OAK BROOK, Ill., Feb. 28, 2019 /PRNewswire/ -- Federal
Signal Corporation (NYSE:FSS), a leader in environmental and safety solutions, today reported results for the fourth quarter and
year ended December 31, 2018.
- Q4 operating income of $33.4 million, up $12.3 million, or 58%,
compared to last year
- Q4 net sales of $279 million, up $32 million, or 13% compared
to last year
- GAAP EPS of $0.53 for the quarter, up 10% from last year, and $1.53 for the year, up 53%
- Adjusted EPS of $0.39 for the quarter, up 63% from last year, and $1.43 for the year, up 68%
- Projecting another strong year in 2019, with adjusted EPS* outlook of $1.48 to
$1.60
Consolidated net sales for the fourth quarter were $279.4 million, up 13% versus the same
quarter a year ago. Fourth quarter income from continuing operations was $32.2 million, equal to
$0.53 per diluted share, up 10% compared to $29.3 million, or
$0.48 per share, in the prior-year quarter. The Company also reported adjusted income from
continuing operations for the fourth quarter of $23.8 million, equal to $0.39 per diluted share, up 65% compared to $14.4 million, or $0.24 per share, in the same quarter a year ago.
Consolidated net sales for the year ended December 31, 2018 were $1,089.5 million, up 21%
compared to the prior year. Income from continuing operations for the year was $93.7 million, equal
to $1.53 per diluted share, up 55% compared to $60.5 million, or
$1.00 per share, in the prior year. Adjusted income from continuing operations for the year was
$87.5 million, equal to $1.43 per diluted share, up 71% compared to
$51.1 million, or $0.85 per diluted share, in the prior year. The
Company is reporting adjusted results to facilitate comparisons of underlying performance on a year-over-year basis. A
reconciliation of these and other non-GAAP measures is provided at the conclusion of this news release.
Fourth Quarter Financial Performance Contributes to Record Annual Results
"We had a strong finish to 2018, a year in which our businesses reported record annual revenues and earnings," said
Jennifer L. Sherman, President and Chief Executive Officer. "During the fourth quarter, both of
our groups achieved double-digit organic sales growth and significant improvements in adjusted EBITDA margins. Benefiting from
several large orders, our Safety and Security Group delivered an outstanding quarter, with a 12% increase in the top line, and an
EBITDA margin in excess of 20%. With continued momentum on our aftermarket and safe-digging initiatives, and ongoing traction
from recent new product introductions, our Environmental Solutions Group reported organic sales growth of 13%, and a 170 basis
point year-over-year improvement in adjusted EBITDA margin."
In the Environmental Solutions Group ("ESG"), net sales were up $25.3 million, or 13% primarily
due to increases in shipments of vacuum trucks and sewer cleaners, as well as higher aftermarket revenue. Sales in the Safety and
Security Systems Group ("SSG") increased by $6.5 million, or 12%, primarily due to higher sales of
public safety products and warning systems.
Consolidated fourth quarter operating income was $33.4 million, up $12.3
million, or 58%, compared to the prior-year quarter, driven by improvements of $7.0 million
and $2.9 million within ESG and SSG, respectively, in addition to a $2.4
million reduction in corporate expenses.
Consolidated adjusted earnings before interest, tax, depreciation and amortization ("adjusted EBITDA") for the fourth quarter
of 2018 was $43.0 million, up $10.9 million, or 34%, compared to the
prior-year quarter, and consolidated adjusted EBITDA margin was 15.4% compared to 13.0% last year.
ESG's adjusted EBITDA for the quarter was up $7.5 million, or 27%, to $35.5 million, and its adjusted EBITDA margin was 16.3%, up from 14.6% last year. SSG's adjusted EBITDA for the
quarter was $12.7 million, up $2.7 million, or 27%, from last year,
and its adjusted EBITDA margin was 20.5%, compared to 18.0% last year.
Order intake in the fourth quarter of 2018 remained strong, with consolidated orders of $297.8
million contributing to a year-end backlog of $338 million, up $80.2
million, or 31%, from a year ago.
Strong Q4 Cash Flow Supports Additional Debt Pay Down and Cash Returns to Shareholders
Net cash of $20.9 million was generated from operations in the fourth quarter of 2018, compared
to $21.4 million in the prior-year quarter. For the year ended December 31, 2018, operating
cash flow totaled $92.8 million, an increase of $19.3 million, or
26%, compared to the prior year. At December 31, 2018, total debt was $210 million,
total cash and cash equivalents were $37 million and the Company had $179
million of availability for borrowings under its credit facility.
"With the 26% year-over-year improvement in operating cash flow, we have paid down approximately $62
million of borrowings in 2018, lowering our debt leverage ratio at the end of the year to 1.3 times adjusted EBITDA," said
Sherman. "Our strong financial position allows us to continue to invest in organic growth initiatives, like the recently
announced plant expansion at Vactor and ongoing new product development. At the same time, we remain committed to pursuing
strategic acquisitions and funding cash returns to shareholders."
The Company funded dividends of $4.9 million during the fourth quarter, bringing the totals for
the year to $18.7 million, and the Board of Directors also recently declared a $0.08 per share dividend that will be payable in the first quarter of 2019. In addition, the Company
repurchased $1.2 million of stock in the fourth quarter under its existing share repurchase
program.
