SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6003
FEDERAL SIGNAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1063330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1415 WEST 22ND STREET, OAK BROOK, ILLINOIS 60521
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 954-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
COMMON STOCK, PAR VALUE $1.00 PER SHARE,
WITH PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 1, 1995.
Common stock, $1.00 par value -- $817,151,270
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of March 1, 1995.
Common stock, $1.00 par value -- 45,291,023 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended
December 31, 1994, are incorporated by reference into Parts I and II.
Portions of the proxy statement for the Annual Meeting of Shareholders
to be held on April 19, 1995, are incorporated by reference into Part
III.
PART I
Item 1. Business.
Federal Signal Corporation, founded in 1901, was reincorporated
as a Delaware Corporation in 1969. The company is a manufacturer
and worldwide supplier of safety, signaling and communications
equipment, fire trucks and emergency vehicles, street sweeping,
vacuum loader and catch basin cleaning vehicles, parking control
equipment, custom on-premise signage, cutting tools, precision
punches and related die components.
Products produced and services rendered by Registrant and its
subsidiaries (referred to collectively as "Registrant" herein,
unless context otherwise indicates) are divided into groups
(business segments) as follows: Safety Products (previously known
as Signal), Sign, Tool and Vehicle. This classification of
products and services is based upon Registrant's historical
divisional structure established by management for the purposes of
internal control, marketing and accounting.
Developments, including acquisitions of businesses, considered
significant to the company or individual segments are described
under the following discussions of the applicable groups.
The Financial Review sections, "Consolidated Results of
Operations," "Group Operations" and "Financial Position and Cash
Flow," and Note N - Segment Information contained in the annual
report to shareholders for the year ended December 31, 1994 are
incorporated herein by reference.
Safety Products Group
Safety Products Group (previously known as the Signal Group)
products manufactured by Registrant consist of: (1) a variety of
visual and audible warning and signaling devices used by private
industry, federal, state and local governments, building
contractors, police, fire and medical fleets, utilities and civil
defense; (2) safety containment products for handling and storing
hazardous materials used by a wide variety of industrial and
laboratory customers as well as military agencies and municipal,
state and federal governments; and (3) parking, revenue control,
and access control equipment and systems for parking facilities,
commercial businesses, bridge and pier installation and residential
developments.
The visual and audible warning and signaling devices include
emergency vehicle warning lights, electromechanical and electronic
vehicle sirens and industrial signal lights, sirens, horns, bells
and solid state audible signals, audio/visual emergency warning and
evacuation systems, including weather and nuclear power plant
warning notification systems and fire alarm system panels and
devices.
In May 1994, the Registrant acquired the principal operating
assets and assumed the principal operating liabilities of Justrite
Manufacturing Company for cash. Justrite is an Illinois-based
manufacturer of safety equipment for the storage, transfer, use and
disposal of flammable and hazardous materials.
The safety containment products offered by Justrite include
safety cabinets for flammables and corrosives; safety and dispenser
cans; waste receptacles and disposal cans; spill control pallets
and overpacks; and hazardous material storage buildings, lockers,
pallets and platforms. These products are designed in accordance
with various regulatory codes and standards, and meet agency
approvals such as FM and UL.
Parking, revenue control, and access control equipment and
systems include parking and security gates, card access readers,
ticket issuing devices, coin and token units, fee computers,
various forms of electronic control units and personal
computer-based revenue and access control systems.
Warning and signaling products, which account for the principal
portion of the group's business, are marketed to both industrial
and governmental users. Products are sold to industrial customers
through manufacturers' representatives who sell to approximately
1,400 wholesalers. Products are also sold to governmental
customers through more than 900 active independent distributors as
well as through original equipment manufacturers and direct sales.
International sales are made through the Registrant's independent
foreign distributors or on a direct basis.
Because of the large number of Registrant's products, Registrant
competes with a variety of manufacturers and suppliers and
encounters varying competitive conditions among its different
products and encounters different classes of customers. Because of
the variety of such products and customers, no meaningful estimate
of either the total number of competitors or Registrant's overall
competitive position can be made. Generally, competition is
intense as to all of Registrant's products and, as to most such
products, is based on price, including competitive bidding, on
product reputation and performance, and on product servicing.
Although some competitors in certain product lines are larger than
Registrant, the Registrant believes it is the leading supplier of
particular products.
In May 1992, the Registrant acquired all of the outstanding
shares of Aplicaciones Tecnologicas VAMA S.L. for cash and an
earnout to be based upon future profitability of the company for a
five-year period. VAMA is a leading European manufacturer of
emergency vehicular signaling products located in Barcelona, Spain.
The acquisition accelerates the Safety Products Group's strategic
objective of increasing international market penetration,
particularly in Europe.
The backlogs of orders of Safety Products Group products
believed to be firm at December 31, 1994 and 1993 were $14.0
million and $9.7 million, respectively. The backlogs at December
31, 1994 included approximately $2.4 million of backlog
attributable to Justrite, which was acquired in May 1994. Almost
all of the backlogs of orders at December 31, 1994 are reasonably
expected to be filled within the current fiscal year.
Sign Group
The Sign Group, operating principally under the name "Federal
Sign" designs, engineers, manufactures, installs and maintains
illuminated and non-illuminated sign displays, for both sale and
lease. Registrant additionally provides sign repair services and
also enters into maintenance service contracts, usually over three
to five-year periods, for signs it manufactures as well as for
signs produced by other manufacturers. Its operations are oriented
to custom designing and engineering of commercial and industrial
signs or groups of signs for its customers.
The sale and lease of signs and the sale of maintenance
contracts are conducted primarily through Registrant's direct sale
organization which operates from its twenty-three principal sales
and manufacturing facilities located strategically throughout the
continental U.S. Customers for sign products and services consist
of local commercial businesses, as well as major national and
multi-national companies.
The Sign Group's markets improved during 1994 with growth coming
from many of its national and multi-national customers, as well as
growth in the casino gaming industry. This growth, combined with
the results of the aggressive restructuring programs implemented
over the last few years, resulted in more than tripling profits in
1994 versus 1993.
A large number of Registrant's displays are leased to customers
for terms of typically three to five years with both the lease and
the maintenance portions of many such contracts then renewed for
successive periods.
Registrant is nationally a principal producer of custom-designed
signs, but has numerous competitors (estimated at about 3,500 in
total), most of whom are localized in their operations.
Competition for sign products and services is intense and
competitive factors consist largely of prices, terms, aesthetic and
design considerations, and maintenance services. In some
instances, smaller and more localized operations may enjoy some
cost advantages which may permit lower pricing for particular
displays. However, Registrant's reputation for creative design,
quality manufacture and complete nationwide service together with
its financial ability to maintain customer leasing programs and to
undertake large project commitments in many cases offset
competitors' price advantages.
Total backlog at December 31, 1994, applicable to sign products
and services was approximately $57.0 million compared to
approximately $54.2 million at December 31, 1993. A significant
part of Registrant's sign products and services backlog relates to
sign maintenance contracts since such contracts are usually
performed over long periods of time. At December 31, 1994, the
Sign Group had a backlog of approximately $39.8 million compared to
approximately $41.5 million at December 31, 1993, represented by
in-service sign maintenance contracts. With the exception of the
sign maintenance contracts, most of the backlog orders at December
31, 1994 are reasonably expected to be filled within the current
fiscal year.
Tool Group
Tool Group products are produced by the Registrant's
wholly-owned subsidiaries including: Dayton Progress Corporation,
Schneider Stanznormalien GmbH, acquired in 1992, Manchester Tool
Company, Dico Corporation, acquired in 1992, Bassett Rotary Tool
Company and Jamestown Punch and Tooling, Inc.
Dayton Progress Corporation manufactures and purchases for
resale an extensive variety of consumable die components for the
metal stamping industry. These components consist of piercing
punches, matched die matrixes, punch holders or retainers and many
other products related to a metal stamper's needs. Registrant also
produces a large variety of consumable precision metal products for
customers' nonstamping needs, including special heat exchanger
tools, beverage container tools, powder compacting units and
molding components.
In March 1992, Dayton Progress Corporation acquired for cash the
assets of Schneider Stanznormalien GmbH, a German manufacturer of
precision punch and die components. This acquisition gives Dayton
Progress manufacturing capabilities on the European continent and
provides greater access to European markets.
In October 1991, Dayton Progress Corporation acquired for cash
and stock all of the outstanding shares of Container Tooling
Corporation. Container Tool manufactures and distributes body
punch tooling used in the production of aluminum and steel beverage
cans. The product complements Dayton Progress' tab-top tooling
product line. In October 1994 the Container Tool operations were
relocated to Dayton Progress' facilities in Dayton, Ohio.
Manchester Tool Company manufactures consumable carbide insert
tooling for cutoff and deep grooving metal cutting applications.
In November 1992, Manchester Tool Company acquired for cash all
of the outstanding shares of Dico Corporation, a manufacturer of
polycrystalline diamond and cubic boron nitride cutting tools.
This product line complements Manchester Tool's carbide insert
products and allows for entry into new market niches within general
business areas already served.
Bassett Rotary Tool Company is a manufacturer of consumable
carbide cutting tools. Its products are medium to high precision
in their manufacture and at times are quite complex in their
configuration. The products represent a narrow band of the much
broader cutting tool industry and require a high level of
manufacturing skill.
Jamestown Punch and Tooling, Inc. manufactures an extensive line
of consumable special die components for the metal stamping and
plastic molding industries in addition to a variety of precision
ground high alloy parts. Sales are made on both a direct basis and
through a limited distributor organization.
Because of the nature of and market for the Registrant's
products, competition is great at both domestic and international
levels. Many customers have some ability to produce the product
themselves, but at a cost disadvantage. Major market emphasis is
placed on quality of product and level of service.
Tool Group products are labor intensive with the only
significant outside cost being the purchase of the tool steel,
carbide and diamond raw material, as well as items necessary for
manufacturing. Inventories are maintained to assure prompt service
to the customer with the average order for standard tools filled in
less than one week for domestic shipments and within two weeks for
international shipments.
Tool Group customers include metal and plastic fabricators and
tool and die shops throughout the world. Because of the nature of
the products, volume depends mainly on repeat orders from customers
numbering in the thousands. These products are used in the
manufacturing process of a broad range of items such as
automobiles, appliances, construction products, electrical motors,
switches and components and a wide variety of other household and
industrial goods. Almost all business is done with private
industry.
Registrant's products are marketed in the United States, Japan
and Europe principally through industrial distributors. Foreign
manufacturing facilities, as well as sales and distribution
offices, are located in Weston, Ontario; Sagamihara, Japan;
Kenilworth, England; and Oberursel, Germany. Sales to nondomestic
customers are made through five wholly-owned subsidiaries: Dayton
Progress Canada, Ltd., Dayton Progress International Corporation,
Dayton Progress (UK) Ltd., Nippon Dayton Progress K.K. and
Schneider Stanznormalien GmbH.
Order backlogs of the Tool Group as of December 31, 1994 and
December 31, 1993 were $9.5 million and $7.5 million, respectively.
Almost all of the backlogs of orders at December 31, 1994 are
expected to be filled within the current fiscal year.
Vehicle Group
The Vehicle Group is composed of Emergency One, Inc., Superior
Emergency Vehicles, Ltd., acquired in 1991, Elgin Sweeper Company,
Vactor Manufacturing, Inc., acquired in 1994, Guzzler
Manufacturing, Inc., acquired in 1993, and Ravo International,
acquired in 1990.
Emergency One, Inc. is a leading manufacturer of custom-designed
ambulances, fire trucks and rescue vehicles including four and
six-wheel drive rescue trucks, tankers, pumpers, aerial ladder
trucks, and airport rescue and fire fighting vehicles (each of
aluminum construction for rust-free operation and energy
efficiency).
In December 1991, Emergency One acquired for cash all of the
outstanding shares of Frontline Corporation, a manufacturer and
distributor of ambulances, rescue trucks and mobile communication
vehicles. The acquisition of Frontline Corporation complemented
Emergency One's product line and enabled Emergency One to provide
a complete product line of fire trucks, fire apparatus, emergency
support and ambulance vehicles for distribution through Emergency
One's domestic and international dealer network. During 1993, the
company's ambulance operations were relocated to Emergency One's
facilities in Ocala, Florida and the mobile communications vehicles
product line was sold. The company was merged into Emergency One
in January 1994.
In December 1991, Emergency One acquired for cash, Superior
Emergency Vehicles, Ltd., a manufacturer and distributor of a full
range of fire truck bodies primarily for the Canadian market. In
addition to increased manufacturing capacity, the acquisition of
Superior Emergency Vehicles, Ltd. provides greater access to the
Canadian market.
Elgin Sweeper Company is the leading manufacturer in the United
States of self-propelled street cleaning vehicles. Utilizing three
basic cleaning methods (mechanical sweeping, vacuuming and
recirculating air), Elgin's products are primarily designed for
large-scale cleaning of curbed streets and other paved surfaces.
In June 1994, the Registrant acquired the principal operating
assets and assumed the principal operating liabilities of Peabody
Myers Corporation ("Vactor") for cash. Vactor Manufacturing, Inc.
is an Illinois-based manufacturer of municipal combination catch
basin/sewer cleaning vacuum trucks. This acquisition provides a
significant expansion of the Registrant's offering of municipal
equipment and enhances the domestic and international dealer
networks of both Elgin Sweeper and Vactor.
In March 1993, Elgin Sweeper Company acquired, principally for
cash, all of the outstanding shares of Guzzler Manufacturing, Inc.
Guzzler is an Alabama-based manufacturer and marketer of waste
removal vehicles, using vacuum technology, for worldwide industrial
and environmental markets. The acquisition of Guzzler
Manufacturing, Inc. complements Elgin Sweeper Company's product
distribution and provides for increased exposure to the industrial
marketplace for both Elgin and Guzzler.
In December 1990, the Registrant, through Federal Signal Europe
BV, acquired all of the outstanding shares of Van Raaij Holdings BV
(which, along with its subsidiaries, is referred to herein as Ravo
International), a Netherlands-based street sweeper manufacturer,
for cash and an earnout to be based upon future profitability of
the company for a five-year period. Ravo International is a
leading European manufacturer and marketer of self-propelled street
and sewer cleaning vehicles. Utilizing the vacuuming cleaning
method, Ravo's products are primarily designed for cleaning of
curbed streets and other paved surfaces. Both Ravo International
and Elgin Sweeper Company also sell accessories and replacement
parts for their sweepers. Ravo International also provides after-
market service and support for its products in the Netherlands.
Some products and components thereof are not manufactured by
Registrant but are purchased for incorporation with products of
Registrant's manufacture.
