Federal Signal Corporation Announces First Quarter Results
15 April 1998
Federal Signal Corporation Announces First Quarter Results
OAK BROOK, Ill., April 15 -- Federal Signal Corporation
achieved record first quarter orders and sales. Orders increased
20% and sales increased 3% over last year's first quarter. First quarter net
income of $10.8 million declined from the $13.6 million reported in the first
quarter of 1997 largely as a result of truck-chassis supply constraints in the
Vehicle Group and lower Sign sales. Diluted earnings per share of $.24 also
declined from last year's $.30. Sales increased to $231.2 million from last
year's first quarter of $224.5 million. Backlog increased 33% to $336.1
million, up from $253.5 million a year ago and up 9% from December 31, 1997,
with most of the increase in the Vehicle Group.
All four groups enjoyed increases in new orders over last year's first
quarter. The Safety Products and Tool groups reported increased sales and
earnings over last year's first quarter while the Vehicle and Sign groups'
sales and earnings were lower.
Safety Products Group orders increased 29%, led by a sharp increase in
non-U.S. orders, as all operating units had good markets and achieved
increases over the prior year. Sales increased 22% and operating income
increased 56%. The strong sales growth was the principal reason for the
group's significantly improved operating margin. Improved product mix in the
group's signaling businesses and excellent results achieved by the group's
recently acquired U.S.-based hazardous area lighting unit also contributed
significantly to the group's sales and earnings growth, as well as to margin
expansion.
Vehicle Group orders increased 24% mainly as a result of strength in the
fire rescue business in the U.S., the acquisition of Saulsbury Fire early in
the quarter and good order growth in all environmental products lines except
European sweepers. Vehicle Group sales declined 4% primarily because truck-
chassis supply shortages continued to constrain deliveries, particularly in
U.S. fire rescue products and municipal sewer cleaners. Operating income
declined 42% for the Vehicle Group as the continuing inability of our
suppliers to provide us with sufficient truck-chassis caused production
inefficiencies in addition to the lower sales volume. A temporary unfavorable
sales mix also reduced margins in the fire rescue business. The truck-chassis
shortage is an industry-wide situation; the current industry outlook, based on
input from our suppliers, is that the supply shortage will alleviate somewhat
in the second half of 1998.
Tool Group orders rose 7% and sales increased 6% over the prior year. New
marketing and sales initiatives helped drive particularly strong orders in the
Tool Group's cutting tool segment. Operating income increased 1% as planned
first quarter marketplace spending in the cutting tool segment, as well as a
short-term mix change in the precision punch segment, temporarily reduced
margins.
The Sign Group's new orders were up 7% in the first quarter. Sales were
down 11% on weak orders and backlog from last year's fourth quarter. The
group reported an operating loss of $.8 million compared to a profit of $.5
million in last year's first quarter. About one-third of the first quarter
loss was caused by one-time costs related to closing the group's Las Vegas
manufacturing plant. The plant closing will lower future manufacturing costs
since improved throughput at Sign's other plants will allow those plants to
handle the volume formerly manufactured in Las Vegas.
Commenting on the company's outlook, Joseph J. Ross, chairman, president
and chief executive officer, stated, "As we anticipated entering the year, our
overall markets are very healthy, as indicated by our strong first quarter
orders in all four groups. Our Sign Group's first quarter order performance,
coupled with a strong increase in the amount of proposals generated in the
quarter, make us cautiously optimistic that order recovery may be on the way
for this group. Based on the industry expectation that truck-chassis
deliveries from suppliers to our Vehicle Group will improve in the second half
of the year, we continue to anticipate improving earnings performances as the
year progresses. While there is no question that our total year sales and
earnings performance will be negatively impacted by the truck-chassis
situation, we still expect a year of overall sales and earnings growth for the
company."
At Federal Signal Corporation's Annual Meeting of Shareholders held on
April 15, 1998, shareholders reelected Thomas N. McGowen, Jr. and Richard R.
Thomas to the board of directors for three-year terms.
Also today, the board of directors of Federal Signal Corporation declared
the regular quarterly cash dividend of 17.75 cents on its common stock,
payable June 2, 1998 to holders of record at the close of business on May 13,
1998. This represents the 201st consecutive quarterly cash dividend paid to
common shareholders of the company.
Federal Signal Corporation is a global manufacturer of leading niche
products in four operating segments: safety and signaling products, custom
signage, consumable industrial tooling and emergency and environmental
vehicles. Based in Oak Brook, Illinois, the company's shares are traded on
the New York Stock Exchange under the symbol FSS.
FEDERAL SIGNAL CORPORATION (NYSE)
Consolidated Financial Data
For the First Quarter (Unaudited) 1998 and 1997
(in thousands except per share data)
Percent
1998 1997 change
Quarter March 31:
Revenues $231,230 $224,485 3%
Net income 10,846 13,616 (20%)
Share earns:
Net income - diluted 0.24 0.30 (20%)
Average common shares
outstanding 45,959 45,827
Group results:
Revenues
Safety Products $60,626 $49,639 22%
Sign 12,875 14,404 (11%)
Tool 36,689 34,697 6%
Vehicle 121,040 125,745 (4%)
Total group revenues $231,230 $224,485 3%
Operating income
Safety Products $8,884 $5,685 56%
Sign (831) 465 NM
Tool 7,500 7,421 1%
Vehicle 6,787 11,713 (42%)
Total group operating income $22,340 $25,284 (12%)
Sales $231,230 $224,485 3%
Cost of sales (160,180) (154,061)
Operating expenses (including
corporate expenses of $2,073
and $1,484, respectively) (50,783) (46,624)
Operating income 20,267 23,800 (15%)
Interest expense (4,467) (3,937)
Other income 161 526
Income before income taxes 15,961 20,389
Income taxes (5,115) (6,773)
Net income $10,846 $13,616 (20%)
Gross margin on sales 30.7% 31.4%
Operating margin on sales 8.8% 10.6%
Net cash provided by operations:
Net income $10,846 $13,616
Depreciation 4,039 3,629
Amortization 1,684 1,376
Working capital changes and other 3,157 (11,080)
Net cash provided by operations 19,726 7,541
Capital expenditures 5,484 5,240
Comprehensive income 9,004 9,534
Financial position at March 31:
Manufacturing current
assets $285,870 $270,165
Manufacturing current
liabilities, excluding
short-term debt 145,018 141,987
Manufacturing debt 146,949 112,932
Financial services debt 145,605 152,033
Shareholders' equity 301,371 279,066
Debt to capitalization ratio:
Manufacturing 33% 29%
Financial services 87% 87%
SOURCE Federal Signal Corporation