10-K 1 d451748d10k.htm FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
Commission File Number 1-6003
FEDERAL SIGNAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1415 West 22nd Street,
Oak Brook, Illinois
(Address of principal executive offices)
36-1063330
(I.R.S. Employer
Identification No.)
60523
(Zip Code)
Registrant’s telephone number, including area code
(630) 954-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange on Which Registered
Common Stock, par value $1.00 per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or shorter period that the registrant was required to submit and post such
files). Yes þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter)
is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ Smaller reporting company ¨
(Do not check if a smaller reporting company)
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No þ
As of June 29, 2012, the aggregate market value of voting stock held by non-affiliates was $351,678,008.
As of February 28, 2013, the number of shares outstanding of the registrant’s common stock was 62,398,530.
Documents Incorporated By Reference
Portions of the definitive proxy statement for the 2013 Annual Meeting of Shareholders are incorporated by reference in
Part III.
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
FEDERAL SIGNAL CORPORATION
Index to Form 10-K
PART I
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
Exhibit Index
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This Annual Report on Form 10-K (“Form 10-K”) and other reports filed by Federal Signal Corporation and its subsidiaries
(referred to collectively as “the Company” or “Company” herein, unless the context otherwise indicates) with the Securities and
Exchange Commission (the “SEC”) and comments made by management may contain words such as “may,” “will,” “believe,”
“expect,” “anticipate,” “intend,” “plan,” “project,” “estimate” and “objective” or the negative thereof or similar terminology
concerning the Company’s future financial performance, business strategy, plans, goals and objectives. These expressions are
intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include information concerning the Company’s possible or assumed future performance or results
of operations and are not guarantees. While these statements are based on assumptions and judgments that management has
made in light of industry experience as well as perceptions of historical trends, current conditions, expected future
developments and other factors believed to be appropriate under the circumstances, they are subject to risks, uncertainties and
other factors that may cause the Company’s actual results, performance or achievements to be materially different.
These risks and uncertainties, some of which are beyond the Company’s control, include the cyclical nature of the
Company’s industrial, municipal, governmental and commercial markets; domestic and foreign governmental policy changes;
restrictive debt covenants; availability of credit and third-party financing for customers; our ability to anticipate and meet
customer demands for new products and product enhancements and the resulting new and enhanced products generating
sufficient revenues to justify research and development expenses; our incurrence of restructuring and impairment charges as
we continue to evaluate opportunities to restructure our business; highly competitive markets; increased product liability,
warranty, recall claims, client service interruptions and other lawsuits and claims; technological advances by competitors;
disruptions in the supply of parts and components from suppliers and subcontractors; attraction and retention of key
employees; disruptions within our dealer network; work stoppages and other labor relations matters; increased pension
funding requirements and expenses beyond our control; costs of compliance with environmental and safety regulations; our
ability to use net operating loss (“NOL”) carryovers to reduce future tax payments; charges related to goodwill and other long-
lived intangible assets; our ability to expand our business through successful future acquisitions; and unknown or unexpected
contingencies in our existing business or in businesses acquired by us. These risks and uncertainties include, but are not
limited to, the risk factors described under Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and other filings with the SEC. These factors may not constitute all factors that could cause actual
results to differ materially from those discussed in any forward-looking statement. The Company operates in a continually
changing business environment and new factors emerge from time to time. The Company cannot predict such factors, nor can it
assess the impact, if any, of such factors on its financial position or results of operations. Accordingly, forward-looking
statements should not be relied upon as a predictor of actual results. The Company disclaims any responsibility to update any
forward-looking statement provided in this Form 10-K.
Item 1. Business.
PART I
Federal Signal Corporation, founded in 1901, was reincorporated as a Delaware corporation in 1969. The Company designs
and manufactures a suite of products and integrated solutions for municipal, governmental, industrial and commercial
customers. The Company’s portfolio of products includes safety and security systems, vacuum loader vehicles, street
sweepers, truck mounted aerial platforms, waterblasters, and technology-based products and solutions for the public safety
market. Federal Signal Corporation and its subsidiaries operate 11 manufacturing facilities in six countries around the world
serving customers in approximately 100 countries in all regions of the world.
Narrative Description of Business
Products manufactured and services rendered by the Company are divided into three major operating segments: Safety
and Security Systems, Fire Rescue and Environmental Solutions. The individual operating businesses are organized as such
because they share certain characteristics, including technology, marketing, distribution and product application, which create
long-term synergies.
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Financial information (net sales, operating income, depreciation and amortization, capital expenditures and identifiable
assets) concerning the Company’s three operating segments as of December 31, 2012 and 2011, and for each of the three years
in the period ended December 31, 2012, is included in Note 14 to the consolidated financial statements included under Item 8 of
Part II of this Form 10-K and is incorporated herein by reference. Information regarding the Company’s discontinued operations
is included in Note 11 to the consolidated financial statements included under Item 8 of Part II of this Form 10-K and is
incorporated herein by reference.
Safety and Security Systems Group
Our Safety and Security Systems Group is a leading manufacturer and supplier of comprehensive systems and products
that law enforcement, fire rescue, emergency medical services, campuses, military facilities and industrial sites use to protect
people and property. Offerings include systems for campus and community alerting, emergency vehicles, first responder
interoperable communications, industrial communications, and command and municipal networked security. Specific products
include vehicle lightbars and sirens, public warning sirens and public safety software. Products are sold under the Federal
Signal
America, Europe and South Africa.
, Federal Signal VAMA , Target Tech and Victor brand names. The Group operates manufacturing facilities in North
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Fire Rescue Group
Our Fire Rescue Group is a leading manufacturer and supplier of sophisticated, vehicle-mounted, aerial platforms for fire
fighting, rescue, electric utility and industrial uses. End customers include fire departments, industrial fire services, electric
utilities and maintenance rental companies for applications such as fire fighting and rescue, transmission line maintenance, and
installation and maintenance of wind turbines. The Group’s telescopic/articulated aerial platforms are designed in accordance
with various regulatory codes and standards, such as European Norms (“EN”), National Fire Protection Association (“NFPA”)
and American National Standards Institute (“ANSI”). In addition to equipment sales, the Group sells parts, service and training
as part of a complete offering to its customer base. The Group manufactures in Finland and sells globally under the Bronto
Skylift brand name.
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Environmental Solutions Group
Our Environmental Solutions Group is a leading manufacturer and supplier of a full range of street sweeper and vacuum
trucks and high-performance waterblasting equipment for municipal and industrial customers. We also manufacture products
for the newer markets of hydro-excavation, glycol recovery and surface cleaning for utility and industrial customers. Products
are sold under the Elgin , Vactor , Guzzler and Jetstream brand names. The Group primarily manufactures its vehicles and
equipment in the United States.
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Under the Elgin brand name, the Company sells a leading U.S. brand of street sweepers primarily designed for large-scale
cleaning of curbed streets, parking lots and other paved surfaces utilizing mechanical sweeping, vacuum, and recirculating air
technology. Vactor is a leading manufacturer of municipal combination catch basin/sewer cleaning vacuum trucks. Guzzler is a
leader in industrial vacuum loaders used to manage industrial waste or recover and recycle valuable raw materials. Jetstream
manufactures high pressure waterblast equipment and accessories for commercial and industrial cleaning and maintenance
operations. In addition to equipment sales, the Group is increasingly engaged in the sale of parts and tooling, service and
repair, equipment rentals and training as part of a complete offering to its customer base.
Discontinued Federal Signal Technologies Group
As discussed in Note 11 to the consolidated financial statements included under Item 8 of Part II of this Form 10-K, on
September 4, 2012, the Company completed the disposition of the assets of its Federal Signal Technologies (“FSTech”) Group.
The consolidated financial statements for all periods presented have been recast to present the operating results of previously
divested or exited businesses as discontinued operations, including the FSTech Group.
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Marketing and Distribution
The Safety and Security Systems Group sells to industrial customers through approximately 2,000 wholesalers/distributors
who are supported by Company sales personnel and/or independent manufacturers’ representatives. Products are also sold to
municipal and governmental customers through more than 1,900 active independent distributors as well as through original
equipment manufacturers and direct sales. International sales are made through the Group’s independent foreign distributors or
on a direct basis. The Company also sells comprehensive integrated warning and interoperable communications through a
combination of a direct sales force and distributors.
The Fire Rescue and Environmental Solutions Groups use dealer networks and direct sales to service customers generally
depending on the type and location of the customer. The Environmental Solutions Group’s direct sales channel concentrates
on the industrial, utility and construction market segments, while the dealer networks focus primarily on the municipal markets.
The Company believes its national and global dealer networks for vehicles distinguish it from its competitors. Dealer
representatives demonstrate the vehicles’ functionalities and capabilities to customers and service the vehicles on a timely
basis.
Customers and Backlog
Approximately 36%, 26% and 38% of the Company’s total 2012 orders were to U.S. municipal and governmental
customers, U.S. commercial and industrial customers, and non-U.S. customers, respectively. No single customer accounted for
10% or more of the Company’s business.
During 2012, the Company’s U.S. municipal and governmental orders increased 8% from 2011, compared to a 22% increase
in these orders in 2011 as compared to 2010, as the U.S. and global markets continued their recovery from the economic
recession. The U.S. commercial and industrial orders in 2012 decreased 7% from 2011, compared to an increase of 36% in these
orders in 2011 compared to 2010.
Approximately 60% of orders to non-U.S. customers flow to municipalities and governments, while approximately 40%
flow to industrial and commercial customers. The non-U.S. municipal and governmental market segment is essentially similar to
the U.S. municipal and governmental market segment in that it is largely dependent on tax revenues to support spending. Of the
non-U.S. orders, the Company typically sells approximately 30% of its products in Europe, 19% in Canada, 12% in the Middle
East and Africa, 16% in China, 6% in Australia and less than 10% in any other particular region.
The Company’s backlog totaled $318.4 million at December 31, 2012 compared to $295.2 million at December 31, 2011.
Backlogs vary by Group due to the nature of the Company’s products and buying patterns of its customers. Safety and
Security Systems typically maintains an average backlog of two months of shipments, Environmental Solutions maintains an
average backlog of three to four months of shipments, and Fire Rescue normally maintains an average backlog of five months
of shipments, excluding service and maintenance contracts that generally cover a period of more than one year. Production of
the Company’s December 31, 2012 backlog is expected to be substantially completed during 2013.
Suppliers
The Company purchases a wide variety of raw materials from around the world for use in the manufacture of its products,
although the majority of current purchases are from North American sources. To minimize the risks of availability, price and
quality, the Company is party to numerous strategic supplier arrangements. Although certain materials are obtained from either
a single-source supplier or a limited number of suppliers, the Company has identified alternative sources to minimize the
interruption of its business in the event of supply problems.
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Components critical to the production of the Company’s vehicles, such as engines and hydraulic systems, are purchased
from a select number of suppliers. The Company also purchases raw and fabricated steel as well as commercial chassis with
certain specifications from multiple sources.
The Company believes it has adequate supplies or sources of availability of the raw materials and components necessary
to meet its needs. However, there are risks and uncertainties with respect to the supply of certain of these raw materials that
could impact their price, quality and availability in sufficient quantities.
Competition
Within specific product categories and domestic markets, the Safety and Security Systems Group companies are among
the leaders with three to four strong competitors and several additional ancillary market participants. The Group’s international
market position varies from leader to ancillary participant depending on the geographic region and product line. Generally,
competition is intense within all of the Group’s product lines, and purchase decisions are made based on competitive bidding,
price, reputation, performance and servicing.
Within the Fire Rescue Group, Bronto Skylift is established as a global leader for aerial platforms used in fire fighting,
rescue and industrial markets. Competitor offerings can include trailer mounted articulated aerials and traditional fire trucks with
ladders. Bronto competes on product performance, where it holds technological advantages in its designs, materials and
production processes.
Within the Environmental Solutions Group, Elgin is recognized as a market leader among several domestic sweeper
competitors and differentiates itself primarily on product performance. Vactor and Guzzler both maintain a leading domestic
position in their respective marketplaces by enhancing product performance with leading technology and application flexibility.
Jetstream is a market leader in the in-plant cleaning segment of the U.S. waterblast industry, competing on product performance
and rapid delivery.
Research and Development
The Company invests in research to support development of new products and the enhancement of existing products and
services. The Company believes this investment is important to maintain and/or enhance its leadership position in key markets.
Expenditures for research and development by the Company were $10.0 million in 2012, $12.1 million in 2011 and $10.4 million in
2010, and were reported within selling, engineering, general and administrative (“SG&A”) expenses.
Patents and Trademarks
The Company owns a number of patents and possesses rights under others to which it attaches importance, but does not
believe that its business as a whole is materially dependent upon any such patents or rights. The Company also owns a
number of trademarks that it believes are important in connection with the identification of its products and associated goodwill
with customers, but no material part of the Company’s business is dependent on such trademarks.
Employees
The Company employed 2,558 people in its businesses at the close of 2012. At December 31, 2012, the Company’s U.S.
hourly workers accounted for approximately 41% of its total workforce. Approximately 28% of the Company’s U.S. hourly
workers were represented by unions at December 31, 2012. We believe that our labor relations with our employees are good.
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Governmental Regulation of the Environment
The Company believes it substantially complies with federal, state and local provisions that have been enacted or
adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment.
Capital expenditures in 2012 attributable to compliance with such laws were not material. The Company believes that the overall
impact of compliance with environmental regulations will not have a material adverse effect on its future operations.
The Company retained an environmental consultant to conduct an environmental risk assessment at the Pearland, Texas
facility. The facility, which was previously used by the Company’s discontinued Pauluhn business, manufactured marine,
offshore and industrial lighting products. The Company sold the facility in May 2012. While the Company has not finalized its
plans, it is probable that the site will require remediation. As of December 31, 2012 and 2011, $1.8 million and $2.2 million,
respectively, of reserves related to the environmental remediation of the Pearland facility are included in liabilities of
discontinued operations on the consolidated balance sheet. The Company’s estimate may change in the near term as more
information becomes available; however, the costs are not expected to have a material adverse effect on the Company’s results
of operations, financial position or liquidity.
Seasonality
Certain of the Company businesses are susceptible to the influences of seasonal buying or delivery patterns. The
Company tends to have lower sales in the first calendar quarter compared to other quarters as a result of these influences.
Additional Information
The Company makes its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
other reports and information filed with the SEC and amendments to those reports available, free of charge, through its Internet
Website (www.federalsignal.com) as soon as reasonably practical after it electronically files or furnishes such materials to the
SEC. All of the Company’s filings may be read or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580,
Washington, DC 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-
800-732-0330. The SEC maintains an Internet website (www.sec.gov) that contains reports, proxy and information statements
and other information regarding issuers that file electronically.
Executive Officers of the Registrant
The following is a list of the Company’s executive officers, their ages, business experience and positions and offices as of
February 1, 2013:
Dennis J. Martin, age 62, was appointed President and Chief Executive Officer in October 2010 and was appointed to the
Board of Directors in March 2008. Mr. Martin had been an independent business consultant from 2005 to October 2010 and was
the Chairman, President and Chief Executive Officer of General Binding Corporation from 2001 to 2005.
Charles F. Avery, Jr., age 48, was appointed Vice President, Corporate Controller and Chief Information Officer in May
2011. Mr. Avery was Vice President, Information Technology and Controller from March 2010 to May 2011 and was Vice
President Finance for the Environmental Solutions Group from March 2005 to March 2010.
Bryan L. Boettger, age 60, was appointed President of Public Safety Systems in May 2011. Mr. Boettger was Vice
President of Operations for the Safety and Security Systems Group from 2010 to 2011 and Interim Vice President/General
Manager Public Safety Systems and President of Emergency Products Division from 2006 to 2009.
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Julie A. Cook, age 51, was appointed Vice President, Human Resources in September 2012. Ms. Cook served as Johnson
Controls, Inc.’s Director of Human Resources, Building Efficiency Programs and then Vice President of Human Resources,
Global Manufacturing, Supply Chain and Communications, during 2010 through 2012. Ms. Cook previously served as the
Company’s Environmental Solutions Group Vice President of Human Resources with responsibility for Corporate Human
Resources from 2008 through 2010. Ms Cook was Group Vice President of Human Resources for the Environmental Solutions
Group from 2001 to 2007.
Esa Peltola, age 61, was appointed President of Bronto Skylift Oy Ab in July 2007. Mr. Peltola was Managing Director of
Bronto Skylift from 1998 to 2007.
Jennifer L. Sherman, age 48, was appointed Chief Administrative Officer, Senior Vice President, General Counsel and
Secretary in October 2010. Ms. Sherman was Senior Vice President, Human Resources, General Counsel and Secretary from
April 2008 to July 2010. Ms. Sherman was Vice President, General Counsel and Secretary from 2004 to March 2008 and was
Deputy General Counsel and Assistant Secretary from 1998 to 2004.
Braden N. Waverley, age 46, was appointed Interim Chief Financial Officer in October 2012. Prior to joining the Company
in a consulting capacity managing the FSTech Group sale process, Mr. Waverley served as Executive Chairman of
CombineNet, Inc. from 2005 to 2010, and was an investor and advisor to multiple, early stage companies.
Mark D. Weber, age 55, was appointed President of the Environmental Solutions Group in April 2003. Mr. Weber was Vice
President Sweeper Products for the Environmental Solutions Group from 2002 to 2003 and General Manager of Elgin Sweeper
Company from 2001 to 2002.
Joseph W. Wilson, age 55, was appointed President of Industrial Systems Division in May 2011. Mr. Wilson was Vice
President/General Manager of the Industrial Systems Division from 2010 to 2011, in 2007 was Vice President/General Manager
Industrial & Commercial System Division, and in 2006 was Vice President/General Manager Public Safety & Transportation
System Division.
These officers hold office until the next annual meeting of the Board of Directors following their election and until their
successors have been elected and qualified.
There are no family relationships among any of the foregoing executive officers.
Item 1A. Risk Factors.
We may occasionally make forward-looking statements and estimates such as forecasts and projections of our future
performance or statements of our plans and objectives. These forward-looking statements may be contained in, among other
things, filings with the SEC, including this Form 10-K, press releases made by us and in oral statements made by our officers.
Actual results could differ materially from those contained in such forward-looking statements. Important factors that could
cause our actual results to differ from those contained in such forward-looking statements include, among other things, the
risks described below.
Our financial results are subject to U.S. economic uncertainty.
In 2012, we generated approximately 61% of our sales in the U.S. Our ability to be profitable depends heavily on varying
conditions in the U.S. governmental and municipal markets and the overall U.S. economy. The industrial markets in which we
compete are subject to considerable cyclicality, and move in response to cycles in the overall business environment. Many of
our customers are municipal government agencies, and as a result, we are dependent on municipal government spending.
Spending by our municipal customers can be
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affected by local political circumstances, budgetary constraints and other factors. The U.S. government and municipalities
depend heavily on tax revenues as a source of their spending and accordingly, there is a historical correlation of a one or two
year lag between the overall strength of the U.S. economy and our sales to the U.S. government and municipalities. Therefore,
downturns in the U.S. economy are likely to result in decreases in demand for our products. During previous economic
downturns, we experienced decreases in sales and profitability, and we expect our business to remain subject to similar
economic fluctuations in the future.
We have international operations that are subject to foreign economic and political uncertainties and foreign currency
rate fluctuations.
Our business is subject to fluctuations in demand and changing international economic and political conditions that are
beyond our control. In 2012, 39% of our sales were generated outside the U.S. and we expect a significant portion of our
revenues to come from international sales for the foreseeable future. Operating in the international marketplace exposes us to a
number of risks, including abrupt changes in foreign government policies and regulations, restrictive domestic and
international trade regulations, U.S. laws applicable to foreign operations, such as the Foreign Corrupt Practices Act (the
“FCPA”) and the UK Bribery Act, political and economic instability, local labor market conditions, the imposition of foreign
tariffs and other trade barriers and, in some cases, international hostilities. To the extent that our international operations are
affected by unexpected and adverse foreign economic and political conditions, we may experience project disruptions and
losses which could significantly reduce our revenues and profits. In addition, penalties for non-compliance with laws
applicable to international business and trade, such as the FCPA, could negatively impact our business.
Some of our contracts are denominated in foreign currencies, which results in additional risk of fluctuating currency
values and exchange rates, hard currency shortages and controls on currency exchange. Changes in the value of foreign
currencies over the longer term could increase our U.S. dollar costs for, or reduce our U.S. dollar revenues from, our foreign
operations. Any increased costs or reduced revenues as a result of foreign currency fluctuations could adversely affect our
profits.
We are subject to a number of restrictive debt covenants.
We recently entered into a credit facility in March 2013 for a period of five years ending March 2018. The proceeds from
this credit facility were used to refinance the majority of the Company’s existing indebtedness, including the Company’s
secured credit facility and term loan. The new credit facility contains certain restrictive debt covenants and other customary
events of default. Our ability to comply with these restrictive covenants may be affected by the other factors described in this
“Risk Factors” section and other factors outside of our control. Failure to comply with one or more of these restrictive
covenants may result in an event of default. Upon an event of default, if not waived by our lenders, our lenders may declare all
amounts outstanding as due and payable. If our current lenders accelerate the maturity of our indebtedness, we may not have
sufficient capital available at that time to pay the amounts due to our lenders on a timely basis. In addition, these restrictive
covenants may prevent us from engaging in transactions that benefit us, including responding to changing business and
economic conditions and taking advantage of attractive business opportunities.
The execution of our growth strategy is dependent upon the continued availability of credit and third-party financing
arrangements for our customers.
Economic downturns result in tighter credit markets, which could adversely affect our customers’ ability to secure
financing or to secure financing at favorable terms or interest rates necessary to proceed or continue with purchases of our
products and services. Our customers’ or potential customers’ inability to secure financing for projects could result in the
delay, cancellation or downsizing of new purchases or the suspension of purchases already under contract, which could cause
a decline in the demand for our products and services and negatively impact our revenues and earnings.
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Our efforts to develop new products and services or enhance existing products and services involve substantial research,
development and marketing expenses, and the resulting new or enhanced products or services may not generate sufficient
revenues to justify the expense.
We place a high priority on developing new products and services, as well as enhancing our existing products and
services. As a result of these efforts, we may be required to expend substantial research, development and marketing resources,
and the time and expense required to develop a new product or service or enhance an existing product or service are difficult to
predict. We may not succeed in developing, introducing or marketing new products or services or product or service
enhancements. In addition, we cannot be certain that any new or enhanced product or service will generate sufficient revenue
to justify the expense and resources devoted to this product diversification effort.
We could incur restructuring and impairment charges as we continue to evaluate opportunities to restructure our
business and rationalize our manufacturing operations in an effort to optimize our cost structure.
We continue to evaluate opportunities to restructure our business and rationalize our manufacturing operations in an
effort to optimize our cost structure. These actions could result in significant charges which could adversely affect our financial
condition and results of operations. Future actions could result in restructuring and related charges, including but not limited
to impairments, employee termination costs and charges for pension and other postretirement contractual benefits and pension
curtailments that could be significant. We have substantial amounts of long-lived assets, including goodwill, which are subject
to periodic impairment analysis and review. Identifying and assessing whether impairment indicators exist, or if events or
changes in circumstances have occurred, including market conditions, operating results, competition and general economic
conditions, requires significant judgment. Any of the above future actions could result in charges that could have an adverse
effect on our financial condition and results of operations.
We operate in highly competitive markets.
The markets in which we operate are highly competitive. Many of our competitors have significantly greater financial
resources than we do. The intensity of this competition, which is expected to continue, can result in price discounting and
margin pressures throughout the industry and may adversely affect our ability to increase or maintain prices for our products.
In addition, certain of our competitors may have lower overall labor or material costs. In addition, our contracts with municipal
and other governmental customers are in some cases awarded and renewed through competitive bidding. We may not be
successful in obtaining or renewing these contracts, which could be harmful to our business and financial performance.
We may incur material losses and costs as a result of product liability, warranty, recall claims, client service interruption
or other lawsuits or claims that may be brought against us.
We are exposed to product liability and warranty claims in the normal course of business in the event that our products
actually or allegedly fail to perform as expected, or the use of our products results or is alleged to result in bodily injury and/or
property damage. For example, we have been sued by firefighters seeking damages claiming that exposure to our sirens has
impaired their hearing and that the sirens are, therefore, defective. In addition, we are subject to other claims and litigation from
time to time as further described in the notes to our consolidated financial statements. We could experience material warranty or
product liability costs in the future and incur significant costs to defend against these claims. We carry insurance and maintain
reserves for product liability claims. However, we cannot assure that our insurance coverage will be adequate if such claims do
arise, and any defense costs and liability not covered by insurance could have a material adverse impact on our financial
position and results of operations. A future claim could involve the imposition of punitive damages, the award of which,
pursuant to state laws, may not be covered by insurance. In addition, warranty or other claims are not typically covered by
insurance. Any product liability or warranty issues may adversely impact our reputation as a manufacturer of high quality, safe
products and may have a material adverse effect on our business.
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Failure to keep pace with technological developments may adversely affect our operations.
We are engaged in an industry which will be affected by future technological developments. The introduction of products
or processes utilizing new technologies could render our existing products or processes obsolete or unmarketable. Our success
will depend upon our ability to develop and introduce on a timely and cost-effective basis new products, applications and
processes that keep pace with technological developments and address increasingly sophisticated customer requirements. We
may not be successful in identifying, developing and marketing new products, applications and processes and product or
process enhancements. We may experience difficulties that could delay or prevent the successful development, introduction
and marketing of product or process enhancements or new products, applications or processes. Our products, applications or
processes may not adequately meet the requirements of the marketplace and achieve market acceptance. Our business,
financial condition and results of operations could be materially and adversely affected if we were to incur delays in developing
new products, applications or processes or product or process enhancements, or if our products do not gain market
acceptance.
