OAK
BROOK, Ill., May 2, 2023
/PRNewswire/ -- Federal Signal Corporation (NYSE:FSS) (the
"Company"), a leader in environmental and safety solutions, today
reported results for the first quarter ended March 31, 2023.
First Quarter Highlights
- Net sales of $386 million, up
$55 million, or 17%, from last year;
organic growth of $44 million, or
13%
- Operating income of $39.5
million, up $11.0 million, or
39%, from last year
- GAAP EPS of $0.45, up
$0.12, or 36%, from last
year
- Adjusted EPS of $0.46, up
$0.12, or 35%, from last
year
- Record quarterly orders of $475
million, up $22 million, or
5%, from last year
- Record backlog of $968
million, up $216 million, or
29%, from last year
- Raises 2023 adjusted EPS* outlook to a new range of
$2.21 to $2.43, from the prior range of $2.15 to $2.40
- Increases low end of 2023 net sales outlook range by
$40 million; new range of
$1.62 billion to $1.72 billion
Consolidated net sales for the first quarter were $386 million, up $55
million, or 17%, compared to the prior-year quarter. Net
income for the first quarter was $27.4
million, or $0.45 per diluted
share, compared to $20.5 million, or
$0.33 per diluted share, in the
prior-year quarter.
The Company also reported adjusted net income for the first
quarter of $27.9 million, or
$0.46 per diluted share, compared to
$20.7 million, or $0.34 per diluted share, in the prior-year
quarter. The Company is reporting adjusted results to facilitate
comparisons of underlying performance on a year-over-year basis. A
reconciliation of these and other non-GAAP measures is provided at
the conclusion of this news release.
Customer Demand Remains at Record Levels; Double-Digit
Improvement in Net Sales and Earnings
"Our businesses were able to deliver double-digit year-over-year
net sales and earnings growth, gross margin expansion, and a
130-basis point improvement in adjusted EBITDA margin during the
first quarter," commented Jennifer L.
Sherman, President and Chief Executive Officer. "Within our
Environmental Solutions Group, an improving supply chain supported
higher production levels, and with increased sales volumes,
contributions from recent acquisitions, robust aftermarket demand,
and strong price realization, we were able to deliver a 16%
year-over-year net sales increase and a 180-basis point improvement
in adjusted EBITDA margin. Our Safety and Security Systems Group
also delivered impressive results, with double-digit top line
growth and an adjusted EBITDA margin of approximately 20%. Demand
for our products and aftermarket offerings remains at unprecedented
levels, with our order intake this quarter representing the highest
quarterly orders in our history, contributing to a record backlog
of $968 million at the end of the
quarter."
In the Environmental Solutions Group, net sales for the first
quarter were $319 million, up
$45 million, or 16%, compared to the
prior-year quarter. In the Safety and Security Systems Group, net
sales were $67 million, up
$11 million, or 19%, compared to the
prior-year quarter.
Consolidated operating income for the first quarter was
$39.5 million, up $11.0 million, or 39%, compared to the prior-year
quarter. Consolidated operating margin for the first quarter was
10.2%, compared to 8.6% in the prior-year quarter.
Consolidated adjusted earnings before interest, tax,
depreciation and amortization ("adjusted EBITDA") for the first
quarter was $54.5 million, up
$12.3 million, or 29%, compared to
the prior-year quarter, and consolidated adjusted EBITDA margin was
14.1%, up from 12.8% in the prior-year quarter.
In the Environmental Solutions Group, adjusted EBITDA for the
first quarter was $51.2 million, up
$11.9 million, or 30%, compared to
the prior-year quarter, and its adjusted EBITDA margin was 16.1%,
up from 14.3% last year. In the Safety and Security Systems Group,
adjusted EBITDA for the first quarter was $13.2 million, up $4.3
million, or 48%, compared to the prior-year quarter, and its
adjusted EBITDA margin was 19.8%, up from 15.9% last year.
