Federal Signal Corporation Reports Revenue and Margin Growth in Second Quarter

Federal Signal Corporation Reports Revenue and Margin Growth in Second Quarter

- Net sales of $223 million, up 9% versus last year

- Operating income of $18.2 million, up 15% versus last year

- Operating margin of 8.2%, compared to 7.7% last year

- Earnings from continuing operations of $1.87 per diluted share, which
reflects a non-cash benefit from the release of $102 million of valuation
allowance against deferred tax assets

- Adjusted diluted earnings of $0.23 per share, up 53% versus last year

- Outlook for full-year earnings raised to $0.62 - $0.72 per share

PR Newswire

OAK BROOK, Ill., Aug. 9, 2013

OAK BROOK, Ill., Aug. 9, 2013 /PRNewswire/ --Federal Signal Corporation
(NYSE:FSS), a leader in environmental and safety solutions, today reported
results for the second quarter ended June 30, 2013. Consolidated net sales
were $222.6 million for the quarter, up 9% versus the same quarter a year
ago. Income from continuing operations was $117.8 million for the quarter,
equal to $1.87 per diluted share.

During the quarter, the Company released a portion of its valuation allowance
in the amount of $102million against its deferred income tax assets.
Excluding this non-cash tax item, as well as the impact of restructuring
benefits in the current and year-ago quarters, adjusted income from continuing
operations was $14.8million for the quarter, equal to $0.23 per share,
compared to $9.5 million, equal to $0.15 per share, in the same quarter a year
ago.

Group Performance and Refinancing Drive Results

"This was a very strong quarter, with both our Environmental Solutions Group
and our Fire Rescue Group performing nicely," said Dennis J. Martin, President
and Chief Executive Officer. "Sales increased and operating margin expanded
to 8.2%. This is also our first full quarter benefiting from our debt
refinancing, which helped reduce interest expense by 62% compared to our first
quarter this year."

"During the quarter, we saw strength in industrial orders and stability in
municipal demand," Martin explained. "The Environmental Solutions Group
continued its positive trend, as our focus on adding incremental capacity for
industrial vacuum trucks helped ESG work through more of its backlog and post
a 12.3% operating margin. The Fire Rescue Group turned in an unusually strong
quarter, with a spike in deliveries that helped drive higher operating margins
and operating income. The Safety and Security Systems Group implemented an
ERP system in the U.S. during May, and while the system will provide
efficiencies as we move forward, it clearly disrupted their second quarter.
The good news is that SSG bounced back with strong shipments in June, and
transitional expenses should continue to reduce during the third quarter."

Orders Stable and Sales Growing

The Company reported orders of $209.7million, up 1% compared to the year-ago
quarter. Backlog was $294.9million, down 8% versus a strong level in the
prior-year quarter.

Net sales were $222.6million, up 9% compared to the second quarter of 2012,
benefiting from strength across most of the Environmental Solutions Group and
in the Fire Rescue Group, which shipped a higher number of units toward the
end of the quarter than it typically would ship. Orders continued strong in
the Safety and Security Systems Group, but sales were disrupted during a
portion of the second quarter as a result of challenges during the
implementation of an ERP system in the U.S., with some additional softness in
international demand.

Consolidated operating income was $18.2million, up 15% compared to the second
quarter of 2012. Consolidated operating margin improved to 8.2%, compared to
7.7% last year. Operating margin for the Environmental Solutions Group and
Fire Rescue Group benefited primarily from leverage on higher sales, while the
Safety and Security Systems Group experienced unfavorable product mix, market
pressures on international margins and additional costs associated with its
ERP implementation. Corporate expenses were $4.6million for the quarter,
compared to $4.7million a year ago.

Interest Charges and Income Taxes Contribute Significantly

Interest expense was $1.7 million for the quarter, down 69% versus a year ago,
reflecting the combined benefits of the recent refinancing and lower debt
levels. Consolidated debt was $144 million, compared to $237 million a year
ago and $161 million on March 31, 2013.