A majority of Vehicle Group sales are made to domestic and
overseas municipalities and other governmental units. Industrial
vacuum loader vehicles produced by Guzzler are principally sold to
commercial and industrial customers. Worldwide sales are
principally conducted by domestic and international dealers, in
most areas, with some sales being made on a direct-to-user basis.
Registrant competes with several domestic and foreign
manufacturers and due to the diversity of products offered, no
meaningful estimate of either the number of competitors or
Registrant's relative position within the market can be made,
although Registrant does believe it is a major supplier within
these product lines. Registrant competes with numerous foreign
manufacturers principally in international markets.
At December 31, 1994, the Vehicle Group backlogs were $180.5
million compared to $150.3 million at December 31, 1993. The
backlogs at December 31, 1994, included approximately $10.2 million
of backlog attributable to Vactor Manufacturing, Inc., which was
acquired in June 1994. A substantial majority of the orders in the
backlogs at December 31, 1994 are reasonably expected to be filled
within the current fiscal year. Approximately $24.0 million of the
backlogs at December 31, 1994 and $34.3 million of the backlogs at
December 31, 1993 represent the funded portion of a subcontract to
build P-23 airport rescue and fire fighting vehicles for the U.S.
Air Force. The majority of the $24.0 million backlog at December
31, 1994 is expected to be produced and shipped during 1995.
Additional Information
Registrant's sources and availability of materials and
components are not materially dependent upon either a single vendor
or very few vendors.
Registrant owns a number of patents and possesses rights under
others to which it attaches importance, but does not believe that
its business as a whole is materially dependent upon any such
patents or rights. Registrant also owns a number of trademarks
which it believes are important in connection with the
identification of its products and associated goodwill with
customers, but no material part of Registrant's business is
dependent on such trademarks.
Registrant's business is not materially dependent upon research
activities relating to the development of new products or services
or the improvement of existing products and services, but such
activities are of importance as to some of Registrant's products.
Expenditures for research and development by the Registrant were
approximately $7.0 million in 1994, $5.6 million in 1993 and $5.2
million in 1992.
Note N - Segment Information, presented in the annual report to
shareholders for the year ended December 31, 1994, contains
information concerning the Registrant's foreign sales, export sales
and operations by geographic area, and is incorporated herein by
reference.
Certain of the Registrant's businesses are susceptible to the
influences of seasonal buying or delivery patterns. The
Registrant's businesses which tend to have lower sales in the first
calendar quarter compared to other quarters as a result of these
influences are signage, street sweeping, outdoor warning, other
municipal emergency signal products and parking systems
manufacturing operations.
No material part of the business of Registrant is dependent
either upon a single customer or very few customers. The
Registrant is in substantial compliance with federal, state and
local provisions which have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise relating
to the protection of the environment. These provisions have had no
material adverse impact upon capital expenditures, earnings or
competitive position of the Registrant and its subsidiaries. The
Registrant employed 5,243 people in ongoing businesses at the close
of 1994. The Registrant believes relations with its employees have
been satisfactory.
Item 2. Properties.
As of March 1, 1995, the Registrant utilized twenty-seven
principal manufacturing plants located primarily throughout North
America, as well as seven in Europe and one in the Far East. In
addition, there were thirty-six sales and service/warehouse sites,
with thirty-three being domestically based and three located
overseas. The majority of the manufacturing plants are owned,
whereas all the sales and service/warehouse sites are leased.
In total, the Registrant devoted approximately 1,464,000 square
feet to manufacturing and 890,000 square feet to service,
warehousing and office space, as of March 1, 1995. Of the total
square footage, approximately 31% is devoted to the Safety Products
Group, 14% to the Sign Group, 11% to the Tool Group and 44% to the
Vehicle Group. Not included in the manufacturing square footage is
approximately 21,000 square feet of unutilized manufacturing space
that resulted from the rearrangement of the Registrant's
manufacturing operations in the Sign and Tool groups. The majority
of this space is presently being marketed for lease to
nonaffiliates. Approximately 66% of the total square footage is
owned by the Registrant, with the remaining 34% being leased.
All of the Registrant's properties, as well as the related
machinery and equipment, are considered to be well-maintained,
suitable and adequate for their intended purposes. In the
aggregate, these facilities are of sufficient capacity for the
Registrant's current business needs.
Capital expenditures for the years ended December 31, 1994,
1993, and 1992 were $11.1 million, $10.1 million, and $8.8 million,
respectively. Registrant anticipates total capital expenditures in
1995 will be approximately 30% to 50% greater than 1994 amounts.
Item 3. Legal Proceedings.
The Registrant is subject to various claims, other pending and
possible legal actions for product liability and other damages and
other matters arising out of the conduct of the Registrant's
business. With the exception of the matter discussed below, the
Registrant believes, based on current knowledge and after
consultation with counsel, that the outcome of such claims and
actions will not have a material adverse effect on the Registrant's
consolidated financial position or the results of operations.
On May 3, 1993, a Texas federal court jury rendered a verdict
of $17,745,000 against Federal Sign, a division of the Registrant,
for alleged violation of the Texas Deceptive Trade Practices Act
and misrepresentations to Duravision, Inc. and Manufacturers
Product Research Group of North America, Inc. in connection with a
1988 research and development project for indoor advertising signs.
The Registrant believes the court erroneously excluded important
evidence and that the verdict was against the weight of the
evidence. Both inside and outside counsel that initially handled
the case opined at the time of the verdict that the likelihood of
a substantially unfavorable result to the Registrant on appeal was
remote. Trial counsel has turned the case over to new appellate
counsel and has stated they cannot currently give an opinion on the
appeal because they are no longer handling the case. Appellate
counsel now handling the appeal of the case has not issued an
opinion on its outcome. However, if the Registrant loses its
appeal of this case, there would be a charge to earnings for this
$17,745,000 verdict, plus interest and attorney fees of up to
$11,000,000. On the other hand, there would be no such charges to
earnings for a decision reversing the original verdict or the
appellate court could issue a decision somewhere in between.
Depending on the outcome of this matter, an adverse decision may
have a material effect on results of operations and cash flows in
the periods that the appellate court decision is made and required
payments are made. The Registrant believes that the ultimate
resolution of this contingency, however, will not have a material
effect on its financial condition nor its results of operations or
cash flows for periods subsequent to the appellate court decision
and payments required as a result of such decision. The Registrant
cannot reasonably estimate the ultimate amount of a judgment, if
any, or interest and attorney fees, if any, which may result from
an adverse appellate court decision. Accordingly, the Registrant
has not recorded any accruals for potential losses which may result
from an adverse judgment. In the event of an adverse decision, the
Registrant intends to aggressively pursue a substantial recovery
from its original trial counsel in this matter.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders through
the solicitation of proxies or otherwise during the three months
ended December 31, 1994.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters.
Federal Signal Corporation's Common Stock is listed and traded
on the New York Stock Exchange under the symbol FSS. Per share
data listed in Note O -Selected Quarterly Data (Unaudited)
contained in the 1994 annual report to shareholders is incorporated
herein by reference. As of March 1, 1995, there were 5,403 holders
of record of the Registrant's common stock.
Certain long-term debt agreements impose restrictions on
Registrant's ability to pay cash dividends on its common stock.
All of the retained earnings at December 31, 1994, were free of any
restrictions.
Item 6. Selected Financial Data.
Selected Financial Data contained in the 1994 annual report to
shareholders is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Financial Review sections "Consolidated Results of
Operations," "Group Operations" and "Financial Position and Cash
Flow" contained in the 1994 annual report to shareholders are
incorporated herein by reference.
Note M - Contingency, contained in the annual report to
shareholders for the year ended December 31, 1994, is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements and accompanying footnotes
of the Registrant and the report of the independent auditors set
forth in the Registrant's 1994 annual report to shareholders are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information under the caption "Election of Directors"
contained in the Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held on April 19, 1995 is
incorporated herein by reference.
The following is a list of the Registrant's executive officers,
their ages, their business experience and their positions and
offices as of March 1, 1995:
Joseph J. Ross, age 49, was elected Chairman, President and
Chief Executive Officer in February, 1990. Previously he served as
President and Chief Executive Officer since December 1987 and as
Chief Operating Officer since July 1986.
John A. DeLeonardis, age 47, was elected Vice President-Taxes
in January 1992. He first joined the company as Director of Tax in
November 1986.
Henry L. Dykema, age 55, joined the Registrant as Vice President
and Chief Financial Officer in January 1995. He replaced Charles
R. Campbell, Chief Financial Officer since 1985, who retired at the
end of 1994. Mr. Dykema was self-employed from September 1993 to
December 1994 and served as Vice President-Finance and Chief
Financial Officer of Kennametal, Inc. from October 1989 to August
1993.
Robert W. Racic, age 46, was elected Vice President and
Treasurer in April 1984.
Richard L. Ritz, age 41, was elected Vice President and
Controller in January 1991. He was appointed Controller effective
November 1985.
Kim A. Wehrenberg, age 43, was elected Vice President, General
Counsel and Secretary effective October 1986.
These officers hold office until the next annual meeting of the
Board of Directors following their election and until their
successors shall have been elected and qualified.
There are no family relationships among any of the foregoing
executive officers.
Item 11. Executive Compensation.
The information contained under the caption "Executive
Compensation" of Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held April 19, 1995 is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information contained under the caption "Security Ownership
of Certain Beneficial Owners" of Registrant's Proxy Statement for
the Annual Meeting of Shareholders to be held April 19, 1995 is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information contained under the caption "Executive
Compensation" of Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held April 19, 1995 is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a)1. Financial Statements
The following consolidated financial statements of Federal
Signal Corporation and Subsidiaries included in the 1994
annual report of the Registrant to its shareholders are
filed as a part of this report and are incorporated by
reference in Item 8:
Consolidated Balance Sheets -- December 31, 1994 and
1993
Consolidated Statements of Income -- Years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows -- Years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following consolidated financial statement schedule of
Federal Signal Corporation and Subsidiaries, for the three
years ended December 31, 1994, is filed as a part of this
report in response to Item 14(d):
Schedule II -- Valuation and qualifying accounts
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore, have been
omitted.
3. Exhibits
3. a. Restated Certificate of Incorporation of Registrant
and Certificate of Amendment, filed as Exhibit (3)(a)
to Registrant's Form 10-K for the year ended December
31, 1991, is incorporated herein by reference.
b. By-laws of Registrant, filed as Exhibit (3)(b) to
Registrant's Form 10-K for the year ended December
31, 1991, is incorporated herein by reference.
4. a. Rights Agreement, filed as Exhibit (4)(a) to
Registrant's Form 10-K for the year ended December
31, 1993, is incorporated herein by reference.
b. The Registrant has no long-term debt agreements for
which the related outstanding debt exceeds 10% of
consolidated total assets as of December 31, 1994.
Copies of debt instruments for which the related debt
is less than 10% of consolidated total assets will be
furnished to the Commission upon request.
10. a. 1988 Stock Benefit Plan, filed as Exhibit (10)(a) to
Registrant's Form 10-K for the year ended December
31, 1991, is incorporated herein by reference.
b. Corporate Management Incentive Bonus Plan.
c. Subsidiaries, Division and Other Designated Profit
Centers Management Incentive Bonus Plan.
d. Supplemental Pension Plan, filed as Exhibit (10)(d)
to Registrant's Form 10-K for the year ended
December 31, 1990, is incorporated herein by
reference.
e. Executive Disability, Survivor and Retirement Plan,
filed as Exhibit (10)(e) to Registrant's Form 10-K
for theyear ended December 31, 1990, is incorporated
herein by reference.
f. Supplemental Savings and Investment Plan, filed as
Exhibit (10)(f) to Registrant's Form 10-K for the
year ended December 31, 1993, is incorporated herein
by reference.
g. Employment Agreement with Joseph J. Ross.
h. Change of Control Agreement with Kim A. Wehrenberg.
i. Director Deferred Compensation Plan, filed as Exhibit
(10)(j) to Registrant's Form 10-K for the year ended
December 31, 1992, is incorporated herein by
reference.
j. Director Retirement Plan, filed as Exhibit (10)(k) to
Registrant's Form 10-K for the year ended December
31, 1992, is incorporated herein by reference.
11. Computation of net income per common share
13. 1994 Annual Report to Shareholders of Federal Signal
Corporation. Such report, except for those portions
thereof which are expressly incorporated by reference in
this Form 10-K, is furnished for the information of the
Commission only and is not to be deemed "filed" as part
of this filing.
21. Subsidiaries of the Registrant
23. Consent of Independent Auditors
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
December 31, 1994.
(c) and (d)
The response to this portion of Item 14 is being submitted as
a separate section of this report.
Other Matters
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities
Act of 1933, the undersigned Registrant hereby undertakes as
follows, which undertaking shall be incorporated by reference into
Registrant's Registration Statements on Form S-8 Nos. 33-12876, 33-
22311, 33-38494, 33-41721 and 33-49476, dated April 14, 1987, June
26, 1988, December 28, 1990, July 15, 1991 and June 9, 1992,
respectively:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FEDERAL SIGNAL CORPORATION
By: Joseph J. Ross March 20, 1995
Chairman, President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below, on March 20, 1995, by the
following persons on behalf of the Registrant and in the capacities
indicated.
Henry L. Dykema Walter R. Peirson
Vice President and Chief Director
Financial Officer
Richard L. Ritz J. Patrick Lannan, Jr.
Vice President and Controller Director
James A. Lovell, Jr.
Director
Thomas N. McGowen, Jr.
Director
Richard R. Thomas
Director
<TABLE>
SCHEDULE II
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
Deductions
Additions Accounts
Balance at Charged to written off Balance
beginning costs and net of at end
Description of year expenses recoveries of year
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts
Manufacturing activities $2,215,000 $2,848,000
Financial service activities 976,000 1,174,000
Total $3,191,000 $1,809,000 $ 978,000 $4,022,000
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts
Manufacturing activities $1,688,000 $2,215,000
Financial service activities 1,138,000 976,000
Total $2,826,000 $2,710,000 $2,345,000 $3,191,000
Year ended December 31, 1992:
Deducted from asset accounts:
Allowance for doubtful accounts
Manufacturing activities $1,392,000 $1,688,000
Financial service activities 857,000 1,138,000
Total $2,249,000 $2,521,000 $1,944,000 $2,826,000
</TABLE>
FEDERAL SIGNAL CORPORATION
Corporate Management Incentive Bonus Plan
The incentive bonus plan has been established to provide an
incentive to key corporate officers and management employees of
Federal Signal Corporation to attain the highest performance
possible in each year. The plan provides key executives with an
opportunity to add to their total annual compensation, if the
corporation attains prescribed levels of return on capital. The
details of the plan follow.
