Federal Signal Corporation Announces 12%
Increase in Full Year EPS From Continuing Operations Before
Restructuring Charges; Continuing Operations EPS Growth in
the Range of 14% to 21% Expected in 2001
- Full Year 2000 Highlights -
-- 12% increase in full year earnings per share from continuing
operations before restructuring charges, meeting the current consensus
of analysts' estimates
-- 19% increase in full year total operating income before restructuring
charges, 13% increase in full year sales
-- Fire Rescue Group earnings more than doubled on a 26% increase in
sales
-- All groups reported increases in sales and earnings before
restructuring charges
-- Record full year orders, sales and backlog
- Outlook for 2001 -
-- Expect EPS from continuing operations of $1.50 to $1.60, up 14% to 21%
over 2000 EPS excluding restructuring charges
-- Continued profitability improvement in Fire Rescue
-- Good municipal markets, high beginning backlogs for Fire Rescue and
Environmental Products
OAK BROOK, Ill., Jan. 25 Federal Signal Corporation
announced record orders, sales and backlog for the fourth quarter and full
year ended December 31, 2000. Fourth quarter net sales increased 15% to
$301 million and new orders increased 13% to $304 million. Fourth quarter
diluted earnings per share from continuing operations before restructuring
charges were $.32 compared to $.35 in 1999. Diluted net income per share
including the results of the discontinued Sign operations and $.04 per share
restructuring charges was $.28 compared to $.37 in 1999. Fourth quarter net
income was $12.6 million compared to $17.0 million the prior year. Year-end
backlog increased 5% to a record $361 million.
Net sales for the full year increased 13% to $1,106 million in 2000 and
new orders increased 9% to $1,114 million. Diluted earnings per share from
continuing operations before restructuring charges increased 12% to $1.32 from
$1.18 the prior year. Diluted net income per share including the discontinued
Sign operations and $.05 per share restructuring charges was $1.26, up
slightly from $1.25 in 1999. Net income was $57.5 million in 2000, even with
the prior year.
Fourth quarter and full year results are reported in conformity with
revenue recognition accounting rules newly required by the SEC (Staff
Accounting Bulletin #101). This accounting change increased fourth quarter
sales approximately 9% and fourth quarter earnings per share by approximately
$.04. The effect on full year sales was slightly positive and on full year
net income was minor. Supplemental information on the accounting change
follows the consolidated financial data tables.
FOURTH QUARTER
Fourth quarter Environmental Products Group earnings before restructuring
charges were down 9% on flat sales. New orders were up 13%.
-- Municipal orders and markets remained strong. The decline in group
margin before restructuring charges was driven by weak industrial unit
and contractor sweeper unit performance. The strong order performance
came too late in the quarter to positively affect the delivery rate.
The group's vacuum truck plant consolidation was also substantially
completed.
Fire Rescue Group earnings more than doubled on a 43% increase in sales.
New orders increased 27%.
-- Group sales and income results were favorably affected by the
accounting change newly required by the SEC; on the prior accounting
basis, sales were up approximately 15% and income was up over 60%.
Certain new orders which had been delayed from the third quarter
helped raise fourth quarter orders sharply in broadly strong municipal
markets. Continuing operating performance improvement in North
America substantially improved the group's throughput, productivity
and operating margin.
Fourth quarter Safety Products Group income fell 22% on a 7% sales
decline. New orders fell 8%.
-- Safety Products new orders and sales were broadly lower, with very
weak December results; municipal markets are good but some municipal
orders moved into 2001. Margins were down mostly because of the sales
decline.
Tool Group income before restructuring charges fell 25% on an 11% sales
increase. New orders rose 8%. Results benefited from the P.C.S.
acquisition, which continued to perform well during the quarter.
-- Without the acquisition, sales declined about 4% mainly as a result of
slower U.S. auto and industrial activity. Margins excluding
restructuring charges declined sharply, caused by lower sales and the
comparison to an exceptionally high margin in 1999 on very strong
sales mix and other positive factors at all units. The superhard
cutting tools plant consolidation was also completed.
FULL YEAR
Full year sales, margin and income growth in 2000 were very strong for the
Fire Rescue Group. Income growth in the other three groups was solid
notwithstanding the fact that poor fourth quarter results in weak markets
negatively affected full year results.
For the full year, the Environmental Products Group increased income
before restructuring charges 6% on a 3% sales gain. New orders rose 12%.
-- The group's sales growth was driven by broadly good performance in
sweepers, waterblasters and municipal vacuum trucks. Industrial
vacuum truck sales were quite a bit lower. Group operating margin
before restructuring charges improved somewhat, augmented by good
performance by the European unit.
Fire Rescue Group earnings more than doubled on a 26% increase in sales.
New orders were up 10%.
