FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
o 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, IL 60521
(Address of principal executive offices) (Zip code)
(630) 954-2000
(Registrant's telephone number including area code)
Not applicable
(Former name, former address, and former fiscal year, if changed since
last report)
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 the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title Outstanding
Common Stock, $1.00 par value 45,249,226
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
INTRODUCTION
The consolidated condensed financial statements of Federal Signal Corporation
and subsidiaries included herein have been prepared by the Registrant, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Registrant believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Registrant's Proxy Statement for the Annual Meeting of Shareholders held on
April 16, 1997.
<PAGE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31
1997 1996
------------ ------------
Net sales $224,485,000 $210,793,000
Costs and expenses:
Cost of sales 154,061,000 147,663,000
Selling, general and administrative 46,624,000 41,918,000
Other (income) and expenses:
Interest expense 3,937,000 3,630,000
Other (income) expense, net (526,000) (282,000)
----------- -----------
204,096,000 192,929,000
Income before income taxes 20,389,000 17,864,000
Income taxes 6,773,000 6,013,000
----------- -----------
Net income $ 13,616,000 $ 11,851,000
=========== ===========
COMMON STOCK DATA:
Net income per share $ .30 $ .26
=========== ===========
Average common shares outstanding 45,841,000 45,963,000
Cash dividends per share of
common stock $ .1675 $ .145
See notes to condensed consolidated financial statements.
<PAGE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 December 31
1997 1996(a)
(Unaudited)
ASSETS
Manufacturing activities -
Current assets:
Cash and cash equivalents $ 5,547,000 $12,431,000
Trade accounts receivable, net of
allowances for doubtful accounts 139,119,000 141,203,000
Inventories:
Raw materials 64,103,000 56,051,000
Work in process 29,129,000 29,088,000
Finished goods 27,125,000 23,154,000
Prepaid expenses 5,142,000 5,079,000
----------- -----------
Total current assets 270,165,000 267,006,000
Properties and equipment:
Land 5,190,000 5,250,000
Buildings and improvements 42,101,000 40,044,000
Machinery and equipment 133,520,000 132,099,000
Accumulated depreciation (97,015,000) (94,568,000)
----------- -----------
Net properties and equipment 83,796,000 82,825,000
Intangible assets, net of
accumulated amortization 162,710,000 165,854,000
Other deferred charges and assets 16,296,000 17,228,000
----------- -----------
Total manufacturing assets 532,967,000 532,913,000
Financial services activities -
Lease financing receivables, net of
allowances for doubtful accounts 175,234,000 170,988,000
----------- -----------
Total assets $708,201,000 $703,901,000
=========== ===========
See notes to condensed consolidated financial statements.
(a) The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date.
<PAGE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS -- Continued
March 31 December 31
1997 1996(a)
(Unaudited)
LIABILITIES
Manufacturing activities -
Current liabilities:
Short-term borrowings $79,819,000 $69,987,000
Trade accounts payable 62,745,000 64,088,000
Accrued liabilities and income taxes 79,242,000 92,338,000
----------- -----------
Total current liabilities 221,806,000 226,413,000
Long-term borrowings 33,113,000 34,311,000
Deferred income taxes 22,183,000 22,183,000
----------- -----------
Total manufacturing liabilities 277,102,000 282,907,000
Financial services activities -
Short-term borrowings 152,033,000 148,205,000
----------- -----------
Total liabilities 429,135,000 431,112,000
SHAREHOLDERS' EQUITY
Common stock - par value 46,073,000 45,986,000
Capital in excess of par value 58,573,000 57,138,000
Retained earnings 203,845,000 190,181,000
Treasury stock (18,121,000) (14,404,000)
Deferred stock awards (2,618,000) (1,508,000)
Foreign currency translation (8,686,000) (4,604,000)
----------- -----------
Total shareholders' equity 279,066,000 272,789,000
----------- -----------
Total liabilities and
shareholders' equity $708,201,000 $703,901,000
=========== ===========
See notes to condensed consolidated financial statements.