Outlook
"Solid execution drove a record year for Federal Signal, with annual revenues exceeding $1
billion for the first time in over a decade. Both groups reported significant improvement in sales and earnings,
delivering adjusted EBITDA margins towards the high end of their target ranges, and our adjusted EPS improved by 68% in
comparison to a strong 2017," Sherman continued. "We entered 2019 with a backlog that is 31% higher than a year ago. In addition,
conditions in most of our end markets remain healthy and we are gaining traction with our strategic initiatives. Although
seasonal effects typically result in our first quarter earnings being lower than subsequent quarters, we are anticipating
year-over-year earnings growth in the first quarter. We are expecting another strong year, with revenue growth and adjusted
earnings per share* of between $1.48 and $1.60, the
midpoint of which would represent a 9% improvement over a record 2018."
CONFERENCE CALL
Federal Signal will host its fourth quarter earnings conference call on Thursday, February 28, 2019 at 10:00 a.m. Eastern Time. The call will last approximately one hour. The call may be accessed over the internet
through Federal Signal's website at http://www.federalsignal.com or by dialing phone number 1-800-289-0438 and entering the pin number
6491007. An archived replay will be available on Federal Signal's website shortly after the call.
About Federal Signal
Federal Signal Corporation (NYSE: FSS) builds and delivers equipment of unmatched quality that moves material, cleans
infrastructure, and protects the communities where we work and live. Founded in 1901, Federal Signal is a leading global
designer, manufacturer and supplier of products and total solutions that serve municipal, governmental, industrial and commercial
customers. Headquartered in Oak Brook, Ill., with manufacturing facilities worldwide, the
Company operates two groups: Environmental Solutions and Safety and Security Systems. For more information on Federal Signal,
visit: http://www.federalsignal.com.
"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 conditions in various regions; product and price competition; supplier and raw material prices; foreign
currency exchange rate changes; interest rate changes; increased legal expenses and litigation results; legal and regulatory
developments and other risks and uncertainties described in filings with the Securities and Exchange Commission.
|
* Adjusted earnings per share ("EPS") is a non-GAAP measure, which includes
certain adjustments to reported GAAP net income and diluted EPS. In 2018, we made adjustments to exclude the impact of
acquisition and integration-related expenses, purchase accounting effects, hearing loss settlement charges and special
tax items, where applicable. Should any similar items occur in 2019, we would expect to exclude them from the
determination of adjusted EPS. However, because of the underlying uncertainty in quantifying amounts which may not
yet be known, a reconciliation of our Adjusted EPS outlook to the most applicable GAAP measure is excluded based on the
unreasonable efforts exception in Item 10(e)(1)(i)(B). In addition, to facilitate comparisons with prior periods, when
reporting our interim and annual non-GAAP results in 2019, we will be adjusting our previously issued non-GAAP results
for 2018 to exclude the recognition of a deferred gain, which will no longer occur in 2019 following the adoption of the
new lease accounting standards. On this basis, Adjusted EPS for 2018 would have been $1.41. At the conclusion of this
news release, we have included a reconciliation of GAAP EPS for interim and annual periods in 2018 to both the previously
issued and revised adjusted EPS for the interim and annual periods in 2018.
|
|
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
(in millions, except per share data)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net sales
|
$
|
279.4
|
|
|
$
|
247.6
|
|
|
$
|
1,089.5
|
|
|
$
|
898.5
|
|
|
Cost of sales
|
207.4
|
|
|
186.0
|
|
