PART I. [FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Federal Signal Corporation's unaudited financial statements and management's analysis of financial condition [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Federal Signal Corporation's unaudited condensed consolidated financial statements for Q3 and YTD periods [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported significant net sales and income growth for Q3 and YTD 2023 compared to the prior year Consolidated Statements of Operations Highlights (in millions, except per share data) | Financial Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $446.4 | $346.4 | $1,274.3 | $1,043.3 | | **Gross profit** | $117.7 | $82.8 | $330.8 | $248.3 | | **Operating income** | $62.5 | $39.5 | $161.4 | $114.2 | | **Net income** | $43.3 | $31.8 | $111.0 | $85.8 | | **Diluted EPS** | $0.71 | $0.52 | $1.81 | $1.40 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets and stockholders' equity increased, with a rise in liabilities from year-end 2022 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $603.7 | $531.4 | | **Goodwill** | $473.6 | $453.4 | | **Total assets** | $1,654.6 | $1,524.3 | | **Total current liabilities** | $202.6 | $180.5 | | **Long-term borrowings** | $362.0 | $361.5 | | **Total liabilities** | $698.7 | $663.4 | | **Total stockholders' equity** | $955.9 | $860.9 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly increased for the nine months ended September 30, 2023, leading to a net cash decrease Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30, in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $91.0 | $32.4 | | **Net cash used for investing activities** | ($75.7) | ($50.1) | | **Net cash (used for) provided by financing activities** | ($21.2) | $14.4 | | **Decrease in cash and cash equivalents** | ($6.5) | ($5.0) | | **Cash and cash equivalents at end of period** | $41.0 | $35.5 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, acquisitions, revenue, debt, goodwill, taxes, legal matters, and segment performance - The company operates through two reportable segments: Environmental Solutions Group and Safety and Security Systems Group[25](index=25&type=chunk) - In 2023, the company completed two acquisitions: Trackless Vehicles Limited for **C$56.3 million** plus a contingent earn-out, and Blasters, Inc. for **$13.0 million** plus a contingent earn-out Both are included in the Environmental Solutions Group[32](index=32&type=chunk)[34](index=34&type=chunk)[40](index=40&type=chunk) Net Sales by Geographic Region (Nine Months Ended Sep 30, in millions) | Region | 2023 | 2022 | | :--- | :--- | :--- | | U.S. | $988.0 | $840.1 | | Canada | $180.4 | $131.2 | | Europe/Other | $105.9 | $72.0 | | **Total** | **$1,274.3** | **$1,043.3** | - As of September 30, 2023, the company had **$364.2 million** drawn on its 2022 Credit Agreement, with **$424.6 million** of net availability for borrowings[67](index=67&type=chunk) - The company has an estimated liability recognized for the potential settlement of hearing loss litigation claims under the 2019 Settlement Framework, with any incremental loss not expected to be material[105](index=105&type=chunk)[107](index=107&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting strong net sales and operating income growth driven by volumes, acquisitions, and pricing Key Operating Results (in millions) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $446.4 | $346.4 | +29% | | **Operating Income** | $62.5 | $39.5 | +58% | | **Net Income** | $43.3 | $31.8 | +36% | | **Total Orders** | $450.2 | $382.1 | +18% | - Consolidated backlog at September 30, 2023, was **$1.01 billion**, **a 22% increase** compared to the prior year, indicating strong future demand[154](index=154&type=chunk) - The Environmental Solutions Group's net sales increased by **31%** in Q3 2023, driven by strong performance in sewer cleaners, street sweepers, and aftermarket revenues[157](index=157&type=chunk) - The Safety and Security Systems Group's net sales grew by **19%** in Q3 2023, primarily due to improvements in sales of public safety equipment and warning systems[157](index=157&type=chunk) - The company anticipates capital expenditures for 2023 to be in the range of **$27 million to $30 million**[209](index=209&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No significant changes in the company's market risk exposure occurred during the nine months ended September 30, 2023 - There have been no significant changes in the Company's exposure to market risk during the nine months ended September 30, 2023[212](index=212&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of September 30, 2023 - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of September 30, 2023[213](index=213&type=chunk) - The assessment of internal controls over financial reporting for the recently acquired Trackless and Blasters businesses has not yet been completed, as permitted by SEC rules[214](index=214&type=chunk) PART II. [OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details legal proceedings, risk factors, equity sales, other information, and exhibits [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal proceedings information by reference from Note 9 of the financial statements - Information regarding legal proceedings is incorporated by reference from Note 9 to the condensed consolidated financial statements[217](index=217&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported from the prior Annual Report on Form 10-K - There have been no material changes in the Company's risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2022[218](index=218&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details common stock repurchase activity for Q3 2023, including shares bought and remaining authorization Common Stock Repurchase Activity (Q3 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2023 | — | $— | | August 2023 | 24,474 | $59.5166 | | September 2023 | 47,994 | $58.2742 | - As of September 30, 2023, **$54.8 million** remained available for repurchase under the company's stock repurchase program authorized in March 2020[219](index=219&type=chunk) [Other Information](index=38&type=section&id=Item%205.%20Other%20Information) This section notes the company issued a press release and presentation slides on November 2, 2023, for Q3 2023 results - The company issued a press release and earnings presentation on November 2, 2023, announcing its Q3 2023 financial results, which are attached as exhibits 99.1 and 99.2[222](index=222&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including governance documents, certifications, and Q3 financial results materials

Financial Data and Key Metrics Changes - Consolidated net sales for the quarter reached $442 million, an increase of $76 million or 21% compared to last year, marking a new quarterly record [19][82] - Adjusted EPS for the quarter was $0.67, up $0.14 or 26% from last year, while GAAP EPS was $0.66, compared to $0.55 last year [83][85] - Consolidated operating income for the quarter was $59.4 million, up $13.2 million or 29% compared to last year [19] - Consolidated gross margin for the quarter was 26.5%, a 200 basis point increase over last year [21] - Cash generated from operations during the quarter was $36 million, up $21 million from Q2 last year [22] Business Line Data and Key Metrics Changes - ESG's net sales for the quarter were $373 million, up $67 million or 22% compared to last year, with an operating income of $56.2 million, up $17.1 million [102] - SSG's net sales for the quarter were $69 million, up $9 million or 15%, with operating income of $14.1 million, up 37% [4] - SSG's adjusted EBITDA for the quarter was $15.2 million, up $3.8 million or 33%, translating to an adjusted EBITDA margin of 21.9%, up 300 basis points compared to last year [4] Market Data and Key Metrics Changes - Municipal orders were up 13% compared to last year, driven by increased demand for sewer cleaners [9] - The company received over $4 million in warning system orders supported by FEMA funding, with several counties awarded grants for tornado warning systems [10] - The Infrastructure Act has earmarked $6.8 billion for FEMA to invest in disaster mitigation programs, contributing to increased demand for warning systems [10] Company Strategy and Development Direction - The company is focused on increasing production levels to reduce backlog and lead times while maintaining healthy order intake [28] - Continued investment in new product development and organic growth initiatives, including the introduction of new features for safety and security products [29][110] - The company is actively pursuing M&A opportunities to enhance growth, with a strong pipeline of potential deals [34][52] Management's Comments on Operating Environment and Future Outlook - Management noted that while supply chain issues are improving, they are not yet maximizing production capacity due to ongoing constraints, particularly in chassis availability [87][66] - The company raised its full-year adjusted EPS outlook to a new range of $2.30 to $2.46, reflecting confidence in continued demand and backlog [93] - Management expects some moderation in SSG orders in the second half of the year due to seasonal factors and a model year changeover [28][154] Other Important Information - The company paid dividends of $6.1 million during the quarter, reflecting an increased dividend of $0.10 per share [6] - The recent acquisition of Trackless is performing well, with integration underway and opportunities to leverage existing distribution channels [13][48] - The company published its latest sustainability report, highlighting progress against sustainability goals established in 2018 [8] Q&A Session Summary Question: What needs to happen in the supply chain to maximize production capabilities? - Management indicated that improvements in chassis availability and consistency in supply chain operations are critical for maximizing production [66] Question: Are SSG orders expected to come down? - Management acknowledged potential moderation in SSG orders in the second half of the year but remains optimistic about healthy order intake [28][154] Question: What types of businesses is the company interested in for M&A? - The company is looking at various opportunities, particularly in specialty vehicles and aftermarket growth, and is encouraged by the current M&A landscape [34] Question: How does the backlog look in terms of pricing compared to previous months? - Management noted strong price realization in the quarter and a healthy mix of municipal and industrial applications in the backlog [120][121] Question: What is the outlook for the infrastructure funding impact? - Management stated that while they have not seen significant orders from the infrastructure bill yet, they are optimistic about future opportunities as the process unfolds [143]

FORM 10-Q Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________ (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 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 CORPORATIO ...

