of $12.4 million
which is included within Other in the table above. During the year ended December 31, 2016 earnings from equity method
investments increased primarily due to a gain recognized by an investment in the first quarter of 2016.

During the year ended December 31, 2015 the Company recorded gains from the sale of marketable securities of $11.0 million
which is included within Other in the table above. In February 2015, the Venezuelan government announced changes to its exchange
rate system that included the launch of a new, market-based system called the Marginal Currency System, or "SIMADI." During
the year ended December 31, 2015 the Company recorded a charge of $2.8 million in order to remeasure net monetary assets at
the SIMADI rate and other unfavorable currency impacts. These losses are within Exchange loss in the table above.

In March 2014, the Venezuelan government launched a SICAD II rate to provide a greater supply of U.S. dollars from sources
other than the Venezuelan government. Given accelerated deterioration in economic conditions driven by a significant drop in the
price of oil and no expectation of improvement for the foreseeable future, the Company concluded that the SICAD II exchange
rate was the most appropriate rate at which to value bolivar denominated assets and liabilities. As a result, on December 31, 2014,
the Company moved the exchange rate applied to bolivars from the official rate to the SICAD II rate. The Company recorded a
charge of $12.1 million in order to remeasure net monetary assets to the SICAD II rate.

NOTE 18 – INCOME TAXES

Earnings before income taxes for the years ended December 31 were taxed within the following jurisdictions:

In millions
United States
Non-U.S.
Total

2016

2015

2014

129.9
165.1
295.0

123.1
86.2
209.3

162.2
105.7
267.9

The components of the Provision for income taxes for the years ended December 31 were as follows:

In millions

Current tax expense:

United States

Non-U.S.

Total:

Deferred tax expense (benefit):

United States

Non-U.S.

Total:

Total tax expense (benefit):

United States

Non-U.S.

Total

2016

2015

2014

53.4

43.8

13.8

57.6

14.4
(8.2)
6.2

58.2

5.6

3.5

56.9

2.1
(4.4)
(2.3)

55.5
(0.9)
54.6

52.9

14.1

67.0

15.6

1.6

17.2

68.5

15.7

84.2

63.8

F-40

The Provision for income taxes differs from the amount of income taxes determined by applying the applicable U.S. statutory
income tax rate to pretax income, as a result of the following differences:

Statutory U.S. rate

Increase (decrease) in rates resulting from:

Non-U.S. tax rate differential (1)

State and local income taxes (1)
Reserves for uncertain tax positions

Tax on unremitted earnings

Tax on remitted earnings

Venezuela devaluation

Production incentives
Other adjustments

Effective tax rate

(1) Net of changes in valuation allowances

At December 31, a summary of the deferred tax accounts were as follows:

In millions

Deferred tax assets:

Inventory and accounts receivable

Fixed assets and intangibles

Postemployment and other benefit liabilities

Other reserves and accruals

Net operating losses, tax credits and other carryforwards
Investment and other asset basis differences

Other

Gross deferred tax assets

Less: deferred tax valuation allowances

Deferred tax assets net of valuation allowances

Deferred tax liabilities:

Fixed assets and intangibles
Unremitted earnings of foreign subsidiaries

Other

Gross deferred tax liabilities

Net deferred tax (liabilities) assets

Percent of pretax income

2016

2015

2014

35.0%

(17.4)
2.0

2.0

1.2

—

—
(0.6)
(0.6)
21.6%

(11.1)
2.8
(3.4)
1.5

—

0.9
(1.0)
1.4

(9.6)
3.0
(2.1)
0.3

2.5

4.0
(2.4)
0.7

26.1%

31.4%

2016

2015

18.3

2.0

42.0

16.0

227.1

—

5.3

310.7
(225.5)
85.2

(90.6) $
(4.2)
(6.0)
(100.8)
(15.6) $

10.2

14.5

65.5

12.7

133.4

1.1

6.2

243.6
(133.3)
110.3

(96.7)
(3.9)
(6.7)
(107.3)
3.0

At December 31, 2016, $4.2 million of deferred tax was recorded for certain undistributed earnings of foreign subsidiaries. No
deferred taxes have been provided for any portion of the remaining undistributed earnings of the Company's subsidiaries since
these earnings have been, and will continue to be, permanently reinvested in these subsidiaries. For many reasons, including the
number of legal entities and jurisdictions involved, the complexity of the Company's legal entity structure, the complexity of tax
laws in the relevant jurisdictions and the impact of projections of income for future years to any calculations, the Company believes
it is not practicable to estimate, within any reasonable range, the amount of additional taxes which may be payable upon the
distribution of earnings.

F-41

At December 31, 2016, the Company had the following tax losses and tax credit carryforwards available to offset taxable income
in prior and future years:

In millions

U.S. Federal tax loss carryforwards
U.S. Federal and State credit carryforwards
U.S. State tax loss carryforwards
Non-U.S. tax loss carryforwards

Amount

Expiration
Period

2027 & 2028
2024-Unlimited
2017-2037
2018-Unlimited

15.1
22.7
26.6
706.2

The U.S. state loss carryforwards were incurred in various jurisdictions. The non-U.S. loss carryforwards were incurred in various
jurisdictions, predominantly in China, Ireland, Luxembourg and the United Kingdom.