Consolidated orders for the first quarter were $475 million, the highest quarterly orders in the
Company's history, and an increase of $22
million, or 5%, compared to the prior-year quarter. With the
strong momentum in customer demand, consolidated backlog at
March 31, 2023 was at an all-time
high level of $968 million, an
increase of $216 million, or 29%,
from last year.
Strong Financial Position Provides Flexibility to Fund Growth
Opportunities and Cash Returns to Stockholders
Operating cash flow during the first quarter was $7 million, generally in line with the prior-year
quarter. At March 31, 2023,
consolidated debt was $376 million,
total cash and cash equivalents were $38
million and the Company had $415
million of availability for borrowings under its previous
credit facility.
During the first quarter, the Company completed the acquisition
of Blasters, Inc. and also closed the acquisition of Trackless
Vehicles Limited in April 2023.
"Our current financial position provides us significant
flexibility to invest in organic growth initiatives and pursue
strategic acquisitions, like Blasters and Trackless," said Sherman.
"As demonstrated with the recent increase in our dividend, we also
remain committed to returning cash to stockholders."
The Company funded dividends of $5.5
million during the first quarter, reflecting a dividend of
$0.09 per share, and as recently
announced, the Board of Directors increased the dividend that will
be payable in the second quarter of 2023 to $0.10 per share, an 11% increase from the prior
dividend.
Outlook
"Demand for our products and our aftermarket offerings remains
at unprecedented levels, with both our orders and backlog this
quarter again setting new Company records," noted Sherman. "With
our first quarter performance, our record backlog and improving
supply chain conditions, we are raising our full-year adjusted EPS*
outlook to a new range of $2.21 to
$2.43, from the prior range of
$2.15 to $2.40. We are also increasing the low end of our
full-year net sales outlook range by $40
million, establishing a new range of $1.62 billion to $1.72
billion."
CONFERENCE CALL
Federal Signal will host its first quarter conference call on
Tuesday, May 2, 2023 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 www.federalsignal.com or by dialing phone number
1-844-826-3035 and entering the pin number 10178056. A replay will
be available on Federal Signal's website shortly after the
call.
About Federal Signal
Federal Signal Corporation (NYSE: FSS) builds and delivers
equipment of unmatched quality that moves material, cleans
infrastructure, and protects the communities where we work and
live. Founded in 1901, Federal Signal is a leading global designer,
manufacturer and supplier of products and total solutions that
serve municipal, governmental, industrial and commercial customers.
Headquartered in Oak Brook, Ill.,
with manufacturing facilities worldwide, the Company operates two
groups: Environmental Solutions and Safety and Security Systems.
For more information on Federal Signal, visit:
www.federalsignal.com.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
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: direct
and indirect impacts of the coronavirus pandemic and the associated
government response, risks and adverse economic effects associated
with emerging geopolitical conflicts, product and price
competition, supply chain disruptions, work stoppages, availability
and pricing of raw materials, cybersecurity risks, risks associated
with acquisitions such as integration of operations and achieving
anticipated revenue and cost benefits, 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.
Contact: Ian Hudson, Chief Financial Officer,
+1-630-954-2000, ihudson@federalsignal.com
* Adjusted earnings per share ("EPS") is a non-GAAP measure,
which includes certain adjustments to reported GAAP net income and
diluted EPS. In 2022, we made adjustments to exclude the impact of
acquisition and integration-related expenses (benefits) and debt
settlement charges, where applicable. Should any similar items
occur in 2023, we would expect to exclude them from the
determination of adjusted EPS. However, because of the underlying
uncertainty in quantifying amounts which may not yet be known, a
reconciliation of our Adjusted EPS outlook to the most applicable
GAAP measure is excluded based on the unreasonable efforts
exception in Item 10(e)(1)(i)(B).