Disciplined Growth Safe Harbor Statement This presentation also contains certain measures that are not in accordance with U.S. generally accepted accounting principles ("GAAP"). The non-GAAP financial information presented herein should be considered supplemental to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company has provided this supplemental information to investors, analysts, and other interested parties to enable them to perform additional an ...

| --- | --- | --- | --- | --- | |-------|-------|-------|-------------------------|----------------------------------------------------| | | | | | | | | | | | | | | | | | High Single Digit Revenue Growth | | | | | | | | | | | EBITDA Margin Targets: | ESG: 15-18% SSG: 17-21% (new) Consolidated: 12-16% | $100 on December 31, 2017 and assumes reinvestment of all dividends through December 31, 2022. Cumulative Returns to Stockholders (Couple of % points > GDP) Long-Term Organic Revenue Growth Cash Conversion: ~ ...

[Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements about future performance, strategy, and objectives, subject to material risks and uncertainties - This Form 10-Q contains forward-looking statements regarding the Company's future financial performance, business strategy, plans, goals, and objectives, which are subject to risks and uncertainties that may cause actual results to differ materially[7](index=7&type=chunk)[8](index=8&type=chunk) [Additional Information](index=3&type=section&id=Additional%20Information) The Company files various reports with the SEC, including 10-K, 10-Q, and 8-K, available on its website and the SEC's website - The Company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other reports with the SEC, making them available free of charge on its website and the SEC's website[9](index=9&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the Company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Federal Signal Corporation's unaudited condensed consolidated financial statements, including key statements and detailed notes on accounting policies and financial position [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement provides a summary of the Company's revenues, expenses, and net income for the reported periods Condensed Consolidated Statements of Operations | Metric (in millions, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $385.5 | $330.2 | | Gross profit | $95.8 | $75.7 | | Operating income | $39.5 | $28.5 | | Income before income taxes | $34.7 | $27.6 | | Net income | $27.4 | $20.5 | | Basic EPS | $0.45 | $0.34 | | Diluted EPS | $0.45 | $0.33 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents the Company's net income and other comprehensive income components, leading to total comprehensive income Condensed Consolidated Statements of Comprehensive Income | Metric (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------- | :-------------------------------- | :-------------------------------- | | Net income | $27.4 | $20.5 | | Total other comprehensive income | $0.6 | $1.5 | | Comprehensive income | $28.0 | $22.0 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement details the Company's assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | Total current assets | $566.3 | $531.4 | | Total assets | $1,584.3 | $1,524.3 | | Total current liabilities | $203.1 | $180.5 | | Total liabilities | $702.3 | $663.4 | | Total stockholders' equity | $882.0 | $860.9 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | Metric (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $7.1 | $7.0 | | Net cash used for investing activities | $(19.4) | $(34.3) | | Net cash provided by financing activities | $3.1 | $26.1 | | Decrease in cash and cash equivalents | $(9.1) | $(1.3) | | Cash and cash equivalents at end of period | $38.4 | $39.2 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in the Company's equity accounts, including common stock, retained earnings, and treasury stock Condensed Consolidated Statements of Stockholders' Equity | Metric (in millions) | Balance at January 1, 2023 | Balance at March 31, 2023 | | :------------------- | :------------------------- | :------------------------ | | Common Stock | $69.5 | $69.7 | | Capital in Excess of Par Value | $271.8 | $274.7 | | Retained Earnings | $782.2 | $804.1 | | Treasury Stock | $(178.6) | $(183.1) | | Accumulated Other Comprehensive Loss | $(84.0) | $(83.4) | | Total Stockholders' Equity | $860.9 | $882.0 | - Net income for the three months ended March 31, 2023, contributed **$27.4 million** to retained earnings[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1 – Summary of Significant Accounting Policies](index=9&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note describes the Company's key accounting principles and the basis of financial statement preparation - The Company's products and services are divided into two reportable segments: Environmental Solutions Group and Safety and Security Systems Group[24](index=24&type=chunk) - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with no new accounting pronouncements or changes to significant accounting policies expected to have a material impact[25](index=25&type=chunk)[28](index=28&type=chunk)[30](index=30&type=chunk) [Note 2 – Acquisitions](index=10&type=section&id=Note%202%20%E2%80%93%20Acquisitions) This note details recent business acquisitions, including purchase price and financial impact - On January 3, 2023, the Company acquired Blasters, Inc. for an initial cash consideration of **$13.4 million**, plus a contingent earn-out of up to **$8.0 million**, to bolster its position in specialized vehicles for maintenance and infrastructure markets[31](index=31&type=chunk)[33](index=33&type=chunk) Acquisition Details | Acquisition Details (in millions) | Amount | | :------------------------------ | :----- | | Purchase price, inclusive of preliminary closing adjustments | $13.4 | | Estimated fair value of additional consideration | $4.0 | | Total consideration | $17.4 | | Goodwill recognized | $4.5 | - Blasters generated **$5.9 million** in net sales and **$0.6 million** in operating income for the period between the acquisition date and March 31, 2023, and its results are included in the Environmental Solutions Group[32](index=32&type=chunk)[39](index=39&type=chunk) [Note 3 – Revenue Recognition](index=12&type=section&id=Note%203%20%E2%80%93%20Revenue%20Recognition) This note provides a breakdown of net sales by geographic region and major product line Net Sales by Geographic Region and Major Product Line | Metric (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | **Geographic Region:** | | | | U.S. | $309.1 | $264.4 | | Canada | $43.9 | $42.3 | | Europe/Other | $32.5 | $23.5 | | **Major Product Line:** | | | | Environmental Solutions - Vehicles and equipment | $245.3 | $217.4 | | Environmental Solutions - Parts | $54.8 | $40.8 | | Environmental Solutions - Rental income | $11.0 | $9.7 | | Safety and Security Systems - Public safety and security equipment | $40.2 | $36.1 | | Safety and Security Systems - Industrial signaling equipment | $18.6 | $14.2 | | Safety and Security Systems - Warning systems | $7.9 | $5.7 | | **Total net sales** | **$385.5** | **$330.2** | - Contract liabilities (customer deposits) were **$29.8 million** as of March 31, 2023, up from **$28.9 million** at December 31, 2022, and are generally recognized as net sales within three to six months[44](index=44&type=chunk) [Note 4 – Inventories](index=12&type=section&id=Note%204%20%E2%80%93%20Inventories) This note presents the composition of the Company's inventory, including finished goods, raw materials, and work in process Inventory Components | Inventory Component (in millions) | March 31, 2023 | December 31, 2022 | | :------------------------------ | :------------- | :---------------- | | Finished goods | $107.0 | $97.5 | | Raw materials | $175.0 | $164.3 | | Work in process | $35.6 | $30.9 | | **Total inventories** | **$317.6** | **$292.7** | [Note 5 – Debt](index=13&type=section&id=Note%205%20%E2%80%93%20Debt) This note details the Company's borrowings, finance lease obligations, and compliance with debt covenants Debt Components | Debt Component (in millions) | March 31, 2023 | December 31, 2022 | | :--------------------------- | :------------- | :---------------- | | 2022 Credit Agreement | $373.6 | $361.0 | | Finance lease obligations | $1.9 | $2.0 | | **Total borrowings and finance lease