Federal Signal Reports 10% Increase in Net Sales and $0.07 Earnings
per Share for Third Quarter
OAK BROOK, Ill., Nov. 9, 2012 /PRNewswire/ -- Federal Signal
Corporation (NYSE: FSS), a leader in environmental and safety
solutions, today reported results for the third quarter ended
September 30, 2012.
- Q3 earnings from continuing operations of $0.07 per share versus $0.05 last year;
- Q3 2012 results include ($0.03)
per share impact of non-cash debt settlement charges;
- Year-to-date earnings per share from continuing operations of
$0.28 compared to $0.11 for the same period in 2011;
- Q3 operating income from continuing operations increased to
$12.4 million, a 46% increase over
the prior year;
- Q3 net sales of $185 million, up
10% from the prior year;
- Backlog increased to $326
million, a 28% increase over the same prior year period, and
orders declined 4% versus the same prior year period;
- Sale proceeds from the FSTech divestiture used to pay down debt
by $75 million, creating the
opportunity to substantially reduce interest expense through
refinancing in 2013.
Dennis J. Martin, President and
Chief Executive Officer, stated, "We are beginning to reap the
rewards of our 80/20 initiatives. Our commitment to
profitable growth is evidenced by our 6.7% operating margin in the
quarter, up from 5.1% during the same prior year period." Mr.
Martin continued, "The third quarter marked both continued
improvement in our income statement and fundamental restructuring
of our balance sheet, the combined effect of which will build our
shareholders' value over the long term."
Orders increased $26.3 million or
4% for the nine months ended September 30,
2012 and were $187.7 million
and $194.9 million for the three
months ended September 30, 2012 and
2011, respectively. In the three months ended September 30, 2012, U.S. orders increased
$3.4 million or 3%, and non-U.S.
orders decreased $10.6 million or 13%
compared to the prior-year periods. In the nine months ended
September 30, 2012, U.S. orders increased $30.3 million or 9%, and non-U.S. orders
decreased $4.0 million or 2%,
compared to the prior-year periods.
Net sales increased $17.2 million
or 10% and $91.8 million or 19% for
the three and nine months ended September
30, 2012, respectively, compared to the respective
prior-year periods, primarily as a result of increased shipments
across most segments, favorable product mix and minor price
increases, partially offset by lower export sales to certain Asian
customers and unfavorable currency impacts.
Operating income increased $3.9
million or 46% and $16.8
million or 77% in the three and nine months ended
September 30, 2012, respectively, compared to the respective
prior-year periods. The increase in operating income was primarily
a result of higher sales volume and an overall favorable change in
product mix.
Interest expense increased $0.7
million and $3.8 million for
the three and nine months ended September 30, 2012,
respectively, compared to the respective prior year periods,
primarily due to an increase in interest rates on the Company's
debt financing agreements entered into in February 2012, partially offset by interest
expense allocated to discontinued operations of $1.7 million and $4.8
million for the three and nine months ended September 30, 2012.
Loss from discontinued operations and disposal, net of tax was
$19.1 million and $0.9 million for the three months ended
September 30, 2012 and 2011, respectively, and $49.4 million and $5.6
million for the nine months ended September 30, 2012 and 2011, respectively.
Mr. Martin concluded, "We are committed to long-term margin
expansion and continued gains in shareholder value in 2013, but we
are aware of the impact global economic challenges can have on
demand and are prepared to act as conditions warrant."
GROUP RESULTS
Safety and Security Systems
The following table summarizes the Safety and Security Systems
Group's operating results as of and for the three and nine-month
periods ended September 30, 2012 and
2011, respectively:
|
|
|
|
|
|
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
($ in
millions)
|
2012
|
2011
|
Change
|
2012
|
2011
|
Change
|
Orders
|
$ 57.1
|
$ 57.4
|
$ (0.3 )
|
$ 182.1
|
$ 170.9
|
$ 11.2
|
Backlog
|
38.7
|
27.8
|
10.9
|
38.7
|
27.8
|
10.9
|
Net
sales
|
57.8
|
52.0
|
5.8
|
173.2
|
161.0
|
12.2
|
Operating
income
|
7.8
|
4.4
|
3.4
|
18.7
|
15.9
|
2.8
|
Operating
margin
|
13.5%
|
8.5 %
|
5.0%
|
10.8%
|
9.9 %
|
0.9%
|
Depreciation and amortization
|
$ 1.0
|
$ 1.1
|
$ (0.1)
|
$ 3.2
|
$ 3.3
|
$ (0.1)
|
Orders of $57.1 million in the
third quarter decreased $0.3 million
compared to the same quarter in 2011. U.S. orders increased
$2.8 million due to improved
municipal spending in the police, fire and outdoor warning markets
and improvement in the industrial market. Non-U.S. orders declined
$3.1 million primarily due to a
$2.1 million order cancellation and
weak demand in the European and export markets. Orders increased
$11.2 million or 7% for the nine
months ended September 30, 2012 compared to the respective
prior-year period. U.S. orders increased $16.7 million, primarily as a result of increased
municipal and governmental spending and strong industrial demand.