|
807.4
|
|
|
677.3
|
|
|
Gross profit
|
72.0
|
|
|
61.6
|
|
|
282.1
|
|
|
221.2
|
|
|
Selling, engineering, general and administrative expenses
|
38.4
|
|
|
39.9
|
|
|
159.1
|
|
|
144.3
|
|
|
Acquisition and integration-related expenses
|
0.2
|
|
|
0.5
|
|
|
1.5
|
|
|
2.7
|
|
|
Restructuring
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.6
|
|
|
Operating income
|
33.4
|
|
|
21.1
|
|
|
121.5
|
|
|
73.6
|
|
|
Interest expense
|
2.1
|
|
|
2.7
|
|
|
9.3
|
|
|
7.3
|
|
|
Pension settlement charges
|
—
|
|
|
6.1
|
|
|
—
|
|
|
6.1
|
|
|
Other expense (income), net
|
0.1
|
|
|
(0.1)
|
|
|
0.6
|
|
|
(0.8)
|
|
|
Income before income taxes
|
31.2
|
|
|
12.4
|
|
|
111.6
|
|
|
61.0
|
|
|
Income tax (benefit) expense
|
(1.0)
|
|
|
(16.9)
|
|
|
17.9
|
|
|
0.5
|
|
|
Income from continuing operations
|
32.2
|
|
|
29.3
|
|
|
93.7
|
|
|
60.5
|
|
|
Gain from discontinued operations and disposal, net of income tax (benefit)
expense of $0.1, $(0.8), $0.1 and $(0.8), respectively
|
0.3
|
|
|
1.1
|
|
|
0.3
|
|
|
1.1
|
|
|
Net income
|
$
|
32.5
|
|
|
$
|
30.4
|
|
|
$
|
94.0
|
|
|
$
|
61.6
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
$
|
0.53
|
|
|
$
|
0.49
|
|
|
$
|
1.56
|
|
|
$
|
1.01
|
|
|
Earnings from discontinued operations and disposal, net of tax
|
$
|
0.01
|
|
|
0.02
|
|
|
0.01
|
|
|
0.02
|
|
|
Net earnings per share
|
$
|
0.54
|
|
|
$
|
0.51
|
|
|
$
|
1.57
|
|
|
$
|
1.03
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
$
|
0.53
|
|
|
$
|
0.48
|
|
|
$
|
1.53
|
|
|
$
|
1.00
|
|
|
Earnings from discontinued operations and disposal, net of tax
|
0.00
|
|
|
0.02
|
|
|
0.01
|
|
|
0.02
|
|
|
Net earnings per share
|
$
|
0.53
|
|
|
$
|
0.50
|
|
|
$
|
1.54
|
|
|
$
|
1.02
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
60.0
|
|
|
59.8
|
|
|
59.9
|
|
|
59.7
|
|
|
Diluted
|
61.3
|
|
|
60.7
|
|
|
61.2
|
|
|
60.4
|
|
|
Cash dividends declared per common share
|
$
|
0.08
|
|
|
$
|
0.07
|
|
|
$
|
0.31
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
Operating data:
|
|
|
|
|
|
|
|
|
Operating margin
|
12.0
|
%
|
|
8.5
|
%
|
|
11.2
|
%
|
|
8.2
|
%
|
|
Adjusted EBITDA
|
$
|
43.0
|
|
|
$
|
32.1
|
|
|
$
|
160.5
|
|
|
$
|
113.5
|
|
|
Adjusted EBITDA margin
|
15.4
|
%
|
|
13.0
|
%
|
|
14.7
|
%
|
|
12.6
|
%
|
|
Total orders
|
$
|
297.8
|
|
|
$
|
302.7
|
|
|
$
|
1,173.2
|
|
|
$
|
1,018.0
|
|
|
Backlog
|
337.7
|
|
|
257.5
|
|
|
337.7
|
|
|
257.5
|
|
|
Depreciation and amortization
|
9.4
|
|
|
8.7
|
|
|
36.4
|
|
|
30.0
|
|
|
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
As of December 31,
|
|
(in millions, except per share data)
|
2018
|
|
2017
|
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
$
|
37.4
|
|
|
$
|
37.5
|
|
|
Accounts receivable, net of allowances for doubtful accounts of $1.6 and
$1.1, respectively
|
124.4
|
|
|
118.2
|
|
|
Inventories
|
157.3
|
|
|
137.2
|
|
|
Prepaid expenses and other current assets
|
9.4
|
|
|
10.9
|
|
|
Total current assets
|
328.5
|
|
|
303.8
|
|
|
Properties and equipment, net of accumulated depreciation of $116.0 and
$108.9, respectively
|
62.0
|
|
|
60.1
|
|
|
Rental equipment, net of accumulated depreciation of $30.0 and $20.0,
respectively
|
96.6
|
|
|
87.2
|
|
|
Goodwill
|
375.1
|
|
|
377.3
|
|
|
Intangible assets, net of accumulated amortization of $13.4 and $5.5,
respectively
|
143.1
|
|
|
151.8
|
|
|
Deferred tax assets
|
12.5
|
|
|
6.2
|
|
|
Deferred charges and other long-term assets
|
5.6
|
|
|
5.4
|
|
|
Long-term assets of discontinued operations
|
0.4
|
|
|
0.5
|
|
|
Total assets
|
$
|
1,023.8
|
|
|
$
|
992.3
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Current portion of long-term borrowings and capital lease
obligations
|
0.2
|
|
|
0.3
|
|
|
Accounts payable
|
66.1
|
|
|
51.5
|
|
|
Customer deposits
|
10.1
|
|
|
6.5
|
|
|
Accrued liabilities:
|
|
|
|
|
Compensation and withholding taxes
|
29.5
|
|
|
22.2
|
|
|
Other current liabilities
|
52.7
|
|
|
36.1
|
|
|
Current liabilities of discontinued operations
|
0.2
|
|
|
0.5
|
|
|
Total current liabilities
|
158.8
|
|
|
117.1
|
|
|
Long-term borrowings and capital lease obligations