obligations** | **$375.5** | **$363.0** | - The Company was in compliance with all net leverage ratio and interest coverage ratio financial covenants under the 2022 Credit Agreement as of March 31, 2023[50](index=50&type=chunk) - Net availability for borrowings under the 2022 Credit Agreement was **$415.2 million** as of March 31, 2023[51](index=51&type=chunk) - The Company uses an interest rate swap with a notional amount of **$75.0 million**, designated as a cash flow hedge, to fix the floating interest rate component on a portion of its variable-rate debt[52](index=52&type=chunk) [Note 6 – Goodwill and Other Intangible Assets](index=14&type=section&id=Note%206%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) This note provides information on the Company's goodwill and other intangible assets, including changes from acquisitions Goodwill and Other Intangible Assets | Metric (in millions) | March 31, 2023 | January 1, 2023 | | :------------------- | :------------- | :-------------- | | Goodwill | $458.4 | $453.4 | | Acquisitions (Goodwill) | $4.5 | N/A | | Total intangible assets, net | $212.8 | $208.2 | - Goodwill increased by **$4.5 million** due to the Blasters acquisition, allocated to the Environmental Solutions Group[38](index=38&type=chunk)[58](index=58&type=chunk) - Amortization expense for the three months ended March 31, 2023, was **$3.6 million**, up from **$3.3 million** in the prior-year quarter[60](index=60&type=chunk) [Note 7 – Income Taxes](index=15&type=section&id=Note%207%20%E2%80%93%20Income%20Taxes) This note presents the Company's income tax expense and effective tax rate, with explanations for period-over-period changes Income Tax Expense and Effective Tax Rate | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----- | :-------------------------------- | :-------------------------------- | | Income tax expense (in millions) | $7.3 | $7.1 | | Effective tax rate | 21.0% | 25.7% | - The lower effective tax rate in Q1 2023 was primarily due to a **$0.9 million** increase in excess tax benefits from stock-based compensation and a **$0.5 million** benefit from changes in tax reserves[63](index=63&type=chunk) [Note 8 – Pensions](index=15&type=section&id=Note%208%20%E2%80%93%20Pensions) This note details the net periodic pension benefit or expense for the Company's U.S. and non-U.S. plans Net Periodic Pension (Benefit) Expense | Metric (in millions) | Q1 2023 (U.S. Benefit Plan) | Q1 2022 (U.S. Benefit Plan) | Q1 2023 (Non-U.S. Benefit Plan) | Q1 2022 (Non-U.S. Benefit Plan) | | :------------------- | :-------------------------- | :-------------------------- | :------------------------------ | :------------------------------ | | Net periodic pension (benefit) expense | $(0.1) | $(0.1) | $0.1 | $(0.1) | [Note 9 – Commitments and Contingencies](index=15&type=section&id=Note%209%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the Company's outstanding commitments, guarantees, warranty liabilities, and legal proceedings - The Company had **$30.5 million** in outstanding performance and financial standby letters of credit and bid/performance bonds as of March 31, 2023[66](index=66&type=chunk) - The maximum potential cash payments for equipment repurchase guarantees amounted to **$1.9 million** as of March 31, 2023[67](index=67&type=chunk) Warranty Liabilities | Warranty Liabilities (in millions) | March 31, 2023 | March 31, 2022 | | :------------------------------- | :------------- | :------------- | | Balance at January 1 | $9.3 | $9.7 | | Provisions to expense | $1.8 | $1.4 | | Payments | $(2.0) | $(1.8) | | Balance at March 31 | $9.2 | $9.3 | - The Company is involved in hearing loss litigation, with a global settlement agreement finalized in November 2019 for approximately **2,160 firefighters** in various jurisdictions (excluding Cook and Lackawanna Counties)[108](index=108&type=chunk) - Under the global settlement, the Company would pay **$700** per eligible firefighter who filed a lawsuit and **$300** per eligible claimant who has not yet filed, provided they meet specific hearing loss criteria[108](index=108&type=chunk) - An estimated liability for the potential settlement amount has been recognized, and the incremental loss is not expected to be material[110](index=110&type=chunk) [Note 10 – Earnings Per Share](index=21&type=section&id=Note%2010%20%E2%80%93%20Earnings%20Per%20Share) This note provides the calculation of basic and diluted earnings per share for the reported periods Earnings Per Share Calculation | Metric (in millions, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $27.4 | $20.5 | | Weighted average shares outstanding – Basic | 60.7 | 60.7 | | Dilutive effect of common stock equivalents | 0.6 | 0.7 | | Weighted average shares outstanding – Diluted | 61.3 | 61.4 | | Basic EPS | $0.45 | $0.34 | | Diluted EPS | $0.45 | $0.33 | [Note 11 – Stockholders' Equity](index=21&type=section&id=Note%2011%20%E2%80%93%20Stockholders'%20Equity) This note details changes in stockholders' equity, including dividends and share repurchase activities - The Board declared a quarterly cash dividend of **$0.09 per common share** (**$5.5 million** total) for Q1 2023, and a **$0.10** dividend for Q2 2023[116](index=116&type=chunk) - No shares were repurchased under the **$75.0 million** stock repurchase program during the three months ended March 31, 2023, compared to **$13.6 million** in repurchases in the prior-year quarter[117](index=117&type=chunk)[118](index=118&type=chunk) Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss (in millions) | Balance at January 1, 2023 | Balance at March 31, 2023 | | :----------------------------------------------- | :------------------------- | :------------------------ | | Total | $(84.0) | $(83.4) | [Note 12 – Segment Information](index=23&type=section&id=Note%2012%20%E2%80%93%20Segment%20Information) This note provides financial data for the Company's Environmental Solutions and Safety and Security Systems segments Segment Performance | Metric (in millions) | Q1 2023 (Environmental Solutions) | Q1 2022 (Environmental Solutions) | Q1 2023 (Safety and Security Systems) | Q1 2022 (Safety and Security Systems) | | :------------------- | :-------------------------------- | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Net sales | $318.8 | $274.2 | $66.7 | $56.0 | | Operating income | $37.6 | $26.8 | $12.1 | $7.9 | | Operating margin | 11.8% | 9.8% | 18.1% | 14.1% | | Total assets (March 31, 2023) | $1,265.5 | N/A | $283.3 | N/A | [Note 13 – Fair Value Measurements](index=23&type=section&id=Note%2013%20%E2%80%93%20Fair%20Value%20Measurements) This note describes the Company's fair value hierarchy and measurements for financial assets and liabilities - The Company uses a three-level fair value hierarchy: Level 1 for cash equivalents, Level 2 for interest rate swaps, and Level 3 for contingent consideration liabilities due to unobservable inputs[127](index=127&type=chunk)[128](index=128&type=chunk)[131](index=131&type=chunk) Fair Value Measurements | Fair Value Measurement (in millions) | Level 1 | Level 2 | Level 3 | Total | | :--------------------------------- | :------ | :------ | :------ | :---- | | **Assets:** | | | | | | Cash equivalents | $16.3 | — | — | $16.3 | | **Liabilities:** | | | | | | Contingent consideration | — | — | $6.0 | $6.0 | | Interest rate swaps | — | $0.8 | — | $0.8 | - Contingent consideration liability increased to **$6.0 million** at March 31, 2023, from **$2.7 million** at January 1, 2023, primarily due to the Blasters acquisition[134](index=134&type=chunk) [Note 14 – Subsequent Events](index=25&type=section&id=Note%2014%20%E2%80%93%20Subsequent%20Events) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On April 3, 2023, the Company acquired Trackless Vehicles Limited for an initial purchase price of **C$54.0 million** (approximately **$40.0 million**), plus a contingent earn-out of up to **C$6.0 million** (approximately **$4.4 million**)[135](index=135&type=chunk) - Trackless is a leading Canadian manufacturer of multi-purpose, off-road municipal tractors and attachments, expected to be included within the Environmental Solutions Group[136](index=136&type=chunk)[137](index=137&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance, condition, and liquidity for the three months ended March 31, 2023, highlighting key operating results, segment-specific performance, corporate expenses, seasonality, and capital resources [Executive