The inability to obtain raw materials, component parts, and/or finished goods in a timely and cost-effective manner from
suppliers would adversely affect our ability to manufacture and market our products.
We purchase from suppliers raw materials and component parts to be used in the manufacturing of our products. In
addition, we purchase certain finished goods from suppliers. Changes in our relationships with suppliers, shortages,
production delays, regulatory restrictions or work stoppages by the employees of such suppliers could have a material adverse
effect on our ability to timely manufacture and market products. In addition, increases in the costs of purchased raw materials,
component parts or finished goods could result in manufacturing interruptions, delays, inefficiencies or our inability to market
products. In addition, our profit margins would decrease if prices of purchased raw materials, component parts or finished
goods increase and we are unable to pass on those increases to our customers.
Our ability to operate effectively could be impaired if we fail to attract and retain key personnel.
Our ability to operate our businesses and implement our strategies depends in part on the efforts of our executive officers
and other key employees. In addition, our future success will depend on, among other factors, our ability to attract and retain
qualified personnel, including finance personnel, research professionals, technical sales professionals and engineers. The loss
of the services of any key employee or the failure to attract or retain other qualified personnel could have a material adverse
effect on our business or business prospects.
Disruptions within our dealer network could adversely affect our business.
We rely on a national and global dealer network to market certain of our products and services. A disruption in our dealer
network within a specific local market could temporarily have an adverse impact on our business within the affected market. In
addition, the loss or termination of a significant number of dealers could cause difficulties in marketing and distributing our
products and have an adverse effect on our business, financial condition or results of operations.
Our business may be adversely impacted by work stoppages and other labor relations matters.
We are subject to risk of work stoppages and other labor relations matters because a portion of our workforce is
unionized. As of December 31, 2012, approximately 28% of our U.S. hourly workers are represented by labor unions and are
covered by collective bargaining agreements. Many of these agreements include provisions that limit our ability to realize cost
savings. Any strikes, threats of strikes, or other resistance in connection with the negotiation of new labor agreements or
otherwise could materially adversely affect our business as well as impair our ability to implement further measures to reduce
structural costs and improve production efficiencies. We believe that our labor relations with our employees are good.
9
Our pension funding requirements and expenses are affected by certain factors outside of our control, including the
performance of plan assets, the discount rate used to value liabilities, actuarial assumptions and experience and legal and
regulatory changes.
Our funding obligations and pension expense for our defined benefit pension plans are driven by the performance of
assets set aside in trusts for these plans, the discount rate used to value the plans’ liabilities, actuarial assumptions and
experience and legal and regulatory funding requirements. Changes in these factors could have an adverse impact on our
results of operations, liquidity or shareholders’ equity. In addition, a portion of our pension plan assets are invested in equity
securities, which can experience significant declines if financial markets weaken. The level of the funding of our defined benefit
pension plan liabilities was approximately 69% as of December 31, 2012. Our future pension expenses and funding requirements
could increase significantly due to the effect of adverse changes in the discount rate and asset levels along with a decline in
the estimated return on plan assets. In addition, the Company could be legally required to make increased contributions to the
pension plans, and these contributions could be material and negatively affect our cash flow.
The costs associated with complying with environmental and safety regulations could lower our margins.
We, like other manufacturers, continue to face heavy governmental regulation of our products, especially in the areas of
the environment and employee health and safety. Complying with environmental and safety requirements has added and will
continue to add to the cost of our products, and could increase the capital required to support our business. While we believe
that we are in compliance in all material respects with these laws and regulations, we may be adversely impacted by costs,
liabilities or claims with respect to our operations under existing laws or those that may be adopted. These requirements are
complex, change frequently and have tended to become more stringent over time. Therefore, we could incur substantial costs,
including cleanup costs, fines and civil or criminal sanctions as a result of violation of, or liabilities under, environmental laws
and safety regulations.
Our ability to use NOL carryovers to reduce future tax payments could be negatively impacted if there is a change in our
ownership or a failure to generate sufficient taxable income.
Presently, there is no annual limitation on our ability to use U.S. federal NOLs to reduce future income taxes. However, if
an ownership change as defined in Section 382 of the Internal Revenue Code of 1986, as amended, occurs with respect to our
capital stock, our ability to use NOLs would be limited to specific annual amounts. Generally, an ownership change occurs if
certain persons or groups increase their aggregate ownership by more than 50% of our total capital stock in a three-year period.
If an ownership change occurs, our ability to use domestic NOLs to reduce taxable income is generally limited to an annual
amount based on the fair market value of our stock immediately prior to the ownership change multiplied by the long-term tax-
exempt interest rate. NOLs that exceed the Section 382 limitation in any year continue to be allowed as carryforwards for the
remainder of the 20-year carryforward period and can be used to offset taxable income for years within the carryover period
subject to the limitation in each year. Our use of new NOLs arising after the date of an ownership change would not be
affected. If more than a 50% ownership change were to occur, use of our NOLs to reduce payments of federal taxable income
may be deferred to later years within the 20-year carryover period; however, if the carryover period for any loss year expires,
the use of the remaining NOLs for the loss year will be prohibited. If we should fail to generate a sufficient level of taxable
income prior to the expiration of the NOL carryforward periods, then we will lose the ability to apply the NOLs as offsets to
future taxable income.
An impairment in the carrying value of goodwill, trade names and other long-lived assets could negatively affect our
consolidated financial position and results of operations.
Goodwill and indefinite-lived intangible assets, such as trade names, are recorded at fair value at the time of acquisition
and are not amortized, but are reviewed for impairment at least annually or more frequently if impairment indicators arise. In
evaluating the potential for impairment of goodwill and trade names, we make
10
assumptions regarding future operating performance, business trends and market and economic conditions. Such analyses
further require us to make certain assumptions about our sales, operating margins, growth rates and discount rates. There are
inherent uncertainties related to these factors and in applying these factors to the assessment of goodwill and trade name
recoverability. Goodwill reviews are prepared using estimates of the fair value of reporting units based on the estimated present
value of future discounted cash flows. We could be required to evaluate the recoverability of goodwill or trade names prior to
the annual assessment if we experience disruptions to the business, unexpected significant declines in operating results, a
divestiture of a significant component of our business or market capitalization declines.
We also continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful
lives of our definite-lived intangible assets and other long-lived assets may warrant revision or whether the remaining balance
of such assets may not be recoverable. We use an estimate of the related undiscounted cash flow over the remaining life of the
asset in measuring whether the asset is recoverable.
If the future operating performance of our reporting units is not consistent with our assumptions, we could be required to
record non-cash impairment charges. Impairment charges could substantially affect our reported earnings in the periods such
charges are recorded. As of December 31, 2012, total consolidated goodwill was approximately 44% of total consolidated
assets.
We may be unsuccessful in our future acquisitions, if any, which may have an adverse effect on our business.
Our long-term strategy includes expanding into adjacent markets through selective acquisitions of companies,
complementary products and services, as well as organic growth in order to enhance our global market position and broaden
our product offerings. This strategy may involve the acquisition of companies that, among other things, enable us to build on
our existing strength in a market or that give us access to proprietary products and services that are strategically valuable or
allow us to leverage our distribution channels. In connection with this strategy, we could face certain risks and uncertainties in
addition to those we face in the day-to-day operations of our business. We also may be unable to identify suitable targets for
acquisition or make acquisitions at favorable prices. If we identify a suitable acquisition candidate, our ability to successfully
implement the acquisition would depend on a variety of factors, including our ability to obtain financing on acceptable terms.
In addition, our acquisition activities could be disrupted by overtures from competitors for the targeted companies,
governmental regulation and rapid developments in our industry that decrease the value of a target’s products or services.
Acquisitions involve risks, including those associated with the following:
• integrating the operations, financial reporting, disparate systems and processes and personnel of acquired
companies;
• managing geographically dispersed operations;
• diverting management’s attention from other business concerns;
• entering markets or lines of business in which we have either limited or no direct experience; and
• potentially losing key employees, customers and strategic partners of acquired companies.
We also may not achieve anticipated revenue and cost benefits. Acquisitions may not be accretive to our earnings and
may negatively impact our results of operations as a result of, among other things, the incurrence of debt, write-offs of goodwill
and amortization expenses of other intangible assets. In addition, future acquisitions could result in dilutive issuances of equity
securities.
11
Businesses acquired by us may have liabilities which are not known to us.
We may assume liabilities in connection with the acquisition of businesses. There may be liabilities that we fail or are
unable to discover in the course of performing due diligence investigations on the acquired businesses. In these
circumstances, we cannot assure that our rights to indemnification from sellers of the acquired businesses to us will be
sufficient in amount, scope or duration to fully offset the possible liabilities associated with the businesses or property
acquired. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
As of December 31, 2012, the Company utilized five principal manufacturing plants located throughout North America, as
well as five in Europe, and one in South Africa. In total, the Company devoted approximately 0.9 million square feet to
manufacturing and 0.5 million square feet to service, warehousing and office space as of December 31, 2012. Of the total square
footage, approximately 46% is devoted to the Safety and Security Systems Group, 12% to the Fire Rescue Group, and 42% to
the Environmental Solutions Group. Approximately 23% of the total square footage is owned by the Company with the
remaining 77% being leased.
All of the Company’s properties, as well as the related machinery and equipment, are considered to be well-maintained,
suitable and adequate for their intended purposes. In the aggregate, these facilities are of sufficient capacity for the Company’s
current business needs.
Item 3. Legal Proceedings.
The information concerning the Company’s legal proceedings included in Note 13 to the consolidated financial
statements contained under Item 8 of Part II of this Form 10-K is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a) Market Information
The Company’s common stock is listed and traded on the New York Stock Exchange (“NYSE”) under the symbol FSS. The
following table presents a summary of the high and low market price per share of our common stock for each quarter of 2012
and 2011:
Year Ended December 31, 2012
1 Qtr
st
2 Qtr
nd
3 Qtr
rd
4 Qtr
th
(b) Holders
High
$5.94
6.00
6.69
7.63
Low
$3.73
4.47
4.85
5.08
Year Ended December 31,2011
1 Qtr
st
2 Qtr
nd
3 Qtr
rd
4 Qtr
th
High
$7.79
6.96
6.79
5.21
Low
$5.06
5.74
4.26
3.50
As of February 28, 2013, there were 2,123 holders of record of the Company’s common stock.
12
(c) Dividends
The Company did not declare any dividends during 2012 or 2011, and accordingly, no dividends were paid in 2012. The
payment of future dividends is at the discretion of the Company’s Board of Directors and will depend, among other things,
upon future earnings and cash flows, capital requirements, the Company’s general financial condition, general business
conditions and other factors.
Effective March 13, 2013, under the Company’s new $225.0 million senior secured credit facility (the “Senior Secured
Credit Facility”), dividends shall be permitted only if the following conditions are met:
• No default or event of default shall exist or shall result from such dividend payment;
• The leverage ratio (Consolidated Total Indebtedness to Consolidated EBITDA, as defined therein) of the Company and
its subsidiaries shall be, for the trailing 12 month period ending on the date of distribution, less than 3.25; and
• The Company is in compliance with the quarterly Consolidated Total Leverage Ratio and Consolidated Fixed Charge
Coverage Ratio.
A complete list of terms and conditions can be found in the $225.0 million Senior Secured Credit Facility, which has been
filed with the SEC and is incorporated by reference as an exhibit to this Form 10-K.
(d) Securities Authorized for Issuance under Equity Compensation
Information concerning the Company’s equity compensation plans is included under Item 12 of Part III of this Form 10-K.
13
(e) Performance Graph
The following graph compares the cumulative five-year total return to shareholders on Federal Signal Corporation’s
common stock relative to the cumulative total returns of the Russell 2000 index, the S&P Midcap 400 index, and the S&P
Industrials index. The graph assumes that the value of the investment in the Company’s common stock, and in each index
(including reinvestment of dividends) was $100 on December 31, 2007 and tracks it through December 31, 2012.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Federal Signal Corporation, the Russell 2000 Index,
the S&P Midcap 400 Index, and the S&P Industrials Index
*$100 invested on December 31, 2007 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright
Copyright
©
©
2013 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
2013 Russell Investment Group. All rights reserved.
Federal Signal Corporation
Russell 2000
S&P Midcap 400
S&P Industrials
12/10
12/08
12/09
12/07
12/12
$100.00 $74.74 $57.10 $ 67.40 $ 40.78 $ 74.77
119.09
128.51
105.58
102.36
109.02
91.53
106.82
110.94
92.07
100.00
100.00
100.00
84.20
87.61
72.65
66.21
63.77
60.08
12/11
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Notwithstanding anything set forth in any of our previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, which might be incorporated into future filings in whole or part, including
this Form 10-K, the preceding performance graph shall not be deemed incorporated by reference into any such findings.
14
Item 6. Selected Financial Data.
The following table presents the selected financial information of the Company as of and for each of the five years in the
period ended December 31:
Results of Operations ($ in millions):
Net sales
Operating income
Income (loss) from continuing operations
Income (loss) from discontinued operations and disposal,
net of tax
Net income (loss)
Financial Position ($ in millions):
Capital expenditures
Depreciation and amortization
Total assets
Total debt (a)
Common Stock Data (per share):
Income (loss) from continuing operations — diluted
Cash dividends per share
Weighted average common shares outstanding — diluted
(in millions)
Performance Measures
Operating margin
Debt to EBITDA ratio (b)
Other Data ($ in millions):
Orders
Backlog
2012
2011
2010
2009
2008
$803.2
51.5
22.0
$688.7
33.2
13.1
$ 633.1
12.4
(74.1)
(49.5)
(27.5)
(27.3)
(14.2)
(101.6)
(175.7)
$ 13.0
13.2
613.2
157.8
$ 0.35
0.00
$ 13.5
13.0
706.7
222.2
$ 0.21
0.00
$ 11.3
11.4
764.5
262.0
$ (1.29)
0.24
$685.4
29.9
16.2
6.9
23.1
$ 14.6
11.1
744.5
201.7
$ 0.33
0.24
$ 809.8
54.8
29.7
(124.8)
(95.1)
$ 27.7
10.4
839.0
278.9
$ 0.62
0.24
62.7
62.2
57.6
48.6
47.7
6.4%
2.4
4.8%
4.8
2.0%
11.0
4.4%
4.9
6.8%
4.3
$826.3
318.4
$831.4
295.2
$ 645.1
158.1
$578.0
155.6
$ 795.9
267.1
(a)
Includes short-term borrowings and current portion of long-term borrowings and capital lease obligations of $5.0 million,
$9.1 million, $77.7 million, $41.9 million and $37.7 million, respectively.
(b) The ratio of debt to EBITDA represents total debt divided by income from continuing operations before interest expense,
debt settlement charges, other expense, income tax provision, and depreciation and amortization expense, as well as a loss
on investment in 2008, on a trailing twelve month basis. The Company uses the ratio of total debt to EBITDA to measure
its ability to repay its outstanding debt obligations. The Company believes that total debt to EBITDA is a meaningful
metric to investors in evaluating the Company’s long term financial performance and may be different than the method
used by other companies to calculate total debt to EBITDA.
Total debt
Income from continuing operations
Add:
Interest expense
Debt settlement charges
Other expense
Income tax provision (benefit)
Depreciation and amortization
Loss on investment in joint venture
EBITDA
Total debt to EBITDA ratio
2012
$157.8
$ 22.0
2011
$222.2
$ 13.1
2010
$262.0
$ (74.1)
2009
$201.7
$ 16.2
21.4
3.5
0.7
3.9
13.2
-
$ 64.7
2.4
16.4
-
0.2
3.5
13.0
-
$ 46.2
4.8
10.2
-
1.2
75.1
11.4
-
$ 23.8
11.0
11.5
-
(1.2)
3.4
11.1
-
$ 41.0
4.9
2008
$278.9
$ 29.7
15.4
-
1.5
(4.8)
10.4
13.0
$ 65.2
4.3
15
Items included in the selected financial data table above that had a significant impact on the Company’s results are
summarized as follows: 2012 income before income taxes includes debt settlement charges of $3.5 million and restructuring
costs of $1.4 million. 2010 income before income taxes includes $3.9 million in acquisition and integration related costs
associated with the FSTech Group, which was subsequently discontinued in 2012, $10.0 million of net costs associated with the
firefighter hearing loss litigation and $4.4 million of restructuring costs. In addition, the Company recorded a $76.0 million
valuation allowance to reflect the amount of domestic deferred tax assets that may not be realized. 2009 income before income
taxes includes $4.7 million of net costs associated with the firefighter hearing loss litigation. 2008 income before income taxes
includes a $13.0 million loss associated with the Company’s decision to terminate funding of a joint venture in China, $10.5
million of net costs associated with the firefighter hearing loss litigation and restructuring costs of $2.7 million. In addition, the
2008 income tax benefit includes $8.2 million for the utilization of capital loss carryforwards resulting from a sale-leaseback
transaction for two U.S. based manufacturing facilities and a benefit of $3.1 million for losses in the China joint venture not
previously recognized.
The selected financial data set forth above should be read in conjunction with the Company’s consolidated financial
statements, including the notes thereto, included under Item 8 of Part II of this Form 10-K and Item 7 of Part II of this Form 10-
K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to
provide information that is supplemental to, and shall be read together with, the consolidated financial statements and the
accompanying notes contained in this Form 10-K. Information in MD&A is intended to assist the reader in obtaining an
understanding of the consolidated financial statements, information about the Company’s business segments and how the
results of those segments impact the Company’s results of operations and financial condition as a whole, and how certain
accounting principles affect the Company’s consolidated financial statements.
Executive Summary
The Company is a leading global manufacturer and supplier of (i) safety, security and communication equipment, (ii) street
sweepers and other environmental vehicles and equipment, and (iii) vehicle-mounted, aerial platforms for fire fighting, rescue,
electric utility and industrial uses. We also are a designer and supplier of technology-based products and services for the
public safety market. In addition, we sell parts and tooling and provide service, repair, equipment rentals and training as part of
a comprehensive offering to our customer base. We operate 11 manufacturing facilities in six countries around the world and
provide our products and integrated solutions to municipal, governmental, industrial and commercial customers in
approximately 100 countries in all regions of the world.
The Company’s business units are organized and managed in three operating segments as follows:
Safety and Security Systems Group
Our Safety and Security Systems Group is a leading manufacturer and supplier of comprehensive systems and products
that law enforcement, fire rescue, emergency medical services, campuses, military facilities and industrial sites use to protect
people and property. Offerings include systems for campus and community alerting, emergency vehicles, public safety
interoperable communications, industrial communications and command and municipal networked security. Specific products
include vehicle lightbars and sirens, public warning sirens and public safety software. Products are sold primarily under the
Federal Signal
in North America, Europe, and South Africa.
, Federal Signal VAMA , Target Tech and Victor brand names. The Group operates manufacturing facilities
™
™
™
®
16
Fire Rescue Group
Our Fire Rescue Group is a leading manufacturer and supplier of sophisticated, vehicle-mounted, aerial platforms for fire
fighting, rescue, electric utility and industrial uses. End customers include fire departments, industrial fire services, electric
utilities and maintenance rental companies for applications such as fire fighting and rescue, transmission line maintenance, and
installation and maintenance of wind turbines. The Group’s telescopic/articulated aerial platforms are designed in accordance
with various regulatory codes and standards, such as EN, NFPA and ANSI. In addition to equipment sales, the Group sells
parts, service and training as part of a complete offering to its customer base. The Group manufactures in Finland and sells
globally under the Bronto Skylift brand name.
®
Environmental Solutions Group
Our Environmental Solutions Group is a leading manufacturer and supplier of a full range of street sweeper and vacuum
trucks and high-performance waterblasting equipment for municipal and industrial customers. We also manufacture products
for the newer markets of hydro-excavation, glycol recovery and surface cleaning for utility and industrial customers. Products
are sold under the Elgin , Vactor , Guzzler and Jetstream brand names. The Group primarily manufactures its vehicles and
equipment in the United States.
™
®
®
®
Under the Elgin brand name, the Company sells the leading U.S. brand of street sweepers primarily designed for large-
scale cleaning of curbed streets, parking lots and other paved surfaces utilizing mechanical sweeping, vacuum, and
recirculating air technology. Vactor is a leading manufacturer of municipal combination catch basin/sewer cleaning vacuum
trucks. Guzzler is a leader in industrial vacuum loaders used to manage industrial waste or recover and recycle valuable raw
materials. Jetstream manufactures high pressure waterblast equipment and accessories for commercial and industrial cleaning
and maintenance operations. In addition to equipment sales, the Group is increasingly engaged in the sale of parts and tooling,
service and repair, equipment rentals and training as part of a complete offering to its customer base.
Results of Operations
Orders
Analysis of orders:
Total orders ($ in millions):
Change in orders year over year
Change in U.S. municipal and government orders year over year
Change in U.S. industrial and commercial orders year over year
Change in non-U.S. orders year over year
2012
2011
2010
$826.3
(0.6)%
7.7%
(7.2)%
(3.0)%
$831.4
28.9%
22.0%
36.5%
30.0%
$645.1
11.6%
1.3%
51.7%
2.7%
Orders of $826.3 million in 2012 decreased 1% compared to 2011 as slower demand for industrial vacuum trucks more than
offset strong municipal demand for sewer cleaners and market share gains in police and fire markets. U.S. municipal and
government orders increased 8% in 2012 driven by a $14.4 million increase in orders for sewer cleaners and a $10.4 million
increase in police and fire markets and outdoor warning systems. U.S. industrial and commercial orders decreased 7% primarily
due to decreases in industrial vacuum truck orders of $35.1 million, partially offset by increased industrial safety and security
product orders of $5.4 million due to higher market demand and increased waterblaster orders of $8.6 million. Non-U.S. orders
decreased 3% compared to 2011 with decreases across most segments, partially offset by a $2.6 million increase in U.S. export
orders to Canada and Asia.
Orders of $831.4 million in 2011 increased 29% compared to 2010 with increases across all segments, primarily fueled by
strong demand for industrial vacuum trucks and sewer cleaners and improved demand for fire-lift products in Asia and
Australia. U.S. municipal and government orders increased 22% in 2011 driven by a $28.3 million increase in orders for sewer
cleaners, $12.2 million increase in sweepers and a $9.1 million
17
increase in outdoor warning systems, partly offset by soft demand for police products. U.S. industrial and commercial orders
increased 36% due to strong order intake of industrial vacuum trucks and industrial safety and security products. Non-U.S.
orders increased 30% compared to 2010 with increases across all segments, primarily led by a $35.4 million increase in orders for
Bronto units and a $29.5 million increase in sweeper orders.
Consolidated results of operations
The following table summarizes the Company’s results of operations and selected operating metrics for each of the three
years in the period ended December 31 ($ in millions, except per share amounts):
Net sales
Cost of sales
Gross profit
Selling, engineering, general and administrative
Acquisition and integration related costs
Restructuring charges
Operating income
Interest expense
Debt settlement charges
Other expense
Income tax provision
Income (loss) from continuing operations
Loss from discontinued operations and disposal, net of tax
Net loss
Other data:
Operating margin
Diluted earnings (loss) per share — continuing operations
Total orders
Depreciation and amortization
2012
$803.2
613.4
189.8
136.9
-
1.4
51.5
21.4
3.5
0.7
(3.9)
22.0
(49.5)
$ (27.5)
2011
$688.7
533.3
155.4
122.2
-
-
33.2
16.4
-
0.2
(3.5)
13.1
(27.3)
$ (14.2)
2010
$ 633.1
482.2
150.9
130.2
3.9
4.4
12.4
10.2
-
1.2
(75.1)
(74.1)
(101.6)
$(175.7)
6.4%
4.8%
2.0%
$ 0.35
826.3
13.2
$ 0.21
831.4
13.0
$ (1.29)
645.1
11.4
Year Ended December 31, 2012 vs. Year Ended December 31, 2011
Net sales increased $114.5 million or 17% compared to 2011 with increases across all segments.
Cost of sales increased $80.1 million or 15% compared to 2011, primarily as a result of increased sales volume, offset by
favorable product mix and currency impacts.
Gross profit margin was 23.6% in 2012 compared to 22.6% in 2011, primarily as a result of increased sales volume and an
overall favorable change in product mix.
Operating income increased $18.3 million or 55% compared to 2011, primarily due to higher sales volume and favorable
product mix, partially offset by restructuring charges of $1.4 million that were recorded in 2012.
Interest expense increased $5.0 million compared to 2011, primarily due to an increase in interest rates on the Company’s
debt financing agreements entered into in February 2012. For further discussion of the debt agreements, see Note 5 to the
consolidated financial statements contained under Item 8 of Part II of this Form 10-K.
In the first quarter of 2012, the Company recorded $1.6 million of charges related to the termination of its prior debt
agreements. On September 4, 2012, the Company expensed $1.9 million of deferred debt issuance costs related to the $75.0
million prepayment of the outstanding principal for the Company’s $215 million term
18
loan and $100 million secured credit facility. The debt settlement charges for 2012 totaled $3.5 million and included $1.0 million
of make-whole interest payments and a write-off of deferred financing costs of $2.5 million.
Other expense totaled $0.7 million in 2012 and $0.2 million in 2011 and primarily includes realized losses from foreign
currency transactions and on derivative contracts.
The 2012 effective tax rate on income from continuing operations decreased to 15.1% from 21.1% in the prior year. The
Company’s 2012 and 2011 effective tax rates reflect no recorded tax benefits for domestic operating losses or domestic loss
carryforwards. However, an income tax provision is recorded for foreign operations and other jurisdictions that are not in a
cumulative loss position.
Income from continuing operations was $22.0 million in 2012 compared to $13.1 million in 2011. The increase of $8.9 million
was primarily due to improved operating income as described above, partially offset by increased interest expense and debt
settlement charges recorded in 2012.