The Company evaluates its deferred income tax assets to determine if valuation allowances are required or should be adjusted.
U.S. GAAP requires that companies assess whether valuation allowances should be established against their deferred tax assets
based on consideration of all available evidence, both positive and negative, using a "more likely than not" standard. This assessment
considers the nature, frequency and amount of recent losses, the duration of statutory carryforward periods and tax planning
strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

Activity associated with the Company’s valuation allowance is as follows:

In millions

Beginning balance

Increase to valuation allowance
Decrease to valuation allowance

Foreign exchange translation

Accumulated other comprehensive income (loss)

Ending balance

2016

2015

2014

133.3

50.8

109.0
(13.9)
(3.3)
0.4

82.2
(3.0)
(1.6)
4.9

225.5

133.3

46.9

28.0
(15.8)
(1.7)
(6.6)
50.8

During 2016, the valuation allowance increased by $92.2 million. This increase is the result of changes in jurisdictional profitability,
country specific tax laws and changes in judgment and facts regarding the realizability of deferred tax assets.

The Company has total unrecognized tax benefits of $32.0 million and $23.8 million as of December 31, 2016, and December 31,
2015, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the continuing operations effective
tax rate are $30.5 million as of December 31, 2016. A reconciliation of the beginning and ending amount of unrecognized tax
benefits is as follows:

In millions

Beginning balance

Additions based on tax positions related to the current year

Additions based on tax positions related to prior years

Reductions based on tax positions related to prior years

Reductions related to settlements with tax authorities

Reductions related to lapses of statute of limitations

Translation (gain)/loss

Ending balance

2016

2015

2014

23.8

25.4

9.1

7.1
(5.5)
(0.6)
(0.9)
(1.0)
32.0

3.9

1.6
(3.0)
—
(1.4)
(2.7)
23.8

40.6

3.1

11.8
(23.9)
(0.7)
(2.7)
(2.8)
25.4

The Company records interest and penalties associated with the uncertain tax positions within its Provision for income taxes. The
Company had reserves associated with interest and penalties, net of tax, of $5.4 million and $5.3 million at December 31, 2016
and 2015. For the year ended December 31, 2016 the Company recognized $0.3 million in net interest and penalties, net of tax,
in continuing operations and did not recognize any net interest and penalties, net of tax, in continuing operations for the year ended
December 31, 2015 related to these uncertain tax positions.

F-42

The total amount of unrecognized tax benefits relating to the Company's tax positions is subject to change based on future events
including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. Although
the outcomes and timing of such events are highly uncertain, it is reasonably possible that the balance of gross unrecognized tax
benefits, excluding interest and penalties, could potentially be reduced by up to approximately $12.5 million during the next 12
months.

The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts
and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income
and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities
periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount
of income or deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period
of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a tax authority with
respect to that return. In the normal course of business, the Company is subject to examination by taxing authorities throughout
the world, including such major jurisdictions as Canada, France, Germany, Italy, Mexico, the Netherlands and the United States.
In general, the examination of the material tax returns of subsidiaries of the Company is complete for the years prior to 2003, with
certain matters being resolved through appeals and litigation.

In connection with the Spin-off, the Company and Ingersoll Rand entered into a Tax Matters Agreement for the allocation of taxes.
In the second quarter of 2016, the Company reached a settlement agreement on a Canadian competent authority matter. The
Company made a net remittance of $49.2 million to Ingersoll Rand related to this competent authority matter in the third quarter
of 2016. At December 31, 2016, the Company has recorded a $4.2 million receivable from Ingersoll Rand related to this competent
authority matter. The Company expects to collect the $4.2 million receivable in 2017. During the fourth quarter of 2016, the
Company received a $44.1 million income tax refund (net of tax on interest income accrued on the refund) from the Canadian Tax
authorities related to the competent authority matter. At December 31, 2016, the Company has recorded $3.1 million as an Other
current asset (net of tax on interest income accrued on the refund) which is due from certain Canadian Provincial Tax Agencies
related to the competent authority matter. The Company expects to collect the $3.1 million receivable in 2017.

As of December 31, 2016, the Company agreed to indemnify Ingersoll Rand $0.1 million for various tax matters, exclusive of
interest and penalties of $0.1 million, which is reflected as an Other noncurrent liability ($0.6 million and $0.6 million at December
31, 2015). In addition, the Company also has other indemnity receivables from Ingersoll Rand in the amount of $5.6 million
reflected as an Other noncurrent asset at December 31, 2016 ($5.0 million at December 31, 2015). The indemnity receivable is
primarily related to additional competent authority relief filings.