Summary](index=26&type=section&id=Executive%20Summary) This summary provides an overview of the Company's business, key financial highlights, and operational performance - Federal Signal Corporation is a leading global manufacturer and supplier of specialized vehicles and equipment for maintenance and infrastructure, and public safety equipment, operating in two reportable segments[140](index=140&type=chunk)[141](index=141&type=chunk) Key Financial Highlights | Metric (in millions) | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :------------------- | :------ | :------ | :--------- | :--------- | | Net sales | $385.5 | $330.2 | $55.3 | 16.7% | | Operating income | $39.5 | $28.5 | $11.0 | 38.6% | | Total orders | $474.7 | $452.6 | $22.1 | 4.9% | | Backlog | $967.6 | $751.2 | $216.4 | 28.8% | [Operating Results (Consolidated)](index=27&type=section&id=Operating%20Results%20(Consolidated)) This section analyzes the Company's consolidated net sales, gross profit, operating income, and net income for the period Consolidated Operating Results | Metric (in millions, except per share) | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :----------------------------------- | :------ | :------ | :--------- | :--------- | | Net sales | $385.5 | $330.2 | $55.3 | 16.7% | | Cost of sales | $289.7 | $254.5 | $35.2 | 13.8% | | Gross profit | $95.8 | $75.7 | $20.1 | 26.6% | | Gross profit margin | 24.9% | 22.9% | 2.0 pp | | | SEG&A expenses | $52.0 | $43.6 | $8.4 | 19.3% | | Operating income | $39.5 | $28.5 | $11.0 | 38.6% | | Operating margin | 10.2% | 8.6% | 1.6 pp | | | Interest expense | $4.7 | $1.3 | $3.4 | 261.5% | | Income before income taxes | $34.7 | $27.6 | $7.1 | 25.7% | | Income tax expense | $7.3 | $7.1 | $0.2 | 2.8% | | Net income | $27.4 | $20.5 | $6.9 | 33.7% | | Diluted earnings per share | $0.45 | $0.33 | $0.12 | 36.4% | [Environmental Solutions Group Analysis](index=28&type=section&id=Environmental%20Solutions%20Group%20Analysis) This section provides a detailed analysis of the Environmental Solutions Group's sales, operating income, and backlog performance Environmental Solutions Group Performance | Metric (in millions) | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :------------------- | :------ | :------ | :--------- | :--------- | | Net sales | $318.8 | $274.2 | $44.6 | 16.3% | | Operating income | $37.6 | $26.8 | $10.8 | 40.3% | | Operating margin | 11.8% | 9.8% | 2.0 pp | | | Total orders | $395.8 | $387.6 | $8.2 | 2.1% | | Backlog | $901.8 | $690.1 | $211.7 | 30.7% | - U.S. sales increased by **$37.0 million**, driven by sewer cleaners, street sweepers, safe-digging trucks, and aftermarket revenues, while non-U.S. sales increased by **$7.6 million**, primarily from aftermarket revenues and metal extraction support equipment[161](index=161&type=chunk) - Gross profit margin improved to **22.0%** (from **20.2%**) due to improved operating leverage from higher sales volumes, pricing actions, and a more favorable sales mix, partially offset by higher material costs[162](index=162&type=chunk) [Safety and Security Systems Group Analysis](index=30&type=section&id=Safety%20and%20Security%20Systems%20Group%20Analysis) This section provides a detailed analysis of the Safety and Security Systems Group's sales, operating income, and backlog performance Safety and Security Systems Group Performance | Metric (in millions) | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :------------------- | :------ | :------ | :--------- | :--------- | | Net sales | $66.7 | $56.0 | $10.7 | 19.1% | | Operating income | $12.1 | $7.9 | $4.2 | 53.2% | | Operating margin | 18.1% | 14.1% | 4.0 pp | | | Total orders | $78.9 | $65.0 | $13.9 | 21.4% | | Backlog | $65.8 | $61.1 | $4.7 | 7.7% | - Non-U.S. orders increased by **$12.9 million**, largely due to an **$11.6 million** improvement in public safety equipment orders, including a large fleet order from a customer in Mexico[166](index=166&type=chunk) - Gross profit margin improved to **38.4%** (from **36.1%**) due to improved operating leverage from higher sales volumes and benefits from pricing actions[168](index=168&type=chunk) [Corporate Expenses](index=30&type=section&id=Corporate%20Expenses) This section discusses the trends and changes in the Company's corporate operating expenses Corporate Operating Expenses | Metric (in millions) | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :------------------- | :------ | :------ | :--------- | :--------- | | Corporate operating expenses | $10.2 | $6.2 | $4.0 | 64.5% | - The increase in corporate operating expenses was primarily due to higher post-retirement and incentive-based compensation expenses[171](index=171&type=chunk) [Seasonality of Company's Business](index=30&type=section&id=Seasonality%20of%20Company's%20Business) This section describes the typical seasonal patterns affecting the Company's equipment sales, rental income, and parts sales - The Company's business is subject to seasonal factors, typically experiencing lower equipment sales in the first calendar quarter and higher rental income and parts sales in the second and third quarters[172](index=172&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=31&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) This section assesses the Company's cash position, operating cash flow, investing activities, and financing activities - The Company believes its existing cash balances, cash flow from operations, and available borrowings under its credit facility will be sufficient to meet its operating needs, capital needs, and financial commitments[173](index=173&type=chunk)[179](index=179&type=chunk) Cash and Cash Equivalents | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | Cash and cash equivalents | $38.4 | $47.5 | - Net cash provided by operating activities was **$7.1 million** in Q1 2023, consistent with the prior-year period[175](index=175&type=chunk) - Net cash used for investing activities was **$19.4 million** in Q1 2023, including **$13.4 million** for the Blasters acquisition[176](index=176&type=chunk) - Net cash provided by financing activities was **$3.1 million** in Q1 2023, including **$12.6 million** in increased debt borrowings[177](index=177&type=chunk) - Capital expenditures for 2023 are anticipated to be in the range of **$25 million** to **$30 million**[178](index=178&type=chunk) [Contractual Obligations and Off-Balance Sheet Arrangements](index=31&type=section&id=Contractual%20Obligations%20and%20Off-Balance%20Sheet%20Arrangements) This section discusses any material changes to the Company's contractual obligations and off-balance sheet arrangements - There have been no material changes in the Company's contractual obligations and off-balance sheet arrangements during the three months ended March 31, 2023, as described in the 2022 Form 10-K[180](index=180&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there were no significant changes in the Company's exposure to market risk during the first quarter of 2023 - No significant changes in the Company's exposure to market risk occurred during the three months ended March 31, 2023[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the Company's disclosure controls were effective as of March 31, 2023, with no material changes to internal control identified, except for the unassessed Blasters acquisition - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2023[182](index=182&type=chunk) - Management has not yet fully assessed the internal control over financial reporting for the recently acquired Blasters, but no other material changes in internal control were identified[183](index=183&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the detailed information on legal proceedings from Note 9 – Commitments and Contingencies in Part I of this Form 10-Q - Information on legal proceedings is incorporated by reference from Note 9 – Commitments and Contingencies[186](index=186&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) No material changes were reported in the Company's risk factors during the first quarter of 2023, as previously described in its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes in the Company's risk factors as described in its Annual Report on Form 10-K for the year ended December 31, 2022[187](index=187&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company did not repurchase any shares under its stock repurchase program during the three months ended March 31, 2023, with the maximum