I. Incentive bonus calculations
A) Target bonus
A target bonus amount will be established for each plan
participant in the plan. This target bonus amount will be
based upon a specified percentage of the participant's
salary.
B) Bonus goals
1) Seventy-five percent (75%) of the bonus amount will be
based on corporate return on capital, (ROC). For this
purpose, ROC is defined as the percent of pre-tax,
pre-bonus income excluding extraordinary items (see
Section IID5) plus interest on long-term debt divided
by the year's monthly average of the sum of
stockholders equity plus long-term debt.
2) Twenty-five percent (25%) of the bonus amount is
discretionary based on an evaluation of the
participants performance. (See Section IIC) This part
of your bonus also constitutes payment for any unused
vacation and by accepting the bonus payment you waive
any claims for payment for unused vacation.
C) Performance goals
Each participant's bonus will be subject to calculation in
accordance with the scale on Attachment A as appropriate,
for total corporate performance. The actual bonus
available for the discretionary award may be at least 25%
of the target bonus, even if the actual performance portion
may be below the minimum target bonus. If the actual
performance portion is higher than target, the
discretionary bonus will be calculated using the same bonus
rate.
II. Administration
A) Selection of participants and bonus level
Selection of corporate participants and bonus levels will
be made by the President of the corporation. The
Compensation/Stock Option Committee of the Board of
Directors will review and give approval for recommended
material changes to the plan as submitted.
B) Determination of bonus award
Following the completion of the year-end audit, the actual
bonus for each participant will be calculated as follows:
1) Calculate the return on capital (ROC) percentage
according to Section IB.
2) Using Attachment A, find appropriate bonus ratio based
on the ROC.
3) Multiply the target bonus by the bonus ratio as
determined in Section IIB2.
4) If the bonus ratio is less than 1.0, the discretionary
portion (25%) may still be paid at the amount of the
target bonus for the discretionary portion (see Section
IC).
C) Determination of discretionary award
Each participant will be evaluated against the following
criteria:
1) General performance of the participant's
responsibilities.
2) Meeting the participant's objectives and/or priorities.
3) Evaluation of initiative, attitude, and dedication to
the company.
4) Management development of self and subordinates.
5) Professional and personal conduct.
The President, in his sole discretion, will determine the
amount, if any, of this portion of the participant's bonus
payment.
D) Other considerations
1) Bonus awards will be paid only to participants who are
actively employed as of the bonus payment date.
2) In the event of the retirement of a participant during
the management incentive bonus plan year, the amount of
bonus award will be based on the full year results with
credit for the number of completed months worked as a
percent of the full plan year.
3) The addition of new participants, including new
employees to the plan during the year, and the bonus
levels for those individuals, must be approved, in
writing, by the President. Any changes for
participants regardless of the reason, (promotion,
change of responsibility, upgrading of salary in the
same position) must also be approved by the President.
Approval, in writing, in any case must be obtained
prior to communication to the individual concerned.
4) Unless otherwise approved by the President, in writing,
this incentive bonus plan will be the sole incentive
plan under which participants included in this plan may
participate.
5) Income will be inclusive of any changes in reserves,
but will exclude any capital gains or losses and other
unusual gains or losses such as proceeds of fire or
casualty insurance or changes in accounting practices.
In cases of uncertainty, the decision of the President
will be final.
FEDERAL SIGNAL CORPORATION
Subsidiaries, Division and Other
Designated Profit Centers
Management Incentive Bonus Plan
The incentive bonus plan has been established to provide an
incentive to key management employees of Federal Signal
Corporation and subsidiaries to attain the highest performance
possible in each year. The plan provides key executives with an
opportunity to add to their total annual compensation, if
prescribed return levels, sales growth or other important
discretionary goals are attained. The details of the plan
follow.
I. Incentive bonus calculations
A) Target bonus
A target bonus amount will be established for each plan
participant in the plan. This target bonus amount will be
based upon a specified percentage of the participant's
salary.
B) Bonus goals
The bonus goals will consist of the following:
ROI, operating margin/sales growth portion
1) A specified percentage of the participant's bonus
amount will be based on the participant's subsidiary,
division or profit center return on investment (ROI) or
operating margin/sales growth targets or a combination
thereof. For this purpose, ROI is defined as the
percent of pre-tax, pre-bonus income excluding
extraordinary items (see Section IID5) divided by the
year's monthly average of the division investment base.
The investment base is defined as the division's total
assets (excluding lease financing assets that are
managed by corporate and including goodwill) less total
liabilities excluding income tax reserves, long-term
debt and capitalized leases. Operating margins are
defined as pre-tax, pre-bonus income excluding interest
on lease financing assets (if managed by corporate),
non-operating income or expense and extraordinary items
divided by the sales of the division. Sales growth is
defined as the percent increase in sales to outside
customers over the prior year.
Discretionary portion
2) A specified percentage of the participant's bonus
amount is discretionary based on an evaluation of the
participant's performance (see IIC) including the
achievement of certain goals related to cash flow
management, sales and/or other criteria. This part of
your bonus also constitutes payment for any unused
vacation and by accepting the bonus payment you waive
any claims for payment for unused vacation.
Corporate portion
3) A specified percentage of the participant's bonus
amount will be based on corporate return on capital
(ROC).
The specified percentage for each of the bonus goals will
be established each year by the President of the
corporation and communicated to the participant in writing.
C) Performance goals
The ROI or operating margin/sales growth portion of each
participant's bonus will be subject to calculation in
accordance with the scale provided in the "Bonus Award
Schedule". The discretionary portion of the participant's
bonus will be subject to calculation based upon the
multiple (or "factor") achieved from the discretionary
performance award schedules (for example, cash flow
targets, sales targets, etc.).
II. Administration
A) Selection of participants and bonus levels
Selection of participants and bonus levels for presidents
of subsidiaries, divisions and other profit centers will be
set by the President of the corporation. Participants and
bonuses for individuals below the president level will be
set by the President in conjunction with the appropriate
subsidiary or division president. The Compensation/Stock
Option Committee of the Board of Directors will review and
give approval for recommended material changes to the plan
as submitted.
B) Determination of bonus award
Following the completion of the year-end audit, the actual
bonus for each participant will be calculated as follows:
ROI or operating income/sales growth portion
1) Calculate the ROI or operating margin/sales growth
portion according to Section IB.
2) Using the "Bonus Award Schedule" provided by the
President, find the appropriate bonus ratio (or
"factor") based on the ROI or operating margin/sales
growth.
3) Multiply the specified percentage (as communicated by
the President) of the target bonus by the bonus ratio
as determined in Section IIB2.
Discretionary portion
1) Based upon the participant's performance, the specified
percentage of the target bonus will be multiplied by
the applicable factor resulting from the participant's
achievement against discretionary bonus goals for cash
flow, sales and/or other factors.
2) Depending upon the participant's discretionary goals
and if the bonus ratio is less than 1.0, a portion of
the discretionary portion may still be paid at the
amount of the target bonus for the discretionary
portion (see Section IC).
Corporate portion
1) For those participants which have a portion of their
bonuses based upon the consolidated performance of the
company, multiply the specified percentage of the
target bonus by the bonus ratio as determined by the
corporate return on capital.
The total of the ROI or operating margin/sales growth
portion, discretionary portion and corporate portion, if
any, will be the bonus award.
C) Determination of discretionary award
Each participant will be evaluated against the following
criteria:
1) General performance of the participant's
responsibilities.
2) Meeting the participant's objectives and/or priorities.
3) Evaluation of initiative, attitude, and dedication to
the company.
4) Management development of self and subordinates.
5) Professional and personal conduct.
The President, in his sole discretion, will determine the
amount, if any, of this portion of the participant's bonus
payment.
D) Other considerations
1) Bonus awards will be paid only to participants who are
actively employed as of the bonus payment date.
2) In the event of the retirement of a participant during
the management incentive bonus plan year, the amount of
bonus award will be based on the full year results with
credit for the number of completed months worked as a
percent of the full plan year.
3) The addition of new participants, including new
employees to the plan during the year, and the bonus
levels for those individuals, must be approved, in
writing, by the President. Any changes for
participants regardless of the reason, (promotion,
change of responsibility, upgrading of salary in the
same position) must also be approved by the President.
Approval in writing in any case must be obtained prior
to communication to the individual concerned.
4) Unless otherwise approved by the President, in writing,
this incentive bonus plan will be the sole incentive
plan under which participants included in this plan may
participate.
5) Income will be inclusive of any changes in reserves,
but will exclude any capital gains or losses and other
unusual gains or losses such as proceeds of fire or
casualty insurance or changes in accounting practices.
In cases of uncertainty, the decision of the President
will be final.
June 23, 1989
Mr. Joseph J. Ross
1195 LeProvence
Naperville, IL 60540
Dear Mr. Ross:
Pursuant to authorization of its Board of Directors (the
"Board"), this letter will set forth certain of the terms and
conditions of your continuing employment by Federal Signal
Corporation ("Federal") as an executive officer of Federal. By
your acceptance hereof you agree that your employment shall
continue upon the terms and conditions hereinafter set forth.
1. Term, Compensation and Services
1.1 The term of your employment pursuant to this
agreement shall continue from the date hereof until the December
31 following your 65th birthday, subject to earlier termination
of employment by Federal or you as hereinafter provided.
1.2 During the term of your employment, you will be
compensated at the annual rate as may from time to time be fixed
by resolution of the Board, provided, however, that your annual
rate of compensation shall in no event be less than $225,000 and
provided further that such minimum annual rate may be increased
by resolution of the Board which resolution shall be binding on
Federal for the remaining term of this agreement. Your annual
compensation shall be payable monthly and you shall be reimbursed
for business, travel and entertainment expenses in accordance
with Federal's prevailing policies. In its discretion, the Board
may pay you additional salary or bonuses.
1.3 You agree to devote your full business time and
efforts to the rendition of such services to Federal as may be
designated by the chief executive officer or the Board, subject,
however, to customary vacations and provided that you shall be
excused from performing services during any period of absence or
inability relating to illness or physical or mental disability.
You will at all times be subject to the direction and supervision
of the chief executive officer and the Board. You may devote a
reasonable amount of time to civic and community affairs but
shall not perform services during the term of your employment for
any other business organization in any capacity without the prior
consent of the Board.
2. Termination
2.1 Your employment shall be subject to termination by
Federal at any time for cause if you shall fail in any material
respect to perform your duties hereunder (other than by reason of
illness or physical or mental disability), shall breach any
provision hereof in any material respect, or shall engage in any
dishonest or fraudulent acts or conduct in the performance of
your duties to Federal. Termination by Federal pursuant to the
preceding sentence shall require that you receive thirty days
prior written notice of the basis for termination and that you
fail to cure or correct the basis for the termination during such
thirty day period. In addition, you may, at your option,
voluntarily terminate your employment hereunder by giving Federal
at least 90 days prior written notice thereof. Upon any
termination under this paragraph 2.1, all obligations of Federal
hereunder shall immediately terminate and, without limiting the
foregoing, Federal shall have no obligation under this agreement
to make payments to you in respect of any period subsequent to
such termination. However termination under this paragraph shall
not affect Federal's obligations, if any, to make payments as
required by other compensation or employee benefit plans
maintained by Federal.
2.2 Your employment shall be subject to termination by
Federal at any time without cause by notifying you in writing of
such termination not less than ten days prior to the effective
date thereof. Upon any termination of employment pursuant to
this paragraph 2.2, Federal shall be obligated to pay to you, or
to your designated beneficiary if you shall not be living, an
amount equal to one year's salary at the minimum annual rate then
in effect, or, if less, an amount equal to the amount of salary
at such minimum annual rate payable during the period from
termination until the December 31 following your 65th birthday.
The total amount owing to you or your designated beneficiary
under this paragraph 2.2 shall be paid in twelve equal monthly
installments. Installment payments shall commence as soon as
practicable following the effective date of termination and shall
not bear interest. For purposes of this paragraph 2.2 any
material breach by Federal of its obligations hereunder which are
not cured after thirty days written notice given to Federal by
you, may, at your option, be treated by you as a termination of
your employment without cause. Amounts payable to you under this
paragraph 2.2 shall be in addition to other payments, if any,
required by other compensation or employee benefit plans
maintained by Federal.
2.3 (a) In the event that a "change of control" (as
hereinafter defined) of Federal occurs during the term of this
agreement, you may at your option terminate this agreement at any
time during the one year following such change of control by
giving thirty days prior written notice of termination to
Federal. Upon such termination, Federal shall be obligated to
pay to you or your designated beneficiary (if you are deceased),
immediately in one lump sum an amount equal to your average
annualized W-2 compensation for the five most recent taxable
years ending before the date on which the change of control
occurs, multiplied by three and then reduced by $1.00. In the
event of termination by you under this paragraph 2.3, you shall
also be entitled to receive all payments and compensation under
any other compensation or employee benefit plans of Federal.
Furthermore, to the extent you are not fully vested under any
such plan, amounts payable under any such other plan shall be
supplemented by Federal to the extent necessary so that the
amounts payable under such plan are at least equal to the amount
you would have received had you remained employed by Federal at
the minimum salary then in effect until your 65th birthday.
(b) A "change of control" shall mean (i) the
filing with the Securities and Exchange Commission by any person
or "group" of a report disclosing beneficial ownership by such
person or group of shares of stock entitled to cast more than 40%
of the votes in the election of directors, or (ii) the election
of any person or persons as a director or directors at a meeting
of Federal's stockholders at which proxies solicited on behalf of
Federal's Board or management were not voted in favor of the
election of such person or persons, or (iii) the occurrence of
any other event which would require an affirmative response to
Item 6(e) of Schedule 14A (the Proxy Statement Disclosure Rules)
as now in effect, regarding a change of control. The date of a
change of control specified in clause (iii) shall be the date
Federal is first advised by its counsel or counsel specified in
the next sentence that an event of the type specified in clause
(iii) has occurred. Any dispute as to whether an event specified
in clause (iii) of the preceding sentence has occurred shall be
conclusively resolved by an opinion of independent counsel
selected by the Chairman of the Securities Law Committee of the
Chicago Bar Association, which may be requested by you or Federal
at any time.
2.4 In the event of your death prior to the effective
date of any termination of your employment pursuant to paragraph
2.1, 2.2 or 2.3 hereof, Federal shall be obligated to pay to your
designated beneficiary, in not more than eighteen equal monthly
installments, an amount equal to one year's compensation at the
minimum annual rate in effect hereunder at the date of death.
