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The Company recorded net income including discontinued operations of $4.3 million in the third quarter of 2009 compared to net income of $14.2 million in the prior year period. Operating cash flow from continuing operations for the first nine months of 2009 totaled $43.2 million, a $33.4 million improvement versus the prior year, primarily due to improved working capital management, offsetting lower profits. The Company had $130 million of global liquidity at the end of the quarter.
William H. Osborne, president and chief executive officer, stated, "I am pleased with the progress the company made in the quarter, as we had success on several fronts. Our team has focused intensely on cost reduction this year, and the results are impressive. Overhead costs - which we define as fixed manufacturing costs and SG&A - were reduced $12.2 million in the quarter versus last year, including a $3.6 million one-time cost related to a contract dispute in Q3 2008. Overhead costs are down $20 million year-to-date, including $5 million in cumulative costs relating to the contract dispute. We improved the operating margin in our Fire Rescue (Bronto) group in the quarter. We generated strong cash flow in the quarter and reduced our net debt by over $26 million."
Mr. Osborne continued, "Orders stabilized in the quarter, with third quarter orders equal to those in the second quarter. While we have not yet seen a consistent pattern of growth across our entire business portfolio, we did see sequential order growth in our Bronto aerial lift and PIPS automated license plate recognition (ALPR) businesses. We are continuing to take steps and devote resources to develop and grow our public safety businesses. I believe that our actions in 2009 have the company well positioned to profit from an economic recovery."
Q3 GROUP RESULTS
Safety and Security Systems
-- Q3 orders of $70.5 million were down slightly from the $72.2 million in
Q2.
-- Orders declined 19% from 2008 to $70.5 million as a result of the global
economic recession and unfavorable currency effects.
-- Net sales were down 18% to $73.8 million due to lower volumes across
most market segments and unfavorable foreign currency effects of 1.9%.
-- Operating income decreased $1.6 million to $6.7 million as a result of
lower sales volumes. Operating expenses were lower than the prior year
by $5.6 million primarily as a result of headcount reductions and cost
containment efforts, and the absence of one-time costs in 2008 related
to a contract dispute. However, this was not sufficient to overcome the
volume decline in the quarter. 2009 operating expenses include an
initial charge of $0.3 million for a restructuring initiative to
consolidate plant operations. As a comparison, Q3 2008 income included
a total of $6.1 million in charges associated with a contract dispute.
Fire Rescue (Bronto)
-- Orders for Q3 were up 24%, or $5.0 million, from Q2 to $26.2 million.
-- Orders declined 23%, or $7.9 million, to $26.2 million from Q3 2008 with
a decrease across all product lines. Early 2008 orders were at record
levels across all segments.
-- Net sales were essentially flat at $27.4 million as the group continues
to work off a strong backlog.
-- Q3 operating income was up $1.5 million, to $2.2 million. Operating
margin increased from 2.5% in 2008 to 8.0% in 2009 as a result of
reduced outsourcing and efficiencies associated with the plant
expansion.
Environmental Solutions
-- Orders were down 5%, or $2.9 million, from the second quarter
-- Q3 Orders declined 28%, to $60.8 million from Q3 2008 with a decrease
across all product lines except sweeper exports.
-- Net sales were down 30% to $65.4 million primarily due to order weakness
and lower sales volume.
-- Q3 operating income was down $6.1 million to $2.7 million. The impact of
lower sales volumes was partially offset by favorable purchase price
variances of $2.1 million and lower manufacturing and operating expenses
of $1.8 million.
Other
-- Q3 Corporate expense was down $1.4 million to $4.1 million primarily as
a result of lower legal expenses associated with the hearing loss
litigation.
-- Interest expense for Q3 was down $1.0 million in 2009 due to lower
interest rates and lower average borrowings.
-- The Q3 effective tax rate on income from continuing operations was
17.9%, or $1.0 million.