FEDERAL SIGNAL
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
|
|
|
Three Months Ended
March 31,
|
(in millions, except
per share data)
|
2023
|
|
2022
|
Net sales
|
$
385.5
|
|
$
330.2
|
Cost of
sales
|
289.7
|
|
254.5
|
Gross profit
|
95.8
|
|
75.7
|
Selling, engineering,
general and administrative expenses
|
52.0
|
|
43.6
|
Amortization
expense
|
3.6
|
|
3.3
|
Acquisition and
integration-related expenses
|
0.7
|
|
0.3
|
Operating
income
|
39.5
|
|
28.5
|
Interest
expense
|
4.7
|
|
1.3
|
Other expense (income),
net
|
0.1
|
|
(0.4)
|
Income before income
taxes
|
34.7
|
|
27.6
|
Income tax
expense
|
7.3
|
|
7.1
|
Net income
|
$ 27.4
|
|
$ 20.5
|
Earnings per
share:
|
|
|
|
Basic
|
$ 0.45
|
|
$ 0.34
|
Diluted
|
$ 0.45
|
|
$ 0.33
|
Weighted average common
shares outstanding:
|
|
|
|
Basic
|
60.7
|
|
60.7
|
Diluted
|
61.3
|
|
61.4
|
Cash dividends declared
per common share
|
$ 0.09
|
|
$ 0.09
|
|
|
|
|
Operating
data:
|
|
|
|
Operating
margin
|
10.2 %
|
|
8.6 %
|
Adjusted
EBITDA
|
$ 54.5
|
|
$ 42.2
|
Adjusted EBITDA
margin
|
14.1 %
|
|
12.8 %
|
Total
orders
|
$
474.7
|
|
$
452.6
|
Backlog
|
967.6
|
|
751.2
|
Depreciation and
amortization
|
14.3
|
|
13.4
|
FEDERAL SIGNAL
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
March 31,
2023
|
|
December 31,
2022
|
(in millions, except
per share data)
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
38.4
|
|
$
47.5
|
Accounts receivable,
net of allowances for doubtful accounts of $2.8 and $2.5,
respectively
|
191.6
|
|
173.8
|
Inventories
|
317.6
|
|
292.7
|
Prepaid expenses and
other current assets
|
18.7
|
|
17.4
|
Total current
assets
|
566.3
|
|
531.4
|
Properties and
equipment, net of accumulated depreciation of $161.6 and $156.4,
respectively
|
180.8
|
|
179.3
|
Rental equipment, net
of accumulated depreciation of $46.1 and $45.4,
respectively
|
121.9
|
|
109.1
|
Operating lease
right-of-use assets
|
25.8
|
|
24.7
|
Goodwill
|
458.4
|
|
453.4
|
Intangible assets, net
of accumulated amortization of $59.0 and $55.4,
respectively
|
212.8
|
|
208.2
|
Deferred tax
assets
|
8.6
|
|
8.8
|
Other long-term
assets
|
9.7
|
|
9.4
|
Total assets
|
$ 1,584.3
|
|
$ 1,524.3
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term borrowings and finance lease obligations
|
$
2.3
|
|
$
1.5
|
Accounts
payable
|
95.6
|
|
72.4
|
Customer
deposits
|
26.1
|
|
25.4
|
Accrued
liabilities:
|
|
|
|
Compensation and
withholding taxes
|
21.8
|
|
31.1
|
Current operating
lease liabilities
|
7.5
|
|
6.9
|
Other current
liabilities
|
49.8
|
|
43.2
|
Total current
liabilities
|
203.1
|
|
180.5
|
Long-term borrowings
and finance lease obligations
|
373.2
|
|
361.5
|
Long-term operating
lease liabilities
|
19.4
|
|
18.5
|
Long-term pension and
other postretirement benefit liabilities
|
39.9
|
|
38.9
|
Deferred tax
liabilities
|
50.3
|
|
51.0
|
Other long-term
liabilities
|
16.4
|
|
13.0
|
Total
liabilities
|
702.3
|
|
663.4
|
Stockholders'
equity:
|
|
|
|
Common stock, $1 par
value per share, 90.0 shares authorized, 69.7 and 69.5 shares
issued, respectively
|
69.7
|
|
69.5
|
Capital in excess of
par value
|
274.7
|
|
271.8
|
Retained
earnings
|
804.1
|
|
782.2
|
Treasury stock, at
cost, 8.8 and 8.8 shares, respectively
|
(183.1)
