Federal Signal Corp 10-Q for FY2021 Q3

Federal Signal Corp /De/ (FSS)

10-Q 2021-11-09 For: 2021-09-30

Added on April 08, 2026

About this 10-Q

Federal Signal Corp filed this 10-Q on November 9, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $298.3M; up 6.6% from $279.8M a year earlier
Net income: $29.2M; up 15.4% from net income of $25.3M a year earlier
Diluted EPS: $0.47; up 14.6% from $0.41 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 Nine Months Ended September 30, 2021 and 2020	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020	3
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements	8
	Note 1 – Summary of Significant Accounting Policies	8
	Note 2 – Acquisitions	9
	Note 3 – Revenue Recognition	11
	Note 4 – Inventories	11
	Note 5 – Debt	12
	Note 6 – Goodwill and Other Intangible Assets	13
	Note 7 – Income Taxes	14
	Note 8 – Pensions	14
	Note 9 – Commitments and Contingencies	15
	Note 10 – Earnings Per Share	20
	Note 11 – Stockholders’ Equity	21
	Note 12 – Segment Information	24
	Note 13 – Fair Value Measurements	24
	Note 14 – Subsequent Events	26
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
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 September 30,				Nine Months Ended September 30,
(in millions, except per share data)	2021		2020		2021		2020
Net sales	$	298.3	$	279.8	$	911.8	$	836.0
Cost of sales	227.4		207.2		690.5		618.3
Gross profit	70.9		72.6		221.3		217.7
Selling, engineering, general and administrative expenses	36.2		38.4		119.8		118.0
Acquisition and integration-related expenses	0.4		0.2		0.9		0.8
Restructuring	—		—		—		1.3
Operating income	34.3		34.0		100.6		97.6
Interest expense	1.1		1.2		3.3		4.5


Other (income) expense, net	(0.3)		(0.1)		(1.1)		2.1
Income before income taxes	33.5		32.9		98.4		91.0
Income tax expense	4.3		7.6		17.3		20.9


Net income	$	29.2	$	25.3	$	81.1	$	70.1
Earnings per share:


Basic	$	0.48	$	0.42	$	1.33	$	1.16



Diluted	0.47		0.41		1.31		1.14
Weighted average common shares outstanding:
Basic	60.9		60.3		60.8		60.3
Diluted	61.7		61.3		61.8		61.5


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Net income	$	29.2	$	25.3	$	81.1	$	70.1
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(4.2)		4.4		(3.4)		(0.5)
Change in unrecognized net actuarial loss and prior service cost related to pension benefit plans, net of income tax expense of $0.2, $0.2, $0.7 and $0.6 respectively	1.4		0.3		3.1		3.0
Change in unrealized gain or loss on interest rate swaps, net of income tax expense (benefit) of $0.0, $0.0, $0.3 and $(1.1) respectively	0.1		0.1		0.9		(3.3)
Total other comprehensive (loss) income	(2.7)		4.8		0.6		(0.8)
Comprehensive income	$	26.5	$	30.1	$	81.7	$	69.3


☑			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


	September 30, 2021		December 31, 2020
(in millions, except per share data)	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	88.0	$	81.7
Accounts receivable, net of allowances for doubtful accounts of $2.3 and $2.9, respectively	140.8		127.0
Inventories	217.0		185.0
Prepaid expenses and other current assets	18.2		11.8



Total current assets	464.0		405.5
Properties and equipment, net of accumulated depreciation of $145.8 and $136.2, respectively	111.2		106.9
Rental equipment, net of accumulated depreciation of $42.8 and $43.5, respectively	114.2		113.3
Operating lease right-of-use assets	31.1		21.9
Goodwill	406.9		394.2
Intangible assets, net of accumulated amortization of $40.0 and $31.9, respectively	173.0		153.5
Deferred tax assets	7.9		9.5
Deferred charges and other long-term assets	5.3		3.8
Long-term assets of discontinued operations	0.2		0.2
Total assets	$	1,313.8	$	1,208.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Current portion of long-term borrowings and finance lease obligations	$	0.6	$	0.2
Accounts payable	65.6		51.6
Customer deposits	12.7		13.3