Installment payments shall commence as soon as practicable
following the date of death and shall not bear interest.
2.5 In no event shall any termination of your employ-
ment under any provision of this agreement relieve you from
complying fully with your agreements set forth in paragraph 3.1
and 3.2 hereof.
3. Non-competition and Trade Secrets Agreements
3.1 During the term of your employment and for a period
of thirty-six months following termination of employment for any
reason, or following expiration of the term hereof, you agree
that you will not directly or indirectly act as an officer,
director, consultant, employee or principal for any entity which
is competitive with Federal. An entity is deemed competitive
with Federal if it is engaged in a line of business in which
Federal has derived at least 10% of its revenues during the two
years prior to termination of employment in the same geographic
area in which Federal conducts such business.
3.2 You further covenant that at no time following such
termination of employment will you, without prior written consent
of Federal, divulge to anyone any trade secret or confidential
corporate information concerning Federal or otherwise use any
such information to the detriment of Federal.
3.3 Paragraph 3.1 shall not prohibit you from investing in
any securities of any corporation which is competitive with
Federal whose securities, or any of them, are listed on a
national securities exchange or traded in the over-the-counter
market if you shall own less than 3% of the outstanding voting
stock of such corporation.
4. General Provisions
4.1 In the event you shall inquire, by writing notice to
Federal, whether any proposed action on your part would be
considered by Federal to be prohibited by or in breach of the
terms hereof, Federal shall have forty-five days after the giving
of such notice, to express in writing to you its position with
respect thereto, and in the event such writing shall not be given
to you, such proposed action (as set forth in your notice to
Federal) shall not be a violation of or in breach of the terms
hereof.
4.2. The term "designated beneficiary" as used in this
agreement shall mean such person or persons as you designate
to receive payments hereunder in the latest written notice
received by the Company from you which specifies a person or
persons as a designated beneficiary hereunder and in the absence
of such written notice shall mean your estate. Federal may
conclusively rely on any written notice specifying or changing a
designated beneficiary which it believes to be authentic.
4.3. Except as context otherwise requires, reference
herein to Federal shall include its subsidiaries and references
to the Board shall include committees thereof to the extent that
any applicable powers of the Board are or shall be delegated to
any such committees.
4.4 The terms and conditions hereof shall constitute the
entire agreement between the parties and shall supersede all
prior written or oral understandings between you and Federal
concerning the subject matter hereof. The agreement may not be
amended or altered except in writing signed by the parties and
approved by a resolution of the Board. Neither party may assign
its rights hereunder without the written consent of the other.
4.5 All notices required or permitted to be given
pursuant to this agreement shall be given in writing, if to you,
then at the address set forth at the beginning hereof or at such
other address as you may specify in writing to Federal; and, if
to Federal, then to the Secretary of Federal at Federal's
corporate office. All notices shall be deemed to have been given
when delivered in person or, if mailed, 48 hours after depositing
same in the United States mail, properly addressed, and postage
prepaid.
4.6 In the event that you or your designated beneficiary
shall be required to commence litigation to enforce your rights
under this agreement or otherwise your rights under this
agreement shall ever be involved in any litigation, the Company
shall indemnify you or your designated beneficiary against all
costs and expenses (including attorneys fees) reasonably incurred
by you in connection with such litigation except to the extent
that it is determined by the court in such litigation that you
are not entitled to such indemnification because you breached
your obligations hereunder. The Company shall, prior to the
outcome or settlement of such litigation, advance funds to you or
your designated beneficiary as you or your designated beneficiary
request for the purpose of paying your reasonable legal fees and
expenses pending the outcome or settlement of such litigation
provided that, as a condition of such advances, you or your
designated beneficiary execute a written undertaking agreeing to
return to the Company all amounts so advanced together with 12%
per annum interest thereon if it is determined by the court that
you are not entitled to indemnification under this paragraph 4.6.
4.7 This agreement replaces the employment agreement
between you and Federal dated June 5, 1984.
Very truly yours,
FEDERAL SIGNAL CORPORATION
By Thomas N. McGowen, Jr.
Chairman of the
Executive Committee
Acceptance:
The foregoing terms and
conditions are accepted and
agreed to effective this 26th
day of June, 1989
Joseph J. Ross
June 23, 1989
Mr. Kim A. Wehrenberg
538 Braemar Ave.
Naperville, IL 60540
Dear Mr. Wehrenberg:
Pursuant to authorization of its Board of Directors (the
"Board"), this letter will set forth certain of the terms and
conditions of termination of your employment with Federal after a
"change of control," as defined below.
1. Change of Control and Termination
1.1 (a) In the event that a "change of control" (as
hereinafter defined) of Federal occurs while you are employed by
Federal, you may at your option terminate this agreement at any
time during the one year following such change of control by
giving thirty days prior written notice of termination to
Federal. Upon such termination, Federal shall be obligated to
pay to you or your designated beneficiary (if you are deceased),
immediately in one lump sum an amount equal to your average
annualized W-2 compensation for the five most recent taxable
years ending before the date on which the change of control
occurs (or such portion of such period which you worked for
Federal), multiplied by three and then reduced by $1.00. In the
event of termination by you under this paragraph 1.1, you shall
also be entitled to receive all payments and compensation under
any other compensation or employee benefit plans of Federal.
(b) A "change of control" shall mean (i) the
filing with the Securities and Exchange Commission by any person
or "group" of a report disclosing beneficial ownership by such
person or group of shares of stock entitled to cast more than 40%
of the votes in the election of directors, or (ii) the election
of any person or persons as a director or directors at a meeting
of Federal's stockholders at which proxies solicited on behalf of
Federal's Board or management were not voted in favor of the
election of such person or persons, or (iii) the occurrence of
any other event which would require an affirmative response to
Item 6(e) of Schedule 14A (the Proxy Statement Disclosure Rules)
as now in effect, regarding a change of control. The date of a
change of control specified in clause (iii) shall be the date
Federal is first advised by its counsel or counsel specified in
the next sentence that an event of the type specified in clause
(iii) has occurred. Any dispute as to whether an event specified
in clause (iii) of the preceding sentence has occurred shall
be conclusively resolved by an opinion of independent counsel
selected by the Chairman of the Securities Law Committee of the
Chicago Bar Association, which may be requested by you or Federal
at any time.
1.2 In no event shall any termination of your employ-
ment under any provision of this agreement relieve you from
complying fully with your agreements set forth in paragraph 2.1
and 2.2 hereof.
2. Non-competition and Trade Secrets Agreements
2.1 During the term of your employment and for a period
of thirty-six months following termination of employment for any
reason, or following expiration of the term hereof, you agree
that you will not directly or indirectly act as an officer,
director, consultant, employee or principal for any entity which
is competitive with Federal. An entity is deemed competitive
with Federal if it is engaged in a line of business in which
Federal has derived at least 10% of its revenues during the two
years prior to termination of employment in the same geographic
area in which Federal conducts such business.
2.2 You further covenant that at no time following such
termination of employment will you, without prior written consent
of Federal, divulge to anyone any trade secret or confidential
corporate information concerning Federal or otherwise use any
such information to the detriment of Federal.
2.3 Paragraph 2.1 shall not prohibit you from invest-
ing in any securities of any corporation which is competitive
with Federal whose securities, or any of them, are listed on a
national securities exchange or traded in the over-the-counter
market if you shall own less than 3% of the outstanding voting
stock of such corporation.
3. General Provisions
3.1 In the event you shall inquire, by writing notice to
Federal, whether any proposed action on your part would be
considered by Federal to be prohibited by or in breach of the
terms hereof, Federal shall have forty-five days after the giving
of such notice, to express in writing to you its position with
respect thereto, and in the event such writing shall not be given
to you, such proposed action (as set forth in your notice to
Federal) shall not be a violation of or in breach of the terms
hereof.
3.2. The term "designated beneficiary" as used in this
agreement shall mean such person or persons as you designate to
receive payments hereunder in the latest written notice received
by the Company from you which specifies a person or persons as a
designated beneficiary hereunder and in the absence of such
written notice shall mean your estate. Federal may conclusively
rely on any written notice specifying or changing a designated
beneficiary which it believes to be authentic.
3.3. Except as context otherwise requires, reference
herein to Federal shall include its subsidiaries and references
to the Board shall include committees thereof to the extent that
any applicable powers of the Board are or shall be delegated to
any such committees.
3.4 The terms and conditions hereof shall constitute the
entire agreement between the parties and shall supersede all
prior written or oral understandings between you and Federal
concerning the subject matter hereof. The agreement may not be
amended or altered except in writing signed by the parties and
approved by a resolution of the Board. Neither party may assign
its rights hereunder without the written consent of the other.
3.5 All notices required or permitted to be given
pursuant to this agreement shall be given in writing, if to you,
then at the address set forth at the beginning hereof or at such
other address as you may specify in writing to Federal; and, if
to Federal, then to the President of Federal at Federal's
corporate office. All notices shall be deemed to have been given
when delivered in person or, if mailed, 48 hours after depositing
same in the United States mail, properly addressed, and postage
prepaid.
3.6 In the event that you or your designated benefi-
ciary shall be required to commence litigation to enforce your
rights under this agreement or otherwise your rights under this
agreement shall ever be involved in any litigation, the Company
shall indemnify you or your designated beneficiary against all
costs and expenses (including attorneys fees) reasonably incurred
by you in connection with such litigation except to the extent
that it is determined by the court in such litigation that you
are not entitled to such indemnification because you breached
your obligations hereunder. The Company shall, prior to the
outcome or settlement of such litigation, advance funds to you or
your designated beneficiary as you or your designated beneficiary
request for the purpose of paying your reasonable legal fees and
expenses pending the outcome or settlement of such litigation
provided that, as a condition of such advances, you or your
designated beneficiary execute a written undertaking agreeing to
return to the Company all amounts so advanced together with 12%
per annum interest thereon if it is determined by the court that
you are not entitled to indemnification under this paragraph 3.6.
Very truly yours,
FEDERAL SIGNAL CORPORATION
By Thomas N. McGowen, Jr.
Chairman of the
Executive Committee
Acceptance:
The foregoing terms and
conditions are accepted and
agreed to effective this 26th
day of June, 1989
Kim A. Wehrenberg
<TABLE>
EXHIBIT 11
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
Computation of Income Per Common Share
Income per common share was computed by dividing income by the weighted average number
of common and common equivalent shares outstanding during each year. The treasury
stock method was applied to those stock options that would have a dilutive effect on
income per share. The average market price of the Registrant's stock was used in
determining income per common share, while the year-end market price (if greater than
the average market price) was used in determining income per common share - assuming
full dilution.
The weighted average number of common and common equivalent shares used in these
computations were:
<CAPTION>
Income Per Common Share 1994 1993 1992
(in thousands except per share data)
<S> <C> <C> <C>
Weighted average shares outstanding 45,458 45,738 45,544
Effect of dilutive options 499 555 584
Total 45,957 46,293 46,128
Income:
Income before cumulative effects
of accounting changes $46,770 $39,780 $34,430
Cumulative effects of accounting changes 30
Net income $46,770 $39,780 $34,460
Net income per share $ 1.02 $ .86 $ .75
Assuming Full Dilution
(in thousands except per share data)
Weighted average shares outstanding 45,458 45,738 45,544
Effect of dilutive options 515 555 584
Total 45,973 46,293 46,128
Income:
Income before cumulative effects
of accounting changes $46,770 $39,780 $34,430
Cumulative effects of accounting changes 30
Net income $46,770 $39,780 $34,460
Net income per share $ 1.02 $ .86 $ .75
</TABLE>
EXHIBIT 13
- ----------
1994 ANNUAL REPORT TO SHAREHOLDERS OF FEDERAL SIGNAL CORPORATION
- -----------------------------------------------------------------
<TABLE>
FEDERAL SIGNAL CORPORATION
Selected Financial Data
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results (dollars in
millions):
Net sales $ 677.2 $ 565.2 $ 518.2 $ 466.9 $ 439.4 $ 398.4 $ 361.4 $ 305.8 $ 273.3 $ 264.5 $ 241.3
Income before income taxes (a) $ 70.2 $ 58.8 $ 49.9 $ 45.6 $ 42.5 $ 34.6 $ 28.4 $ 23.8 $ 20.9 $ 16.3 $ 14.9
Income from continuing
operations (b) $ 46.8 $ 39.8 $ 34.5 $ 31.0 $ 28.1 $ 22.1 $ 18.2 $ 14.5 $ 12.3 $ 11.9 $ 9.2
Operating margin 11.6% 11.3% 10.6% 10.8% 10.8% 10.6% 9.6% 8.6% 8.5% 7.2% 7.3%
Return on average common
shareholders' equity 22.3% 21.0% 20.0% 20.0% 20.4% 18.7% 17.0% 14.5% 12.2% 13.3% 11.0%
Common Stock Data
(per share) (c):
Income from continuing
operations $ 1.02 $ 0.86 $ 0.75 $ 0.67 $ 0.61 $ 0.48 $ 0.40 $ 0.31 $ 0.26 $ 0.26 $ 0.20
Cash dividends $ 0.42 $ 0.36 $ 0.31 $ 0.27 $ 0.22 $ 0.19 $ 0.16 $ 0.15 $ 0.15 $ 0.15 $ 0.15
Market price range:
High $21-3/8 $21 $17-5/8 $15-1/4 $10-3/4 $7-1/8 $4-7/8 $4-7/8 $4-1/2 $3-3/4 $3-5/8
Low $16-7/8 $15-3/4 $12-3/8 $9-1/4 $6-1/4 $4-1/4 $3-1/2 $2-7/8 $3-1/8 $2-5/8 $2-1/2
Average common shares
outstanding (in thousands) 45,957 46,293 46,128 46,126 46,038 46,103 45,639 47,137 46,767 45,335 45,357
Financial Position at Year-End
(dollars in millions):
Working capital (d) $ 53.9 $ 52.8 $ 49.5 $ 44.9 $ 42.7 $ 63.8 $ 59.5 $ 53.9 $ 52.8 $ 58.2 $ 60.6
Current ratio (d) 1.4 1.5 1.6 1.5 1.5 2.1 2.0 1.9 2.2 2.3 2.5
Total assets $ 521.6 $ 405.7 $ 363.7 $ 341.2 $ 295.8 $ 271.3 $ 251.1 $ 233.3 $ 191.4 $ 187.4 $ 178.7
Shareholders' equity $ 220.3 $ 199.2 $ 179.0 $ 164.8 $ 146.4 $ 130.4 $ 115.5 $ 103.2 $ 102.4 $ 91.1 $ 85.3
Debt to capitalization ratio (d) 22% 1% 2% 1% 2% 10% 18% 22% 4% 15% 18%
Other (dollars in millions) (e):
New business $ 700.3 $ 584.2 $ 510.3 $ 462.7 $ 467.6 $ 429.9 $ 382.4 $ 328.3 $ 276.4 $ 274.6 $ 246.5
Backlog $ 261.0 $ 221.8 $ 198.0 $ 203.2 $ 199.9 $ 171.7 $ 140.2 $ 119.2 $ 96.7 $ 93.6 $ 83.5
Net cash provided by operating
activities $ 53.8 $ 48.8 $ 40.2 $ 43.9 $ 48.3 $ 34.6 $ 22.5 $ 20.1 $ 22.7 $ 16.5 $ 13.6
Net cash (used for) investing
activities $ (96.9) $ (38.1) $ (26.9) $ (47.8) $ (14.7) $ (24.1) $ (20.8) $ (37.7) $ (12.8) $ (6.9) $ (9.0)
Net cash provided by (used for)
financing activities $ 45.1 $ (10.3) $ (11.2) $ 2.5 $ (34.6) $ (8.9) $ (3.3) $ 17.8 $ (9.9) $ (9.4) $ (5.1)
Capital expenditures $ 11.1 $ 10.1 $ 8.8 $ 12.0 $ 8.3 $ 9.2 $ 7.3 $ 6.9 $ 6.3 $ 6.9 $ 4.5
Depreciation $ 10.3 $ 9.2 $ 8.7 $ 8.2 $ 7.8 $ 7.9 $ 7.1 $ 5.5 $ 5.2 $ 5.3 $ 4.8
Employees 5,243 4,426 4,268 4,212 4,158 4,142 3,880 3,653 3,183 3,190 2,962
<FN>
(a) in 1985, reflects pre-tax provisions to expense for non-recurring charges of $4.6 million
(b) in 1992, reflects net cumulative effects of accounting changes for postretirement benefits and income taxes of $30,000; in 1985,
reflects cumulative effect of accounting change for investment tax credits of $2.2 million and after-tax provisions to expense
for non-recurring charges of $2.3 million
(c) reflects 10% stock dividends each paid in 1988 and 1989, 3-for-2 stock splits in 1990, 1991 and 1992, and a 4-for-3 stock split
distributed March 1, 1994
(d) manufacturing operations only
(e) continuing operations only
</TABLE>
FINANCIAL REVIEW
Consolidated Results of Operations
Federal Signal Corporation again achieved record levels of net sales
and net income in 1994. Net sales increased to $677.2 million, 20%
higher than 1993's $565.2 million. Net income increased 18% to $46.8
million in 1994 from $39.8 million in 1993. These increases follow
1993's increases of 9% in sales and 15% in net income. Net income per
share for 1994 increased 19% to $1.02 per share compared to $.86 in
1993 and $.75 per share in 1992.