dollar value of shares remaining available for purchase at $59,052,829 Stock Repurchase Program Activity | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | | :----- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :--------------------------------------------------------------------------------- | | January 2023 | — | $— | — | $59,052,829 | | February 2023 | — | $— | — | $59,052,829 | | March 2023 | — | $— | — | $59,052,829 | - No shares were repurchased under the stock repurchase program during the three months ended March 31, 2023[188](index=188&type=chunk) [Item 3. Defaults Upon Senior Securities](index=33&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[189](index=189&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[190](index=190&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) The Company issued a press release and posted earnings call presentation slides on May 2, 2023, announcing its financial results for the first quarter of 2023, which are filed as Exhibits 99.1 and 99.2 - The Company issued a press release and posted earnings call presentation slides on May 2, 2023, announcing Q1 2023 financial results, filed as Exhibits 99.1 and 99.2[191](index=191&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, CEO and CFO certifications, and various XBRL interactive data files - Exhibits include Restated Certificate of Incorporation, Amended and Restated By-laws, CEO and CFO Certifications (Sections 302 and 906), First Quarter Financial Results Press Release (99.1), First Quarter Earnings Call Presentation Slides (99.2), and various XBRL documents[193](index=193&type=chunk)

Financial Performance - Total orders for the year reached a record level of $1.7 billion, an increase of $153 million, or 10%, from the previous year[118]. - Net sales for the year ended December 31, 2022 were $1.4 billion, an increase of $222 million, or 18%, from the previous year[118]. - Operating income for the year was $160.8 million, an increase of $30.1 million, or 23%, from the previous year, with a consolidated operating margin of 11.2%[118]. - Income from continuing operations was $120.4 million, an increase of $19.8 million, or 20%, from the previous year[120]. - Adjusted EBITDA for the year was $215.0 million, an increase of $34.5 million, or 19%, with an adjusted EBITDA margin of 15.0%[120]. - The Environmental Solutions Group reported a net sales increase of $186.6 million, or 19%, driven by various product sales improvements[124]. - Gross profit for the year ended December 31, 2022, increased by $56.2 million, or 19%, with a gross profit margin of 24.0% compared to 23.8% in the prior year[126]. - Operating income increased by $30.1 million, or 23%, with a consolidated operating margin of 11.2%, up from 10.8% in the prior year[128]. - Federal Signal Corporation reported net sales of $1,434.8 million for the year ended December 31, 2022, representing a 18.2% increase from $1,213.2 million in 2021[221]. - The company's gross profit for 2022 was $344.9 million, up from $288.7 million in 2021, indicating a gross margin improvement[221]. - Operating income increased to $160.8 million in 2022, compared to $130.7 million in 2021, reflecting a growth of 23%[221]. - Income from continuing operations was $120.4 million in 2022, compared to $100.6 million in 2021, marking a 19.4% increase[221]. - Basic earnings per share rose to $1.99 in 2022, up from $1.65 in 2021, representing a 20.6% increase[221]. - The company reported a net income of $120.4 million for 2022, compared to $100.6 million in 2021, showing a growth of 19.4%[221]. - Net income for 2022 was $120.4 million, an increase of 19.4% compared to $100.6 million in 2021[224]. Orders and Backlog - Backlog as of December 31, 2022 was $879 million, an increase of $250 million, or 40%, compared to the end of the previous year[118]. - Total orders in the Environmental Solutions Group increased by $146.9 million, or 11%, with a backlog of $824 million at year-end[137][141]. - Operating income in the Safety and Security Systems Group increased by $8.1 million, or 24.8%, with total orders rising by $6.5 million, or 3%[142][143]. - Backlog was $55 million at December 31, 2022, compared to $53 million at December 31, 2021[147]. Expenses and Costs - Cost of sales increased by $165.4 million, or 18%, largely due to increased sales volumes and higher material costs[125]. - SEG&A expenses rose by $22.5 million, or 15%, but decreased as a percentage of net sales from 12.3% to 12.0%[127]. - Interest expense surged by $5.8 million, or 129%, due to higher average debt levels and interest rates[129]. - Income tax expense for the year was $30.5 million, leading to an effective tax rate of 20.2%, compared to 14.5% in 2021[132]. - Cost of sales rose by $21.5 million, or 16%, primarily due to higher sales volumes and increased material costs, resulting in a gross profit margin of 37.1%[145]. Cash Flow and Investments - Net cash provided by operating activities totaled $71.8 million in 2022, a decrease from $101.8 million in 2021, primarily due to increases in working capital[153]. - Net cash used for investing activities totaled $99.7 million in 2022, including $53.0 million in capital expenditures[154]. - The company invested $49.8 million in acquisition-related activities in 2022, compared to $131.8 million in 2021, a decrease of 62.3%[229]. - The company declared cash dividends of $21.8 million in 2022, slightly down from $22.0 million in 2021[231]. Assets and Liabilities - As of December 31, 2022, cash and cash equivalents totaled $47.5 million, with $19.4 million held by foreign subsidiaries[152]. - Total current assets rose to $531.4 million in 2022, up from $431.0 million in 2021, reflecting a growth of 23.3%[227]. - Total assets reached $1,524.3 million in 2022, up from $1,366.1 million in 2021, representing an increase of 11.6%[227]. - Long-term borrowings and finance lease obligations increased to $361.5 million in 2022 from $282.2 million in 2021, a rise of 28.1%[227]. - The company has long-term debt of $361.0 million, with interest payments totaling $94.8 million, of which $19.9 million is due within one year[168]. - The fair value of the company's total debt obligations was $363.0 million as of December 31, 2022[194]. - The company had a liability of approximately $1.2 million for unrecognized tax benefits as of December 31, 2022[171]. Acquisitions - The company completed its ninth acquisition since 2016 with the acquisition of TowHaul[120]. - Federal Signal Corporation's acquisition of TowHaul Corporation on October 3, 2022, contributed approximately 1% to total assets and net sales[215]. - The acquisition of TowHaul on October 3, 2022, generated net sales of $7.2 million and operating income of $2.3 million during the year ended December 31, 2022[286]. - The initial cash consideration for the TowHaul acquisition was approximately $43.3 million, which is subject to certain post-closing adjustments[287]. - The acquisition of Deist in December 2021 involved a cash payment of $38.1 million, with a contingent earn-out payment of up to $7.5 million based on financial targets[295]. - The acquisition of Ground Force on October 4, 2021, had a cash consideration of $43.1 million, funded through existing cash and borrowings[302]. - The acquisition of OSW on February 17, 2021, involved a cash payment of $53.2 million, funded through existing cash and borrowings[309]. Research and Development - The Company reported research and development expenditures of $11.5 million in 2022, slightly up from $11.4 million in 2021 and down from $12.2 million in 2020[276]. Other Financial Metrics - The company maintained effective internal control over financial reporting as of December 31, 2022, according to the audit opinion[213]. - The company had no goodwill impairments in 2022, 2021, or 2020, with fair values exceeding carrying values by more than 20%[184]. - The fair value of indefinite-lived intangible assets tested for impairment exceeded their carrying value by more than 50% in 2022[189]. - The weighted average interest rate on long-term borrowings was 5.5% at December 31, 2022[165]. - A hypothetical 1% increase or decrease in variable interest rates would change annual interest expense by approximately $2.9 million[194]. - Approximately 80% of the company's net sales are conducted in U.S. dollars, with a 10% appreciation of the U.S. dollar estimated to reduce full-year net sales by approximately 1%[195].

