Federal Signal Corp 10-Q for FY2023 Q2

Federal Signal Corp /De/ (FSS)

10-Q 2023-07-27 For: 2023-06-30

Added on April 08, 2026

About this 10-Q

Federal Signal Corp filed this 10-Q on July 27, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $442.4M; up 20.6% from $366.7M a year earlier
Net income: $40.3M; up 20.3% from net income of $33.5M a year earlier
Diluted EPS: $0.66; up 20.0% from $0.55 a year earlier

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Delaware						36-1063330
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	FSS	New York Stock Exchange


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022	3
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements	8
	Note 1 – Summary of Significant Accounting Policies	8

	Note 2 – Acquisitions	9
	Note 3 – Revenue Recognition	13
	Note 4 – Inventories	13
	Note 5 – Debt	14

	Note 6 – Goodwill and Other Intangible Assets	15
	Note 7 – Income Taxes	16
	Note 8 – Pensions	16
	Note 9 – Commitments and Contingencies	16
	Note 10 – Earnings Per Share	22
	Note 11 – Stockholders’ Equity	23
	Note 12 – Segment Information	25
	Note 13 – Fair Value Measurements	26



Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39

SIGNATURE		40


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share data)	2023		2022		2023		2022
Net sales	$	442.4	$	366.7	$	827.9	$	696.9
Cost of sales	325.1		276.9		614.8		531.4
Gross profit	117.3		89.8		213.1		165.5
Selling, engineering, general and administrative expenses	53.4		42.1		105.4		85.7
Amortization expense	3.9		3.2		7.5		6.5
Acquisition and integration-related expenses (benefits)	0.6		(1.7)		1.3		(1.4)

Operating income	59.4		46.2		98.9		74.7
Interest expense	5.6		1.9		10.3		3.2


Other expense (income), net	1.1		(0.3)		1.2		(0.7)
Income before income taxes	52.7		44.6		87.4		72.2
Income tax expense	12.4		11.1		19.7		18.2


Net income	$	40.3	$	33.5	$	67.7	$	54.0
Earnings per share:


Basic	$	0.66	$	0.55	$	1.12	$	0.89



Diluted	0.66		0.55		1.10		0.88
Weighted average common shares outstanding:
Basic	60.7		60.4		60.7		60.6
Diluted	61.4		60.9		61.4		61.1


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2023		2022		2023		2022
Net income	$	40.3	$	33.5	$	67.7	$	54.0
Other comprehensive income (loss):
Change in foreign currency translation adjustment	3.2		(8.6)		4.7		(10.2)
Change in unrecognized net actuarial loss and prior service cost related to pension benefit plans, net of income tax expense of $0.0, $0.1, $0.0,and $0.5 respectively	(0.1)		2.1		(0.1)		3.1
Change in unrealized gain or loss on interest rate swaps, net of income tax expense (benefit) of $0.2, $0.1, $(0.1) and $0.8, respectively	0.6		0.2		(0.3)		2.3
Total other comprehensive income (loss)	3.7		(6.3)		4.3		(4.8)
Comprehensive income	$	44.0	$	27.2	$	72.0	$	49.2


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	June 30, 2023		December 31, 2022
(in millions, except per share data)	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	48.8	$	47.5
Accounts receivable, net of allowances for doubtful accounts of $2.8 and $2.5, respectively	193.4		173.8
Inventories	339.4		292.7
Prepaid expenses and other current assets	24.4		17.4



Total current assets	606.0		531.4
Properties and equipment, net of accumulated depreciation of $167.2 and $156.4, respectively	189.1		179.3
Rental equipment, net of accumulated depreciation of $49.0 and $45.4, respectively	129.8		109.1
Operating lease right-of-use assets	25.1		24.7
Goodwill	475.4		453.4
Intangible assets, net of accumulated amortization of $63.0 and $55.4, respectively	216.7		208.2
Deferred tax assets	8.4		8.8
Other long-term assets	10.2		9.4

Total assets	$	1,660.7	$	1,524.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Current portion of long-term borrowings and finance lease obligations	$	3.1	$	1.5
Accounts payable	86.7		72.4
Customer deposits	26.6		25.4


Accrued liabilities:
Compensation and withholding taxes	30.2		31.1
Current operating lease liabilities	7.8		6.9
Other current liabilities	44.0		43.2

Total current liabilities	198.4		180.5
Long-term borrowings and finance lease obligations	406.1		361.5
Long-term operating lease liabilities	18.3		18.5
Long-term pension and other postretirement benefit liabilities	40.3		38.9