Loss from discontinued operations and disposal, net of tax, was $49.5 million in 2012, primarily from the sale of the FSTech
Group, and $27.3 million in 2011, primarily from the operations of the FSTech Group, including goodwill and intangibles
impairment charges. For further discussion of the loss from discontinued operations and disposals, refer to Note 11 to the
consolidated financial statements contained under Item 8 of Part II of this Form 10-K.
Net loss was $27.5 million in 2012 and $14.2 million in 2011.
Year Ended December 31, 2011 vs. Year Ended December 31, 2010
Net sales increased $55.6 million or 9% compared to 2010, primarily as a result of an increase in industrial vacuum and
sewer cleaner truck shipments.
Cost of sales increased $51.1 million or 11% compared to 2010, primarily as a result of an increase in industrial vacuum and
sewer cleaner truck shipments and the change in product mix, primarily for sweepers, between international and domestic
regions.
Gross profit margin was 22.6% in 2011 compared to 23.8% in 2010, primarily as a result of an overall unfavorable change in
product mix which was partially offset by increased sales volume impacts.
Operating income increased $20.8 million or 168% compared to 2010, primarily due to higher sales volume in 2011 and the
absence of restructuring charges of $4.4 million and acquisition and integration related costs of $3.9 million associated with the
discontinued FSTech Group that were recorded in 2010.
Interest expense increased $6.2 million compared to 2010, primarily due to an increase in interest rates on the amended
debt agreements that were replaced by new financing agreements as of February 2012. For further discussion of the debt
agreements, refer to Note 5 to the consolidated financial statements contained under Item 8 of Part II of this Form 10-K.
Other expense totaled $0.2 million in 2011 and $1.2 million in 2010 and primarily includes realized losses from foreign
currency transactions and on derivative contracts.
The 2011 effective tax rate on income from continuing operations decreased primarily due to aggregate tax expense of
$76.0 million relating to a domestic valuation allowance recorded in 2010. The Company’s 2011 effective tax rate of
21.1% reflects no recorded tax benefits for domestic operating losses or domestic loss carryforwards. However, an income tax
provision is recorded for foreign operations and other jurisdictions that are not in a cumulative loss position.
19
Income from continuing operations was $13.1 million in 2011 compared to a loss of $74.1 million in 2010. The increase of
$87.2 million was primarily due to the absence of the $76.0 million tax expense related to establishing the domestic valuation
allowance in 2010 and from other changes in operating income as described above.
Loss from discontinued operations and disposal, net of tax, was $27.3 million in 2011 and $101.6 million in 2010. For 2011,
$20.6 million was related to goodwill and intangibles impairment charges for the discontinued FSTech Group and $6.7 million
was related to the loss from operations of the discontinued FSTech Group. For 2010, $78.9 million was related to goodwill and
intangibles impairment charges for the discontinued FSTech Group, $12.2 million was related to the Company’s discontinued E-
ONE, Riverchase and China Wholly-Owned Foreign Enterprise (“China WOFE”) businesses, $2.2 million was related to the
environmental remediation liability at the Company’s Pearland, Texas site and $0.6 million was related to restructuring charges
for the discontinued FSTech Group. The remaining $7.7 million was primarily related to the loss from operations of the
discontinued FSTech Group.
Safety and Security Systems
The following table presents the Safety and Security Systems Group’s results of operations for each of the three years in
the period ended December 31 ($ in millions):
Net sales
Operating income
Other data:
Operating margin
Total orders
Backlog
Depreciation and amortization
2012
$240.3
27.9
2011
$221.4
21.5
11.6%
$241.9
31.2
4.3
9.7%
$235.3
31.7
4.4
2010
$214.5
23.7
11.0%
$215.6
18.2
3.7
Orders in 2012 increased $6.6 million or 3% compared to the prior year, due to market share gains and modest market
growth in most segments. U.S. orders increased $15.7 million or 13%, including increases of $5.7 million in outdoor warning
systems due to improved municipal spending, $5.5 million in public safety markets, and $4.5 million in industrial markets. Non-
U.S. orders decreased $9.1 million or 8%, primarily due to decreases in non-U.S. public safety orders of $16.5 million, partially
offset by increases in industrial product exports of $5.5 million.
Net sales in 2012 increased $18.9 million or 9% compared to the prior year. Excluding foreign currency effects, sales
increased by $22.5 million and were offset by $3.6 million or 2% of unfavorable exchange rates. U.S. sales grew by $23.4 million
or 20% compared to 2011, including $14.4 million in outdoor warning systems, $4.3 million in public safety markets due to
market share gains, $2.1 million in industrial products, and price increases of approximately 1% of sales. Non-U.S. sales
decreased $4.5 million from the prior year, primarily due to decreases of $11.8 million in the European and export markets for
public safety products, partially offset by higher industrial product export sales of $8.0 million, primarily in the oil and gas
markets, as well as some higher sales of mining products in international markets.
Cost of sales in 2012 increased $8.4 million or 6% compared to the prior year. The increase in cost of sales was at a lower
rate than the increase in sales due to higher absorption of fixed overhead costs, higher growth rates in higher margin industrial
divisions and product lines, and material cost reductions on certain electrical components, as well as a 2% favorable exchange
rate impact. In addition, cost of sales was unfavorably impacted by $2.2 million higher charges for inventory write downs.
Operating income in 2012 increased $6.4 million or 30% compared to the prior year primarily due to higher sales and gross
margins. These increases were offset by increased selling costs of $2.6 million, higher variable
20
sales commissions of $0.9 million, and higher incentive compensation expenses of $1.2 million, which were offset by a $0.6
million decrease in legal expenses. The Safety and Security Systems Group incurred restructuring costs of $0.9 million in 2012,
while there were no restructuring costs recorded in 2011.
Orders in 2011 increased $19.7 million or 9% compared to 2010. U.S. orders increased $8.7 million or 7%, as improved
municipal demand for outdoor warning systems and higher demand in industrial markets were offset by continued weakness in
the police market. Non-U.S. orders increased $11.0 million or 11%, driven by strong demand for U.S. exports in public safety
markets primarily driven by customers in Asia as well as strength in international mining markets, which were partially offset by
significant declines in European public safety markets.
Net sales in 2011 increased $6.9 million or 3% compared to 2010. The increase in sales was partially driven by volume
increases of $2.8 million, including volume-related increases in U.S. industrial products, mining products and significantly
higher volumes of U.S. export products to Asia and Latin America, partially offset by lower volumes in the U.S. police market,
lower international outdoor warning system sales, and significant volume decreases in European public safety markets due to
lower governmental spending in the European market. The increase in sales was also driven by favorable currency impacts of
$2.3 million, and price improvements of $1.8 million.
Cost of sales in 2011 increased $5.5 million or 4% compared to 2010. This increase was at a slightly higher rate than the
increase in net sales, primarily due to price compression in the public safety markets of both the United States and Europe,
volume growth with an unfavorable impact on cost of sales of $2.5 million primarily for U.S. export products to Asia and Latin
America at lower margins, and unfavorable currency impacts of $1.8 million. An increase in sales commissions and other costs
of $1.2 million also contributed to the increase in cost of sales.
Operating income in 2011 decreased $2.2 million or 9% compared to 2010, despite higher sales volumes, due to additional
spending on marketing and product development of $1.5 million, $1.5 million in higher legal expenses, and increases in sales
commissions of $1.0 million related to higher sales volumes. There were no restructuring costs recorded in 2011, while $1.7
million of restructuring charges were incurred in 2010.
Fire Rescue
The following table presents the Fire Rescue Group’s results of operations for each of the three years in the period ended
December 31 ($ in millions):
Net sales
Operating income
Other data:
Operating margin
Total orders
Backlog
Depreciation and amortization
2012
$135.1
8.9
2011
$109.5
6.6
2010
$108.8
9.4
6.6%
6.0%
8.6%
$136.5
83.6
2.6
$137.6
80.1
2.5
$101.3
57.3
2.2
Orders in 2012 decreased $1.1 million or 1% compared to the prior year.
Net sales in 2012 increased $25.6 million or 23% compared to the prior year, primarily due to increased sales volume of
$28.8 million, pricing increases of $2.5 million, and favorable product mix of $4.8 million, partially offset by unfavorable currency
impacts of $10.5 million.
Cost of sales in 2012 increased $20.7 million or 24% compared to the prior year due to increased sales volume impacts of
$22.3 million and product mix of $6.7 million, partially offset by favorable currency impacts of $8.3 million.
21
Operating income in 2012 increased $2.3 million or 35% compared to the prior year primarily due to higher sales volumes
impacts of $6.5 million, partially offset by higher selling, engineering, general and administrative (“SG&A”) expenses of $1.5
million, unfavorable product mix of $2.0 million, and unfavorable currency impacts of $0.7 million.
Orders in 2011 increased $36.3 million or 36% compared to the prior year, primarily as a result of strong demand for fire-lift
products in Asia and Australia, partially offset by lower demand for industrial products in Europe.
Net sales in 2011 increased $0.7 million or 1% compared to the prior year, primarily due to favorable currency impacts of
$5.3 million and favorable product mix of $1.8 million. These increases were offset by lower pricing attributable to sales
commissions of $0.5 million and lower sales volume in local currency of $5.9 million. The decline in sales volume was primarily
due to lower demand for fire-lift products in Europe.
Cost of sales in 2011 increased $4.9 million or 6% compared to the prior year. The increase primarily resulted from
unfavorable product mix impacts of $5.0 million and unfavorable currency impacts of $4.3 million, partially offset by decreased
sales volumes impacts of $4.4 million. The unfavorable product mix of $5.0 million includes higher purchase costs for chassis of
$1.7 million and other product mix impacts of $3.3 million.
Operating income in 2011 decreased $2.8 million or 30% compared to the prior year. The decrease was primarily due to
unfavorable product mix impacts of $3.1 million and lower sales volumes impacts of $1.5 million, partially offset by lower SG&A
expenses of $1.5 million and favorable currency impacts of $0.3 million.
Environmental Solutions
The following table presents the Environmental Solutions Group’s results of operations for each of the three years in the
period ended December 31 ($ in millions):
Net sales
Operating income
Other data:
Operating margin
Total orders
Backlog
Depreciation and amortization
2012
$427.8
42.0
2011
$357.8
24.5
2010
$309.8
17.9
9.8%
6.8%
5.8%
$447.9
203.6
5.4
$458.5
183.4
5.2
$328.2
82.6
4.7
Orders in 2012 decreased $10.6 million or 2% compared to the prior year. U.S. orders decreased $13.2 million or 4% from the
prior year, primarily due to decreases in vacuum trucks of $35.1 million and sweepers of $2.7 million, partially offset by increases
in sewer cleaners of $14.4 million and waterblasters of $8.6 million. Non-U.S. orders increased $2.6 million or 3% compared to the
prior year, with increases in U.S. export orders to Canada and Asia.
Net sales in 2012 increased $70.0 million or 20% compared to the prior year. U.S. sales increased $56.7 million with
increases in all product lines as a result of strong opening backlog and solid orders during the year. Non-U.S. sales were up
$13.3 million, resulting from an increase in shipments to Canada and Asia, partially offset by declines in shipments to the
Middle East.
Cost of sales in 2012 increased $51.1 million or 17% over the prior year. Increases in cost of sales were primarily associated
with volume increases of $56.2 million, partially offset by favorable product mix of $5.1 million between domestic and
international markets.
22
Operating income in 2012 increased $17.5 million or 71%, primarily as a result of higher gross margins of $18.9 million,
partially offset by increased SG&A expenses of $1.4 million. The increase in SG&A expenses was related to additional
commission expense associated with increased sales and increases in salary and benefit programs.
Orders in 2011 increased $130.3 million or 40% compared to the prior year. U.S. orders increased $100.8 million or 37% in
2011, primarily as a result of increases in orders for vacuum trucks of $51.9 million, sewer cleaners of $28.3 million, sweepers of
$12.2 million, and waterblasters of $3.6 million. Non-U.S. orders increased $29.5 million or 52% from the prior year, with
increases in U.S. export orders from Canada, Mexico and the Middle East. All product lines contributed to the overall increase
in U.S. export orders.
Net sales in 2011 increased $48.0 million or 15% compared to the prior year. U.S. sales were up $42.4 million, primarily
resulting from improvements within the industrial market, which is consistent with vacuum truck order increases. Non-U.S.
sales were up $5.6 million due to improved sweeper and waterblaster sales. The increase in net sales of $48.0 million is due to
volume increases of $35.0 million, price improvements of $7.1 million, and product mix impacts of $5.9 million, primarily for
sweepers, between international and domestic sales.
Cost of sales in 2011 increased $41.0 million or 16% compared to the prior year. The increase in cost of sales is associated
with volume increases in product sales of $29.2 million. Cost of sales increased at a slightly higher rate than net sales as a result
of product mix changes of $11.8 million between international and domestic regions.
Operating income in 2011 increased $6.6 million or 37% and operating margins improved 1.1% compared to the prior year.
Operating income increased primarily due to improved gross profit of $7.1 million and the absence of a restructuring charge of
$0.8 million that was recorded in 2010. These increases were partially offset by increased salaries and employee benefit costs of
$1.3 million.
Corporate Expense
Corporate expenses totaled $27.3 million, $19.4 million and $38.6 million in 2012, 2011 and 2010, respectively. The 41%
increase in 2012 compared to 2011 is primarily due to higher incentive compensation expense of $4.2 million, restructuring
charges of $0.6 million recorded in 2012, and a $1.3 million reduction in an insurance reserve associated with carrier-paid claims
recorded in 2011. Corporate expenses include depreciation and amortization expense of $0.9 million, $0.9 million and $0.8 million
for 2012, 2011 and 2010, respectively.
The 50% decrease in 2011 compared to 2010 is partly due to a $10.2 million reduction in legal expenses primarily associated
with the hearing loss litigation. In addition, 2011 benefited by the absence of $1.2 million in restructuring costs, $1.0 million in
expense related to the departure of the Company’s former CEO, $3.9 million in acquisition and integration related costs
associated with the discontinued FSTech Group, all of which were recorded in 2010, as well as a $1.3 million reduction in
insurance reserves associated with carrier paid claims which was recorded in 2011.
The hearing loss litigation has historically been managed by the Company’s legal staff resident at the corporate office and
not by management at any reporting segment. In accordance with Accounting Standards Codification (“ASC”) Topic 280,
Segment Reporting, which provides that segment reporting should follow the management of the item and that certain
expenses may be corporate expenses, these legal expenses (which are unusual and not part of the normal operating activities of
any of our operating segments), are reported and managed as corporate expenses.
23
Financial Condition, Liquidity and Capital Resources
During each of the three years in the period ended December 31, 2012, the Company used its cash flows from operations
to pay cash dividends, if any, to shareholders, to fund growth and to make capital investments that both sustain and reduce
the cost of its operations. Beyond these uses, remaining cash was used to fund acquisitions, pay down debt and make
voluntary pension contributions.
The Company’s cash and cash equivalents totaled $29.7 million, $9.5 million and $62.1 million as of December 31, 2012,
2011 and 2010, respectively. As of December 31, 2012, $18.7 million of cash and cash equivalents was held by foreign
subsidiaries. Cash and cash equivalents held by subsidiaries outside the United States is held primarily in the currency of the
country in which it is located. This cash is used to fund the operating activities of our foreign subsidiaries and for further
investment in foreign operations. Generally, we consider such cash to be permanently reinvested in our foreign operations and
our current plans do not demonstrate a need to repatriate such cash to fund U.S. operations. The Company’s ability to
refinance its debt in February 2012 demonstrates that it does not need to repatriate cash from its foreign subsidiaries to fund
U.S. operations. Repatriation of cash held by foreign subsidiaries may require the accrual and payment of taxes in the U.S.
The following table summarizes the Company’s cash flows for each of the three years in the period ended December 31 ($
in millions):
Net cash provided by operating activities
Purchases of properties and equipment
Proceeds from sales of properties and equipment
Payments for acquisitions, net of cash acquired
Proceeds from sale of FSTech Group
Increase in restricted cash
Borrowing activity, net
Payments of debt financing fees
Net cash used for discontinued financing activities
Cash dividends paid to shareholders
Proceeds from equity offering, net of fees
All other, net
Increase (decrease) in cash and cash equivalents
2012
23.2
$
(13.0)
1.8
-
82.1
(1.0)
(67.3)
(6.9)
(0.9)
-
-
2.2
20.2
$
2011
3.8
$
(13.5)
1.9
-
-
-
(40.2)
(2.3)
(0.6)
(3.7)
-
2.0
$ (52.6)
2010
30.3
$
(11.3)
1.8
(97.3)
-
-
60.5
-
(1.0)
(13.3)
71.2
0.1
41.0
$
Net cash provided by operating activities totaled $23.2 million, $3.8 million and $30.3 million in 2012, 2011 and 2010,
respectively. In 2012, the increase was primarily due to higher collections on accounts receivable balances resulting from
increased sales volume. The decrease in 2011 was primarily due to an increase in cash used to support net working capital. In
the fourth quarter of 2010, the Company recorded an $76.0 million valuation allowance against its U.S. deferred tax assets as a
non-cash charge to income tax expense. Recording the valuation allowance does not restrict the Company’s ability to utilize the
future deductions and net operating losses associated with the deferred tax assets assuming taxable income is recognized in
future periods.
The Company uses the ratio of total debt to EBITDA to measure its ability to repay its outstanding debt obligations. The
Company believes that total debt to EBITDA is a meaningful metric to investors in evaluating the Company’s long term
financial performance and may be different than the method used by other companies to calculate total debt to EBITDA. The
ratio of total debt to EBITDA represents total debt divided by income from continuing operations before interest expense, debt
settlement charges, other expense, income tax provision, and depreciation and amortization on a trailing twelve month basis.
24
Total debt to EBITDA for the years ended December 31, 2012 and 2011 was as follows ($ in millions):
Total debt
Income from continuing operations
Add:
Interest expense
Debt settlement charges
Other expense
Income tax provision
Depreciation and amortization
EBITDA
Total debt to EBITDA ratio
2012
$157.8
$ 22.0
21.4
3.5
0.7
3.9
13.2
$ 64.7
2.4
2011
$222.2
$ 13.1
16.4
-
0.2
3.5
13.0
$ 46.2
4.8
The Company acquired two businesses in 2010 within the discontinued FSTech Group. VESystems, LLC was acquired for
$34.8 million, of which $24.6 million was a cash payment. Sirit Inc. was acquired for CDN $77.1 million (USD $74.9 million), all of
which was paid in cash. The acquisitions were funded with the Company’s existing cash balances and debt drawn against the
availability of the prior revolving credit facility. In addition to the use of cash and debt, the Company issued 1.2 million shares
of its common stock to fund a portion of the cost of purchasing VESystems, LLC. The issuances increased the total number of
Company common stock shares outstanding.
In May 2010, the Company issued 12.1 million common shares at a price of $6.25 per share for total gross proceeds of
$75.6 million. After deducting direct fees, net proceeds totaled $71.2 million. Proceeds from the equity offering were used to pay
down debt.
On February 22, 2012, the Company entered into a Credit Agreement, by and among the Company, as borrower and
General Electric Capital Corporation, as a co-collateral agent, and Wells Fargo Capital Finance, LLC, as administrative agent and
co-collateral agent, providing the Company with a $100 million secured credit facility (the “ABL Facility”).
The ABL Facility is a five-year asset-based revolving credit facility pursuant to which up to $100 million initially will be
available, with the right, subject to certain conditions, to increase the availability under the facility by up to an additional $25
million. The ABL Facility provides for loans and letters of credit in an amount up to the aggregate availability under the facility
subject to meeting certain borrowing base conditions, with a sub-limit of $50 million for letters of credits. Borrowings under the
ABL Facility bear interest, at the Company’s option, at a base rate or a LIBOR rate, plus, in each case, an applicable margin. The
applicable margin ranges from 1.00% to 2.75% for base rate borrowings and 1.75% to 3.50% for LIBOR borrowings. The
Company must also pay a commitment fee to the facility lenders equal to 0.50% per annum on the unused portion of the ABL
Facility along with other standard fees. Letter of credit fees are payable on outstanding letters of credit in an amount equal to
the applicable LIBOR margin plus other customary fees.
The Company is allowed to prepay in whole or in part advances under the ABL Facility without penalty or premium other
than customary “breakage” costs with respect to LIBOR loans.
The ABL Facility requires that the Company, on a consolidated basis, maintain a minimum monthly fixed charge coverage
ratio, along with other customary restrictive covenants, certain of which are subject to materiality thresholds.
On February 22, 2012, the Company also entered into a Financing Agreement by and among the Company, as borrower,
certain subsidiaries of the Company, as guarantors, the lenders party thereto (the “Term Lenders”)
25
and TPG Specialty Lending, Inc., as administrative agent, collateral agent and sole lead arranger, pursuant to which the Term
Lenders agreed to provide the Company with a $215 million term loan (the “Term Loan”).
The Term Loan is a five-year secured term loan maturing on February 22, 2017. Installment payments under the Term Loan
did not commence until March 2013. The Term Loan allows for mandatory prepayments in certain specified situations. Except in
these certain specified situations, the Term Loan is not repayable in the first 12 months of the term and thereafter is subject to
the following prepayment premium: (i) 2.75% in months 13-24, (ii) 2.00% in months 25-36 and (iii) nothing thereafter. These
provisions are subject to change upon the occurrence of certain specified events.
The Term Loan bears interest, at the Company’s option, at a base rate or adjusted LIBOR rate, plus, in each case, an
applicable margin. The applicable margin ranges from 9.00% to 10.00% for base rate borrowings and 10.00% to 11.00% for
LIBOR borrowings. The Company is required to pay certain customary fees in connection with the Term Loan.
On September 4, 2012, the Company prepaid $65.0 million of its outstanding principal balance of its Term Loan debt at par
with no prepayment penalty and related accrued interest of $0.1 million with net proceeds from the sale of the FSTech Group.
This prepayment was executed in accordance with the terms of the Financing Agreement. The Company also prepaid $10.0
million of debt drawn under the ABL Facility on the same date with net proceeds from the sale of the FSTech Group.
The Company was in compliance with all its debt covenants as of December 31, 2012.
On March 13, 2013, the Company entered into a new credit agreement (the “2013 Credit Agreement”), by and among the
Company, as borrower, Wells Fargo Bank, N.A., as administrative agent, swingline lender and issuing lender, General Electric
Capital Corporation as syndication agent, and five additional lenders. The 2013 Credit Agreement provides the Company with a
new $225.0 million senior secured credit facility (the “Senior Secured Credit Facility”) comprised of a five-year fully funded term
loan in the amount of $75.0 million maturing March 13, 2018, and a five-year $150.0 million revolving credit facility under which
borrowings may be made from time to time during the term of the Senior Secured Credit Facility. The revolving credit facility
provides for loans and letters of credit in an amount up to an aggregate of $150.0 million, with a sub-limit of $50.0 million for
letters of credit.
Borrowings under the Senior Secured Credit Facility bear interest, at the Company’s option, at a base rate or a LIBOR rate,
plus, in each case, an applicable margin. The applicable margin ranges from 1.00% to 2.00% for base rate borrowings and 2.00%
to 3.00% for LIBOR borrowings. The Company must also pay a commitment fee to the Senior Secured Credit Facility lenders
ranging between 0.25% to 0.45% per annum on the unused portion of the $150.0 million revolving credit facility along with
other standard fees. Letter of credit fees are payable on outstanding letters of credit in an amount equal to the applicable
LIBOR margin plus other customary fees.
The Senior Secured Credit Facility requires equal quarterly installment payments of the $75.0 million term loan beginning
on June 30, 2013 based on the following amortization schedule: 7.5% of the original amount in the first year, 10.0% of the
original amount in each of the second and third years, 12.5% of the original amount in each of the fourth and fifth years, and
the remaining balance on March 13, 2018, the maturity date.
The Company is allowed to prepay in whole or in part advances under the revolving credit facility and all or any part of
the term loan without penalty or premium other than customary “breakage” costs with respect to LIBOR loans.
The Senior Secured Credit Facility requires the Company to comply with financial covenants related to the maintenance of
a minimum fixed charge coverage ratio and maximum leverage ratio. The financial covenants are measured at each fiscal quarter-
end.
Under the Senior Secured Credit Facility, restricted payments, including dividends, shall be permitted only if the pro-forma
leverage ratio, after giving effect to such payment, is less than 3.25, there is pro-forma
26
compliance with all other financial covenants after giving effect to such payment, and there are no existing defaults under the
Senior Secured Credit Facility.
The Senior Secured Credit Facility is secured by a first priority security interest in all now or hereafter acquired domestic
property and assets and the stock or other equity interests in each of the domestic subsidiaries and certain of the first-tier
foreign subsidiaries, subject to certain exclusions.
The Company used the proceeds from the Senior Secured Credit Facility to (i) repay the outstanding balance of the Term
Loan, (ii) repay outstanding balances under the ABL Facility, (iii) finance the ongoing general corporate needs of the Company
and its subsidiaries; (iv) pay fees and expenses associated with repayment of amounts due under the Term Loan and the ABL
Facility, including the payment of approximately $4.1 million in prepayment premiums under the Term Loan; and (v) pay fees
and expenses associated with the Senior Secured Credit Facility.
On March 13, 2013, the Company entered into an interest rate swap. The swap locks in the Company’s interest rate on the
forecasted debt balances of the $75.0 million term loan of the Senior Secured Credit Facility.
As of December 31, 2012, the available borrowing base under the ABL Facility was $61.6 million. As of December 31, 2012,
there was $6.7 million in cash drawn and $29.2 million of undrawn letters of credit under the ABL Facility, reducing net
availability for borrowings to $25.7 million.
As of December 31, 2012, $0.3 million was drawn against the Company’s non-U.S. lines of credit which provide for
borrowings up to $14.5 million.
