Oak Brook, Illinois, March 1, 2022 — Federal Signal Corporation (NYSE:FSS), a leader in environmental and safety solutions, today reported results for the fourth quarter and year ended December 31, 2021.

Fourth Quarter and Full-Year Highlights

• Q4 net sales of $301 million, up $7 million, or 2%, from last year
• Full-year net sales of $1.21 billion, up $82 million, or 7%, from last year
• GAAP EPS of $0.32 for the quarter, and $1.63 for the year
• Adjusted EPS of $0.40 for the quarter, and $1.75 for the year
• Record orders of $444 million for the quarter, up $168 million, or 61%, from last year
• Record backlog of $629 million, up $325 million, or 107%, from last year
• Issues 2022 outlook with adjusted EPS* of $1.76 to $2.00 and net sales of $1.35 billion to $1.45 billion

Consolidated net sales for the fourth quarter were $301 million, up $7 million, or 2%, compared to the same quarter a year ago. Income from continuing operations for the fourth quarter was $19.5 million, equal to $0.32 per diluted share, compared to $26.0 million, or $0.42 per share, in the prior-year quarter. Income from continuing operations in the current-year quarter includes a non-cash, pre-tax pension settlement charge of $10.3 million, and approximately $3.0 million more discrete tax benefits compared to the prior-year quarter. The Company also reported adjusted income from continuing operations for the fourth quarter of $24.9 million, equal to $0.40 per diluted share, compared to $27.2 million, or $0.44 per share, in the same quarter a year ago. The Company is reporting adjusted results to facilitate comparisons of underlying performance on a year-over-year basis. A reconciliation of these and other non-GAAP measures is provided at the conclusion of this news release.

Consolidated net sales for the year ended December 31, 2021 were $1.21 billion, up $82 million, or 7%, compared to the prior year. Income from continuing operations for the year was $100.6 million, equal to $1.63 per diluted share, compared to $96.1 million, or $1.56 per share, in the prior year. Adjusted income from continuing operations for the year was $108.4 million, equal to $1.75 per diluted share, compared to $103.0 million, or $1.67 per diluted share, in the prior year.

Solid Operational Performance Despite Ongoing Disruptions; Customer Demand at Unprecedented Levels

“Our fourth quarter performance represented a solid finish to a year in which we delivered the second highest adjusted EPS* in our history, and is a testament to our team’s relentless focus on serving our customers despite the ongoing challenges in the marketplace,” commented Jennifer L. Sherman, President and Chief Executive Officer. “Our results were impacted by widespread supply chain disruption, increased commodity costs and the effects of higher coronavirus-related medical costs, partially offset by a lower-than-expected tax rate. Demand for our products remains at unprecedented levels, with our order intake this quarter setting a new Company record, contributing to an all-time high backlog of $629 million at the end of 2021, more than double the amount at the same time last year.”

In the Environmental Solutions Group, net sales for the fourth quarter were $246 million, up $8 million, or 3%, compared to the prior-year quarter, while in the Safety and Security Systems Group, net sales for the fourth quarter were $56 million, compared to $57 million in the prior-year quarter.

   Consolidated operating income for the fourth quarter was $30.1 million, compared to $33.8 million in the prior-year quarter. Consolidated operating margin for the fourth quarter was 10.0%, compared to 11.5% last year.

Consolidated adjusted earnings before interest, tax, depreciation and amortization (“adjusted EBITDA”) for the fourth quarter was $40.0 million, compared to $47.0 million last year, and consolidated adjusted EBITDA margin in the current-year quarter was 13.3%, compared to 15.9% last year.

Adjusted EBITDA in the Environmental Solutions Group for the fourth quarter was $36.2 million, compared to $44.2 million last year, and its adjusted EBITDA margin in the current-year quarter was 14.7%, compared to 18.6% last year. Within the Safety and Security Systems Group, adjusted EBITDA for the fourth quarter was $11.0 million, compared to $11.2 million in the prior-year quarter, and its adjusted EBITDA margin in the current-year quarter was 19.7%, up from 19.6% last year.