Deferred tax liabilities	52.6		51.0
Other long-term liabilities	21.1		13.0

Total liabilities	736.8		663.4
Stockholders’ equity:
Common stock, $1 par value per share, 90.0 shares authorized, 69.9 and 69.5 shares issued, respectively	69.9		69.5
Capital in excess of par value	280.9		271.8
Retained earnings	838.3		782.2
Treasury stock, at cost, 8.9 and 8.8 shares, respectively	(185.5)		(178.6)
Accumulated other comprehensive loss	(79.7)		(84.0)
Total stockholders’ equity	923.9		860.9
Total liabilities and stockholders’ equity	$	1,660.7	$	1,524.3


	Three Months Ended June 30, 2023
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at April 1, 2023	$	69.7	$	274.7	$	804.1	$	(183.1)	$	(83.4)	$	882.0
Net income					40.3						40.3
Total other comprehensive income									3.7		3.7
Cash dividends declared ($0.10 per share)					(6.1)						(6.1)
Stock-based payments:
Stock-based compensation			3.1								3.1
Stock option exercises and other	0.2		3.1				(2.4)				0.9


Balance at June 30, 2023	$	69.9	$	280.9	$	838.3	$	(185.5)	$	(79.7)	$	923.9


	Three Months Ended June 30, 2022
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at April 1, 2022	$	69.1	$	259.3	$	698.6	$	(166.5)	$	(72.7)	$	787.8
Net income					33.5						33.5
Total other comprehensive loss									(6.3)		(6.3)
Cash dividends declared ($0.09 per share)					(5.4)						(5.4)
Stock-based payments:
Stock-based compensation			2.3								2.3
Stock option exercises and other	0.1		0.8				(1.2)				(0.3)

Stock repurchase program							(2.5)				(2.5)
Balance at June 30, 2022	$	69.2	$	262.4	$	726.7	$	(170.2)	$	(79.0)	$	809.1


	Six Months Ended June 30, 2023
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2023	$	69.5	$	271.8	$	782.2	$	(178.6)	$	(84.0)	$	860.9
Net income					67.7						67.7
Total other comprehensive income									4.3		4.3
Cash dividends declared ($0.19 per share)					(11.6)						(11.6)
Stock-based payments:
Stock-based compensation			5.1								5.1
Stock option exercises and other	0.3		4.1				(3.6)				0.8
Performance share unit transactions	0.1		(0.1)				(3.3)				(3.3)

Balance at June 30, 2023	$	69.9	$	280.9	$	838.3	$	(185.5)	$	(79.7)	$	923.9


	Six Months Ended June 30, 2022
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2022	$	68.9	$	256.7	$	683.6	$	(151.0)	$	(74.2)	$	784.0
Net income					54.0						54.0
Total other comprehensive loss									(4.8)		(4.8)
Cash dividends declared ($0.18 per share)					(10.9)						(10.9)
Stock-based payments:
Stock-based compensation			4.7								4.7
Stock option exercises and other	0.2		1.1				(1.8)				(0.5)
Performance share unit transactions	0.1		(0.1)				(1.3)				(1.3)
Stock repurchase program							(16.1)				(16.1)
Balance at June 30, 2022	$	69.2	$	262.4	$	726.7	$	(170.2)	$	(79.0)	$	809.1


(in millions)
Purchase price, inclusive of preliminary closing adjustments	$	42.6
Estimated fair value of additional consideration (a)	4.5
Total consideration	47.1


Accounts receivable	4.7
Inventories	14.3
Prepaid expenses and other current assets	0.1
Rental equipment	1.6
Properties and equipment	4.4



Customer relationships (b)	10.5
Trade names (c)	2.8
Other intangible assets	1.3
Accounts payable	(1.5)
Accrued liabilities	(0.5)



Net assets acquired	37.7

Goodwill (d)	$	9.4


(in millions)
Purchase price, inclusive of closing adjustments	$	13.2
Estimated fair value of additional consideration (a)	4.0
Total consideration	17.2


Accounts receivable	0.7
Inventories	4.6
Prepaid expenses and other current assets	0.1

Properties and equipment	1.1

Operating lease right-of-use assets (b)	1.1

Customer relationships (c)	5.3
Trade names (d)	2.6
Other intangible assets	0.3
Operating lease liabilities (b)	(1.1)
Accounts payable	(0.9)
Accrued liabilities	(0.3)
Customer deposits	(0.5)
Finance lease obligations	(0.1)
Net assets acquired	12.9