Aggregate maturities of total borrowings amount to approximately $5.0 million in 2013, $7.4 million in 2014, $7.9 million in
2015, $9.3 million in 2016, and $128.2 million in 2017 and thereafter. These maturities primarily reflect the payment terms of the
Senior Secured Credit Facility. The fair values of borrowings aggregated $208.5 million and $221.4 million at December 31, 2012
and 2011, respectively. Included in current maturities are $0.3 million of other non-U.S. lines of credit, $4.2 million of term loan
debt related to the Senior Secured Credit Facility and $0.5 million of capital lease obligations.
Upon execution of the Company’s new debt agreements in March 2013, the remaining unamortized deferred financing
costs related to the Financing Agreement and the ABL Facility were written off. In the first quarter of 2013, the Company
expects to record $8.7 million of charges related to the termination of its prior debt agreements. The charges include a write-off
of deferred financing costs of $4.6 million and a prepayment premium of $4.1 million, which was equal to 2.75% of the
outstanding balance of the Term Loan under the Financing Agreement. The $4.1 million prepayment premium was funded from
the proceeds of the new lending arrangements.
The Company paid interest of $20.6 million in 2012, $16.1 million in 2011 and $9.7 million in 2010. The weighted average
interest rate on short-term borrowings was 5.15% at December 31, 2012.
Cash dividends paid to shareholders in 2011 and 2010 were $3.7 million and $13.3 million, respectively. The Company did
not declare any dividends in 2012 or 2011, and accordingly, no dividends were paid in 2012.
Total debt net of cash and cash equivalents included in continuing operations was $128.1 million representing 47% of
total capitalization at December 31, 2012 versus $212.7 million or 55% at December 31, 2011. The decrease in the percentage of
debt to total capitalization in 2012 was due to reductions in equity of $27.8 million and debt net of cash and cash equivalents of
$44.2 million.
The Company anticipates that capital expenditures for 2013 will approximate $15 million. The Company believes that its
financial resources and major sources of liquidity, including cash flow from operations and borrowing capacity, will be
adequate to meet its operating and capital needs in addition to its financial commitments.
27
Contractual Obligations and Commercial Commitments
The following table presents a summary of the Company’s contractual obligations and payments due by period as of
December 31, 2012 ($ in millions):
Short-term obligations
Long-term debt*
Operating lease obligations
Capital lease obligations
Interest payments on long term debt
Total contractual obligations
Payments Due by Period
2-
Less than
4-
1 Year
$0.3
4.2
7.8
0.5
4.6
$17.4
3 Years
$ -
14.5
11.4
0.8
8.6
$35.3
5 Years
$ -
18.4
10.3
0.4
7.5
$36.6
More than
5 Years
$ -
118.7
22.4
-
0.7
$141.8
Total
$0.3
155.8
51.9
1.7
21.4
$231.1
* Long term debt includes financial service borrowings which are reported in discontinued operations. The payments due by
period reflect the payment terms outlined in the Company’s Senior Secured Credit Facility executed in March 2013, as
discussed in Note 5 to the consolidated financial statements included under Item 8 of Part II of this Form 10-K.
The Company also enters into foreign currency forward contracts to protect against the variability in exchange rates on
cash flows and intercompany transactions with its foreign subsidiaries. As of December 31, 2012, there is less than $0.1 million
of unrealized gains on the Company’s foreign exchange contracts. Volatility in the future exchange rates between the
U.S. dollar, Euro and British pound will impact the final settlement of any of these contracts.
The following table presents a summary of the Company’s commercial commitments and the notional amount by
expiration period as of December 31, 2012 ($ in millions):
Notional Amount by Expiration Period
Financial standby letters of credit*
Performance standby letters of credit
Purchase obligations**
Total commercial commitments
Total
$
28.5
0.7
48.0
77.2
$
Less than
1 Year
$
$
28.2
0.6
47.3
76.1
2-3
Years
0.3
$
0.1
0.7
1.1
$
* Financial standby letters of credit largely relate to casualty insurance policies for the Company’s workers’ compensation,
automobile, general liability and product liability policies. Performance standby letters of credit represent guarantees of
performance by foreign subsidiaries that engage in cross-border transactions with foreign customers.
**Purchase obligations relate to commercial chassis.
As of December 31, 2012, the Company has a liability of approximately $4.0 million for unrecognized tax benefits (refer to
Note 6 to the consolidated financial statements included under Item 8 of Part II of this Form 10-K). Due to the uncertainties
related to these tax matters, the Company cannot make a reasonably reliable estimate of the period of cash settlement for this
liability. We expect our unrecognized tax benefits to decrease by $1.6 million over the next 12 months due to potential expiration
of the statute of limitations and settlements with tax authorities.
The Company expects to contribute up to $6.8 million to the U.S. benefit plans and up to $2.3 million to the non-
U.S. benefit plan in 2013. Future contributions to the plans will be based on such factors as annual service cost as well as
return on plan asset values, interest rate movements, and benefit payments.
28
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
(“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company considers
the following policies to be the most critical in understanding the judgments that are involved in the preparation of the
Company’s consolidated financial statements and the uncertainties that could impact the Company’s financial condition,
results of operations and cash flows.
Revenue Recognition
Net sales consist primarily of revenue from the sale of equipment, environmental vehicles, vehicle mounted aerial
platforms, parts, service and maintenance contracts.
The Company recognizes revenue for products when persuasive evidence of an arrangement exists, delivery has
occurred, the sales price is fixed or determinable, and collection is probable. A product is considered delivered to the customer
once it has been shipped and title and risk of loss have been transferred. For most of the Company’s product sales, these
criteria are met at the time the product is shipped; however, occasionally title passes later or earlier than shipment due to
customer contracts or letter of credit terms. If at the outset of an arrangement the Company determines the arrangement fee is
not, or is presumed not to be, fixed or determinable, revenue is deferred and subsequently recognized as amounts become due
and payable and all other criteria for revenue recognition have been met.
Workers’ Compensation and Product Liability Reserves
Due to the nature of the products manufactured, the Company is subject to product liability claims in the ordinary course
of business. The Company is partially self-funded for workers’ compensation and product liability claims with various retention
and excess coverage thresholds. After the claim is filed, an initial liability is estimated, if any is expected, to resolve the claim.
This liability is periodically updated as more claim facts become known. The establishment and update of liabilities for unpaid
claims, including claims incurred but not reported, is based on the assessment by the Company’s claim administrator of each
claim, an independent actuarial valuation of the nature and severity of total claims and management’s estimate. The Company
utilizes a third-party claims administrator to pay claims, track and evaluate actual claims experience and ensure consistency in
the data used in the actuarial valuation. Management believes that the reserve established at December 31, 2012 appropriately
reflects the Company’s risk exposure. The Company has not established a reserve for potential losses resulting from the
firefighter hearing loss litigation (see Note 13 to the consolidated financial statements included in Item 8 of Part II of this
Form 10-K). If the Company is not successful in its defense after exhausting all appellate options, it will record a charge for
such claims, to the extent they exceed insurance recoveries, at the appropriate time.
Goodwill
Goodwill represents the excess of the cost of an acquired business over the amounts assigned to its net assets. Goodwill
is not amortized but is tested for impairment at a reporting unit level on an annual basis or when an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The
Company performed its annual goodwill impairment test as of October 31, 2012.
Goodwill is tested for impairment based on a two-step test. The first step, used to identify potential impairment, compares
the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its
carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is unnecessary. If the
carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. The second step compares the implied fair value of reporting unit goodwill with
the carrying amount of that
29
goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is
recognized in an amount equal to that excess. The Company generally determines the fair value of its reporting units using two
valuation methods: the “Income Approach — Discounted Cash Flow Analysis” method, and the “Market Approach —
Guideline Public Company Method.”
Under the “Income Approach — Discounted Cash Flow Analysis” method the key assumptions consider projected sales,
cost of sales and operating expenses. These assumptions were determined by management utilizing our internal operating plan,
growth rates for revenues and operating expenses and margin assumptions. An additional key assumption under this approach
is the discount rate, which is determined by looking at current risk-free rates of capital, current market interest rates and the
evaluation of risk premium relevant to the business segment. If our assumptions relative to growth rates were to change or were
incorrect, our fair value calculation may change, which could result in impairment.
Under the “Market Approach — Guideline Public Company Method” the Company identified several publicly traded
companies, including Federal Signal, which we believe have sufficiently relevant similarities. For these companies, the
Company calculated the mean ratio of invested capital to revenues and invested capital to EBITDA. Similar to the income
approach discussed above, sales, cost of sales, operating expenses and their respective growth rates are key assumptions
utilized. The market prices of the Company’s common stock and other guideline companies are additional key assumptions. If
these market prices increase, the estimated market value would increase. If the market prices decrease, the estimated market
value would decrease.
The results of these two methods are weighted based upon management’s evaluation of the relevance of the two
approaches. In the 2012 evaluation, management determined that the income approach provided a more relevant measure of
each reporting unit’s fair value and used it to determine reporting unit fair value. Management used the market approach to
corroborate the results of the income approach. Management used the income approach to determine fair value of the reporting
units because it considers anticipated future financial performance. The market approach is based upon historical and current
economic conditions which might not reflect the long term prospects or opportunities for the business segment being
evaluated.
The Company had no goodwill impairments for its continuing operations in 2012, 2011 and 2010. Adverse changes to the
Company’s business environment and future cash flows could cause us to record impairment charges in future periods, which
could be material. See Note 4 to the consolidated financial statements included in Item 8 of Part II of this Form 10-K for a
summary of the Company’s goodwill and definite lived intangible assets and Note 11 to the consolidated financial statements
included in Item 8 of Part II of this Form 10-K for discussion of impairment charges recorded for the discontinued FSTech
Group.
Pensions
The Company sponsors domestic and foreign defined benefit pension plans. Major assumptions used in the accounting
for these employee benefit plans include the discount rate, expected return on plan assets and rate of increase in employee
compensation levels. A change in any of these assumptions would have an effect on net periodic pension costs.
The following table summarizes the impact that a change in these assumptions would have on the Company’s operating
income ($ in millions):
Discount rate
Return on assets
Employee compensation levels
Assumption change:
25 Basis Point Increase
0.3
0.3
-
25 Basis Point Decrease
(0.3)
(0.3)
-
30
The weighted-average discount rate used to measure pension liabilities and costs is set by reference to published, high-
quality bond indices. However, these indices give only an indication of the appropriate discount rate because the cash flows of
the bonds comprising the indices do not precisely match the projected benefit payment stream of the plan. For this reason, we
also consider the individual characteristics of the plan, such as projected cash flow patterns and payment durations, when
setting the discount rate. The weighted-average discount rate used to measure U.S. pension liabilities decreased from 5.0% in
2011 to 4.2% in 2012. See Note 7 to the consolidated financial statements included in Item 8 of Part II of this Form 10-K for
further discussion.
An incremental component is added for the expected return from active management based on the plan’s experience and
on historical information obtained from the plan’s investment consultants. These forecasted gross returns are reduced by
estimated management fees and expenses, yielding a long-term rate of return of 8.1% per annum for 2012. The expected asset
return assumption is based upon a long-term view; therefore, we do not expect to see frequent changes from year to year based
on positive or negative actual performance in a single year.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax
assets are also recorded with respect to net operating losses and other tax attribute carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the years in which temporary differences are expected to be
recovered or settled. Valuation allowances are established when it is more likely than not that deferred tax assets will not be
realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income of the period that
includes the enactment date.
The ultimate recovery of deferred tax assets is dependent upon the amount and timing of future taxable income, and other
factors such as the taxing jurisdiction in which the asset is to be recovered. A high degree of judgment is required to determine
if, and the extent that, valuation allowances should be recorded against deferred tax assets. In the year ended December 31,
2010, we recorded a valuation allowance of $76.0 million against our net domestic deferred tax assets based on our assessment
of past operating results, estimates of future taxable income and the feasibility of tax planning strategies. Specifically,
beginning in the fourth quarter of 2010, we had three years of cumulative domestic losses for continuing operations. In 2012
and 2011, we recorded additional valuation allowances of $9.4 million and $11.1 million, respectively, against our domestic
deferred tax assets. We believe having three years of cumulative losses limits our ability to look to future taxable income as a
source for recovering our deferred tax assets. We will continue to evaluate our ability to utilize our deferred tax assets and, as a
result, we may increase or decrease our valuation allowance in future periods. Although we believe that our approach to
estimates and judgments as described herein is reasonable, actual results could differ and we may be exposed to increases or
decreases in income taxes that could be material.
Accounting for uncertainty in income taxes addresses the determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial statements. We recognize the tax benefit from an uncertain tax
position if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured
based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
The guidance on accounting for uncertainty in income taxes also provides guidance on de-recognition and classification,
and requires companies to elect and disclose their method of reporting interest and penalties on income taxes. We recognize
interest and penalties related to uncertain tax positions as part of income tax expense.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The Company is subject to market risk associated with changes in interest rates and foreign exchange rates. To mitigate
this risk, the Company utilizes interest rate swaps and foreign currency forward contracts. The
31
Company does not hold or issue derivative financial instruments for trading or speculative purposes and is not party to
leveraged derivatives contracts.
Interest Rate Risk
The Company manages its exposure to interest rate movements by targeting a proportionate relationship between fixed-
rate debt to total debt generally within percentages between 40% and 60%. The Company uses funded fixed-rate borrowings as
well as interest rate swap agreements to balance its overall fixed/floating interest rate mix. During the month of June 2010,
floating to fixed interest rate swaps with a total notional amount of $70 million matured and that portion of the Company’s debt
was left floating rate. Since the floating rate of interest the Company receives on its revolving credit facility has favorable
pricing further enhanced by historically low LIBOR rates, the Company decided to maintain a percentage of floating rate debt
outside of the 40% to 60% targets.
The following table presents the principal cash flows and weighted average interest rates by year of maturity for the
Company’s total debt obligations held at December 31, 2012 ($ in millions):
Variable rate debt
Average interest rate
2014
$7.4
2013
$5.0
3.0%
Expected Maturity Date
2016
$9.3
2015
$7.9
Thereafter
$ 128.2
Total
$157.8
3.0%
3.0%
3.0%
3.0%
3.0%
Fair
Value
$208.5
-
See Note 5 to the consolidated financial statements included in Item 8 of Part II of this Form 10-K for a description of these
agreements. A 100 basis point increase or decrease in variable interest rates in 2012 would have increased or decreased interest
expense by $0.1 million, respectively.
Foreign Exchange Rate Risk
Although the majority of sales, expenses and cash flows are transacted in U.S. dollars, the Company has exposure to
changes in foreign exchange rates, primarily the Euro and the British pound. If average annual foreign exchange rates had
collectively weakened against the U.S. dollar by 10%, pre-tax earnings in 2012 would have decreased by $0.9 million from
foreign currency translation.
The Company has foreign currency exposures related to buying and selling in currencies other than the local currency in
which it operates. The Company utilizes foreign currency options and forward contracts to manage these risks.
Forward exchange contracts are recorded as a natural hedge when the hedged item is a recorded asset or liability that is
revalued each accounting period, in accordance with ASC Topic 830, Foreign Currency Matters. For derivatives designated
as natural hedges, changes in fair values are reported in the “other expense” line of the consolidated statements of operations.
32
Item 8. Financial Statements and Supplementary Data.
FEDERAL SIGNAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2012 and 2011
Consolidated Statements of Operations for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
Page
34
36
37
38
39
40
41
33
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Federal Signal Corporation
We have audited the accompanying consolidated balance sheets of Federal Signal Corporation and subsidiaries as of
December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss),
shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits also
included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Federal Signal Corporation and subsidiaries at December 31, 2012 and 2011, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with
U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth
therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), Federal Signal Corporation’s internal control over financial reporting as of December 31, 2012, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 15, 2013, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Chicago, Illinois
March 15, 2013
34
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Federal Signal Corporation
We have audited Federal Signal Corporation’s internal control over financial reporting as of December 31, 2012, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“the COSO criteria”). Federal Signal Corporation’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Federal Signal Corporation maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets as of December 31, 2012 and 2011, and the related consolidated statements of
operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2012 of Federal Signal Corporation and subsidiaries and our report dated March 15, 2013, expressed an
unqualified opinion thereon.
/s/ Ernst & Young LLP
Chicago, Illinois
March 15, 2013
35
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances for doubtful accounts of $2.4 million and $2.4 million,
ASSETS
respectively
Inventories — Note 2
Prepaid expenses
Other current assets
Current assets of discontinued operations — Note 11
Total current assets
Properties and equipment — Note 3
Other assets:
Goodwill — Note 4
Intangible assets, net — Note 4
Deferred charges and other assets
Long-term assets of discontinued operations — Note 11
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings — Note 5
Current portion of long-term borrowings and capital lease obligations — Note 5
Accounts payable
Customer deposits
Deferred revenue
Deferred tax liability — Note 6
Accrued liabilities:
Compensation and withholding taxes
Other
Current liabilities of discontinued operations — Note 11
Total current liabilities
Long-term borrowings and capital lease obligations — Note 5
Long-term pension and other postretirement benefit liabilities — Note 7
Deferred gain — Note 3
Deferred tax liabilities — Note 6
Other long-term liabilities
Long-term liabilities of discontinued operations — Note 11
Total liabilities
Shareholders’ equity — Notes 8 and 9:
Common stock, $1 par value per share, 90.0 million shares authorized, 63.4 million and 63.1 million
shares issued, respectively
Capital in excess of par value
Retained earnings
Treasury stock, 0.9 million and 0.9 million shares, respectively, at cost
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
See notes to consolidated financial statements.
December 31,
2012
2011
($ in millions)
$ 29.7
1.0
$ 9.5
-
96.9
119.9
13.8
5.1
0.8
267.2
59.3
272.3
0.7
12.5
1.2
$613.2
$ 0.3
4.7
52.5
13.1
3.1
10.6
25.8
33.1
6.4
149.6
152.8
84.1
19.4
35.8
16.0
8.6
466.3
63.4
171.1
8.9
(16.4)
(80.1)
146.9
$613.2
105.0
104.3
14.6
5.6
35.9
274.9
60.0
270.6
1.8
2.0
97.4
$706.7
$ 9.0
0.1
49.5
14.4
2.9
2.7
18.7
30.6
24.1
152.0
213.1
74.1
21.4
41.0
14.5
15.9
532.0
63.1
167.7
36.4
(16.1)
(76.4)
174.7
$706.7
36
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
2010
$
2012
$ 803.2
613.4
189.8
136.9
-
For the Years Ended December 31,
2011
($ in millions, except per share data)
$ 688.7
533.3
155.4
122.2
-
-
33.2
16.4
-
633.1
482.2
150.9
130.2
3.9
4.4
12.4
10.2
-
1.4
51.5
21.4
3.5
0.7
25.9
(3.9)
22.0
$
$
$
$
$
$
(49.5)
(27.5)
0.35
(0.79)
(0.44)
62.3
62.7
0.2
16.6
(3.5)
13.1
(27.3)
(14.2)
0.21
(0.44)
(0.23)
62.2
62.2
1.2
1.0
(75.1)
(74.1)
(101.6)
$ (175.7)
$
$
(1.29)
(1.76)
(3.05)
57.6
57.6
Net sales
Cost of sales
Gross profit
Selling, engineering, general and administrative
Acquisition and integration related costs
Restructuring charges — Note 12
Operating income
Interest expense
Debt settlement charges
Other expense
Income before income taxes
Income tax provision — Note 6
Income (loss) from continuing operations
Discontinued operations — Note 11
Loss from discontinued operations and disposal, net of tax benefit of $3.6 million,
$2.0 million and $2.9 million, respectively
Net loss
Basic and diluted earnings (loss) per share:
Earnings (loss) from continuing operations
Loss from discontinued operations and disposal, net of taxes
Net loss per share
Weighted average shares outstanding:
Basic
Diluted
See notes to consolidated financial statements.
37
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net loss
Other comprehensive income (loss):
2012
For the Years Ended December 31,
2011
($ in millions)
$ (14.2)
$ (27.5)
2010
$ (175.7)
Change in foreign currency translation adjustment
Unrealized net gain (loss) on derivatives, net of tax expense of $0.2, $0.1 and $0.0,
respectively
Change in unrecognized gains (losses) related to pension benefit plans, net of tax
benefit (expense) of $0.3, $1.6 and ($0.0), respectively
Total other comprehensive loss
Comprehensive loss
11.1
0.7
(4.3)
(0.7)
(4.5)
0.8
(15.5)
(3.7)
$ (31.2)
(29.8)
(34.8)
$ (49.0)
1.4
(2.3)
$ (178.0)
See notes to consolidated financial statements.
38
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Balance at December 31, 2009
Net loss
Total other comprehensive loss
Shares issued for acquisition
Equity offering, net of fees
Cash dividends declared ($0.24 per common
share)
Share based payments:
Non-vested stock and options
Stock awards
Common stock canceled
Balance at December 31, 2010
Net loss
Total other comprehensive loss
Share based payments:
Non-vested stock and options
Stock awards
Shares received in connection with vesting
of awards
Common stock canceled
Balance at December 31, 2011
Net loss
Total other comprehensive loss
Share based payments:
Non-vested stock and options
Stock awards
Balance at December 31, 2012
Common
Stock Par
Value
Capital in
Excess of
Par Value
$
49.6
$
93.8
1.2
12.1
9.0
59.1
Retained
Earnings
Treasury
Stock
($ in millions)
Accumulated
Other
Comprehensive
Loss
$ 240.4
(175.7)
$ (15.8)
$
(39.3)
(2.3)
0.1
63.0
0.1
63.1
2.3
0.3
0.2
164.7
2.0
0.9
0.1
167.7
(14.1)
50.6
(14.2)
(15.8)
(0.3)
(16.1)
36.4
(27.5)
(41.6)
(34.8)
(76.4)
(3.7)
0.3
63.4
$
3.1
0.3
$ 171.1
$
8.9
(0.3)
$ (16.4)
$
(80.1)
Total
$ 328.7
(175.7)
(2.3)
10.2
71.2
(14.1)
2.3
0.4
0.2
220.9
(14.2)
(34.8)
2.0
1.0
(0.3)
0.1
174.7
(27.5)
(3.7)
3.1
0.3
$ 146.9
See notes to consolidated financial statements.
39
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on discontinued operations and disposal
Gain on joint venture
Restructuring charges, net of cash payments
Depreciation and amortization
Debt settlement charges
Stock-based compensation expense
Pension expense, net of funding
Provision for doubtful accounts
Deferred income taxes, including change in valuation allowance
Changes in operating assets and liabilities, net of effects from acquisitions and
dispositions of companies:
Accounts receivable
Inventories
Other current assets
Accounts payable
Customer deposits
Accrued liabilities
Income taxes
Other
Net cash provided by continuing operating activities
Net cash (used for) provided by discontinued operating activities
Net cash provided by operating activities
Investing activities:
Purchases of properties and equipment
Proceeds from sales of properties and equipment
Payments for acquisitions, net of cash acquired
Proceeds from sale of FSTech Group
Increase in restricted cash
Net cash provided by (used for) continuing investing activities
Net cash used for discontinued investing activities
Net cash provided by (used for) investing activities
Financing activities:
(Decrease) increase in revolving lines of credit
(Decrease) increase in short-term borrowings, net
Proceeds from issuance of long-term borrowings
Payments on long-term borrowings
Payments of debt financing fees
Cash dividends paid to shareholders
Proceeds from equity offering, net of fees
Other, net
Net cash (used for) provided by continuing financing activities
Net cash used for discontinued financing activities
Net cash (used for) provided by financing activities
Effects of foreign exchange rate changes on cash
For the Years Ended
December 31,
2011
2012
($ in millions)
2010
$ (27.5)
$(14.2)
$(175.7)
49.5
-
0.9
13.2
2.5
2.6
(5.7)
0.6
(4.8)
8.7
(14.5)
0.5
2.6
(1.5)
16.4
8.6
(2.9)
49.2
(26.0)
23.2
(13.0)
1.8
-
82.1
(1.0)
69.9
-
69.9
(173.3)
(9.5)
215.0
(99.5)
(6.9)
-
-
2.4
(71.8)
(0.9)
(72.7)
(0.2)
27.3
-
-
13.0
-
1.8
1.5
0.4
1.8
(27.3)
3.4
(2.3)
3.7
4.6
(1.5)
2.7
(0.8)
14.1
(10.3)
3.8
(13.5)
1.9
-
-
-
(11.6)
-
(11.6)
(34.6)
7.6
-
(13.2)
(2.3)
(3.7)
-
1.3
(44.9)
(0.6)
(45.5)
0.7
101.6
(0.1)
2.3
11.4
-
2.1
2.2
1.1
75.7
23.9
(4.2)
4.9
2.0
(0.1)
(4.8)
(12.3)
(1.3)
28.7
1.6
30.3
(11.3)
1.8
(97.3)
-
-
(106.8)
(0.9)
(107.7)
129.6
1.7
-
(70.8)
-
(13.3)
71.2
0.8
119.2
(1.0)
118.2
0.2
Increase (decrease) in cash and cash equivalents
20.2
(52.6)
41.0
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See notes to consolidated financial statements.
40
9.5
$ 29.7
62.1
$ 9.5
21.1
$ 62.1
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in millions, except per share data)
NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying consolidated financial statements include the accounts of Federal Signal
Corporation and all of its subsidiaries (“Federal Signal” or the “Company”) and have been prepared in accordance with
accounting principles generally accepted in the United States of America (“U.S. GAAP”). All significant intercompany balances
and transactions have been eliminated in consolidation. These consolidated financial statements include estimates and
assumptions by management that affect the amounts reported in the consolidated financial statements. Actual results could
differ from these estimates. The operating results of businesses divested during 2012 and 2010 have been excluded since the
date of sale, and have been reported as discontinued operations prior to sale (see Note 11). Certain prior year amounts have
been reclassified to conform to the current year presentation.