Accrued liabilities:
Compensation and withholding taxes	21.5		30.3
Current operating lease liabilities	10.0		8.2
Other current liabilities	47.0		44.7
Current liabilities of discontinued operations	0.1		0.1
Total current liabilities	157.5		148.4
Long-term borrowings and finance lease obligations	251.8		209.8
Long-term operating lease liabilities	22.7		15.5
Long-term pension and other postretirement benefit liabilities	50.1		54.0

Deferred tax liabilities	45.6		53.7
Other long-term liabilities	19.6		24.5
Long-term liabilities of discontinued operations	0.8		0.8
Total liabilities	548.1		506.7
Stockholders’ equity:
Common stock, $1 par value per share, 90.0 shares authorized, 68.7 and 67.8 shares issued, respectively	68.7		67.8
Capital in excess of par value	251.9		240.8
Retained earnings	669.6		605.0
Treasury stock, at cost, 7.6 and 7.3 shares, respectively	(133.4)		(119.8)
Accumulated other comprehensive loss	(91.1)		(91.7)
Total stockholders’ equity	765.7		702.1
Total liabilities and stockholders’ equity	$	1,313.8	$	1,208.8


	Three Months Ended September 30, 2021
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at July 1, 2021	$	68.7	$	249.6	$	645.9	$	(129.8)	$	(88.4)	$	746.0
Net income					29.2						29.2
Total other comprehensive loss									(2.7)		(2.7)
Cash dividends declared ($0.09 per share)					(5.5)						(5.5)
Stock-based payments:
Stock-based compensation			1.7								1.7
Stock option exercises and other	—		0.6				(0.4)				0.2

Stock repurchase program							(3.2)				(3.2)
Balance at September 30, 2021	$	68.7	$	251.9	$	669.6	$	(133.4)	$	(91.1)	$	765.7


	Three Months Ended September 30, 2020
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at July 1, 2020	$	67.5	$	234.7	$	563.3	$	(115.4)	$	(94.7)	$	655.4
Net income					25.3						25.3
Total other comprehensive income									4.8		4.8
Cash dividends declared ($0.08 per share)					(4.8)						(4.8)

Stock-based payments:
Stock-based compensation			1.5								1.5
Stock option exercises and other	0.3		1.2				(3.7)				(2.2)

Stock repurchase program							(0.2)				(0.2)
Balance at September 30, 2020	$	67.8	$	237.4	$	583.8	$	(119.3)	$	(89.9)	$	679.8


	Nine Months Ended September 30, 2021
(in millions)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Total
Balance at January 1, 2021	$	67.8	$	240.8	$	605.0	$	(119.8)	$	(91.7)	$	702.1
Net income					81.1						81.1
Total other comprehensive income									0.6		0.6
Cash dividends declared ($0.27 per share)					(16.5)						(16.5)
Stock-based payments:
Stock-based compensation			4.9								4.9
Stock option exercises and other	0.7		6.4				(6.4)				0.7
Performance share unit transactions	0.2		(0.2)				(3.8)				(3.8)
Stock repurchase program							(3.4)				(3.4)
Balance at September 30, 2021	$	68.7	$	251.9	$	669.6	$	(133.4)	$	(91.1)	$	765.7


	Nine Months Ended September 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					70.1						70.1
Total other comprehensive loss									(0.8)		(0.8)
Cash dividends declared ($0.24 per share)					(14.5)						(14.5)
Stock-based payments:
Stock-based compensation			5.4								5.4
Stock option exercises and other	0.7		3.6				(9.7)				(5.4)
Performance share unit transactions	0.2		(0.2)				(2.9)				(2.9)
Stock repurchase program							(13.7)				(13.7)
Balance at September 30, 2020	$	67.8	$	237.4	$	583.8	$	(119.3)	$	(89.9)	$	679.8


(in millions)
Purchase price, inclusive of preliminary closing adjustments (a)	$	53.5
Total consideration	53.5

Cash	1.3
Accounts receivable	3.6
Inventories	8.4
Prepaid expenses and other current assets	0.7

