Federal Signal Corporation Announces First Quarter Earnings
Company Generates Q1 Profit Despite Challenging Economic Conditions
–Highlights–
- Q1 EPS of
- Overhead Costs Reduced
- Q1 Order Backlog =
-
The Company recorded net income including discontinued operations of
Cash flow from continuing operations for the first three months of 2009 totaled
Mr. Osborne continued, “In addition, we continued to see growth in some of our key public safety businesses, as our PIPS automated license plate recognition (ALPR) cameras and warning systems business both generated double-digit revenue increases in the quarter. We begin the second quarter with an order backlog of
GROUP RESULTS
Safety and Security Systems
- Orders declined 21% from 2008 to
$76.1 as a result of the global economic recession and unfavorable currency effects. Orders for the month of March were down 6% versus 2008. - Net sales were down 16% to
$76.2 million due to low order intake and unfavorable foreign currency effects of 4%. - Operating income was
$6.1 million , with an 8% operating margin in the quarter. Operating Income declined$2.2 million versus 2008, driven by lower sales volumes and unfavorable currency effects, partially offset by SG&A cost reductions of$3 million , or 14% in the first quarter.
Fire Rescue
- Q1 orders were down
$36.9 million , to$20.8 million . The economic weakness impacted orders across markets in the current quarter, while 2008 order demand was at record levels in all segments. A strong order backlog of$128 million at the end of Q1 will provide revenue stability in 2009. - Net sales were up 41%, or
$9.4 million , over the prior year as a result of a strong order backlog and the completion in late 2008 of a factory expansion that allowed for higher volumes. This increase is net of an 18% unfavorable currency effect. - Operating income more than tripled in the quarter to
$2.4 million . Operating margin increased from 3.0% in Q1 2008 to 7.4% in Q1 2009 as a result of higher volumes coupled with efficiencies associated with the plant expansion.
Environmental Solutions
- Orders declined 17%, to
$80.3 million from first quarter 2008 largely as a result of the reduction in orders for industrial vacuum trucks. However, orders in March were down only 1%. Orders in the U.S. municipal markets and non-U.S. markets were relatively flat compared to the prior year, with improvement towards the latter part of the quarter. Q1 orders for sweepers increased versus Q1 2008. - Net sales were down 16% to
$94.8 million primarily due to lower shipments of sweepers and sewer cleaners. - Q1 operating income was
$3.1 million . Lower sales volumes translated into a$6.4 million decline in operating income. The lower volumes were partially offset by$2 million lower costs for fixed manufacturing and SG&A inclusive of a$0.9 million charge for severance costs in 2009.
Other
- First quarter corporate expenses totaled
$6.0 million , a reduction of$1.3 million from 2008, partially due to a reduction of$0.6 million in legal costs associated with the Company’s ongoing hearing loss litigation. In addition, the first quarter of 2008 included a$1.5 million charge relating to a contract dispute for theDallas Fort Worth airport project. The year-on-year corporate expense favorability was somewhat mitigated by proxy solicitation costs of$0.6 million . - Interest expense was down
$1.8 million in first quarter of 2009 due to lower interest rates and lower average borrowings in the quarter. - The effective tax rate on income from continuing operations was 12.3%, or
$0.2 million , compared to an expense of 27.6%, or$1.6 million for the first quarter of 2008. The benefit in 2009 is due to the resolution of an IRS audit of the 2006 tax year. In addition, the effective tax rate for Q1 2009 includes research and development tax credit benefits which did not exist in 2008.