Non-U.S. orders decreased $5.5
million, driven primarily by weak demand in European and
Asian markets.
Net sales increased $5.8 million
for the three months ended September 30,
2012 compared to the respective prior-year period. Higher
industrial sales of $4.0 million,
improved domestic municipal shipments of $2.3 million, market share gains in the police
market of $1.9 million and higher
mining product sales of $1.1 million
were partially offset by lower exports of $2.0 million and exchange rate impacts of 2.5% of
sales. Net sales increased $12.2
million or 8% for the nine months ended September 30, 2012 compared to the respective
prior-year period. U.S. sales grew by $4.0
million due to market share gains in police and fire
markets, $2.6 million due to
increased warning system shipments, $1.4
million due to strong industrial sales, and minor price
increases. International sales were lower by $4.2 million due to lower export sales to certain
Asian customers and unfavorable currency impacts of approximately
2.0% of sales.
Operating income increased $3.4
million for the three months ended September 30, 2012 compared to the respective
prior-year period, primarily due to higher sales volumes as well as
higher gross profit, which more than offset higher operating
expenses to support the higher sales levels. Operating income
increased $2.8 million for the nine
months ended September 30, 2012 compared to the respective
prior-year period due to higher sales of $12.2 million, slight price increases in several
divisions, and lower warranty expense of $0.4 million and the other reductions in cost of
sales noted above, which were partially offset by higher charges
for inventory reserves of $2.0
million. Improvements in gross margin were partially offset
by higher operating expenses to support higher sales levels. In
addition, the Safety and Security Systems Group recorded
$0.9 million of restructuring charges
in the nine months ended September 30
2012, while no restructuring charges were recorded during the
respective prior year period.
Fire Rescue
The following table summarizes the Fire Rescue Group's operating
results as of and for the three and nine-month periods ended
September 30, 2012 and 2011, respectively:
|
|
|
|
|
|
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
($ in
millions)
|
2012
|
2011
|
Change
|
2012
|
2011
|
Change
|
Orders
|
$34.7
|
$ 42.0
|
$ (7.3)
|
$ 112.3
|
$
108.8
|
$ 3.5
|
Backlog
|
101.3
|
95.7
|
5.6
|
101.3
|
95.7
|
5.6
|
Net
sales
|
25.6
|
22.2
|
3.4
|
90.7
|
68.1
|
22.6
|
Operating
income
|
1.9
|
0.2
|
1.7
|
4.4
|
1.7
|
2.7
|
Operating
margin
|
7.4 %
|
0.9 %
|
6.5%
|
4.9%
|
2.5 %
|
2.4%
|
Depreciation and amortization
|
$ 0.6
|
$ 0.7
|
$ (0.1)
|
$ 1.9
|
$ 1.9
|
$ —
|
Orders of $34.7 million in the
third quarter decreased $7.3 million
compared to the same quarter in 2011. The decrease is due to a
decline in the average order size for fire-lift products from
customers in Asia compared to the
prior year, when chassis orders were steadily on the rise. Orders
increased $3.5 million for the nine
months ended September 30, 2012 compared to the respective
prior-year period, primarily as result of strong demand for
fire-lift products in Asia and
strong demand for industrial and rental products in Australia.
Net sales increased $3.4 million
and $22.6 million for the three and
nine months ended September 30, 2012 compared to the
respective prior-year periods. For the three months ended
September 30, 2012, net sales
increased $4.8 million as a result of
increased Asian and Australian business together with some
increased shipments to European markets, and $1.6 million of higher pricing attributable to
sales commissions, partially offset by unfavorable currency impacts
of $3.2 million. The strong backlog
and improvements in manufacturing processes also contributed to the
growth in sales. Year-to-date, net sales increased $22.6 million, primarily due to sales volumes of
$24.5 million, higher pricing
attributable to sales commissions of $3.3
million, and a favorable product mix of $4.3 million, partially offset by unfavorable
currency impacts of $9.4 million.