Properties and equipment	5.8

Operating lease right-of-use assets	12.3

Customer relationships (b)	16.9
Trade names (c)	10.3
Other intangible assets	0.4
Operating lease liabilities	(12.3)
Accounts payable	(3.8)
Accrued liabilities	(1.9)
Customer deposits	(0.8)
Finance lease obligations	(1.7)
Net assets acquired	39.2

Goodwill (d)	$	14.3


(in millions)	September 30, 2021		December 31, 2020

2019 Credit Agreement (a)	$	250.2	$	209.4
Finance lease obligations (b)	2.2		0.6
Total long-term borrowings and finance lease obligations, including current portion	252.4		210.0

Less: Current finance lease obligations (b)	0.6		0.2
Total long-term borrowings and finance lease obligations	$	251.8	$	209.8


	September 30, 2021				December 31, 2020
(in millions)	Notional Amount		Fair Value		Notional Amount		Fair Value

Long-term borrowings (a)	$	252.4	$	252.4	$	210.0	$	210.0


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Geographic Region:
U.S.	$	233.3	$	219.1	$	692.5	$	650.7
Canada	44.9		41.6		151.6		113.4
Europe/Other	20.1		19.1		67.7		71.9
Total net sales	$	298.3	$	279.8	$	911.8	$	836.0
Major Product Line:
Environmental Solutions
Vehicles and equipment (a)	$	185.5	$	179.1	$	578.2	$	531.1
Parts	37.5		32.4		112.7		96.7
Rental income (b)	11.9		9.2		32.6		27.3
Other (c)	14.2		10.3		35.0		23.1
Total	249.1		231.0		758.5		678.2
Safety and Security Systems
Public safety and security equipment	30.2		29.5		93.6		97.6
Industrial signaling equipment	12.2		11.6		39.9		38.0
Warning systems	6.8		7.7		19.8		22.2

Total	49.2		48.8		153.3		157.8
Total net sales	$	298.3	$	279.8	$	911.8	$	836.0


(in millions)	September 30, 2021		December 31, 2020
Finished goods	$	88.6	$	95.3
Raw materials	108.4		76.6
Work in process	20.0		13.1
Total inventories (a)	$	217.0	$	185.0


(in millions)	Environmental Solutions		Safety & Security Systems		Total
Balance at January 1, 2021	$	279.9	$	114.3	$	394.2
Acquisitions	14.3		—		14.3
Translation adjustments	0.1		(1.7)		(1.6)
Balance at September 30, 2021	$	294.3	$	112.6	$	406.9


	U.S. Benefit Plan								Non-U.S. Benefit Plan
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020		2021		2020		2021		2020
Service cost	$	—	$	—	$	—	$	—	$	—	$	—	$	0.1	$	0.1
Interest cost	1.2		1.5		3.6		4.3		0.2		0.2		0.5		0.7
Amortization of actuarial loss	1.0		0.8		2.9		2.4		0.2		0.2		0.6		0.4
Amortization of prior service cost	—		—		—		—		0.1		—		0.2		0.1
Expected return on plan assets	(2.4)		(2.3)		(7.2)		(6.9)		(0.5)		(0.5)		(1.5)		(1.4)
Net periodic pension benefit	$	(0.2)	$	—	$	(0.7)	$	(0.2)	$	—	$	(0.1)	$	(0.1)	$	(0.1)


(in millions) (a)	Actuarial Losses		Prior Service Costs		Foreign Currency Translation		Unrealized Gain (Loss) on Interest Rate Swaps		Total
Balance at July 1, 2021	$	(86.6)	$	(2.5)	$	2.1	$	(1.4)	$	(88.4)
Other comprehensive income (loss) before reclassifications	0.5		—		(4.2)		(0.1)		(3.8)
Amounts reclassified from accumulated other comprehensive loss	0.8		0.1		—		0.2		1.1
Net current-period other comprehensive income (loss)	1.3		0.1		(4.2)		0.1		(2.7)
Balance at September 30, 2021	$	(85.3)	$	(2.4)	$	(2.1)	$	(1.3)	$	(91.1)