(a) The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date.
<PAGE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31
1997 1996
----------- -----------
Operating activities:
Net income $13,616,000 $11,851,000
Depreciation 3,629,000 3,277,000
Amortization 1,376,000 1,095,000
Working capital changes and other (11,080,000) (12,078,000)
----------- -----------
Net cash provided by operating
activities 7,541,000 4,145,000
Investing activities:
Purchases of properties and
equipment (5,240,000) (4,028,000)
Principal extensions under
lease financing agreements (31,770,000) (23,726,000)
Principal collections under
lease financing agreements 27,524,000 20,152,000
Payments for purchases of companies,
net of cash acquired (685,000)
Other, net 1,652,000 276,000
----------- -----------
Net cash used for investing
activities (7,834,000) (8,011,000)
Financing activities:
Additional short-term
borrowings, net 13,899,000 7,439,000
Reduction of long-term borrowings (1,206,000) (987,000)
Purchases of treasury stock (5,252,000)
Cash dividends paid to
shareholders (14,131,000) (12,240,000)
Other, net 99,000 304,000
----------- -----------
Net cash used for financing
activities (6,591,000) (5,484,000)
----------- -----------
Decrease in cash and cash
equivalents (6,884,000) (9,350,000)
Cash and cash equivalents at
beginning of period 12,431,000 9,350,000
----------- -----------
Cash and cash equivalents at
end of period $ 5,547,000 $ --
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. It is suggested that the condensed consolidated financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Registrant's Proxy Statement for the Annual Meeting of
Shareholders held on April 16, 1997.
2. In the opinion of the Registrant, the information contained herein
reflects all adjustments necessary to present fairly the Registrant's
financial position, results of operations and cash flows for the interim
periods. Such adjustments are of a normal recurring nature. The operating
results for the three months ended March 31, 1997, are not necessarily
indicative of the results to be expected for the full year of 1997.
3. Interest paid for the three-month periods ended March 31, 1997 and 1996
was $4,020,000 and $3,535,000, respectively. Income taxes paid for these
same periods were $4,914,000 and $604,000, respectively.
4. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be
adopted on December 31, 1997. At that time, the Registrant will
be required to change the method currently used to compute
earnings per share. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options
will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share for these quarters
is expected to be insignificant.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
FIRST QUARTER 1997
Comparison with First Quarter 1996
First quarter net income of $13.6 million, or $.30 per share, increased 15% over
the $11.9 million, or $.26 per share, achieved in the first quarter of 1996.
First quarter sales of $224.5 million increased 6% over last year's $210.8
million. New business of $201.4 million decreased 9% from the $222.0 million
booked in last year's first quarter. Excluding the impact of the acquisition of
Victor which occurred in mid-1996, sales increased 3% and new business decreased
12% from last year. Backlogs stood at $253.5 million compared with $263.4
million a year ago.
The Safety, Vehicle and Tool groups reported increases in sales over last year's
first quarter while Sign's sales were lower. The Vehicle Group's earnings
increased significantly in the first quarter of 1997, while earnings in the
company's other groups declined. New business declined 9% which reflected some
deferred ordering in 1997's first quarter in the Sign and Vehicle groups as well
as unusually strong orders for those same groups in last year's first quarter.
The Safety Products Group achieved an 8% increase in sales while earnings fell
19%. These percentage changes reflect the first time inclusion of the mid-1996
acquisition, Victor Products. Excluding the impact of Victor, the group's sales
and earnings were down by 7% and 23%, respectively. Sales of emergency vehicle
lighting and outdoor warning products declined from the unusually high levels
achieved in last year's first quarter when the group's sales increased 21% over
the prior year. These lower sales are also the result of lower orders from the
Far East and delayed orders in Europe. For the quarter, margins were adversely
affected by a short-term shift to lower-margin products.