Operating income increased $1.7
million and $2.7 million for
the three and nine months ended September 30, 2012, compared
to the respective prior-year periods. For the three months ended
September 30, 2012, operating income increased due to higher
sales volumes of $1.0 million, and
improved product mix into higher margin products of $1.4 million, partially offset by higher Selling,
General, and Administrative ("SG&A") expenses of $0.5 million and unfavorable currency impacts of
$0.2 million. For the nine months
ended September 30, 2012, compared to
the respective prior-year period, operating income increased
primarily due to higher sales volumes of $5.3 million, partially offset by higher SG&A
expenses of $1.5 million, unfavorable
product mix of $0.7 million, and
unfavorable currency impacts of $0.5
million.
Environmental Solutions
The following table summarizes the Environmental Solutions
Group's operating results as of and for the three and nine-month
periods ended September 30, 2012 and 2011, respectively:
|
|
|
|
|
|
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
($ in
millions)
|
2012
|
2011
|
Change
|
2012
|
2011
|
Change
|
Orders
|
$95.9
|
$
95.5
|
$
0.4
|
$ 323.9
|
$ 312.3
|
$ 11.6
|
Backlog
|
185.9
|
130.3
|
55.6
|
185.9
|
130.3
|
55.6
|
Net
sales
|
101.6
|
93.6
|
8.0
|
321.6
|
264.6
|
57.0
|
Operating
income
|
9.3
|
7.7
|
1.6
|
33.8
|
17.8
|
16.0
|
Operating
margin
|
9.2 %
|
8.2 %
|
1.0%
|
10.5 %
|
6.7 %
|
3.8%
|
Depreciation and amortization
|
$
1.3
|
$
1.3
|
$ —
|
$ 3.9
|
$ 3.8
|
$ 0.1
|
Orders increased $0.4 million for
the three months ended September 30,
2012 compared to the respective prior-year period. U.S.
orders increased $0.1 million from
the prior-year period primarily due to increases in sewer cleaners
of $6.1 million, sweepers of
$6.0 million, and waterblasters of
$0.8 million, partially offset by
declines in vacuum trucks of $12.5
million. Non-U.S. orders increased $0.3 million from the prior-year period due to
market increases in Canada and
Asia, partially offset by declines
in Mexico and Europe. Year-to-date orders of $323.9 million were up from the previous year by
$11.6 million, or 4%. U.S. orders
were up 4%, or $11.6 million,
primarily as a result of increases in orders for municipal sewer
cleaners of $13.8 million,
waterblasters of $5.8 million, and
sweepers of $2.0 million, partially
offset by declines in industrial orders of $11.2 million. Non-U.S. orders remained flat at
$63.9 million compared to the prior
year.
Net sales increased $8.0 million
and $57.0 million for the three and
nine months ended September 30, 2012
compared to the respective prior-year periods. U.S. sales increased
$3.0 million for the three months
primarily resulting from municipal sewer cleaner shipments, which
is consistent with the increased order volume. Non-U.S. sales for
the three months were up $5.0 million
due to strength in Canada,
partially offset by declines in Europe and Mexico. U.S. sales for the nine months were up
$44.7 million due to increases across
all product lines. Non-U.S. sales for the nine months were up
$12.3 million resulting from large
backlogs, despite flat non-U.S. orders.
Operating income increased $1.6
million and $16.0 million for
the three and nine months ended September
30, 2012, compared to the respective prior-year periods.
Operating income increases are a result of higher gross margins of
$2.0 million and $17.5 million, respectively, partially offset by
increased SG&A expenses of $0.4
million and $1.5 million,
respectively. The increase in SG&A expenses relates to
additional commission expenses associated with increased
orders.
Corporate Expenses
Corporate expenses were $6.6
million and $3.8 million for
the three months ended September 30, 2012 and 2011,
respectively. The increase primarily was due to higher incentive
compensation expense of $1.1 million
in 2012 and a $1.3 million reduction
in an insurance reserve associated with carrier paid claims in
2011.
Corporate expenses were $18.4
million and $13.8 million for
the nine months ended September 30, 2012 and 2011,
respectively. The increase primarily was due to higher incentive
compensation expense of $2.8 million
and a $1.3 million reduction in an
insurance reserve associated with carrier-paid claims in 2011.
Corporate expenses included depreciation and amortization
expense of $0.1 million and
$0.6 million for the three and nine
months ended September 30, 2012,
respectively, and $0.0 million and
$0.6 million for the comparable
periods in 2011, respectively.