|
|
(178.6)
|
Accumulated other
comprehensive loss
|
(83.4)
|
|
(84.0)
|
Total stockholders'
equity
|
882.0
|
|
860.9
|
Total liabilities and
stockholders' equity
|
$ 1,584.3
|
|
$ 1,524.3
|
FEDERAL SIGNAL
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
Three Months
Ended
March
31,
|
(in
millions)
|
2023
|
|
2022
|
Operating
activities:
|
|
|
|
Net income
|
$
27.4
|
|
$
20.5
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
14.3
|
|
13.4
|
Stock-based
compensation expense
|
2.0
|
|
2.4
|
Changes in fair value
of contingent consideration
|
(0.2)
|
|
—
|
Amortization of
interest rate swap settlement gain
|
(0.6)
|
|
—
|
Deferred income
taxes
|
(0.3)
|
|
0.3
|
Changes in operating
assets and liabilities
|
(35.5)
|
|
(29.6)
|
Net cash provided by
operating activities
|
7.1
|
|
7.0
|
Investing
activities:
|
|
|
|
Purchases of
properties and equipment
|
(6.0)
|
|
(33.7)
|
Payments for
acquisition-related activity, net of cash acquired
|
(13.5)
|
|
(1.0)
|
Other, net
|
0.1
|
|
0.4
|
Net cash used for
investing activities
|
(19.4)
|
|
(34.3)
|
Financing
activities:
|
|
|
|
Increase in revolving
lines of credit, net
|
12.6
|
|
46.8
|
Purchases of treasury
stock
|
—
|
|
(13.6)
|
Redemptions of common
stock to satisfy withholding taxes related to stock-based
compensation
|
(3.8)
|
|
(1.5)
|
Payments for
acquisition-related activity
|
(0.5)
|
|
—
|
Cash dividends paid to
stockholders
|
(5.5)
|
|
(5.5)
|
Proceeds from
stock-based compensation activity
|
0.4
|
|
—
|
Other, net
|
(0.1)
|
|
(0.1)
|
Net cash provided by
financing activities
|
3.1
|
|
26.1
|
Effects of foreign
exchange rate changes on cash and cash equivalents
|
0.1
|
|
(0.1)
|
Decrease in cash and
cash equivalents
|
(9.1)
|
|
(1.3)
|
Cash and cash
equivalents at beginning of year
|
47.5
|
|
40.5
|
Cash and cash
equivalents at end of period
|
$
38.4
|
|
$
39.2
|
FEDERAL SIGNAL CORPORATION AND
SUBSIDIARIES
GROUP RESULTS (Unaudited)
The following tables summarize group operating results as of and
for the three months ended March 31, 2023 and 2022:
Environmental
Solutions Group
|
|
Three Months Ended
March 31,
|
($ in
millions)
|
2023
|
|
2022
|
|
Change
|
Net sales
|
$
318.8
|
|
$
274.2
|
|
$ 44.6
|
Operating
income
|
37.6
|
|
26.8
|
|
10.8
|
Adjusted
EBITDA
|
51.2
|
|
39.3
|
|
11.9
|
Operating
data:
|
|
|
|
|
|
Operating
margin
|
11.8 %
|
|
9.8 %
|
|
2.0 %
|
Adjusted EBITDA
margin
|
16.1 %
|
|
14.3 %
|
|
1.8 %
|
Total
orders
|
$
395.8
|
|
$
387.6
|
|
$
8.2
|
Backlog
|
901.8
|
|
690.1
|
|
211.7
|
Depreciation and
amortization
|
13.2
|
|
12.4
|
|
0.8
|
Safety and Security
Systems Group
|
|
Three Months Ended
March 31,
|
($ in
millions)
|
2023
|
|
2022
|
|
Change
|
Net sales
|
$ 66.7
|
|
$ 56.0
|
|
$ 10.7
|
Operating
income
|
12.1
|
|
7.9
|
|
4.2
|
Adjusted
EBITDA
|
13.2
|
|
8.9
|
|
4.3
|
Operating
data:
|
|
|
|
|
|
Operating
margin
|
18.1 %
|
|
14.1 %
|
|
4.0 %
|
Adjusted EBITDA
margin
|
19.8 %
|
|
15.9 %
|
|
3.9 %
|
Total
orders
|
$ 78.9
|
|
$ 65.0
|
|
$ 13.9
|
Backlog
|
65.8
|
|
61.1
|
|
4.7
|
Depreciation and
amortization
|
1.1
|
|
1.0
|
|
0.1
|
Corporate Expenses
Corporate operating expenses were $10.2
million and $6.2 million for
the three months ended March 31, 2023
and 2022, respectively.
