Federal Signal Corp 10-Q for FY2020 Q2

Federal Signal Corp /De/ (FSS)

10-Q 2020-07-29 For: 2020-06-30

Added on April 08, 2026

About this 10-Q

Federal Signal Corp filed this 10-Q on July 29, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $270.1M; down 16.7% from $324.3M a year earlier
Net income: $21.4M; down 34.8% from net income of $32.8M a year earlier
Diluted EPS: $0.35; down 35.2% from $0.54 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, 2020 and 2019	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019	3
	Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30 , 2020 and 2019	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019	6
	Notes to Condensed Consolidated Financial Statements	8
	Note 1 – Summary of Significant Accounting Policies	8
	Note 2 – Acquisitions	9
	Note 3 – Revenue Recognition	10
	Note 4 – Inventories	10
	Note 5 – Debt	11
	Note 6 – Income Taxes	12
	Note 7 – Pension and Other Post-Employment Plans	12
	Note 8 – Commitments and Contingencies	13
	Note 9 – Earnings Per Share	18
	Note 10 – Stockholders’ Equity	19
	Note 1 1 – Segment Information	22
	Note 1 2 – Fair Value Measurements	22
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38

SIGNATURE			39


	Three Months Ended June 30,						Six Months Ended June 30,
(in millions, except per share data)	2020		2019		2020		2019
Net sales	$	270.1	$	324.3	$	556.2	$	598.1
Cost of sales	199.8		235.3		411.1		438.8
Gross profit	70.3		89.0		145.1		159.3
Selling, engineering, general and administrative expenses	37.4		41.8		79.6		85.7
Acquisition and integration-related expenses	0.3		0.9		0.6		1.5
Restructuring	1.3		—		1.3		—
Operating income	31.3		46.3		63.6		72.1
Interest expense	1.8		2.0		3.3		4.0


Other expense (income), net	2.0		(0.1)		2.2		0.3
Income before income taxes	27.5		44.4		58.1		67.8
Income tax expense	6.1		11.6		13.3		17.5


Net income	$	21.4	$	32.8	$	44.8	$	50.3
Earnings per share:


Basic	$	0.36	$	0.55	$	0.74	$	0.84



Diluted	0.35		0.54		0.73		0.82
Weighted average common shares outstanding:
Basic	60.1		60.1		60.3		60.1
Diluted	61.3		61.3		61.6		61.2


	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2020		2019		2020		2019
Net income	$	21.4	$	32.8	$	44.8	$	50.3
Other comprehensive income (loss):
Change in foreign currency translation adjustment	1.2		0.8		(4.9)		0.8
Change in unrecognized net actuarial loss and prior service cost related to pension benefit plans, net of income tax expense of $0.2, $0.1, $0.4 and $0.3, respectively	0.9		1.3		2.7		1.5
Change in unrealized gain or loss on interest rate swaps, net of income tax benefit of $0.1, $0.2, $1.1 and $0.4, respectively	(0.3)		(0.7)		(3.4)		(1.2)
Total other comprehensive income (loss)	1.8		1.4		(5.6)		1.1
Comprehensive income	$	23.2	$	34.2	$	39.2	$	51.4


☑			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, 2020		December 31, 2019
(in millions, except per share data)	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	73.6	$	31.6
Accounts receivable, net of allowances for doubtful accounts of $2.6 and $2.4, respectively	125.3		134.2
Inventories	197.5		182.9
Prepaid expenses and other current assets	10.4		12.0



Total current assets	406.8		360.7
Properties and equipment, net of accumulated depreciation of $129.7 and $125.5, respectively	101.4		91.9
Rental equipment, net of accumulated depreciation of $37.8 and $33.6, respectively	113.4		115.4
Operating lease right-of-use assets	24.8		27.6
Goodwill	390.6		388.8
Intangible assets, net of accumulated amortization of $26.9 and $22.1, respectively	157.6		162.9
Deferred tax assets	8.7		10.0
Deferred charges and other long-term assets	7.6		7.9
Long-term assets of discontinued operations	0.3		0.3
Total assets	$	1,211.2	$	1,165.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Current portion of long-term borrowings and finance lease obligations	$	0.2	$	0.2
Accounts payable	73.1		65.0
Customer deposits	11.7		11.5