CONFERENCE CALL
Federal Signal will host its third quarter conference call on Tuesday, November 3, 2009 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 | Quote | Chart | News | PowerRating) 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 (NYSE)
Consolidated Financial Data
For the Third Quarter 2009 and 2008 (Unaudited)
(in millions except per share data)
QTR QTR YTD YTD
September 30 September 30 September 30 September 30
2009 2008 2009 2008
---- ---- ---- ----
Quarter September 30:
Net Sales $166.6 $212.0 $560.9 $665.9
Cost of sales (124.6) (155.7) (415.7) (488.3)
Operating
expenses (34.5) (44.0) (122.9) (136.1)
------ ------ ------ ------
Operating income 7.5 12.3 22.3 41.5
Interest expense (2.6) (3.6) (8.8) (12.6)
Other income
(expense) 0.7 (0.1) (0.3) (1.9)
------ ------ ------ ------
Income before income
taxes 5.6 8.6 13.2 27.0
Income tax (expense)
benefit (1.0) 5.9 (2.5) (0.3)
------ ------ ------ ------
Income from continuing
operations 4.6 14.5 10.7 26.7
Loss from discontinued
operations and
disposal, net of
tax (0.3) (0.3) (10.3) (110.6)
------ ------ ------ ------
Net income (loss) $4.3 $14.2 $0.4 $(83.9)
====== ====== ====== ======
Gross margin 25.2% 26.6% 25.9% 26.7%
Operating margin 4.5% 5.8% 4.0% 6.2%
Effective tax rate 17.9% (68.6%) 18.9% 0.9%
Diluted earnings per
share:
Earnings from
continuing
operations $0.10 $0.31 $0.22 $0.56
Loss from
discontinued
operations and
disposal, net
of tax (0.01) (0.01) (0.21) (2.32)
------ ------ ------ ------
Income (loss) per
share $0.09 $0.30 $0.01 $(1.76)
------ ------ ------ ------
Average common
shares
outstanding 48.0 47.6 48.5 47.7
QTR QTR YTD YTD
September 30 September 30 September 30 September 30
2009 2008 2009 2008
---- ---- ---- ----
Group results:
Safety and Security
Systems Group:
Orders $70.5 $86.6 $218.7 $281.2
Net Sales 73.8 90.3 228.8 275.9
Operating
Income 6.7 8.3 21.8 27.5
Operating
Margin 9.1% 9.2% 9.5% 10.0%
Backlog $43.3 $61.8
Fire Rescue Group:
Orders $26.2 $34.1 $68.2 $135.5
Net Sales 27.4 28.1 101.4 92.5
Operating
Income 2.2 0.7 9.5 4.6
Operating
Margin 8.0% 2.5% 9.4% 5.0%
Backlog $106.6 $174.8
Environmental Solutions
Group:
Orders $60.8 $84.2 $191.9 $270.2
Net Sales 65.4 93.6 230.7 297.5
Operating
Income 2.7 8.8 11.9 29.7
Operating
Margin 4.1% 9.4% 5.2% 10.0%
Backlog $59.1 $101.4
Corporate Operating
Expenses $(4.1) $(5.5) $(20.9) $(20.3)
------ ------ ------ ------
Total Operating
Income $7.5 $12.3 $22.3 $41.5
====== ====== ====== ======
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30 December 31
($in millions) 2009 2008
---- ----
ASSETS
Current assets
Cash and cash equivalents $21.1 $23.4
Short-term investments - 10.0
Accounts receivable, net of allowances
for doubtful accounts of $1.9 million
and $2.0 million, respectively 114.1 138.6
Inventories 129.2 133.5
Other current assets 27.1 21.5
------ ------
Total current assets 291.5 327.0
Properties and equipment, net 67.7 63.5
Other assets
Goodwill 330.5 328.1
Intangible assets, net of accumulated
amortization 48.0 47.8
Deferred tax assets 26.9 30.3
Deferred charges and other assets 1.8 4.4
------ ------
Total assets 766.4 801.1
Assets of discontinued operations 10.2 37.0
------ ------
Total assets $776.6 $838.1
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $1.3 $12.6
Current portion of long-term
borrowings 40.4 25.1
Accounts payable 41.6 48.4
