Federal Signal Corporation Announces 2011 Full Year and Fourth Quarter Results

Federal Signal Corporation (NYSE: FSS), today reported results for the full year and the fourth quarter ended December 31, of 2011.
Dennis J. Martin, President and Chief Executive Officer, stated, "Our strong order trends and healthy order backlog have positioned the Company well as we begin 2012. Year-end order backlogs for each of our four business groups are at least 40% higher than they were a year ago." Mr. Martin continued, "We believe these positive order trends, the process improvements we have implemented over the last year at our operating units, reduction of our corporate expenses and economic recovery in our markets will generate profit increases in 2012. In addition, we remain committed to either divesting or improving our under-performing assets before year end."

The Company reported orders of $349 million for the fourth quarter of 2011 that were up 87% from $187 million a year earlier, led by dramatic improvements in order rates at the Company's Environmental Solutions and Federal Signal Technologies Groups.  The fourth quarter operating income (excluding impairment charges of $22.2 million in 2011 and excluding impairment charges, acquisition costs and restructuring charges of $80.0 million in 2010) improved $12.6 million from a loss of $2.7 million in the fourth quarter of 2010 to income of $9.9 million in the fourth quarter of 2011, reflecting significant increases from the Environmental Solutions Group.

For the full year 2011, the Company reported a loss per share from continuing operations of ($0.23) on net sales of $795.6 million compared to a loss in 2010 of ($2.79) on net sales of $726.5 million. The year-over-year change is primarily related to increased sales as well as lower goodwill and other intangible asset impairment charges. In 2011, the results include non-cash goodwill and other intangible asset impairment charges of $20.6 million in the aggregate from Federal Signal Technologies.  This compares with 2010 charges relating to a non-cash tax valuation allowance of $85.0 million, non-cash goodwill and other intangible asset impairment charges of $78.9 million in the aggregate from Federal Signal Technologies, restructuring charges of $5.0 million, acquisition and integration related costs of $3.9 million, and a settlement charge of $3.8 million for the hearing loss litigation.

The Company reported a loss per share from continuing operations of ($0.27) and a loss from continuing operations of ($16.8) million on net sales of $223.3 million for the fourth quarter of 2011. For the same period of 2010, the Company reported a loss per share from continuing operations of ($2.55) and a loss from continuing operations of ($158.4) million on net sales of $186.7 million.  The ($0.27) loss per share from continuing operations for the fourth quarter of 2011 includes goodwill and other intangible asset impairment charges of ($0.33) per share. For the full year, the 2011 net loss was ($14.2) million, including a gain from discontinued operations of $0.2 million compared to a 2010 net loss of ($175.7) million, including a loss from discontinued operations of ($15.0) million. The Company recorded a net loss of ($16.6) million including income from discontinued operations of $0.2 million in the fourth quarter of 2011 compared to a net loss of ($169.2) million including a loss from discontinued operations of ($10.8) million in the same prior year period.

Safety and Security Systems

Orders increased $12.1 million in the fourth quarter compared to the respective prior year period. U.S. orders increased $5.9 million due to strong demand in industrial and outdoor warning markets, partially offset by lower demand in the public safety market. Non-U.S. orders increased $6.2 million as the demand for U.S. exports in public safety and mining markets continued to improve.
Net sales increased $5.5 million in the fourth quarter compared to the respective prior year period resulting from strong demand in outdoor warnings systems and international markets, partially offset by lower demand in the domestic public safety market.
Operating income decreased $1.6 million in the fourth quarter compared to the respective prior year period driven by margin compression in the police, fire and industrial and outdoor warnings systems markets , which resulted in a 3.8% decrease to the operating margin compared to the same prior year period.

Fire Rescue

Orders remained flat compared to the respective prior year period.
Net sales increased $6.9 million in the fourth quarter compared to the respective prior year period as a result of increased demand in Asia and Australia, partially offset by weaker demand in Europe.
Operating income increased by $0.5 million in the fourth quarter compared to the respective prior year period due to increased volumes. Operating margin decreased by 1.0% compared to the respective prior year period, primarily due to lower gross profit margin related to product mix.

Environmental Solutions

Orders increased $62.0 million in the fourth quarter compared to the respective prior year period. U.S. orders increased $53.0 million in the fourth quarter compared to the respective prior year period due to an increase of $25.2 million in the industrial market and $27.8 million in the municipal and government markets. Non-U.S. orders in the fourth quarter compared to the respective prior year period increased $9.0 million due to stronger global demand for street sweepers and sewer cleaners.
Net sales increased $21.3 million in the fourth quarter compared to the respective prior year period as a result of higher sales volumes in sewer cleaners and parts, street sweepers and international markets.
Operating income increased $4.9 million compared to the respective prior year period, primarily due to increased sales of sweepers, sewer cleaners and vacuum trucks.

Federal Signal Technologies

Orders increased $87.6 million in the fourth quarter compared to the respective prior year period. U.S. orders increased $74.9 million in the fourth quarter compared to the respective prior year period primarily due to a $68.0 million order for a large, three-year back office and operations system project and other new business from Sirit and VESystems. Non-U.S. orders increased $12.7 million in the fourth quarter compared to the respective prior year period due to increased demand for ALPR cameras in the European market.
Net sales increased $2.9 million in the fourth quarter compared to the respective prior year period, primarily due to new business from Sirit and VESystems.
Operating loss was ($23.5) million in the fourth quarter compared to an operating loss of ($81.0) million for the respective prior year period. The improvement in the operating loss was primarily due to lower non-cash goodwill and other intangible asset impairment charges, partially offset by higher amortization expense and higher research and development costs.

Corporate Expenses

Corporate expenses were $6.0 million and $15.1 million for the fourth quarter of 2011 and 2010, respectively. The decrease was mainly due to the absence of one-time costs related to the Company's ongoing hearing loss litigation and severance expenses.

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.
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