CONFERENCE CALL
Federal Signal will host its third quarter conference call on
Friday, November 9, 2012 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. 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 institutional customers.
Headquartered in Oak Brook, IL,
with manufacturing facilities worldwide, the Company operates three
groups: Safety and Security Systems, Fire Rescue, and Environmental
Solutions. For more information on Federal Signal, visit:
http://www.federalsignal.com.
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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
|
|
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
(in
millions, except per share data)
|
2012
|
2011
|
2012
|
2011
|
Net
sales
|
$ 185.0
|
$ 167.8
|
$ 585.5
|
$ 493.7
|
Cost of
sales
|
139.4
|
131.3
|
445.4
|
384.0
|
|
|
|
|
|
Gross
profit
|
45.6
|
36.5
|
140.1
|
109.7
|
Selling,
engineering, general and
administrative
|
33.2
|
28.0
|
100.8
|
88.0
|
Restructuring
charge
|
—
|
—
|
0.8
|
—
|
|
|
|
|
|
Operating
income
|
12.4
|
8.5
|
38.5
|
21.7
|
Interest
expense
|
5.2
|
4.5
|
15.7
|
11.9
|
Debt
settlement charges
|
1.9
|
—
|
3.5
|
—
|
Other
(income) expense,
net
|
(0.1)
|
0.5
|
0.2
|
0.4
|
|
|
|
|
|
Income
before income
taxes
|
5.4
|
3.5
|
19.1
|
9.4
|
Income tax
expense
|
(1.0)
|
(0.2)
|
(1.9)
|
(2.8)
|
|
|
|
|
|
Income
from continuing operations
|
4.4
|
3.3
|
17.2
|
6.6
|
Loss from
discontinued operations and disposal, net of income tax benefit of
$2.9, $0.3, $3.5 and $0.3, respectively
|
(19.1)
|
(0.9)
|
(49.4)
|
(5.6)
|
|
|
|
|
|
Net (loss)
income
|
$ (14.7)
|
$ 2.4
|
$ (32.2)
|
$ 1.0
|
|
|
|
|
|
Basic and
diluted earnings (loss) per share:
|
|
|
|
|
Income from continuing
operations
|
$ 0.07
|
$ 0.05
|
$ 0.28
|
$ 0.11
|
Loss from discontinued operations and
disposal,
net of tax
|
(0.31)
|
(0.01)
|
(0.79)
|
(0.09)
|
|
|
|
|
|
(Loss) earnings per
share
|
$ (0.24)
|
$ 0.04
|
$ (0.51)
|
$ 0.02
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
Basic
|
62.4
|
62.2
|
62.3
|
62.2
|
Diluted
|
63.0
|
62.2
|
62.6
|
62.2
|
Cash
dividends declared per share of common
stock
|
$ —
|
$ —
|
$ —
|
$ —
|
FEDERAL
SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
(in
millions, except per share data)
|
September 30,
2012
|
December 31,
2011
|
(unaudited)
|
|
ASSETS
|
|
|
Current assets
|
|
|
Cash and cash
equivalents
|
$
9.1
|
$
9.5
|
Restricted cash
|
1.5
|
—
|
Accounts receivable, net of allowances for
doubtful
accounts of $2.4 and $2.4,
respectively
|
99.4
|
105.0
|
Inventories
|
129.5
|
104.3
|
Other current
assets
|
20.7
|
18.7
|
Current assets of discontinued
operations
|
1.3
|
131.9
|
|
|
|
Total current assets
|
261.5
|
369.4
|
Properties and equipment,
net
|
58.8
|
60.0
|
Other
assets
|
|
|
Goodwill
|
271.0
|
270.6
|
Intangible assets,
net
|
1.0
|
1.8
|
Deferred charges and other
assets
|
13.3
|
2.0
|
Long-term assets of discontinued
operations
|
1.6
|
2.9
|
|
|
|
Total
assets
|
$ 607.2
|
$ 706.7
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
Current
liabilities
|
|
|
Short-term borrowings
|
$
2.0
|
$
9.0
|
Current portion of long-term borrowings and capital
lease obligations
|
6.1
|
0.1
|
Accounts
payable
|
50.9
|
49.5
|
Customer
deposits
|
15.6
|
14.4
|
Deferred
revenue
|
3.0
|
2.9
|
Accrued
liabilities
|
|
|
Compensation and withholding
taxes
|
21.1
|
18.7
|
Other
|
36.6
|
34.0
|
