OAK BROOK, Ill. , Oct. 30 /PRNewswire-FirstCall/ -- Federal Signal Corporation (NYSE: FSS), a leader in advancing security and well-being, today reported net income from continuing operations of $14.8 million , or $.31 per share, for the third quarter of 2008 on net sales of $227 million . For the same period of 2007, the Company earned $10.2 million from continuing operations, or $.21 per share, on net sales of $229 million . The year-over-year increase in net income from continuing operations was due to an $8.2 million benefit arising from the use of tax loss carry forwards on the sale/leaseback of two production facilities. Partly offsetting this item was an adverse $3.4 million after-tax charge to settle a dispute and write off assets associated with a contract to install a parking system at the Dallas/Ft. Worth airport, and the absence of a $1.2 million after-tax favorable excise tax settlement received in the prior year.
'Our aggressive debt reduction has positioned the Company well. Since January 1 , we have reduced net debt by $186 million , leaving us ample committed credit lines with a strong bank group. We have accomplished this while at the same time increasing pension contributions and investing capital to expand facilities with strong markets and backlog. During the quarter, we completed the expansion of our Bronto plant, and began construction of a 40% capacity addition at our Vactor/Guzzler plant in Streator, Illinois . Our strong balance sheet and diverse market participation position us to weather the current economic turmoil and grow profitably over the long term.'
The Company recorded third quarter net income including discontinued operations of $14.2 million , compared to $4.5 million of net income in the prior year period. The prior year results included a $5.7 million loss primarily related to discontinued operations of E-ONE. On August 5, 2008 the Company announced the sale of its E-ONE subsidiary.
Cash flow from operations totaled $129.3 million for the first nine months, significantly above $44.3 million in the prior year. The increase is primarily the result of the sale or liquidation of the majority of the Company's financial services assets during the quarter.
GROUP RESULTS
Safety and Security Systems
-- Orders declined 2% from the prior year period to $87 million . Non- U.S. orders increased 17% as a result of improvements from all business units including the addition of orders for PIPS automated license plate recognition (ALPR) systems, which was acquired in August of 2007. U.S. orders were down 14% from the prior year due to decreased demand for police lightbars and sirens, outdoor warning devices and parking and revenue control systems.
-- Net sales declined 4% from the third quarter of 2007 due to the wind-down of deliveries against the large parking systems projects, reduced demand for US police products and disruptions in shipments from the Houston -based hazardous lighting plant associated with the impact of Hurricane Ike. Offsetting the decline somewhat were increased sales of ALPR cameras.
-- Operating income of $8.3 million was down $4.4 million from the prior year due to the settlement and asset write-off of the DFW contract of $6.0M and the $.4 million impact of Hurricane Ike which was somewhat offset by increased sales of higher margin ALPR cameras. Excluding the impact of the DFW settlement, Q3 operating margins averaged 15.7%.
Fire Rescue
-- Orders for Bronto aerial devices increased from the prior year, but total dollars declined because of a generally lower-priced mix. In general, demand for work platforms from European industrial and rental companies remains below prior year, offset by growth in other global markets. Quarter-end backlog of $175 million remained 32% above prior year.
-- Net sales of $29 million rose 13% from the prior year period as a result of the relatively stronger Euro. Bronto has completed the 40% capacity expansion and is in the process of ramping up production to help meet the increased demand.
-- Operating income of $1.2 million was down $1.7 million from 2007. Operating income and margin declined as higher component costs and a high level of subcontracting impacted gross margins for the quarter. Costs associated with transition to the expanded plant, higher promotion and launch costs associated with the next generation product range and higher bad debt from a failed U.K. dealer also affected results for the period. The benefits of the plant capacity expansion are expected to reduce fourth quarter production costs as subcontractor costs are being eliminated.
Environmental Solutions
-- Orders totaled $95 million , down 7% from the prior year quarter. Orders in the US municipal and government markets were down 13% due to weakening sweeper and sewer cleaner orders. Orders in the industrial market were up 5% primarily as a result of increases in industrial vacuums and the Jetstream rental business. Quarter-end backlog totaled $110 million , essentially flat with the prior year quarter.
-- Net sales of $108 million remained relatively flat compared to the prior year as lower sweeper sales were offset by increased sales for sewer cleaners and industrial vacuums and higher prices. Additionally, the group's Jetstream water blaster operation in Houston was disrupted due to the impact of Hurricane Ike.
