Federal Signal Reports Third Quarter Results Including 6% Organic Net Sales Growth and Double-Digit Earnings Improvement; Raises Full-Year Earnings Outlook and EBITDA Margin Targets for Safety and Security Systems Group
Third Quarter Highlights
-
Net sales of
$474 million , up$28 million , or 6%, from last year -
Operating income of
$75.9 million , up$13.4 million , or 21%, from last year -
GAAP Diluted EPS of
$0.87 , up$0.16 , or 23%, from last year -
Adjusted EPS of
$0.88 , up$0.17 , or 24%, from last year -
Backlog of
$1.03 billion , up$27 million , or 3%, from last year -
Operating cash flow of
$69 million , up$21 million , or 43%, from last year -
Raises 2024 adjusted EPS* outlook to a new range of
$3.30 to$3.40 , from the prior range of$3.20 to$3.35 -
Raises EBITDA margin targets for the
Safety and Security Systems Group to a new range of 18% to 24%, from the previous range of 17% to 21%
Consolidated net sales for the third quarter were
The Company also reported adjusted net income for the third quarter of
Organic Year-over-Year Net Sales Growth and Double-Digit Improvement in Earnings; Raising EBITDA Margin Targets for the
"With our teams' continued focus on operational execution and serving our customers, our businesses were able to deliver 6% year-over-year organic net sales growth, double-digit earnings improvement, gross margin expansion, and a 200-basis point increase in adjusted EBITDA margin during the third quarter," commented
In the
Consolidated operating income for the third quarter was
Consolidated adjusted earnings before interest, tax, depreciation and amortization ("adjusted EBITDA") for the third quarter was
In the
Consolidated orders for the third quarter were
Increased Operating Cash Flow Further Strengthens Financial Position, Providing Flexibility to Fund Growth Opportunities and Cash Returns to Stockholders
Net cash provided by operating activities during the third quarter was
At
"Our operating cash flow generation this quarter was outstanding, enabling us to pay down approximately
The Company funded dividends of
Outlook
"Demand for our products and aftermarket offerings remains high, with our order intake this quarter contributing to a backlog of
CONFERENCE CALL
About
"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: economic and political uncertainty, risks and adverse economic effects associated with geopolitical conflicts, legal and regulatory developments, foreign currency exchange rate changes, inflationary pressures, product and price competition, supply chain disruptions, availability and pricing of raw materials, interest rate changes, risks associated with acquisitions such as integration of operations and achieving anticipated revenue and cost benefits, work stoppages, increases in pension funding requirements, cybersecurity risks, increased legal expenses and litigation results and other risks, and uncertainties described in filings with the
* Adjusted earnings per share ("EPS") is a non-GAAP measure, which includes certain adjustments to reported GAAP net income and diluted EPS. In the three and nine months ended
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
|||||||
|
|||||||
|
Three Months Ended |
|
Nine Months Ended |
||||
(in millions, except per share data) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Net sales |
$ 474.2 |
|
$ 446.4 |
|
|
|
|
Cost of sales |
333.8 |
|
328.7 |
|
989.1 |
|
943.5 |
Gross profit |
140.4 |
|
117.7 |
|
400.4 |
|
330.8 |
Selling, engineering, general and administrative expenses |
60.1 |
|
50.6 |
|
175.6 |
|
156.0 |
Amortization expense |
3.8 |
|
3.9 |
|
11.2 |
|
11.4 |
Acquisition and integration-related expenses, net |
0.6 |
|
0.7 |
|
2.3 |
|
2.0 |