Details about Accumulated Other Comprehensive Loss Components	Amount Reclassified from Accumulated Other Comprehensive Loss				Affected Line Item in Condensed Consolidated Statements of Operations
	2021		2020
(in millions) (a)
Amortization of actuarial losses of defined benefit pension plans	$	(1.2)	$	(1.0)	Other (income) expense, net
Amortization of prior service costs of defined benefit pension plans	(0.1)		—		Other (income) expense, net
Interest rate swaps	(0.2)		(0.2)		Interest expense
Total before tax	(1.5)		(1.2)
Income tax benefit	0.4		0.4		Income tax expense
Total reclassifications for the period, net of tax	$	(1.1)	$	(0.8)


(in millions)	As of September 30, 2021		As of December 31, 2020
Total assets:
Environmental Solutions	$	1,015.0	$	926.8
Safety and Security Systems	220.4		225.5
Corporate and eliminations	78.2		56.3
Total assets of continuing operations	1,313.6		1,208.6
Total assets of discontinued operations	0.2		0.2
Total assets	$	1,313.8	$	1,208.8


	Fair Value Measurement at Reporting Date Using
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	0.1	$	—	$	—	$	0.1

Liabilities:
Contingent consideration	—		—		4.2		4.2
Interest rate swap	—		1.8		—		1.8


	Three Months Ended September 30,									Nine Months Ended September 30,
($ in millions, except per share data)	2021			2020			Change			2021			2020			Change
Net sales	$	298.3		$	279.8		$	18.5		$	911.8		$	836.0		$	75.8
Cost of sales	227.4			207.2			20.2			690.5			618.3			72.2
Gross profit	70.9			72.6			(1.7)			221.3			217.7			3.6
Selling, engineering, general and administrative expenses	36.2			38.4			(2.2)			119.8			118.0			1.8
Acquisition and integration-related expenses	0.4			0.2			0.2			0.9			0.8			0.1
Restructuring	—			—			—			—			1.3			(1.3)
Operating income	34.3			34.0			0.3			100.6			97.6			3.0
Interest expense	1.1			1.2			(0.1)			3.3			4.5			(1.2)


Other (income) expense, net	(0.3)			(0.1)			(0.2)			(1.1)			2.1			(3.2)
Income before income taxes	33.5			32.9			0.6			98.4			91.0			7.4
Income tax expense	4.3			7.6			(3.3)			17.3			20.9			(3.6)


Net income	$	29.2		$	25.3		$	3.9		$	81.1		$	70.1		$	11.0
Operating data:
Operating margin	11.5		%	12.2		%	(0.7)		%	11.0		%	11.7		%	(0.7)		%
Diluted earnings per share	$	0.47		$	0.41		$	0.06		$	1.31		$	1.14		$	0.17
Total orders	350.4			265.8			84.6			1,095.0			771.0			324.0
Backlog	487.1			319.7			167.4			487.1			319.7			167.4
Depreciation and amortization	12.7			11.2			1.5			37.5			33.1			4.4


	Three Months Ended September 30,									Nine Months Ended September 30,
($ in millions)	2021			2020			Change			2021			2020			Change
Net sales	$	249.1		$	231.0		$	18.1		$	758.5		$	678.2		$	80.3
Operating income	30.8			33.0			(2.2)			96.4			91.0			5.4
Operating data:
Operating margin	12.4		%	14.3		%	(1.9)		%	12.7		%	13.4		%	(0.7)		%
Total orders	$	292.1		$	220.0		$	72.1		$	916.0		$	615.2		$	300.8
Backlog	440.8			292.6			148.2			440.8			292.6			148.2
Depreciation and amortization	11.8			10.4			1.4			34.7			30.6			4.1


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)
July 2021 (7/4/21 – 8/7/21)	34,296	$	38.3332	34,296	$	89,016,183
August 2021 (8/8/21 – 9/4/21)	20,832	38.3873		20,832	88,216,499
September 2021 (9/5/21 – 10/2/21)	27,626	38.6055		27,626	87,149,983


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.

10.1*						Eighth Amendment to Federal Signal Corporation Savings Restoration Plan , effective as of January 1, 2021

10.2						Purchase and Sale Agreement, dated as of September 22, 2021

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						Third Q uarter Financial Results Press Release, Dated November 9 , 2021.

99.2						Third 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:	November 9, 2021	/s/ Ian A. Hudson
		Ian A. Hudson
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)