Accrued liabilities:
Compensation and withholding taxes	23.1		31.1

Other current liabilities	52.4		52.2
Current liabilities of discontinued operations	0.2		0.2
Total current liabilities	160.7		160.2
Long-term borrowings and finance lease obligations	244.4		220.3
Long-term operating lease liabilities	18.3		21.6
Long-term pension and other postretirement benefit liabilities	49.6		50.9

Deferred tax liabilities	56.9		52.7
Other long-term liabilities	25.0		17.3
Long-term liabilities of discontinued operations	0.9		0.9
Total liabilities	555.8		523.9
Stockholders’ equity:
Common stock, $1 par value per share, 90.0 shares authorized, 67.5 and 66.9 shares issued, respectively	67.5		66.9
Capital in excess of par value	234.7		228.6
Retained earnings	563.3		528.2
Treasury stock, at cost, 7.1 and 6.4 shares, respectively	(115.4)		(93.0)
Accumulated other comprehensive loss	(94.7)		(89.1)
Total stockholders’ equity	655.4		641.6
Total liabilities and stockholders’ equity	$	1,211.2	$	1,165.5


	Three Months Ended June 30, 2020
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at April 1, 2020	$	67.2	$	230.1	$	546.8	$	(111.4)	$	(96.5)	$	636.2
Net income					21.4						21.4
Total other comprehensive income									1.8		1.8
Cash dividends declared ($0.08 per share)					(4.9)						(4.9)
Stock-based payments:
Stock-based compensation			2.9								2.9
Stock option exercises and other	0.3		1.7				(4.0)				(2.0)


Balance at June 30, 2020	$	67.5	$	234.7	$	563.3	$	(115.4)	$	(94.7)	$	655.4


	Three Months Ended June 30, 2019
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at April 1, 2019	$	66.5	$	218.4	$	451.7	$	(90.6)	$	(97.6)	$	548.4
Net income					32.8						32.8
Total other comprehensive income									1.4		1.4
Cash dividends declared ($0.08 per share)					(4.8)						(4.8)

Stock-based payments:
Stock-based compensation			2.1								2.1
Stock option exercises and other	0.2		0.8				(0.8)				0.2


Balance at June 30, 2019	$	66.7	$	221.3	$	479.7	$	(91.4)	$	(96.2)	$	580.1


	Six Months Ended June 30, 2020
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2020	$	66.9	$	228.6	$	528.2	$	(93.0)	$	(89.1)	$	641.6
Net income					44.8						44.8
Total other comprehensive loss									(5.6)		(5.6)
Cash dividends declared ($0.16 per share)					(9.7)						(9.7)
Stock-based payments:
Stock-based compensation			3.9								3.9
Stock option exercises and other	0.4		2.4				(6.0)				(3.2)
Performance share unit transactions	0.2		(0.2)				(2.9)				(2.9)
Stock repurchase program							(13.5)				(13.5)
Balance at June 30, 2020	$	67.5	$	234.7	$	563.3	$	(115.4)	$	(94.7)	$	655.4


	Six Months Ended June 30, 2019
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2019	$	66.4	$	217.0	$	432.5	$	(88.5)	$	(97.3)	$	530.1
Net income					50.3						50.3
Total other comprehensive income									1.1		1.1
Cash dividends declared ($0.16 per share)					(9.6)						(9.6)
Impact of adoption of ASU 2016-02					6.5						6.5
Stock-based payments:
Stock-based compensation			3.5								3.5
Stock option exercises and other	0.2		0.9				(1.0)				0.1
Performance share unit transactions	0.1		(0.1)				(0.9)				(0.9)
Stock repurchase program							(1.0)				(1.0)
Balance at June 30, 2019	$	66.7	$	221.3	$	479.7	$	(91.4)	$	(96.2)	$	580.1


