Federal Signal Corporation Announces 2011 First Quarter Results

OAK BROOK, Ill., April 28, 2011  Federal Signal Corporation (NYSE: FSS), a leader in environmental, safety and transportation solutions, announced today a loss per share from continuing operations of $0.08 for the first quarter and a loss from continuing operations of $5.3 million on net sales of $173.6 million. For the same period of 2010, the Company reported a loss per share of $0.08 on a loss of $4.0 million from continuing operations on net sales of $164.6 million.

In connection with the completion of the second step of the goodwill impairment analysis in the first quarter of 2011, the Company recorded an adjustment of $1.6 million, which reduced a portion of the original goodwill impairment recorded in the fourth quarter of 2010. For the first quarter of 2011, the Company recorded tax expense of $0.7 million on a loss before income tax of $4.6 million, compared with a tax benefit of $1.3 million on a loss before income tax of $5.3 million in the same prior year period. The increase in income tax expense reflects the absence of a tax benefit on U.S. losses due to the valuation allowance established against U.S. deferred tax assets, and normal tax rates on non-U.S. earnings.

The Company recorded a net loss of $5.3 million in the first quarter of 2011 compared to net loss of $5.0 million, including a loss from discontinued operations of $1.0 million in the same prior year period.

Dennis J. Martin, President and Chief Executive Officer, stated, "The first quarter reflected a continuation of some of the positive trends we saw in the fourth quarter of last year.  Orders for our longer lead time businesses increased significantly, both on a sequential basis and as compared to the first quarter of last year.  Our order backlog is almost 20% higher at the end of the first quarter than it was at the end of last year."

Mr. Martin continued, "In addition, we are continuing to make progress on our 80/20 profitable growth initiatives.  We are bringing more focus to inventory management across all of the businesses, and we are leveraging our strong businesses and products to position ourselves for profitable growth.  Our recently announced relationship with Kapsch to work together on initiatives in North American intelligent transportation markets is a good example of leveraging our strengths to drive value creation."   

GROUP RESULTS

Safety and Security Systems

The following table summarizes the Safety and Security Systems Group's operating results for the three month periods ended March 31, 2011 and 2010:

• Orders decreased $6.9 million for the three months ended March 31, 2011 compared to the respective prior year period. U.S. orders decreased $1.0 million due to lower municipal spending in the police, fire and outdoor warning markets, partially offset by stronger industrial demand of $1.3 million. Non-U.S. orders decreased $5.9 million, primarily due to the absence of a large European police order received in the same period last year.
• Net sales increased $0.6 million for the three months ended March 31, 2011 compared to the respective prior year period, primarily due to strong industrial demand, partially offset by soft municipal demand for fire and police products in both the U.S. and European markets.
• Operating income increased $0.5 million for the three months ended March 31, 2011 compared to the respective prior year period, primarily due to higher sale volumes and improved profit margins as a result of pricing initiatives initiated in the fourth quarter of 2010.

Fire Rescue

The following table summarizes the Fire Rescue Group's operating results for the three month periods ended March 31, 2011 and 2010:

• Orders increased $4.5 million for the three months ended March 31, 2011 compared to the respective prior year period. The increase is due to strong demand in the industrial market, which is in the process of recovering from the global economic recession, partially offset by decreased demand in the Company's fire-lift products in the European market as result of soft municipal and government spending.
• Net sales decreased $3.6 million for the three months ended March 31, 2011 compared to the respective prior year period as a result of lower backlog at the end of 2010.
• Operating income was consistent for the three months ended March 31, 2011 compared to the respective prior year periods, while the sales volume was down. Operating margin improved 0.6% due to the higher gross profit resulting from a better product mix.  

Environmental Solutions

The following table summarizes the Environmental Solutions Group's operating results for the three month periods ended March 31, 2011 and 2010:

• Orders increased $12.2 million for the three months ended March 31, 2011 compared to the respective prior year period. U.S. orders increased $4.3 million for the three months ended March 31, 2011 compared to the respective prior year period due to an increase of $17.2 million in industrial vacuum truck orders, partially offset by a decrease in demand of sewer cleaning truck and street sweeper orders as a result of continued weakness in the municipal markets. Non-U.S. orders for the three months ended March 31, 2011 compared to the respective prior year period increased $7.9 million due to larger orders of street sweepers in the Middle East market.
• Net sales increased $6.4 million for the three months ended March 31, 2011 compared to the respective prior year period primarily as a result of increased demand in non-U.S. markets.
• Operating income decreased $2.9 million for the three months ended March 31, 2011 compared to the respective prior year period, primarily due to lower gross margins from non-U.S. orders for street sweepers, an unfavorable product mix, and increased costs associated with the final deployment of a common ERP system across the Group. In addition, productivity and profitability were negatively impacted by a union campaign at our Vactor facility. The election was held on April 21, 2011, at which time a majority of the employees voted against union representation.

Federal Signal Technologies

The following table summarizes the Federal Signal Technologies Group's operating results for the three month periods ended March 31, 2011 and 2010:

• Orders increased $1.2 million to $20.1 million for the three months ended March 31, 2011 compared to the respective prior year period. U.S. orders increased $2.3 million for the three months ended March 31, 2011 compared to the respective prior year due to an increase in orders for automated license plate recognition ("ALPR") cameras and orders attributed to the newly acquired businesses, Sirit and VESystems, partially offset by a decrease in parking system orders. Non-U.S. orders decreased $1.1 million for the three months ended March 31, 2011 compared to the respective prior year period due to a decrease of $2.0 million in ALPR camera orders, partially offset by the newly acquired businesses.
• Net sales increased $5.6 million for the three months ended March 31, 2011 compared to the respective prior year period due to revenues from the newly acquired businesses and an increase in ALPR camera sales, partially offset by a decrease in parking system shipments.
• The operating loss for the three months ended March 31, 2011 (excluding the $1.6 million goodwill impairment adjustment) was $5.1 million compared to an operating loss of $2.6 million from the respective prior year period, primarily due to higher operating expenses associated with the newly acquired businesses.

CORPORATE EXPENSES

• Corporate expenses were $4.6 million and $8.2 million for the three months ended March 31, 2011 and 2010, respectively. The decrease was mainly due to the absence of $2.6 million in acquisition and integration costs associated with the businesses acquired in the first quarter of 2010, a $0.6 million insurance reimbursement in the first quarter of 2011, and $0.3 million lower salary expenses due to reduced headcount in the first quarter of 2011.

CONFERENCE CALL

Federal Signal will host its first quarter conference call on Thursday, April 28, 2011 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, Ill., with manufacturing facilities worldwide, the Company operates four groups: Safety and Security Systems, Environmental Solutions, Federal Signal Technologies, 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.

SOURCE Federal Signal Corporation