Federal Signal (FSS) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Federal Signal Corporation's unaudited financial statements and management's analysis of financial condition Financial Statements (Unaudited) This section presents Federal Signal Corporation's unaudited condensed consolidated financial statements for Q3 and YTD periods Condensed Consolidated Statements of Operations 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 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 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 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] - 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][34][40] 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] - 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][107] Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - 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] - 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] - The company anticipates capital expenditures for 2023 to be in the range of $27 million to $30 million[209] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION This section details legal proceedings, risk factors, equity sales, other information, and exhibits Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Other Information 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] Exhibits This section lists exhibits filed with the Form 10-Q, including governance documents, certifications, and Q3 financial results materials