Dennis Martin, President & Chief Executive Officer Brian Cooper, - - PowerPoint PPT Presentation

Federal Signal Q2 2015 Earnings Call

July 28, 2015

Dennis Martin, President & Chief Executive Officer Brian Cooper, SVP, Chief Financial Officer Jennifer Sherman, SVP, Chief Operating Officer

Safe Harbor

This presentation 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 presentation 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. This presentation also contains references to certain non-GAAP financial information. Such items are reconciled herein and in our earnings news release provided as of the date of this presentation.

2

• Create disciplined growth
• Investing in businesses we want to grow
• Leverage invested capital/improve manufacturing efficiencies

and costs

• Record quarterly operating margin of 12.7%
• Improvement in each of our groups
• Diversify customer base
• Innovation initiatives enable quicker response to market needs
• Focused on acquisitions
• Appetite to add at least $250 M from acquisitions to our

revenue run-rate over the next 3 years

3

Update on Strategic Initiatives

Q2 Highlights *

• Net sales of $231 M, down 2%
• Excluding foreign currency translation effects, net sales up $4 M, or 2%
• Operating income of $29.2 M, up 22%
• Operating margin of 12.7%, up from 10.2%
• Improved operating margin in each of our groups
• EPS of $0.29, up 7% from $0.27
• Orders of $214 M, down 16%

4

* Comparisons versus Q2 of 2014

5

Group and Corporate Results

$ millions, except %

Q2 2015 Q2 2014 % Change ESG Orders 114.2 $ 152.0 $

• 25%

Sales 146.6 139.2 5% Operating income 29.2 23.1 26%

Operating margin 19.9% 16.6%

SSG Orders 60.4 $ 61.0 $

• 1%

Sales 58.8 61.3

• 4%

Operating income 7.3 7.5

• 3%

Operating margin 12.4% 12.2%

FRG Orders 38.9 $ 40.4 $

• 4%

Sales 25.4 34.1

• 26%

Operating income (loss) 0.0 (0.3) NM

Operating margin 0.0%

• 0.9%

Corporate expenses 7.3 $ 6.4 $ 14% Consolidated Orders 213.5 $ 253.4 $

• 16%

Sales 230.8 234.6

• 2%

Operating income 29.2 23.9 22%

Operating margin 12.7% 10.2%

Income from Continuing Operations

6

$ millions, except % and per share

Q2 2015 Q2 2014 $ Change % Change Net sales 230.8 $ 234.6 $ (3.8) $

• 2%

Gross profit 65.7 58.9 6.8 12% SEG&A expenses 36.1 34.9 1.2 3% Restructuring 0.4 0.1 0.3 NM Operating income 29.2 23.9 5.3 22% Interest expense 0.6 0.9 (0.3)

• 33%

Other expense, net 0.1 0.3 (0.2) NM Income tax expense 10.2 5.7 4.5 79% Income from continuing operations 18.3 17.0 1.3 8% Diluted earnings per share from continuing operations 0.29 $ 0.27 $ 0.02 $ 7% Effective tax rate (1) 35.8% 25.1%

(1) The effective tax rate for the prior-year quarter includes a $1.5 M benefit associated with the release

• f tax reserves

• Q2 Cash flow from continuing operations was $24 M vs. $31 M in

prior-year quarter

• Year-to-date operating cash flow up $4 M, or 16%
• Total debt at 6/30/15 was $49 M
• Down $27 M since 6/30/14
• Net debt of $13 M at 6/30/15
• Debt to adjusted EBITDA declined to 0.4x
• Compared to 0.5x on 12/31/14 and 0.8x a year ago
• Used $3.7 M for dividends, $1.4 M for share repurchases
• Quarterly dividend of $0.06 per share paid in the second quarter of 2015
• Aggregate authorization under share repurchase programs of $75 M

7

Balance Sheet and Cash Flow *

* As of or for the period ending 6/30/2015

• Strong second quarter results
• Another outstanding quarter for ESG, reporting a record 20% operating

margin

• Steady performance overall at SSG, particular strength in global public

safety markets

• FRG second quarter results improved vs. weak prior-year quarter
• Order levels down compared to last year
• Mainly driven by reduction in ESG orders vs. record levels last year
• Prior-year orders included significant fleet orders for street sweepers,

which represented ~$27 M, or 72% of the orders decrease

• Capacity improvements and reduced lead times have also led to fewer

“advance” stocking orders within ESG

• FRG orders include $9 M unfavorable foreign currency translation impact;

up 18% in local currency

• ESG and SSG orders impacted by oil and gas uncertainties and currency

headwinds impacting exports

8

COO Remarks

• Priorities for capital, in descending order, are to fund:
• Organic growth opportunities
• Value-adding acquisitions
• Dividends
• Share repurchases
• Active in evaluating a number of acquisition opportunities
• Maintaining a disciplined approach to attain incremental revenue
• bjective
• Intended debt target of about 2x - 2.5x EBITDA
• Strong balance sheet position and low leverage ratio
• Funded dividends of $3.7 M in second quarter
• Similar dividend recently declared for the third quarter
• Approximately $75 M of remaining authorization for share

repurchases, equates to ~ 8% of market capitalization

9

Growth Initiatives

Full-Year Outlook

10

2014 2015 Adjusted EPS of $0.93

Adjusted for:

• release of valuation allowance
• tax rate changes

Affirming expectation of full-year adjusted EPS within the range from $0.95 to $1.02

Federal Signal Q2 2015 Earnings Call

July 28, 2015

Q&A

Dennis Martin, President & Chief Executive Officer Brian Cooper, SVP, Chief Financial Officer Jennifer Sherman, SVP, Chief Operating Officer