Goodwill (e)	$	4.3


(in millions)
Purchase price, inclusive of closing adjustments	$	43.3

Total consideration	43.3


Accounts receivable	1.5
Inventories	4.7

Properties and equipment	6.4



Customer relationships (a)	6.9
Trade names (b)	5.7
Other intangible assets	1.0
Accounts payable	(0.1)
Accrued liabilities	(0.5)
Customer deposits	(2.4)


Net assets acquired	23.2

Goodwill (c)	$	20.1


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2023		2022		2023		2022
Geographic Region:
U.S.	$	338.9	$	299.8	$	648.0	$	564.2
Canada	69.4		44.0		113.3		86.3
Europe/Other	34.1		22.9		66.6		46.4
Total net sales	$	442.4	$	366.7	$	827.9	$	696.9
Major Product Line:
Environmental Solutions
Vehicles and equipment (a)	$	285.0	$	235.8	$	530.3	$	453.2
Parts	59.6		45.1		114.4		85.9
Rental income (b)	16.9		16.1		27.9		25.8
Other (c)	11.5		9.3		19.2		15.6
Total	373.0		306.3		691.8		580.5
Safety and Security Systems
Public safety and security equipment	42.4		37.5		82.6		73.6
Industrial signaling equipment	18.7		15.1		37.3		29.3
Warning systems	8.3		7.8		16.2		13.5

Total	69.4		60.4		136.1		116.4
Total net sales	$	442.4	$	366.7	$	827.9	$	696.9


(in millions)	June 30, 2023		December 31, 2022
Finished goods	$	131.4	$	97.5
Raw materials	173.6		164.3
Work in process	34.4		30.9
Total inventories (a)	$	339.4	$	292.7


	Fair Value Measurement at Reporting Date Using
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	13.5	$	—	$	—	$	13.5
Interest rate swaps	—		0.6		—		0.6
Liabilities:
Contingent consideration	—		—		10.5		10.5


(in millions)	2023		2022
Contingent consideration liability, at April 1	$	6.0	$	2.7
Issuance of contingent consideration in connection with acquisitions	4.5		—


Contingent consideration liability, at June 30	$	10.5	$	2.7


(in millions)	June 30, 2023		December 31, 2022

2022 Credit Agreement (a)	$	407.4	$	361.0
Finance lease obligations	1.8		2.0
Total borrowings and finance lease obligations, including current portion	409.2		363.0
Less: Current borrowings	2.4		0.8
Less: Current finance lease obligations	0.7		0.7
Total long-term borrowings and finance lease obligations	$	406.1	$	361.5


(in millions)	Environmental Solutions		Safety & Security Systems		Total
Balance at January 1, 2023	$	343.8	$	109.6	$	453.4
Acquisitions, including measurement period adjustments	20.9		—		20.9
Translation adjustments	0.3		0.8		1.1
Balance at June 30, 2023	$	365.0	$	110.4	$	475.4


	June 30, 2023						December 31, 2022
(in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Definite-lived intangible assets:
Customer relationships (a)	$	162.6	$	(59.1)	$	103.5	$	153.7	$	(52.0)	$	101.7
Other (a)	8.3		(3.9)		4.4		5.7		(3.4)		2.3
Total definite-lived intangible assets	170.9		(63.0)		107.9		159.4		(55.4)		104.0
Indefinite-lived intangible assets:
Trade names	104.5		—		104.5		99.9		—		99.9
Other	4.3		—		4.3		4.3		—		4.3
Total indefinite-lived intangible assets	108.8		—		108.8		104.2		—		104.2
Total intangible assets	$	279.7	$	(63.0)	$	216.7	$	263.6	$	(55.4)	$	208.2


	U.S. Benefit Plan								Non-U.S. Benefit Plan
	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2023		2022		2023		2022		2023		2022		2023		2022

Interest cost	$	1.5	$	1.0	3.0		2.1		$	0.4	$	0.2	0.8		0.4
Amortization of actuarial loss	0.3		0.6		0.6		1.1		0.3		0.1		0.5		0.3
Amortization of prior service cost	—		—		—		—		—		0.1		—		0.1
Expected return on plan assets	(1.9)		(1.8)		(3.8)		(3.5)		(0.5)		(0.5)		(1.0)		(1.0)
Net periodic pension (benefit) expense	$	(0.1)	$	(0.2)	$	(0.2)	$	(0.3)	$	0.2	$	(0.1)	$	0.3	$	(0.2)