CONFERENCE CALL
Federal Signal will host its first quarter conference call on
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
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 First Quarter 2009 and 2008 (Unaudited)
(in millions except per share data)
YTD YTD
Mar 31 Mar 31
Quarter March 31: 2009 2008
---- ----
Net Sales $203.5 $226.4
Cost of sales (152.9) (168.2)
Operating expenses (45.0) (47.0)
---- ----
Operating income 5.6 11.2
Interest expense (3.3) (5.1)
Loss on investment in joint venture (0.9) (0.6)
Other (expense) income (0.1) 0.2
---- ----
Income before income taxes 1.3 5.7
Income tax expense (0.2) (1.6)
---- ----
Income from continuing operations 1.1 4.1
Loss from discontinued operations and disposal, net of tax (0.1) (89.0)
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Net income (loss) $1.0 $(84.9)
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Gross margin on revenues 24.9% 25.7%
Operating margin on revenues 2.8% 4.9%
Effective Tax Rate 12.3% 27.6%
Diluted earnings per share:
Income from continuing operations $0.02 $0.09
Loss from discontinued operations and disposal (1.86)
---- ----
Diluted earnings (loss) per share $0.02 $(1.77)
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Average common shares outstanding 48.0 47.9
YTD YTD
Mar 31 Mar 31
Group results: 2009 2008
---- ----
Safety and Security Systems
Group:
Orders $76.1 $95.9
Net Sales 76.2 90.8
Operating Income 6.1 8.3
Operating Margin 8.0% 9.1%
Backlog $52.6 $67.0
Fire Rescue Group:
Orders $20.8 $57.7
Net Sales 32.5 23.1
Operating Income 2.4 0.7
Operating Margin 7.4% 3.0%
Backlog $128.4 $178.8
Environmental Solutions Group:
Orders $80.3 $97.1
Net Sales 94.8 112.5
Operating Income 3.1 9.5
Operating Margin 3.3% 8.4%
Backlog $92.2 $122.6
Corporate operating expenses $(6.0) $(7.3)
---- ----
Total Operating Income $5.6 $11.2
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FEDERAL SIGNAL CORPORATE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Mar 31 Dec 31
($in millions) 2009 2008
---- ----
ASSETS
Current assets
Cash and cash equivalents $9.7 $23.4
Short-term investments 10.0 10.0
Accounts receivable, net of allowances for doubtful
accounts of $2.2 million and $2.0 million,
respectively 145.0 153.2
Inventories 143.5 137.1
Other current assets 24.4 21.6
---- ----
Total current assets 332.6 345.3
Properties and equipment, net 66.3 65.4
Other assets
Goodwill, net of accumulated amortization 326.5 328.1
Intangible assets, net 46.7 47.8
Deferred tax assets 25.5 30.3
Deferred charges and other assets 4.5 4.4
---- ----
Total assets 802.1 821.3
Assets of discontinued operations 13.2 12.7
---- ----
Total assets $815.3 $834.0
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $1.2 $12.6
Current portion of long-term borrowings 26.1 25.1
Accounts payable 58.6 56.4
Accrued Liabilities
Compensation and withholding taxes 20.7 25.1
Customer deposits 18.1 17.4
Other 51.8 49.8
---- ----
Total current liabilities 176.5 186.4
Long-term borrowings 239.8 241.2
Long-term pension liabilities 54.2 58.0
Deferred gain 25.7 26.2
Other long-term liabilities 13.8 13.3
---- ----
Total liabilities 510.0 525.1
Liabilities of discontinued operations 19.1 24.4
---- ----
Total liabilities 529.1 549.5
Shareholders' equity
Common stock, $1 par value per share, 90.0
million shares authorized,
49.5 million and 49.3 million shares issued,
respectively 49.5 49.3
Capital in excess of par value 91.2 106.4
Retained earnings 224.5 226.4
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 (6.5) (4.1)
Net derivative loss, cash flow hedges, net (0.6) (0.9)
Unrecognized pension and postretirement
losses, net (56.1) (56.5)
---- ----
Total (63.2) (61.5)
---- ----
Total shareholders' equity 286.2 284.5
---- ----
Total liabilities and shareholders' equity $815.3 $834.0
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Supplemental data:
Debt $267.1 $278.9
Debt-to-capitalization ratio: 48.3% 49.5%
Net Debt/Cap Ratio 46.4% 46.3%
Net Debt/Cap Ratio = debt-to-capitalization ratio, net of cash
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Quarter Ended
March 31,
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2009 2008
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($in millions)
Operating activities
Net income (loss) $1.0 $(84.9)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Loss on discontinued operations and disposal 0.1 89.0
Loss on investment in joint venture 0.9 0.6
Depreciation and amortization 3.9 4.3
Stock based compensation expense 1.1 1.1
Pension contributions (0.5) (0.4)
Working capital (1) 1.6 (12.2)
Other (1.7) (4.2)
---- ----
Net cash provided by (used for) continuing
operating activities 6.4 (6.7)
Net cash provided by discontinued operating activities 1.4 18.0
---- ----
Net cash provided by operating activities 7.8 11.3
Investing activities
Purchases of properties and equipment (3.8) (7.7)
---- ----
Net cash used for continuing investing activities (3.8) (7.7)
Net cash provided by (used for) discontinued
investing activities 2.9 (0.9)
---- ----
Net cash used for investing activities (0.9) (8.6)
Financing activities
Decrease in short-term borrowings, net (11.4) (2.5)
(Payments on) proceeds from long-term
borrowings, net (0.1) 14.5
Cash dividends paid to shareholders (2.9) (2.9)
Other, net 0.2 (0.8)
---- ----
Net cash (used for) provided by continuing
financing activities (14.2) 8.3
---- ----
Net cash used for discontinued financing
activities (6.4) (15.4)
---- ----
Net cash used for financing activities (20.6) (7.1)
---- ----
Effects of foreign exchange rate changes on cash - 0.9
Decrease in cash and cash equivalents (13.7) (3.5)
Cash and cash equivalents at beginning of year 23.4 12.5
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Cash and cash equivalents at end of period $9.7 $9.0
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(1) Working capital is composed of net accounts receivable, inventories,
accounts payable and customer deposits.
SOURCE Federal Signal Corporation