NOTE 19 – DISCONTINUED OPERATIONS

Discontinued operations recognized a loss of $0.4 million and $11.1 million for the years ended December 31, 2015 and 2014,
respectively. There was no amount associated with discontinued operations for the year ended December 31, 2016. These losses
were mainly related to the sale of the United Kingdom (UK) Door Business in the third quarter of 2014 in addition to non-
cancellable lease expense and other miscellaneous expenses from previously sold businesses.

NOTE 20 – 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 calculation for
the effect of all potentially dilutive ordinary shares, which in the Company’s case, includes shares issuable under share-based
compensation plans.

Basic and Diluted EPS for all periods prior to the Spin-off reflect the number of distributed shares on December 1, 2013, or 96.0
million shares. For 2013 year to date calculations, these shares are treated as issued and outstanding from January 1, 2013 for
purposes of calculating historical basic EPS. At the time of the Spin-off, stock options and restricted stock awards were converted
to awards of Allegion, and therefore there were no dilutive securities outstanding for historical periods. For 2013, the Company
determined its weighted average dilutive share outstanding assuming that the date of our separation from Ingersoll Rand was the
beginning of the period.

F-43

The following table summarizes the weighted-average number of ordinary shares outstanding for basic and diluted earnings per
share calculations.

In millions

Weighted-average number of basic shares

Shares issuable under incentive stock plans

Weighted-average number of diluted shares

2016

2015

2014

95.8

1.1

96.9

95.9

1.0

96.9

96.1

1.1

97.2

At December 31, 2016, 0.6 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 21 – COMMITMENTS AND CONTINGENCIES

The Company is involved in various litigations, 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 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 our 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.

The Company incurred $23.3 million, $4.4 million, and $2.9 million of expenses during the years ended December 31, 2016, 2015
and 2014, respectively, for environmental remediation at sites presently or formerly owned or leased by the Company. In the
fourth-quarter of 2016, with the collaboration and approval of state regulators, the Company launched a proactive, alternative
approach to remediate two sites in the United States. This approach will allow the Company to more aggressively address
environmental conditions at these sites and reduce the impact of potential changes in regulatory requirements. As a result, the
Company recorded a $15 million charge for environmental remediation in the fourth quarter.

Environmental remediation costs are recorded in Costs of goods sold within the Consolidated Statements of Comprehensive
Income. As of December 31, 2016 and 2015, the Company has recorded reserves for environmental matters of $30.6 million and
$15.2 million. The total reserve at December 31, 2016 and 2015 included $9.6 million and $2.8 million 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 based on their expected term. The Company's total current environmental reserve at December 31,
2016 and 2015 was $6.1 million and $3.7 million and the remainder is classified as noncurrent. Given the evolving nature of
environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.

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.

F-44

The changes in the standard product warranty liability for the year ended December 31, were as follows:

In millions

Balance at beginning of period

Reductions for payments

Accruals for warranties issued during the current period

Changes to accruals related to preexisting warranties

Translation

Balance at end of period

2016

2015

2014

11.7
(6.5)
8.1

0.2
(0.2)
13.3

9.8
(5.4)
7.1

0.5
(0.3)
11.7

9.4
(4.9)
6.1
(0.6)
(0.2)
9.8

Standard product warranty liabilities are classified as Accrued expenses and other current liabilities.

Other Commitments and Contingencies

Certain office and warehouse facilities, transportation vehicles and data processing equipment are leased by the Company. Total
rental expense was $32.5 million in 2016, $30.3 million in 2015 and $32.5 million in 2014. Minimum lease payments required
under non-cancellable operating leases with terms in excess of one year for the next five years are as follows: $19.8 million in
2017, $13.1 million in 2018, $9.0 million in 2019, $5.8 million in 2020, and $2.9 million in 2021.

NOTE 22 – BUSINESS SEGMENT INFORMATION

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies
except that the operating segments’ results are prepared on a management basis that is consistent with the manner in which the
Company disaggregates financial information for internal review and decision making. 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 its operating decisions. The Company defines Segment operating margin as Segment operating income
as a percentage of Net revenues.

Each reportable segment is based primarily on the geography in which it operates. A description of the Company’s reportable
segments is as follows:

The Americas segment provides security products and solutions in approximately 30 countries 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 frames, electronic product and access control systems to
end-users in commercial, institutional and residential facilities, including into the education, healthcare, government, commercial
office and single- and multi-family residential markets. This segment’s primary brands are Schlage, Von Duprin and LCN.

The EMEIA segment provides security products and solutions throughout Europe, the Middle East, India and Africa in
approximately 85 countries. The segment offers customers the same portfolio of products as the Americas segment, as well as
time and attendance and workforce productivity solutions. This segment’s primary brands are Bricard, CISA, Interflex and
SimonsVoss. This segment also resells Schlage, Von Duprin and LCN products, primarily in the Middle East.

The Asia Pacific segment provides security products and solutions throughout Asia Pacific in approximately 14 countries. The
segment offers customers the same portfolio of products as the Americas segment. This segment’s primary brands are Milre,
Schlage, CISA, Von Duprin and LCN.