The 1994 sales increase of 20% resulted from volume increases of 19%
(including 8% resulting from the acquisitions of Justrite
Manufacturing in May and Vactor Manufacturing at the end of June) and
price increases of 1%. Domestic sales increased 21% in 1994 while
foreign sales increased 15%. Excluding the sales of Justrite and
Vactor, domestic sales were 12% higher in 1994 while foreign sales
increased 8%. Foreign sales accounted for 19% of the company's total
sales in 1994 compared to 20% of total sales in 1993.
The 1994 sales increases follow a 9% increase in sales in 1993. The
increase in sales in 1993 resulted from volume increases of 8%
(including 4% from the acquisition of Guzzler Manufacturing in March
1993) and price increases of 1%. Excluding the sales of Guzzler in
1993, domestic sales were 10% above 1992. Foreign sales declined 7%
in 1993 largely due to the recessionary European economic environment
then present.
Operating margins have increased from 10.8% in 1990 to 11.6% in 1994,
despite generally declining gross profit margins as the following
table shows:
(percent of sales)
1994 1993 1992 1991 1990
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 69.0 67.8 68.2 67.9 66.8
Gross profit margin 31.0 32.2 31.8 32.1 33.2
Selling, general and
administrative expenses 19.4 20.9 21.2 21.3 22.4
Operating margin 11.6% 11.3% 10.6% 10.8% 10.8%
Gross profit margins have generally declined principally due to sales
of the Vehicle Group increasing greater than sales of the other
groups. The Vehicle Group normally experiences higher cost of sales
percentages but lower operating expense percentages than the other
groups. This was exacerbated in 1992 due to the late 1991
acquisitions of Superior Emergency Vehicles and Frontline Emergency
Vehicles. This trend reversed in 1993 due to improving gross margins
of three of the company's four groups, most notably Safety Products
and Sign. Due to the reorganization costs incurred in 1992 for newly
acquired businesses and certain costs incurred at Ravo for development
and other operational changes, the percentage of selling, general and
administrative expenses did not decline in 1992 as rapidly as normally
would be expected. In 1993 and 1994, however, reductions in the
percentage of selling, general and administrative costs did occur.
The reductions in 1993 and 1994 are a result of: 1) higher sales, and
the resultant impact of fixed costs being spread over those higher
sales, and 2) operational improvements made, particularly in the Sign
Group. All of the company's groups continue to work toward reducing
their costs.
Because of the varied nature of its operations, the company recognizes
that changes in operating income as a percentage of net sales on a
consolidated basis may sometimes distort its real operating
performance. In order to monitor the operating performance of its
operations, the company utilizes various methods, one of which is a
return on assets approach. Return on assets is defined as operating
income divided by the identifiable assets of its businesses. In
recent years, the company's operations have achieved strong returns as
summarized in the chart below.
The company has improved its return on assets of its existing
businesses over the years by increasing operating margins and asset
turnover. Return for the total company remained even with last year's
level. Return on assets for the Sign and Vehicle groups increased
above 1993 while the return for the Safety Products and Tool groups
declined. Excluding the effects of the acquisition of Justrite made
in 1994, return on manufacturing assets for the Safety Products Group
improved.
The company acquires businesses which meet the company's growth and
other strategic objectives. In large part as a result of intangibles
arising from our acquisitions, it is anticipated that businesses
acquired will not generate the same levels of returns as the company's
other businesses for some time following their respective acquisition.
However, the company's strategies include making constant improvements
in all of its businesses. The results of these efforts are evidenced
by the improving returns on manufacturing assets of businesses
operated for two years or more. Excluding the effects of the
companies acquired in 1994, the company's return on manufacturing
assets increased to 24% in 1994 from 22% in 1993. The declines in
1991 and 1992 and the even results in 1993 and 1994 were due solely to
the acquisitions made during those respective years or late in
previous years. Excluding the effects of companies acquired, returns
on assets were as follows: 26% in 1991 and 1992, and 24% in 1993. In
addition to continuing programs undertaken to reduce manufacturing and
operating costs and improve productivity, the company also has
continuing programs to improve asset turnover. Improving inventory
turnover and accelerating the collection of accounts receivable have
also had a significant positive impact on return on assets.
Interest expense increased $2.4 million in 1994 following a decline of
$.3 million in 1993. The increase in 1994 was the result of
substantially increased borrowings caused largely by two factors: 1)
$69.6 million relating to the acquisitions for cash of Justrite and
Vactor, and 2) a $16.8 million increase in financial services assets
which occurred during the year. In addition, weighted average
interest rates on short-term borrowings experienced in 1994 were 4.5%
compared to 3.5% in 1993. Interest expense declined $.3 million in
1993 principally as a result of lower interest rates partially offset
by increased average borrowings required to fund the purchase of
Guzzler Manufacturing in March 1993, increases in financial services
assets and repurchases of the company's stock at the end of 1992.
The company's effective tax rate of 33.4% in 1994 increased from rates
of 32.3% and 31.0% in 1993 and 1992, respectively. The increase in
1994 results from: 1) the fact that the 1993 rate included the impact
of favorable tax return audit results, and 2) tax-exempt interest
income has become a lower percentage of the company's total income.
The increase in 1993 was largely due to the enacted change in the
statutory federal income tax rate partially offset by the favorable
audit results impact.
In November 1992, the Financial Accounting Standards Board issued SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." This
statement is required to be adopted no later than for the year ended
1994. The company's adoption of this statement in 1994 had an
insignificant impact on results of operations for the year.
At the end of 1994, the company changed its assumptions for discount
rates used in determining the actuarial present values of accumulated
and projected benefit obligations for its postretirement plans from
7.6% to 8.9%. This increase resulted from the higher interest rate
environment being experienced at the end of 1994. The company also
increased its estimate for projected rates of increase in compensation
levels from 4% to 5% for future years despite relatively low levels of
inflation. The expectation that somewhat increasing levels of
inflation will continue for the foreseeable future is based upon
recent increases in interest rates which are reflective of a
potentially higher inflationary trend. The company expects that the
changes in assumptions will have an insignificant impact on 1995
results of operations.
Certain of the company's businesses are susceptible to the influences
of seasonal buying or delivery patterns. The company's businesses
which tend to have lower sales in the first calendar quarter compared
to other quarters as a result of these influences are signage, street
sweeping, outdoor warning, other municipal emergency signal products
and parking systems manufacturing operations.
Group Operations
Domestic markets were generally stronger in 1994 for all four of the
company's groups. As mentioned previously, foreign sales increased 8%
(excluding acquisitions) in 1994. The Safety Products, Vehicle and
Tool groups achieved much higher foreign sales in 1994. For the
second year in a row, all four groups achieved increases in both sales
and earnings.
Safety Products
Safety Products Group sales increased 29% in 1994 resulting from
increased sales at Signal Products and Federal APD and the acquisition
of Justrite. Justrite, acquired in May 1994, accounted for about
three-fourths of the increase. Domestic sales were up 35% (8%
excluding Justrite) while foreign sales increased 11% (6% excluding
Justrite). Earnings increased 44% in 1994; a little over two-thirds
of the increase was attributable to Justrite.
For the eighth consecutive year, the Safety Products Group's operating
margin increased. Cost reductions, the impact of recent new product
sales, and increased penetration of foreign markets contributed to the
improved results including an increase in the group's return on
manufacturing assets (excluding the dilutive effect of the newly
acquired Justrite). The Safety Products Group further improved its
manufacturing throughput and reduced manufacturing costs and operating
expenses. For the seventh year in a row, Signal Products made
improvements in its inventory turnover. Reductions in inventories
resulted in LIFO credits of $.3 million in 1993 and $.5 million in
1992. The acquisition of Justrite in May 1994 and the acquisition of
VAMA in 1992 resulted in a dilutive effect on the group's return on
manufacturing assets. The group's return on manufacturing assets in
1992 increased to 38% (excluding VAMA) and in 1994 increased to 36%
(excluding Justrite, including VAMA).
Sign
After posting losses in 1991 and 1992, the Sign Group made substantial
internal improvements and returned to profitability in 1993.
Additional further improvements resulted in lower expenses and
improved operating margins culminating in a profit of $4.0 million in
1994. Commercial and industrial construction activity appears to have
stabilized and after a two-year period of declining sales Sign
achieved sales increases in 1993 (4%) and 1994 (13%). While increased
sales levels contributed to the group's improved profitability in 1993
and 1994, steps taken to consolidate its manufacturing resources,
increased training, and a focus on higher margin sales were the
essential reasons for its improved profitability. The group's break-
even point has been substantially reduced over the past three years
and has had a positive impact on its cost competitiveness. The Sign
Group anticipates that its markets in 1995 will be somewhat similar to
those experienced in 1994. The steps taken by the group and the
continued stable market conditions expected for 1995 should result in
improved operating results next year.
Tool
In 1994, the Tool Group achieved a 9% increase in sales and a 1%
increase in income. Excluding the impacts of certain charges that are
not expected to recur, earnings increased in 1994 at nearly the same
rate as sales. Domestic sales increased 8% in 1994 while foreign sales
increased 13%. Dayton Progress again increased its domestic market
share and experienced the favorable impacts of improved economies in its
key foreign markets. The 1994 foreign sales gains follow a 7% decline
in 1993 which was principally caused by the weak economies in Europe and
Japan. The declines in the returns on manufacturing assets have
resulted from the following principal factors: 1) the impact of the
nonrecurring charges (excluding these charges, the return would have
been 37% in 1994), 2) the impact of the acquisitions of Dico, Schneider
Stanznormalien and Container Tool (excluding this effect, the return
would have been 42% in 1993 and 48% in 1992), and 3) competitive price
pressure which negatively affected margins in 1991. Returns on
manufacturing assets available through investments in newly acquired
companies have been lower than historical returns produced by existing
operations. As mentioned earlier, this is anticipated in the company's
acquisition objectives. The company anticipates improving returns on
assets in 1995 for the group's operations excluding the impacts of
future acquisitions, if any, that may be made.
Vehicle
Earnings for the Vehicle Group increased 11% in 1994 on a sales increase
of 22%. Excluding the effects of Vactor Manufacturing which was
acquired in mid-1994, sales would have increased approximately 14% while
earnings would have increased about 8%. Domestic sales increased 24% in
1994 (16% excluding Vactor). Foreign sales increased 17% in 1994 (9%
excluding Vactor). Strong domestic sales were achieved by Emergency
One, Elgin and Guzzler. While foreign sales were lower at Elgin, all of
the group's other units experienced strong increases. The group's
sweeper and industrial vacuum businesses both achieved strong sales and
earnings increases in 1994. While further improvement is expected in
1995, the rate of improvement will likely be somewhat less than in 1994.
Fire apparatus earnings were down somewhat in 1994 principally resulting
from a temporary shift into lower margin products. A substantial
improvement in operating results is expected in the fire apparatus
business in 1995. Return on manufacturing assets for the group improved
in 1994 reversing the decline since 1991. The previous declines were
the result of the dilutive impact of acquisitions in each of the years
ended December 31, 1992 and 1993. Returns on manufacturing assets for
this period excluding acquisitions were as follows: 21% in 1992
(excluding Superior and Frontline), 17% in 1993 (excluding Guzzler) and
17% in 1994 (excluding Vactor).
Financial Services Activities
The company maintains a large investment ($128.4 million at December 31,
1994) in lease financing and other receivables which are generated
principally by its vehicle operations with the balance generated by its
sign operations. These assets continued to be conservatively leveraged
in accordance with the company's stated financial objectives for these
assets for the five-year period ending December 31, 1994 (see further
discussion in Financial Position and Cash Flow).