|
209.9
|
|
|
277.4
|
|
|
Long-term pension and other post-retirement benefit liabilities
|
54.6
|
|
|
56.6
|
|
|
Deferred gain
|
6.8
|
|
|
8.7
|
|
|
Deferred tax liabilities
|
46.3
|
|
|
45.4
|
|
|
Other long-term liabilities
|
15.9
|
|
|
28.2
|
|
|
Long-term liabilities of discontinued operations
|
1.4
|
|
|
1.5
|
|
|
Total liabilities
|
493.7
|
|
|
534.9
|
|
|
Stockholders' equity:
|
|
|
|
|
Common stock, $1 par value per share, 90.0 shares authorized,
66.4 and 66.1 shares issued, respectively
|
66.4
|
|
|
66.1
|
|
|
Capital in excess of par value
|
217.0
|
|
|
207.7
|
|
|
Retained earnings
|
432.5
|
|
|
346.6
|
|
|
Treasury stock, at cost, 6.2 and 6.1 shares, respectively
|
(88.5)
|
|
|
(86.1)
|
|
|
Accumulated other comprehensive loss
|
(97.3)
|
|
|
(76.9)
|
|
|
Total stockholders' equity
|
530.1
|
|
|
457.4
|
|
|
Total liabilities and stockholders' equity
|
$
|
1,023.8
|
|
|
$
|
992.3
|
|
|
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
For the Years Ended
December 31,
|
|
(in millions)
|
2018
|
|
2017
|
|
Operating activities:
|
|
|
|
|
Net income
|
$
|
94.0
|
|
|
$
|
61.6
|
|
|
Adjustments to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Net gain on discontinued operations and disposal
|
(0.3)
|
|
|
(1.1)
|
|
|
Depreciation and amortization
|
36.4
|
|
|
30.0
|
|
|
Deferred financing costs
|
0.4
|
|
|
0.3
|
|
|
Deferred gain
|
(1.9)
|
|
|
(2.0)
|
|
|
Stock-based compensation expense
|
7.6
|
|
|
4.6
|
|
|
Pension settlement charges
|
—
|
|
|
6.1
|
|
|
Pension expense, net of funding
|
(7.8)
|
|
|
(5.2)
|
|
|
Changes in fair value of contingent consideration and deferred
payment
|
1.1
|
|
|
1.0
|
|
|
Deferred income taxes, including change in valuation allowance
|
(5.6)
|
|
|
(14.9)
|
|
|
Changes in operating assets and liabilities, net of effects of discontinued
operations:
|
|
|
|
|
Accounts receivable
|
(7.9)
|
|
|
(11.1)
|
|
|
Inventories
|
(22.6)
|
|
|
9.4
|
|
|
Rental equipment
|
(30.6)
|
|
|
(15.7)
|
|
|
Prepaid expenses and other current assets
|
(1.0)
|
|
|
3.9
|
|
|
Accounts payable
|
15.6
|
|
|
(5.2)
|
|
|
Customer deposits
|
3.7
|
|
|
1.5
|
|
|
Accrued liabilities
|
8.2
|
|
|
8.0
|
|
|
Income taxes
|
2.2
|
|
|
1.6
|
|
|
Other
|
1.3
|
|
|
0.7
|
|
|
Net cash provided by continuing operating activities
|
92.8
|
|
|
73.5
|
|
|
Net cash used for discontinued operating activities
|
—
|
|
|
(0.7)
|
|
|
Net cash provided by operating activities
|
92.8
|
|
|
72.8
|
|
|
Investing activities:
|
|
|
|
|
Purchases of properties and equipment
|
(14.1)
|
|
|
(8.0)
|
|
|
Proceeds from (payments for) acquisitions, net of cash acquired
|
3.0
|
|
|
(269.2)
|
|
|
Other, net
|
0.1
|
|
|
0.1
|
|
|
Net cash used for continuing investing activities
|
(11.0)
|
|
|
(277.1)
|
|
|
Net cash (used for) provided by discontinued investing
activities
|
—
|
|
|
(1.1)
|
|
|
Net cash used for investing activities
|
(11.0)
|
|
|
(278.2)
|
|
|
Financing activities:
|
|
|
|
|
(Decrease) increase in revolving lines of credit, net
|
(62.1)
|
|
|
209.1
|
|
|
Payments of debt financing fees
|
—
|
|
|
(0.2)
|
|
|
Purchases of treasury stock
|
(1.2)
|
|
|
—
|
|
|
Redemptions of common stock to satisfy withholding taxes related to
stock-based compensation
|
(0.5)
|
|
|
(2.9)
|
|
|
Cash dividends paid to stockholders
|
(18.7)
|
|
|
(16.8)
|
|
|
Proceeds from stock compensation activity
|
1.3
|
|
|
1.6
|
|
|
Other, net
|
—
|
|
|
(0.1)
|
|
|
Net cash (used for) provided by continuing financing activities
|
(81.2)
|
|
|
190.7
|
|
|
Net cash provided by discontinued financing activities
|
—
|
|
|
—
|
|
|
Net cash (used for) provided by financing activities
|
(81.2)
|
|
|
190.7
|
|
|
Effects of foreign exchange rate changes on cash and cash
equivalents
|
(0.7)
|
|
|
1.5
|
|
|
Decrease in cash and cash equivalents
|
(0.1)
|
|
|
(13.2)
|
|
|
Cash and cash equivalents at beginning of year
|
37.5
|
|
|
50.7
|
|
|
Cash and cash equivalents at end of year
|
$
|
37.4
|
|
|
$
|
37.5
|
|
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
GROUP RESULTS