Income taxes reflect the Company's conclusion, based on an improved and more
stable business performance and outlook, that it no longer requires a
valuation allowance to reserve the value of certain income tax assets. The
Company therefore released $102million of this valuation allowance, which
created a one-time, non-cash tax benefit during the quarter in that amount.
In 2014, the Company expects to reflect a normalized income tax rate as a
result of the release of the valuation allowance. If the Company had no
valuation allowance, its normalized consolidated 2013 tax rate would have been
approximately 32% for the year. Cash taxes are unaffected by the release of
the valuation allowance, as the tax assets had been and remain available to
shield cash income taxes payable by the Company.

Progress Leads to Raised Performance Outlook

"Our healthy performance this quarter demonstrates stability in most of our
markets and continuing progress on our 80/20 growth and expense efforts,"
continued Martin. "While uncertainties remain, we are increasing our target
for adjusted earnings per share from continuing operations for the year,
excluding the effects of debt settlement charges, restructuring charges and
the change in valuation allowance, from a former range of $0.55 to $0.65 to a
new range of $0.62 to $0.72."

GROUP RESULTS

Environmental Solutions

The following table summarizes the Environmental Solutions Group's operating
results as of and for the three and six months ended June 30, 2013 and 2012:

                 ThreeMonthsEndedJune30,    SixMonthsEndedJune30,
(in millions)    2013      2012      Change   2013      2012     Change
Net sales        $  128.3 $  112.0 $  16.3  $  240.0 $       $  20.0
                                                          220.0
Operating income 15.8      12.5      3.3        28.5      24.5     4.0
Operating data:
Operating margin 12.3%     11.2%     1.1%       11.9%     11.1%    0.8%
Total orders     $ 105.8  $ 103.9  $   1.9 $ 207.2  $ 228.0 $  (20.8)
Backlog          170.8     191.5     (20.7)     170.8     191.5    (20.7)
Depreciation and 1.5       1.3       0.2        3.0       2.6      0.4
amortization

Three months ended June 30, 2013 vs. three months ended June 30, 2012

Total orders increased by $1.9 million for the three months ended June 30,
2013. U.S. orders decreased $2.1 million largely due to declines in vacuum
truck and used equipment orders of $1.9 million and $1.1 million,
respectively, partially offset by increases in municipal sewer cleaner and
street sweeper orders of $0.8 million and $0.3 million, respectively.
Non-U.S. orders increased $4.0 million, or 20%, compared to the prior year
primarily due to two large export orders for our municipal street sweepers
from customers in the Canadian and South American markets.

Net sales increased by $16.3 million, or 15%, for the three months ended June
30, 2013. U.S. sales increased $11.2 million primarily resulting from
improved vacuum truck and municipal sewer cleaner sales, partially offset by
declines in municipal street sweepers. Non-U.S. sales increased $5.1 million,
or 32%, and benefited from a large shipment to a customer in the Asia Pacific
market during the second quarter of 2013. In the aggregate, sales were
positively impacted by the effects of product mix and the resulting shift to
higher-priced units, including our vacuum trucks.

Costs of sales increased by $12.3 million for the three months ended June 30,
2013. The increase was predominantly associated with a shift in product mix
driven by increased shipments of industrial products, including vacuum trucks,
and fewer shipments of municipal products.

Operating income increased by $3.3 million, or 26%, for the three months ended
June 30, 2013. Increases in operating income were a result of higher gross
profit of $4.0 million, largely due to improved product pricing, partially
offset by increased selling, engineering, general and administrative expenses
of $0.6 million relating to higher training costs, salary and benefits, and
travel expenses.