SEC REGULATION G NON-GAAP RECONCILIATION
The financial measures presented below are unaudited and are not
in accordance with U.S. generally accepted accounting principles
("GAAP"). The non-GAAP financial information presented herein
should be considered supplemental to, and not a substitute for, or
superior to, financial measures calculated in accordance with GAAP.
The Company has provided this supplemental information to
investors, analysts, and other interested parties to enable them to
perform additional analyses of operating results, to illustrate the
results of operations giving effect to the non-GAAP adjustments
shown in the reconciliations below, and to provide an additional
measure of performance which management considers in operating the
business.
Adjusted Net Income and Earnings Per Share ("EPS"):
The Company believes that modifying its 2023 and 2022 net income
and diluted EPS provides additional measures which are
representative of the Company's underlying performance and improves
the comparability of results across reporting periods. During the
three months ended March 31, 2023 and 2022 adjustments were
made to reported GAAP net income and diluted EPS to exclude the
impact of acquisition and integration-related expenses.
|
Three Months
Ended
March 31,
|
(in
millions)
|
2023
|
|
2022
|
Net income, as
reported
|
$
27.4
|
|
$
20.5
|
Add:
|
|
|
|
Income tax
expense
|
7.3
|
|
7.1
|
Income before income
taxes
|
34.7
|
|
27.6
|
Add:
|
|
|
|
Acquisition and
integration-related expenses
|
0.7
|
|
0.3
|
Adjusted income before
income taxes
|
35.4
|
|
27.9
|
Adjusted income tax
expense (a)
|
(7.5)
|
|
(7.2)
|
Adjusted net
income
|
$
27.9
|
|
$
20.7
|
|
|
|
|
|
Three Months
Ended
March 31,
|
(dollars per diluted
share)
|
2023
|
|
2022
|
EPS, as
reported
|
$
0.45
|
|
$
0.33
|
Add:
|
|
|
|
Income tax
expense
|
0.12
|
|
0.12
|
Income before income
taxes
|
0.57
|
|
0.45
|
Add:
|
|
|
|
Acquisition and
integration-related expenses
|
0.01
|
|
0.01
|
Adjusted income before
income taxes
|
0.58
|
|
0.46
|
Adjusted income tax
expense (a)
|
(0.12)
|
|
(0.12)
|
Adjusted EPS
|
$
0.46
|
|
$
0.34
|
|
|
(a)
|
Adjusted income tax
expense for the three months ended March 31, 2023 and 2022 was
recomputed after excluding the impact of acquisition and
integration-related expenses.
|
Adjusted EBITDA and Adjusted EBITDA Margin:
The Company uses adjusted EBITDA and the ratio of adjusted
EBITDA to net sales ("adjusted EBITDA margin"), at both the
consolidated and segment level, as additional measures which are
representative of its underlying performance and to improve the
comparability of results across reporting periods. We believe that
investors use versions of these metrics in a similar manner. For
these reasons, the Company believes that adjusted EBITDA and
adjusted EBITDA margin, at both the consolidated and segment level,
are meaningful metrics to investors in evaluating the Company's
underlying financial performance.
Consolidated adjusted EBITDA is a non-GAAP measure that
represents the total of net income, interest expense, acquisition
and integration-related expenses, other income/expense, income tax
expense, and depreciation and amortization expense, as applicable.