Effective September 1, 2014 the Company completed the sale of its United Kingdom (UK) Door businesses to an unrelated third
party. The businesses sold included the Dor-o-Matic™ branded automatic door business, the Martin Roberts™ branded performance

F-45

steel doorset business and the UK service organization. Historical results of the component have been reclassified to discontinued
operations for all periods presented. See Note 19 - Discontinued Operations for more information.

A summary of operations and balance sheet information by reportable segments as of and for the years ended December 31 were
as follows:

Dollar amounts in millions
Americas

Net revenues
Segment operating income
Segment operating margin
Depreciation and amortization
Capital expenditures
Total segment assets

EMEIA

Net revenues
Segment operating income
Segment operating margin
Depreciation and amortization
Capital expenditures
Total segment assets

Asia Pacific

Net revenues
Segment operating income (loss)
Segment operating margin
Depreciation and amortization
Capital expenditures
Total segment assets

Total net revenues

Reconciliation to earnings before income taxes

Segment operating income from reportable segments
Unallocated corporate expense
Interest expense
Loss on divestitures
Other expense (income), net
Total earnings before income taxes

Depreciation and amortization from reportable segments

Unallocated depreciation and amortization

Total depreciation and amortization

Capital expenditures from reportable segments

Corporate capital expenditures

Total capital expenditures

Assets from reportable segments

Unallocated assets (a)

Total assets

2016

2015

2014

1,645.7
448.1
27.2%
26.4
21.5
852.7

1,558.4
418.0
26.8 %
26.4
18.9
806.1

1,560.0
387.3
24.8%
24.8
23.6
990.7

485.9
35.9
7.4%
27.6
13.6
886.2

106.4
6.1
5.7%
2.4
1.1
177.4

2,238.0

490.1
64.6
64.3
84.4
(18.2)
295.0

56.4

5.0

61.4

36.2

6.3

42.5

1,916.3

331.1

2,247.4

386.3
8.6
2.2 %
17.2
5.6
899.4

123.4
(3.4)
(2.8)%
2.1
2.0
237.1

2,068.1

423.2
64.6
52.9
104.2
(7.8)
209.3

45.7

3.1

48.8

26.5

8.7

35.2

1,942.6

320.4

2,263.0

393.4
4.9
1.2%
16.4
4.9
457.7

164.9
2.3
1.4%
1.1
1.5
442.2

2,118.3

394.5
68.2
53.8
—
4.6
267.9

42.3

1.9

44.2

30.0

21.5

51.5

1,890.6

125.3

2,015.9

(a) Unallocated assets consists of debt issuance costs, deferred income tax balances and cash.

F-46

Revenues by destination and product as well as long-lived assets by geographic area for the years ended December 31 were as
follows:

In millions
Revenues

United States

Non-U.S.

Total

In millions
Revenues

Mechanical products
All other

Total

2016

2015

2014

1,531.2

706.8

2,238.0

1,425.1

643.0

2,068.1

1,332.0

786.3

2,118.3

2016

2015

2014

1,793.1

444.9

2,238.0

1,661.4

406.7

2,068.1

1,685.0

433.3

2,118.3

Less than 10% of the Company's net revenues come from the sale of services.

In millions
Long-lived assets

United States

Non-U.S.

Total

NOTE 23 – SUBSEQUENT EVENTS

2016

2015

117.1

402.3

519.4

134.9

400.2

535.1

On January 3, 2017, the Company acquired Republic Doors & Frames, Inc. through one of its subsidiaries.

On February 2, 2017, the Company's Board of Directors declared a quarterly dividend of $0.16 cents per ordinary share. The
dividend is payable March 31, 2017 to shareholders of record on March 15, 2017.

Also on February 2, 2017, the Company's Board of Directors approved a new stock repurchase authorization of up to $500 million
of the Company's ordinary shares. This new stock repurchase authorization replaces the authorization established in 2014.

F-47

NOTE 24 – GUARANTOR FINANCIAL INFORMATION

Allegion US Holding Company, Inc. ("Allegion US Holding") is the issuer of the 2021 Senior Notes and a guarantor of the 2023
Senior Notes. Allegion plc is the issuer of the 2023 Senior Notes and a guarantor of the 2023 Senior Notes. Schlage Lock Company
LLC and Von Duprin LLC (together, the "Other Subsidiary Guarantors") are guarantors of the 2021 Senior Notes and the 2023
Senior Notes. The following condensed and consolidated financial information of Allegion plc, Allegion US Holding, the Subsidiary
Guarantors and the other Allegion subsidiaries that are not guarantors (the "Other Subsidiaries") on a combined basis as of
December 31, 2016 and for the years ended December 31, 2016, 2015 and 2014, is being presented in order to meet the reporting
requirements under the Senior Notes indenture and Rule 3-10 of Regulation S-X. In accordance with Rule 3-10(d) of Regulation
S-X, separate financial statements for the Issuer, the Parent and the Subsidiary Guarantors are not required to be filed with the
SEC as the subsidiary debt issuer and the guarantors are directly or indirectly 100% owned by the Parent and the guarantees are
full and unconditional and joint and several.