Products manufactured and services rendered by the Company are divided into three major operating segments: Safety
and Security Systems, Fire Rescue and Environmental Solutions. The individual operating businesses are organized as such
because they share certain characteristics, including technology, marketing, distribution and product application, which create
long-term synergies.
Non-U.S. operations: Assets and liabilities of non-U.S. subsidiaries, other than those whose functional currency is the
U.S. dollar, are translated at current exchange rates with the related translation adjustments reported in shareholders’ equity as
a component of accumulated other comprehensive loss. Statements of operations accounts are translated at the average
exchange rate during the period. Non-monetary assets and liabilities are translated at historical exchange rates. The Company
incurs foreign currency transaction gains/losses relating to assets and liabilities that are denominated in a currency other than
the functional currency. For 2012, 2011 and 2010, the Company incurred foreign currency translation losses, included in other
expense in the consolidated statements of operations, of $0.6 million, $0.3 million and $1.4 million, respectively. The cumulative
translation adjustment, included in accumulated other comprehensive loss as of December 31, 2012 and 2011, was cumulative
income of $10.8 million and a cumulative loss of $0.3 million, respectively.
Fair value of financial instruments: The Company applies the provisions of Accounting Standards Codification
(“ASC”) Topic 820, Fair Value Measurements and Disclosures, to its non-financial assets and non-financial liabilities. ASC
Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers
include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than
quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in
which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Cash equivalents: The Company considers all highly liquid investments with a maturity of three months or less, when
purchased, to be cash equivalents. The carrying amounts of cash and cash equivalents and restricted cash approximate fair
value because of the short-term maturity and highly liquid nature of these instruments (Level 1 input).
Restricted cash: Restricted cash of $1.0 million at December 31, 2012 consisted of cash deposited with various financial
institutions that was pledged as collateral for the Company’s cash-collateralized letters of credit related to equipment and
service performance guarantees.
Allowance for doubtful accounts: The Company maintains allowances for doubtful accounts for estimated losses as a
result of a customer’s inability to make required payments. Management evaluates the aging of the accounts receivable
balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the
amount of accounts receivables that may not be collected in the future and records the appropriate provision.
41
Inventories: The Company’s inventories are valued at the lower of cost or market. Cost is determined using the first-in,
first-out (“FIFO”) method. Included in the cost of inventories are raw materials, direct wages and associated production costs.
Properties and equipment and related depreciation: Properties and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the assets. Useful lives range from eight to 40 years
for buildings and three to 15 years for machinery and equipment. Leasehold improvements are depreciated over the shorter of
the remaining life of the lease or the useful life of the improvement. Property and equipment and other long-term assets are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of
assets, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. Such
analyses necessarily involve significant judgment.
Goodwill and definite lived intangible assets: Goodwill represents the excess of the cost of an acquired business over
the amounts assigned to its net assets. Goodwill is not amortized but is tested for impairment at a reporting unit level on an
annual basis or when an event occurs or circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying amount. The Company performs its annual goodwill impairment test as of October 31.
Goodwill is tested for impairment based on a two-step test. The first step, used to identify potential impairment, compares
the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its
carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is unnecessary. If the
carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. The second step compares the implied fair value of reporting unit goodwill with
the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that
goodwill, an impairment loss is recognized in an amount equal to that excess. The Company generally determines the fair value
of its reporting units using two valuation methods: the “Income Approach — Discounted Cash Flow Analysis” method, and
the “Market Approach — Guideline Public Company Method.”
Under the “Income Approach — Discounted Cash Flow Analysis” method the key assumptions consider projected sales,
cost of sales and operating expenses. These assumptions were determined by management utilizing our internal operating plan,
growth rates for revenues and operating expenses and margin assumptions. An additional key assumption under this approach
is the discount rate, which is determined by looking at current risk-free rates of capital, current market interest rates, and the
evaluation of risk premium relevant to the business segment. If our assumptions relative to growth rates were to change or were
incorrect, our fair value calculation may change, which could result in impairment.
Under the “Market Approach — Guideline Public Company Method” the Company identified several publicly traded
companies, including Federal Signal, which we believe have sufficiently relevant similarities. For these companies, the
Company calculated the mean ratio of invested capital to revenues and invested capital to EBITDA. Similar to the income
approach discussed above, sales, cost of sales, operating expenses and their respective growth rates are key assumptions
utilized. The market prices of Federal Signal and other guideline companies are additional key assumptions. If these market
prices increase, the estimated market value would increase. If the market prices decrease, the estimated market value would
decrease.
The results of these two methods are weighted based upon management’s evaluation of the relevance of the two
approaches. In the current-year evaluation, management determined that the income approach provided a more relevant
measure of each reporting unit’s fair value and used it to determine reporting unit fair value. Management used the market
approach to corroborate the results of the income approach. Management used the
42
income approach to determine fair value of the reporting units because it considers anticipated future financial performance.
The market approach is based upon historical and current economic conditions which might not reflect the long-term prospects
or opportunities for the business segment being evaluated.
Definite lived intangible assets are amortized using the straight-line method over the estimated useful lives and are tested
for impairment if indicators exist.
The Company had no goodwill impairments for its continuing operations in 2012, 2011 or 2010. Adverse changes to the
Company’s business environment and future cash flows could cause us to record impairment charges in future periods, which
could be material. See Note 4 for a summary of the Company’s goodwill and definite lived intangible assets and Note 11 for a
discussion of impairment charges recorded for the discontinued Federal Signal Technologies (“FSTech”) Group.
Pensions: The Company sponsors domestic and foreign defined benefit pension plans. Major assumptions used in the
accounting for these employee benefit plans include the discount rate, expected return on plan assets and rate of increase in
employee compensation levels. A change in any of these assumptions would have an effect on net periodic pension costs.
Stock-based compensation plans: The Company has various stock-based compensation plans, described more fully in
Note 8. The Company accounts for stock-based compensation in accordance with the provisions of ASC Topic 718,
Compensation — Stock Compensation. The fair value of stock options is determined using a Black-Scholes option pricing
model.
Use of estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Warranty: Sales of many of the Company’s products carry express warranties based on terms that are generally
accepted in the Company’s marketplaces. The Company records provisions for estimated warranty at the time of sale based on
historical experience and periodically adjusts these provisions to reflect actual experience. Infrequently, a material warranty
issue can arise which is beyond the scope of the Company’s historical experience. The Company records costs related to these
issues as they become probable and estimable.
Product liability and workers’ compensation liability: Due to the nature of the Company’s products, the Company is
subject to claims for product liability and workers’ compensation in the normal course of business. The Company is self-funded
for a portion of these claims. The Company establishes a reserve using a third-party actuary for any known outstanding
matters, including a reserve for claims incurred but not yet reported.
The Company has not established a reserve for potential losses resulting from the firefighter hearing loss litigation (see
Note 13). If the Company is not successful in its defense after exhausting all appellate options, it will record a charge for such
claims, to the extent they exceed insurance recoveries, at the appropriate time.
Revenue recognition: Net sales consist primarily of revenue from the sale of equipment, environmental vehicles,
vehicle-mounted aerial platforms, parts, service, and maintenance contracts.
The Company recognizes revenue for products when persuasive evidence of an arrangement exists, delivery has
occurred, the sales price is fixed or determinable and collection is probable. A product is considered delivered to the customer
once it has been shipped and title and risk of loss have been transferred. For most of the Company’s product sales, these
criteria are met at the time the product is shipped; however, occasionally title passes later or earlier than shipment due to
customer contracts or letter of credit terms. If at the outset of an arrangement the Company determines the arrangement fee is
not, or is presumed not to be, fixed or determinable, revenue is deferred and subsequently recognized as amounts become due
and payable and all other criteria for revenue recognition have been met.
43
Net sales: Net sales are net of returns and allowances. Returns and allowances are calculated and recorded as a
percentage of revenue based upon historical returns. Gross sales include sales of products and billed freight related to product
sales. Freight has not historically comprised a material component of gross sales.
Product shipping costs: Product shipping costs are expensed as incurred and are included in cost of sales.
Research and development: The Company invests in research to support development of new products and the
enhancement of existing products and services. The Company believes this investment is important to maintain and/or enhance
its leadership position in key markets. Expenditures for research and development by the Company were $10.0 million in 2012,
$12.1 million in 2011 and $10.4 million in 2010, and were reported within selling, engineering, general and administrative
(“SG&A”) expenses.
Income taxes: We file a consolidated U.S. federal income tax return for Federal Signal Corporation and its eligible
domestic subsidiaries. Our non-U.S. subsidiaries file income tax returns in their respective local jurisdictions. We account for
income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and tax benefit carryforwards. Deferred tax assets and liabilities at the end of each
period are determined using enacted tax rates. A valuation allowance is established or maintained when, based on currently
available information and other factors, it is more likely than not that all or a portion of a deferred tax asset will not be realized.
Accounting standards on accounting for uncertainty in income taxes address the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under the guidance on
accounting for uncertainty in income taxes, we may recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty
in income taxes also provides guidance on de-recognition, classification, interest and penalties on income taxes, and
accounting in interim periods.
Litigation contingencies: The Company is subject to various claims, other pending and possible legal actions for
product liability and other damages, and other matters arising out of the conduct of the Company’s business. The Company
believes, based on current knowledge and after consultation with counsel, that the outcome of such claims and actions will not
have an adverse effect on the Company’s consolidated financial position or results of operations. However, in the event of
unexpected future developments, it is possible that the ultimate resolution of such matters, if unfavorable, could have a material
adverse effect on the Company’s results of operations. Professional legal fees are expensed when incurred. We accrue for
contingent losses when such losses are probable and reasonably estimable. In the event that estimates or assumptions of
contingent losses are different from actual, adjustments are made in subsequent periods to reflect more current information.
44
NOTE 2 — INVENTORIES
Inventories at December 31 are summarized as follows ($ in millions):
Raw materials
Work in process
Finished goods
Total inventories
NOTE 3 — PROPERTIES AND EQUIPMENT
Properties and equipment at December 31 are summarized as follows ($ in millions):
Land
Buildings and improvements
Machinery and equipment
Accumulated depreciation
Total properties and equipment
2012
$ 56.8
26.8
36.3
$119.9
2011
$ 47.1
27.6
29.6
$104.3
2012
0.3
$
23.7
148.4
(113.1)
$ 59.3
2011
$
0.3
23.1
138.4
(101.8)
$ 60.0
In July 2008, the Company entered into sale-leaseback transactions for its Elgin and University Park, Illinois plant
locations. Net proceeds received were $35.8 million, resulting in a deferred gain of $29.0 million. The deferred gain is being
amortized over the 15-year life of the respective leases. The balance was $19.4 million and $21.4 million at December 31, 2012
and 2011, respectively.
The Company leases certain facilities and equipment under operating leases, some of which contain options to renew.
Total rental expense on all operating leases was $8.9 million in 2012, $8.8 million in 2011 and $9.1 million in 2010. Sublease
income and contingent rentals relating to operating leases were insignificant. At December 31, 2012, minimum future rental
commitments under operating leases having non-cancelable lease terms in excess of one year aggregated $51.9 million payable
as follows: $7.8 million in 2013, $6.0 million in 2014, $5.4 million in 2015, $5.4 million in 2016, $4.9 million in 2017 and $22.4 million
thereafter.
NOTE 4 — GOODWILL AND DEFINITE LIVED INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for the years ended December 31, 2012 and 2011, by operating segment, were
as follows ($ in millions):
December 31, 2010
Translation adjustments
December 31, 2011
Translation adjustments
December 31, 2012
Environmental
Solutions
$
$
120.4
-
120.4
-
120.4
Fire
Rescue
$ 33.9
(0.7)
33.2
0.6
$ 33.8
Safety
& Security
$ 118.2
(1.2)
117.0
1.1
$ 118.1
Total
$272.5
(1.9)
270.6
1.7
$272.3
45
The following table provides the gross carrying value and accumulated amortization for each major class of intangible
assets ($ in millions):
Amortizable intangible assets:
Developed software
Patents
Total
Weighted
Average
Useful
Life
(Years)
December 31, 2012
December 31, 2011
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Gross
Carrying
Value
Value
Accumulated
Amortization
Net
Carrying
Value
5
10
5.5
$
$
6.0
0.6
6.6
$
$
(5.4)
(0.5)
(5.9)
$
$
0.6
0.1
0.7
$
$
6.0
0.6
6.6
$
$
(4.4)
(0.4)
(4.8)
$
$
1.6
0.2
1.8
Amortization expense for the years ended December 31, 2012, 2011 and 2010 totaled $1.0 million, $1.3 million and
$1.3 million, respectively. The Company estimates that the aggregate amortization expenses will be $0.2 million in 2013,
$0.2 million in 2014, $0.2 million in 2015, $0.1 million in 2016, and $0.0 million thereafter. Actual amounts of amortization may
differ from estimated amounts due to additional intangible asset acquisitions, changes in foreign currency rates, impairment of
intangible assets and other events.
The Company determined that the trade name assets associated with the FSTech Group with a carrying value of $7.9
million were impaired, and recorded an impairment charge of $0.6 million in the second quarter of 2012. The Company’s
calculation of fair value of trade name assets was based on an income approach using discounted cash flow projections. The
trade name assets were sold to 3M Company as part of the sale of the FSTech Group.
NOTE 5 — DEBT
Short-term borrowings at December 31 consisted of the following ($ in millions):
Non-U.S. lines of credit
Total short-term borrowings
Long-term borrowings at December 31 consisted of the following ($ in millions):
Revolving Credit Facility
ABL Facility
Term Loan
12.98% private placement note due 2012
Private placement note, floating rate (8.85% at December 31, 2011)
Capital lease obligations
Unamortized balance of terminated fair value interest rate swaps
Less current maturities, excluding financial services activities
Less current capital lease obligations
Less financial services activities — borrowings (included in discontinued operations)
Total long-term borrowings and capital lease obligations, net
46
2012
$ 0.3
$ 0.3
2011
$ 9.0
$ 9.0
2012
$ -
6.7
149.1
-
-
1.7
157.5
-
157.5
(4.2)
(0.5)
-
$152.8
2011
$180.0
-
-
27.3
6.2
0.5
214.0
0.1
214.1
-
(0.1)
(0.9)
$213.1
The carrying value of short-term debt approximates fair value due to its short maturity (Level 2 input). The fair value of
long-term debt is based on interest rates that we believe are currently available to us for issuance of debt with similar terms and
remaining maturities (Level 2 input).
The following table summarizes the carrying amounts and fair values of the Company’s financial instruments at
December 31 ($ in millions):
Short-term debt
Long-term debt (1)
2012
2011
Notional
Amount
$
0.3
157.5
Fair
Value
$ 0.3
208.2
Notional
Amount
$
9.0
214.1
Fair
Value
$ 9.0
212.4
(1) Long-term debt includes current portions of long-term debt and current portions of capital lease obligations of $4.7 million
and $0.1 million as of December 31, 2012 and 2011, respectively, and $0.9 million of financial service borrowings at
December 31, 2011, which is included in discontinued operations.
On February 22, 2012, the Company entered into a Credit Agreement, by and among the Company, as borrower and
General Electric Capital Corporation, as a co-collateral agent, and Wells Fargo Capital Finance, LLC, as administrative agent and
co-collateral agent, providing the Company with a $100 million secured credit facility (the “ABL Facility”).
The ABL Facility is a five-year asset-based revolving credit facility pursuant to which up to $100 million initially will be
available, with the right, subject to certain conditions, to increase the availability under the facility by up to an additional $25
million. The ABL Facility provides for loans and letters of credit in an amount up to the aggregate availability under the facility
subject to meeting certain borrowing base conditions, with a sub-limit of $50 million for letters of credits. Borrowings under the
ABL Facility bear interest, at the Company’s option, at a base rate or a LIBOR rate, plus, in each case, an applicable margin. The
applicable margin ranges from 1.00% to 2.75% for base rate borrowings and 1.75% to 3.50% for LIBOR borrowings. The
Company must also pay a commitment fee to the facility lenders equal to 0.50% per annum on the unused portion of the ABL
Facility along with other standard fees. Letter of credit fees are payable on outstanding letters of credit in an amount equal to
the applicable LIBOR margin plus other customary fees.
The Company is allowed to prepay in whole or in part advances under the ABL Facility without penalty or premium other
than customary “breakage” costs with respect to LIBOR loans.
The ABL Facility requires that the Company, on a consolidated basis, maintain a minimum monthly fixed charge coverage
ratio, along with other customary restrictive covenants, certain of which are subject to materiality thresholds.
On February 22, 2012, the Company also entered into a Financing Agreement by and among the Company, as borrower,
certain subsidiaries of the Company, as guarantors, the lenders party thereto (the “Term Lenders”) and TPG Specialty Lending,
Inc., as administrative agent, collateral agent and sole lead arranger, pursuant to which the Term Lenders agreed to provide the
Company with a $215 million term loan (the “Term Loan”).
The Term Loan is a five-year secured term loan maturing on February 22, 2017. Installment payments under the Term Loan
did not commence until March 2013. The Term Loan allows for mandatory prepayments in certain specified situations. Except in
these certain specified situations, the Term Loan is not repayable in the first 12 months of the term and thereafter is subject to
the following prepayment premium: (i) 2.75% in months 13-24, (ii) 2.00% in months 25-36 and (iii) nothing thereafter. These
provisions are subject to change upon the occurrence of certain specified events.
47
The Term Loan bears interest, at the Company’s option, at a base rate or adjusted LIBOR rate, plus, in each case, an
applicable margin. The applicable margin ranges from 9.00% to 10.00% for base rate borrowings and 10.00% to 11.00% for
LIBOR borrowings. The Company is required to pay certain customary fees in connection with the Term Loan.
On September 4, 2012, the Company prepaid $65.0 million of its outstanding principal balance of its Term Loan debt at par
with no prepayment penalty and related accrued interest of $0.1 million with net proceeds from the sale of the FSTech Group.
This prepayment was executed in accordance with the terms of the Financing Agreement. The Company also prepaid $10.0
million of debt drawn under the ABL Facility on the same date with net proceeds from the sale of the FSTech Group.
The Company was in compliance with all its debt covenants as of December 31, 2012.
As of December 31, 2012, the available borrowing base under the ABL Facility was $61.6 million. As of December 31, 2012,
there was $6.7 million in cash drawn and $29.2 million of undrawn letters of credit under the ABL Facility, reducing net
availability for borrowings to $25.7 million.
As of December 31, 2012, $0.3 million was drawn against the Company’s non-U.S. lines of credit which provide for
borrowings up to $14.5 million.
Aggregate maturities of total borrowings amount to approximately $5.0 million in 2013, $7.4 million in 2014, $7.9 million in
2015, $9.3 million in 2016, and $128.2 million in 2017 and thereafter. Since the Company has refinanced a portion of its short-term
debt subsequent to the balance sheet date, the Company has reclassified $3.3 million of its short-term debt to long-term debt.
See Note 18 for further information. Included in current maturities are $0.3 million of other non-U.S. lines of credit, $4.2 million of
term loan debt and $0.5 million of capital lease obligations. The fair values of borrowings aggregated $208.5 million and $221.4
million at December 31, 2012 and 2011, respectively.
The Company paid interest of $20.6 million in 2012, $16.1 million in 2011 and $9.7 million in 2010. The weighted average
interest rate on short-term borrowings was 5.15% at December 31, 2012.
NOTE 6 — INCOME TAXES
The provision (benefit) for income taxes from continuing operations for each of the three years in the period ended
December 31 consisted of the following ($ in millions):
Current:
Federal
Foreign
State and local
Deferred:
Federal
Foreign
State and local
Total income tax provision
48
2012
2011
2010
$(1.8)
3.2
0.1
1.5
$ 2.1
0.3
-
2.4
$ 3.9
$(3.8)
2.1
0.3
(1.4)
$ 4.7
0.2
-
4.9
$ 3.5
$ (3.0)
5.3
0.3
2.6
$70.8
(0.9)
2.6
72.5
$75.1
Differences between the statutory federal income tax rate and the effective income tax rate from continuing operations for
each of the three years in the period ended December 31 are summarized below:
Statutory federal income tax rate
State income taxes, net of federal tax benefit
Valuation allowance
Bad debt deduction
Asset dispositions and write-offs
Non-deductible acquisition costs
Tax reserves
R&D tax credits
Foreign tax rate effects
Other, net
Effective income tax rate
2012
35.0%
1.0
41.3
(24.9)
(29.5)
-
(1.0)
-
(7.2)
0.4
15.1%
2011
35.0%
0.9
8.8
-
-
-
4.1
(4.1)
(22.5)
(1.1)
21.1%
2010
35.0%
16.4
7,646.4
-
-
41.6
(100.9)
(54.8)
(138.0)
64.3
7,510.0%
Due to the Company’s recent cumulative domestic losses for book purposes and the uncertainty of the realization of
certain deferred tax assets, the Company continues to adjust its valuation allowance as the deferred tax assets increase or
decrease, resulting in effectively no recorded tax benefit for domestic operating losses or tax provision for domestic income.
However, the Company has recorded tax expense for the increase in the deferred tax liabilities of its domestic indefinite lived
intangibles. An income tax provision is still required for foreign operations that are not in a cumulative loss position.
Deferred income tax assets and liabilities at December 31 are summarized as follows ($ in millions):
Deferred tax assets:
Depreciation and amortization
Accrued expenses
Net operating loss, capital loss, alternative minimum tax, research and development, and foreign
tax credit carryforwards
Definite lived intangibles
Pension benefits
Other
Deferred revenue
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Expenses capitalized for book
Indefinite lived intangibles
Gross deferred tax liabilities
Net deferred tax liability
2012
2011
$ 12.5
27.9
$ 12.5
28.0
75.0
1.8
31.1
0.3
0.1
148.7
(131.8)
16.9
(5.0)
(2.1)
(56.2)
(63.3)
$ (46.4)
73.1
1.8
27.4
0.2
0.1
143.1
(123.9)
19.2
(5.9)
(2.5)
(54.5)
(62.9)
$ (43.7)
Federal and state income taxes have not been provided on accumulated undistributed earnings of certain foreign
subsidiaries aggregating approximately $87.8 million and $86.1 million at December 31, 2012 and 2011, respectively, as such
earnings have been reinvested in the business. The determination of the amount of the unrecognized deferred tax liability
related to the undistributed earnings is not practicable.
49
In the fourth quarter of 2010, the Company determined that $15 million of previously undistributed earnings at one of the
Company’s foreign subsidiaries would be repatriated in the future. As a result of this change, the Company increased its
deferred tax liabilities related to the $15 million by $0.2 million. The remainder of the foreign subsidiaries undistributed earnings
is indefinitely reinvested.
The deferred tax asset for tax loss carryforwards at December 31, 2012, includes federal net operating loss carryforwards of
$20.9 million, which begin to expire in 2018, state net operating loss carryforwards of $2.2 million, which will begin to expire in
2019; foreign net operating loss carryforwards of $8.2 million of which $0.5 million has an indefinite life and $7.7 million which
will expire in 2030; and $12.8 million for capital loss carryforwards which will expire in 2013. The deferred tax asset for tax credit
carryforwards includes U.S. research tax credit carryforwards of $6.3 million, which will begin to expire in 2022, U.S. foreign tax
credits of $21.1 million, which will begin to expire in 2015 and U.S. alternative minimum tax credit carryforwards of $3.3 million
with no expiration.
The deferred tax asset for tax loss carryforwards at December 31, 2011, includes federal net operating loss carryforwards of
$18.0 million, which begin to expire in 2018, state net operating loss carryforwards of $1.6 million, which will begin to expire in
2019, foreign net operating loss carryforwards of $0.5 million of which $0.5 million has an indefinite life, and $22.2 million for
capital loss carryforwards that will expire in 2012 and 2013. The deferred tax asset for tax credit carryforwards includes
U.S. research tax credit carryforwards of $6.3 million, which will begin to expire in 2022, U.S. foreign tax credits of $20.3 million,
which will begin to expire in 2015 and U.S. alternative minimum tax credit carryforwards of $4.0 million with no expiration.
Valuation allowances totaling $131.8 million have been established at December 31, 2012 and include $2.2 million related to
state net operating loss carryforwards, $8.3 million related to foreign net operating loss carryforwards, $12.8 million related to
capital loss carryforwards and $108.5 million related to domestic deferred tax assets.
Valuation allowances totaling $123.9 million have been established at December 31, 2011 and include $1.6 million related to
state net operating loss carryforwards, $0.5 million related to foreign net operating loss carryforwards, $22.2 million related to
capital loss carryforwards and $99.6 million related to domestic deferred tax assets.
The net deferred tax asset at December 31 is classified in the balance sheet as follows ($ in millions):
Current net deferred tax assets
Current valuation allowance
Total current deferred tax liability
Long-term net deferred tax asset
Long-term valuation allowance
Long-term net deferred tax liability
$
2012
4.0
(14.6)
$ (10.6)
$ 81.4
(117.2)
$ (35.8)
$
2011
4.8
(7.5)
$ (2.7)
$ 75.3
(116.3)
$ (41.0)
ASC Topic 740, Income Taxes, requires that the future realization of deferred tax assets depends on the existence of
sufficient taxable income in future periods. Possible sources of taxable income include taxable income in carryback periods, the
future reversal of existing taxable temporary differences recorded as a deferred tax liability, tax-planning strategies that generate
future income or gains in excess of anticipated losses in the carryforward period and projected future taxable income. If, based
upon all available evidence, both positive and negative, it is more likely than not such deferred tax assets will not be realized, a
valuation allowance is recorded. Significant weight is given to positive and negative evidence that is objectively verifiable. A
company’s three-year cumulative loss position is significant negative evidence in considering whether deferred tax assets are
realizable and the accounting guidance restricts the amount of reliance the Company can place on projected taxable income to
support the recovery of the deferred tax assets.