-- Florida-based manufacturing operations improved substantially over the
year, raising productivity, throughput and margins. Sales growth at
the Finland-based operation was modest and income declined as this
unit incurred costs related to the rollout of several important new
products. New orders for the group were strong in good North American
municipal markets.
Safety Products Group earnings rose 6% on a 2% sales increase. New orders
decreased 3%.
-- Continued weakness in oilfield-related markets caused orders to be
weak and sales growth modest. Municipal markets were good all year,
which benefited margin comparisons to 1999.
Tool Group income before restructuring charges rose 9% on a 23% sales
gain. New orders rose 24%. Full year performance strongly benefited from
two acquisitions, one in mid-1999 and one in the first quarter of 2000.
-- Tool Group performance suffered as a result of weakened U.S. auto and
broad industrial markets in the second half of the year, especially
the fourth quarter. Excluding the two acquisitions, sales were up
modestly.
Earnings per share from discontinued operations declined from
$.07 per share to $.02 per share as U.S. sign markets weakened substantially
in 2000.
OUTLOOK
Commenting on the company's outlook, Joseph J. Ross, chairman and chief
executive officer, stated, "Our large municipal markets look strong as we
enter 2001, but U.S. industrial market weakness is expected to continue into
the second half of 2001. Overall, we still expect a good growth year with
earnings from continuing operations before restructuring charges increasing in
the 14% to 21% range. The Fire Rescue Group in particular has a high backlog,
good markets and steadily improving operating performance. This group will be
the key earnings growth driver in 2001. We expect first quarter earnings per
share in the $.30 to $.32 range, with performance in the range dependent on
U.S. non-municipal market strength.
"The economic slowdown of the last few months, specifically within our
broad-based U.S. industrial business, has continued into this year. As a
result, we anticipate full year earnings per share in the $1.50 to $1.60
range, the lower end of our previous broad target range. Our performance
within this range will be influenced by the strength of the industrial segment
of the U.S. economy in the second half of 2001. Cash flow for the full year
should show greater growth than earnings from continuing operations as we
continue to improve the ratio of working capital to sales.
"I am also pleased to announce that Andrew Graves has been elected
president and chief operating officer of the company. As our business grows
and becomes more complex, it is timely to add strength to our corporate
office. Andy comes to us from CNH Global N.V., the successor company to Case
Corporation and New Holland Corporation, and brings with him a great deal of
operating experience, much of it focused outside of the U.S. Most recently,
Andy was president of CNH Capital Corporation, managing a global portfolio in
excess of $12 billion in assets providing loan and leasing services to CNH
customers. Prior to his role with CNH Capital Corporation, Andy served as
Vice President, Latin America for Case Corporation."
Federal Signal will host its fourth quarter conference call today,
Thursday, January 25, 2001 at 3:30 p.m. Eastern Time to highlight results of
the fourth quarter as well as full year 2000, and discuss the company's
outlook. The call will last approximately one hour. You may listen to the
conference call over the Internet through Federal's website at
http://www.federalsignal.com . To listen to the call live, we recommend you
go to the website at least 15 minutes in advance to register and to download
and install (if necessary) the required free audio software. If you are
unable to listen to the live broadcast, a replay accessible from our website
will be available shortly after the call concludes through 5:00 p.m. Eastern
Time, Friday, February 2, 2001.
Federal Signal Corporation is a global manufacturer of leading niche
products in four operating groups: environmental vehicles and related
products, fire rescue vehicles, safety and signaling products, and consumable
industrial tooling. Based in Oak Brook, Illinois, the company's shares are
traded on the New York Stock Exchange under the symbol FSS.
This release contains various forward-looking statements. 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: economic conditions in various regions, product and
price competition, raw material prices, foreign currency exchange rate
changes, technology changes, patent issues, litigation results, legal and
regulatory developments and other risks and uncertainties described in
releases filed with the Securities and Exchange Commission.