(in millions)	June 30, 2020		December 31, 2019

2019 Credit Agreement^(a)	$	243.9	$	219.9
Finance lease obligations	0.7		0.6
Total long-term borrowings and finance lease obligations, including current portion	244.6		220.5

Less: Current finance lease obligations	0.2		0.2
Total long-term borrowings and finance lease obligations	$	244.4	$	220.3


	June 30, 2020						December 31, 2019
(in millions)	Notional Amount		Fair Value		Notional Amount		Fair Value

Long-term borrowings^(a)	$	244.6	$	244.6	$	220.5	$	220.5


	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)	2020		2019		2020		2019		2020		2019		2020		2019
Service cost	$	—	$	—	$	—	$	—	$	—	$	—	$	0.1	$	0.1
Interest cost	$	1.4	1.7		2.8		3.4		0.2		0.4		0.5		0.7
Amortization of actuarial loss	0.8		0.6		1.6		1.2		0.1		0.1		0.2		0.3
Amortization of prior service cost	—		—		—		—		0.1		0.1		0.1		0.1
Expected return on plan assets	(2.3)		(2.2)		(4.6)		(4.4)		(0.4)		(0.5)		(0.9)		(1.0)
Net periodic pension (benefit) expense	$	(0.1)	$	0.1	(0.2)		0.2		$	—	$	0.1	—		0.2


	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2020		2019		2020		2019
Geographic Region:
U.S.	$	205.0	$	248.2	$	431.6	$	453.0
Canada	38.3		51.2		71.8		95.6
Europe/Other	26.8		24.9		52.8		49.5
Total net sales	$	270.1	$	324.3	$	556.2	$	598.1
Major Product Line:
Environmental Solutions
Vehicles and equipment ^(a)	$	165.9	$	213.7	$	352.0	$	387.4
Parts	30.9		35.5		64.3		66.6
Rental income ^(b)	9.3		13.4		18.1		23.0
Other ^(c)	8.1		4.6		12.8		9.7
Total	214.2		267.2		447.2		486.7
Safety and Security Systems
Public safety and security equipment	36.3		34.6		68.1		67.0
Industrial signaling equipment	12.1		16.2		26.4		30.0
Warning systems	7.5		6.3		14.5		14.4

Total	55.9		57.1		109.0		111.4
Total net sales	$	270.1	$	324.3	$	556.2	$	598.1


(in millions)	June 30, 2020		December 31, 2019
Finished goods	$	100.5	$	86.8
Raw materials	80.5		79.5
Work in process	16.5		16.6
Total inventories	$	197.5	$	182.9


	Three Months Ended June 30,															Six Months Ended June 30,
($ in millions)	2020			2019			Change			2020			2019			Change
Net sales	$	214.2		$	267.2		$	(53.0)		$	447.2		$	486.7		$	(39.5)
Operating income	28.6			44.8			(16.2)			58.0			70.5			(12.5)
Operating data:
Operating margin	13.4		%	16.8		%	(3.4)		%	13.0		%	14.5		%	(1.5)		%
Total orders	$	157.7		$	253.2		$	(95.5)		$	395.2		$	496.9		$	(101.7)
Backlog	302.7			322.0			(19.3)			302.7			322.0			(19.3)
Depreciation and amortization	10.2			8.9			1.3			20.2			17.5			2.7


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) (b)}
April 2020 (3/29/20 – 5/2/20)	—	$	—	—	$	90,724,309
May 2020 (5/3/20 – 5/30/20)	—	—		—	90,724,309
June 2020 (5/31/20 – 6/27/20)	—	—		—	90,724,309