Condensed and Consolidated Statement of Comprehensive Income
For the year ended December 31, 2016

In millions

Net revenues
Cost of goods sold
Selling and administrative expenses
Operating income (loss)
Equity earnings (loss) in affiliates, net of tax
Interest expense
Intercompany interest and fees
Loss on divestitures
Other (income) expense, net
Earnings (loss) before income taxes
Provision (benefit) for income taxes
Net earnings (loss)
Less: Net earnings attributable to noncontrolling
interests
Net earnings (loss) attributable to Allegion plc

Total comprehensive income (loss)
Less: Total comprehensive income attributable
to noncontrolling interests

Total comprehensive income (loss) attributable
to Allegion plc

Allegion
plc

Allegion
US
Holding

Other
Subsidiary
Guarantors

Other
Subsidiaries

Consolidating
Adjustments

Total

$ — $
—
4.7
(4.7)
277.4
43.5
(0.4)
—
—
229.6
0.5
229.1

—
$ 229.1

$ 197.0

—

— $
—
—
—
148.3
20.2
97.9
—
—
30.2
(45.5)
75.7

—
75.7

79.4

—

1,589.3
918.7
331.3
339.3
0.3
—
(147.2)
—
(19.4)
506.2
199.4
306.8

—
306.8

313.8

—

1,081.4
766.7
223.8
90.9
306.6
0.6
49.7
84.4
1.2
261.6
(90.6)
352.2

2.1
350.1

306.9

1.7

(432.7) $2,238.0
(432.7)
1,252.7
559.8
—
425.5
—
(732.6)
—
64.3
—
—
—
84.4
—
(18.2)
—
(732.6)
295.0
63.8
—
(732.6)
231.2

—

2.1
(732.6) $ 229.1

(698.4) $ 198.7

—

1.7

$ 197.0

79.4

313.8

305.2

(698.4) $ 197.0

F-48

Condensed and Consolidated Statement of Comprehensive Income
For the year ended December 31, 2015

In millions

Net revenues

Cost of goods sold

Selling and administrative expenses

Operating income (loss)

Equity earnings (loss) in affiliates, net of tax

Interest expense

Intercompany interest and fees

Loss on divestitures

Other (income) expense, net

Earnings (loss) before income taxes

Provision (benefit) for income taxes
Earnings (loss) from continuing operations

Discontinued operations, net of tax

Net earnings (loss)

Less: Net earnings attributable to noncontrolling
interests
Net earnings (loss) attributable to Allegion plc

Total comprehensive income (loss)

Less: Total comprehensive income attributable
to noncontrolling interests

Total comprehensive income (loss) attributable
to Allegion plc

Allegion
plc

Allegion
US
Holding

Other
Subsidiary
Guarantors

Other
Subsidiaries

Consolidating
Adjustments

Total

$ — $

— $

1,506.0

761.6

—

4.7

(4.7)

190.6

31.2

(0.4)

—

(0.2)

155.3

1.2
154.1

—

154.1

—

$ 154.1

69.8

—

—
(0.1)
0.1

167.2

21.1

95.0

—

51.2
(44.7)
95.9

—

95.9

—

95.9

95.6

—

859.2

307.1

339.7

3.8

—
(140.0)
—

0.9

482.6

187.1
295.5
(0.1)
295.4

—

295.4

290.2

539.3

198.8

23.5

291.6

0.6

45.4

104.2
(8.5)
173.4
(89.0)
262.4
(0.3)
262.1

0.4

261.7

183.7

(199.5) $2,068.1
(199.5)
1,199.0
—

510.5

—
(653.2)
—

—

—
(653.2)
—
(653.2)
—
(653.2)

358.6

—

52.9

—

104.2
(7.8)
209.3

54.6
154.7
(0.4)
154.3

—

0.4
(653.2) $ 153.9

(570.4) $

68.9

—

(0.9)

—

(0.9)

69.8

95.6

290.2

184.6

(570.4) $

69.8

F-49

Condensed and Consolidated Statement of Comprehensive Income
For the year ended December 31, 2014

In millions

Net revenues

Cost of goods sold

Selling and administrative expenses

Operating income (loss)

Equity earnings (loss) in affiliates, net of tax

Interest expense

Intercompany interest and fees

Other (income) expense, net

Earnings (loss) before income taxes

Provision (benefit) for income taxes

Earnings (loss) from continuing operations
Discontinued operations, net of tax

Net earnings (loss)

Less: Net earnings attributable to noncontrolling
interests
Net earnings (loss) attributable to Allegion plc

Total comprehensive income (loss)

Less: Total comprehensive income attributable
to noncontrolling interests

Total comprehensive income (loss) attributable
to Allegion plc

Allegion
plc

Allegion
US
Holding

Other
Subsidiary
Guarantors
1,399.9

Other
Subsidiaries

Consolidating
Adjustments

Total

916.4

$ — $

—

4.5

(4.5)

182.0

5.6

(3.2)

(0.1)

