Federal Signal Corporation Announces 2012 First Quarter Results

OAK BROOK, Ill., May 4, 2012 /PRNewswire/ -- Federal Signal Corporation (NYSE: FSS) today reported results for the first quarter ended March 31, 2012

• Q1 Operating income increased to $7.1 million versus a loss of ($1.0) million in Q1 2011
• Q1 Orders of $243 million, up 16% versus last year
• Q1 Net sales of $225 million, up 29% versus last year
• Backlog increased to $455 million (up $29 million versus year end) compared to $258 million at the end of Q1 2011
• Reported loss per share from continuing operations of ($0.01) versus ($0.08) in Q1 2011
• Q1 2012 results include ($0.03) per share impact of refinancing-related costs and ($0.01) per share for restructuring charge  

Dennis J. Martin, President and Chief Executive Officer, stated, "I'm pleased with the continued progress achieved during the first quarter as reflected in the financial results.  Orders, sales and operating income were all significantly improved versus last year, and our order backlog continued to increase."  Mr. Martin continued, "Our order trends, strong backlogs and margin improvement initiatives have positioned each of our business groups to generate significantly higher profits in 2012. In addition, we refinanced the Company's long-term debt with an option to prepay without penalty upon the sale of certain assets.  We remain committed to either divesting or improving our underperforming businesses before year end."

The Company reported orders of $242.8 million for the first quarter of 2012, up 16% from $209.7 million a year earlier, led by strong increases in order rates at the Company's Environmental Solutions and Safety and Security Systems Groups. 

Net sales increased $51.0 million or 29% to $224.6 million for the first quarter of 2012, with sales increases across all segments, primarily lead by higher shipments resulting from strong fourth quarter 2011 backlogs, for the Environmental Solutions and Fire Rescue Groups.

Operating income was $7.1 million in the three months ended March 31, 2012 compared to an operating loss of $1.0 million for the prior year period. The increase in operating income was a result of higher sales volume, partially offset by a $0.9 million restructuring charge in 2012 and the absence of $1.6 million of income in the first quarter of 2011 from a favorable adjustment to the goodwill impairment charge originally recognized in the fourth quarter of 2010.

Interest expense increased $2.6 million for the three months ended March 31, 2012, compared to the prior year period, primarily due to an increase in interest rates on the Company's new debt agreements entered into in February 2012. In the first quarter of 2012, the Company recorded $1.6 million of costs related to the termination of its prior debt agreements. The costs included $1.0 million of make-whole interest payments and a write-off of deferred financing costs of $0.6 million.

For the first quarter of 2012, the Company reported a loss per share from continuing operations of $0.01 on a loss from continuing operations of $0.6 million on net sales of $224.6 million. For the same period of 2011, the Company reported a loss per share from continuing operations of $0.08 on a loss of $5.3 million from continuing operations on net sales of $173.6 million.

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-month periods ended March 31, 2012 and 2011, respectively:

• Orders increased $8.4 million for the three months ended March 31, 2012 compared to the respective prior-year period. U.S. orders increased $7.4 million due to higher municipal spending in the fire and outdoor warning markets and higher industrial orders of $1.6 million. Non-U.S. orders increased $1.0 million for the three months ended March 31, 2012 compared to the respective prior-year period.
• Net sales increased $3.6 million for the three months ended March 31, 2012 compared to the respective prior-year period, primarily due to strong industrial demand, increased sales of $1.9 million related to large warning systems projects, and higher demand for U.S. municipal fire products, partially offset by softness in the U.S. export market.
• Operating income decreased $0.6 million for the three months ended March 31, 2012 compared to the respective prior-year period. During the first quarter of 2012, the Company recorded a restructuring charge of $0.9 million in the Safety and Security Systems Group, which drove the decrease in operating income compared to the prior-year period.