50
In the fourth quarter of 2010, the Company recorded a $76.0 million valuation allowance against its United States federal
deferred tax assets as a non-cash charge to income tax expense after the Company fell into a cumulative three-year domestic
loss position after excluding the results of discontinued operations and disposals. In reaching this conclusion, the Company
considered the weak municipal markets in the United States and significant impairment charges, which have led to a three-year
cumulative U.S. loss position from continuing operations in the fourth quarter of 2010. Recording the valuation allowance does
not restrict the Company’s ability to utilize the future deductions and net operating losses associated with the deferred tax
assets assuming taxable income is recognized in future periods.
The $16.9 million of deferred tax assets at December 31, 2012, for which no valuation allowance is recorded, is anticipated
to be realized through the future reversal of existing taxable temporary differences recorded as deferred tax liabilities at
December 31, 2012. Should the Company determine that it would not be able to realize its remaining deferred tax assets in the
future, an adjustment to the valuation allowance would be recorded in the period such determination is made. The need to
maintain a valuation allowance against deferred tax assets may cause greater volatility in our effective tax rate.
The Company paid income taxes of $2.9 million in 2012, $4.2 million in 2011 and $6.8 million in 2010.
Income (loss) from continuing operations before taxes for each of the three years ended December 31 consisted of the
following ($ in millions):
U.S.
Non-U.S.
2012
$10.0
15.9
$25.9
2011
$ 2.5
14.1
$16.6
2010
$(13.6)
14.6
$ 1.0
The following table summarizes the activity related to the Company’s unrecognized tax benefits ($ in millions):
Balance at January 1, 2011
Increases related to current year tax
Decreases due to settlements with tax authorities
Decreases due to lapse of statute of limitations
Balance at December 31, 2011
Increases related to current year tax
Increases from prior period positions
Decreases from prior period positions
Decreases due to lapse of statute of limitations
Balance at December 31, 2012
$ 3.8
1.3
(0.2)
(0.6)
$ 4.3
0.2
0.1
(0.2)
(0.4)
$ 4.0
Included in the unrecognized tax benefits of $4.0 million at December 31, 2012 was $3.9 million of tax benefits that if
recognized, would impact our annual effective tax rate. However, to the extent we continue to maintain a full valuation
allowance against certain deferred tax assets, the effect may be in the form of an increase in the deferred tax asset related to our
net operating loss carryforward, which would be offset by a full valuation allowance. The Company’s continuing practice is to
recognize interest and penalties related to income tax matters in income tax expense. Interest and penalties amounting to
$0.2 million and $0.1 million, respectively, are included in the consolidated balance sheet but are not included in the table
above. We expect our unrecognized tax benefits to decrease by $1.6 million over the next 12 months due to potential expiration
of statute of limitations and settlements with tax authorities.
51
We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2009 through
2012 tax years generally remain subject to examination by federal and most state tax authorities. In significant foreign
jurisdictions, the 2008 through 2012 tax years generally remain subject to examination by their respective tax authorities.
On January 2, 2013 the American Taxpayer Relief Act (the “ATRA”) of 2012 was signed into law. Some of the provisions
were retroactive to January 1, 2012 including the exclusion from U.S. federal taxable income of certain interest, dividends, rents,
and royalty income of foreign affiliates, as well as the tax benefits of the credits with respect to that income. In addition the
Research and Experimental tax credit was made retroactive to January 1, 2012. The tax rate above reflects the tax law that was in
place as of December 31, 2012. Had the ATRA had been enacted prior to January 1, 2013, our overall tax expense and effective
tax rate would have been the same. Our domestic valuation allowance would have been $0.5 million higher than reported. This
difference will be reflected in the first quarter of 2013.
NOTE 7 — PENSIONS
The Company and its subsidiaries sponsor a number of defined benefit pension plans covering certain salaried and hourly
employees. Benefits under these plans are primarily based on final average compensation and years of service as defined
within the provisions of the individual plans. The Company also participates in a retirement plan that provides defined benefits
to employees under certain collective bargaining agreements.
The components of net periodic pension expense for each of the three years in the period ended December 31, are
summarized as follows ($ in millions):
U.S. Benefit Plans
2012
2011
2010
Non-U.S. Benefit Plan
2010
2011
2012
Company-sponsored plans
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Multi-employer plans
Net periodic pension expense
$ - $ - $ - $ 0.2 $ 0.1 $ 0.2
2.7
(3.1)
0.8
0.6
-
$ 5.1 $ 5.0 $ 2.9 $ 1.0 $ 0.6 $ 0.6
7.4
(8.2)
3.5
2.7
0.2
7.4
(8.1)
5.5
4.8
0.3
2.6
(2.6)
0.8
1.0
-
7.4
(7.2)
4.5
4.7
0.3
2.9
(3.3)
0.9
0.6
-
The Company, through its subsidiaries, participates in certain multiemployer pension plans under U.S. collective
bargaining agreements. None of these plans are considered individually significant to the Company. Contributions to these
plans totaled $0.3 million, $0.3 million and $0.2 million for 2012, 2011 and 2010, respectively.
The following table summarizes the weighted-average assumptions used in determining pension costs in each of the three
years for the period ended December 31:
Discount rate
Rate of increase in compensation levels *
Expected long term rate of return on plan assets
U.S. Benefit Plans
2011
5.8%
3.5%
8.2%
2012
5.0%
3.5%
8.1%
2010
6.0%
3.5%
8.5%
* Non-U.S. plan benefits are not adjusted for compensation level changes.
52
Non-U.S. Benefit Plan
2011
5.4%
N/A
6.5%
2012
4.6%
N/A
5.3%
2010
5.7%
N/A
6.5%
The following summarizes the changes in the projected benefit obligation and plan assets, the funded status of the
Company-sponsored plans, and the major assumptions used to determine these amounts at December 31 ($ in millions):
Change in Benefit Obligation
Benefit obligation, beginning of year
Service cost
Interest cost
Actuarial loss
Benefits paid
Translation and other
Benefit obligation, end of year
Accumulated benefit obligation, end of year
U.S. Benefit Plans
2012
2011
Non-U.S. Benefit Plan
2011
2012
$156.6
-
7.7
22.4
(7.0)
-
$179.7
$177.2
$138.4
-
7.8
17.4
(7.0)
-
$156.6
$154.5
$
$
$
57.1 $
0.2
2.6
5.9
(2.9)
2.7
65.6 $
65.6 $
52.6
0.1
2.9
4.9
(2.5)
(0.9)
57.1
57.1
The following table summarizes the weighted-average assumptions used in determining benefit obligations as of
December 31:
Discount rate
Rate of increase in compensation levels
Change in Plan Assets ($ in millions)
Fair value of plan assets, beginning of year
Actual return on plan assets
Company contribution
Benefits and expenses paid
Translation and other
Fair value of plan assets, end of year
U.S. Benefit Plans
2012
4.2%
3.5%
2011
5.0%
3.5%
Non-
U.S. Benefit Plan
2011
2012
4.6%
4.1%
N/A
N/A
U.S. Benefit Plans
2012
2011
Non-U.S. Benefit Plan
2011
2012
$ 97.0
13.0
9.2
(7.0)
-
$112.2
$104.8
(3.5)
2.7
(7.0)
-
$ 97.0
$
$
47.9
5.3
2.3
(2.9)
2.2
54.8
$
$
50.6
(0.8)
1.1
(2.5)
(0.5)
47.9
The amounts included in translation and other in the preceding tables reflect the impact of the foreign exchange
translation for the non-U.S. benefit plan.
The plan asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that
is significant to the fair value measurement.
Following is a description of the valuation methodologies used for assets measured at fair value for the U.S. benefit plan:
• Cash and Cash Equivalents — Valued at net asset value as provided by the administrator of the fund.
• U.S. Government and agency securities — Valued at the closing price reported on the active market on which the
security is traded or valued by the trustee at year-end using various pricing services of financial institutions.
• Common stock — Valued at the closing price reported on the active market on which the security is traded.
53
• Collective/Common trust — Valued at the net asset value, based on quoted market value of the underlying assets, of
shares held by the plan at year end.
• Mutual funds — Valued at the net asset value, based on quoted market prices in active markets, of shares held by the
plan at year end.
Plan assets for the non-U.S. benefit plans are based on quoted prices in active markets for identical assets.
The following table summarizes the Company’s pension assets in a three-tier fair value hierarchy for its benefit plan as of
December 31 ($ in millions):
U. S. Benefit Plans
2012
2011
Cash and Cash Equivalents
Equities
U.S. Large Cap
U.S. Small and Mid Cap
Federal Signal Common Stock
Developed International
Emerging Markets
Fixed Income
Government Bonds
Asset -backed Securities
Collective/Common Trust and Other
Mutual Funds
Total assets at fair value
Cash and cash equivalents
Equity Securities
Government Securities
Company Bonds and Debt Securities
Total
Level 1 Level 2 Level 3
$ 3.7
$-
$ - $ 3.7
Total Level 1 Level 2 Level 3 Total
- $ 3.9
$ - $ 3.9 $
32.7
11.9
7.1
6.6
4.5
-
-
-
-
-
5.7
-
-
5.9
-
-
-
-
-
-
-
32.7
11.9
7.1
6.6
4.5
27.7
9.9
3.9
3.7
3.3
-
-
-
-
-
-
-
-
-
-
27.7
9.9
3.9
3.7
3.3
5.7
5.9
4.5
-
-
6.7
-
-
4.5
6.7
34.1
-
$106.3 $ 5.9 $
-
34.1
33.3
- $112.2 $ 86.3 $ 10.7 $
0.1
-
33.4
- $97.0
Non-U. S. Benefit Plan
2012
2011
Total Level 1 Level 2 Level 3
Level 1 Level 2 Level 3
$ 10.6
4.8
4.1
5.6
$ - $
29.7
-
-
-
-
-
$ 25.1 $ 29.7 $
- $10.6 $ 8.6
4.0
4.9
5.3
- $54.8 $ 22.8 $ 25.1 $
$ - $
25.1
-
-
34.5
4.1
5.6
Total
- $ 8.6
29.1
4.9
5.3
- $47.9
-
-
-
During 2010, the Company adopted a structured derisking investment strategy for the U.S. pension plans to improve
alignment of assets and liabilities that includes: (1) maintaining a diversified portfolio that can provide a near-term weighted-
average target return of 8.1% or more; (2) maintaining liquidity to meet obligations; and (3) prudently managing administrative
and management costs. The plan invests in equity, mutual funds, and fixed income instruments.
Plan assets for the non-U.S. benefit plan consist principally of a diversified portfolio of equity securities, U.K. government
securities, company bonds and debt securities. During 2012, the Company determined the inputs used to value certain non-U.S.
investments in equity securities both in the U.K. and overseas markets were based on observable market information
consistent with Level 2 of the fair value hierarchy, rather than Level 1 as reported in the 2011 financial statements. Accordingly,
the amounts shown in the 2011 table above have been revised to reflect the correct presentation.
54
As of December 31, 2012 and 2011, equity securities included 0.9 million and 0.9 million shares of the Company’s common
stock valued at $7.1 million and $3.9 million, respectively. Dividends paid on the Company’s common stock to the pension
trusts aggregated $0.1 million in the year ended December 31, 2011 and none in the year ended December 31, 2012.
Funded status, end of year ($ in millions):
Fair value of plan assets
Benefit obligations
Funded status
Amounts recognized in the balance sheet consist of
($ in millions):
Long term pension liabilities
Accumulated other comprehensive loss, pre-tax
Net amount recognized
Amounts recognized in accumulated other
comprehensive income consist of ($ in millions):
Net actuarial loss
Prior service cost
Net amount recognized, pre-tax
U.S. Benefit Plans
Non-U.S. Benefit Plan
2012
2011
2012
2011
$ 112.2
179.7
$ (67.5)
$
97.0
156.6
$ (59.6)
$
54.8
65.6
$ (10.8)
$
$
47.9
57.1
(9.2)
U.S. Benefit Plans
Non-U.S. Benefit Plan
2012
2011
2012
2011
$ (67.5)
91.5
24.0
$
$ (59.6)
79.3
19.7
$
$ (10.8)
26.8
16.0
$
$
$
91.5
-
91.5
$
$
79.3
-
79.3
$
$
26.8
-
26.8
$
$
$
$
(9.2)
23.2
14.0
23.2
-
23.2
The Company expects $8.1 million relating to amortization of the actuarial loss to be amortized from accumulated other
comprehensive loss into net periodic benefit cost in 2013.
The Company expects to contribute up to $6.8 million to the U.S. benefit plans and up to $2.3 million to the non-
U.S. benefit plan in 2013. Future contributions to the plans will be based on such factors as annual service cost as well as
return on plan asset values, interest rate movements, and benefit payments.
The following table presents the benefits expected to be paid under the Company’s defined benefit plans in each of the
next five years, and in aggregate for the five years thereafter ($ in millions):
2013
2014
2015
2016
2017
2018-2022
U.S. Benefit
Plans
$
7.9
8.1
8.8
8.7
9.5
51.8
Non-U.S.
Benefit Plan
2.7
$
2.8
2.9
3.0
3.1
16.8
The Company also sponsors a defined contribution retirement plan covering a majority of its employees. Participation is
via automatic enrollment; employees may elect to opt out of the plan. Company contributions to the plan are based on
employees’ age and service as well as a percentage of employee contributions. The cost of these plans during each of the three
years in the period ended December 31, 2012, was $6.3 million in 2012, $5.8 million in 2011 and $5.5 million in 2010.
Prior to September 30, 2003, the Company also provided medical benefits to certain eligible retired employees. These
benefits are funded when the claims are incurred. Participants generally became eligible for these benefits at
55
age 60 after completing at least 15 years of service. The plan provided for the payment of specified percentages of medical
expenses reduced by any deductible and payments made by other primary group coverage and government programs. Effective
September 30, 2003, the Company amended the retiree medical plan and effectively canceled coverage for all eligible active
employees except for retirees and a limited group that qualified under a formula based on age and years of service.
Accumulated postretirement benefit liabilities of $1.0 million and $1.0 million at December 31, 2012 and 2011, respectively, were
fully accrued. The net periodic postretirement benefit costs have not been significant during the three-year period ended
December 31, 2012.
NOTE 8 — STOCK-BASED COMPENSATION
The Company’s stock compensation plans, approved by the Company’s shareholders and administered by the
Compensation and Benefits Committee of the Board of Directors of the Company, provide for the grant of incentive and non-
incentive stock options, restricted stock, and other stock-based awards or units to key employees and directors. The plans, as
amended, authorize the grant of up to 7.8 million shares or units through April 2020. These share or unit amounts exclude
amounts that were issued under predecessor plans.
Stock options vest equally over the three years from the date of the grant. The cost of stock options, based on the fair
market value of the shares on the date of grant, is charged to expense over the respective vesting periods. Stock options
normally become exercisable at a rate of one-third annually and in full on the third anniversary date. All options and rights must
be exercised within ten years from date of grant. At the Company’s discretion, vested stock option holders are permitted to
elect an alternative settlement method in lieu of purchasing common stock at the option price. The alternative settlement
method permits the employee to receive, without payment to the Company, cash, shares of common stock, or a combination
thereof equal to the excess of market value of common stock over the option purchase price. The Company has historically
settled all such options in common stock and intends to continue to do so.
The weighted average fair value of options granted during 2012, 2011 and 2010 was $2.73, $3.12 and $3.27, respectively.
The fair value of each option grant was estimated using the Black-Scholes option pricing model with the following
assumptions:
Dividend yield
Expected volatility
Risk free interest rate
Weighted average expected option life in years
2012
0.7%
59%
0.9%
5.6
2011
0.6%
52%
2.2%
5.9
2010
2.9%
48%
2.0%
5.9
The expected life of options represents the weighted average period of time that options granted are expected to be
outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns. The risk-free interest
rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life
of the options. Expected volatility is based on historical volatility of the Company’s common stock. Dividend yields are based
on historical dividend payments.
Stock option activity for the three years ended December 31, 2012 was as follows:
2012
Option Shares
2011
2010
2012
2011
2010
Weighted Average Exercise Price
Outstanding at beginning of year
Granted
Canceled or expired
Outstanding at end of year
Exercisable at end of year
1.9
0.7
(0.6)
2.0
1.0
2.0
0.6
(0.3)
2.3
1.3
56
(in millions)
2.1
0.4
(0.6)
1.9
1.2
$ 10.16
5.52
9.88
8.93
$ 11.22
$
$ 12.61
6.50
14.02
$ 10.16
$ 13.12
$ 13.60
8.93
13.47
$ 12.61
$ 14.84
The following table summarizes information for stock options outstanding as of December 31, 2012 under all plans:
Options Outstanding
Options Exercisable
Range of Ex ercise Prices
Shares
Remaining Life
Weighted
Average
5.01 — 10.00
10.01 — 15.00
15.01 — 20.00
(in millions)
1.5
0.4
0.4
2.3
(in years)
8.1
5.5
2.3
6.6
Weighted
Average
Exercise
Price
6.12
$
10.74
16.87
8.93
$
Shares
(in millions)
0.5
0.4
0.4
1.3
Weighted
Average
Exercise
Price
6.51
$
10.81
16.87
$ 11.22
The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2012 was $0.5 million.
Restricted stock awards are granted to employees at no cost. Awards primarily cliff vest at the third anniversary from the
date of award, provided the recipient is still employed by the Company on the vesting date. The cost of restricted stock awards,
based on the fair market value at the date of grant, is being charged to expense over the respective vesting periods. The
following table summarizes restricted stock grants for the 12-month period ended December 31, 2012:
Outstanding and non-vested at December 31, 2011
Granted
Vested
Outstanding and non-vested at December 31, 2012
Number of
Restricted Shares
(in millions)
0.4
0.1
(0.2)
0.3
Weighted Average
Price per Share
$
$
7.99
5.72
7.14
7.38
The total compensation expense related to all stock option and stock award compensation plans was $2.0 million,
$1.8 million and $2.1 million for the years ended December 31, 2012, 2011 and 2010, respectively. Also, as of December 31, 2012,
there were $1.6 million and $0.5 million of total unrecognized compensation cost related to stock options and stock awards,
respectively, that is expected to be recognized over the weighted-average period of approximately 1.9 and 2.1 years,
respectively.
2010 Performance Share Units
In 2008, the Company established a long term incentive plan for executive officers under which awards were classified as
equity in accordance with ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). Performance share units
granted in 2010 were tied to the achievement of a pre-determined three-year relative performance metric based upon Total
Stockholder Return (“TSR”) relative to a comparator group of companies, which is a market condition per ASC 718.
Performance share units would have vested if (1) the Company had achieved certain specified stock performance targets
compared to a comparator group of companies measured at December 31, 2012, and (2) the employee remained continuously
employed by the Company until the last day of the three-year performance period, December 31, 2012. The TSR performance
metric for the 2010 award was not met. Accordingly, the 2010 performance share units were not earned. Compensation expense
is based on the fair value of the performance share unit on the date of grant. As of December 31, 2012, compensation expense
relating to the unearned 2010 performance share units has been fully amortized.
57
The fair value is calculated using a Monte Carlo simulation model with the following assumptions:
Dividend yield
Expected volatility
Risk free interest rate
Weighted average expected life in years
2011 and 2012 Performance Share Units
2010
2.4%
64%
1.5%
2.7
The performance share units granted in 2011 and 2012 were extended to certain other non-executive officers. The
performance share units granted in 2011 and 2012 both have a one-year performance period ending December 31, 2011 and
2012, respectively, in which the Company must achieve certain earnings per share (“EPS”) from continuing operations, which is
a performance condition per ASC 718, followed by a two-year service requirement (i.e., if earned, these shares would vest in full
on December 31, 2013 or 2014, respectively). The EPS threshold for the 2011 award was not met. Accordingly, the 2011
performance share units were not earned, and no compensation expense was recorded relating to the 2011 award. The EPS
threshold for 2012 was achieved at the maximum level, and 200% of the target shares were earned. Compensation expense
included in the consolidated statement of operations for the 2012 performance unit shares for the year ended December 31, 2012
was $ 0.6 million. The total compensation expense for these performance share units is being amortized through the end of the
vesting period, December 31, 2014.
NOTE 9 — SHAREHOLDERS’ EQUITY
The Company’s Board of Directors has the authority to issue 90.0 million shares of common stock at a par value of $1 per
share. The holders of common stock (i) may receive dividends subject to all of the rights of the holders of preference stock;
(ii) shall be entitled to share ratably upon any liquidation of the Company in the assets of the Company, if any, remaining after
payment in full to the holders of preference stock; and (iii) receive one vote for each common share held and shall vote together
share for share with the holders of voting shares of preference stock as one class for the election of directors and for all other
purposes. The Company has 63.4 million and 63.1 million common shares issued as of December 31, 2012 and 2011,
respectively. Of those amounts, 62.4 million and 62.2 million common shares were outstanding as of December 31, 2012 and
2011, respectively.
The Company’s Board of Directors is also authorized to provide for the issuance of 0.8 million shares of preference stock
at a par value of $1 per share. The authority of the Board of Directors includes, but is not limited to, the determination of the
dividend rate, voting rights, conversion and redemption features, and liquidation preferences. The Company has not
designated or issued any preference stock as of December 31, 2012.
In May 2010, the Company issued 12.1 million shares of common stock at a price of $6.25 per share for total gross
proceeds of $75.6 million. After deducting direct fees, net proceeds to the Company totaled $71.2 million. Proceeds from the
equity offering were used to pay down debt.
The change in accumulated other comprehensive loss for each of the three years ended December 31 was as follows ($ in
millions):
Beginning balance
Foreign currency translation adjustment
Unrealized net gain (loss) on derivatives, net of tax expense of $0.2, $0.1 and $0.0,
respectively
Change in unrecognized gains (losses) related to pension benefit plans, net of tax
benefit (expense) of $0.3, $1.6 and $0.0, respectively
Ending balance
2012
$(76.4)
11.1
2011
$(41.6)
(4.3)
2010
$(39.3)
(4.5)
0.7
(0.7)
0.8
(15.5)
$(80.1)
(29.8)
$(76.4)
1.4
$(41.6)
58
As of December 31, 2012 and 2011, the ending balance of accumulated other comprehensive loss consisted of cumulative
translation adjustment income (loss) of $10.8 million and ($0.3) million, unrealized gain (loss) on derivatives of $0.1 million and
($0.6) million, and unrecognized pension benefit plan costs of ($91.0) million and ($75.5) million, respectively.
NOTE 10 — EARNINGS (LOSS) PER SHARE
Basic EPS is computed by dividing income or loss available to common stockholders by the weighted average number of
shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of
shares of common stock outstanding plus the effect of dilutive potential common shares outstanding during the period using
the treasury stock method. Dilutive potential common shares include outstanding stock options and performance share units
and reflect the potential dilution that could occur if options issued under stock-based compensation awards were converted
into common stock. In 2012, 2011 and 2010, options to purchase 2.3 million, 2.0 million and 1.9 million shares of the Company’s
common stock, respectively, had an antidilutive effect on EPS, and accordingly, are excluded from the calculation of diluted
EPS.
The following is a reconciliation of net income (loss) to basic and diluted EPS at December 31 ($ in millions, except per
share amounts):
Income (loss) income from continuing operations
Loss from discontinued operations and disposal, net of tax
Net loss
Weighted average shares outstanding — basic
Dilutive effect of common stock equivalents
Weighted average shares outstanding — diluted
Basic and diluted earnings (loss) per share:
Income from continuing operations
Loss from discontinued operations and disposal, net of tax
Loss per share
59
2012
$ 22.0
(49.5)
$(27.5)
62.3
0.4
62.7
$ 0.35
$(0.79)
$(0.44)
2011
$ 13.1
(27.3)
$(14.2)
62.2
-
62.2
$ 0.21
$(0.44)
$(0.23)
2010
$ (74.1)
(101.6)
$(175.7)
57.6
-
57.6
$ (1.29)
$ (1.76)
$ (3.05)
NOTE 11 — DISCONTINUED OPERATIONS
The following table presents the operating results of the Company’s discontinued operations for the three-year period
ended December 31 ($ in millions):
Federal Signal Technologies
Net sales
Interest allocated to discontinued operations
Goodwill and intangible assets impairment
Restructuring charges
Other costs and expenses
Loss before income taxes
Income tax benefit
Loss from discontinued operations
China WOFE
Net sales
Costs and expenses
Loss before income taxes
Income tax benefit
Loss from discontinued operations
Riverchase (SSG Segment)
Net sales
Costs and expenses
Loss before income taxes
Income tax benefit
Loss from discontinued operations
2012
$ 87.0
4.8
0.6
-
100.0
(18.4)
3.6
$ (14.8)
2011
$106.9
-
20.6
-
116.2
(29.9)
2.0
$ (27.9)
2011
$ 0.2
0.5
(0.3)
-
$ (0.3)
2010
$ 93.4
-
78.9
0.6
103.2
(89.3)
2.9
$ (86.4)
2010
$ 1.5
3.2
(1.7)
-
$ (1.7)
2010
$ -
1.3
(1.3)
-
$ (1.3)
On June 21, 2012, the Company announced that it had signed a definitive agreement to sell the FSTech Group for $110.0
million, subject to working capital adjustments. In accordance with ASC Topic 360, Impairment and Disposal of Long-Lived
Assets (“ASC 360”), the Company met held for sale criteria during the second quarter of 2012 and the FSTech Group was
reported as a discontinued operation in the Company’s condensed consolidated financial statements. In accordance with ASC
360-10, net assets held for sale with a carrying value of $121.1 million were written down to fair value less cost to sell or $97.6
million (fair value of $101.0 million and costs to sell of $3.4 million). This write-down resulted in a $23.5 million loss for the six
months ended June 30, 2012. The valuation methodology for the net assets held for sale was based upon a contract price which
is an observable input (Level 2).