Financial services assets have repayment terms generally ranging from
two to eight years. The increases in these assets resulted from
increasing sales of the Vehicle Group as well as continuing greater
acceptance by customers of the benefits of using the company as their
source of financing vehicle purchases. In accordance with the company's
change in strategy regarding financing risk tolerance and profitability
with respect to its Sign operations, financing assets for the Sign Group
have declined in recent years.
Financial Position and Cash Flow
The company emphasizes generating strong cash flows from operations.
During 1994, cash flow from operations increased to a level of $53.8
million compared to $48.8 million in 1993 and $40.2 million in 1992.
These results are directly reflective of: 1) efforts to lower costs,
and 2) the amount of improvement (reduction) in the relative amounts of
working capital required to support the company's increased sales
volumes. The company has reduced its average working capital to sales
ratio (8% during 1994) by nearly half since 1987 principally by
improving its days-sales-outstanding and inventory turnover ratios. As
a result of the reductions achieved so far, the company anticipates that
significant further reduction in the working capital to sales ratio is
unlikely to be achieved going forward. Nevertheless, the company
expects continued improvement in its operating cash flow as it focuses
aggressively on its efficiencies and costs as well as its working
capital management.
During the 1990-1994 period, the company has utilized its strong cash
flows from operations to: 1) fund in whole or in part strategic
acquisitions of companies operating in markets related to those already
served by the company; 2) purchase increasing amounts of equipment
principally to provide for further cost reductions and increased
productive capacity for the future as well as tooling for new products;
3) increase its investment in financial services activities; 4) pay
increasing amounts in cash dividends to shareholders; and 5) repurchase
up to 1-2% of its outstanding common stock each year.
Cash flows for the five-year period ending December 31, 1994 are
summarized as follows:
(in millions)
1994 1993 1992 1991 1990
Cash provided by
(used for):
Operating activities $ 53.8 $ 48.8 $ 40.2 $ 43.9 $ 48.3
Investing activities (96.9) (38.1) (26.9) (47.8) (14.7)
Financing activities 45.1 (10.3) (11.2) 2.5 (34.6)
Increase (decrease) in
cash and cash
equivalents $ 2.0 $ .4 $ 2.1 $ (1.4) $ (1.0)
In order to show the distinct characteristics of the company's
investment in its manufacturing activities and its investment in its
financial services activities, the company has presented separately
these investments and their related liabilities. Each of these two
types of activities are supported by different percentages of debt and
equity.
One of the company's financial objectives is to maintain a strong
financial position. The company defines its goal as normally having a
debt to capitalization ratio of 30% or less for its manufacturing
operations. At December 31, 1994 and 1993, the company's debt to
capitalization ratios of its manufacturing operations were 22% and 1%,
respectively. The increase in this ratio occurred largely due to the
1994 acquisitions of Justrite and Vactor for cash. The strong operating
cash flows enabled a decline in this ratio during the second half of
1994 from the 28% level at June 30 (immediately after the company's
acquisition of Vactor). Also, at December 31, 1994 and 1993, the
company's debt to capitalization ratios for its financial services
activities were 87% and 86%, respectively. The company believes that
its financial assets, due to their overall quality, are capable of
sustaining a leverage ratio in the range of 85% to 87% on average. The
company intends to maintain this range of leverage for its financial
activities in the future and at the same time fulfill its financial
objective with respect to its manufacturing debt to capitalization
ratio. These intentions are consistent with its investment grade credit
rating obtained in connection with its commercial paper program.
As indicated earlier, substantial effort is focused on improving the
utilization of the company's working capital. The company's current
ratio for its manufacturing operations was 1.4 at December 31, 1994 and
1.5 at December 31, 1993. These ratios are slightly lower than those in
prior years as a result of reduced working capital needs for receivables
and inventories and improved management of cash disbursements as well as
increased short-term debt. The company anticipates that its financial
resources and major sources of liquidity, including cash flow from
operations, will continue to be adequate to meet its operating and
capital needs in addition to its financial commitments.
<TABLE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Assets
Manufacturing activities:
Current assets
Cash and cash equivalents $ 4,605,000 $ 2,576,000
Accounts receivable, net of allowances
for doubtful accounts of $2,848,000
and $2,215,000, respectively 107,985,000 81,593,000
Inventories - Note C 78,899,000 63,022,000
Prepaid expenses 4,807,000 4,627,000
Total current assets 196,296,000 151,818,000
Properties and equipment - Note D 72,838,000 62,204,000
Other assets
Intangible assets, net of accumulated amortization 115,306,000 65,436,000
Other deferred charges and assets 9,972,000 15,666,000
Total manufacturing assets 394,412,000 295,124,000
Financial services activities
Lease financing and other receivables, net of allowances
for doubtful accounts of $1,174,000 and $976,000,
respectively, and net of unearned finance
revenue - Note E 127,188,000 110,580,000
Total assets $ 521,600,000 $ 405,704,000
Liabilities and Shareholders' Equity
Manufacturing activities:
Current liabilities
Short-term borrowings - Note F $ 25,222,000 $ 282,000
Accounts payable 44,918,000 33,363,000
Accrued liabilities
Compensation and withholding taxes 19,032,000 16,601,000
Other - Note B 45,943,000 44,541,000
Income taxes - Notes B and G 7,263,000 4,269,000
Total current liabilities 142,378,000 99,056,000
Other liabilities
Long-term borrowings - Note F 34,878,000 1,344,000
Deferred income taxes - Notes B and G 13,778,000 10,929,000
Total manufacturing liabilities 191,034,000 111,329,000
Financial services activities - Note F
Short-term borrowings 110,252,000 75,433,000
Long-term borrowings 19,734,000
Total financial services liabilities 110,252,000 95,167,000
Total liabilities 301,286,000 206,496,000
Contingency - Note M
Shareholders' equity - Notes J and K
Common stock, $1 par value, 90,000,000 shares
authorized, 45,767,000 and 45,738,000 shares
issued, respectively 45,767,000 45,738,000
Capital in excess of par value 53,756,000 54,045,000
Retained earnings - Note F 133,138,000 105,471,000
Treasury stock, 395,000 shares, at cost (7,880,000)
Deferred stock awards (1,688,000) (1,715,000)
Foreign currency translation adjustment (2,779,000) (4,331,000)
Total shareholders' equity 220,314,000 199,208,000
Total liabilities and shareholders' equity $ 521,600,000 $ 405,704,000
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Net sales $ 677,228,000 $ 565,163,000 $ 518,223,000
Other income, net 412,000 1,048,000 1,214,000
Costs and expenses
Cost of sales 467,494,000 383,087,000 353,231,000
Selling, general and administrative 131,466,000 118,192,000 109,834,000
Interest expense 8,499,000 6,136,000 6,471,000
Total costs and expenses 607,459,000 507,415,000 469,536,000
Income before income taxes 70,181,000 58,796,000 49,901,000
Income taxes - Note G 23,411,000 19,016,000 15,471,000
Income before cumulative effects of changes in
accounting methods 46,770,000 39,780,000 34,430,000
Cumulative effects of changes in accounting
methods - Note B 30,000
Net income $ 46,770,000 $ 39,780,000 $ 34,460,000
Net income per share $ 1.02 $ 0.86 $ 0.75
Average common shares outstanding 45,957,000 46,293,000 46,128,000
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Operating activities
Net income $ 46,770,000 $ 39,780,000 $ 34,460,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 10,302,000 9,215,000 8,732,000
Cumulative effects of changes in accounting methods (30,000)
Provision for doubtful accounts 1,809,000 2,710,000 2,521,000
Deferred income taxes 3,544,000 (350,000) 2,213,000
Other, net 5,518,000 (1,844,000) (764,000)
Changes in operating assets and liabilities net of
effects from acquisitions and divestitures of companies
Accounts receivable (20,050,000) (10,742,000) 1,165,000
Inventories (4,458,000) (400,000) 1,054,000
Prepaid expenses (108,000) (935,000) 1,126,000
Accounts payable 5,217,000 5,193,000 (4,170,000)
Accrued liabilities 2,713,000 3,378,000 (4,474,000)
Income taxes 2,505,000 2,746,000 (1,594,000)
Net cash provided by operating activities 53,762,000 48,751,000 40,239,000
Investing activities
Purchases of properties and equipment (11,108,000) (10,139,000) (8,835,000)
Principal extensions under lease financing agreements (97,988,000) (70,470,000) (66,400,000)
Principal collections under lease financing agreements 81,182,000 64,041,000 63,063,000
Payments for purchases of companies, net of cash acquired (69,563,000) (22,869,000) (14,825,000)
Other, net 613,000 1,378,000 79,000
Net cash used for investing activities (96,864,000) (38,059,000) (26,918,000)
Financing activities
Addition to short-term borrowings 59,699,000 2,542,000 8,160,000
Principal payments on long-term borrowings (1,811,000) (1,002,000) (1,215,000)
Principal extensions under long-term borrowings 15,000,000 5,080,000
Purchases of treasury stock (9,736,000) (1,778,000) (4,679,000)
Cash dividends paid to shareholders (18,462,000) (15,938,000) (13,848,000)
Other, net 441,000 757,000 391,000
Net cash provided by (used for) financing activities 45,131,000 (10,339,000) (11,191,000)
Increase in cash and cash equivalents 2,029,000 353,000 2,130,000
Cash and cash equivalents at beginning of year 2,576,000 2,223,000 93,000
Cash and cash equivalents at end of year $ 4,605,000 $ 2,576,000 $ 2,223,000
<FN>
See notes to consolidated financial statements.
</TABLE>
Federal Signal Corporation and Subsidiaries
Notes to Consolidated Financial Statements
Note A - Significant Accounting Policies
Principles of consolidation: The consolidated financial statements
include the accounts of Federal Signal Corporation and all of its
subsidiaries.
Cash equivalents: The company considers all highly liquid investments
with a maturity of three months or less, when purchased, to be cash
equivalents.
Inventories: Inventories are stated at the lower of cost or market.
At December 31, 1994 and 1993, approximately 60% and 67%,
respectively, of the company's inventories are costed using the LIFO
(last-in, first-out) method. The remaining portion of the company's
inventories are costed using the FIFO (first-in, first-out) method.
Properties and depreciation: Properties and equipment are stated at
cost. Depreciation, for financial reporting purposes, is computed
principally on the straight-line method over the estimated useful
lives of the assets.
Intangible assets: Intangible assets principally consist of costs in
excess of fair values of net assets acquired in purchase transactions
and are generally being amortized over forty years. Accumulated
amortization aggregated $9,469,000 and $6,737,000 at December 31, 1994
and 1993, respectively. The company makes regular periodic
assessments to determine if factors are present which indicate that an
impairment of intangibles may exist. If factors indicate that an
impairment may exist, the company makes an estimate of the related
future cash flows. The undiscounted cash flows, excluding interest,
are compared to the related book value including the intangibles. If
such cash flows are less than the book value, the company makes an
estimate of the fair value of the related business to determine the
amount of impairment loss, if any, to be recorded as a reduction of
the recorded intangibles.
Revenue recognition: Substantially all of the company's sales are
recorded as products are shipped or services are rendered. The
percentage-of-completion method of accounting is used in certain
instances for custom-manufactured products where, due to the nature of
specific orders, production and delivery schedules exceed normal
schedules.
Income per share: Income per share was computed on the basis of the
weighted average number of common and common equivalent shares
(dilutive stock options) outstanding during the year.
Note B - Changes in Accounting for Postretirement Benefits and
Income Taxes
Effective January 1, 1992, the company adopted the provisions of
Statements of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," and No. 109, "Accounting for Income Taxes." The provisions
of SFAS No. 106 require that expenses associated with certain
postretirement benefits be recognized during the eligible service
lives of the respective employees. Prior to adoption of SFAS No. 106,
the company recorded the expenses for such benefits when the claims
were incurred. The company elected to recognize the transition
obligation of $1,931,000 ($1,231,000 net of the related income tax
benefits) immediately in net income in 1992, the year of adoption.
The provisions of SFAS No. 109 require that income tax liabilities and
assets are to be determined based upon tax rates and legislation
enacted as of the respective balance sheet date. Prior to the
company's adoption of SFAS No. 109, the company's income tax
liabilities and assets were determined using historical tax rates.
The company elected to record the cumulative adjustment of $1,261,000
in net income in 1992, the year of adoption.
Note C - Inventories
Inventories at December 31 are summarized as follows:
1994 1993
Finished goods $20,054,000 $15,860,000
Work in process 22,355,000 18,567,000
Raw materials 36,490,000 28,595,000
Total inventories $78,899,000 $63,022,000
If the first-in, first-out cost method, which approximates replacement
cost, had been used by the company, inventories would have aggregated
$88,093,000 and $71,541,000 at December 31, 1994 and 1993,
respectively.
Note D - Properties and Equipment
A comparative summary of properties and equipment at December 31 is as
follows:
1994 1993
Land $ 5,740,000 $ 5,502,000
Buildings and improvements 38,045,000 36,014,000
Machinery and equipment 109,841,000 93,481,000
Accumulated depreciation (80,788,000) (72,793,000)
Total properties and equipment $72,838,000 $62,204,000
Note E - Lease Financing and Other Receivables
As an added service to its customers, the company is engaged in
financial services activities. These activities primarily consist of
providing long-term financing for certain customers of the company's
sign and vehicle operations. A substantial portion of the lease
financing receivables of the Vehicle Group are due from
municipalities. Financing is provided through sales-type lease
contracts with terms which range typically as follows:
Sign-related leases 3 - 5 years
Vehicle-related leases 2 - 8 years
At the inception of the lease, the company records the product sales
price and related costs and expenses of the sale. Financing revenues
are included in income over the life of the lease. The amounts
recorded as lease financing receivables represent amounts equivalent
to normal selling prices less subsequent customer payments.
Lease financing and other receivables will become due as follows:
$44,917,000 in 1995, $23,620,000 in 1996, $19,328,000 in 1997,
$13,820,000 in 1998, $9,432,000 in 1999 and $17,245,000 thereafter.
At December 31, 1994 and 1993, unearned finance revenue on these
leases aggregated $21,347,000 and $18,924,000, respectively.
Note F - Debt
Short-term borrowings at December 31 consisted of the following:
1994 1993
Commercial paper $ $21,422,000
Notes payable 134,289,000 53,021,000
Current maturities of long-term debt 1,185,000 1,272,000
Total short-term borrowings $135,474,000 $75,715,000
Long-term borrowings at December 31 consisted of the following:
1994 1993
7.59% unsecured note payable in 2001
($4,000,000) and 2002 ($8,000,000) $12,000,000 $12,000,000
7.99% unsecured note payable in 2004 15,000,000
6.58% unsecured discounted notes
payable in annual installments of
$1,000,000 ending in 2001 5,769,000 6,403,000
Other 3,294,000 3,947,000
Subtotal 36,063,000 22,350,000
Less current maturities 1,185,000 1,272,000
Total long-term borrowings $34,878,000 $21,078,000
Aggregate maturities of long-term debt amount to approximately
$1,185,000 in 1995, $1,073,000 in 1996, $3,655,000 in 1997, $987,000
in 1998 and $767,000 in 1999. The company believes that the fair
values of borrowings are not substantially different from recorded
amounts.