175.2

—

175.2
—

175.2

—

$ 175.2

$ 123.7

—

— $

—

0.2
(0.2)
170.8

58.0

63.0

—

49.6
(46.7)
96.3
—

96.3

—

96.3

—

803.1

304.4

292.4

6.9

—
(285.5)
(0.2)
585.0

222.6

362.4
—

362.4

—

362.4

659.5

218.3

38.6

351.5

1.0

225.7

4.9

158.5
(95.7)
254.2
(11.1)
243.1

(2.6)
245.7

242.4

(198.0) $2,118.3
(198.0)
1,264.6
—

527.4

—
(711.2)
(10.8)
—

—
(700.4)
4.0
(704.4)
—
(704.4)

326.3

—

53.8

—

4.6

267.9

84.2

183.7
(11.1)
172.6

—

(2.6)
(704.4) $ 175.2

(704.4) $ 120.4

—

(3.3)

—

(3.3)

$ 123.7

96.3

362.4

245.7

(704.4) $ 123.7

F-50

Condensed and Consolidated Balance Sheet
December 31, 2016

In millions

Current assets:

Allegion plc

Allegion
US Holding

Other
Subsidiary
Guarantors

Other
Subsidiaries

Consolidating
Adjustments

Total

Cash and cash equivalents

0.5

0.1

166.0

145.8

— $

—

—
(168.3)
—
(1,047.2)
(1,215.5)
(7,659.5)
—

—
(6,327.5)
—

312.4

260.0

220.6

34.1

2.2

—

829.3

—

226.6

1,074.2
—

117.3
$ (15,202.5) $ 2,247.4

120.0

143.0

142.9

2.2

320.6

874.5

3,422.6

104.6

893.4
1,679.8

35.2

7,010.1

184.8

(168.3) $

381.4

1.3

380.8

566.9

1.0

3,583.5

146.0

4,297.4

—
(1,047.2)
(1,215.5)
—
(6,327.5)
—
(7,543.0)

48.2

—

429.6

1,415.6

—

285.8

2,131.0

113.3

3.1

(7,659.5)
—
(7,659.5)

116.4
$ (15,202.5) $ 2,247.4

Accounts and notes receivable, net

Inventories

Other current assets

Assets held for sale

Accounts and notes receivable affiliates

Total current assets

Investment in affiliates

Property, plant and equipment, net

Intangible assets, net
Notes receivable affiliates

Other noncurrent assets

—

0.4

—

0.9

—

49.7

—

331.6

381.4

1,229.4

2,814.1

—

—
53.2

5.4

—

—
1,149.8

14.8

Total assets

$ 1,288.9

$ 4,360.1

Current liabilities:

Accounts payable and accruals

7.0

4.7

Short-term borrowings and current
maturities of long-term debt

Accounts and note payable affiliates

Total current liabilities

Long-term debt

Note payable affiliate

Other noncurrent liabilities

46.9

0.4

54.3

—

36.4

41.1

1,120.2

294.4

— 2,690.7

1.1

—

140.0

77.6

9.4

—

395.0

788.0

193.4

122.0

180.8
3,444.7

61.9

4,790.8

353.2

—

629.6

982.8

—

53.3

138.7

Total liabilities

1,175.6

3,026.2

1,174.8

Equity:

Total shareholders equity (deficit)

113.3

1,333.9

3,616.0

2,709.6

Noncontrolling interests

Total equity (deficit)

—

3.1

113.3

1,333.9

3,616.0

2,712.7

Total liabilities and equity

$ 1,288.9

$ 4,360.1

4,790.8

7,010.1

F-51

Allegion plc

Allegion
US Holding

Other
Subsidiary
Guarantors

Other
Subsidiaries

Consolidating
Adjustments

Total

3.3

0.3

73.8

122.3

— $

Condensed and Consolidated Balance Sheet
December 31, 2015

In millions

Current assets:

Cash and cash equivalents

Accounts and notes receivable, net

Inventories

Other current assets

Accounts and notes receivable affiliates

Total current assets

Investment in affiliates

Property, plant and equipment, net

Intangible assets, net

Notes receivable affiliates

Other noncurrent assets

—

0.5

248.6

252.4

986.2

—

44.7

356.4

401.4

3,001.4

—

— 1,144.2
1.5

10.8

Total assets

$ 1,249.4

$ 4,548.5

Current liabilities:

Accounts payable and accruals

8.2

4.3

Short-term borrowings and current
maturities of long-term debt

Accounts and note payable affiliates

Total current liabilities

Long-term debt

Note payable affiliate

Other noncurrent liabilities

Total liabilities

Equity:

46.9

0.3

55.4

—

57.5

61.8

1,168.4

289.1

— 2,750.8

—

1.2

1,223.8

3,102.9

121.6

106.7

9.9

375.9

687.9

192.9

147.6

181.4

3,549.9
82.1

4,841.8

356.7

0.1

636.4

993.2

—

124.7

1,117.9

—

—
(1,305.4)
(1,305.4)
(8,840.7)
—

181.8

97.4
(27.2)
324.5

698.8

4,660.2

77.2

905.1

1,726.3
122.2

8,189.8

—
(6,420.4)
—

—
216.6
$ (16,566.5) $ 2,263.0

12.3

— $

381.5

18.6

611.2

642.1

—

3,669.6

202.8

4,514.5

—
(1,305.4)
(1,305.4)
—
(6,420.4)
—
(7,725.8)