FEDERAL SIGNAL CORPORATION (NYSE)
Consolidated Financial Data
For the Fourth Quarter and Full Year 2000 and 1999
(in thousands except per share data)
Percent
2000 1999 change
Quarter December 31:
Sales $300,544 $261,314 15%
Income:
Income from continuing operations,
before restructuring charges 14,745 16,094 -8%
Restructuring charges, net of tax (1,756)
Income from continuing operations 12,989 16,094 -19%
Discontinued operations, net of tax (360) 915
Net income 12,629 17,009 -26%
Share earns (diluted):
Income from continuing operations,
before restructuring charges .32 .35 -9%
Restructuring charges, net of tax (.04)
Income from continuing operations * .29 .35 -17%
Discontinued operations, net of tax (.01) .02
Net income .28 .37 -24%
* amounts may not add due to
rounding
Average common shares outstanding 45,506 46,256
Sales $300,544 $261,314 15%
Cost of sales (215,327) (180,596)
Operating expenses before
restructuring charges (55,124) (50,976)
Operating income before
restructuring charges 30,093 29,742 1%
Restructuring charges (2,832)
Operating income 27,261 29,742 -8%
Interest expense (8,222) (6,211)
Other income (expense) 94 (92)
Income before income taxes 19,133 23,439
Income taxes (6,144) (7,345)
Income from continuing operations 12,989 16,094
Discontinued operations, net of tax (360) 915
Net income $12,629 $17,009 -26%
Gross margin on sales 28.4% 30.9%
Operating margin on sales 9.1% 11.4%
Comprehensive income $15,398 $13,529
Percent
2000 1999 change
12 months:
Sales $1,106,127 $977,209 13%
Income:
Income from continuing operations,
before restructuring charges 59,976 54,383
Restructuring charges, net of tax (2,321)
Income from continuing operations 57,655 54,383 6%
Discontinued operations, net of tax 726 3,154
Cumulative effect of accounting
change (844)
Net income 57,537 57,537
Share earns (diluted):
Income from continuing operations,
before restructuring charges 1.32 1.18 12%
Restructuring charges, net of tax (.05)
Income from continuing operations 1.27 1.18 8%
Discontinued operations, net of tax .02 .07
Cumulative effect of accounting
change (.02)
Net income * 1.26 1.25 1%
* amounts may not add due to
rounding
Average common shares outstanding 45,521 45,958
Sales $1,106,127 $977,209 13%
Cost of sales (768,783) (676,607)
Operating expenses before
restructuring charges (216,946) (199,250)
Operating income before restructuring
charges 120,398 101,352 19%
Restructuring charges (3,744)
Operating income 116,654 101,352 15%
Interest expense (31,401) (23,339)
Other income (expense) (839) 1,296
Income before income taxes 84,414 79,309
Income taxes (26,759) (24,926)
Income from continuing operations 57,655 54,383
Discontinued operations, net of tax 726 3,154
Cumulative effect of accounting
change (844)
Net income $57,537 $57,537
Gross margin on sales 30.5% 30.8%
Operating margin on sales 10.5% 10.4%
Net cash provided by operations:
Net income $57,537 $57,537
Depreciation* 19,482 17,057
Amortization* 9,575 8,740
Working capital changes and other (22,204) (25,678)
Net cash provided by operations 64,390 57,656
Capital expenditures* 22,288 23,404
Comprehensive income 52,680 50,947
* continuing operations only in
both 2000 and 1999
Percent
2000 1999 change
Group results:
Quarter December 31:
Sales
Environmental Products $59,376 $59,126 0%
Fire Rescue 130,361 91,210 43%
Safety Products 63,840 68,479 -7%
Tool 46,967 42,499 11%
Total sales $300,544 $261,314 15%
Operating income (before
restructuring charges)
Environmental Products $3,981 $4,357 -9%
Fire Rescue 11,366 4,800 137%
Safety Products 10,061 12,822 -22%
Tool 7,381 9,782 -25%
Total group operating income $32,789 $31,761 3%
Operating income (including
restructuring charges)
Environmental Products $1,855* $4,357 -57%
Fire Rescue 11,366 4,800 137%
Safety Products 10,061 12,822 -22%
Tool 6,675* 9,782 -32%
Total group operating income $29,957 $31,761 -6%
12 months:
Sales
Environmental Products $255,269 $247,097 3%
Fire Rescue 389,311 310,008 26%
Safety Products 267,062 261,940 2%
Tool 194,485 158,164 23%
Total sales $1,106,127 $977,209 13%
Operating income (before
restructuring charges)
Environmental Products $25,874 $24,454 6%
Fire Rescue 24,940 10,900 129%
Safety Products 43,721 41,384 6%
Tool 36,269 33,303 9%
Total group operating income $130,804 $110,041 19%
Operating income (including
restructuring charges)
Environmental Products $23,101* $24,454 -6%
Fire Rescue 24,940 10,900 129%
Safety Products 43,721 41,384 6%
Tool 35,298* 33,303 6%
Total group operating income $127,060 $110,041 15%
* includes restructuring charges in 2000 of: - Environmental Products:
Quarter - $2,126, 12 months - $2,773; Tool: Quarter - $706,12 months -
$971
December 31, December 31,
2000 1999
Assets
Manufacturing activities:-
Current assets:
Cash and cash equivalents $13,556 $8,764
Trade accounts receivable, net
of allowances for doubtful
accounts 167,964 152,956