The Vehicle Group's earnings increased 73% and sales increased 13%. High
beginning backlogs in the domestic and foreign units generated significantly
increased fire rescue sales in the quarter. Both fire rescue and environmental
products achieved significant earnings gains over the prior year, reflecting
several positive operational factors. Increased sales, improvements in
productivity, improved product mix and the results of last year's successful
reorganization of the group's Finnish operations doubled fire rescue earnings in
the first quarter over the prior year. Environmental products' earnings were
also sharply higher on increased sales volume, various operational benefits and
improved sales mix in municipal sweepers.
Tool Group sales increased 1% while earnings declined 2%. Both domestic and
foreign sales increased in the die components and cutting tools businesses;
weakness in the can tooling business somewhat offset those increases.
The Sign Group's sales and earnings continued weak through the first quarter.
Sales declined 25% and earnings declined 69%. While the group has improved its
order-to-manufacturing processes to substantially reduce last year's costly
overruns, it continues to weather a longer than expected lag in the placement of
customer orders.
Registrant expects the second quarter to show increases over last year's sales
and earnings in all groups except Sign. Quoting activity has been strong and
improving for the Sign Group and Registrant believes that second quarter will
improve over the first quarter but not exceed last year's second quarter
earrings performance. Last year's organizational improvements in the foreign
vehicles businesses are expected to continue to benefit Registrant's results for
both the short and long term. Cost of sales as a percent of net sales decreased
from 70.1% in the first quarter of 1996 to 68.6% in the first quarter of 1997.
The percentage decrease was attributed to the Vehicle Group, which experienced
significantly improved gross margins due to the reorganization of the Finnish
operations and productivity improvements in the sweeper business. Selling,
general and administrative expenses as a percent of net sales increased slightly
to 20.8% from 19.9% in the first quarter of 1996. The effective tax rate for the
first quarter of 1997 was 33.2% compared to the first quarter 1996 rate of
33.7%. The decrease mainly resulted from favorable foreign effects.
Seasonality of Registrant's Business
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,
municipal emergency signal products, parking systems and aerial access platform
operations.
Financial Position and Liquidity at March 31, 1997
The current ratio applicable to manufacturing activities was 1.2 at March 31,
1997 and December 31, 1996. Working capital (manufacturing operations) at March
31, 1997 was $48.4 million compared to $40.6 million at the most recent year
end. The increase in working capital resulted from inventory purchases made
largely in anticipation of orders that are expected to ship in the second
quarter of 1997, particularly in the Vehicle Group. The debt to capitalization
ratio applicable to manufacturing activities was 29% at March 31, 1997 compared
to 28% at December 31, 1996. The debt to capitalization ratio applicable to
financial services activities was 87% at March 31, 1997 and December 31, 1996.
Current financial resources and anticipated funds from the Registrant's
operations are expected to be adequate to meet future cash requirements
including capital expenditures and modest amounts of additional stock purchases.
Part II. Other Information
Responses to items one, two, three, five and six are omitted since these
items are either inapplicable or the response thereto would be negative.
Item 4. Submission of Matters to a Vote of Security Holders.
At its Annual Meeting of Stockholders on April 16, 1997, the stockholders of the
Registrant voted to elect two directors.
Walter R. Peirson. was re-elected a director for a three-year term.
Holders of 36,230,597 shares voted for the re-election, 517,589 shares
withheld votes, 8,609,214 shares did not vote and there were no broker
nonvotes.
Joseph J. Ross was re-elected a director for a three-year term. Holders of
36,250,815 shares voted for the re-election, 497,371 shares withheld votes,
8,609,214 shares did not vote and there were no broker nonvotes.
SIGNATURES
Pursuant to the requirements 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
05/09/97 By:___________________________________________
Date Henry L. Dykema, Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Registrant's consolidated condensed balance sheet as
of March 31, 1997 and consolidated condensed statement of income
for the three months ended March 31, 1997, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> MAR-31-1997
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<ALLOWANCES> 2825
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0
0
<COMMON> 46073
<OTHER-SE> 232993
<TOTAL-LIABILITY-AND-EQUITY> 708201
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<CGS> 154061
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<FN>
<F1>MANUFACTURING OPERATIONS ONLY
</FN>
</TABLE>