199.7

303.4

204.1

27.9

—

735.1

—

224.8

1,086.5

65.6

—

447.1

1,457.5

—

328.7

2,233.3

25.6

4.1

(8,840.7)
—
(8,840.7)

29.7
$ (16,566.5) $ 2,263.0

Total shareholders equity (deficit)

Noncontrolling interests

Total equity (deficit)

25.6

—

25.6

1,445.6

3,723.9

3,671.2

—

4.1

1,445.6

3,723.9

3,675.3

Total liabilities and equity

$ 1,249.4

$ 4,548.5

4,841.8

8,189.8

F-52

Condensed and Consolidated Statement of Cash Flows
For the year ended December 31, 2016

In millions

Net cash provided by (used in) operating
activities

Allegion
plc

Allegion
US
Holding

Other
Subsidiary
Guarantors

Other
Subsidiaries

Consolidating
Adjustments

Total

$ (25.6) $

34.1

584.7

631.5

(847.2) $ 377.5

Cash flows from investing activities:
Capital expenditures

Acquisition of businesses, net of cash acquired

Proceeds from sales and maturities of marketable
securities
Proceeds (payments) related to business
dispositions

Other investing activities, net
Net cash used in investing activities

Cash flows from financing activities:
Net debt repayments

Debt issuance costs

Net inter-company proceeds (payments)

Dividends paid to shareholders

Dividends paid to noncontrolling interests

Dividends paid

Repurchase of ordinary shares

Other financing activities, net
Net cash provided by (used in) financing
activities

Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash
equivalents

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

—

(47.0)

(0.3)

195.4

(46.0)

—

(85.1)

5.8

—

—
(34.3)
—

—

(19.4)
—

—

—
(19.4)

—

214.9

—

—
(688.0)
—

—

(23.1)
(31.4)

14.1

(4.3)
0.1
(44.6)

(17.4)
—
(376.0)
—
(2.7)
(159.2)
—
(3.3)

—

847.2

—

(42.5)
(31.4)

14.1

(4.3)
0.1
(64.0)

(64.4)
(0.3)
—
(46.0)
(2.7)
—
(85.1)
2.5

22.8

(34.3)

(473.1)

(558.6)

847.2

(196.0)

—

(0.2)
0.3

(2.8)

3.3

0.5

—

92.2

73.8

(4.8)

23.5

122.3

—

(4.8)

112.7

199.7

0.1

166.0

145.8

— $ 312.4

F-53

Condensed and Consolidated Statement of Cash Flows
For the year ended December 31, 2015

In millions

Net cash provided by (used in) continuing
operating activities

Net cash used in discontinued operating
activities

Net cash provided by (used in) operating
activities

Allegion
plc

Allegion
US
Holding

Other
Subsidiary
Guarantors

Other
Subsidiaries

Consolidating
Adjustments

Total

$ (23.4) $ 125.8

484.7

682.1

$ (1,011.8) $ 257.4

—

(0.1)

(0.3)

—

(0.4)

$ (23.4) $ 125.8

484.6

681.8

$ (1,011.8) $ 257.0

Cash flows from investing activities:
Capital expenditures

Acquisition of businesses, net of cash acquired

Proceeds from sales and maturities of marketable
securities

Proceeds from business disposition, net of cash
sold
Other investing activities, net
Net cash used in investing activities

Cash flows from financing activities:
Net debt proceeds

Debt issuance costs

Net inter-company proceeds (payments)

Dividends paid to shareholders

Dividends paid to noncontrolling interests

Dividends paid

Repurchase of ordinary shares

Other financing activities, net
Net cash provided by (used in) financing
activities

—

263.8

(9.0)

(200.9)

(38.3)

—

(30.0)

14.0

—

—
(126.0)
—

—

(27.2)
(31.3)

(8.0)
(480.0)

—

4.4

0.1

12.3

(4.3)
0.2

(54.0)

(479.8)

—

230.6

—

—
(713.7)

—

14.5

—

96.3

—
(20.0)
(298.1)

—

1,011.8

—

(35.2)
(511.3)

12.3

0.1

0.3

(533.8)

278.3
(9.0)
—
(38.3)
(20.0)
—

(30.0)
14.0

(0.4)

(126.0)

(483.1)

(207.3)

1,011.8

195.0

Effect of exchange rate changes on cash and cash
equivalents
Net decrease in cash and cash equivalents

Cash and cash equivalents - beginning of period

—

(9.0)

(23.8)

27.1

(0.2)
0.5

(52.5)
126.3

(14.3)
136.6

—

(9.0)

(90.8)
290.5

Cash and cash equivalents - end of period

3.3

0.3

73.8

122.3

— $ 199.7

F-54

Condensed and Consolidated Statement of Cash Flows
For the year ended December 31, 2014