Orders for the fourth quarter were $444 million, a new quarterly record for the Company, and an improvement of $168 million, or 61%, from last year. With the unprecedented order intake, consolidated backlog at December 31, 2021 was also at a record level of $629 million, an improvement of $325 million, or 107%, from last year.

Strong Cash Flow Supports M&A, Organic Growth Investment and Cash Returns to Shareholders

    Net cash of $47 million was generated from operations in the fourth quarter, bringing the total year-to-date operating cash generation to $102 million.

During the fourth quarter, the Company completed the acquisitions of Ground Force and Deist. The Company also purchased its manufacturing facilities in Elgin, Illinois and University Park, Illinois in December 2021 and February 2022, respectively.

    At December 31, 2021, total debt was $283 million, total cash and cash equivalents were $41 million and the Company had $209 million of availability for borrowings under its credit facility.

    “Our cash flow generation remains strong, allowing us to acquire Ground Force and Deist, purchase two of our largest manufacturing facilities and fund cash returns to shareholders, while maintaining a low debt leverage position.” said Sherman.

During the fourth quarter, the Company funded $12.0 million of share repurchases, bringing the total for the year to $15.4 million. The Company also funded dividends of $5.5 million during the fourth quarter, bringing the total for the year to $22.0 million, and recently declared a similar $0.09 per share dividend that will be payable in the first quarter of 2022.

Outlook

“We remain encouraged by conditions in our end markets, the ongoing execution against our strategic initiatives, and the order trends that we have seen over the last few quarters, which have contributed to a record backlog entering 2022,” noted Sherman. “We have started to see benefits from federal stimulus funding in our municipal orders and with the recent increase in oil prices, we expect to see an uptick in demand for our safe-digging products. Notwithstanding a softer-than-normal first quarter, associated with ongoing supply chain volatility, coronavirus-related disruption and adverse weather, we anticipate recovery over the remainder of the year. For the full-year, we currently expect to report net sales of between $1.35 billion and $1.45 billion and adjusted EPS* of between $1.76 and $2.00 per share, despite a headwind of approximately $0.20 per share resulting from the normalization of our tax rate. With an active M&A pipeline, ongoing investments in new product development, capacity expansions and our people, and with anticipated multi-year tailwinds from infrastructure legislation passed in November, our businesses are well positioned for long-term, sustainable growth.”

   CONFERENCE CALL

Federal Signal will host its fourth quarter earnings conference call on Tuesday, March 1, 2022 at 10:00 a.m. Eastern Time. The call will last approximately one hour. The call may be accessed over the internet through Federal Signal’s website at www.federalsignal.com or by dialing phone number 1-855-327-6837 and entering the pin number 10018209. An archived replay will be available on Federal Signal’s website shortly after the call.

About Federal Signal

Federal Signal Corporation (NYSE: FSS) builds and delivers equipment of unmatched quality that moves material, cleans infrastructure, and protects the communities where we work and live. Founded in 1901, Federal Signal is a leading global designer, manufacturer and supplier of products and total solutions that serve municipal, governmental, industrial and commercial customers. Headquartered in Oak Brook, Ill., with manufacturing facilities worldwide, the Company operates two groups: Environmental Solutions and Safety and Security Systems. For more information on Federal Signal, visit: www.federalsignal.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

This release contains unaudited financial information and various forward-looking statements as of the date hereof and we undertake no obligation to update these forward-looking statements regardless of new developments or otherwise.  Statements in this release that are not historical are forward-looking statements. Such statements are subject to various risks and uncertainties that could cause actual results to vary materially from those stated. Such risks and uncertainties include but are not limited to: direct and indirect impacts of the coronavirus pandemic and the associated government response, risks and adverse economic effects associated with emerging geopolitical conflicts, product and price competition, supply chain disruptions, work stoppages, availability and pricing of raw materials, cybersecurity risks, risks associated with acquisitions such as integration of operations and achieving anticipated revenue and cost benefits, foreign currency exchange rate changes, interest rate changes, increased legal expenses and litigation results, legal and regulatory developments and other risks and uncertainties described in filings with the Securities and Exchange Commission.