Federal Signal Reports 13 Percent Revenue Growth, $0.26 Continuing EPS

Federal Signal Corporation (FSS) reported results for the third quarter ended Sept. 30, 2013. Consolidated net sales were $209.3 million for the quarter, up 13% versus the same quarter a year ago. Income from continuing operations was $16.8 million for the quarter, equal to $0.26 per diluted share.

The company also reports adjusted results to facilitate comparisons of performance. Adjusted net income from continuing operations for the quarter was $16.6 million, equal to $0.26 per diluted share, up 163% compared to $6.3 million, or $0.10 per diluted share, in the same quarter a year ago.

“This was another quarter in which we successfully executed our business strategy, with both our Environmental Solutions Group and our Fire Rescue Group continuing to deliver strong results,” said Dennis J. Martin, president and CEO. “Our Safety and Security Systems Group recovered from problems experienced during its ERP launch in the second quarter of this year, and corporate expenses were low. On a consolidated basis, we experienced double-digit sales growth versus last year, and our operating margin expanded to 9.0%. In addition, interest expense was down 71%. These positive factors all contributed to our 163% increase in adjusted net income versus last year.”

Net sales were $209.3 million for the quarter, up 13% compared to the third quarter of 2012. Environmental Solutions Group sales were up 11% on higher vacuum truck and municipal sewer cleaner shipments as a result of expanded production capacity. Fire Rescue Group sales were up 51%, driven by improved sales of fire-lift products, while Safety and Security Systems Group sales were flat compared to the same period of the prior year.

Consolidated operating income was $18.8 million, up 52% compared to the third quarter of 2012. Consolidated operating margin improved to 9.0%, compared to 6.7% last year. Operating margin was up for both the Environmental Solutions Group, at 10.7%, and the Fire Rescue Group, at 8.5%, benefiting primarily from leverage on higher sales volumes. The Safety and Security Systems Group’s operating margin of 12.2% was 1.3% lower than in the prior year period as a result of unfavorable product mix and additional costs associated with its ERP implementation. However, its operating margin was up significantly compared to 6.3% in the second quarter of 2013.

The company reported orders of $197.1 million, up 5% compared to the year-ago quarter. Backlog was $286.5 million, down 12% versus an extended backlog in the prior-year quarter.

“We are comfortable with orders and backlog during the quarter,” Martin continued. “Strong orders matched strong sales in the Environmental Systems Group, and its backlog is at a healthy level. We had worked on deliberate reductions in backlog during the second quarter. On the other hand, the Fire Rescue Group experienced some softness in orders during the quarter. The Safety and Security Systems Group experiences less advance ordering, and its orders and backlog were steady. It continues to work a large funnel of long-range systems opportunities.”