Safety and Security Systems

The following table summarizes the Safety and Security Systems Group's
operating results as of and for the three and six months ended June 30, 2013
and 2012:

                   ThreeMonthsEndedJune30,     SixMonthsEndedJune30,
(in millions)      2013      2012      Change  2013   2012   Change
Net sales          $  56.8 $  59.1 $   (2.3) $     $     $   (0.1)
                                                   115.3  115.4
Operating income   3.6       6.3       (2.7)       9.1    10.9   (1.8)
Operating data:
Operating margin   6.3%      10.7%     (4.4)%      7.9%   9.4%   (1.5)%
Total orders       $  65.6 $  63.0 $   2.6   $     $     $   (2.5)
                                                   122.5  125.0
Backlog            36.8      39.6      (2.8)       36.8   39.6   (2.8)
Depreciation and   1.0       1.1       (0.1)       2.1    2.2    (0.1)
amortization

Three months ended June 30, 2013 vs. three months ended June 30, 2012

Total orders increased by $2.6 million for the three months ended June 30,
2013. U.S. orders increased $2.4 million primarily driven by higher demand
for outdoor warning systems, as well as increases in our U.S. public safety
markets resulting from increased levels of new police vehicle registrations.
Non-U.S. orders increased $0.2 million based on higher demand for outdoor
warning systems, partially offset by decreases in systems-related projects
within our industrial markets and lower non-U.S. public safety orders.

Net sales decreased by $2.3 million for the three months ended June 30, 2013.
The decrease was largely due to $1.5 million in lower sales of outdoor warning
systems driven by the timing of certain large shipments in the second quarter
of 2012, a decrease in mining product sales of $0.9 million due to slowing
market demand in the coal industry, and $0.7 million of decreased industrial
product sales. These decreases were partially offset by improvements of $0.7
million within our U.S. and international public safety markets. Shipments
during the second quarter of 2013 were also disrupted or deferred in
connection with the implementation of an enterprise resource planning ("ERP")
system for the U.S. operations which went live during May.

Cost of sales increased by $0.6 million for the three months ended June 30,
2013. This increase was related to a change in mix of product sales, as well
as lower absorption of fixed overhead costs that was driven by both decreased
sales and lower production levels related to inventory reduction efforts.
Cost of sales was further impacted by higher information technology expenses
primarily related to the implementation of new ERP software within our U.S.
operations.

Operating income decreased $2.7 million, or 43%, for the three months ended
June 30, 2013. Operating expenses were largely flat as compared to the prior
year, with increases related to sales commissions, provisions for
uncollectible accounts and inefficiencies from the ERP system implementation
being fully offset by lower marketing expenses and other reductions in
selling, engineering, general and administrative expenses. The decrease in
operating income was primarily due to mix of product sales, lower fixed
overhead absorption and impacts of the ERP system implementation.

Fire Rescue

The following table summarizes the Fire Rescue Group's operating results as of
and for the three and six months ended June 30, 2013 and 2012:

                    ThreeMonthsEndedJune30,     SixMonthsEndedJune30,
(in millions)       2013      2012      Change  2013  2012     Change
Net sales           $  37.5 $  33.3 $   4.2  $    $  65.1 $   2.0
                                                    67.1
Operating income    3.4       1.7       1.7         4.1   2.5      1.6
Operating data:
Operating margin    9.1%      5.1%      4.0%        6.1%  3.8%     2.3%
Total orders        $  38.3 $  40.6 $   (2.3) $    $       $  (5.4)
                                                    72.2 77.6
Backlog             87.3      90.4      (3.1)       87.3  90.4     (3.1)
Depreciation and    0.8       0.7       0.1         1.5   1.3      0.2
amortization

Three months ended June 30, 2013 vs. three months ended June 30, 2012

Total orders declined by $2.3 million for the three months ended June 30,
2013. U.S. orders decreased $7.6 million compared with exceptionally strong
orders in the second quarter of 2012 which was partially offset by improved
demand for fire-lift products in Asia and Europe.

Net sales increased by $4.2 million, or 13%, for the three months ended June
30, 2013 primarily driven by increased industrial product sales in the U.S. In
the aggregate, the increase in sales was attributable to an increase in
volumes of $2.3 million, favorable product mix of $1.8 million, and favorable
currency impacts of $0.7 million, partially offset by decreased product
pricing.

Cost of sales increased $2.8 million for the three months ended June 30, 2013
largely as a result of increases in volumes of $1.7 million and product mix of
$0.6 million, as well as unfavorable currency impacts.