(in millions) ^(a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Unrealized Gain (Loss) on Interest Rate Swaps		Total
Balance at April 1, 2020	$	(78.6)	$	(2.4)	$	(13.2)	$	(2.3)	$	(96.5)
Other comprehensive income (loss) before reclassifications	0.1		—		1.2		(0.4)		0.9
Amounts reclassified from accumulated other comprehensive loss	0.7		0.1		—		0.1		0.9
Net current-period other comprehensive income (loss)	0.8		0.1		1.2		(0.3)		1.8
Balance at June 30, 2020	$	(77.8)	$	(2.3)	$	(12.0)	$	(2.6)	$	(94.7)


Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss							Affected Line Item in Condensed Consolidated Statements of Operations
			2020			2019
(in millions)^(a)
Amortization of actuarial losses of defined benefit pension plans	$	(0.9)		$	(0.7)		Other expense (income), net
Amortization of prior service costs of defined benefit pension plans	(0.1)			(0.1)			Other expense (income), net
Interest rate swaps	(0.1)			0.3			Interest expense
Total before tax	(1.1)			(0.5)
Income tax benefit	0.2			—			Income tax expense
Total reclassifications for the period, net of tax	$	(0.9)		$	(0.5)


(in millions)	As of June 30, 2020		As of December 31, 2019
Total assets:
Environmental Solutions	$	923.8	$	908.1
Safety and Security Systems	226.6		222.6
Corporate and eliminations	60.5		34.5
Total assets of continuing operations	1,210.9		1,165.2
Total assets of discontinued operations	0.3		0.3
Total assets	$	1,211.2	$	1,165.5


	Fair Value Measurement at Reporting Date Using
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	27.8	$	—	$	—	$	27.8

Liabilities:
Contingent consideration	—		—		4.4		4.4
Interest rate swap	—		3.5		—		3.5


(in millions)	2020		2019 ^(a)
Contingent consideration liability, at April 1	$	4.3	$	7.1


Foreign currency translation	—		0.1
Total losses included in earnings	0.1		0.4
Contingent consideration liability, at June 30	$	4.4	$	7.6


	Three Months Ended June 30,															Six Months Ended June 30,
($ in millions, except per share data)	2020			2019			Change			2020			2019			Change
Net sales	$	270.1		$	324.3		$	(54.2)		$	556.2		$	598.1		$	(41.9)
Cost of sales	199.8			235.3			(35.5)			411.1			438.8			(27.7)
Gross profit	70.3			89.0			(18.7)			145.1			159.3			(14.2)
Selling, engineering, general and administrative expenses	37.4			41.8			(4.4)			79.6			85.7			(6.1)
Acquisition and integration-related expenses	0.3			0.9			(0.6)			0.6			1.5			(0.9)
Restructuring	1.3			—			1.3			1.3			—			1.3
Operating income	31.3			46.3			(15.0)			63.6			72.1			(8.5)
Interest expense	1.8			2.0			(0.2)			3.3			4.0			(0.7)


Other expense (income), net	2.0			(0.1)			2.1			2.2			0.3			1.9
Income before income taxes	27.5			44.4			(16.9)			58.1			67.8			(9.7)
Income tax expense	6.1			11.6			(5.5)			13.3			17.5			(4.2)


Net income	$	21.4		$	32.8		$	(11.4)		$	44.8		$	50.3		$	(5.5)
Operating data:
Operating margin	11.6		%	14.3		%	(2.7)		%	11.4		%	12.1		%	(0.7)		%
Diluted earnings per share	$	0.35		$	0.54		$	(0.19)		$	0.73		$	0.82		$	(0.09)
Total orders	201.3			308.0			(106.7)			505.2			607.0			(101.8)
Backlog	332.7			347.7			(15.0)			332.7			347.7			(15.0)
Depreciation and amortization	11.1			9.8			1.3			21.9			19.3			2.6


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						Second Quarter Financial Results Press Release, Dated July 29, 2020.

99.2						Second 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 29, 2020	/s/ Ian A. Hudson
		Ian A. Hudson
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)