Inventories 157,619 159,970
Prepaid expenses 9,797 8,895
Total current assets 348,936 330,585
Properties and equipment 112,596 111,212
Intangible assets, net of
accumulated amortization 274,925 273,844
Other deferred charges and assets 25,873 23,592
Total manufacturing assets 762,330 739,233
Net assets of discontinued
operations, including financial assets 14,558 18,132
Financial services activities - Lease
financing receivables, net of allowances for
doubtful accounts 214,230 191,261
Total assets $991,118 $948,626
Liabilities
Manufacturing activities:-
Current liabilities:
Short-term borrowings $145,813 $99,204
Trade accounts payable 60,878 68,533
Accrued liabilities and income
taxes 82,229 91,262
Total current liabilities 288,920 258,999
Long-term borrowings 125,449 134,410
Deferred income taxes 27,835 28,574
Total manufacturing liabilities 442,204 421,983
Financial services activities -
Borrowings 191,483 172,610
Shareholders' equity 357,431 354,033
Total liabilities and shareholders'
equity $991,118 $948,626
Supplemental data:
Manufacturing current liabilities,
excluding short-term debt $143,107 $159,795
Manufacturing debt 271,262 233,614
Debt-to-capitalization ratio:
Manufacturing 45% 42%
Financial services 87% 87%
Supplemental Information Relative to Accounting Change
The Securities and Exchange Commission issued Staff Accounting Bulletin
#101, Revenue Recognition in Financial Statements, which required Federal
Signal Corporation and many other companies to change the methods used to
record revenue in financial statements. Prior to the required adoption of SAB
#101, Federal Signal Corporation principally recorded revenues at the time of
shipment, which was then in conformity with generally accepted accounting
principles. Under SAB #101 retroactively applied to January 1, 2000, Federal
Signal Corporation records revenues principally at the time of delivery under
the terms of each respective sales agreement. The retroactive application of
the new accounting method requires the restatement of previously-issued
financial statements for each of the first three interim quarters of 2000.
The tables below summarize the restated group and consolidated data for
the first three interim quarters of 2000 in addition to the fourth quarter of
2000 (all amounts in $000's except per share amounts; * indicates restated
quarterly information):
Year
Three-month period ending ending
March 31* June 30* Sept. 30* Dec. 31 Dec. 31
Sales
Environmental Products 62,521 67,741 65,631 59,376 255,269
Fire Rescue 79,282 98,860 80,808 130,361 389,311
Safety Products 69,990 69,294 63,938 63,840 267,062
Tool 48,388 50,930 48,200 46,967 194,485
Total sales 260,181 286,825 258,577 300,544 1,106,127
Operating income (excluding
restructuring charges)
Environmental Products 6,017 8,042 7,834 3,981 25,874
Fire Rescue 4,012 5,545 4,017 11,366 24,940
Safety Products 11,229 11,281 11,150 10,061 43,721
Tool 10,152 10,002 8,734 7,381 36,269
Group operating income 31,410 34,870 31,735 32,789 130,804
Operating income (including
restructuring charges)
Environmental Products 6,017 7,967 7,262 1,855 23,101
Fire Rescue 4,012 5,545 4,017 11,366 24,940
Safety Products 11,229 11,281 11,150 10,061 43,721
Tool 10,152 10,002 8,469 6,675 35,298
Group operating income 31,410 34,795 30,898 29,957 127,060
Year
Three-month period ending ending
March 31* June 30* Sept. 30* Dec. 31 Dec. 31
Sales 260,181 286,825 258,577 300,544 1,106,127
Cost of sales (177,374) (198,039) (178,043) (215,327) (768,783)
Operating expenses (54,155) (56,680) (50,987) (55,124) (216,946)
Operating income before
restructuring charges 28,652 32,106 29,547 30,093 120,398
Restructuring charges (75) (837) (2,832) (3,744)
Operating income 28,652 32,031 28,710 27,261 116,654
Interest expense (6,970) (7,992) (8,217) (8,222) (31,401)
Other income (expense) (1,242) 176 133 94 (839)
Income before income
taxes 20,440 24,215 20,626 19,133 84,414
Income taxes (6,677) (8,017) (5,921) (6,144) (26,759)
Income from continuing
operations 13,763 16,198 14,705 12,989 57,655
Discontinued operations,
net of tax 939 172 (25) (360) 726
Cumulative effect of
change in accounting
method (844) (844)
Net income 13,858 16,370 14,680 12,629 57,537
Average shares
outstanding 45,674 45,436 45,468 45,506 45,521
Earnings per share:
Income from
continuing
operations $.30 $.36 $.32 $.29 $1.27
Discontinued
operations, net of
tax .02 ** ** (.01) .02
Cumulative effect of
change in accounting
method (.02) (.02)
Net income *** $.30 $.36 $.32 $.28 $1.26
Pro-forma earnings per
share-diluted
(before restructuring
charges):
Income from
continuing
operations $.30 $.36 $.33 $.32 $1.32
Discontinued
operations, net of tax .02 ** ** (.01) .02
Cumulative effect of
change in accounting
method (.02) (.02)
Net income *** $.30 $.36 $.33 $.32 $1.31
** fractional amount
*** amounts may not add due to rounding