Fire Rescue

The following table summarizes the Fire Rescue Group's operating results as of and for the three-month periods ended March 31, 2012 and 2011, respectively:

• Orders increased $0.8 million for the three months ended March 31, 2012 compared to the respective prior-year period. Non-U.S. orders increased $4.6 million, primarily due to stronger demand from maintenance rental equipment companies in the Australian and European markets. U.S. orders declined $3.8 million, as the demand in the industrial market softened during this quarter.
• Net sales increased $10.6 million for the three months ended March 31, 2012 compared to the respective prior-year period. The 50% increase in sales volume was driven by increased shipments during the current quarter.
• Operating income was consistent for the three months ended March 31, 2012 at $0.8 million compared to the respective prior-year period, despite increased sales volume. Operating margin declined 1.3% due to the lower gross profit resulting from unfavorable product mix, such that the impact of the lower margin primarily in the European markets more than offset the increase in sales volume.

Environmental Solutions

The following table summarizes the Environmental Solutions Group's operating results as of and for the three-month periods ended March 31, 2012 and 2011, respectively:

• Orders increased $24.3 million or 24% for the three months ended March 31, 2012 compared to the respective prior-year period. U.S. orders increased $20.4 million or 27% for the three months ended March 31, 2012 compared to the respective prior-year period, primarily due to increases in orders for sewer cleaners of $11.4 million, sweepers of $4.5 million, and waterblasters of $2.5 million. Non-U.S. orders increased $3.9 million or 17% from the prior-year, with increases in U.S. export orders from Canada, Asia, the Middle East, and Mexico.
• Net sales increased $31.6 million or 41% for the three months ended March 31, 2012 compared to the respective prior-year period. The 2012 net sales increase is a result of improvements in the industrial markets and increases in shipments of sweepers and sewer cleaners.
• Operating income increased $11.1 million for the three months ended March 31, 2012 compared to the respective prior-year period, primarily due to higher shipments, a more favorable product mix, price increases, and the absence of increased costs associated with the final deployment of a common enterprise resource planning ("ERP") system across the group that were present in 2011.

Federal Signal Technologies

The following table summarizes the Federal Signal Technologies Group's operating results as of and for the three-month periods ended March 31, 2012 and 2011, respectively:

• Orders decreased $0.4 million to $19.7 million for the three months ended March 31, 2012 compared to the respective prior-year period. U.S. orders were unchanged at $13.7 million for the three months ended March 31, 2012 compared to the respective prior-year period as softness in the U.S. municipal market offset increases in the industrial market. Non-U.S. orders decreased $0.5 million for the three months ended March 31, 2012 compared to the respective prior-year period due to lower export orders from Mexico.
• Net sales increased $5.2 million for the three months ended March 31, 2012 compared to the respective prior-year period due to revenue recognized in connection with a longer-term project of $2.0 million, as well as sales associated with two other large shipments for the FSTech Group.
• The operating loss for the three months ended March 31, 2012 was $2.8 million compared to an operating loss of $3.5 million from the respective prior-year period. The improvement in the operating loss reflects the revenue recognized in connection with a longer-term project of $2.0 million and margins associated with two other large shipments for the FSTech Group, partially offset by the absence of $1.6 million of income in the first quarter of 2011 from a favorable adjustment to the goodwill impairment charge originally recognized in the fourth quarter of 2010.

CORPORATE EXPENSES

Corporate expenses were $7.5 million and $4.4 million for the three months ended March 31, 2012 and 2011, respectively. The increase was primarily due to higher expenses for incentive compensation of $1.0 million, legal fees of $0.9 million, as well as the absence of a $0.6 million insurance reimbursement in the first quarter of 2011.

Corporate expenses include depreciation and amortization expense of $0.2 million and $0.3 million for the three month periods ended March 31, 2012 and 2011, respectively.

CONFERENCE CALL

Federal Signal will host its first quarter conference call on Friday, May 4, 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 four groups: Safety and Security Systems, Fire Rescue, Environmental Solutions, and Federal Signal Technologies. 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