Operating income |
75.9 |
|
62.5 |
|
211.3 |
|
161.4 |
Interest expense, net |
3.0 |
|
5.1 |
|
9.4 |
|
15.4 |
Other expense, net |
0.3 |
|
0.3 |
|
0.9 |
|
1.5 |
Income before income taxes |
72.6 |
|
57.1 |
|
201.0 |
|
144.5 |
Income tax expense |
18.7 |
|
13.8 |
|
34.7 |
|
33.5 |
Net income |
$ 53.9 |
|
$ 43.3 |
|
$ 166.3 |
|
$ 111.0 |
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ 0.88 |
|
$ 0.71 |
|
$ 2.73 |
|
$ 1.83 |
Diluted |
$ 0.87 |
|
$ 0.71 |
|
$ 2.70 |
|
$ 1.81 |
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
61.0 |
|
60.8 |
|
61.0 |
|
60.7 |
Diluted |
61.7 |
|
61.4 |
|
61.7 |
|
61.4 |
Cash dividends declared per common share |
$ 0.12 |
|
$ 0.10 |
|
$ 0.36 |
|
$ 0.29 |
|
|
|
|
|
|
|
|
Operating data: |
|
|
|
|
|
|
|
Operating margin |
16.0 % |
|
14.0 % |
|
15.2 % |
|
12.7 % |
Adjusted EBITDA |
$ 93.0 |
|
$ 78.5 |
|
$ 261.3 |
|
$ 208.5 |
Adjusted EBITDA margin |
19.6 % |
|
17.6 % |
|
18.8 % |
|
16.4 % |
Total orders |
$ 425.9 |
|
$ 450.2 |
|
|
|
|
Backlog |
1,032.8 |
|
1,005.8 |
|
1,032.8 |
|
1,005.8 |
Depreciation and amortization |
16.5 |
|
15.3 |
|
47.7 |
|
45.1 |
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS |
|||
|
|||
|
|
|
|
(in millions, except per share data) |
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ 73.7 |
|
$ 61.0 |
Accounts receivable, net of allowances for doubtful accounts of |
220.3 |
|
186.2 |
Inventories |
337.0 |
|
303.4 |
Prepaid expenses and other current assets |
18.2 |
|
19.6 |
Total current assets |
649.2 |
|
570.2 |
Properties and equipment, net of accumulated depreciation of |
205.6 |
|
190.8 |
Rental equipment, net of accumulated depreciation of |
159.8 |
|
134.8 |
Operating lease right-of-use assets |
27.0 |
|
21.0 |
|
471.6 |
|
472.7 |
Intangible assets, net of accumulated amortization of |
197.1 |
|
207.5 |
Deferred tax assets |
11.7 |
|
12.0 |
Other long-term assets |
11.6 |
|
11.5 |
Total assets |
$ 1,733.6 |
|
$ 1,620.5 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term borrowings and finance lease obligations |
$ 8.1 |
|
$ 4.7 |
Accounts payable |
88.9 |
|
66.7 |
Customer deposits |
22.0 |
|
27.1 |
Accrued liabilities: |
|
|
|
Compensation and withholding taxes |
41.0 |
|
42.3 |
Current operating lease liabilities |
7.1 |
|
6.8 |
Other current liabilities |
62.3 |
|
48.2 |
Total current liabilities |
229.4 |
|
195.8 |
Long-term borrowings and finance lease obligations |
223.3 |
|
294.3 |
Long-term operating lease liabilities |
20.7 |
|
14.9 |
Long-term pension and other postretirement benefit liabilities |
41.0 |
|
44.2 |
Deferred tax liabilities |
56.5 |
|
53.2 |
Other long-term liabilities |
13.3 |
|
16.2 |
Total liabilities |
584.2 |
|
618.6 |
Stockholders' equity: |
|
|
|
Common stock, |
70.3 |
|
70.0 |
Capital in excess of par value |
306.0 |
|
291.1 |
Retained earnings |
1,060.1 |
|
915.8 |
|
(205.5) |
|
(193.7) |
Accumulated other comprehensive loss |
(81.5) |
|
(81.3) |
Total stockholders' equity |
1,149.4 |
|
1,001.9 |
Total liabilities and stockholders' equity |
$ 1,733.6 |
|
$ 1,620.5 |
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
|||
|
|||
|
Nine Months Ended
|
||
(in millions) |
2024 |
|
2023 |
Operating activities: |
|
|
|
Net income |
$ 166.3 |
|
$ 111.0 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
47.7 |
|
45.1 |
Stock-based compensation expense |
12.2 |
|
8.9 |
Changes in fair value of contingent consideration |
0.1 |
|
(0.2) |
Amortization of interest rate swap settlement gain |
(1.4) |
|
(1.8) |
Deferred income taxes |
4.0 |
|
2.0 |
Changes in operating assets and liabilities |
(88.2) |
|
(74.0) |
Net cash provided by operating activities |
140.7 |
|
91.0 |
Investing activities: |
|
|
|
Purchases of properties and equipment |
(32.1) |