Current liabilities of discontinued
operations
|
15.8
|
35.7
|
|
|
|
Total current
liabilities
|
151.1
|
164.3
|
Long-term borrowings and capital lease obligations,
less current portion
|
151.8
|
213.1
|
Long-term pension and other postretirement
liabilities
|
63.3
|
74.1
|
Deferred
gain
|
19.9
|
21.4
|
Deferred tax
liabilities
|
42.0
|
36.0
|
Other long-term
liabilities
|
13.9
|
14.5
|
Long-term liabilities of discontinued
operations
|
6.7
|
8.6
|
|
|
|
Total
liabilities
|
448.7
|
532.0
|
Shareholders' equity
|
|
|
Common stock, $1 par value per share,
90.0 million shares authorized,
63.4 million and 63.1 million shares
issued,
respectively
|
63.4
|
63.1
|
Capital in excess of par value
|
170.0
|
167.7
|
Retained earnings
|
4.2
|
36.4
|
Treasury stock, 0.9 million and 0.9 million
shares, respectively,
at
cost
|
(16.4)
|
(16.1)
|
Accumulated other comprehensive
loss
|
(62.7)
|
(76.4 )
|
|
|
|
Total
shareholders' equity
|
158.5
|
174.7
|
|
|
|
Total
liabilities and shareholders'
equity
|
$ 607.2
|
$ 706.7
|
|
|
|
FEDERAL
SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
Nine months ended
September 30,
|
($ in
millions)
|
2012
|
2011
|
Operating
activities
|
|
|
Net (loss)
income
|
$ (32.2)
|
$ 1.0
|
Adjustments to reconcile net loss to net cash (used
for) provided by operating activities
|
|
|
Loss on discontinued operations and
disposal
|
49.4
|
5.6
|
Depreciation and
amortization
|
9.6
|
9.6
|
Debt settlement charges
|
3.5
|
—
|
Stock-based compensation
expense
|
2.1
|
1.6
|
Pension expense, net of funding
|
(6.2)
|
1.5
|
Restructuring charge
|
0.8
|
—
|
Deferred income taxes
|
2.6
|
2.1
|
Changes in other operating assets and
liabilities
|
(10.8)
|
(9.0)
|
|
|
|
Net cash
provided by continuing operating activities
|
18.8
|
12.4
|
Net cash
used for discontinued operating
activities
|
(21.1)
|
(11.6)
|
|
|
|
Net cash
(used for) provided by operating
activities
|
(2.3)
|
0.8
|
Investing
activities
|
|
|
Purchases of properties and
equipment
|
(9.2)
|
(10.6)
|
Proceeds from sales of properties, plant and
equipment
|
1.3
|
1.2
|
Proceeds from sale of FSTech Group
|
82.1
|
—
|
Increase in restricted
cash
|
(1.5)
|
—
|
|
|
|
Net cash
provided by (used for) continuing investing
activities
|
72.7
|
(9.4)
|
Net cash
provided by discontinued investing
activities
|
—
|
—
|
|
|
|
Net cash
provided by (used for) investing
activities
|
72.7
|
(9.4)
|
Financing
activities
|
|
|
Reduction in debt outstanding under revolving credit
facilities
|
(173.1)
|
(28.6)
|
Proceeds on short-term
borrowings
|
50.9
|
48.5
|
Payments on short-term
borrowings
|
(58.5)
|
(42.4 )
|
Proceeds from issuance of long-term
borrowings
|
215.0
|
—
|
Payments on long-term
borrowings
|
(99.4)
|
(12.3)
|
Payments of debt financing
fees
|
(6.9)
|
(2.3)
|
Cash dividends paid to
shareholders
|
—
|
(3.7)
|
Other, net
|
2.3
|
0.7
|
|
|
|
Net cash
used for continuing financing
activities
|
(69.7)
|
(40.1)
|
Net cash
used for discontinued financing
activities
|
(0.9)
|
(0.3)
|
|
|
|
Net cash
used for financing
activities
|
(70.6)
|
(40.4)
|
|
|
|
Effects of
foreign exchange rate changes on cash and cash
equivalents
|
(0.2)
|
0.1
|
|
|
|
Decrease
in cash and cash
equivalents
|
(0.4)
|
(48.9)
|
Cash and
cash equivalents at beginning of
period
|
9.5
|
62.1
|
|
|
|
Cash and
cash equivalents at end of period
|
$ 9.1
|
$ 13.2
|
|
|
|
SOURCE Federal Signal Corporation