On September 4, 2012, the Company completed the disposition of the assets of the FSTech Group for $110.0 million in
cash, subject to working capital adjustments in favor of the buyer of $5.9 million. The Company received $82.1 million in cash at
closing and the remaining $22.0 million was placed into escrow as security for indemnification obligations provided by the
Company pursuant to the sale agreement, including defense and other costs associated with the Neology lawsuits discussed in
Note 13. Additionally, in the third quarter of 2012, the Company recognized an additional loss related to a change in its estimate
of total proceeds to be received from escrowed amounts of $5.0 million, an increase in the carrying value of the FSTech Group
through the date of divestiture of $0.8 million and additional costs to sell of approximately $0.5 million. The working capital
adjustment, the additional loss related to the change in estimated proceeds to be received from escrowed amounts, the increase
in the carrying value of the FSTech Group and the additional costs to sell resulted in an additional loss of $12.2 million for the
third quarter of 2012. The Company recorded a total loss of $34.7 million on disposal for the year ended December 31, 2012.
60
A significant portion of the escrow identified for general indemnification obligations will be held for a period of 18 months
with the remaining general escrow funds to be held for 36 months. The portion of escrow associated with the Neology lawsuits
and certain other indemnifications are to be held for a period of up to 48 months, but may be released earlier under certain
conditions. If and when the relevant conditions associated with the Neology lawsuits and certain other contingencies are
resolved and any remaining escrowed proceeds are released, the Company may recognize an adjustment to the loss from
discontinued operations in its financial statements. The net carrying amount of the escrow receivable at December 31, 2012 is
$8.0 million and is classified in deferred charges and other assets. As discussed in Note 5, the Company used $75.0 million of
the sale proceeds to repay obligations under its existing credit facilities pursuant to mandatory prepayment provisions under
those facilities.
As required by ASC 350-20, goodwill of a reporting unit is to be tested for impairment between annual tests whenever
events or changes in circumstances indicate that the carrying value may not be recoverable. An interim test for goodwill and
indefinite-lived asset impairment was completed for the FSTech Group during the second quarter of 2012. The Company
determined that the trade names associated with the FSTech Group reporting unit were impaired and recorded an impairment
charge of $0.6 million. Goodwill was reviewed for impairment based on a two-step test. The first step, used to identify potential
impairment, compared the fair value of the FSTech Group with its carrying amount. The carrying amount of the FSTech Group
exceeded its fair value; therefore, the second step of the goodwill impairment test was required to be performed to measure the
amount of impairment loss, if any. The second step compared the implied fair value of the FSTech Group goodwill with the
carrying amount of that goodwill. The Company determined that the carrying amount of the goodwill was less than the implied
fair value of that goodwill, and consequently was not required to recognize an impairment loss.
During the fourth quarter of 2011, the Company performed the annual assessment, determined that the goodwill and
certain trade names within the FSTech Group were lower than the carrying value, and recorded impairment charges of $14.8
million and $7.4 million, respectively.
During the fourth quarter of 2010, the Company performed the annual assessment, determined that the goodwill and
certain trade names within the FSTech Group reporting unit were lower than carrying value, and recorded impairment charges of
$67.1 million and $11.8 million, respectively. As of December 31, 2010, the goodwill impairment charge was an estimate. Upon
completion of the detailed second step impairment analysis in the first quarter of 2011, the Company recorded an adjustment of
$1.6 million which reduced a portion of the original goodwill impairment recognized during the fourth quarter of 2010.
In accordance with ASC 205-20-45-6, Allocation of Interest to Discontinued Operations, the Company has allocated
interest on debt that is required to be repaid as a result of a disposal transaction to discontinued operations. The consolidated
financial statements for all periods presented have been recast to present the operating results of the FSTech Group and
previously divested or exited businesses as discontinued operations.
In December 2010, the Company determined that its China WOFE business was no longer strategic. The results of the
China WOFE operations previously were included within the Environmental Solutions and Safety and Security Systems
Groups. In 2012, the Company recorded a gain of $0.4 million on discontinued operations associated with the liquidation of the
assets of the China WOFE business. The 2011 loss includes $0.5 million of costs associated with the winddown of the
business. The 2010 loss includes a write-down of $2.1 million to reflect the estimated fair value of the net assets and certain
other costs associated with the dissolution of the business.
On September 1, 2010, the Company sold its Riverchase business for $0.2 million, which had previously been reported as
part of the Safety and Security Systems operating segment. The Company’s Riverchase business developed a suite of
products that enables emergency response agencies to manage and communicate remotely with their fleets. The Company
wrote down assets of the Riverchase business to net realizable value, resulting in a net loss of $2.1 million. The 2010 net loss
included the write-off of $1.9 million of intangible assets.
61
In May 2012, the Company sold its Pearland Texas facility, which was previously used by the Company’s discontinued
Pauluhn business, for proceeds of $0.9 million and recorded a pre-tax gain of $0.4 million. The Company retains certain liabilities
for discontinued operations prior to January 1, 2010, primarily for environmental remediation and product liability.
Included in liabilities at December 31, 2012 and 2011 is $1.8 million and $2.2 million, respectively, related to environmental
remediation at the Pearland, Texas facility, and $4.6 million and $5.1 million, respectively, relating to estimated product liability
obligations of the discontinued North American refuse truck body business.
The following table shows an analysis of assets and liabilities of discontinued operations as of December 31 ($ in
millions):
Current assets
Properties and equipment
Long-term assets
Financial service assets, net
Total assets of discontinued operations
Current liabilities
Long-term liabilities
Financial service liabilities
Total liabilities of discontinued operations
NOTE 12 — RESTRUCTURING
2012
$ 0.8
-
0.7
0.5
$ 2.0
$ 6.4
8.6
-
$15.0
2011
$ 35.9
2.7
93.7
1.0
$133.3
$ 24.1
15.0
0.9
$ 40.0
During 2012 and 2010, the Company announced restructuring initiatives. As of December 31, 2012 and 2011, the
Company’s total restructuring accrual was $1.0 million and $0.1 million, respectively, and was included in accrued liabilities
other on the consolidated balance sheets. There were no new restructuring activities initiated in 2011. The Company continues
to review its business for opportunities to reduce operating expenses and focus on executing its strategy based on core
competencies and cost efficiencies.
2012 Plan
During the first quarter of 2012, the Company recorded expenses of $0.9 million related to severance costs in the Safety
and Security Systems Group. During the fourth quarter of 2012, the Company recorded an additional $0.6 million related to
severance costs within corporate expense. These actions are expected to be completed within the next 12 months.
2010 Plan
During 2010, the Company announced restructuring initiatives and other functional reorganizations focused on aligning
its cost base with revenues and recorded $4.0 million in restructuring charges related to a global reduction in force across all
functions. The Company completed the 2010 plan initiatives in 2012 and released the remaining $0.1 million reserve to income
during the second quarter of 2012.
In 2010, the Company also recorded an additional $0.4 million in restructuring charges related to an initiative started in
2009. The Company completed these actions as of December 31, 2010.
62
The following table summarizes the 2010 restructuring charges by segment and the total charges estimated to be incurred
($ in millions):
Group
Environmental Solutions
Safety and Security Systems
Fire Rescue
Corporate
Total restructuring
Pre-Tax
Restructuring
Charges at
December 31,
2010
$
$
0.8
1.8
0.6
1.2
4.4
The following presents an analysis of the restructuring reserves included in other accrued liabilities as of December 31,
2012 and 2011, respectively ($ in millions):
2012 Plan
Balance as of December 31, 2011
Charges to selling, general and administrative expenses
Cash payments
Balance as of December 31, 2012
2010 Plan
Balance as of December 31, 2009
Charges to selling, general and administrative expenses
Cash payments
Balance as of December 31, 2010
Charges to selling, general and administrative expenses
Cash payments
Balance as of December 31, 2011
Charges and adjustments to selling, general and administrative expenses
Balance as of December 31, 2012
Severance
Other
Total
$-
1.5
(0.5)
1.0
$
$ -
-
-
$-
$-
1.5
(0.5)
$ 1.0
Severance
Other
Total
$
$-
3.5
(1.6)
1.9
0.1
(2.0)
-
-
$-
$-
0.5
(0.1)
$ 0.4
(0.1)
(0.2)
0.1
(0.1)
$-
$-
4.0
(1.7)
$ 2.3
-
(2.2)
0.1
(0.1)
$-
NOTE 13 — LEGAL PROCEEDINGS
The Company is subject to various claims, other pending and possible legal actions for product liability and other
damages, and other matters arising out of the conduct of the Company’s business. On a quarterly basis, the Company reviews
the uninsured material legal claims against the Company. The Company accrues for the costs of such claims as appropriate and
in the exercise of its best judgment and experience. However, due to a lack of factual information available to the Company
about a claim, or the procedural stage of a claim, it may not be possible for the Company to reasonably assess either the
probability of a favorable or unfavorable outcome of the claim or to reasonably estimate the amount of loss should there be an
unfavorable outcome. Therefore, for many of the claims, the Company cannot estimate a range of loss.
The Company believes, based on current knowledge and after consultation with counsel, that the outcome of such claims
and actions will not have a material adverse effect on the Company’s consolidated financial position
63
or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of
such matters, if unfavorable, could have a material adverse effect on the Company’s consolidated financial position or results
of operations.
The Company has been sued by firefighters seeking damages claiming that exposure to the Company’s sirens has
impaired their hearing and that the sirens are therefore defective. There were 33 cases filed during the period of 1999 through
2004, involving a total of 2,443 plaintiffs, in the Circuit Court of Cook County, Illinois. These cases involved more than 1,800
firefighter plaintiffs from locations outside of Chicago. Beginning in 2009, six additional cases were filed in Cook County,
involving 299 Pennsylvania firefighter plaintiffs. The trial of the first 27 of these plaintiffs’ claims occurred in 2008, when a Cook
County jury returned a unanimous verdict in favor of the Company. An additional 40 Chicago firefighter plaintiffs were selected
for trial in 2009. Plaintiffs’ counsel later moved to reduce the number of plaintiffs from 40 to nine. The trial for these nine
plaintiffs concluded with a verdict returned against the Company and for the plaintiffs in varying amounts totaling $0.4 million.
The Company appealed this verdict. On September 13, 2012, the Illinois Appellate Court rejected this appeal. Two justices
voted to uphold the verdict and one justice filed a lengthy and vigorous dissent. The Company thereafter filed a petition for
rehearing with the Appellate Court. The Appellate Court denied this petition on February 7, 2013. The Company intends to seek
further review of this verdict by filing a petition for leave to appeal with the Illinois Supreme Court. A third consolidated trial
involving eight Chicago firefighter plaintiffs occurred during November 2011. The jury returned a unanimous verdict in favor of
the Company at the conclusion of this trial. Following this trial, the trial court on March 12, 2012 entered an order certifying a
class of the remaining Chicago Fire Department firefighter plaintiffs for trial on the sole issue of whether the Company’s sirens
were defective and unreasonably dangerous. The Company petitioned the Illinois appellate court for interlocutory appeal of
this ruling. On May 17, 2012, the Illinois Appellate Court accepted the Company’s petition. On June 8, 2012, plaintiffs moved to
dismiss the appeal, agreeing with the Company that the trial court had erred in certifying a class action trial in this matter.
Pursuant to plaintiffs’ motion, the appellate court reversed the trial court’s certification order. Thereafter, the trial court
scheduled another consolidated trial, involving three firefighter plaintiffs, which was scheduled to begin on December 6, 2012.
Prior to the start of this fourth trial, the claims of two of the three firefighter plaintiffs involved in the case were dismissed.
On December 17, 2012, the jury entered a complete defense verdict for the Company in this trial. Following this defense verdict,
plaintiffs again moved to certify a class of Chicago Fire Department plaintiffs for trial on the sole issue of whether the
Company’s sirens were defective and unreasonably dangerous. Over the Company’s objection, the trial court granted
plaintiffs’ motion for class certification on March 11, 2013. A class action trial is scheduled to begin on June 10, 2013. The
Company currently plans to seek appellate court review of the Order granting plaintiffs’ motion for class certification.
The Company has also been sued on this issue outside of the Cook County, Illinois venue. Most of these cases have
involved lawsuits filed by a single attorney in the Court of Common Pleas, Philadelphia County, Pennsylvania. During 2007 and
through 2009, this attorney filed a total of 71 lawsuits, involving 71 plaintiffs in this jurisdiction. Three of these cases were
dismissed pursuant to pretrial motions filed by the Company. Another case was voluntarily dismissed. Prior to trial in four
cases, the Company paid nominal sums, which included reimbursements of expenses, to obtain dismissals. Three trials occurred
in Philadelphia involving these cases. The first trial involving one of these plaintiffs occurred in 2010, when the jury returned a
verdict for the plaintiff. In particular, the jury found that the Company’s siren was not defectively designed, but that the
Company negligently constructed the siren. The jury awarded damages in the amount of $0.1 million, which was subsequently
reduced to $0.08 million. The Company appealed this verdict. Another trial, involving nine Philadelphia firefighter plaintiffs,
also occurred in 2010 when the jury returned a defense verdict for the Company as to all claims and all plaintiffs involved in that
trial. The third trial, involving nine Philadelphia firefighter plaintiffs, was completed during 2010 when the jury returned a
defense verdict for the Company as to all claims and all plaintiffs involved in that trial.
Following defense verdicts in the last two Philadelphia trials, the Company negotiated settlements with respect to all
remaining filed cases in Philadelphia at that time, as well as other firefighter claimants represented
64
by the attorney who filed the Philadelphia cases. On January 4, 2011, the Company entered into a Global Settlement Agreement
(the “Settlement Agreement”) with the law firm of the attorney representing the Philadelphia claimants, on behalf of 1,125
claimants the firm represents (the “Claimants”) and who had asserted product claims against the Company (the “Claims”).
Three hundred and eight of the Claimants had lawsuits pending against the Company in Cook County, Illinois.
The Settlement Agreement, as amended, provided that the Company pay (the “Settlement Payment”) a total amount of
$3.8 million to settle the Claims (including the costs, fees and other expenses of the law firm in connection with its
representation of the claimants), subject to certain terms, conditions and procedures set forth in the Settlement Agreement. In
order for the Company to be required to make the Settlement Payment: (i) each claimant who agreed to settle his or her claims
had to sign a release acceptable to the Company (a “Release”); (ii) each Claimant who agreed to the settlement and who was a
plaintiff in a lawsuit, had to dismiss his or her lawsuit, with prejudice; (iii) by April 29, 2011, at least 93% of the claimants
identified in the Settlement Agreement must have agreed to settle their claims and provide a signed Release to the Company;
and (iv) the law firm had to withdraw from representing any claimants who did not agree to the settlement, including those who
filed lawsuits. If the conditions to the settlement were met, but less than 100% of the Claimants agreed to settle their Claims and
sign a Release, the Settlement Payment would be reduced by the percentage of Claimants who did not agree to the settlement.
On April 22, 2011, the Company confirmed that the terms and conditions of the Settlement Agreement had been met and
made a payment of $3.6 million to conclude the settlement. The amount was based upon the Company’s receipt of 1,069 signed
releases provided by claimants, which was 95.02% of all claimants identified in the Settlement Agreement.
The Company generally denies the allegations made in the claims and lawsuits by the Claimants and denies that its
products caused any injuries to the Claimants. Nonetheless, the Company entered into the Settlement Agreement for the
purpose of minimizing its expenses, including legal fees, and avoiding the inconvenience, uncertainty, and distraction of the
claims and lawsuits.
During April and May 2012, 15 new cases were filed in the Court of Common Pleas, Philadelphia County, Pennsylvania.
These cases were filed on behalf of 15 Philadelphia firefighters and involve various defendants in addition to the Company.
Firefighters have brought hearing loss claims against the Company in jurisdictions other than Philadelphia and Cook
County. In particular, cases have been filed in New Jersey, Missouri, Maryland and New York. All of those cases, however,
were dismissed prior to trial, including four cases in the Supreme Court of Kings County, New York which were dismissed upon
the Company’s motion in 2008. The trial court subsequently denied reconsideration of its ruling. On appeal, the appellate court
affirmed the trial court’s dismissal of these cases. Plaintiffs’ attorneys have threatened to file additional lawsuits. The Company
intends to vigorously defend all of these lawsuits, if filed.
The Company’s ongoing negotiations with its insurer, CNA, over insurance coverage on these claims have resulted in
reimbursements of a portion of the Company’s defense costs. In the year ended December 31, 2012, the Company recorded
$0.7 million of reimbursements from CNA related to legal costs incurred in the prior year, as a reduction of corporate operating
expenses, of which $0.6 million had been received as of December 31, 2012. In the years ended December 31, 2011 and 2010, the
Company recorded $0.8 million and $0.6 million, respectively, of CNA reimbursements.
On July 29, 2011, Neology, Inc. (“Neology”) filed a complaint against the Company in the U.S. District Court of Delaware
for alleged patent infringements. The lawsuit demands that the Company cease manufacturing, marketing, importing or selling
Radio Frequency Identification (“RFID”) systems and products that allegedly infringe certain specified patents owned by
Neology, and also demands compensation for past
65
alleged infringement. The Company has denied the allegations in the complaint. On December 2, 2011, Neology filed a motion
for preliminary injunction, requesting that the court enter an order preliminarily enjoining the Company from further alleged
infringement of certain Neology patents. On June 18, 2012, a U.S. District Court Magistrate issued a Report and
Recommendation that the motion for a preliminary injunction be denied. On August 12, 2012, a U.S. District Court Judge
adopted that Report and Recommendation. On August 20, 2012, Neology filed a motion for leave to file for partial summary
judgment against the Company regarding two of the patents in issue in this litigation. On September 21, 2012, a U.S. District
Court Magistrate denied the motion.
On May 21, 2012, Neology filed another complaint against the Company, also for alleged patent infringement, in the U.S.
District Court for the Central District of California. On July 19, 2012, Neology filed certain amendments to that complaint. The
amended complaint similarly demands that the Company cease manufacturing, marketing, importing or selling certain RFID
transponders and readers that allegedly infringe certain other specified patents owned by Neology, and also demands
compensation for past alleged infringement. The Company has denied the allegations in the compliant. On September 10, 2012,
the Company filed a motion requesting that the court transfer this litigation to the U.S. District Court of Delaware, where
Neology filed its earlier patent infringement suit against the Company. On October 15, 2012, the court granted this motion and
ordered the transfer of this litigation to the U.S. District Court of Delaware.
In connection with the closing of the sale of the FSTech Group to 3M Company on September 4, 2012, 3M Company
agreed to assume the defense of the Neology lawsuits. A portion of the purchase price proceeds was placed into escrow to be
held for a period of 48 months as security for our indemnification obligations as well as defense and other costs associated
with the lawsuits, subject to early release under certain conditions. Information regarding the Company’s discontinued
operations is included in Note 11.
NOTE 14 — SEGMENT AND RELATED INFORMATION
The Company has three continuing operating segments as defined under ASC Topic 280, Segment Reporting. Business
units are organized under each segment because they share certain characteristics, such as technology, marketing, distribution
and product application, which create long-term synergies. The principal activities of the Company’s operating segments are as
follows:
Information regarding the Company’s discontinued operations is included in Note 11.
Safety and Security Systems — Our Safety and Security Systems Group is a leading manufacturer and supplier of
comprehensive systems and products that law enforcement, fire rescue, emergency medical services, campuses, military
facilities and industrial sites use to protect people and property. Offerings include systems for campus and community alerting,
emergency vehicles, first responder interoperable communications, industrial communications and command and municipal
networked security. Specific products include vehicle lightbars and sirens, public warning sirens and public safety software.
Products are primarily sold under the Federal Signal
Group operates manufacturing facilities in North America, Europe, and South Africa.
, Federal Signal VAMA , Target Tech , and Victor
brand names. The
TM
TM
TM
®
Fire Rescue — The Fire Rescue Group manufactures articulated and telescopic aerial platforms for rescue and fire fighting
and for maintenance purposes. This Group sells to municipal and industrial fire services, civil defense authorities, rental
companies, electric utilities and industrial customers. The Group manufactures in Finland and sells globally under the Bronto
Skylift brand name.
®
Environmental Solutions — The Environmental Solutions Group manufactures a variety of self-propelled street cleaning
vehicles, vacuum loader vehicles, municipal catch basin/sewer cleaning vacuum trucks, and waterblasting equipment. This
Group sells primarily to municipal and government customers and industrial contractors. Products are sold under the Elgin ,
®
Vactor , Guzzler and Jetstream brand names. The Group primarily manufactures its vehicles and equipment in the United
States.
®
®
®
Corporate contains those items that are not included in our operating segments.
66
Net sales by operating segment reflect sales of products and services to external customers, as reported in the Company’s
consolidated statements of operations. Intersegment sales are insignificant. The Company evaluates performance based on
operating income of the respective segment. Operating income includes all revenues, costs and expenses directly related to the
segment involved. In determining operating segment income, neither corporate nor interest expenses are included. Operating
segment depreciation expense, identifiable assets and capital expenditures relate to those assets that are utilized by the
respective operating segment. Corporate assets consist principally of cash and cash equivalents, short-term investments, notes
and other receivables and fixed assets. The accounting policies of each operating segment are the same as those described in
the summary of significant accounting policies.
Revenues attributed to customers located outside of the U.S. aggregated $310.5 million in 2012, $268.2 million in 2011 and
$258.5 million in 2010, of which sales exported from the U.S. aggregated $127.9 million, $126.1 million and $112.4 million,
respectively.
A summary of the Company’s continuing operations by segment for each of the three years in the period ended
December 31 is as follows ($ in millions):
Net sales
Safety and Security Systems
Fire Rescue
Environmental Solutions
Total net sales
Operating income
Safety and Security Systems
Fire Rescue
Environmental Solutions
Corporate expense
Total operating income
Interest expense
Debt settlement charges
Other expenses
Income before income taxes
Depreciation and amortization
Safety and Security Systems
Fire Rescue
Environmental Solutions
Corporate
Total depreciation and amortization
Identifiable assets
Safety and Security Systems
Fire Rescue
Environmental Solutions
Corporate
Total assets of continuing operations
Assets of discontinued operations
Total identifiable assets
67
2012
2011
2010
$240.3
135.1
427.8
$803.2
$ 27.9
8.9
42.0
(27.3)
51.5
21.4
3.5
0.7
$ 25.9
$ 4.3
2.6
5.4
0.9
$ 13.2
$221.4
109.5
357.8
$688.7
$ 21.5
6.6
24.5
(19.4)
33.2
16.4
-
0.2
$ 16.6
$ 4.4
2.5
5.2
0.9
$ 13.0
$214.5
108.8
309.8
$633.1
$ 23.7
9.4
17.9
(38.6)
12.4
10.2
-
1.2
$ 1.0
$ 3.7
2.2
4.7
0.8
$ 11.4
2012
2011
$209.5
122.5
237.5
41.7
611.2
2.0
$613.2
$200.3
117.3
231.7
24.1
573.4
133.8
$706.7
Capital expenditures
Safety and Security Systems
Fire Rescue
Environmental Solutions
Corporate
Total capital expenditures
2012
2011
2010
$ 2.7
3.1
6.4
0.8
$13.0
$ 3.6
2.9
6.7
0.3
$13.5
$ 3.0
1.1
6.5
0.7
$11.3
The segment information provided below is classified based on geographic location of the Company’s subsidiaries ($ in
millions):
Net sales
United States
Europe/Other
Canada
Long-lived assets (excluding intangibles)
United States
Europe
Other
2012
2011
2010
$374.6
220.0
38.5
$633.1
$492.7
259.0
51.5
$803.2
$ 54.5
16.8
0.5
$ 71.8
$420.5
229.0
39.2
$688.7
$ 45.4
16.0
0.6
$ 62.0
NOTE 15 — COMMITMENTS AND CONTINGENCIES
At December 31, 2012 and 2011, the Company had outstanding standby letters of credit aggregating $29.2 million and
$34.2 million, respectively, principally to act as security for retention levels related to casualty insurance policies and to
guarantee the performance of subsidiaries that engage in export transactions to non-U.S. governments and municipalities.
The Company issues product performance warranties to customers with the sale of its products. The specific terms and
conditions of these warranties vary depending upon the product sold and country in which the Company does business, with
warranty periods generally ranging from one to ten years. The Company estimates the costs that may be incurred under its
basic limited warranty and records a liability in the amount of such costs at the time the sale of the related product is
recognized. Factors that affect the Company’s warranty liability include the number of units under warranty from time to time,
historical and anticipated rates of warranty claims, and costs per claim. The Company periodically assesses the adequacy of its
recorded warranty liabilities and adjusts the amounts as necessary.
Changes in the Company’s warranty liabilities for the years ended December 31, 2012 and 2011 were as follows ($ in
millions):
Balance at January 1
Provisions to expense
Actual costs incurred
Balance at December 31
2012
$ 6.7
5.8
(5.7)
$ 6.8
2011
$ 5.5
9.7
(8.5)
$ 6.7
68
The Company retained an environmental consultant to conduct an environmental risk assessment at the Pearland, Texas
facility. The facility, which was previously used by the Company’s discontinued Pauluhn business, manufactured marine,
offshore and industrial lighting products. The Company sold the facility in May 2012. While the Company has not finalized its
plans, it is probable that the site will require remediation. As of December 31, 2012 and 2011, $1.8 million and $2.2 million,
respectively, of reserves related to the environmental remediation of the Pearland facility are included in liabilities of
discontinued operations on the consolidated balance sheet. The recorded reserves are based on an undiscounted estimate of
the range of costs to remediate the site, depending upon the remediation approach and other factors. The Company’s estimate
may change in the near term as more information becomes available; however, the costs are not expected to have a material
adverse effect on the Company’s results of operations, financial position or liquidity.
