Federal Signal Corporation Announces 2010 Fourth Quarter Results
Orders increased 10% sequentially over the third quarter
Federal Signal Corporation (NYSE: FSS), a leader in environmental, safety and transportation solutions, announced today a loss per share from continuing operations of ($2.55) for the fourth quarter and a loss from continuing operations of ($158.4) million on net sales of $186.7 million. For the same period of 2009, the Company reported earnings per share of $0.19 on income of $9.4 million from continuing operations on net sales of $205.6 million. Included in the results for the fourth quarter of 2010 is a non-cash charge to recognize a valuation allowance of $85.0 million against deferred tax assets, a non-cash goodwill and other intangible asset impairment charge of $78.9 million in the Federal Signal Technologies Group, and a charge of $3.8 million to settle a significant portion of the Company's existing hearing loss litigation. The deferred tax asset valuation allowance does not impact the Company's ability to use the related tax benefits in the future. The ($2.55) loss per share from continuing operations for the fourth quarter of 2010 included goodwill and other assets impairment charges of ($1.15) per share, restructuring charges of ($0.01) per share, hearing loss settlement charge of ($0.04), and ($1.37) per share for tax charges, primarily related to the establishment of a deferred tax valuation allowance resulting from the cumulative domestic losses reported by the Company. Earnings per share for the fourth quarter of 2009 included restructuring charges of ($0.01) per share.
Year to date, the Company reported a loss per share from continuing operations of ($2.79) on net sales of $726.5 million as compared to earnings per share from continuing operations in 2009 of $0.41 on net sales of $750.4 million. The year over year reduction is primarily related to the non-cash tax valuation allowance and goodwill and other intangible asset impairment charge discussed above, restructuring charges of $5.0 million, acquisition and integration related costs of $3.9 million, and a settlement charge of $3.8 million for the hearing loss litigation.
The Company recorded a net loss of ($169.2) million including a loss from discontinued operations of ($10.8) million in the fourth quarter of 2010 compared to net income of $22.7 million including a gain from discontinued operations of $13.3 million in the same prior year period.
Fourth quarter 2010 discontinued operations included a $2.7 million loss associated with the closing of a wholly-owned China based business, a $2.9 million charge primarily related to an environmental remediation liability at a Texas facility that was previously used by the discontinued Pauluhn business, a $2.2 million charge to the product liability reserve and a $2.9 million tax expense associated with the deferred tax asset valuation allowance, compared to the gain on sale of the Pauluhn business of $14.3 million recorded in the fourth quarter of 2009.
For the full year, the 2010 net loss was ($175.7) million compared to 2009 net income of $23.1 million in the prior year.
As of December 31, 2010, the Company was not in compliance with its interest coverage ratio under its existing credit and private placement note agreements. The Company has received a waiver of this event of default from its lenders. In addition, the credit and private placement note agreements have been amended to include new financial and other covenants. Certain new restrictions have also been added to the agreements which will limit the Company's ability to incur additional indebtedness, make investments, pay dividends and engage in other transactions. As a result, the Company will not pay a dividend for the first quarter 2011.
Dennis J. Martin, President and Chief Executive Officer, stated, "We recognized significant charges in the fourth quarter. Some will result in improved future profitability, and some were non-cash charges driven by accounting guidelines. With the fourth quarter now behind us, we are focused on delivering improved results - both earnings and cash flow - as we move through 2011. Many of our industrial businesses performed well in 2010, with solid growth at good margins - while our municipal-focused businesses faced a challenging environment."
Mr. Martin continued, "My goal is to drive margin and cash flow improvement across all of the businesses in our portfolio. We have begun the process of segmenting, simplifying and improving our lower-margin businesses, while identifying ways to further enhance our better-performing businesses. Orders for the fourth quarter increased $17 million, or 10%, versus the third quarter, with most of those gains coming in our longer lead-time businesses at Bronto and ESG. This is an encouraging sign for 2011 as these orders will be turned into higher sales and profits in the second quarter and beyond, and our margin improvement initiatives will gain traction as we move through the year."
Year to date, the Company reported a loss per share from continuing operations of ($2.79) on net sales of $726.5 million as compared to earnings per share from continuing operations in 2009 of $0.41 on net sales of $750.4 million. The year over year reduction is primarily related to the non-cash tax valuation allowance and goodwill and other intangible asset impairment charge discussed above, restructuring charges of $5.0 million, acquisition and integration related costs of $3.9 million, and a settlement charge of $3.8 million for the hearing loss litigation.
The Company recorded a net loss of ($169.2) million including a loss from discontinued operations of ($10.8) million in the fourth quarter of 2010 compared to net income of $22.7 million including a gain from discontinued operations of $13.3 million in the same prior year period.
Fourth quarter 2010 discontinued operations included a $2.7 million loss associated with the closing of a wholly-owned China based business, a $2.9 million charge primarily related to an environmental remediation liability at a Texas facility that was previously used by the discontinued Pauluhn business, a $2.2 million charge to the product liability reserve and a $2.9 million tax expense associated with the deferred tax asset valuation allowance, compared to the gain on sale of the Pauluhn business of $14.3 million recorded in the fourth quarter of 2009.
For the full year, the 2010 net loss was ($175.7) million compared to 2009 net income of $23.1 million in the prior year.
As of December 31, 2010, the Company was not in compliance with its interest coverage ratio under its existing credit and private placement note agreements. The Company has received a waiver of this event of default from its lenders. In addition, the credit and private placement note agreements have been amended to include new financial and other covenants. Certain new restrictions have also been added to the agreements which will limit the Company's ability to incur additional indebtedness, make investments, pay dividends and engage in other transactions. As a result, the Company will not pay a dividend for the first quarter 2011.
Dennis J. Martin, President and Chief Executive Officer, stated, "We recognized significant charges in the fourth quarter. Some will result in improved future profitability, and some were non-cash charges driven by accounting guidelines. With the fourth quarter now behind us, we are focused on delivering improved results - both earnings and cash flow - as we move through 2011. Many of our industrial businesses performed well in 2010, with solid growth at good margins - while our municipal-focused businesses faced a challenging environment."
Mr. Martin continued, "My goal is to drive margin and cash flow improvement across all of the businesses in our portfolio. We have begun the process of segmenting, simplifying and improving our lower-margin businesses, while identifying ways to further enhance our better-performing businesses. Orders for the fourth quarter increased $17 million, or 10%, versus the third quarter, with most of those gains coming in our longer lead-time businesses at Bronto and ESG. This is an encouraging sign for 2011 as these orders will be turned into higher sales and profits in the second quarter and beyond, and our margin improvement initiatives will gain traction as we move through the year."
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