|
(21.4) |
Payments for acquisition-related activity, net of cash acquired |
— |
|
(55.1) |
Other, net |
1.3 |
|
0.8 |
Net cash used for investing activities |
(30.8) |
|
(75.7) |
Financing activities: |
|
|
|
(Decrease) increase in revolving lines of credit, net |
(64.4) |
|
4.6 |
Payments on long-term borrowings |
(1.6) |
|
— |
Purchases of treasury stock |
(4.5) |
|
(4.3) |
Redemptions of common stock to satisfy withholding taxes related to stock-based compensation |
(6.0) |
|
(5.6) |
Payments for acquisition-related activity |
— |
|
(0.5) |
Cash dividends paid to stockholders |
(22.0) |
|
(17.7) |
Proceeds from stock-based compensation activity |
1.6 |
|
2.3 |
Other, net |
(0.3) |
|
— |
Net cash used for financing activities |
(97.2) |
|
(21.2) |
Effects of foreign exchange rate changes on cash and cash equivalents |
— |
|
(0.6) |
Increase (decrease) in cash and cash equivalents |
12.7 |
|
(6.5) |
Cash and cash equivalents at beginning of year |
61.0 |
|
47.5 |
Cash and cash equivalents at end of period |
$ 73.7 |
|
$ 41.0 |
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
GROUP RESULTS (Unaudited) |
|||||||||||
The following tables summarize group operating results as of and for the three and nine months ended Environmental Solutions Group |
|||||||||||
|
|||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||
($ in millions) |
2024 |
|
2023 |
|
Change |
|
2024 |
|
2023 |
|
Change |
Net sales |
$ 398.2 |
|
$ 373.0 |
|
$ 25.2 |
|
$ 1,161.0 |
|
$ 1,064.8 |
|
$ 96.2 |
Operating income |
71.5 |
|
57.2 |
|
14.3 |
|
196.1 |
|
151.0 |
|
45.1 |
Adjusted EBITDA |
87.2 |
|
72.0 |
|
15.2 |
|
241.9 |
|
193.9 |
|
48.0 |
Operating data: |
|
|
|
|
|
|
|
|
|
|
|
Operating margin |
18.0 % |
|
15.3 % |
|
2.7 % |
|
16.9 % |
|
14.2 % |
|
2.7 % |
Adjusted EBITDA margin |
21.9 % |
|
19.3 % |
|
2.6 % |
|
20.8 % |
|
18.2 % |
|
2.6 % |
Total orders |
$ 352.7 |
|
$ 374.8 |
|
$ (22.1) |
|
$ 1,176.6 |
|
$ 1,179.2 |
|
$ (2.6) |
Backlog |
979.7 |
|
938.6 |
|
41.1 |
|
979.7 |
|
938.6 |
|
41.1 |
Depreciation and amortization |
15.4 |
|
14.3 |
|
1.1 |
|
44.4 |
|
41.8 |
|
2.6 |
|
|||||||||||
|
|||||||||||
|
Three Months Ended |
|
Nine Months Ended |
||||||||
($ in millions) |
2024 |
|
2023 |
|
Change |
|
2024 |
|
2023 |
|
Change |
Net sales |
$ 76.0 |
|
$ 73.4 |
|
$ 2.6 |
|
$ 228.5 |
|
$ 209.5 |
|
$ 19.0 |
Operating income |
16.8 |
|
13.7 |
|
3.1 |
|
48.9 |
|
39.9 |
|
9.0 |
Adjusted EBITDA |
17.8 |
|
14.6 |
|
3.2 |
|
51.9 |
|
43.0 |
|
8.9 |
Operating data: |
|
|
|
|
|
|
|
|
|
|
|
Operating margin |
22.1 % |
|
18.7 % |
|
3.4 % |
|
21.4 % |
|
19.0 % |
|
2.4 % |
Adjusted EBITDA margin |
23.4 % |
|
19.9 % |
|
3.5 % |
|
22.7 % |
|
20.5 % |
|
2.2 % |
Total orders |
$ 73.2 |
|
$ 75.4 |
|
$ (2.2) |
|
$ 225.0 |
|
$ 225.9 |
|
$ (0.9) |
Backlog |
53.1 |
|
67.2 |
|
(14.1) |
|
53.1 |
|
67.2 |
|
(14.1) |
Depreciation and amortization |
1.0 |
|
0.9 |
|
0.1 |
|
3.0 |
|
3.1 |
|
(0.1) |
Corporate Expenses
Corporate operating expenses were
SEC REGULATION G NON-GAAP RECONCILIATION
The financial measures presented below are unaudited and are not in accordance with
Adjusted Net Income and Earnings Per Share ("EPS"):
The Company believes that modifying its 2024 and 2023 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 and nine months ended
|
Three Months Ended |
|
Nine Months Ended |
||||
(in millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Net income, as reported |
$ 53.9 |
|
$ 43.3 |
|
$ 166.3 |
|
$ 111.0 |
Add: |
|
|
|
|
|
|
|
Income tax expense |
18.7 |
|
13.8 |
|
34.7 |
|
33.5 |
Income before income taxes |
72.6 |
|
57.1 |
|
201.0 |
|
144.5 |
Add: |
|
|
|
|
|
|
|
Acquisition and integration-related expenses, net |
0.6 |
|
0.7 |
|
2.3 |
|
2.0 |