NOTE 16 — NEW ACCOUNTING PRONOUNCEMENTS
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement Topic 820, Amendments to Achieve Common
Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS, which amends the definition of fair value
measurement principles and disclosure requirements to eliminate differences between U.S. GAAP and International Financial
Reporting Standards (“IFRS”). ASU 2011-04 requires new quantitative and qualitative disclosures about the sensitivity of
recurring Level 3 measurement disclosures, as well as transfers between Level 1 and Level 2 of the fair value hierarchy. As this
update impacts disclosures only, the Company’s adoption of this guidance on January 1, 2012 did not impact the Company’s
financial position, results of operations, or cash flows.
In June 2011, the FASB issued ASU No. 2011-05, Topic 220, Presentation of Comprehensive Income, which requires
companies to include a statement of comprehensive income as part of its interim and annual financial statements. The guidance
gives companies the option to present net income and comprehensive income either in one continuous statement or in two
separate but consecutive statements. This approach represents a change from prior U.S. GAAP, which allowed companies to
report other comprehensive income (“OCI”) and its components in the statement of shareholders’ equity. The current guidance
allows companies to present OCI either net of tax with details in the notes or shown gross of tax (with tax effects shown
parenthetically). The Company’s disclosure of comprehensive income for the years ended December 31, 2012, 2011 and 2010 is
presented in the Company’s consolidated statements of comprehensive income. Under this guidance, certain information
included in the consolidated statements of shareholders’ equity is shown in the statement of comprehensive income. This
guidance is effective for fiscal years beginning after December 15, 2011. ASU 2011-05 is effective for fiscal years, and interim
periods within those years, beginning January 1, 2012 and should be applied retrospectively. The guidance impacts disclosures
only and the Company’s adoption of this guidance on January 1, 2012 did not have an impact on its financial position, results
of operations or cash flows.
In September 2011, the FASB issued ASU No. 2011-08, Topic 350, Testing of Goodwill for Impairment, which allows
companies to assess qualitative factors to determine whether they need to perform the two-step quantitative goodwill
impairment test. Under the option, an entity no longer would be required to calculate the fair value of a reporting unit unless it
determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying
amount. The ASU may change how a company tests goodwill for impairment but should not change the timing or measurement
of goodwill impairments. The ASU is effective for fiscal years beginning after December 15, 2011. The Company performed its
annual goodwill impairment test as of October 31, 2012. The Company’s adoption of this guidance on January 1, 2012 did not
have an impact on its results of operations, financial position or cash flows.
In December 2011, the FASB issued ASU No. 2011-11, Topic 210, Disclosures about Offsetting Assets and Liabilities.
This update is intended to improve the comparability of statements of financial position prepared in accordance with U.S.
GAAP and IFRS, requiring both gross and net presentation of offsetting assets and liabilities. The new requirements are
effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. As this
guidance only affects disclosures, the adoption of this standard will not have an impact on the Company’s results of
operations, financial position or cash flows.
69
No other new accounting pronouncements issued or effective during 2012 have had or are expected to have a material
impact on the consolidated financial statements.
NOTE 17 — SELECTED QUARTERLY DATA (UNAUDITED)
The Company reports its interim quarterly periods on a 13-week basis ending on a Saturday with the fiscal year ending on
December 31. For convenience purposes, the Company uses “March 31”, “June 30”, “September 30” and “December 31” to
refer to its results of operations for the quarterly periods then ended. In 2012, the Company’s interim quarterly periods ended
March 31, June 30, September 29 and December 31; and in 2011, the Company’s interim quarterly periods ended
April 2, July 2, October 1 and December 31, respectively.
The following is a summary of the quarterly results of operations, including income per share, for the Company for the
quarterly periods of fiscal 2012 and 2011 ($ in millions, except per share amount):
Net sales
Gross profit
Income from continuing operations
Loss from discontinued operations and disposal
Net (loss) income
Per share data — diluted:
Earnings from continuing operations
Earnings (loss) from discontinued operations
Net (loss) income
Net sales
Gross profit
(Loss) income from continuing operations
Loss from discontinued operations and disposal
Net (loss) income
Per share data — diluted:
(Loss) earnings from continuing operations
Loss from discontinued operations
Net (loss) income
NOTE 18 — SUBSEQUENT EVENT
March 31
$ 196.1
45.3
3.1
(4.2)
(1.1)
$
0.05
(0.07)
(0.02)
March 31
$ 150.3
33.3
(2.4)
(3.4)
(5.8)
$ (0.04)
(0.05)
(0.09)
June 30
$204.4
49.2
9.6
(26.1)
(16.5)
$ 0.15
(0.41)
(0.26)
June 30
$175.6
39.9
5.7
(1.3)
4.4
$ 0.09
(0.02)
0.07
2012
September 30
185.0
$
45.6
4.4
(19.1)
(14.7)
December 31
217.7
$
49.7
4.9
(0.1)
4.8
$
0.07
(0.31)
(0.24)
0.08
0.00
0.08
$
2011
September 30
167.8
$
36.5
3.3
(0.9)
2.4
December 31,
195.0
$
45.7
6.5
(21.7)
(15.2)
$
$
0.05
(0.01)
0.04
0.11
(0.36)
(0.25)
On March 13, 2013, the Company entered into a new credit agreement (the “2013 Credit Agreement”), by and among the
Company, as borrower, Wells Fargo Bank, N.A., as administrative agent, swingline lender and issuing lender, General Electric
Capital Corporation as syndication agent, and five additional lenders. The 2013 Credit Agreement provides the Company with a
new $225.0 million senior secured credit facility (the “Senior Secured Credit Facility”) comprised of a five-year fully funded term
loan in the amount of $75.0 million maturing March 13, 2018, and a five-year $150.0 million revolving credit facility under which
borrowings may be made from time to time during the term of the Senior Secured Credit Facility. The revolving credit facility
provides for loans and letters of credit in an amount up to an aggregate of $150.0 million, with a sub-limit of $50.0 million for
letters of credit.
70
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its management, including the
Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of the Company’s
“disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e)) as of December 31, 2012.
Based on that evaluation, the Company’s Chief Executive Officer and Interim Chief Financial Officer concluded that the
Company’s disclosure controls and procedures were effective as of December 31, 2012.
(b) Management’s Annual Report on Internal Control over Financial Reporting and Attestation Report of the Registered
Public Accounting Firm
The Company’s management is responsible for establishing and maintaining an adequate system of internal control over
financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an assessment of the Company’s
internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of
the Treadway Commission in Internal Control — Integrated Framework. Based on the assessment, management concluded that,
as of December 31, 2012, the Company’s internal control over financial reporting is effective.
Ernst & Young LLP, an independent registered public accounting firm, has audited the consolidated financial statements
included in this Annual Report on Form 10-K and, as part of their audit, has issued its report, included herein, on the
effectiveness of the Company’s internal control over financial reporting. See “Report of Independent Registered Public
Accounting Firm” on page 29.
(c) Changes in Internal Control over Financial Reporting
From time to time, the Company may make changes aimed at enhancing the effectiveness of the controls and to ensure
that the systems evolve with the business. There were no changes in the Company’s internal control over financial reporting
that occurred during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
On March 13, 2013, the Company entered into a new credit agreement (the “2013 Credit Agreement”), by and among the
Company, as borrower, Wells Fargo Bank, N.A., as administrative agent, swingline lender and issuing lender, General Electric
Capital Corporation as syndication agent, and five additional lenders. The 2013 Credit Agreement provides the Company with a
new $225.0 million senior secured credit facility (the “Senior Secured Credit Facility”) comprised of a five-year fully funded term
loan in the amount of $75.0 million maturing March 13, 2018, and a five-year $150.0 million revolving credit facility under which
borrowings may be made from time to time during the term of the Senior Secured Credit Facility. The revolving credit facility
provides for loans and letters of credit in an amount up to an aggregate of $150.0 million, with a sub-limit of $50.0 million for
letters of credit.
Borrowings under the Senior Secured Credit Facility bear interest, at the Company’s option, at a base rate or a LIBOR rate,
plus, in each case, an applicable margin. The applicable margin ranges from 1.00% to 2.00% for base rate borrowings and 2.00%
to 3.00% for LIBOR borrowings. The Company must also pay a commitment fee to the Senior Secured Credit Facility lenders
ranging between 0.25% to 0.45% per annum on the unused portion of the $150.0 million revolving credit facility along with
other standard fees. Letter of credit fees are payable on outstanding letters of credit in an amount equal to the applicable
LIBOR margin plus other customary fees.
71
The Senior Secured Credit Facility requires equal quarterly installment payments of the $75.0 million term loan beginning
on June 30, 2013 based on the following amortization schedule: 7.5% of the original amount in the first year, 10.0% of the
original amount in each of the second and third years, 12.5% of the original amount in each of the fourth and fifth years, and
the remaining balance on March 13, 2018, the maturity date.
The Company is allowed to prepay in whole or in part advances under the revolving credit facility and all or any part of
the term loan without penalty or premium other than customary “breakage” costs with respect to LIBOR loans.
The Senior Secured Credit Facility requires the Company to comply with financial covenants related to the maintenance of
a minimum fixed charge coverage ratio and maximum leverage ratio. The financial covenants are measured at each fiscal quarter-
end.
Under the Senior Secured Credit Facility, restricted payments, including dividends, shall be permitted only if the pro-forma
leverage ratio, after giving effect to such payment, is less than 3.25, there is pro-forma compliance with all other financial
covenants after giving effect to such payment, and there are no existing defaults under the Senior Secured Credit Facility.
The Senior Secured Credit Facility is secured by a first priority security interest in all now or hereafter acquired domestic
property and assets and the stock or other equity interests in each of the domestic subsidiaries and certain of the first-tier
foreign subsidiaries, subject to certain exclusions.
The Company used the proceeds from the Senior Secured Credit Facility to (i) repay the outstanding balance of the Term
Loan, (ii) repay outstanding balances under the ABL Facility, (iii) finance the ongoing general corporate needs of the Company
and its subsidiaries; (iv) pay fees and expenses associated with repayment of amounts due under the Term Loan and the ABL
Facility, including the payment of approximately $4.1 million in prepayment premiums under the Term Loan; and (v) pay fees
and expenses associated with the Senior Secured Credit Facility.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
A list of our executive officers and biographical information appears in Item 1 of Part I of this Form 10-K. Information
regarding directors and nominees for directors is set forth in the Company’s proxy statement for its 2013 Annual Meeting of
Stockholders and is incorporated herein by reference.
Information regarding Compliance with Section 16(a) of the Exchange Act is set forth in the Company’s 2013 proxy
statement under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by
reference. Information regarding the Company’s Audit Committee, Nominating and Governance Committee, and Compensation
and Benefits Committee are set forth in the Company’s 2013 proxy statement under the caption “Information Concerning the
Board of Directors” and is incorporated herein by reference.
The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer and
principal accounting officer. This code of ethics and the Company’s corporate governance policies are posted on the
Company’s website at www.federalsignal.com. The Company intends to satisfy its disclosure requirements regarding
amendments to or waivers from its code of ethics by posting such information on this website. The charters of the Audit
Committee, Nominating and Corporate Governance Committee, and Compensation and Benefits Committee of the Company’s
Board of Directors are available on the Company’s website and are also available in print free of charge.
Item 11. Executive Compensation.
The information contained under the captions “Information Concerning the Board of Directors,” “Compensation
Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Compensation and Benefits
Committee Report” and “Executive Compensation” of the Company’s 2013 proxy statement is incorporated herein by reference.
72
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information regarding security ownership of certain beneficial owners, of all directors and nominees, of the named
executive officers, and of directors and executive officers as a group is set forth in the Company’s 2013 proxy statement under
the caption “Ownership of Our Common Stock” and is incorporated herein by reference. Information regarding our equity
compensation plans is set forth in the Company’s 2013 proxy statement under the caption “Equity Compensation Plan
Information” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information regarding certain relationships is hereby incorporated by reference from the Company’s 2013 proxy statement
under the heading “Information Concerning the Board of Directors” and under the heading “Certain Relationships and Related
Party Transactions.”
Item 14. Principal Accountant Fees and Services.
Information regarding principal accountant fees and services is incorporated by reference from the Company’s 2013 proxy
statement under the heading “Accounting Fees.”
Item 15. Exhibits and Financial Statement Schedules.
1. Financial Statements
PART IV
The following consolidated financial statements of Federal Signal Corporation and Subsidiaries and the report of the
Independent Registered Public Accounting Firm contained under Item 8 of Part II this Form 10-K are incorporated herein by
reference:
(a) Consolidated balance sheets as of December 31, 2012 and 2011;
(b) Consolidated Statements of Operations for the Years Ended December 31, 2012, 2011 and 2010;
(c) Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010;
(d) Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2012, 2011 and 2010;
(e) Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010; and
(f) Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Schedule II — Valuation and Qualifying Accounts of Federal Signal Corporation and Subsidiaries, for the three years
ended December 31, 2012 is filed as a part of this Report in response to Item 15(a) (2):
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted.
3. Exhibits
See Exhibit Index.
73
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Signatures
FEDERAL SIGNAL CORPORATION
By:
/s/ Dennis J Martin
Dennis J. Martin
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 15, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities indicated, as of March 15, 2013.
/s/ Dennis J. Martin
Dennis J. Martin
/s/ Braden N. Waverley
Braden N. Waverley
/s/ Charles F. Avery, Jr.
Charles F. Avery, Jr.
/s/ James E. Goodwin
James E. Goodwin
/s/ Charles R. Campbell
Charles R. Campbell
/s/ Paul W. Jones
Paul W. Jones
/s/ Richard R. Mudge
Richard R. Mudge
/s/ William F. Owens
William F. Owens
/s/ Brenda L. Reichelderfer
Brenda L. Reichelderfer
/s/ Dominic A. Romeo
Dominic A. Romeo
President, Chief
Executive Officer
and Director
(Principal Executive Officer)
Interim Chief
Financial Officer
(Principal Financial Officer)
Vice President, Corporate Controller and Chief Information Officer
(Principal Accounting Officer)
Chairman and Director
Director
Director
Director
Director
Director
Director
74
SCHEDULE II
FEDERAL SIGNAL CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
For the Years Ended December 31, 2012, 2011 and 2010
Description
Allowance for doubtful accounts:
Year ended December 31, 2012:
Year ended December 31, 2011:
Year ended December 31, 2010:
Inventory obsolescence:
Year ended December 31, 2012:
Year ended December 31, 2011:
Year ended December 31, 2010:
Income tax valuation allowances:
Year ended December 31, 2012:
Year ended December 31, 2011:
Year ended December 31, 2010:
Balance at
Beginning
of Year
Additions
Charged to
Costs and
Expenses
Deductions
Accounts
Written off
Net of
Recoveries
($ in millions)
$
$
$
$
$
$
2.4
2.4
1.9
7.7
7.4
7.1
$ 123.9
$ 112.8
25.2
$
$
$
$
$
$
$
$
$
$
0.6
0.4
1.1
4.2
2.3
2.2
17.3
11.2
89.4
$
$
$
$
$
$
$
$
$
(0.6)
(0.4)
(0.6)
(3.1)
(2.0)
(1.9)
(9.4)
(0.1)
(1.8)
Balance
at End
of Year
$ 2.4
$ 2.4
$ 2.4
$ 8.8
$ 7.7
$ 7.4
$131.8
$123.9
$112.8
75
The following exhibits, other than those incorporated by reference, have been included in the Company’s Form 10-K filed
with the Securities and Exchange Commission. The Company shall furnish copies of these exhibits upon written request to the
Corporate Secretary at the address given on the cover page.
EXHIBIT INDEX
3.
4.
10.
a.
b.
a.
b.
c.
d.
e.
f.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
Restated Certificate of Incorporation of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s
Form 8-K filed April 30, 2010.
Amended and Restated By-laws of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s
Form 8-K filed February 28, 2012.
Second Amended and Restated Credit Agreement among the Company, Bank of Montreal and other third party
lenders named therein, dated April 25, 2007. Incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q
for the quarter ended September 30, 2007.
Supplemental Agreement to the Second Amended and Restated Credit Agreement among the Company, Federal
Signal of Europe B.V. y CIA, SC, and Bank of Montreal, Ireland and other third party lenders named therein, dated
September 6, 2007. Incorporated by reference to Exhibit 4.C to the Company’s Form 10-K for the year ended
December 31, 2007.
Second Amendment and Waiver to the Second Amended and Restated Credit Agreement, dated March 27, 2008.
Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2008.
Global Amendment to Note Purchase Agreements between the Company and the holders of senior notes named
therein, dated April 27, 2009. Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter
ended March 31, 2009.
Third Amendment and Waiver to the Second Amended and Restated Credit Agreement, dated March 15, 2011.
Incorporated by reference to Exhibit 4.e to the Company’s Form 10-K for the year ended December 31, 2011.
Second Global Amendment and Waiver to the Note Purchase Agreements, dated March 15, 2011. Incorporated by
reference to Exhibit 4.f to the Company’s Form 10-K for the year ended December 31, 2011.
The 1996 Stock Benefit Plan, as amended. Incorporated by reference to Exhibit 10.(A) to the Company’s Form 10-K
for the year ended December 31, 2003.(1)
Supplemental Pension Plan. Incorporated by reference to Exhibit 10.C to the Company’s Form 10-K for the year
ended December 31, 1995.(1)
Executive Disability, Survivor and Retirement Plan. Incorporated by reference to Exhibit 10.D to the Company’s
Form 10-K for the year ended December 31, 1995.(1)
Director Deferred Compensation Plan. Incorporated by reference to Exhibit 10.H to the Company’s Form 10-K for
the year ended December 31, 1997.(1)
Pension Agreement with Stephanie K. Kushner. Incorporated by reference to Exhibit 10.G to the Company’s
Form 10-K for the year ended December 31, 2002.(1)
Savings Restoration Plan, as amended and restated January 1, 2007. Incorporated by reference to Exhibit 10.FF to
the Company’s Form 10-K for the year ended December 31, 2008.(1)
First Amendment of the Federal Signal Corporation Savings Restoration Plan. Incorporated by reference to
Exhibit 10.MM to the Company’s Form 10-K for the year ended December 31, 2008.(1)
Second Amendment to Federal Signal Corporation Savings Restoration Plan. Incorporated by reference to
Exhibit 10.NN to the Company’s Form 10-K for the year ended December 31, 2008.(1)
Third Amendment to Federal Signal Corporation Savings Restoration Plan. Incorporated by reference to
Exhibit 10.OO to the Company’s Form 10-K for the year ended December 31, 2008.(1)
Executive General Severance Plan, as amended and restated August 2012. Incorporated by reference to Exhibit 10.1
to the Company’s Form 10-Q for the quarter ended June 30, 2012.(1)
Form of 2008 Executive Change-In-Control Severance Agreement (Tier 1) with certain executive officers.
Incorporated by reference to Exhibit 10.HH to the Company’s Form 10-K for the year ended December 31, 2008.(1)
76
l.
m.
n.
o.
p.
q.
r.
s.
t.
u.
v.
w.
x.
y.
z.
aa.
bb.
Form of 2008 Executive Change-In-Control Severance Agreement (Tier 2) with and certain executive officers.
Incorporated by reference to Exhibit 10.II to the Company’s Form 10-K for the year ended December 31, 2008.(1)
Employment Letter Agreement between the Company and William G. Barker, III dated November 10, 2008.
Incorporated by reference to Exhibit 10.JJ to the Company’s Form 10-K for the year ended December 31, 2008.(1)
Forms of Equity Award Agreements. Incorporated by reference to Exhibit 10.LL to the Company’s Form 10-K for the
year ended December 31, 2008, Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2009 and
Exhibit 10 to the Company’s Form 10-Q for the quarter ended June 30, 2010.(1)
Share Purchase Agreement among Fayat, Federal Signal of Europe B.V. and the Company, dated July 16, 2009.
Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended June 30, 2009.
Arrangement Agreement between the Company and 1815315 Ontario Limited and Sirit Inc., dated January 13, 2010.
Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed January 15, 2010.
Release and Severance Agreement between the Company and David R. McConnaughey, dated January 20, 2010.
Incorporated by reference to Exhibit 10.00 of the Company’s Form 10-K filed February 26, 2010.(1)
Release and Severance Agreement by and between the Company and William H. Osborne. Incorporated by reference
to Exhibit 10.1 to the Company’s Form 8-K filed November 3, 2010.(1)
Global Settlement Agreement between and among the Company and the law firm of Cappelli Mustin LLC, including
each attorney with Cappelli Mustin. Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed
January 10, 2011.
Form of 2010 Executive Change-In-Control Severance Agreement with certain executive officers (Tier 1).
Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2010.(1)
Form of 2010 Executive Change-In-Control Severance Agreement with certain executive officers (Tier 2).
Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarter ended March 31, 2010.(1)
Employment Agreement between the Company and Manfred Rietsch, dated 2010. Incorporated by reference to
Exhibit 10.3 to the Company’s Form 10-Q for the Company’s Form 10-Q for the quarter ended March 31, 2010.(1)
2005 Executive Incentive Compensation Plan (2010 Restatement). Incorporated by reference to Appendix B to the
Company’s Definitive Proxy statement filed on Schedule 14A filed March 25, 2010.(1)
Federal Signal Corporation Executive Incentive Performance Plan, as amended and restated. Incorporated by
reference to Appendix C to the Company’s Definitive Proxy Statement filed on Schedule 14A filed March 25, 2010.(1)
Release and Severance Agreement by and between the Company and Jennifer M. Erfurth, dated January 7, 2011.
Incorporated by reference to Exhibit 10.z to the Company’s Form 10-K for the year ended December 31, 2011.(1)
Release and Severance Agreement by and between the Company and Fred H. Lietz dated January 7, 2011.
Incorporated by reference to Exhibit 10.aa to the Company’s Form 10-K for the year ended December 31, 2011.(1)
Credit Agreement, dated as of February 22, 2012, by and among the Company, the lenders identified on the signature
pages thereof, General Electric Capital Corporation, as a co-collateral agent and Wells Fargo Capital Finance, LLC, as
administrative agent and a co-collateral agent. Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-
K/A filed September 21, 2012.(3)
Financing Agreement, dated as of February 22, 2012, by and among the Company, certain Subsidiaries of the
Company, as Guarantors, the Lenders from time to time party thereto, and TPG Specialty Lending, Inc., as
administrative agent, collateral agent and sole lead arranger. Incorporated by reference to Exhibit 10.2 to the
Company’s Form 8-K/A filed September 21, 2012.(3)
77
cc.
dd.
ee.
ff.
gg.
Intercreditor Agreement, dated as of February 22, 2012, among Wells Fargo Capital Finance, LLC, as the
ABL Agent, and TPG Specialty Lending, Inc., as the Term Agent. Incorporated by reference to Exhibit 10.3
to the Company’s Form 8-K filed February 28, 2012.
Asset Purchase Agreement dated as of June 20, 2012, by and among 3M Company, a Delaware
corporation, the Company, and certain subsidiaries of the Company identified on the signature pages
thereto. Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed June 25, 2012.
Amendment No. 1, dated as of August 3, 2012, to the Asset Purchase Agreement dated as of June 20, 2012,
by and among the Company, and certain subsidiaries of the Company identified therein, in favor of 3M
Company, a Delaware corporation, and one or more subsidiaries of 3M Company identified therein.
Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed September 7, 2012.
Amendment No. 2, dated as of September 4, 2012, to the Asset Purchase Agreement dated as of June 20,
2012, by and among the Company, and certain subsidiaries of the Company identified therein, in favor of
3M Company, a Delaware corporation, and one or more subsidiaries of 3M Company identified therein.
Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed September 7, 2012.
Consulting Agreement dated October 10, 2012 between the Company and Braden Waverly. Incorporated
by reference to Exhibit 10.1 to the Company’s Form 8-K filed October 12, 2012.
hh. Short Term Incentive Bonus Plan.*
ii.
Credit Agreement dated as of March 13, 2013, by and among the Company, as Borrower, the Lenders
referred to therein, as Lenders, and Wells Fargo Bank, National Association, as Administrative Agent,
Swingline Lender and Issuing Lender, General Electric Capital Corporation, as Syndication Agent, Wells
Fargo Securities, LLC, and GE Capital Markets, Inc., as Joint Lead Arrangers and Joint Book Managers.*
Code of Ethics for Chief Executive Officer and Senior Financial Officers, as amended. Incorporated by
reference to Exhibit 14 to the Company’s Form 10-K for the year ended December 31, 2003.
Subsidiaries of the Company.*
Consent of Independent Registered Public Accounting Firm.*
CEO Certification under Section 302 of the Sarbanes-Oxley Act.*
CFO Certification under Section 302 of the Sarbanes-Oxley Act.*
CEO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act.*
CFO Certification of Periodic Report under Section 906 of the Sarbanes-Oxley Act.*
Press Release*
Q4 Earnings Call Presentation Slides.*
XBRL Instance Document(2)
XBRL Taxonomy Extension Schema Document(2)
XBRL Taxonomy Calculation Linkbase Document(2)
XBRL Taxonomy Extension Definition Linkbase Document(2)
XBRL Taxonomy Label Linkbase Document(2)
XBRL Taxonomy Presentation Linkbase Document(2)
14.
21.
23.
31.1
31.2
32.1
32.2
99.1
99.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Filed herewith.
*
(1) Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of
(2)
Form 10-K.
In accordance with Rule 406T of Regulation S-T, these interactive data files are deemed “furnished, but not filed” for
purposes of section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under that section.
(3) Certain provisions of this exhibit have been omitted pursuant to an amended Confidential Treatment Request filed with the
Commission.
78