-- Operating income of $9.1 million was down $.4 million from the prior year as a result of the absence of a favorable $1.8 million excise tax settlement which occurred in 2007, and the $.4 million adverse impact of Hurricane Ike. Largely offsetting were reduced operating expenses, due in part to lower incentive compensation expense.
OTHER
-- Third quarter corporate expense totaled $5.8 million , an increase of $.3 million from the prior year quarter. The increase is the result of higher legal costs associated with hearing loss litigation and costs associated with the leadership change, offset by lower incentive and stock compensation expense and other cost containment actions.
-- The third quarter effective tax rate was (71.5)% versus 21.1% in 2007. The negative tax rate reflects a tax benefit of $8.2 million for the utilization of capital loss carry forwards triggered by the sale leaseback transactions for two US based manufacturing facilities.
-- At quarter-end, manufacturing debt net of cash totaled $228 million , down from $414 million at the beginning of the year. The company had $60.1 million drawn against its $250 million revolving credit facility, which matures in April of 2012.
CONFERENCE CALL
Federal Signal will host its second quarter conference call on Thursday, October 30 at 11:00 a.m. Eastern Time to highlight results of the quarter. 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 accessible from this company website will be available 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, Ill. , with manufacturing facilities worldwide, the Company operates three groups: Safety and Security Systems, Environmental Solutions and Fire Rescue. 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
CONSOLIDATED STATEMENTS OF OPERATIONS
QTR QTR YTD YTD
September September September September
30 30 30 30
2008 2007 2008 2007
Quarter Sept 30:
($ in millions, except
per share data)
Net Sales $226.5 $228.5 $709.0 $684.7
Cost of sales (167.6) (164.4) (522.3) (498.0)
Operating expenses (46.1) (44.5) (142.5) (127.7)
------- ------- ------- -------
Operating income 12.8 19.6 44.2 59.0
Interest expense (4.1) (6.4) (16.4) (18.2)
Other expense (0.1) (0.3) (1.9) (1.0)
------- ------- ------- -------
Income before income
taxes 8.6 12.9 25.9 39.8
Income tax benefit
(expense) 6.2 (2.7) 1.2 (10.1)
------- ------- ------- -------
Income from continuing
operations 14.8 10.2 27.1 29.7
(Loss) gain from
discontinued
operations
and disposal, net of
tax (0.6) (5.7) (111.2) 16.5
Net income (loss) $14.2 $4.5 $(84.1) $46.2
======= ======= ======= =======
Gross margin 26.0% 28.1% 26.3% 27.3%
Operating margin 5.7% 8.6% 6.2% 8.6%
Effective tax rate (71.5%) 21.1% (4.9%) 25.4%
Diluted earnings per
share:
Earnings from
continuing
operations $0.31 $0.21 $0.57 $0.62
(Loss) earnings from
discontinued
operations
and disposal, net of
tax (0.01) (0.12) (2.33) 0.35
------- ------- ------- -------
Earnings (loss) per
share $0.30 $0.09 $(1.76) $0.97
------- ------- ------- -------
Average common shares
outstanding 47.6 47.8 47.7 47.9
QTR QTR YTD YTD
September September September September
30 30 30 30
2008 2007 2008 2007
Group results:
($ in millions)
Safety and
Security
Systems Group:
Orders $86.7 $88.5 $281.2 $279.5
Net Sales 90.4 94.4 276.0 269.0
Operating
Income 8.3 12.7 27.5 36.4
Operating
Margin 9.2% 13.5% 10.0% 13.5%
Backlog $61.8 $71.7
Fire Rescue
Group:
Orders $34.7 $36.5 $138.5 $136.3
Net Sales 28.6 25.2 95.5 76.4
Operating
Income 1.2 2.9 7.6 8.3
Operating
Margin 4.2% 11.5% 8.0% 10.9%
Backlog $174.8 $132.4
Environmental
Solutions
Group:
Orders $95.0 $102.7 $310.4 $321.3
Net Sales 107.5 108.9 337.5 339.3
Operating
Income 9.1 9.5 30.0 30.8
Operating
Margin 8.5% 8.7% 8.9% 9.1%
Backlog $110.4 $111.4
Corporate
operating
expenses $(5.8) $(5.5) $(20.9) $(16.5)
------- ------- ------- -------
Total
Operating
Income $12.8 $19.6 $44.2 $59.0
======== ======= ======= =======
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30 December 31
2008 2007
($ in millions)
ASSETS
Manufacturing activities:
Current assets
Cash and cash equivalents $15.8 $12.5
Accounts receivable, net of
allowances for doubtful accounts
of $2.4 million and $3.8 million,
respectively 141.9 147.8