Environmental remediation costs of a discontinued operation (a) |
— |
|
— |
|
— |
|
0.8 |
Adjusted income before income taxes |
73.2 |
|
57.8 |
|
203.3 |
|
147.3 |
Adjusted income tax expense (b) (c) |
(19.0) |
|
(14.0) |
|
(50.8) |
|
(34.2) |
Adjusted net income |
$ 54.2 |
|
$ 43.8 |
|
$ 152.5 |
|
$ 113.1 |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||
(dollars per diluted share) |
2024 |
|
2023 |
|
2024 |
|
2023 |
EPS, as reported |
$ 0.87 |
|
$ 0.71 |
|
$ 2.70 |
|
$ 1.81 |
Add: |
|
|
|
|
|
|
|
Income tax expense |
0.31 |
|
0.22 |
|
0.56 |
|
0.55 |
Income before income taxes |
1.18 |
|
0.93 |
|
3.26 |
|
2.36 |
Add: |
|
|
|
|
|
|
|
Acquisition and integration-related expenses, net |
0.01 |
|
0.01 |
|
0.04 |
|
0.03 |
Environmental remediation costs of a discontinued operation (a) |
— |
|
— |
|
— |
|
0.01 |
Adjusted income before income taxes |
1.19 |
|
0.94 |
|
3.30 |
|
2.40 |
Adjusted income tax expense (b) (c) |
(0.31) |
|
(0.23) |
|
(0.83) |
|
(0.56) |
Adjusted EPS |
$ 0.88 |
|
$ 0.71 |
|
$ 2.47 |
|
$ 1.84 |
(a) |
Environmental remediation costs of a discontinued operation in the nine months ended |
(b) |
Adjusted income tax expense for the three and nine months ended |
(c) |
Adjusted income tax expense for the three and nine months ended |
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, net, acquisition and integration-related expenses, net, other expense, net, 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, net, acquisition and integration-related expenses, net, other expense, net, 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, net, 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, net, and depreciation and amortization expense, as applicable, divided by segment 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 operating 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 and nine months ended
|
Three Months Ended |
|
Nine Months Ended |
||||
($ in millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Net income |
$ 53.9 |
|
$ 43.3 |
|
$ 166.3 |
|
$ 111.0 |
Add: |
|
|
|
|
|
|
|
Interest expense, net |
3.0 |
|
5.1 |
|
9.4 |
|
15.4 |
Acquisition and integration-related expenses, net |
0.6 |
|
0.7 |
|
2.3 |
|
2.0 |
Other expense, net |
0.3 |
|
0.3 |
|
0.9 |
|
1.5 |
Income tax expense |
18.7 |
|
13.8 |
|
34.7 |
|
33.5 |
Depreciation and amortization |
16.5 |
|
15.3 |
|
47.7 |
|
45.1 |
Consolidated adjusted EBITDA |
$ 93.0 |
|
$ 78.5 |
|
$ 261.3 |
|
$ 208.5 |
|
|
|
|
|
|
|
|
Net sales |
$ 474.2 |
|
$ 446.4 |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated adjusted EBITDA margin |
19.6 % |
|
17.6 % |
|
18.8 % |
|
16.4 % |
Environmental Solutions Group
The following table summarizes the
|
Three Months Ended |
|
Nine Months Ended |
||||
($ in millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Operating income |
$ 71.5 |
|
$ 57.2 |
|
$ 196.1 |
|
$ 151.0 |
Add: |
|
|
|
|
|
|
|
Acquisition and integration-related expenses, net |
0.3 |
|
0.5 |
|
1.4 |
|
1.1 |
Depreciation and amortization |
15.4 |
|
14.3 |
|
44.4 |
|
41.8 |
Adjusted EBITDA |
$ 87.2 |
|
$ 72.0 |
|
$ 241.9 |
|
$ 193.9 |
|
|
|
|
|
|
|
|
Net sales |
$ 398.2 |
|
$ 373.0 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin |
21.9 % |
|
19.3 % |
|
20.8 % |
|
18.2 % |
The following table summarizes the
|
Three Months Ended |
|
Nine Months Ended |
||||
($ in millions) |
2024 |
|
2023 |
|
2024 |
|
2023 |
Operating income |
$ 16.8 |
|
$ 13.7 |
|
$ 48.9 |
|
$ 39.9 |
Add: |
|
|
|
|
|
|
|
Depreciation and amortization |
1.0 |
|
0.9 |
|
3.0 |
|
3.1 |
Adjusted EBITDA |
$ 17.8 |
|
$ 14.6 |
|
$ 51.9 |
|
$ 43.0 |
|
|
|
|
|
|
|
|
Net sales |
$ 76.0 |
|
$ 73.4 |
|
$ 228.5 |
|
$ 209.5 |
|
|
|
|
|
|
|
|
Adjusted EBITDA margin |
23.4 % |
|
19.9 % |
|
22.7 % |
|
20.5 % |
SOURCE