Allegion
plc

Allegion
US
Holding

Other
Subsidiary
Guarantors

Other
Subsidiaries

Consolidating
Adjustments

Total

In millions

Net cash provided by (used in) continuing
operating activities

Net cash used in discontinued operating activities

—

$ 105.4

$ (847.5) $

567.2

1,172.4
(3.1)

(738.5) $ 259.0
(3.1)

—

Net cash provided by (used in) operating
activities

105.4

(847.5)

567.2

1,169.3

(738.5)

255.9

Cash flows from investing activities:
Capital expenditures

Acquisition of businesses, net of cash acquired

Capital contributions to subsidiaries
Proceeds from business disposition, net of cash
sold

Other investing activities, net
Net cash provided by (used in) investing
activities

Cash flows from financing activities:
Net debt (repayments) proceeds

Debt issuance costs

Net inter-company proceeds (payments)

Capital contributions received

Dividends paid to shareholders

Dividends paid to noncontrolling interests

Dividends paid

Repurchase of ordinary shares

Other financing activities, net
Net cash provided by (used in) financing
activities

—

(975.0)

—

—
(135.0)

—
—

(41.6)
—

—

—
0.5

(9.9)
(25.2)
(160.7)

1.2
40.2

—

1,270.7

—
—

(51.5)
(25.2)
—

1.2
40.7

(975.0)

(135.0)

(41.1)

(154.4)

1,270.7

(34.8)

962.8

(5.8)

(1,000.0)
—

— 1,822.3

—

160.7

(30.0)

—

(50.3)

18.6

—

—
(44.1)
7.0

—

—
(441.5)
—

—

(40.8)
—
(1,778.2)
1,103.0

—
(4.5)
(297.0)
—

—

—
(1,270.7)
—

—

738.5

—

(78.0)
(5.8)
—

—
(30.0)
(4.5)
—
(50.3)
18.6

895.3

983.0

(478.6)

(1,017.5)

(532.2)

(150.0)

Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash
equivalents

Cash and cash equivalents - beginning of period

—

25.7

1.4

Cash and cash equivalents - end of period

27.1

—

0.5

—

0.5

—

47.5

78.8

(8.0)

(10.6)
147.2

—

(8.0)

63.1

227.4

126.3

136.6

— $ 290.5

F-55

ALLEGION PLC
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED December 31, 2016, 2015 AND 2014
(Amounts in millions)

Allowances for Doubtful Accounts:

Balance December 31, 2013

Additions charged to costs and expenses

Deductions*

Currency translation
Balance December 31, 2014

Additions charged to costs and expenses

Deductions*

Business acquisitions and divestitures, net

Currency translation
Balance December 31, 2015

Additions charged to costs and expenses

Deductions*

Business acquisitions and divestitures, net

Currency translation
Balance December 31, 2016

(*)

"Deductions" include accounts and advances written off, less recoveries.

SCHEDULE II

2.4

2.1
(1.1)
(0.2)
3.2

1.6
(1.5)
0.9
(0.4)
3.8

0.1
(1.1)
—
(0.1)
2.7

F-56

We are many.
We are one.
We are Allegion.

About Allegion™
Allegion (NYSE: ALLE) is a global pioneer in safety and security, with
leading brands like CISA®, Interflex®, LCN®, Schlage®, SimonsVoss® and
Von Duprin®. Focusing on security around the door and adjacent areas,

Corporate data

Shareholder information services

The company’s 2016 Annual Report on

Form 10-K as filed with the Securities

and Exchange Commission, and other

company information, is available through

Allegion’s website, www.allegion.com.

Securities analysts, portfolio managers and

representatives of institutional investors

seeking information about the company

should contact:

Mike Wagnes

Vice President, Treasurer

and Investor Relations

317-810-3494

Annual general meeting

June 7, 2017, 4:30 p.m. local time

Allegion produces a range of solutions for homes, businesses, schools

Waldorf Astoria Amsterdam

and other institutions. Allegion is a $2 billion company, with products

Herengracht 542-556

sold in almost 130 countries.

For more, visit www.allegion.com.

allegion.com linkedin.com/company/allegion-plc

Scan here to get more information

on our 2016 performance, or visit:

allegion.com/annualreport

Amsterdam 1017 CG, Netherlands

Stock exchange

NYSE Ticker Symbol: ALLE

The most recent certifications by the

company’s Chief Executive Officer and

Chief Financial Officer pursuant 302 of the

Sarbanes-Oxley Act of 2002 are filed as

exhibits to the company’s Form 10-K. The

company filed with the New York Stock

Exchange an annual CEO certification as

required by Section 303A.12(a) of the

New York Stock Exchange Listed

Company Manual.

Transfer agent and registrar

Computershare Telephone Inquiries:

877-660-6629

Website:

www.computershare.com/investor

Address shareholder inquiries

with standard priority:

Computershare, P.O. Box 30170

College Station, TX 77842-3170

Address shareholder inquiries

with overnight priority:

Computershare, 211 Quality Circle, Suite 210

College Station, TX 77845