(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Interest Rate Swaps		Total
Balance at April 1, 2023	$	(68.6)	$	(2.0)	$	(14.5)	$	1.7	$	(83.4)
Other comprehensive (loss) income before reclassifications	(0.5)		—		3.2		1.1		3.8
Amounts reclassified from accumulated other comprehensive loss	0.4		—		—		(0.5)		(0.1)
Net current-period other comprehensive (loss) income	(0.1)		—		3.2		0.6		3.7
Balance at June 30, 2023	$	(68.7)	$	(2.0)	$	(11.3)	$	2.3	$	(79.7)


Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item in Condensed Consolidated Statements of Operations
	2023		2022
(in millions) (a)
Amortization of actuarial losses of defined benefit pension plans	$	(0.6)	$	(0.7)	Other expense (income), net
Amortization of prior service costs of defined benefit pension plans	—		(0.1)		Other expense (income), net
Interest rate swaps	0.7		(0.1)		Interest expense
Total before tax	0.1		(0.9)
Income tax (expense) benefit	—		0.2		Income tax expense
Total reclassifications for the period, net of tax	$	0.1	$	(0.7)


	Three Months Ended June 30,									Six Months Ended June 30,
($ in millions, except per share data)	2023			2022			Change			2023			2022			Change
Net sales	$	442.4		$	366.7		$	75.7		$	827.9		$	696.9		$	131.0
Cost of sales	325.1			276.9			48.2			614.8			531.4			83.4
Gross profit	117.3			89.8			27.5			213.1			165.5			47.6
Selling, engineering, general and administrative expenses	53.4			42.1			11.3			105.4			85.7			19.7
Amortization expense	3.9			3.2			0.7			7.5			6.5			1.0
Acquisition and integration-related expenses (benefits)	0.6			(1.7)			2.3			1.3			(1.4)			2.7

Operating income	59.4			46.2			13.2			98.9			74.7			24.2
Interest expense	5.6			1.9			3.7			10.3			3.2			7.1


Other expense (income), net	1.1			(0.3)			1.4			1.2			(0.7)			1.9
Income before income taxes	52.7			44.6			8.1			87.4			72.2			15.2
Income tax expense	12.4			11.1			1.3			19.7			18.2			1.5


Net income	$	40.3		$	33.5		$	6.8		$	67.7		$	54.0		$	13.7
Operating data:
Operating margin	13.4		%	12.6		%	0.8		%	11.9		%	10.7		%	1.2		%
Diluted earnings per share	$	0.66		$	0.55		$	0.11		$	1.10		$	0.88		$	0.22
Total orders	480.2			413.3			66.9			954.9			865.9			89.0
Backlog	1,006.5			795.0			211.5			1,006.5			795.0			211.5
Depreciation and amortization	15.5			13.7			1.8			29.8			27.1			2.7


	Three Months Ended June 30,									Six Months Ended June 30,
($ in millions)	2023			2022			Change			2023			2022			Change
Net sales	$	373.0		$	306.3		$	66.7		$	691.8		$	580.5		$	111.3
Operating income	56.2			39.1			17.1			93.8			65.9			27.9
Operating data:
Operating margin	15.1		%	12.8		%	2.3		%	13.6		%	11.4		%	2.2		%
Total orders	$	408.6		$	351.7		$	56.9		$	804.4		$	739.3		$	65.1
Backlog	939.7			733.5			206.2			939.7			733.5			206.2
Depreciation and amortization	14.3			12.6			1.7			27.5			25.0			2.5


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (a)
April 2023 (4/2/23 - 5/6/23)	—	$	—	—	$	59,052,829
May 2023 (5/7/23 - 6/3/23)	—	—		—	59,052,829
June 2023 (6/4/23 - 7/1/23)	—	—		—	59,052,829


3.1						Restated Certificate of Incorporation of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed April 30, 2010.

3.2						Amended and Restated By-laws of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed February 9, 2016.


31.1						CEO Certification under Section 302 of the Sarbanes-Oxley Act.

31.2						CFO Certification under Section 302 of the Sarbanes-Oxley Act.

32.1						CEO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act.

32.2						CFO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act.

99.1						S econd Quarter Financial Results Press Release, Dated July 27 , 2023.

99.2						Se cond Quarter Earnings Call Presentation Slides.

101.INS						XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH						Inline XBRL Taxonomy Extension Schema Document.

101.CAL						Inline XBRL Taxonomy Calculation Linkbase Document.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB						Inline XBRL Taxonomy Label Linkbase Document.

101.PRE						Inline XBRL Taxonomy Presentation Linkbase Document.

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


		Federal Signal Corporation

Date:	July 27, 2023	/s/ Ian A. Hudson
		Ian A. Hudson
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)


			/s/ Jennifer L. Sherman
			Jennifer L. Sherman
			President and Chief Executive Officer
			(Principal Executive Officer)