Operating income increased $1.7 million, or 100%, for the three months ended
June 30, 2013 ,benefiting from product mix and improved production
efficiencies of $1.2 million, as well as an increase in volumes of $0.6
million, partially offset by an increase in selling, engineering, general and
administrative expenses of $0.2 million.

CORPORATE EXPENSES

Corporate operating expenses were $4.6 million and $4.7 million for the three
months ended June 30, 2013 and 2012. The decrease is due primarily to the
release of a restructuring liability in the second quarter of 2013, partially
offset by increased salary and benefits. Non-operating expenses within
Corporate were further impacted by lower interest expense of $3.7 million.
The decrease in interest expense was driven by the pay down of debt levels
during the third quarter of 2012, coupled with lower interest rates on
borrowings as a result of our March 2013 refinancing.

CONFERENCE CALL

Federal Signal will host its second quarter conference call on Friday, August
9, 2013 at 10:00 a.m. Eastern Time. The call will last approximately one hour.
The call may be accessed over the internet through Federal Signal's website at
http://www.federalsignal.com or by dialing phone number 1-888-437-9445 and
entering the pin number 1791060. A replay will be available on Federal
Signal's website shortly after the call.

About Federal Signal

Federal Signal Corporation (NYSE: FSS) enhances the safety, security and
well-being of communities and workplaces around the world. Founded in 1901,
Federal Signal is a leading global designer and manufacturer of products and
total solutions that serve municipal, governmental, industrial and commercial
customers. Headquartered in Oak Brook, IL, with manufacturing facilities
worldwide, the Company operates three groups: Environmental Solutions, Safety
and Security Systems, and Fire Rescue. For more information on Federal Signal,
visit: http://www.federalsignal.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995

This release contains unaudited financial information and various
forward-looking statements as of the date hereof and we undertake no
obligation to update these forward-looking statements regardless of new
developments or otherwise. Statements in this release that are not historical
are forward-looking statements. Such statements are subject to various risks
and uncertainties that could cause actual results to vary materially from
those stated. Such risks and uncertainties include but are not limited to:
economic conditions in various regions, product and price competition,
supplier and raw material prices, foreign currency exchange rate changes,
interest rate changes, increased legal expenses and litigation results, legal
and regulatory developments and other risks and uncertainties described in
filings with the Securities and Exchange Commission.



FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                             Threemonthsended         Sixmonthsended

                             June30,                   June30,
(in millions, except per     2013         2012          2013       2012
share data)
Net sales                    $  222.6    $  204.4     $  422.4  $  400.5
Cost of sales                170.8        155.2         323.8      306.0
Gross profit                 51.8         49.2          98.6       94.5
Selling, engineering,
general and administrative   34.2         33.5          68.9       67.6
expenses
Restructuring charges        (0.6)        (0.1)         (0.6)      0.8
(benefit)
Operating income             18.2         15.8          30.3       26.1
Interest expense             1.7          5.4           6.2        10.5
Debt settlement charges      —            —             8.7        1.6
Other (income) expense, net  0.1          0.5           (0.1)      0.3
Income before income taxes   16.4         9.9           15.5       13.7
Income tax benefit (expense) (101.4)      (0.3)         101.2      (1.0)
Income from continuing       117.8        9.6           116.7      12.7
operations
Gain (loss) from
discontinued operations and
disposal, net of income tax  (0.3)        (26.1)        0.2        (30.2)
expense (benefit) of $0.2,
($0.7), $0.2 and ($0.6),
respectively
Net income (loss)            $  117.5    $  (16.5)   $  116.9  $  (17.5)
Basic earnings (loss) per
share:
Earnings from continuing     $    1.88 $    0.15  $   1.87 $   0.20
operations
Loss from discontinued
operations and disposal, net —            (0.41)        —          (0.48)
of tax
Net earnings (loss) per      $    1.88 $   (0.26) $   1.87 $  (0.28)
share
Diluted earnings (loss) per
share:
Earnings from continuing     $    1.87 $    0.15  $   1.86 $   0.20
operations
Loss from discontinued
operations and disposal, net —            (0.41)        —          (0.48)
of tax
Net earnings (loss) earnings $    1.87 $   (0.26) $   1.86 $  (0.28)
per share
Weighted average common
shares outstanding:
Basic                        62.5         62.3          62.4       62.2
Diluted                      62.9         62.6          62.8       62.5



FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                                                June 30,         December31,

                                                2013             2012
(in millions, except per share data)            (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents                       $     13.1  $    29.7
Restricted cash                                 —                1.0
Accounts receivable, net of allowances for
doubtful accounts of $2.6 and $2.4,             105.1            96.9
respectively
Inventories                                     112.2            119.9
Prepaid expenses                                12.5             13.8
Other current assets                            11.9             5.1
Current assets of discontinued operations       3.6              0.8
Total current assets                            258.4            267.2
Properties and equipment, net                   60.3             59.3
Other assets:
Goodwill                                        270.5            272.3
Intangible assets, net                          0.6              0.7
Deferred tax assets                             51.6             —
Deferred charges and other assets               2.9              12.5
Long-term assets of discontinued operations     5.7              1.2
Total assets                                    $     650.0  $   613.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings                           $       — $     0.3
Current portion of long-term borrowings and     6.6              4.7
capital lease obligations
Accounts payable                                47.2             52.5
Customer deposits                               10.8             13.1
Deferred revenue                                2.8              3.1
Deferred tax liability                          3.0              10.6
Accrued liabilities:
  Compensation and withholding taxes      18.9             25.8
 Other current liabilities               31.3             33.1
Current liabilities of discontinued operations  5.5              6.4
Total current liabilities                       126.1            149.6
Long-term borrowings and capital lease          137.6            152.8
obligations
Long-term pension and other postretirement      79.3             84.1
benefit liabilities
Deferred gain                                   18.6             19.4
Deferred tax liabilities                        —                35.8
Other long-term liabilities                     16.7             16.0
Long-term liabilities of discontinued           4.0              8.6
operations
Total liabilities                               382.3            466.3
Shareholders' equity:
Common stock, $1 par value per share, 90.0
shares authorized, 63.6 and 63.4 shares issued, 63.6             63.4
respectively
Capital in excess of par value                  173.6            171.1
Retained earnings                               125.8            8.9
Treasury stock, at cost, 1.0 shares at both     (16.6)           (16.4)
dates
Accumulated other comprehensive loss            (78.7)           (80.1)
Total shareholders' equity                     267.7            146.9
Total liabilities and shareholders' equity      $     650.0  $   613.2





FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                                              SixMonthsEnded

                                                              June 30,
(in millions)                                                 2013    2012
Operating activities:
Net income (loss)                                             $ 116.9 $ (17.5)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
(Gain) loss on discontinued operations and disposal           (0.2)   30.2
Depreciation and amortization                                 6.9     6.6
Write-off of deferred financing costs                         4.5     1.6
Stock-based compensation expense                              1.8     1.4
Pension expense, net of funding                               (0.2)   (1.5)
Provision for doubtful accounts                               0.2     0.3
Deferred income taxes, including changes in valuation         (94.9)  (1.6)
allowance
Changes in operating assets and liabilities, net of effects   (24.1)  (10.0)
from dispositions of companies
Net cash provided by continuing operating activities          10.9    9.5
Net cash used for operating activities of discontinued        (5.0)   (10.0)
operations
Net cash provided by (used for) operating activities          5.9     (0.5)
Investing activities:
Purchases of properties and equipment                         (9.5)   (5.5)
Proceeds from sales of properties and equipment               1.5     1.0
Decrease (increase) in restricted cash                        1.0     (1.5)
Net cash used for continuing investing activities             (7.0)   (6.0)
Net cash provided by investing activities of discontinued     —       —
operations
Net cash used for investing activities                        (7.0)   (6.0)
Financing activities:
Increase (decrease) in revolving lines of credit, net         66.5    (161.8)
Decrease in short-term borrowings, net                        (0.3)   (5.3)
Proceeds from issuance of long-term borrowings                75.0    215.0
Payments on long-term borrowings                              (150.7) (34.4)
Payments of debt financing fees                               (6.2)   (6.2)
Other, net                                                    0.9     0.9
Net cash provided by (used for) continuing financing          (14.8)  8.2
activities
Net cash used for financing activities of discontinued        —       (0.9)
operations
Net cash provided by (used for) financing activities          (14.8)  7.3
Effects of foreign exchange rate changes on cash and cash     (0.7)   —
equivalents
Increase (decrease) in cash and cash equivalents              (16.6)  0.8
Cash and cash equivalents at beginning of period              29.7    9.5
Cash and cash equivalents at end of period                    $ 13.1 $ 10.3