The following tables summarize group operating results as of and for the three and twelve months ended December 31, 2018
and 2017:
|
Environmental Solutions Group
|
|
|
Three Months Ended December 31,
|
|
Twelve Months Ended December 31,
|
|
($ in millions)
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
Net sales
|
$
|
217.3
|
|
|
$
|
192.0
|
|
|
$
|
25.3
|
|
|
$
|
863.5
|
|
|
$
|
692.6
|
|
|
$
|
170.9
|
|
|
Operating income
|
26.9
|
|
|
19.9
|
|
|
7.0
|
|
|
113.0
|
|
|
72.4
|
|
|
40.6
|
|
|
Adjusted EBITDA
|
35.5
|
|
|
28.0
|
|
|
7.5
|
|
|
147.3
|
|
|
103.5
|
|
|
43.8
|
|
|
Operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin
|
12.4
|
%
|
|
10.4
|
%
|
|
2.0
|
%
|
|
13.1
|
%
|
|
10.5
|
%
|
|
2.6
|
%
|
|
Adjusted EBITDA margin
|
16.3
|
%
|
|
14.6
|
%
|
|
1.7
|
%
|
|
17.1
|
%
|
|
14.9
|
%
|
|
2.2
|
%
|
|
Total orders
|
$
|
239.6
|
|
|
$
|
246.8
|
|
|
$
|
(7.2)
|
|
|
$
|
945.8
|
|
|
$
|
806.3
|
|
|
$
|
139.5
|
|
|
Backlog
|
310.3
|
|
|
231.1
|
|
|
79.2
|
|
|
310.3
|
|
|
231.1
|
|
|
79.2
|
|
|
Depreciation and amortization
|
8.5
|
|
|
7.6
|
|
|
0.9
|
|
|
32.6
|
|
|
25.7
|
|
|
6.9
|
|
|
|
|
Safety and Security Systems Group
|
|
|
Three Months Ended December 31,
|
|
Twelve Months Ended December 31,
|
|
($ in millions)
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
Net sales
|
$
|
62.1
|
|
|
$
|
55.6
|
|
|
$
|
6.5
|
|
|
$
|
226.0
|
|
|
$
|
205.9
|
|
|
$
|
20.1
|
|
|
Operating income
|
11.8
|
|
|
8.9
|
|
|
2.9
|
|
|
34.1
|
|
|
27.0
|
|
|
7.1
|
|
|
Adjusted EBITDA
|
12.7
|
|
|
10.0
|
|
|
2.7
|
|
|
37.8
|
|
|
31.7
|
|
|
6.1
|
|
|
Operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin
|
19.0
|
%
|
|
16.0
|
%
|
|
3.0
|
%
|
|
15.1
|
%
|
|
13.1
|
%
|
|
2.0
|
%
|
|
Adjusted EBITDA margin
|
20.5
|
%
|
|
18.0
|
%
|
|
2.5
|
%
|
|
16.7
|
%
|
|
15.4
|
%
|
|
1.3
|
%
|
|
Total orders
|
$
|
58.2
|
|
|
$
|
55.9
|
|
|
$
|
2.3
|
|
|
$
|
227.4
|
|
|
$
|
211.7
|
|
|
$
|
15.7
|
|
|
Backlog
|
27.4
|
|
|
26.4
|
|
|
1.0
|
|
|
27.4
|
|
|
26.4
|
|
|
1.0
|
|
|
Depreciation and amortization
|
0.9
|
|
|
1.0
|
|
|
(0.1)
|
|
|
3.7
|
|
|
4.1
|
|
|
(0.4)
|
|
Corporate Expenses
Corporate operating expenses were $5.3 million and $7.7 million
for the three months ended December 31, 2018 and 2017, respectively. The decrease was primarily driven by reductions in
hearing loss litigation and post-employment expenses, partially offset by increased stock compensation expense.
Corporate operating expenses were $25.6 million and $25.8 million
for the years ended December 31, 2018 and 2017, respectively.
SEC REGULATION G NON-GAAP RECONCILIATION
The financial measures presented below are unaudited and are not in accordance with U.S. generally accepted accounting
principles ("GAAP"). The non-GAAP financial information presented herein should be considered supplemental to, and not a
substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company has provided this supplemental
information to investors, analysts, and other interested parties to enable them to perform additional analyses of operating
results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the reconciliations below,
and to provide an additional measure of performance which management considers in operating the business.
Adjusted income and earnings per share from continuing operations ("EPS"):
The Company believes that modifying its 2018 and 2017 income and diluted EPS provides additional measures which are
representative of the Company's underlying performance and improve the comparability of results between reporting periods. During
the three and twelve months ended December 31, 2018 and 2017, adjustments were made to reported GAAP income and diluted EPS
from continuing operations to exclude the impact of restructuring activity, executive severance costs, acquisition and
integration-related expenses, purchase accounting effects, pension settlement charges and hearing loss settlement charges, where
applicable. In addition, during the three and twelve months ended December 31, 2018 and 2017, adjustments were made to
reported GAAP income tax expense to exclude certain special tax items.