The 7.59% and 7.99% notes contain various restrictions relating to
maintenance of minimum working capital, payments of cash dividends,
purchases of the company's stock, and principal and interest of any
subordinated debt. All of the company's retained earnings at December
31, 1994 were free of any restrictions.
The company paid interest of $6,943,000 in 1994, $5,437,000 in 1993
and $5,871,000 in 1992. Weighted average interest rates on short-term
borrowings were 5.8% and 3.6% at December 31, 1994 and 1993,
respectively.
At December 31, 1994, the company had unused credit lines of
$60,000,000, which expire on June 20, 1998. Commitment fees, paid in
lieu of compensating balances, were insignificant.
Note G - Income Taxes
The provisions for income taxes consisted of the following:
1994 1993 1992
Current:
Federal and foreign $17,775,000 $17,200,000 $11,817,000
State and local 2,092,000 1,946,000 1,441,000
Total 19,867,000 19,146,000 13,258,000
Deferred (credit):
Federal and foreign 3,333,000 (226,000) 2,117,000
State and local 211,000 (124,000) 96,000
Total 3,544,000 (350,000) 2,213,000
Enacted rate change
effect on deferred
liabilities 220,000
Total income taxes $23,411,000 $19,016,000 $15,471,000
Differences between the statutory federal income tax rate and the
effective income tax rate are summarized below:
1994 1993 1992
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of federal
tax benefit 2.1 2.0 2.0
Tax-exempt interest (2.6) (3.0) (3.4)
Enacted rate change effect on
deferred liabilities .4
Other, net (1.1) (2.1) (1.6)
Effective income tax rate 33.4% 32.3% 31.0%
The company had net current deferred income tax benefits of $1,362,000
and $2,057,000 recorded in the balance sheet at December 31, 1994 and
1993, respectively. The company paid income taxes of $17,735,000 in
1994, $16,938,000 in 1993 and $13,503,000 in 1992.
Deferred tax liabilities (assets) comprised the following at
December 31, 1994: Depreciation and amortization - $14,296,000;
revenue recognized on lease financing receivables and custom
manufacturing contracts - $8,143,000; accrued expenses deductible in
future periods - $(9,283,000); and other $(740,000). Deferred tax
liabilities (assets) comprised the following at December 31, 1993:
Depreciation and amortization - $10,708,000; revenue recognized on
lease financing receivables and custom manufacturing contracts -
$8,393,000; accrued expenses deductible in future periods -
$(7,593,000); and other $(2,636,000).
Note H - Postretirement Benefits
The company and its subsidiaries sponsor a number of defined benefit
retirement plans covering certain of its salaried employees and hourly
employees not covered by plans under collective bargaining agreements.
Benefits under these plans are primarily based on final average
compensation as defined within the provisions of the individual plans.
The company's policy is to contribute amounts sufficient to meet the
minimum funding requirements of applicable laws and regulations. Plan
assets consist principally of a broadly diversified portfolio of
equity securities, corporate and U.S. Government obligations and
guaranteed-return insurance contracts. The company also participates
in several multiemployer retirement plans which provide benefits to
employees under certain collective bargaining agreements.
Pension expense is summarized as follows:
1994 1993 1992
Company-sponsored plans
Service cost $1,687,000 $1,511,000 $1,415,000
Interest cost 2,437,000 2,290,000 2,053,000
Return on plan assets 581,000 (6,428,000) (3,827,000)
Other amortization and
deferral (5,521,000) 1,943,000 (219,000)
Total (816,000) (684,000) (578,000)
Multiemployer plans 337,000 561,000 530,000
Total pension expense
(credit) $ (479,000) $ (123,000) $ (48,000)
The following summarizes the funded status of the company-sponsored
plans at December 31, 1994 and 1993 and the major assumptions used to
determine these amounts. At December 31, 1994 and 1993, all of the
company's plans had assets which exceeded accumulated benefits.
1994 1993
Actuarial present value of:
Vested benefit obligation $21,904,000 $24,193,000
Nonvested benefits 1,746,000 1,874,000
Accumulated benefit obligation $23,650,000 $26,067,000
Actuarial present value of projected
benefit obligation $31,072,000 $32,457,000
Plan assets at market value 43,318,000 45,058,000
Plan assets in excess of projected
benefit obligation 12,246,000 12,601,000
Unrecognized net obligation at
January 1, 1994 and 1993,
respectively (2,270,000) (2,455,000)
Unrecognized net experience
(gain) (9,660,000) (10,646,000)
Net pension asset (liability) $ 316,000 $ (500,000)
The following significant assumptions were used in determining pension
costs for the years ended December 31, 1994, 1993 and 1992:
1994 1993 1992
Discount rate 7.6% 8.5% 8.5%
Rate of increase in
compensation levels 4% 5% 5%
Expected long-term rate of
return on plan assets 11% 11% 11%
The weighted average discount rates used in determining the actuarial
present value of all pension obligations at December 31, 1994 and 1993
were 8.9% and 7.6%, respectively.
The company also sponsors a number of defined contribution pension
plans covering a majority of its employees. Participation in the plans
is at each employee's election. Company contributions to these plans
are based on a percentage of employee contributions. The cost of these
plans was $2,900,000 in 1994 (including newly acquired companies),
$2,160,000 in 1993 and $2,130,000 in 1992.
The company also provides certain medical, dental and life benefits to
certain eligible retired employees. These benefits are funded when the
claims are incurred. Participants generally become eligible for these
benefits at age 60 after completing at least fifteen years of service.
The plan provides for the payment of specified percentages of medical
and dental expenses reduced by any deductible and payments made by
other primary group coverage and government programs. The corporation
will continue to reduce the percentage of the cost of benefits that it
will pay since the company's future costs are limited to 150% of the
1992 cost.
The following table sets forth the status of the retiree health care
benefits at December 31, 1994 and 1993, respectively:
1994 1993
Accumulated postretirement benefit
obligation:
Retirees $ 638,000 $ 696,000
Fully eligible active
plan participants 30,000 22,000
Other active plan participants 1,510,000 1,465,000
Unrecognized net experience gain 163,000
Accrued postretirement benefit
liability $2,341,000 $2,183,000
The net periodic postretirement benefit cost for 1994, 1993 and 1992
consisted of the following:
1994 1993 1992
Service cost of
benefits earned $112,000 $ 89,000 $ 94,000
Interest cost on
accumulated postretirement
benefit obligation 179,000 163,000 167,000
Net periodic postretirement
benefit cost $291,000 $252,000 $261,000
The expected postretirement benefit obligation was measured using an
assumed 12% increase in the per capita claims medical costs and a 10%
increase in the per capita dental claims costs for 1993. These
increases are reduced by .65% and .55%, respectively, after 1993
through 2003 and remain at 5.5% and 4.5%, respectively, thereafter.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.9% at December 31, 1994 and
7.6% at December 31, 1993. If the health care cost trend rates were
increased 1%, the accumulated postretirement benefit obligation as of
December 31, 1994 would have increased by 1%. The effect of this
change on the aggregate of service and interest cost for 1994 would be
an increase of 2%.
Note I - Derivative Financial Instruments
The company enters into agreements (derivative financial instruments)
to manage the risks associated with certain aspects of its business.
The company does not actively trade such instruments nor enter into
such agreements for speculative purposes. The company principally
utilizes two types of derivative financial instruments: 1) interest
rate swaps to manage its interest rate risk, and 2) foreign currency
forward exchange contracts to manage risks associated with sales and
purchase commitments denominated in foreign currencies.
At December 31, 1994, the company had agreements with financial
institutions to swap interest rates on notional amounts totaling $15
million. One of the agreements expires in 1995 and provides that the
company will pay interest at an average fixed annual rate of 7.12% on
a notional amount of $5 million and will receive interest based upon
the London Interbank Offered Rate (LIBOR). The other agreement expires
in 1997 and provides that the company will receive a fixed annual rate
of 5.08% and will pay interest at the LIBOR with a maximum floating
rate of 7.50% for the last twelve months of the agreement. The
differential between the amount received and the amount paid is accrued
as interest rates change and recognized as an adjustment to interest
expense; the related amount payable to or receivable from the
counterparties is included in accrued liabilities or other assets. The
estimated cost to terminate these agreements was $500,000 at
December 31, 1994.
At December 31, 1994, the company had foreign currency forward exchange
contracts designated and effective as hedges which become due in
various amounts and at various dates through February 1997 totalling
$3,000,000. All such contracts at December 31, 1994 were for the
purpose of hedging purchase commitments. Unrealized gains and losses
on the forward exchange contracts are deferred and will be recognized
in income in the same period as the hedged transaction. The difference
between the contract value and the fair value was insignificant at
December 31, 1994.
Note J - Stock Options and Awards
The company's stock benefit plan, approved by the company's
shareholders, authorizes the grant of up to 2,737,500 (as adjusted for
subsequent stock splits and dividends) benefit shares or units to key
employees and directors until May 1998. This excludes shares which
were issued under predecessor plans. Benefit shares or units include
stock options, both incentive and non-incentive, stock awards and other
stock units.
Stock options are primarily granted at the fair market value of the
shares on the date of grant and become exercisable one year after grant
at a rate of one-half annually and are exercisable in full on the
second anniversary date. All options and rights must be exercised
within ten years from date of grant. At the company's discretion,
vested stock option holders are permitted to elect an alternative
settlement method in lieu of purchasing common stock at the option
price. The alternative settlement method permits the employee to
receive, without payment to the company, cash, shares of common stock
or a combination thereof equal to the excess of market value of common
stock over the option purchase price.
Changes in outstanding shares under option during 1994 were as follows:
Option
Option shares price range
Outstanding at December 31, 1993 1,694,334 $ 2.80-$20.63
Granted 211,438 $17.50-$20.63
Canceled or expired (17,329) $11.17-$20.16
Exercised (73,311) $ 2.80-$15.47
Outstanding at December 31, 1994 1,815,132 $ 3.21-$20.63
Exercisable at December 31, 1994 1,302,771 $ 3.21-$20.63
Stock award shares are granted to employees at no cost. Awards
primarily vest at the rate of 25% annually commencing one year from the
date of award, provided the recipient is still employed by the company
on the vesting date. The cost of stock awards, based on the fair
market value at the date of grant, is being charged to expense over the
four-year vesting period.
Available for future grant were 425,950 and 658,707 benefit shares or
units at December 31, 1994 and 1993, respectively.
<TABLE>
Note K - Shareholders' Equity
The company has 90,000,000 authorized shares of common stock, $1 par value and 800,000 authorized and unissued shares of preference
stock, $1 par value.
The changes in shareholders' equity for each of the three years in the period ended December 31, 1994 were as follows:
<CAPTION>
Foreign
Common Capital in Deferred currency
stock excess of Retained Treasury stock translation
par value par value earnings stock awards adjustment
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991 -
23,541,000 shares issued $23,541,000 $93,156,000 $62,063,000 $(12,871,000) $(2,118,000) $1,003,000
Net income 34,460,000
Cash dividends declared (14,363,000)
Conversion of debentures 133,000 798,000
Exercise of stock options:
Cash proceeds 56,000 337,000
Exchange of shares 69,000 300,000 (369,000)
Stock awards granted 26,000 508,000 (534,000)
Tax benefits related to stock
compensation plans 656,000
Retirement of treasury stock (44,000) (812,000) 856,000
Purchases of 264,000 shares
of treasury stock (5,249,000)
3-for-2 stock split,
10,697,000 shares issued 10,697,000 (23,590,000) 12,893,000
Amortization of deferred stock
awards 711,000
Foreign currency translation
adjustment (2,915,000)
Other 69,000 (487,000)
Balance at December 31, 1992 -
34,478,000 shares issued 34,478,000 71,422,000 82,160,000 (5,227,000) (1,941,000) (1,912,000)
Net income 39,780,000
Cash dividends declared (16,469,000)
Exercise of stock options:
Cash proceeds 86,000 438,000
Exchange of shares 155,000 938,000 (1,093,000)
Stock awards granted 30,000 659,000 (689,000)
Stock awards canceled (2,000) (57,000) 59,000
Tax benefits related to stock
compensation plans 1,562,000
Retirement of treasury stock (81,000) (1,929,000) 2,010,000
Purchases of 99,000 shares of
treasury stock (2,689,000)
4-for-3 stock split,
11,072,000 shares issued 11,072,000 (18,988,000) 7,916,000
Amortization of deferred stock
awards 856,000
Foreign currency translation
adjustment (2,419,000)
Other (917,000)
Balance at December 31, 1993 -
45,738,000 shares issued 45,738,000 54,045,000 105,471,000 - (1,715,000) (4,331,000)
Net income 46,770,000
Cash dividends declared (19,103,000)
Exercise of stock options:
Cash proceeds 67,000 393,000
Exchange of shares 6,000 21,000 (27,000)
Stock awards granted 43,000 770,000 (813,000)
Stock awards canceled (4,000) (59,000) 63,000
Tax benefits related to stock
compensation plans 206,000
Retirement of treasury stock (12,000) (213,000) 225,000
Purchases of 466,000 shares
of treasury stock (9,339,000)
Shares purchased subsequent to
December 31, 1993 used to
effect 4-for-3 stock split (71,000) (1,387,000) 1,458,000
Amortization of deferred stock
awards 777,000
Foreign currency translation
adjustment 1,552,000
Other (20,000) (197,000)
Balance at December 31, 1994 -
45,767,000 shares issued $45,767,000 $53,756,000 $133,138,000 $(7,880,000) $(1,688,000) $(2,779,000)
</TABLE>
In June 1988, the company declared a dividend distribution of one
preferred share purchase right on each share of common stock
outstanding on and after July 5, 1988. The rights are not exercisable
until the rights distribution date, defined as the earlier of: 1) the
tenth day following a public announcement that a person or group of
affiliated or associated persons acquired or obtained the right to
acquire beneficial ownership of 20% or more of the outstanding common
stock or 2) the tenth day following the commencement or announcement
of an intention to make a tender offer or exchange offer, the
consummation of which would result in the beneficial ownership by a
person or group of 30% or more of such outstanding common shares. Each
right, when exercisable, entitles the holder to purchase from the
company one one-hundredth of a share of Series A Preferred stock of the
company at a price of $90 per one one-hundredth of a preferred share,
subject to adjustment. The company is entitled to redeem the rights at
$.10 per right, payable in cash or common shares, at any time prior to
the expiration of twenty days following the public announcement that a
20% position has been acquired. In the event that the company is
acquired in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power is sold, proper
provision will be made so that each holder of a right will thereafter
have the right to receive, upon the exercise thereof at the then
current exercise price of a right, that number of shares of common
stock of the acquiring company which at the time of such transaction
would have a market value of two times the exercise price of the right.