SEC REGULATION G NON-GAAP RECONCILIATION

The financial measures presented below are unaudited and are not in accordance
with U.S. generally accepted accounting principles ("GAAP"). The non-GAAP
financial information presented herein should be considered supplemental to,
and not a substitute for, or superior to, financial measures calculated in
accordance with GAAP. The Company has provided this supplemental information
to investors, analysts and other interested parties to enable them to perform
additional analyses of operating results, to illustrate the results of
operations giving effect to the non-GAAP adjustments shown in the
reconciliations below, and to provide an additional measure of performance
which management considers in operating the business.

Adjusted net income and earnings per share from continuing operations:

The Company believes that adjusting its net income and diluted earnings per
share from continuing operations to exclude the reversal of a portion of our
income tax valuation allowance and the impacts of restructuring, which are not
considered to be part of its ongoing operating results, provides measures
which are representative of the Company's underlying performance and improves
the comparability of year to year results.

                                                   Three Months Ended June 30,
(in millions)                                      2013           2012
Income from continuing operations                  $  117.8      $  9.6
Less:
 Restructuring benefit                          (0.6)          (0.1)
 Income tax valuation allowance release         (102.4)        —
Adjusted income from continuing operations         $   14.8     $  9.5
                                                   Three Months Ended June 30,
                                                   2013           2012
Diluted earnings per share from continuing         $  1.87      $ 0.15
operations
Less:
 Restructuring benefit                          (0.01)         —
 Income tax valuation allowance release         (1.63)         —
Adjusted diluted earnings per share from           $  0.23      $ 0.15
continuing operations

Total debt to adjusted EBITDA ratio:

The Company also uses the ratio of total debt to adjusted EBITDA as one
measure of its long-term financial stability. Furthermore, the Company
believes that total debt to adjusted EBITDA is a meaningful metric to
investors and other interested parties. The Company's calculation
methodology, which may be different than the method used by other companies,
consists of dividing total debt by income from continuing operations before
interest expense, debt settlement charges, other expense, income tax
provision, and depreciation and amortization on a trailing 12-month basis. The
following table summarizes the Company's ratio of total debt to adjusted
EBITDA, and reconciles income from continuing operations to adjusted EBITDA:

                                  Trailing Twelve Months Ending June 30,
(in millions)                     2013                2012
Total debt                        $ 144.2             $ 236.7
Income from continuing operations $ 126.0             $  22.5
Add:
Interest expense                  17.1                19.5
Debt settlement charges           10.6                1.6
Other expense                     0.2                 0.7
Income tax provision              (98.2)              1.9
Depreciation and amortization     13.6                13.0
EBITDA                            $  69.3            $  59.2
Total debt to EBITDA ratio        2.1                 4.0

Fiscal 2013 guidance – Adjusted earnings per share from continuing operations:

                                                            Lower    Upper
Diluted earnings per share from continuing operations       $  2.12 $  2.22
Plus:
 Debt settlement charges                                 0.14     0.14
Less:
 Restructuring benefit                                   (0.01)   (0.01)
 Income tax valuation allowance release                  (1.63)   (1.63)
Adjusted diluted earnings per share from continuing         $  0.62 $  0.72
operations
Approximate diluted weighted average shares outstanding     63.2     63.2

SOURCE Federal Signal Corporation

Website: http://www.federalsignal.com
Contact: Brian Cooper +1-630-954-2000, bcooper@federalsignal.com
 
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