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
(in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Income from continuing operations
|
$
|
32.2
|
|
|
$
|
29.3
|
|
|
$
|
93.7
|
|
|
$
|
60.5
|
|
|
Add:
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense
|
(1.0)
|
|
|
(16.9)
|
|
|
17.9
|
|
|
0.5
|
|
|
Income before income taxes
|
31.2
|
|
|
12.4
|
|
|
111.6
|
|
|
61.0
|
|
|
Add:
|
|
|
|
|
|
|
|
|
Restructuring
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.6
|
|
|
Executive severance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|
Acquisition and integration-related expenses
|
0.2
|
|
|
0.5
|
|
|
1.5
|
|
|
2.7
|
|
|
Purchase accounting effects (a)
|
0.1
|
|
|
0.5
|
|
|
1.2
|
|
|
4.8
|
|
|
Pension settlement charges
|
—
|
|
|
6.1
|
|
|
—
|
|
|
6.1
|
|
|
Hearing loss settlement charges
|
—
|
|
|
1.5
|
|
|
0.4
|
|
|
1.5
|
|
|
Adjusted income before income taxes
|
$
|
31.5
|
|
|
$
|
21.1
|
|
|
$
|
114.7
|
|
|
$
|
77.4
|
|
|
Adjusted income tax expense (b) (c)
|
(7.7)
|
|
|
(6.7)
|
|
|
(27.2)
|
|
|
(26.3)
|
|
|
Adjusted income from continuing operations
|
$
|
23.8
|
|
|
$
|
14.4
|
|
|
$
|
87.5
|
|
|
$
|
51.1
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
(dollars per diluted share)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
EPS, as reported
|
$
|
0.53
|
|
|
$
|
0.48
|
|
|
$
|
1.53
|
|
|
$
|
1.00
|
|
|
Add:
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
(0.02)
|
|
|
(0.28)
|
|
|
0.29
|
|
|
0.01
|
|
|
Income before income taxes
|
0.51
|
|
|
0.20
|
|
|
1.82
|
|
|
1.01
|
|
|
Add:
|
|
|
|
|
|
|
|
|
Restructuring
|
—
|
|
|
0.00
|
|
|
—
|
|
|
0.01
|
|
|
Executive severance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
Acquisition and integration-related expenses
|
0.00
|
|
|
0.01
|
|
|
0.02
|
|
|
0.04
|
|
|
Purchase accounting effects (a)
|
0.00
|
|
|
0.01
|
|
|
0.02
|
|
|
0.08
|
|
|
Pension settlement charges
|
—
|
|
|
0.10
|
|
|
—
|
|
|
0.10
|
|
|
Hearing loss settlement charges
|
—
|
|
|
0.03
|
|
|
0.01
|
|
|
0.03
|
|
|
Adjusted income before income taxes
|
$
|
0.51
|
|
|
$
|
0.35
|
|
|
$
|
1.87
|
|
|
$
|
1.28
|
|
|
Adjusted income tax expense (b) (c)
|
(0.12)
|
|
|
(0.11)
|
|
|
(0.44)
|
|
|
(0.43)
|
|
|
Adjusted EPS
|
$
|
0.39
|
|
|
$
|
0.24
|
|
|
$
|
1.43
|
|
|
$
|
0.85
|
|
|
|
|
(a)
|
Purchase accounting effects relate to adjustments to exclude the step-up in
the valuation of equipment acquired in connection with recent acquisitions that was sold subsequent to the acquisition
dates in the three and twelve months ended December 31, 2018 and 2017, as well as to exclude the depreciation of the
step-up in the valuation of the rental fleet acquired in the JJE transaction.
|
|
(b)
|
Adjusted income tax expense for the three and twelve months ended
December 31, 2018 excludes an $8.6 million net tax benefit associated with tax planning strategies. Adjusted income
tax expense for the three and twelve months ended December 31, 2018 also excludes the tax effects of acquisition and
integration-related expenses, purchase accounting effects and hearing loss settlement charges, where
applicable.
|
|
(c)
|
Adjusted income tax expense for the three and twelve months ended
December 31, 2017 excludes a $20.0 million net tax benefit, representing the Company's preliminary estimate of the
impact of the 2017 Tax Act, and a $0.8 million benefit from changes in state deferred tax valuation allowance. Adjusted
income tax expense for the twelve months ended December 31, 2017 also excludes $0.6 million of tax expense
associated with a change in the enacted state tax rate in Illinois. Adjusted income tax expense for the three and twelve
months ended December 31, 2017 also excludes the tax effects of restructuring activity, executive severance costs,
acquisition and integration-related expenses, purchase accounting effects, hearing loss settlement charges and pension
settlement charges, where applicable.