Consolidated adjusted EBITDA margin is a non-GAAP measure that
represents the total of net income, interest expense, acquisition
and integration-related expenses, other income/expense, income tax
expense, and depreciation and amortization expense, as applicable,
divided by net sales for the applicable period(s).
Segment adjusted EBITDA is a non-GAAP measure that represents
the total of segment operating income, acquisition and
integration-related expenses and depreciation and amortization
expense, as applicable. Segment adjusted EBITDA margin is a
non-GAAP measure that represents the total of segment operating
income, acquisition and integration-related expenses and
depreciation and amortization expense, as applicable, divided by
net sales for the applicable period(s). Segment operating income
includes all revenues, costs and expenses directly related to the
segment involved. In determining segment income, neither corporate
nor interest expenses are included. Segment depreciation and
amortization expense relates to those assets, both tangible and
intangible, that are utilized by the respective segment.
Other companies may use different methods to calculate adjusted
EBITDA and adjusted EBITDA margin.
Consolidated
The following table summarizes the Company's consolidated
adjusted EBITDA and adjusted EBITDA margin and reconciles net
income to consolidated adjusted EBITDA for the three months ended
March 31, 2023 and 2022:
|
Three Months
Ended
March 31,
|
($ in
millions)
|
2023
|
|
2022
|
Net income
|
$ 27.4
|
|
$ 20.5
|
Add:
|
|
|
|
Interest
expense
|
4.7
|
|
1.3
|
Acquisition and
integration-related expenses
|
0.7
|
|
0.3
|
Other expense
(income), net
|
0.1
|
|
(0.4)
|
Income tax
expense
|
7.3
|
|
7.1
|
Depreciation and
amortization
|
14.3
|
|
13.4
|
Consolidated adjusted
EBITDA
|
$ 54.5
|
|
$ 42.2
|
|
|
|
|
Net sales
|
$
385.5
|
|
$
330.2
|
|
|
|
|
Consolidated adjusted
EBITDA margin
|
14.1 %
|
|
12.8 %
|
Environmental Solutions Group
The following table summarizes the Environmental Solutions
Group's adjusted EBITDA and adjusted EBITDA margin and reconciles
operating income to adjusted EBITDA for the three months ended
March 31, 2023 and 2022:
|
Three Months Ended
March 31,
|
($ in
millions)
|
2023
|
|
2022
|
Operating
income
|
$ 37.6
|
|
$ 26.8
|
Add:
|
|
|
|
Acquisition and
integration-related expenses
|
0.4
|
|
0.1
|
Depreciation and
amortization
|
13.2
|
|
12.4
|
Adjusted
EBITDA
|
$ 51.2
|
|
$ 39.3
|
|
|
|
|
Net sales
|
$
318.8
|
|
$
274.2
|
|
|
|
|
Adjusted EBITDA
margin
|
16.1 %
|
|
14.3 %
|
Safety and Security Systems Group
The following table summarizes the Safety and Security Systems
Group's adjusted EBITDA and adjusted EBITDA margin and reconciles
operating income to adjusted EBITDA for the three months ended
March 31, 2023 and 2022:
|
Three Months Ended
March 31,
|
($ in
millions)
|
2023
|
|
2022
|
Operating
income
|
$ 12.1
|
|
$ 7.9
|
Add:
|
|
|
|
Depreciation and
amortization
|
1.1
|
|
1.0
|
Adjusted
EBITDA
|
$ 13.2
|
|
$ 8.9
|
|
|
|
|
Net sales
|
$ 66.7
|
|
$ 56.0
|
|
|
|
|
Adjusted EBITDA
margin
|
19.8 %
|
|
15.9 %
|
View original
content:https://www.prnewswire.com/news-releases/federal-signal-reports-first-quarter-results-including-double-digit-sales-and-earnings-growth-record-orders-and-backlog-raises-full-year-outlook-301812532.html
SOURCE Federal Signal Corporation