Financial Data and Key Metrics Changes - Consolidated net sales for Q3 2022 were $346 million, an increase of $48 million or 16% year-over-year, despite a $3 million unfavorable foreign currency translation impact [5] - Organic revenue growth for the quarter was $27 million or 9% [5] - Consolidated operating income was $39.5 million, up $5.2 million or 15% compared to last year [5] - Consolidated adjusted EBITDA for the quarter was $53.5 million, up $6.1 million or 13% year-over-year, with a margin of 15.4% compared to 15.9% last year [5] - Net income for the quarter was $31.8 million, an increase of $2.6 million or 9% from last year, equating to GAAP EPS of $0.52 per share, up 11% [5][6] - Adjusted EPS for the quarter was $0.53, an improvement of $0.05 or 10% compared to last year [6] - Order intake for the quarter was $382 million, representing an increase of $32 million or 9% compared to Q3 last year [6] - Consolidated backlog at the end of the quarter reached a record $824 million, an increase of $337 million or 69% from last year [6] Business Line Data and Key Metrics Changes - Environmental Solutions Group (ESG) net sales were $285 million, an increase of $36 million or 14% year-over-year [7] - ESG's operating income was $33.9 million, up $3.1 million or 10% compared to last year [7] - ESG's adjusted EBITDA was $46.5 million, up $3.8 million or 9% year-over-year, with an adjusted EBITDA margin of 16.3% compared to 17.1% last year [7] - Safety and Security Systems Group (SSG) net sales were $62 million, up $12 million or 25% year-over-year [7] - SSG's operating income was $10.5 million, up $2.9 million or 38% from last year [7] - SSG's adjusted EBITDA was $11.5 million, up $3 million or 35% year-over-year, with an adjusted EBITDA margin of 18.7%, up 140 basis points from Q3 last year [7][8] Market Data and Key Metrics Changes - U.S. municipal orders were up 20% for both the quarter and year-to-date, with strong demand for street sweepers and sewer cleaners [21] - Domestic municipal demand within SSG saw a 9% order improvement year-to-date [21] - Industrial end markets experienced a 15% year-over-year improvement in domestic orders [22] - The infrastructure bill, with $550 billion for new investments, is expected to drive demand for equipment inquiries from contractors [24][30] Company Strategy and Development Direction - The company is focused on organic growth initiatives and strategic acquisitions, including the recent acquisition of TowHaul Corporation for $43 million [11][25] - The acquisition of TowHaul is expected to enhance the company's position in the metal extraction industry and support recurring aftermarket needs [25][26] - The company is committed to vehicle electrification initiatives and has entered into agreements with EV chassis manufacturers [32] - The company is actively pursuing M&A opportunities and has a strong pipeline for future acquisitions [31][74] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term opportunities and the prospects for recent acquisitions, highlighting strong demand for products and aftermarket offerings [28][29] - Despite ongoing supply chain disruptions, the company has seen improvements in production levels and is encouraged by recent trends [18][19] - The company raised its full-year adjusted EPS outlook to a range of $1.91 to $2, and net sales outlook to $1.41 billion to $1.44 billion [28] - Management noted that they are not currently seeing leading indicators of a recession and have not experienced meaningful order cancellations [31] Other Important Information - The company generated $10 million of cash from operations during the quarter, with total year-to-date operating cash generation at $32 million [10] - The company executed a new 5-year $800 million credit facility, providing greater financial flexibility [11] - The effective tax rate for the quarter was 13.4%, with expectations for a full-year effective tax rate of approximately 22% [9][60] Q&A Session Summary Question: Is the updated guidance implying a record 4Q revenue performance? - Management indicated that the combination of backlog size and recent production improvements gives confidence for revenue to be up over Q3 [40][41] Question: How much of the ESG backlog is shippable in 2023? - Management confirmed that all of the $765 million ESG backlog is shippable in 2023 [44][45] Question: Can you quantify how much revenue disruptions cost in ESG? - Management estimated that disruptions cost around $20 million in revenue, but noted it was difficult to pinpoint an exact number [66][68] Question: What are the lead times for products now compared to normal times? - Management acknowledged that lead times are currently too long but are focused on reducing them moving forward [76] Question: How does the rising interest rate environment impact customer purchases? - Management believes that municipal purchases will not be significantly impacted, while the aftermarket business provides rental options for industrial customers [77]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the period [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements, highlighting increased net sales, inventories, and long-term debt Condensed Consolidated Statements of Operations Highlights (Q3 & Nine Months 2022 vs 2021, in millions, except EPS) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $346.4 | $298.3 | $1,043.3 | $911.8 | | **Operating income** | $39.5 | $34.3 | $114.2 | $100.6 | | **Net income** | $31.8 | $29.2 | $85.8 | $81.1 | | **Diluted EPS** | $0.52 | $0.47 | $1.40 | $1.31 | Condensed Consolidated Balance Sheet Highlights (in millions) | Metric | Sept 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $510.8 | $431.0 | | **Total assets** | $1,465.1 | $1,366.1 | | **Total current liabilities** | $181.4 | $170.4 | | **Total liabilities** | $637.1 | $582.1 | | **Total stockholders' equity** | $828.0 | $784.0 | Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended, in millions) | Metric | Sept 30, 2022 | Sept 30, 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $32.4 | $55.1 | | **Net cash used for investing activities** | $(50.1) | $(64.5) | | **Net cash provided by financing activities** | $14.4 | $16.4 | [Note 1 – Summary of Significant Accounting Policies](index=10&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) Outlines accounting policies, confirming U.S. GAAP adherence and early adoption of ASU No. 2021-08 - The Company early adopted ASU No. 2021-08, Business Combinations (Topic 805), effective January 1, 2022, which will be applied prospectively to future business combinations[28](index=28&type=chunk) - The Company's business is divided into two reportable segments: Environmental Solutions Group and Safety and Security Systems Group[24](index=24&type=chunk) [Note 2 - Acquisitions](index=11&type=section&id=Note%202%20-%20Acquisitions) Details Ground Force acquisition's final purchase price allocation, including **$15.4 million** in goodwill Ground Force Acquisition Purchase Price Allocation (in millions) | Item | Value | | :--- | :--- | | **Purchase price** | $43.1 | | **Net assets acquired** | $27.7 | | **Goodwill** | $15.4 | [Note 3 – Revenue Recognition](index=12&type=section&id=Note%203%20%E2%80%93%20Revenue%20Recognition) Disaggregates net sales by geographic region and product line, showing growth driven by U.S. and Environmental Solutions Net Sales by Geographic Region (in millions) | Region | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | | U.S. | $840.1 | $692.5 | | Canada | $131.2 | $151.6 | | Europe/Other | $72.0 | $67.7 | | **Total** | **$1,043.3** | **$911.8** | Net Sales by Major Product Line (in millions) | Product Line | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | | **Environmental Solutions** | **$865.3** | **$758.5** | | Vehicles and equipment | $668.0 | $578.2 | | Parts | $130.0 | $112.7 | | **Safety and Security Systems** | **$178.0** | **$153.3** | [Note 4 – Inventories](index=12&type=section&id=Note%204%20%E2%80%93%20Inventories) Breaks down inventory components, showing a significant increase to **$287.5 million**, primarily in raw materials Components of Inventories (in millions) | Component | Sept 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Finished goods | $97.3 | $87.9 | | Raw materials | $152.8 | $116.4 | | Work in process | $37.4 | $24.8 | | **Total inventories** | **$287.5** | **$229.1** | [Note 5 – Debt](index=13&type=section&id=Note%205%20%E2%80%93%20Debt) Details debt structure, compliance with covenants, and subsequent entry into a new, larger credit agreement - As of September 30, 2022, the company had **$329.5 million** drawn on its credit facility and was in compliance with all financial covenants[47](index=47&type=chunk)[48](index=48&type=chunk) - On October 21, 2022, the company entered into a new Third Amended and Restated Credit Agreement (the "2022 Credit Agreement"), which amends and restates the 2019 Credit Agreement[49](index=49&type=chunk) [Note 6 – Income Taxes](index=14&type=section&id=Note%206%20%E2%80%93%20Income%20Taxes) Explains income tax expense components, noting effective tax rates of **13.4%** for Q3 and **21.2%** for nine months - The effective tax rate for Q3 2022 was **13.4%**, influenced by a **$2.7 million** tax benefit from releasing a valuation allowance against foreign tax credits and a **$1.1 million** benefit from a similar release in the U.K[55](index=55&type=chunk) - The effective tax rate for the nine months ended September 30, 2022, was **21.2%**, compared to **17.6%** in the prior-year period[56](index=56&type=chunk) [Note 7 – Pensions](index=15&type=section&id=Note%207%20%E2%80%93%20Pensions) Summarizes net periodic pension expense (benefit), reporting a **$0.4 million** benefit for the nine months Net Periodic Pension Expense (Benefit) (in millions) | Period | U.S. Plan | Non-U.S. Plan | | :--- | :--- | :--- | | **Three Months Ended Sep 30, 2022** | $(0.2) | $— | | **Nine Months Ended Sep 30, 2022** | $(0.2) | $(0.2) | [Note 8 – Commitments and Contingencies](index=15&type=section&id=Note%208%20%E2%80%93%20Commitments%20and%20Contingencies) Details financial commitments, product warranties, and significant legal proceedings, notably ongoing hearing loss litigation - As of September 30, 2022, the company had outstanding performance and financial standby letters of credit and bonds aggregating to **$36.5 million**[60](index=60&type=chunk) - In July 2022, the company issued a **$0.2 million** settlement payment to resolve claims of approximately 462 firefighters in the Cook County hearing loss litigation[77](index=77&type=chunk) - A global settlement agreement was executed on November 4, 2019, to resolve hearing loss claims in multiple jurisdictions, and the company has recognized an estimated liability for the potential settlement amount[101](index=101&type=chunk)[102](index=102&type=chunk) [Note 9 – Earnings Per Share](index=20&type=section&id=Note%209%20%E2%80%93%20Earnings%20Per%20Share) Reconciles net income to basic and diluted EPS, showing diluted EPS of **$0.52** for Q3 2022 Earnings Per Share Reconciliation (Q3 2022, in millions, except per share data) | Metric | Value | | :--- | :--- | | Net income | $31.8 | | Weighted average shares outstanding – Diluted | 61.0 | | **Diluted EPS** | **$0.52** | [Note 10 – Stockholders' Equity](index=21&type=section&id=Note%2010%20%E2%80%93%20Stockholders%27%20Equity) Covers changes in stockholders' equity, including **$0.09** quarterly dividends and **$16.1 million** in stock repurchases - The Board of Directors declared quarterly cash dividends of **$0.09** per common share during 2022[111](index=111&type=chunk)[112](index=112&type=chunk) - During the nine months ended September 30, 2022, the company repurchased **472,381** shares for a total of **$16.1 million**; no shares were repurchased in Q3 2022[117](index=117&type=chunk) [Note 11 – Segment Information](index=24&type=section&id=Note%2011%20%E2%80%93%20Segment%20Information) Presents financial data for two segments, with Environmental Solutions as the larger contributor to sales and income Segment Performance (Nine Months Ended Sep 30, 2022, in millions) | Segment | Net Sales | Operating Income | Total Assets (as of Sep 30) | | :--- | :--- | :--- | :--- | | **Environmental Solutions** | $865.3 | $99.8 | $1,163.3 | | **Safety and Security Systems** | $178.0 | $28.7 | $264.7 | [Note 12 – Fair Value Measurements](index=24&type=section&id=Note%2012%20%E2%80%93%20Fair%20Value%20Measurements) Describes fair value measurement methodology, classifying interest rate swaps as Level 2 and contingent liabilities as Level 3 - The company has contingent consideration liabilities of **$2.7 million** as of September 30, 2022, related to the MRL and Deist acquisitions, classified as Level 3 fair value measurements[133](index=133&type=chunk)[136](index=136&type=chunk) [Note 13 - Subsequent Events](index=26&type=section&id=Note%2013%20-%20Subsequent%20Events) Discloses significant post-period events, including the TowHaul acquisition and a new **$800 million** credit facility - On October 3, 2022, the Company acquired TowHaul Corporation for an initial purchase price of **$43.3 million**[138](index=138&type=chunk) - On October 21, 2022, the Company entered into a new **$800 million** credit agreement, consisting of a **$675 million** revolving credit facility and a **$125 million** term loan[141](index=141&type=chunk)[142](index=142&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting record backlog, supply chain impacts, and a subsequent debt refinancing - Customer demand reached unprecedented levels, resulting in a record backlog of **$824 million** as of September 30, 2022[154](index=154&type=chunk) - Global supply chain disruptions and cost inflation for raw materials and components continued to impact production levels and profitability, though these were partially mitigated by price increases[155](index=155&type=chunk) Consolidated Results Highlights (Q3 2022 vs Q3 2021, in millions) | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | **Net sales** | $346.4 | $298.3 | +16% | | **Operating income** | $39.5 | $34.3 | +15% | | **Total orders** | $382.1 | $350.4 | +9% | [Results of Operations](index=30&type=section&id=MD%26A%20-%20Results%20of%20Operations) Provides detailed income statement analysis, showing **16%** net sales growth and **15%** operating income growth in Q3 2022 - Q3 2022 net sales increased by **$48.1 million** (**16%**) year-over-year, driven by a **$35.7 million** increase in Environmental Solutions and a **$12.4 million** increase in Safety and Security Systems[170](index=170&type=chunk) - Gross profit margin for Q3 2022 was **23.9%**, a slight improvement from **23.8%** in Q3 2021, as pricing actions and favorable mix offset margin pressure[174](index=174&type=chunk) - Interest expense increased by **$1.6 million** in Q3 2022 compared to the prior year, due to higher average debt levels and rising interest rates[180](index=180&type=chunk) [Environmental Solutions](index=32&type=section&id=MD%26A%20-%20Environmental%20Solutions) Environmental Solutions Group reported **14%** net sales growth, but operating margin decreased to **11.9%** due to cost inflation Environmental Solutions Performance (Q3 2022 vs Q3 2021, in millions) | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | **Net sales** | $284.8 | $249.1 | +14% | | **Operating