|
Adjusted EBITDA:
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 income from continuing operations, interest
expense, pension settlement charges, hearing loss settlement charges, acquisition and integration-related expenses, restructuring
activity, executive severance costs, purchase accounting effects, other expense/income, income tax expense (benefit), and
depreciation and amortization expense. Consolidated adjusted EBITDA margin is a non-GAAP measure that represents the total of
income from continuing operations, interest expense, pension settlement charges, hearing loss settlement charges, acquisition and
integration-related expenses, restructuring activity, executive severance costs, purchase accounting effects, other
expense/income, income tax expense (benefit), and depreciation and amortization expense 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, restructuring activity, purchase accounting effects 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, restructuring activity, purchase accounting effects and depreciation and
amortization expense, as applicable, divided by 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 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 income
from continuing operations to consolidated adjusted EBITDA for the three and twelve months ended December 31, 2018 and
2017:
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Income from continuing operations
|
32.2
|
|
|
29.3
|
|
|
93.7
|
|
|
60.5
|
|
|
Add:
|
|
|
|
|
|
|
|
|
Interest expense
|
2.1
|
|
|
2.7
|
|
|
9.3
|
|
|
7.3
|
|
|
Pension settlement charges
|
—
|
|
|
6.1
|
|
|
—
|
|
|
6.1
|
|
|
Hearing loss settlement charges
|
—
|
|
|
1.5
|
|
|
0.4
|
|
|
1.5
|
|
|
Acquisition and integration-related expenses
|
0.2
|
|
|
0.5
|
|
|
1.5
|
|
|
2.7
|
|
|
Restructuring
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.6
|
|
|
Executive severance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|
Purchase accounting effects *
|
—
|
|
|
0.2
|
|
|
0.7
|
|
|
4.4
|
|
|
Other expense (income), net
|
0.1
|
|
|
(0.1)
|
|
|
0.6
|
|
|
(0.8)
|
|
|
Income tax (benefit) expense
|
(1.0)
|
|
|
(16.9)
|
|
|
17.9
|
|
|
0.5
|
|
|
Depreciation and amortization
|
9.4
|
|
|
8.7
|
|
|
36.4
|
|
|
30.0
|
|
|
Consolidated adjusted EBITDA
|
$
|
43.0
|
|
|
$
|
32.1
|
|
|
$
|
160.5
|
|
|
$
|
113.5
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
279.4
|
|
|
$
|
247.6
|
|
|
$
|
1,089.5
|
|
|
$
|
898.5
|
|
|
|
|
|
|
|
|
|
|
Consolidated adjusted EBITDA margin
|
15.4
|
%
|
|
13.0
|
%
|
|
14.7
|
%
|
|
12.6
|
%
|
|
|
* Excludes purchase accounting expense effects included within
depreciation and amortization of $0.1 million and $0.3 million for the three months ended December 31, 2018 and 2017, and
$0.5 million and $0.4 million for the twelve months ended December 31, 2018 and 2017, respectively
|
Environmental Solutions Group
The following table summarizes the Environmental Solutions Group's adjusted EBITDA and adjusted EBITDA margin and reconciles
operating income to adjusted EBITDA for the three and twelve months ended December 31, 2018 and 2017:
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Operating income
|
$
|
26.9
|
|
|
$
|
19.9
|
|
|
$
|
113.0
|
|
|
$
|
72.4
|
|
|
Add:
|
|
|
|
|
|
|
|
|
Acquisition and integration-related expenses
|
0.1
|
|
|
0.3
|
|
|
1.0
|
|
|
1.0
|
|
|
Purchase accounting effects *
|
—
|
|
|
0.2
|
|
|
0.7
|
|
|
4.4
|
|
|
Depreciation and amortization
|
8.5
|
|
|
7.6
|
|
|
32.6
|
|
|
25.7
|
|
|
Adjusted EBITDA
|
$
|
35.5
|
|
|
$
|
28.0
|
|
|
$
|
147.3
|
|
|
$
|
103.5
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
217.3
|
|
|
$
|
192.0
|
|
|
$
|
863.5
|
|
|
$
|
692.6
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
|
16.3
|
%
|
|
14.6
|
%
|
|
17.1
|
%
|
|
14.9
|
%
|
|
|
* Excludes purchase accounting expense effects included within
depreciation and amortization of $0.1 million and $0.3 million for the three months ended December 31, 2018 and 2017, and
$0.5 million and $0.4 million for the twelve months ended December 31, 2018 and 2017, respectively
|
Safety and Security Systems Group
The following table summarizes the Safety and Security Systems Group's adjusted EBITDA and adjusted EBITDA margin and
reconciles operating income to adjusted EBITDA for the three and twelve months ended December 31, 2018 and 2017:
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
($ in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Operating income
|
$
|
11.8
|
|
|
$
|
8.9
|
|
|
$
|
34.1
|
|
|
$
|
27.0
|
|
|
Add:
|
|
|
|
|
|
|
|
|
Restructuring
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.6
|
|
|
Depreciation and amortization
|
0.9
|
|
|
1.0
|
|
|
3.7
|
|
|
4.1
|
|
|
Adjusted EBITDA
|
$
|
12.7
|
|
|
$
|
10.0
|
|
|
$
|
37.8
|
|
|
$
|
31.7
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
62.1
|
|
|
$
|
55.6
|
|
|
$
|
226.0
|
|
|
$
|
205.9
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA margin
|
20.5
|
%
|
|
18.0
|
%
|
|
16.7
|
%
|
|
15.4
|
%
|
Lease Accounting Change
Effective January 1, 2019, the Company will adopt the new lease accounting standard, which will
result in the recognition of right-of-use assets and lease liabilities on the Company's Consolidated Balance Sheet and will
result in a change to the Company's recognition of the deferred gain associated with historical sale lease-back
transactions. The deferred gain, which initially totaled $29.0 million, has been recognized
through the Company's Consolidated Statement of Operations on a straight-line basis over the 15-year life of the respective
leases. As a result, approximately $1.9 million of the deferred gain has been recognized each year
since 2008, of which approximately $1.1 million and $0.8 million has
been recognized within the Environmental Solutions Group and Safety and Security Systems Group, respectively. Effective in 2019,
the Company will no longer recognize any portion of the gain through the Consolidated Statement of Operations, and will recognize
the remaining deferred gain balance, net of the related deferred tax asset, as a cumulative effect adjustment to opening retained
earnings.
To facilitate comparisons with prior periods, when reporting our interim and annual non-GAAP results in 2019, we will be
adjusting our previously issued interim and annual non-GAAP results for 2018 to exclude the recognition of this deferred gain.