Inventories 134.8 121.8
Other current assets 50.3 28.6
------ ------
Total current assets 342.8 310.7
Properties and equipment, net 64.0 59.6
Other assets
Goodwill 341.2 344.7
Intangible assets, net of
accumulated amortization 58.0 65.2
Deferred charges and other assets 8.3 7.2
------ ------
Total manufacturing assets 814.3 787.4
Assets of discontinued
operations 10.5 231.8
Financial services activities -
Lease financing and other
receivables, net of
allowances for doubtful accounts
of $3.1 million and $3.6 million,
respectively 11.0 146.8
------- --------
Total assets $835.8 $1,166.0
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Manufacturing activities:
Current liabilities
Short-term borrowings $1.7 $2.6
Current portion of long-term
borrowings 25.1 45.4
Accounts payable 60.8 66.2
Accrued Liabilities
Compensation and withholding taxes 20.7 26.8
Customer deposits 22.6 17.7
Other 55.7 53.6
------ ------
Total current liabilities 186.6 212.3
Long-term borrowings 207.0 240.7
Long-term pension and other
liabilities 47.7 32.3
Deferred income taxes 18.6 25.2
------ ------
Total manufacturing liabilities 459.9 510.5
Liabilities of discontinued
operations 17.6 72.8
Financial services activities -
Borrowings 10.1 137.4
------ ------
Total liabilities 487.6 720.7
------ ------
Shareholders' equity
Common stock, $1 par value per
share, 90.0 million shares
authorized, 49.3 million and 49.4
million shares issued, respectively 49.3 49.4
Capital in excess of par value 105.4 103.2
Retained earnings 240.8 333.8
Treasury stock, 1.9 and 1.5
million shares, respectively, at
cost (36.1) (30.1)
Accumulated other comprehensive
(loss) income:
Foreign currency translation, net 12.7 15.9
Net derivative loss, cash flow
hedges, net (0.3) (2.0)
Unrecognized pension and
postretirement losses, net (23.6) (24.9)
------ ------
Total (11.2) (11.0)
------ ------
Total shareholders' equity 348.2 445.3
Total liabilities and ------- ---------
shareholders' equity $835.8 $1,166.0
======= =========
Supplemental data:
Manufacturing debt $233.8 $288.7
Debt-to-capitalization ratio:
Manufacturing 40.0% 40.0%
Financial services 92.0% 94.0%
Net Debt/Cap Ratio 38.6% 38.8%
Net Debt/Cap Ratio = manufacturing debt-to-capitalization ratio, net of
cash
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months
Ended
September 30,
2008 2007
($ in millions)
Operating activities
Net (loss) income $(84.1) $46.2
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities:
Loss (gain) on discontinued operations
and disposal 111.2 (16.5)
Depreciation and amortization 12.1 8.8
Stock based compensation expense 2.1 3.9
Lease financing and other receivables 135.7 21.7
Pension contributions (8.2) (6.2)
Working capital (1) (13.3) (16.6)
Other (6.6) 20.1
------ ------
Net cash provided by continuing operating
activities 148.9 61.4
Net cash used for discontinued operating
activities (19.6) (17.1)
------ ------
Net cash provided by operating activities 129.3 44.3
Investing activities
Purchases of properties and equipment (18.9) (14.5)
Proceeds from sales of properties, plant
and equipment 35.8 -
Payments for acquisitions, net of cash
acquired - (139.2)
Other, net 0.8 (2.0)
------ -------
Net cash provided by (used for) continuing
investing activities 17.7 (155.7)
Net cash provided by discontinued investing
activities 54.5 61.2
Net cash provided by (used for) investing ------ -------
activities 72.2 (94.5)
Financing activities
Decrease in short-term borrowings, net (1.4) (26.5)
(Payments on) proceeds from long-term
borrowings, net (182.1) 92.7
Purchases of treasury stock (6.0) -
Cash dividends paid to shareholders (8.6) (8.6)
Other, net (0.1) (0.2)
------- -------
Net cash (used for) provided by continuing
financing activities (198.2) 57.4
Net cash (used for) provided by financing ------- -------
activities (198.2) 57.4
Effects of foreign exchange rate changes on ------- -------
cash - 0.6
Increase in cash and cash equivalents 3.3 7.8
Cash and cash equivalents at beginning of
period 12.5 15.7
------- -------
Cash and cash equivalents at end of period $15.8 $23.5
======= =======
(1) Working capital is composed of net accounts receivable, inventories,
accounts payable and customer deposits.
SOURCE Federal Signal Corporation