income** | $33.9 | $30.8 | +10% | | **Operating margin** | 11.9% | 12.4% | -0.5% | | **Total orders** | $321.4 | $292.1 | +10% | [Safety and Security Systems](index=34&type=section&id=MD%26A%20-%20Safety%20and%20Security%20Systems) Safety and Security Systems Group achieved **25%** net sales growth and **38%** operating income growth in Q3 2022 Safety and Security Systems Performance (Q3 2022 vs Q3 2021, in millions) | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | **Net sales** | $61.6 | $49.2 | +25% | | **Operating income** | $10.5 | $7.6 | +38% | | **Operating margin** | 17.0% | 15.4% | +1.6% | | **Total orders** | $60.7 | $58.3 | +4% | [Financial Condition, Liquidity and Capital Resources](index=36&type=section&id=MD%26A%20-%20Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) Details liquidity and capital management, noting decreased operating cash flow and a new **$800 million** credit facility - Net cash from operating activities decreased to **$32.4 million** in the first nine months of 2022 from **$55.1 million** in 2021, primarily due to strategic increases in accounts receivable and inventory[214](index=214&type=chunk) - Capital expenditures for the first nine months of 2022 totaled **$45.6 million**, which included **$27.8 million** for the purchase of its University Park, Illinois manufacturing facility[215](index=215&type=chunk) - In October 2022, the company entered into a new credit agreement, increasing its revolving credit facility to **$675 million** and adding a **$125 million** term loan[218](index=218&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Reports no significant changes in market risk exposure during the nine months ended September 30, 2022 - There have been no significant changes in the Company's exposure to market risk during the nine months ended September 30, 2022[223](index=223&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022 - The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2022[224](index=224&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information, including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Incorporates by reference detailed discussion of legal matters, primarily ongoing hearing loss litigation - Information regarding legal proceedings is incorporated by reference from Note 8 – Commitments and Contingencies to the condensed consolidated financial statements[228](index=228&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) Reports no material changes to risk factors from the Annual Report on Form 10-K - There have been no material changes in the Company's risk factors as described in the Annual Report on Form 10-K for the year ended December 31, 2021[229](index=229&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Summarizes stock repurchase activity, noting no repurchases in Q3 2022 and **$59.1 million** remaining Stock Repurchase Activity (Q3 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2022 | — | $— | | August 2022 | — | $— | | September 2022 | — | $— | - As of October 1, 2022, the maximum dollar value of shares that may yet be purchased under the plan was **$59,052,829**[230](index=230&type=chunk) [Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Reports no defaults upon senior securities during the period - None[231](index=231&type=chunk) [Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is reported as not applicable to the company - Not applicable[232](index=232&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) Notes the issuance of a press release and presentation slides announcing Q3 2022 financial results - On November 3, 2022, the Company issued a press release (Exhibit 99.1) and earnings presentation (Exhibit 99.2) announcing its Q3 2022 financial results[233](index=233&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including credit agreement and CEO/CFO certifications - Key exhibits filed include the Third Amended and Restated Credit Agreement dated October 21, 2022, and CEO/CFO certifications[237](index=237&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 were $367 million, an increase of $32 million or 10% compared to last year [5] - Consolidated operating income for the quarter was $46.2 million, up $7.7 million or 20% compared to last year [5] - Consolidated adjusted EBITDA for the quarter was $58.2 million, up $6.3 million or 12% compared to last year, with a margin of 15.9%, up 40 basis points [5] - GAAP EPS for the quarter was $0.55 per share, up 15% compared to last year, while adjusted EPS was $0.53 per share, up 6% [6][13] - Order intake for the quarter was $413 million, representing an increase of $53 million or 15% compared to Q2 last year [6] - Backlog at the end of the quarter was $795 million, an increase of $358 million or 82% compared to Q2 last year [6] Business Line Data and Key Metrics Changes - Environmental Solutions Group (ESG) net sales were $306 million, an increase of $25 million or 9% compared to last year [6] - ESG's operating income was $39.1 million, up $600,000 or 2% compared to last year, with adjusted EBITDA of $51.6 million, up $1 million or 2% [7] - Safety and Security Systems Group (SSG) reported net sales of $60 million, an improvement of $7 million or 13% compared to last year, with operating income of $10.3 million, up 32% [8] Market Data and Key Metrics Changes - Demand for rental parts and used equipment sales increased, with aftermarket revenues totaling $161 million, a 12% improvement over last year [20] - Year-to-date orders from municipal and industrial customers were each up around 20% year-over-year [25] - Demand for safe digging products saw orders in the first half up $26 million or 69% year-over-year [28] Company Strategy and Development Direction - The company is focused on expanding its supply base and enhancing product offerings through R&D initiatives [31][34] - Recent acquisitions and capacity expansions are expected to contribute to long-term growth [37] - The company is well-positioned to benefit from federal stimulus and infrastructure legislation, which is anticipated to provide multi-year momentum [105] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges and expects margins in the second half of the year to be higher than the first half [21][38] - The company raised the midpoint of its full-year adjusted EPS outlook to a new range of $1.85 to $2 [39] - Management highlighted the importance of government funding and infrastructure investments as key drivers for future demand [26][66] Other Important Information - The company generated $15 million of cash from operations during the quarter, representing a 16% increase over Q2 last year [14] - The company paid dividends of $5.4 million during the quarter and funded $2.5 million of share repurchases [15] Q&A Session Summary Question: Details on post-closing adjustment related to acquisition - The post-closing adjustment was related to the OSW acquisition, resulting in a $2 million cash inflow during the quarter [43] Question: Performance of safety and security products - Strong performance was noted across major product lines, particularly in public safety systems, driven by new product development and major project shipments [44] Question: Update on heavy truck chassis availability - Chassis availability remains a challenge, but the company is receiving allocated chassis for certain businesses [47] Question: Impact of supply chain issues on production - Supply chain issues are expected to continue affecting production schedules, but the company is adapting to these challenges [93] Question: Organic growth rates for revenue and orders - Of the 15% order improvement, about 9% was organic, with a fairly even split between volume and price [92]