The impact of this adjustment on previously reported adjusted income from continuing operations and adjusted EPS for interim and
annual periods in 2018 is reflected in the following tables:
|
Three Months Ended
|
|
Year Ended
|
|
(in millions)
|
March 31,
2018
|
|
June 30,
2018
|
|
September,
2018
|
|
December 31,
2018
|
|
December 31,
2018
|
|
Income from continuing operations
|
$
|
12.9
|
|
|
$
|
26.9
|
|
|
$
|
21.7
|
|
|
$
|
32.2
|
|
|
$
|
93.7
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
4.1
|
|
|
8.3
|
|
|
6.5
|
|
|
(1.0)
|
|
|
17.9
|
|
|
Income before income taxes
|
17.0
|
|
|
35.2
|
|
|
28.2
|
|
|
31.2
|
|
|
111.6
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
Acquisition and integration-related expenses
|
0.5
|
|
|
0.4
|
|
|
0.4
|
|
|
0.2
|
|
|
1.5
|
|
|
Purchase accounting effects (a)
|
0.6
|
|
|
0.4
|
|
|
0.1
|
|
|
0.1
|
|
|
1.2
|
|
|
Hearing loss settlement charges
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
Adjusted income before income taxes
|
$
|
18.5
|
|
|
$
|
36.0
|
|
|
$
|
28.7
|
|
|
$
|
31.5
|
|
|
$
|
114.7
|
|
|
Adjusted income tax expense (b)
|
(4.5)
|
|
|
(8.5)
|
|
|
(6.6)
|
|
|
(7.7)
|
|
|
(27.2)
|
|
|
Adjusted income from continuing operations
|
$
|
14.0
|
|
|
$
|
27.5
|
|
|
$
|
22.1
|
|
|
$
|
23.8
|
|
|
$
|
87.5
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Deferred gain recognition, net of income tax expense of $0.1, $0.1, $0.1,
$0.1, and $0.4, respectively
|
(0.4)
|
|
|
(0.4)
|
|
|
(0.4)
|
|
|
(0.4)
|
|
|
(1.5)
|
|
|
Adjusted income from continuing operations, as revised
|
$
|
13.6
|
|
|
$
|
27.1
|
|
|
$
|
21.7
|
|
|
$
|
23.4
|
|
|
$
|
86.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
(dollars per diluted share)
|
March 31,
2018
|
|
June 30,
2018
|
|
September,
2018
|
|
December 31,
2018
|
|
December 31,
2018
|
|
EPS, as reported
|
$
|
0.21
|
|
|
$
|
0.44
|
|
|
$
|
0.36
|
|
|
$
|
0.53
|
|
|
$
|
1.53
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
0.07
|
|
|
0.14
|
|
|
0.10
|
|
|
(0.02)
|
|
|
0.29
|
|
|
Income before income taxes
|
0.28
|
|
|
0.58
|
|
|
0.46
|
|
|
0.51
|
|
|
1.82
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
Acquisition and integration-related expenses
|
0.01
|
|
|
0.01
|
|
|
0.01
|
|
|
0.00
|
|
|
0.02
|
|
|
Purchase accounting effects (a)
|
0.01
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
0.02
|
|
|
Hearing loss settlement charges
|
0.01
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
Adjusted income before income taxes
|
$
|
0.31
|
|
|
$
|
0.59
|
|
|
$
|
0.47
|
|
|
$
|
0.51
|
|
|
$
|
1.87
|
|
|
Adjusted income tax expense (b)
|
(0.08)
|
|
|
(0.14)
|
|
|
(0.11)
|
|
|
(0.12)
|
|
|
(0.44)
|
|
|
Adjusted EPS
|
$
|
0.23
|
|
|
$
|
0.45
|
|
|
$
|
0.36
|
|
|
$
|
0.39
|
|
|
$
|
1.43
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
Deferred gain recognition, net of income tax expense
|
0.00
|
|
|
(0.01)
|
|
|
0.00
|
|
|
(0.01)
|
|
|
(0.02)
|
|
|
Adjusted EPS, as revised
|
$
|
0.23
|
|
|
$
|
0.44
|
|
|
$
|
0.36
|
|
|
$
|
0.38
|
|
|
$
|
1.41
|
|
|
|
|
(a)
|
Purchase accounting effects relate to adjustments to exclude the step-up in
the valuation of equipment acquired in connection with recent acquisitions that was sold subsequent to the acquisition
dates in the interim and annual periods within the year ended December 31, 2018, as well as to exclude the
depreciation of the step-up in the valuation of the rental fleet acquired in the JJE transaction.
|
|
(b)
|
Adjusted income tax expense for the three and twelve months ended
December 31, 2018 excludes a $8.6 million net tax benefit associated with tax planning strategies. Adjusted income
tax expense for the interim and annual periods within the year ended December 31, 2018 also excludes the tax effects
of acquisition and integration-related expenses, purchase accounting effects and hearing loss settlement charges, where
applicable.
|
View original content:http://www.prnewswire.com/news-releases/federal-signal-finishes-record-year-with-fourth-quarter-operating-income-up-58-projects-continued-momentum-in-2019-300803785.html
SOURCE Federal Signal Corporation