Accrued liabilities
Compensation and withholding taxes 20.6 23.9
Customer deposits 12.5 17.4
Other 53.0 48.6
------ ------
Total current liabilities 169.4 176.0
Long-term borrowings 196.8 241.2
Long-term pension liabilities 54.1 58.0
Deferred gain 24.7 26.2
Other long-term liabilities 12.2 14.8
------ ------
Total liabilities 457.2 516.2
Liabilities of discontinued operations 13.9 34.8
------ ------
Total liabilities 471.1 551.0
Shareholders' equity
Common stock, $1 par value per share,
90.0 million shares authorized, 49.6
million and 49.3 million shares issued,
respectively 49.6 49.3
Capital in excess of par value 93.3 106.4
Retained earnings 220.6 229.0
Treasury stock, 0.8 million and 1.9
million shares at cost, respectively (15.8) (36.1)
Accumulated other comprehensive loss
Foreign currency translation, net 15.3 (4.1)
Net derivative loss, cash flow hedges,
net (0.9) (0.9)
Unrecognized pension and postretirement
losses, net (56.6) (56.5)
------ ------
Total (42.2) (61.5)
------ ------
Total shareholders' equity 305.5 287.1
------ ------
Total liabilities and shareholders'
equity $776.6 $838.1
====== ======
Supplemental data:
Debt $238.5 $278.9
Debt-to-capitalization ratio: 43.8% 49.3%
Net Debt/Cap Ratio 41.6% 46.1%
Net Debt/Cap Ratio = debt-to-capitalization ratio, net of cash
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Year-to-Date
September 30,
-------------------------
2009 2008
---- ----
($in millions)
Operating activities
Net income (loss) $0.4 $(83.9)
Adjustments to reconcile net income (loss)
to net cash provided by
(Used for) operating activities:
Loss on discontinued operations and
disposal 10.3 110.6
Depreciation and amortization 11.7 11.9
Stock based compensation expense 3.3 2.1
Pension contributions (0.5) (8.2)
Working capital (1) 21.4 (16.2)
Other (3.4) (6.5)
------ ------
Net cash provided by continuing operating
activities 43.2 9.8
Net cash (used for) provided by discontinued
operating activities (3.2) 119.5
------ ------
Net cash provided by operating activities 40.0 129.3
Investing activities
Purchases of properties and equipment (11.9) (18.8)
Proceeds from sales of properties,
plant and equipment 1.2 35.8
Other, net 10.0 0.8
------ ------
Net cash (used for) provided by continuing
investing activities (0.7) 17.8
Net cash provided by discontinued investing
activities 14.2 54.4
------ ------
Net cash provided by investing activities 13.5 72.2
Financing activities
Decrease in short-term borrowings, net (11.3) (1.4)
Payments on long-term borrowings, net (29.8) (55.4)
Purchases of treasury stock - (6.0)
Cash dividends paid to shareholders (8.7) (8.6)
Other, net 0.2 (0.1)
------ ------
Net cash used for continuing financing
activities (49.6) (71.5)
Net cash used for discontinued financing
activities (7.1) (126.7)
------ ------
Net cash used for financing activities (56.7) (198.2)
Effects of foreign exchange rate changes
on cash 0.9 -
(Decrease) increase in cash and cash
equivalents (2.3) 3.3
Cash and cash equivalents at beginning
of period 23.4 12.5
------ ------
Cash and cash equivalents at end of
period $21.1 $15.8
====== ======
(1) Working capital is composed of net accounts receivable, inventories,
accounts payable and customer deposits.
SOURCE Federal Signal Corporation
http://www.federalsignal.com
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