The rights expire on July 5, 1998 unless earlier redeemed by the
company. Until exercised, the holder of a right, as such, will have no
rights as a shareholder, including, without limitation, the right to
vote or to receive dividends.
Note L - Acquisitions
During the three-year period ended December 31, 1994, the company made
the following acquisitions, all principally for cash and, in certain
instances, earnouts to be based upon the future profitability of the
respective business. Generally, earnouts are payable at the end of a
five-year period, a portion of which are sometimes guaranteed. In June
1994, the company acquired the principal operating assets and assumed
the principal operating liabilities of Peabody Myers Corporation
("Vactor"). Vactor is an Illinois-based manufacturer of municipal
combination catch basin/sewer cleaning vacuum trucks. In May 1994, the
company acquired the principal operating assets and assumed the
principal operating liabilities of Justrite Manufacturing Company, an
Illinois-based manufacturer of safety equipment for the storage,
transfer, use and disposal of flammable and hazardous materials. As a
result of the 1994 acquisitions, the company recorded approximately
$9.9 million of working capital, $10.3 million of fixed and other
assets and $49.6 million of costs in excess of fair values. In March
1993, the company acquired the outstanding shares of Guzzler
Manufacturing, Inc., an Alabama-based manufacturer of vacuum loader
vehicles. As a result of this acquisition, the company recorded
approximately $6.0 million of working capital, $6.1 million of fixed
and other assets, $.8 million of debt assumed and $12.7 million of
costs in excess of fair values. In November 1992, the company acquired
the outstanding shares of Dico Corporation, a Michigan-based
manufacturer of polycrystalline diamond and cubic boron nitride cutting
tools. In May 1992, the company acquired the outstanding shares of
Aplicaciones Tecnologicas Vama S.L., a leading European manufacturer of
emergency vehicular signaling products located in Barcelona, Spain. In
March 1992, the company acquired the assets of Schneider Stanznormalien
GmbH, a German manufacturer of precision punch and die components, for
cash. As a result of the 1992 acquisitions, the company recorded
approximately $7.2 million of working capital, $2.8 million of fixed
and other assets, $.5 million of debt assumed and $12.0 million of
costs in excess of fair values.
All of the acquisitions in the three-year period ended December 31,
1994 have been accounted for as purchases. Accordingly, the results of
operations of the acquired companies have been included in the
consolidated statements of income from the effective dates of the
acquisitions. Assuming the 1994 and 1993 acquisitions occurred on
January 1, 1993, the company estimates that consolidated net sales
would have been increased 6% and 15% in 1994 and 1993, respectively,
while net income would have increased 2% and 9%, respectively.
Note M - Contingency
On May 3, 1993, a Texas federal court jury rendered a verdict of
$17,745,000 against Federal Sign, a division of the company, for
alleged violation of the Texas Deceptive Trade Practices Act and
misrepresentations to Duravision, Inc. and Manufacturers Product
Research Group of North America, Inc. in connection with a 1988
research and development project for indoor advertising signs. The
company believes the court erroneously excluded important evidence and
that the verdict was against the weight of the evidence. Both inside
and outside counsel that initially handled the case opined at the time
of the verdict that the likelihood of a substantially unfavorable
result to the company on appeal was remote. Trial counsel has turned
the case over to new appellate counsel and has stated they cannot
currently give an opinion on the appeal because they are no longer
handling the case. Appellate counsel now handling the appeal of the
case has not issued an opinion on its outcome. However, if the company
loses its appeal of this case, there would be a charge to earnings for
this $17,745,000 verdict, plus interest and attorney fees of up to
$11,000,000. On the other hand, there would be no such charges to
earnings for a decision reversing the original verdict or the appellate
court could issue a decision somewhere in between. Depending on the
outcome of this matter, an adverse decision may have a material effect
on results of operations and cash flows in the periods that the
appellate court decision is made and required payments are made. The
company believes that the ultimate resolution of this contingency,
however, will not have a material effect on its financial condition nor
its results of operations or cash flows for periods subsequent to the
appellate court decision and payments required as a result of such
decision. The company cannot reasonably estimate the ultimate amount
of a judgment, if any, or interest and attorney fees, if any, which may
result from an adverse appellate court decision. Accordingly, the
company has not recorded any accruals for potential losses which may
result from an adverse judgment. In the event of an adverse decision,
the company intends to aggressively pursue a substantial recovery from
its original trial counsel in this matter.
Note N - Segment Information
The principal activities of the company's primary industry segments are
as follows:
Safety Products Group: The Safety Products Group produces: a variety
of visual and audible warning and signal devices used by private
industry and various governmental agencies; paging, local signaling,
and building security, parking and access control systems; and
equipment for storage, transfer, use and disposal of flammable and
hazardous materials.
Sign Group: The Sign Group manufactures for sale or lease illuminated,
non-illuminated and electronic advertising sign displays. It also
enters into contracts to provide maintenance service for the signs it
manufactures as well as for signs manufactured by others.
Tool Group: The Tool Group manufactures a variety of perishable tools
which include die components for the metal stamping industry, a large
selection of precision metal products for non-stamping needs and a line
of precision cutting and deep grooving tools.
Vehicle Group: The Vehicle Group manufactures: chassis; fire trucks
including Class A pumpers, mini-pumpers and tankers; airport and other
rescue vehicles, ambulances and aerial ladder trucks; a variety of
self-propelled street cleaning vehicles; vacuum loader vehicles and
municipal catch basin/sewer cleaning vacuum trucks.
Total revenue by business segment reflects sales to unaffiliated
customers, as reported in the company's consolidated statements of
income. Operating profit includes all costs and expenses directly
related to the segment involved. In determining operating profit,
neither corporate nor interest expenses were included. Business
segment depreciation expense, identifiable assets and capital
expenditures relate to those assets that are utilized by the respective
business segment. Corporate assets consist principally of cash and
cash equivalents, notes and other receivables and fixed assets.
Foreign sales, including export and foreign operations, aggregated
$129,896,000 in 1994, $113,210,000 in 1993 and $121,332,000 in 1992.
Export sales aggregated $67,341,000 in 1994, $59,324,000 in 1993 and
$61,355,000 in 1992.
A summary of the company's operations by geographic area for the three-
year period ended December 31, 1994 is as follows (in thousands):
1994 1993 1992
United States
Net sales $614,673 $511,277 $458,246
Operating income 76,190 62,977 53,863
Identifiable assets 463,621 353,172 307,088
All foreign (principally
Europe, Canada and Japan)
Net sales $ 62,555 $ 53,886 $ 59,977
Operating income 2,078 907 1,295
Identifiable assets 57,979 52,532 56,571
For the years ended December 31,
(in thousands)
1994 1993 1992
Net sales
Safety Products $135,424 $104,927 $ 95,946
Sign 66,090 58,550 56,074
Tool 121,657 111,879 99,619
Vehicle 354,057 289,807 266,584
Total net sales $677,228 $565,163 $518,223
Operating income
Safety Products $ 23,313 $ 16,159 $ 13,518
Sign 3,988 1,169 (1,815)
Tool 23,475 23,273 21,715
Vehicle 33,531 30,289 28,267
Corporate expense (6,039) (7,006) (6,527)
Total operating income 78,268 63,884 55,158
Interest expense (8,499) (6,136) (6,471)
Other income 412 1,048 1,214
Income before income taxes $ 70,181 $ 58,796 $ 49,901
Depreciation
Safety Products $ 2,693 $ 1,757 $ 1,792
Sign 1,400 1,684 1,856
Tool 2,386 2,313 1,957
Vehicle 3,772 3,412 3,082
Corporate 51 49 45
Total depreciation $ 10,302 $ 9,215 $ 8,732
Identifiable assets
Manufacturing activities
Safety Products $ 98,438 $ 51,092 $ 47,043
Sign 26,771 24,480 23,237
Tool 66,729 62,035 61,803
Vehicle 192,436 142,158 120,507
Corporate 10,038 15,359 7,080
Total manufacturing
activities 394,412 295,124 259,670
Financial services activities
Sign 13,836 17,282 19,958
Vehicle 113,352 93,298 84,031
Total financial services
activities 127,188 110,580 103,989
Total identifiable assets $521,600 $405,704 $363,659
Capital expenditures
Safety Products $ 2,409 $ 2,675 $ 1,366
Sign 1,218 988 1,227
Tool 4,200 2,614 2,710
Vehicle 3,245 3,848 3,513
Corporate 36 14 19
Total capital expenditures $ 11,108 $ 10,139 $ 8,835
<TABLE>
Note O - Selected Quarterly Data (Unaudited)
(in thousands of dollars except per share amounts)
<CAPTION>
For the three months ended
1 9 9 4 1 9 9 3
March June September December March June September December
31 30 30 31 31 30 30 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $138,106 $164,001 $181,283 $193,838 $127,447 $146,463 $142,740 $148,513
Gross margin $ 42,891 $ 51,751 $ 55,415 $ 59,677 $ 40,472 $ 46,244 $ 46,365 $ 48,995
Net income $ 8,156 $ 12,396 $ 12,436 $ 13,782 $ 7,151 $ 10,602 $ 10,661 $ 11,366
Per share data:
Net income $ .18 $ .27 $ .27 $ .30 $ .15 $ .23 $ .23 $ .25
Dividends paid $ .11 $ .11 $ .11 $ .11 $ .09 $ .09 $ .09 $ .09
Market price range
High $ 21 3/8 $ 20 3/8 $ 20 5/8 $ 21 $ 18 1/4 $ 19 $ 21 $ 21
Low $ 19 1/4 $ 16 7/8 $ 17 $ 17 3/4 $ 15 3/4 $ 16 1/2 $ 17 7/8 $ 19 1/2
</TABLE>
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders and Board of Directors
of Federal Signal Corporation
We have audited the accompanying consolidated balance sheets of Federal
Signal Corporation and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income and cash flows for
each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Federal Signal Corporation and subsidiaries as of December 31, 1994
and 1993, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note M to the financial statements, during 1993 a Texas
federal court jury rendered a verdict of $17,745,000, plus interest and
attorney fees, against Federal Sign, a division of the company, for
alleged violation of the Texas Deceptive Trade Practices Act and
misrepresentation related to a research and development project. The
company has appealed the verdict. The company cannot reasonably
estimate the ultimate outcome of the litigation. Accordingly, no
provision for any liability that may result has been made in the
financial statements.
Ernst & Young LLP
Chicago, Illinois
January 23, 1995
APPENDIX A
- ----------
FEDERAL SIGNAL CORPORATION
1994 Annual Report Graphic Material
The following table sets forth bar graph information contained in the
Financial Review section of the 1994 Annual Report paper format. It is
presented here in tabular format in order to conform with electronic
filing requirements.
(IN PERCENT)
1990 1991 1992 1993 1994
RETURN ON MANUFACTURING
ASSETS:
Total Company (1) 25% 24% 22% 22% 22%
Safety Products (2) 24% 30% 31% 34% 29%
Sign 10% -10% -12% 1% 12%
Tool 46% 44% 41% 37% 35%
Vehicle (3) 21% 22% 17% 15% 16%
(1) excluding acquisitions, return was 24% in 1994
(2) excluding acquisitions, return was 36% in 1994
(3) excluding acquisitions, return was 17% in 1994
EXHIBIT 21
FEDERAL SIGNAL CORPORATION
Subsidiaries of the Registrant
The following table sets forth information concerning significant
subsidiaries of the Registrant.
Jurisdiction
in which
Name Organized
---------------------------------------- ------------
Aplicaciones Tecnologicas VAMA S.L. Spain
Bassett Rotary Tool Company Indiana
Dayton Progress Canada, Ltd. Ontario, Canada
Dayton Progress Corporation Ohio
Dayton Progress International Corporation Ohio
Dayton Progress (U.K.), Ltd. United Kingdom
Dico Corporation Michigan
Elgin Sweeper Company Delaware
Emergency One, Inc. Delaware
Federal APD, Inc. Michigan
Federal Signal Credit Corporation Delaware
Federal Signal International (FSC), Ltd. Jamaica, W.I.
Guzzler Manufacturing, Inc. Alabama
Jamestown Punch and Tooling, Inc. New York
Justrite Manufacturing Company, L.L.C. Delaware
Manchester Tool Company Delaware
Nippon Dayton Progress K.K. Japan
Ravo International (Van Raaij Holdings BV
and its subsidiaries) Netherlands
Schneider Stanznormalien GmbH Germany
Superior Emergency Vehicles, Ltd. Alberta, Canada
Vactor Manufacturing, Inc. Illinois
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Federal Signal Corporation of our report dated January 23, 1995,
included in the 1994 Annual Report to Shareholders of Federal Signal
Corporation.
Our audits also included the financial statement schedule of Federal Signal
Corporation listed in item 14(a)2. This schedule is the responsibility of
the Corporation's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 Nos. 33-12876, 33-22311, 33-38494, 33-41721 and
33-49476) pertaining to the Stock Option Plan and Employee Savings and
Investment Plans of our report dated January 23, 1995, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Federal
Signal Corporation.
Ernst & Young LLP
Chicago, Illinois
March 20, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1994 AND CONSOLIDATED
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,605
<SECURITIES> 0
<RECEIVABLES> 110,833
<ALLOWANCES> 2,848<F1>
<INVENTORY> 78,899
<CURRENT-ASSETS> 196,296<F1>
<PP&E> 153,626
<DEPRECIATION> 80,788
<TOTAL-ASSETS> 521,600
<CURRENT-LIABILITIES> 142,378<F1>
<BONDS> 34,878
<COMMON> 45,767
0
0
<OTHER-SE> 174,547
<TOTAL-LIABILITY-AND-EQUITY> 521,600
<SALES> 677,228
<TOTAL-REVENUES> 677,228
<CGS> 467,494
<TOTAL-COSTS> 467,494
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,499
<INCOME-PRETAX> 70,181
<INCOME-TAX> 23,411
<INCOME-CONTINUING> 46,770
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,770
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
<FN>
<F1>MANUFACTURING OPERATIONS ONLY
</FN>
</TABLE>
